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Home My WebLink About20121025Comments.pdfIDAHO - PlVER® RECEJt.;. An IDACORP Company fl:12OCT25 PM 2: 17 DONOVAN E. WALKER rU ... Lead Counsel UTILtT1 dwaIker(äidahopower.com October 25, 2012 VIA HAND DELIVERY Jean D. Jewell, Secretary Idaho Public Utilities Commission 472 West Washington Street Boise, Idaho 83702 Re: Case No. GNR-E-11-03 PURPA SAR and IRP Methodologies - Idaho Power Company's Comments on Partial Settlement Stipulation Dear Ms. Jewell: Enclosed for filing in the above matter are an original and seven (7) copies of Idaho Power Company's Comments on Partial Settlement Stipulation. Verytr lyyours, onovan E. Walker DEW:evp Enclosures 1221 W. Idaho St. (83702) P.O. Box 70 Boise, ID 83707 DONOVAN E. WALKER (ISB No. 5921) Idaho Power Company 1221 West Idaho Street (83702) P.O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-5317 Facsimile: (208) 388-6936 dwalkercidahopower.com RECE" 70!28CT25 P11 2:17 --:1 U Lt I Attorney for Idaho Power Company 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 PUBLISHED AVOIDED COST RATES. CASE NO. GNR-E-11-03 IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION COMES NOW, Idaho Power Company ("Idaho Power" or 'Company"), and comments on the Partial Settlement Stipulation filed in the above matter on October 2, 2012, by the Idaho Public Utilities Commission Staff ("Commission"). Idaho Power did not sign the proposed Settlement Stipulation primarily because significant qualifying facility ("QF") parties did not agree, and did not sign onto the stipulation. Without complete agreement from all of the QF parties, Idaho Power saw little to no value in entering into some kind of compromise of its position that it has set forth in the record before the Commission in this proceeding. Frankly many of the non utility parties that did sign onto the Stipulation are not directly affected by the terms of IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -1 the stipulation, and are not the parties likely to bring some kind of challenge or objection to the provisions that are the subject of the proposed stipulation. Consequently, Idaho Power maintains its position that it has put forth on the record in this proceeding: The Commission should maintain its presently required Delay Damacies and Delay Damacie Security provisions in PURPA QF contracts. The provisions regarding Delay Damages and Delay Damage Security contained in the Commission-approved PURPA Firm Energy Sales Agreements ("FESA") are necessary, reasonable, non-punitive, and in the public interest. Moreover, each party that entered into a FESA is precluded from challenging such provisions under the well-established doctrines of res judicata and collateral estoppel. See, Stokes Rebuttal, p. 46-47; Idaho Power's Legal Brief, section Il.A.8, p. 27-32. An actual damages model, such as that contemplated in the Partial Stipulation, does not adequately compensate customers for the risks assumed by customers and the damages incurred by a QF breach of the FESA. Delay liquidated damages provisions have been included in PURPA FESA contracts approved by the Commission since at least 2007. See, Case No. IPC-E-06-36. In addition, one of the first Commission approved FESAs to contain terms requiring the project to post liquid security was the FESA for Cassia Gulch Wind Park and Tuana Springs Energy, Case No. IPC-E-09-24. In that case the Commission approved provisions requiring the posting of liquid security in the amount of $20 per kW of project capacity. The Commission considered and approved provisions providing for the posting of liquid security in the amount of $20 per kW of project capacity in at least four other PURPA FESAs. See, Case No. IPC-E-09-18, IPC-E-09-19, IPC-E-09-20, and IPC-E- IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -2 09-25. The Commission has since analyzed and approved provisions requiring the posting of liquid security in the amount of $45 per kW of nameplate capacity in at least twenty-seven different PURPA FESAs. See, Case No. IPC-E-10-02, IPC-E-10-05, IPC- E-1 0-15, IPC-E-1 0-16, IPC-E-1 0-17, IPC-E-1 0-18, IPC-E-1 0-19, IPC-E-1 0-22, IPC-E- 10-26, IPC-E-1 0-37, IPC-E-1 0-38, IPC-E-1 0-39, I PC-E-1 0-40, [PC-E-10-41, IPC-E-1 0- 42, I PC-E-1 0-43, I PC-E-1 0-44, IPC-E-1 0-45, I PC-E-1 0-47, I PC-E-1 0-48, IPC-E-1 0-49, IPC-E-1 0-50, IPC-E-1 1-09, IPC-E-1 