Reply Comments.pdf

BARTON L. KLINE ISB #1526
Idaho Power Company
P. 0. Box 70
Boise, Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
Attorney for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. IPC-E-02-8
REPLY COMMENTS OF IDAHO
POWER COMPANY
IN THE MATTER OF THE FILING BY
IDAHO POWER COMPANY OF ITS
2002 ELECTRIC INTEGRATED
RESOURCE PLAN (IRP).
COMES NOW, Idaho Power Company ("Idaho Power" or "the Company"),
by and through its attorney of record, and in response to the comments of the
Commission Staff and other interested parties, hereby submits the following reply
comments. Because the comments received addressed substantially similar subjects,
these reply comments will address the comments by subject rather than focusing on the
individual comments of the individual commenters.
1. GARNET POWER PURCHASE AGREEMENT.
Several commenters (Staff, p. 2-3, Idaho Rivers United, et al., p. 2)
correctly identify the December 14, 2001 Power Purchase Agreement between Idaho
Power and Garnet Energy LLC (Garnet PPA) as an important component of the
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Company's 2002 Integrated Resource Plan (IRP) as filed. In their comments they
express the concern that without the Garnet PPA, the 2002 IRP as currently filed will not
accurately portray the actual resource plan the Company is likely to pursue.
Idaho Power acknowledges that the removal of the Garnet PPA from the
2002 IRP resource stack will require that the Company move expeditiously to pursue
alternative resources to ensure that the Company will be able to meet its service
obligations in a cost-effective manner.
The Commission has already recognized the need to consider alternative
resources if the Garnet PPA cannot be pursued. In Order No. 29085 the Commission
directed Idaho Power to file a report with the Commission addressing whether or not the
Garnet PPA can be made viable and, if not, the options that are available to Idaho
Power Company for satisfying future load requirements in the absence of the Garnet
PPA (Garnet Report).
In the Garnet Report, filed contemporaneously with these reply comments,
the Company presents its evaluation of several alternative resource strategies to the
Commission. The Garnet Report includes an October 24, 2002 letter from Garnet
Energy LLC in which Garnet Energy LLC describes the changes that would need to be
made to the Garnet PPA to allow Garnet to proceed with financing and development of
the generating resource that would support the Garnet PPA. The October 24 letter also
presents two other proposals from Garnet Energy LLC that could allow Idaho Power to
potentially reduce the cost of acquiring additional generating resources.
In the Garnet Report the Company advises the Commission that based on
its initial investigation, Idaho Power has concluded that there may be other alternatives
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 2
available that would be less expensive than a revision to the PPA along the lines
presented in the second proposal in Garnet's October 24 letter. The two other
proposals contained in the October 24, 2002 Garnet letter may present an opportunity
for the Company to reduce the cost of acquiring alternative resources. These two
proposals will be considered in conjunction with the other resource acquisition strategies
described in the Garnet Report.
The Garnet Report also indicates that since the RFP which led to the
Garnet PPA was issued, a number of changes have occurred in the wholesale energy
markets in the western United States. As a result of these changes, Idaho Power is
optimistic that it will be able to replace the seasonal purchases specified in the Garnet
PPA with a combination of resources including, but not limited to, seasonal wholesale
firm purchase contracts and exchange contracts that will allow the Company to obtain
the capacity and energy that previously would have been supplied under the Garnet
PPA at prices that are equal to or less expensive than the cost of the Garnet PPA. As
of the date of the filing of these reply comments, Idaho Power is actively pursuing
negotiations to secure some of these resource options. The Garnet Report describes
the potential resources currently under negotiation. Idaho Power has presented the
Garnet Report to the Commission with the request that the Commission maintain the
confidentiality of the commercially sensitive information contained in the Report for the
limited period of time that it is necessary for the Company to complete its negotiations.
Idaho Power will regularly update the Commission Staff on the status of the contract
negotiations.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 3
Included with these reply comments as Attachment 1 is a redacted copy of
the Garnet Report.
