20011221Comments.pdf

- 3{ob
SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY TO AMEND
SCHEDULE 86-COGENERATION AND
SMALL POWER PRODUCTION-NON.FIRM
ENERGY.
ii[cilvt0
ri!"[I]
?Cili llil 2l Atl l0' 28
r_ q' _'; i 1-'
,-r i iLtT ILS CCjiililSSl tit
Street Address for Express Mail
472W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAIIO PUBLIC UTILITIES COMMISSION
)
)
)
)
)
)
CASE NO. IPC-E-01-40
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment Deadline/Protest Deadline
issued on November 23,2001, submits the following comments.
On January 22,1997, the Commission issued Order No. 26750 approving the curent
Schedule 86. On May 3, l999,the Commission issued Order No. 28033 approving the current
methodology for computing the purchase price, or avoided energy cost, for non-firm purchases
under Schedule 86. The purchase price section of Schedule 86 currently provides two options
under which PURPA qualifying facilities can sell non-firm energy to the Company:
Option A. The purchase price is an amount equal to the monthly weighted average cost
per kilowatt hour of the daily on-peak and off-peak Dow Jones Mid-Columbia Electricity Price
lndex prices for non-firm energy published in the Wall Street Joumal (Mid-C lndex) minus
$0.004 per kWh.,
1STAFF COMMENTS DECEMBER2I,2OOT
Option B. Under the Net Metering Option, customer generation is credited at a rate equal
to the customer's retail rate less a discount to allow Idaho Power to recover its investment in
facilities and service costs.
Staff Analysis
1. Removal of Schedule 86 Option B
Idaho Power has requested that the Commission approve a new tariff Schedule 84-Net
Metering-that would take the place of Option B under Schedule 86. Reference Case No.
IPC-E-0l-39. Staff analysis of Idaho Power's proposed new Schedule 84-Net Metering is
included in Staff Comments in Case No. IPC-E-OI-39 and is not discussed here. Staff has no
objection to eliminating Option B from Schedule 86, assuming the Commission approves a new
Schedule 84 with some form of net metering provisions.
2. Tariff Eligibility Criteria
Idaho Power proposes to limit the applicability of Schedule 86 to PURPA qualifying
facilities (QFs) with capacity name-plate ratings of less than 1 MW. This change, the Company
contends, will bring Schedule 86 into conformity with the Commission's current policy
concerning qualifying facility purchase arrangements. Qualifying facilities smaller than 1 MW
are entitled to Commission-established published rates; but qualifying facilities 1 MW and larger
are required to negotiate contracts with Idaho Power containing power purchase prices computed
using a methodology based on the Company's integrated resource plan.
Staff opposes the Company's proposal to limit Schedule 86 to projects smaller than one
megawatt. Schedule 86 is the only means currently in place for establishing avoided cost rates
for non-firm energy. The existing methodologies for smaller and larger than I MW facilities are
specifically designed for firm energy only. Neither of these methodologies can fairly determine
the value of non-firm energy. Consequently, if Schedule 86 is limited to projects smaller than
for 1 MW, there will be no consistent means for determining non-firm energy rates for 1 MW
and larger facilities. Given that the vast majority of non-firm energy currently purchased from
QFs by Idaho Power is from a handful of facilities all larger than 1 MW, there must be some
tariff or method in place to accommodate these types of non-firm energy sales.
As an alternative to restricting Schedule 86 to projects smaller than 1 MW, Staff suggests
that Idaho Power add provisions to Schedule 86 permitting the Company to negotiate non-firm
2STAFF COMMENTS DECEMBERZI,2OOI
energy rates on a case-by-case basis for projects 1 MW and larger. This would be consistent
with the manner in which the Company has handled several recent non-firm energy agreements
with large industrial customers. In addition, such a provision explicitly acknowledges Idaho
Power's continuing obligation under PURPA to purchase energy from all QFs. Without such an
explicit provision, there could be a perception that the Company is willing to sign non-firm
energy contracts with some customers but not with others. Staff believes that the logical starting
point for negotiations for I MW and larger projects should be the under 1 MW Schedule 86
rates, with discounts or bonuses to this price based on individual characteristics of each large
project.