1-10, IPC-E-1 1-25, IPC-E-1 1-26, and IPC-E-1 1-27. In approving the change in the amount of delay damage security that is acceptable for such contracts from $20 to $45 per kW of nameplate capacity, the Commission specifically found such delay security to be reasonable, necessary, and not to be punitive. Order No. 31034, p. 3-4, Case No. IPC-E-10-02 (2010). Idaho Power supports and recommends the Commission's continued requirements to provide for delay liquidated damages, and well as delay damage security in its approved PURPA FESAs. As referenced above this requirement has been specifically addressed in several cases, and found by the Commission to be a just, reasonable, and appropriate term for a PURPA QF contract that is in the public interest. With regard to the reasonableness of liquidated damages, some witnesses, such as Dr. Reading, focus only upon the comparison to the cost of replacement power should the QF not bring its project on-line when it commits itself to a Scheduled Operation Date that it chooses in the contract. This highlights an important part of Idaho Power's case that it provided much evidence of in its direct testimony, and that is typically the Company can acquire replacement power from other available sources at a cost that is below the contract price in the PURPA contract. This, however, is not the only measure of harm and damages. In addition to the system operation and planning problems that failure to bring generation units on-line in a timely manner and when they are scheduled to come on-line, there is the substantial value IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -3 that the QF gets by locking in a price, and a pricing stream with its contract. If a QF is allowed to come on-line, or not, at its choosing with no consequences and no liability for the value of that option, then customers are left in a financially disadvantaged position and uncompensated for the price lock and option they extended to the QF project. There are financial instruments that can be purchased that would allow a utility to lock in a 20-year, or long-term, stream of prices, and have the option to not execute on that option at a date certain in the future. Such products are very costly, and could be as much as $5 per MWh of power. The $45 per kW of nameplate capacity is very small in comparison, but at least provides an agreed upon valuation of an assessment of risk that the customers are bearing associated with whether a QF generator brings its project on-line when it commits that it will. Stokes, Rebuttal, p. 46-47. Regardless of whether market prices are higher or lower than prices contained in the QF contract, Idaho Powers customers end up assuming the risk associated with the uncertainty, and have no control over whether the QF energy will be there or not. There is value associated with reducing or eliminating risk even if the potential positive and negative outcomes are evenly split. A fixed rate QF contract eliminates this risk for the QF developer and pushes it entirely onto Idaho Powers customers. As stated in Mark Stokes' rebuttal testimony, "There are financial instruments that can be purchased that would allow a utility to lock in a 20-year, or long-term, stream of prices, and have the option to not execute on that option at a date certain in the future. Such products are very costly, and could be as much as $5 per MWh of power. Stokes, Rebuttal, p. 47 (emphasis added). The financial instrument referenced above would be a "put" option. It is important to note the emphasized section of the passage above in that a put option allows a party to not execute on the option if conditions are not favorable for the option holder. It is exactly this option that is available to the QF, and the exercise of which the IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -4 QF my choose or not choose depending upon the favorableness, or unfavorableness of the prices contained in its FESA in relation to market prices or other factors. In this way, a QF has the ability to eliminate its own downside, to the direct and substantial harm and detriment of Idaho Power's customers, and take advantage of the upside. Consequently while in theory, one may argue that prices may vary either above or below those set in the FESA, it is the QF that has the ability to eliminate the downside, from its perspective, and it is the customers that take all