2. CONSERVATION.
A number of commenters were critical of the fact that the IRP did not
evaluate and assign specific values to potential DSM, conservation programs and new
energy pricing options (i.e. time-of-use pricing, inverted rates, etc.) and use the
assigned values to displace or defer the need to add new generation in the I RP. (Staff
comments, p. 6-10, Idaho Rivers United, et al., p. 7-9, Jeffrey Brooks).
Idaho Power believes that using estimated conservation savings to defer
or displace other resources in the IRP would be inconsistent with prior Commission
orders and has the potential to short-circuit the Commission's recently approved Energy
Efficiency Advisory Group (EEAG) process.
No one doubts that carefully targeted and financially responsible
conservation programs can be beneficial to the utility and the utility's customers.
However, throughout the myriad of Commission orders and hearings before the
Commission addressing the role of conservation in resource planning, the Idaho PUC
has consistently cautioned Idaho Power to realistically assess both the financial costs
and the benefits of conservation. For example, in 1989, in Case No. U-1500-170, the
Commission considered a proposal by Idaho Power, Utah Power and Washington
Water Power that estimated conservation benefits be utilized to defer other resources
for purposes of determining the utility's avoided costs. At that time Idaho Power and the
other utilities proposed that the estimated capacity and energy savings from
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conservation programs be included in the resource stack thereby deferring the need for
new resources and reducing the Company's avoided costs. In Order No. 22636 the
Commission addressed this issue as follows:
All three of the utilities plan to use conservation as their next
resource. Yet we are unaware of a single electric utility that has
documented a reliable, predictable conservation resource
procurement program. We applaud the Idaho electric utilities for
their new-found enthusiasm for conservation. However, until there
is sufficient industry experience in estimating the quantity, quality,
and cost of conservation resources so that they are procurable and
reliable, we will not consider them avoidable resources: You can't
avoid what you can't procure. Therefore, only conservation
resources actually contracted for shall be used to extend the time
until load/resource balance; estimated future conservation
resources shall not. Utilities are expected to contract only for
reasonably confirmable conservation resources. (Order No. 22636,
p. 51-52).
Over the years there has been considerable disagreement as to whether
conservation should be treated as the equivalent of a generating resource or whether
conservation should be reflected solely as a demonstrated reduction in load. For many
years Idaho Power has prepared and filed a conservation plan with the Commission that
is separate from the I RP and identifies possible conservation load reductions. A copy of
the Company's annual conservation plan is included with each IRP. Under the existing
conservation planning regime, the benefits of existing conservation are reflected in the
IRP as reduced load forecasts. Additional estimated or projected conservation savings
are not treated as resources to defer or replace future planned resources. The
contribution of existing conservation programs manifest themselves in reduced loads
which automatically defer the need for new resources. Conservation demonstrates its
value over time based upon actual results rather than future estimates. The Company
expects that the written reports generated in conjunction with the recently approved
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Energy Efficiency Advisory Group process will be an integral part of the Company's
annual conservation reporting process.
Substantial controversy and uncertainty developed in Idaho during the late
1990s associated with traditionally structured and funded utility conservation programs.
During that time the state of Idaho struggled to define a role for utility conservation
programs that was satisfactory to a broad range of customer classes and that fairly
compensated the utilities for undertaking conservation.
Attachment No. 2 to these comments contains the Commission orders
which chronicle the issues and the decision making process which led to the
modification to the Idaho Power Company approach to traditional utility conservation
programs which are the subject of some comments. The orders set out in the
attachment are a part of the public record on conservation in Idaho and the decisions
leading to the current level of traditional utility conservation programs should be
considered within this historic context.
