20130115Answer to Petitions for Reconsideration and Clarification.pdf

KRISTJNE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
7013 ..1&N IT r t.: 3
••
I:..
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S
REVIEW OF PURPA QF CONTRACT
PROVISIONS INCLUDING THE SURROGATE
AVOIDED RESOURCE (SAR) AND
INTEGRATED RESOURCE PLANNING (IRP)
METHODOLOGIES FOR CALCULATING
AVOIDED COST RATES.
CASE NO. GNR-E-11-03
ANSWER OF THE
COMMISSION STAFF TO
PETITIONS FOR
RECONSIDERATION AND
CLARIFICATION
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, pursuant to Commission Rule of
Procedure 331.05 and Idaho Code § 61-626, and in response to the petitions for reconsideration
and/or clarification submitted in Case No. GNR-E-11-03 to Order No. 32697, submits the
following answer.
Published rates for contract renewals
The Renewable Energy Coalition ("REC") seeks clarification as to the published avoided
cost rates for QFs who wish to replace existing contracts that will be expiring with Idaho Power
and PacifiCorp. Order No. 32697 states that "...we find it reasonable to allow QFs entering into
contract extensions or renewals to be paid capacity for the full term of the extension or renewal."
Order No. 32697 at p. 21-22. Attachments A, B, and C to Order No. 32697 show the avoided cost
rates for each of the three utilities, for a variety of different QF resource types, but only for new
STAFF ANSWER 1 JANUARY 15, 2013
QFs. REC believes clarification could be accomplished by providing a separate set of
attachments, similar to Attachments A, B, and C, showing published rates for existing QFs
seeking to replace an expiring contract, and which would include capacity payments in the initial
years of capacity sufficiency.
Staff will modify the SAR model to include the capability to compute published avoided
cost rates to be included in contracts for either new QFs or for existing QFs seeking to replace
expiring contracts. The rates generated by the SAR model for replacement/renewal contracts will
incorporate capacity payments beginning in the first contract year, regardless of the utility's
resource deficit position, in accordance with Order No. 32697. Staff will be able to compute
these rates on request, and has no objection to producing rate tables similar to Attachments A, B,
and C to Order No. 32697 if directed by the Commission. These rate tables would consist of 15
pages; therefore, if the Commission wished to publish two full sets of rate tables—one set for new
QFs and one set for replacement/renewal contracts—the full set of rate tables would comprise 30
pages. To avoid the confusion that might ensue if the Commission were to publish 30 pages of
avoided cost rate tables, Staff recommends that the Commission simply order Staff to maintain
the capability to compute rates for replacement contracts upon request.
Definition of "canal drop hydro"
The published avoided cost rate tables included as Attachments A, B, and C include a note
on the table for canal drop hydro projects that defines a "canal drop hydro project" as follows:
A "canal drop hydro project" is defined as a generation facility which produces
the majority of its generation during the irrigation season and is located on a man-
made waterway that conveys water primarily intended for irrigation or that
primarily conveys irrigation return flows.
REC requests that the definition of canal drop hydro be modified as follows:
A "canal drop irrigation related hydro project" is defined as a generation
facility which produces a majority of its generation during the irrigation season
and is located on a man made waterway that conveys or impounds water
primarily intended for irrigation or that primarily conveys irrigation return flews.
REC also recommends that the name or title of this particular schedule be changed by substituting
the words "irrigation related" for the words "canal drop," or other words to the same effect, so as
to avoid the possibility that this schedule not be interpreted as to require that a project must be
located on a canal drop, in order to qualify for this avoided cost rate.
STAFF ANSWER 2 JANUARY 15, 2013
The reason it matters whether a project is classified as "canal drop hydro/irrigation-
related" or as simply "hydro" is because rates for canal drop hydro are significantly higher.
The reason canal drop rates are higher is because irrigation-related projects can provide capacity
during a time of the year when it is most valuable to the utility and not provide capacity to the
utility in a time of the year when it is not needed. In computing avoided cost rates, the capacity
value of a canal drop project is spread over fewer hours of the year than for other hydro projects,
producing higher rates per kWh. The difference then, between rates for canal drop hydro and
other hydro, is directly tied to the capacity factor assumption used in the SAR model
computations.
Throughout the course of Case No. GNR-E-11-03, there was no testimony or other
evidence that attempted to define exactly what was meant by the phrase "canal drop hydro."