of the risk, and shoulder a disproportionate amount of price deviation from that which is contracted for. CONCLUSION The delay damage and delay damage security provisions that the Commission has evolved, approved, and implemented as part of its federally delegated responsibility to implement PURPA in the state of Idaho, represents a just, reasonable, necessary, and non-punitive provision of a PURPA QF contract with a utility. It is aimed at providing compensation for cost and risk allocations in the relationship between the utility and the QF that are difficult to quantify with precision, but are none-the-less very real to the utility and its customers. Idaho Power asks that the Commission continue to authorize and require the provisions in a PURPA QF contract that provide for delay damages and delay damage security. DATED at Boise, Idaho, this 25 th day of Octobç 2012. X____ DONOVAN E. WALKER Attorney for Idaho Power Company IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -5 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 25 th day of October 2012 I served a true and correct copy of IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Kristine A. Sasser Donald L. Howell, II Deputy Attorneys General Idaho Public Utilities Commission 472 West Washington (83702) P.O. Box 83720 Boise, Idaho 83720-0074 Avista Corporation Michael G. Andrea Avista Corporation 1411 East Mission Avenue, MSC-23 Spokane, Washington 99202 PacifiCorp dibla Rocky Mountain Power Daniel E. Solander PacifiCorp d/b/a Rocky Mountain Power 201 South Main Street, Suite 2300 Salt Lake City, Utah 84111 Exergy Development, Grand View Solar II, J.R. Simplot, Northwest and Intermountain Power Producers Coalition, Board of Commissioners of Adams County, Idaho, and Clearwater Paper Corporation Peter J. Richardson Gregory M. Adams RICHARDSON & O'LEARY, PLLC 515 North 27th Street (83702) P.O. Box 7218 Boise, Idaho 83707 Exergy Development Group of Idaho, LLC James Carkulis, Managing Member Exergy Development Group of Idaho, LLC 802 West Bannock Street, Suite 1200 Boise, Idaho 83702 Hand Delivered U.S. Mail Overnight Mail FAX X Email kris.sassercpuc.idaho.qov don. howell(@-Puc. idaho.go Hand Delivered U.S. Mail Overnight Mail FAX X Email michael. and reaavistacorp.com Hand Delivered U.S. Mail Overnight Mail FAX X Email daniel.solander(pacificorp.com Hand Delivered U.S. Mail Overnight Mail FAX X Email petercrichardsonandoIearv.com qregrichardsonandoleary.com Hand Delivered U.S. Mail Overnight Mail FAX X Email jcarkulisexerciydevelopment.com IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT' STIPULATION -6 Dr. Don Reading 6070 Hill Road Boise, Idaho 83703 Grand View Solar II Robert A. Paul Grand View Solar II 15690 Vista Circle Desert Hot Springs, California 92241 J.R. Simplot Company Don Sturtevant, Energy Director J.R. Simplot Company One Capital Center 999 Main Street P.O. Box 27 Boise, Idaho 83707-0027 Northwest and Intermountain Power Producers Coalition Robert D. Kahn, Executive Director Northwest and Intermountain Power Producers Coalition 1117 Minor Avenue, Suite 300 Seattle, Washington 98101 Board of Commissioners of Adams County, Idaho Bill Brown, Chair Board of Commissioners of Adams County, Idaho P.O. Box 48 Council, Idaho 83612 Clearwater Paper Corporation Mary Lewallen Clearwater Paper Corporation 601 West Riverside Avenue, Suite 1100 Spokane, Washington 99201 Hand Delivered U.S. Mail Overnight Mail FAX X Email dreadinqmindspring.com d r(ben iohnsonassociates.com Hand Delivered U.S. Mail Overnight Mail FAX X Email robertapaul08cqmail.com Hand Delivered U.S. Mail Overnight Mail FAX X Email don.sturtevant(simpIot.com Hand Delivered U.S. Mail Overnight Mail FAX X Email rkahncnirøc.orci Hand Delivered U.S. Mail Overnight Mail FAX X Email bd brownfrontiernet. net Hand Delivered U.S. Mail Overnight Mail FAX X Email mary.lewaIlenclearwaterpaper.com IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -7 Renewable Energy Coalition and Dynamis Energy, LLC Ronald L. Williams WILLIAMS BRADBURY, P.C. 1015 West Hays Street Boise, Idaho 83702 Renewable Energy Coalition John R. Lowe, Consultant Renewable Energy Coalition 12050 SW Tremont Street Portland, Oregon 97225 Dynamis Energy, LLC Wade Thomas, General Counsel Dynamis Energy, LLC 776 East Riverside Drive, Suite 150 Eagle, Idaho 83616 Interconnect Solar Development, LLC R. Greg Ferney MIMURA LAW OFFICES, PLLC 2176 