Recently, the Commission and Idaho Power Company have created a
method to fund conservation (tariff rider) as well as an advisory group (EEAG) to insure
that the Company's conservation programs are realistically assessed and conservation
funds are wisely spent - to insure that Idaho Power Company "contracts only for
reasonably confirmable conservation resources." (Order No. 22636 p. 52)
In response to Order No. 28922, Idaho Power Company proposed a tariff
rider as a means of funding conservation or demand-side management programs. The
Commission recognized in Order No. 29026 that the level of funding may not be
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adequate to support some programs and the Commission will reassess the level of
funding annually when the PCA rates are reviewed in May (Order No. 29026, page 21 ).
The responsibility of the Energy Efficiency Advisory Group is further
defined on page 21 of Order No. 29026:
We believe the Energy Efficiency Advisory Group will be a
valuable resource in recommending and evaluating potential
conservation programs for Idaho Power. The Commission expects
that the Advisory Group will meet frequently to recommend the
initial DSM programs and at least quarterly thereafter ....
Furthermore, Idaho Power shall consult the Energy Efficiency
Advisory Group regarding the need to initiate a comprehensive
DSM study of the IPC service territory relative to the priority for
DSM funds to identify: (1) cost-effective DSM opportunities in each
customer class; (2) estimated costs to fully fund those
opportunities; and (3) opportunities for reductions in peak loads as
well as reductions in total energy consumption.
Idaho Power intends to work closely with the Energy Efficiency Advisory
Group to evaluate potential demand reduction and energy conservation programs.
Idaho Power Company is particularly interested in the demand reduction programs
mentioned in (3) in the above-quoted section of Order No. 29026. Certainly
"opportunities for reductions in peak loads" due to the projected capacity constraints
during times of summer peak should be the primary focus of the Company and the
EEAG in the near term.
Idaho Power Company is working with the Energy Efficiency Advisory
Group to identify appropriate conservation programs given the projected months of
deficiency identified in the 2002 Integrated Resource Plan. The comments of the Staff,
Jeffrey Brooks, and Idaho Rivers United, et al., all urge the Commission to require Idaho
Power, as a part of the integrated resource planning process, to establish goals or
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targets for specific conservation programs to be acquired and used to defer or eliminate
the acquisition of generating resources. Staff's comments indicate that 150 aMW to
400 a MW may be a reasonable total DSM goal. Idaho Power Company does not
support using conservation estimates or targets in the IRP to defer or eliminate planned
future resource acquisitions.
Idaho Power believes that the proper forum for identifying and promoting
new conservation programs is the EEAG process. Requiring Idaho Power to develop
conservation plans within the IRP process would generally render the recently instituted
Energy Efficiency Advisory Group process meaningless. The EEAG process should be
given an opportunity to succeed before it is discarded and replaced by energy goals or
targets developed in the IRP. To the extent that Staff, IRU and others have
recommendations for DSM and energy conservation programs, the Energy Efficiency
Advisory Group process provides the forum in which the conservation programs and
projects should be reviewed.
3. END-USE RESEARCH
Several commenters indicate that as part of the IRP, Idaho Power should
have undertaken an end-use study to identify those loads that should be targeted for
implementation of DSM programs. (Staff, p. 8-9, IRU, et al., p. 5, Brooks, p. 3). Idaho
Power Company disagrees that end-use studies are a critical part of the Integrated
Resource Planning process. The term "end-use " is not mentioned in Idaho PUC Order
No. 22299 directing utilities to submit Resource Management Reports or Integrated
Resource Plans. Idaho Power has been unable to find any reference to the need for
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end-use studies in either Order No. 22299 or any other Commission order approving or
acknowledging prior IRP's. Idaho Power disagrees with the Staff's comment that "Idaho
Power should have completed end-use load research as part of its IRP" (Staff
Comments, page 9, August 30, 2002).
In the past, end-use studies have been used to identify priorities for
evaluating traditional conservation programs. However, Idaho Power does not agree
than an extensive end-use study is currently needed to make good resource planning
decisions.