The rates developed for "canal drop hydro" were derived based on an annual capacity factor
assumption of 40 percent, a summer on-peak capacity factor of 100 percent and a winter on-peak
capacity factor of zero. These capacity factor assumptions correspond closely to an irrigation-
related hydro project that operates at about 80 percent of rated capacity for the duration of the
typical irrigation season (April 15 - October 15), but does not generate at all during the non-
irrigation season. In reality, most irrigation-related facilities would operate at less than full
capacity during perhaps the beginning and end of the irrigation season, but at full nameplate
capacity during the peak of the irrigation season. Nonetheless, Staff believes the capacity factor
assumptions used to derive the rates for "canal drop hydro" are reasonable and have not been
challenged.
Every hydro project, whether irrigation-related or not, will have its own unique capacity
factor. In turn, different capacity factors would produce different rates under the SAR
methodology. While it would be possible to compute a unique set of rates for each individual
hydro project, one objective of the SAR methodology is to keep things simple. To achieve
simplicity, it is necessary to classify projects into a limited number of categories. While it may
be true that some hydro facilities (such as the examples described by REC) produce 70-90 percent
of their generation during the irrigation season, the same could probably be said of many projects
that are not irrigation-related. Consequently, what is important for hydro project rates is not
whether they are irrigation-related or not, but instead whether they provide capacity during the
utility's seasonal peak and what their capacity factor is over the course of the year.
STAFF ANSWER 3 JANUARY 15, 2013
Staff agrees that the definition of "canal drop hydro" needs to be revised; however, Staff
does not agree with the revised definition suggested by REC. REC's proposed definition would
entitle almost any hydro project to higher rates as long as it produced the majority of its
generation during the irrigation season and used water primarily intended for irrigation. REC's
proposed definition is so vague that nearly all hydro projects could qualify. All hydro projects in
Idaho produce the majority of their generation during the irrigation season, and it is arguable that
the water used by most is in some way, at some point, irrigation-related.
In order to clarify entitlement to "canal drop hydro" rates, Staff recommends that the
Commission invite comments from any interested parties, with instructions that proposed
definitions be consistent with the capacity factors used to derive the rates in the SAR model.
Staff does not wish to complicate or prolong the proceedings in this case, but Staff does believe
that this issue deserves to be fully aired and that all interested parties be given an opportunity to
weigh in. There are dozens of existing hydro projects whose contracts will be expiring in coming
years that would be impacted by how "hydro," "irrigation-related hydro" and "canal drop hydro"
are defined.
Methodology and inputs for SAR published rates
In its pleading, Idaho Power seeks clarification regarding the methodology and inputs
utilized to establish the published avoided cost rates that appear in Attachments A, B, and C to
Order No. 32697. On January 9, 2013, Staff sent a copy of the avoided cost spreadsheet used to
compute published rates to Idaho Power via email. Idaho Power should now be able to review
the model and its inputs, and to study the modifications made to the model to accommodate the
Commission's decisions in Order No. 32697. Staff stands ready to send a copy of the spreadsheet
to any party who requests it and to assist any party in understanding how to use the model and
interpret its results.
Use of terms "contract extensions or renewals"
Idaho Power expresses concern that the Commission's use of the terms "contract
extensions" or "renewals" is improper. The Company contends that when an existing long-term
contract expires, it must be replaced with an entirely new contract and that the existing contract
cannot be "renewed" or "extended."
STAFF ANSWER 4 JANUARY 15, 2013
Staff believes that the intent of the Order is clear, although agrees that the terminology
used could lead to confusion and misunderstanding if too strict a literal interpretation is applied.
Consequently, Staff suggests that new contracts that are signed whenever old contracts expire be
referred to as "replacement contracts" or "new contracts for existing projects" if reference to them
is necessary.
Whether the June 1 date for updates to the SAR and IRP models can be changed
Idaho Power expresses concern that the June 1 date for updating input data used in the
SAR and IRP models may be unworkable. In accordance with Order No. 32697, SAR rates
would be adjusted annually based on an updated gas price forecast from the ETA Annual Energy
Outlook. Load-resource balance data as used in the SAR model would be revised on June 1 in
alternate years to reflect the utility's most recent IRP. For the IRP-based rates, annual updates are
to be made simultaneously on June 1 with the SAR rates, and include internal utility load
forecasts and fuel price forecasts.