3. Schedule 86 Purchase Price
Idaho Power proposes to set the purchase price at an amount equal to eighty-five percent
of the monthly weighted average non-firm Mid-C lndex, consistent with several purchase and sale
agreements the Company has recently entered into with various sellers. By establishing the
purchase price as a percentage discount from the Mid-C lndex, Idaho Power's customers, the
Company contends, can be confident that non-firm energy Idaho Power is obligated to purchase
under Schedule 86 can be resold in the wholesale market at a price that will recover Idaho
Power's purchase costs plus transmission costs. Conversely, the Company contends that when
Idaho Power desires to retain the non-firm energy delivered by a seller under Schedule 86, Idaho
Power can be assured that the purchase price will be at least as beneficial as a wholesale non-firm
market purchase.
Staff contends that the value of non-firm generation to Idaho Power varies depending
upon whether the Company needs the generation or not. When it needs the generation, the value
should be equal to full market price plus the costs of transmission, losses and transaction costs
incurred in getting an equivalent amount of energy to Idaho Power's system. When it does not
need the generation, the value is equal to market price minus the costs of transmission, losses and
transaction costs incurred in getting the energy to the market. It is not practical to price customer
generation differently depending on whether Idaho Power needs the generation. Similarly, it is
not realistic to assume that Idaho Power will always need the generation or that it will need it
even half of the time. As a result, Staff believes it is reasonable to price non-firm customer
generation at a discount from the non-firm market price. This provides a safeguard that the
JSTAFF COMMENTS DECEMBER 21, 2OOI
purchase and subsequent resale of non-firm energy at times when the Company does not actually
need the generation will not harm Idaho Power and its customers.
The costs of transmission, losses and transaction costs vary somewhat depending on the
amount of energy being considered and the location tolfrom which it will be purchased/sold.
However, these costs are typically in the range of $4 per MWh. For market prices in their
current range (approx. $27A4Wh on l2ll9l01), these costs represent about 15 percent of market
price. Consequently, in the range of current market prices, the price in Schedule 86 of Mid-C
minus 4 mills is approximately equal to 85 percent of market price. Thus, Idaho Power's new
proposed pricing method gives nearly the same price as the pricing method now in effect. Staff
believes that 85 percent of market price is fair to customer generators while offering price
protection to Idaho Power and its ratepayers in the event the Company is forced to sell customer
generation it does not need.
Staff Recommendations
Staff recommends that the Commission approve Idaho Power's request to eliminate
Option B from the current Schedule 86, provided the Commission approves the Company's
request in companion Case No. IPC-E-01-39 to implement a new Schedule 84. If the
Commission decides not to approve the proposed new Schedule 84, then Staff recommends that
Option B continue to be included in Schedule 86.
Staff recommends that the Commission reject Idaho Power's request to limit eligibility
under Schedule 86 to facilities smaller than 1 MW. As an alternative, Staff recommends that
Schedule 86 be amended to include a provision requiring Idaho Power to negotiate contracts on a
case-by-case basis for projects 1 MW and larger. Staff recommends that 85 percent of market
price be the starting point for price negotiations, with discounts or bonuses based on individual
project characteristics.
Staff recommends that the Commission accept 85 percent of non-firm market price as the
price for purchases under Schedule 86.
4STAFF COMMENTS DECEMBER 2I, 2OOT
Reqpectivelysubmitted this Jfi^tof December2001.
-,hfu-Aflffir.a
Technioal Staff: Rick Sterling
SW:R.S :i/umiseJcoffiruldipce0l.4ewrps
SoottrWoodbury
Deputy Attorney General
5STAFF COMMENTS DBCEMBER 2I,2OOI
CERTIHCATE OF SERYICE
I HEREBY CERTIFY THAT I HAVE TI{IS 21ST DAY OF DECEMBER 2001,
SERVED T}IE, FOREGOING COMMENTS OF TIIE COMNflSSION STAFF, IN CASE
NO. IPC-E.01-40, BY MAILING A COPY T}IE,REOF, POSTAGE PREPAID, TO THE
FOLLOWING:
BARTON L KLINE
SEMORATTORNEY
IDAIIO POWER COMPANY
PO BOX 70
BOrSE ID 83707-0070
MAGGIE BRILZ
DIRECTOR OF PRICING
IDAHO POWER COMPA}IY
PO BOX 70
BOrSE ID 83707-0070
CERTIFICATE OF SERVICE