There is significant agreement among all parties that the primary
contributors to the Idaho Power summer peak are residential and commercial air­
conditioning and irrigation load. During the hottest periods of the summer the Idaho
Power peak was nearly 3000 MW. During temperate fall days the Idaho Power
Company peak load can be 1500 MW or less during the same workday hours as the
summer peak. The primary difference between the 3000 MW demand on a summer
peak day and the 1500 MW demand during the same hours on a temperate fall day is
the reduced air conditioning and irrigation load.
For current resource planning purposes, Idaho Power Company believes
that it will be more productive to focus immediate attention and programs on the major
loads known to contribute to the summer peak, air conditioning and irrigation load,
where there is the greatest likelihood to reduce summer peak demand.
Idaho Power Company is presently investigating demand reduction pilot
programs focusing on residential air-conditioning and irrigation loads. An end-use study
is not essential for developing these pilot programs.
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4. PLANNING CRITERIA
The comments of the I RU, et al., are critical of the Company's decision to
propose a change in its planning criteria in the preparation of the 2002 IRP. Discussion
of planning criteria was a focal point for preparation of the 2002 Integrated Resource
Plan. Prior to the 2000 IRP, the Company's planning criteria included a median level
water assumption and an expected load forecast. It was understood and anticipated by
the Company, the Commission, and the public that 50 percent of the time the Company
could experience less than median stream flows and 50 percent of the time loads could
be higher than forecast. The Company, the Commission, and the public recognized that
if stream flows were below median or loads were higher than forecast, the Company
could be dependent upon market purchases to satisfy what would otherwise be system
deficiencies. Market prices traditionally had not been highly volatile and periodic market
purchase reliance was viewed as wise planning.
With the events of 2000 resulting in high market prices and high market
price volatility, the Company suggested at numerous public meetings that a change in
planning criteria that would reduce the frequency of market purchase reliance might be
a wise planning criteria change. Generally, the public agreed. In the 2002 IRP, Idaho
Power has emphasized planning based upon a 10th percentile water condition and a
10th percentile loads condition. The changes to the planning criteria assume that lower
than median water conditions and higher than expected load conditions are the starting
point for planning additional resources. The result is a stated need for resources
greater than the levels of need that would be identified under a median water condition
and an expected load forecast. By acquiring resources based upon the new starting
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point, Idaho Power Company will rely on market purchases less than under previous
planning criteria. This was the intended goal that Idaho Power believed the
Commission and the public desired.
Commission Staff's comments affirm the Company's belief that a new
planning criteria emphasis on below median water and above expected load is
appropriate. The jointly filed comments of the Land and Water Fund of the Rockies,
Idaho Rivers United and the NW Energy Coalition, however, state that the planning
criteria deserve closer scrutiny. They contend that "contingency planning" should be the
"cornerstone" of the IRP and that the Company should plan for critical water and load
conditions. The fact of the matter is that the Company is involved in "contingency
planning." However the Company views contingency planning as a relatively near term
process rather than a long term process. There is little value in evaluating an extreme
occurrence with low probability at a point in time ten years away. It is easy to criticize
the Company for not being prepared for the market price spikes that occurred in 2000;
however, the fact of the matter is that no one anticipated such volatile market price
movements. Reliance on market purchases as a contingency was a reasonable and
time-tested planning consideration. Times have changed and alternatives to market
purchases to deal with extreme conditions are worth additional evaluation, but the
Company believes that changing the nature of the IRP from a long term planning
document to a contingency evaluation document is inappropriate.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 11
5. ALTERNATIVE RATE STRUCTURES
It was suggested by several commenters that Idaho Power evaluate
alternative rate structures that might modify customer consumption thus reducing the
Company's need to acquire additional resources. The primary alternative rate structure
discussed has been time-of-use pricing. Idaho Power submitted its report to the
Commission regarding the viability of time-of-use pricing for residential customers on
September 12, 2002. The conclusion derived from the Company's study is that until an
automated meter reading system is in place that allows for the economic recording and
collection of customer usage by time-of-day, residential time-of-use pricing is not
economically viable. Idaho Power Company believes it is only fair that any
consideration of alternative rate structures be based on the recognition that alternative
rate structures must not have a negative impact on the Company's earnings due to the
unequal treatment of the Company's revenues and expenses impacted by load shifting.