Idaho Power proposes that the annual update to SAR rates be made and effective
immediately upon the release of the relevant EIA gas price forecast. Idaho Power also requests
that the fuel price and load forecast inputs into the IRP methodology be changed to a date that
better matches when the utility normally makes these updates internally for planning and other
purposes. Idaho Power did not recommend a specific date in its petition, but suggests Staff and
the three utilities may be able to agree on a date—a date other than June 1.
Staff believes the intent in choosing June 1 as the date when updates are to be made was
1) to accommodate the normal schedule for changes in the EIA Annual Energy Outlook, 2) to
make the updates to the SAR inputs and the IRP methodology inputs simultaneously, and 3) to
make the updates coincide with PURPA rate changes that are made annually for a limited number
of existing contracts. Although the intent was good, Staff is not opposed to decoupling the dates
for SAR and IRP updates if that works better for the utilities.
For incorporation of the ETA gas forecast in SAR rates, Staff recommends that the
Commission stick to the June 1 date, but add the qualifier "or within 30 days of the final release
of the ETA Annual Energy Outlook, whichever is later." This will accommodate incorporation of
the EIA gas forecast even in years when the release date is too late to meet a June 1 update date.
Staff does not recommend allowing use of" early release" forecasts because this would likely
require an additional subsequent rate update once EIA's "final release" is made. Staff also does
STAFF ANSWER 5 JANUARY 15, 2013
not recommend updating the SAR rates immediately upon issuance of the gas forecast by EIA.
Although Staff recognizes Idaho Power's concern of possible "gamesmanship," Staff is not
convinced that such gamesmanship can be avoided, regardless of when the new gas forecast is
incorporated in SAR rates. Staff believes there is some value in certainty of when rates will be
updated.
For updates to the gas and load forecasts used in the IRP methodology, Staff is not
opposed to any date requested by the utilities, provided the utilities can come up with the same
date for all three utilities. Incorporating the forecast changes contemporaneously for all three
utilities will help to ensure consistency and minimize confusion. Staff recommends that the
Commission direct the three utilities to collaboratively propose a suitable date.
Disavow use of "single-run" methodology
J.R. Simplot and Clearwater Paper ("Simplot" and "Clearwater") recommend that the
Commission disavow use of the "single run" approach for calculation of avoided cost rates under
the IRP methodology.
In their petitions, Simplot and Clearwater correctly cite the legal standard for petitions for
reconsideration as follows:
Petitions for reconsideration must set forth specifically the ground or grounds why
the petitioner contends that the order or any issue decided in the order is
unreasonable, unlawful, erroneous, or not in conformity with the law, and a
statement of the nature and quantity of evidence or argument the petition will offer
if reconsideration is granted."
IPUC RP 331.01 and Idaho Code § 61-626.
Staff does not believe that the arguments presented by Simplot and Clearwater as they
relate to use of the "single run" approach meet the legal standard that they, themselves,
acknowledge. The Commission's Order relating to use of a "single run" approach is not
unreasonable, unlawful, erroneous, or not in conformity with the law.
Although Order No. 32697 refers to Idaho Power's proposed modifications to the IRP
methodology as a "single-run simulation,"' the use of that terminology, Staff believes, was not
intended to be a prescriptive description of how the methodology is to be applied. Instead, Staff
believes use of the terminology was simply a shorthand way of referring to Idaho Power's
'Order No. 32697 at p. 21.
STAFF ANSWER 6 JANUARY 15, 2013
approach that focuses on identifying the hourly incremental costs that would be avoided by the
addition of a QF to its system. Whether identification of incremental costs can be accomplished
through a single run or multiple runs is not the issue. The issue is that the methodology properly
focus on identifying the incremental costs that can be avoided rather than the method being
predicated, as it has been in the past, on making surplus sales at AURORA-forecasted market
prices. Staff believes that the Commission's intent in Order No. 32697 was clear, and that
Simplot and Clearwater are reading too much into the Order's language in an effort to support
their dissatisfaction with the Order's result.