East Franklin Road, Suite 120 Meridian, Idaho 83642 _Hand Delivered U.S. Mail _Overnight Mail FAX X Email roncwilliamsbradbury.com Hand Delivered U.S. Mail Overnight Mail FAX X Email iravenesanmarcosvahoo.com Hand Delivered U.S. Mail Overnight Mail FAX X Email wthomas(dynamisenemy.com Hand Delivered U.S. Mail Overnight Mail FAX X Email greqmimuraIaw.com Bill Piske, Manager Hand Delivered Interconnect Solar Development, LLC U.S. Mail 1303 East Carter Overnight Mail Boise, Idaho 83706 FAX X Email biIIpiskeccabIeone.net Renewable Northwest Project, Idaho Windfarms, LLC, and Ridgeline Energy LLC Dean J. Miller Chas. F. McDevitt McDEVITT & MILLER LLP 420 West Bannock Street (83702) P.O. Box 2564 Boise, Idaho 83701 Megan Walseth Decker Senior Staff Counsel Renewable Northwest Project 421 SW 6th Avenue, Suite 1125 Portland, Oregon 97204 Hand Delivered U.S. Mail Overnight Mail FAX X Email joe(ämcdevitt-miIler.com chasmcdevitt-milIer.com Hand Delivered ___U.S. Mail Overnight Mail FAX X Email meqanrnp.orq IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -8 Idaho Windfarms, LLC Glenn Ikemoto Margaret Rueger Idaho Windfarms, LLC 672 Blair Avenue Piedmont, California 94611 Twin Falls Canal Company, North Side Canal Company, Big Wood Canal Company, and American Falls Reservoir District No. 2 C. Thomas Arkoosh CAPITOL LAW GROUP, PLLC 205 North 10th Street, 4th Floor P.O. Box 2598 Boise, Idaho 83701-2598 ELECTRONIC SERVICE ONLY Lori Thomas CAPITOL LAW GROUP, PLLC 205 North 10th Street, 4th Floor P.O. Box 2598 Boise, Idaho 83701-2598 ELECTRONIC SERVICE ONLY Donald W. Schoenbeck RCS, Inc. 900 Washington Street, Suite 780 Vancouver, Washington 98660 ELECTRONIC SERVICE ONLY Twin Falls Canal Company Brian Olmstead, General Manager Twin Falls Canal Company P.O. Box 326 Twin Falls, Idaho 83303 ELECTRONIC SERVICE ONLY North Side Canal Company Ted Diehl, General Manager North Side Canal Company 921 North Lincoln Street Jerome, Idaho 83338 Hand Delivered U.S. Mail Overnight Mail FAX X Email -glen nienvisionwind.com marciaretenvisionwind .com _Hand Delivered U.S. Mail _Overnight Mail FAX X Email tarkooshcaDitollawqroup.com Hand Delivered U.S. Mail Overnight Mail FAX X Email lthomasccapitollawQroup.com Hand Delivered U.S. Mail Overnight Mail FAX X Email dwscr-c-s-inc.com Hand Delivered U.S. Mail _Overnight Mail FAX X Email olmstead(tfcanal.com Hand Delivered U.S. Mail Overnight Mail FAX X Email nscanal(äcableone.net IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -9 Birch Power Company Ted S. Sorenson, P.E. Birch Power Company 5203 South 11th East Idaho Falls, Idaho 83404 Blue Ribbon Energy LLC M.J. Humphries Blue Ribbon Energy LLC 3470 Rich Lane Ammon, Idaho 83406-7ñ8 Arron F. Jepson Blue Ribbon Energy LLC 10660 South 540 East Sandy, Utah 84070 Idaho Conservation League Benjamin J. Otto Idaho Conservation League 710 North Sixth Street (83702) P.O. Box 844 Boise, Idaho 83701 Snake River Alliance Liz Woodruff, Executive Director Ken Miller, Clean Energy Program Director Snake River Alliance P.O. Box 1731 Boise, Idaho 83701 Energy Integrity Project Tauna Christensen Energy Integrity Project 769 North 1100 East Shelley, Idaho 83274 Idaho Wind Partners I, LLC Deborah E. Nelson Kelsey J. Nunez GIVENS PURSLEY LLP 601 West Bannock Street (83702) P.O. Box 2720 Boise, Idaho 83701-2720 Hand Delivered U.S. Mail Overnight Mail FAX X Email ted(tsorenson.net _Hand Delivered U.S. Mail _Overnight Mail FAX X Email blueribbonenercivimaiI.com Hand Delivered U.S. Mail Overnight Mail FAX X Email arronesg(aol.com Hand Delivered U.S. Mail Overnight Mail FAX X Email bottoidahoconservation.orq Hand Delivered U.S. Mail Overnight Mail FAX X Email lwoodruffsnakeriveralliance.orQ kmiller(snakeriveralIiance.orci _Hand Delivered U.S. Mail _Overnight Mail FAX X Email taunaenerqyinteqrityproiect.orq Hand Delivered U.S. Mail Overnight Mail FAX X Email den(äciivenspursley.com kincciivenspursley.com IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -10 Mountain Air Projects, LLC J. Kahle Becker The Alaska Center 1020 West Main Street, Suite 400 Boise, Idaho 83702 Michael J. Uda UDA LAW FIRM, P.C. 7 West 6th Avenue, Suite 4E Helena, Montana 59601 Hand Delivered U.S. Mail Overnight Mail FAX X Email kahIe(kahlebeckerlaw.com Hand Delivered U.S. Mail Overnight Mail FAX X Email mudacmthelena.com Eliz th Paynteregal Assistant IDAHO POWER COMPANY'S COMMENTS ON PARTIAL SETTLEMENT STIPULATION -11