Simplot and Clearwater's argument seems to be based on an unsupported presumption that
a "single-run" approach produces rates that are below the utility's "full" avoided cost. Simplot
and Clearwater fail to demonstrate how the methodology proposed by Idaho Power and accepted
by the Commission does not produce "full" avoided costs, or define exactly what "full" avoided
costs actually are. Further, they fail to demonstrate that rates generated by an hourly incremental
cost approach will always be less than those produced by a "two-run" approach. Simplot and
Clearwater cite as evidence, the following language from FERC:
One way of determining the avoided cost is to calculate the total (capacity and
energy) costs that would be incurred by a utility to meet a specified demand in
comparison to the cost that the utility would incur if it purchased energy or
capacity or both from a qualifying facility to meet part of its demand, and supplied
its remaining needs from its own facilities. The difference between these two
figures would represent the utility's net avoided cost. In this case, the avoided
costs are the excess of the total capacity and energy cost of the system developed
in accordance with the utility's optimal capacity expansion plan, excluding the
qualifying facility, over the total capacity and energy cost of the system (before
payment to the qualifying facility) developed in accordance with the utility's
optimal capacity expansion plan including the qualifying facility.
FERC Order No. 69, 45 Fed. Reg. at 12,216 (emphasis added).
Simplot and Clearwater fail to recognize that the approach suggested by FERC is only one
y to determine avoided costs, but not the only way. Idaho Power's approach focused the
determination of avoided cost on the incremental costs that would be avoided, not solely on the
value of potential market sales. Quite simply, Simplot and Clearwater's arguments fail to present
any persuasive evidence that the Commission's decision to accept Idaho Power's hourly
incremental approach is unreasonable, unlawful, erroneous, or not in conformity with the law.
STAFF ANSWER 7 JANUARY 15, 2013
The Commission stated the following in Order No. 32697:
The Commission finds Idaho Power's proposed modifications to the IRP
Methodology reasonable. We agree that the Company's revisions properly focus
the determination of avoided costs on incremental costs, not solely on the value of
potential market sales. The result, we find, is a more accurate avoided cost.
Moreover, we find that the modified methodology comports with the definition of
avoided cost contained in FERC regulations. Therefore, we direct Idaho Power,
Avista and Rocky Mountain Power to utilize displaceable incremental costs in
calculating avoided cost rates under the IRP Methodology.
The Commission found that Idaho Power's proposed approach produced a more accurate avoided
cost and that it comports with the FERC's definition of avoided cost. All parties in the case,
including Simplot and Clearwater, had full opportunity to present arguments in support of their
positions. The Commission's decision was sound and based on the evidence presented. The
decision was reasonable, lawful, not erroneous, and conforms with the law; therefore,
reconsideration is not justified. Simplot and Clearwater's Petitions for Reconsideration are simply
a thinly disguised attempt to reverse a decision that they find undesirable. Staff recommends that
the Commission reject Simplot and Clearwater's arguments.
Finally, Staff continues to believe that a determination regarding ownership of renewable
energy credits is within the Commission's statutory authority. The Commission's decision in
Order No. 32697 is not unreasonable, unlawful, erroneous and it is consistent with both federal
and state laws.
1 TH Dated at Boise, Idaho, this I
1
day of January 2013.
a
Kris me A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i:umiso:comments/gnre 11 .3ksrps stipulation commentsdoc
STAFF ANSWER 8 JANUARY 15, 2013
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 15TH DAY OF JANUARY 2013,
SERVED THE FOREGOING ANSWER OF THE COMMISSION STAFF TO
PETITIONS FOR RECONSIDERATION AND CLARIFICATION, IN CASE
NO. GNR-E- 11-03, BY E-MAILING A COPY THEREOF TO THE FOLLOWING:
DONOVAN E WALKER
IDAHO POWER COMPANY
P0 BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
201 S MAIN STSTE2300
SALT LAKE CITY UT 84111
E-mail: [e-mail]
MICHAEL G ANDREA
AVISTA CORPORATION
1411 E MISSION AVE
SPOKANE WA 99202
E-mail: [e-mail]
ROBERT D KAHN
NW & INTERMOUNTAIN POWER
PRODUCERS COALITION
1117 MINOR AVE STE 300
SEATTLE WA 98101
E-mail: rkahncnippc.org
ROBERT A PAUL
GRAND VIEW SOLAR II
15690 VISTA CIRCLE
DESERT HOT SPRINGS CA 92241
E-mail: [e-mail]
ELECTRONIC SERVICE ONLY:
DR. DON READING
E-mail: [e-mail]
MARV LEWALLEN
CLEARWATER PAPER CORP
601 W RIVERSIDE AVE STE 1100
SPOKANE WA 99201
E-mail: marv.lewallenäclearwaterpaper.com
PETER J RICHARDSON
GREGORY M ADAMS
RICHARDSON & O'LEARY
515 N 27TH STREET
BOISE ID 83702
E-mail: peter@,richardsonandoleary.com
gregrichardsonandoleary.com
DON STURTEVANT
ENERGY DIRECTOR
J R SIMPLOT COMPANY
P0 BOX 27
BOISE ID 83707-0027
E-mail: [e-mail]
JAMES CARKULIS
EXERGY DEVELOPMENT GROUP OF
IDAHO LLC
802 W BANNOCK ST STE 1200
BOISE ID 83702
E-mail: [e-mail]
BILL BROWN CHAIR
BOARD OF COMMISSIONERS
OF ADAMS COUNTY ID
P0 BOX 48
COUNCIL ID 83612
E-mail: [e-mail]
TED S SORENSON P E
BIRCH POWER COMPANY
5203 SOUTH 11TH EAST
IDAHO FALLS ID 83404
E-mail: [e-mail]
CERTIFICATE OF SERVICE
R GREG FERNEY BILL PISKE MGR
MIMURA LAW OFFICES PLLC INTERCONNECT SOLAR DEVELOPMENT LLC
2176 E FRANKLIN RD STE 120 1303 E CARTER
MERIDIAN ID 83642 BOISE ID 83706
E-mail: [e-mail] E-mail: [e-mail]
RONALD L WILLIAMS WADE THOMAS
WILLIAMS BRADBURY DYNAMIS ENERGY LLC
1015 W HAYS ST 776 E RIVERSIDE DR STE 15
BOISE ID 83702 EAGLE ID 83616
E-mail: [e-mail] E-mail: [e-mail]
JOHN R LOWE LIZ WOODRUFF
RENEWABLE ENERGY COALITION KEN MILLER
12050 SW TREMONT ST SNAKE RIVER ALLIANCE
PORTLAND OR 97225 BOX 1731
E-mail: [e-mail] BOISE ID 83701
E-mail: [e-mail]
[e-mail]
C THOMAS ARKOOSH ELECTRONIC SERVICE ONLY:
ARKOOSH EIGUREN
802 W BANNOCK, 9TH FL BRIAN OLMSTEAD
P0 BOX 2900 GENERAL MANAGER
BOISE ID 83701 E-mail: [e-mail]
E-mail: [e-mail]
TED DIEHL
GENERAL MANAGER
E-mail: [e-mail]
DON SCHOENBECK
RCS
E-mail: [e-mail]
LORI THOMAS
CAPITOL LAW GROUP PLLC
E-mail: lthomascapitollawgroup.com
M J HUMPHRIES MEGAN WALSETH DECKER
BLUE RIBBON ENERGY LLC SR STAFF COUNSEL
3470 RICH LANE RENEWABLE NW PROJECT
AMMON ID 83406 421 SW 6TH AVE STE 1125
E-mail: [e-mail] PORTLAND OR 97204
E-mail: megan(rnp.org
DEAN J MILLER
CHAS McDEVITT THOMAS H NELSON
MeDEVITT & MILLER LLP RENEWABLE ENERGY
P0 BOX 2564 COALITION
BOISE ID 83701 P0 BOX 1211
E-mail: [e-mail] WELCHES OR 97067
[e-mail]
CERTIFICATE OF SERVICE
GLENN IKEMOTO
MARGARET RUEGER
IDAHO W1NDFARMS LLC
672 BLAIR AVE
PIEDMONT CA 94611
E-mail: [e-mail]
margaretenvisionwind.com
TAUNA CHRISTENSEN
ENERGY INTEGRITY PROJECT
769N 1100E
SHELLEY ID 83274
E-mail: tauna(energvintegrityproject.org
BENJAMIN J OTTO
IDAHO CONSERVATION LEAGUE
P0 BOX 844
BOISE ID 83702
DEBORAH E NELSON
KELSEY J NTJNEZ
GIVENS PURSLEY
601 W BANNOCK ST (83702)
P0 BOX 2720
BOISE ID 83701-2720
E-mail: [e-mail]
[e-mail]
SECRETARY
CERTIFICATE OF SERVICE