On September 24, 2002, the Commission initiated Case No. IPC-E-02-12 to provide
interested parties the opportunity to comment on the Company's study. Idaho Power
Company believes that Case No. IPC-E-02-12, and not this case, is the proper forum in
which to consider comments regarding time-of-use pricing.
6. LOAD FORECAST
In reference to the footnote on page 4 of the Staff Comments, Idaho
Power agrees that the household growth rate in Idaho should be slightly below 2.0%
from 2001 to 2011. In addition, we agree that the household growth rate in Idaho
reported on page nine of the 2002 IRP should be reported as 2.0% versus the 2.1 %
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shown. However, the growth rate reported should be calculated over the planning
period 2002-2011.
More important than the number of Idaho households is the number of
Idaho Power service area households. However, Idaho Power service area household
figures are not currently published in the 2002 Economic Forecast and the figures were
provided separately. The number of residential customers is forecast using a
regression model where the number of residential customers is a function of the number
of households in the Idaho Power service territory. The regression model results in a
residential customer growth rate slightly higher than the growth rate in the number of
service area households.
The table below reports the growth rates for Idaho households, Idaho Power
service area households, the number of residential customers, and residential electricity
sales. Growth rates are calculated over the 2002-2011 planning period of this IRP and
again over the period 2001-2011 for comparison.
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Number of Number of
Number of Households IPCo Residential
Households For IPCo Residential Sales
Year for Idaho Service Area Customers (in megawatthours)
2001 479,450 303,372 331,009 4,340,551
2002 489,840 311,074 339,544 4,366,202
2003 499,960 318,340 347,872 4,415,667
2004 510,670 325,771 356,305 4,645,394
2005 521,270 333,516 365,008 4,914,555
2006 532,180 341,060 373,580 5,016,564
2007 542,760 348,489 382,040 5,118,487
2008 553,450 356,101 390,641 5,203,432
2009 563,330 363,747 399,298 5,277,435
2010 573,270 371,346 407,951 5,338,432
2011 583,590 379,226 416,829 5,401,236
Growth Rates
2001-
2011 1.99% 2.26% 2.33% 2.21%
2002-
2011 * 1.96% 2.23% 2.30% 2.39%
*Planning period is 2002 through 2011
Electricity demand varies inversely with electricity prices and the large
temporary rate increases in effect since May 2001 have resulted in lower electricity
sales to our residential customers. The lower residential sales divided by the number of
residential customers results in a drop in use per residential customer in 2001, 2002,
and 2003. Although use per residential customer is declining on an annual basis,
residential use per customer does not decline in all months. The summer months of
June, July, and August continue to show increasing use per residential customer.
The low use per customer in 2001, 2002, and 2003 will impact any growth
rate calculations. Careful interpretation is required when using linear trend forecasts
because the growth rate calculations only use a beginning year data point and an end
year data point and ignore any data that falls between the two. Utilizing data points that
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are unusually low such as occur in years 2001, 2002, or 2003 in the growth rate
calculations may result in invalid conclusions.
Once electricity prices return to closer to historically normal levels, Idaho
Power expects residential use per customer to increase for a time before stabilizing and
returning to the slow pattern of downward descent on an annual basis. It is difficult to
measure exactly to what level use per customer will eventually recover. The electricity
price increase was only temporary and consumers may have only adjusted their
consumption patterns in the short term. Electricity sales are a function of price and
electricity prices are assumed to return to base rates -- the same prices customers paid
three or four years ago. In real terms, electricity prices continue downward. What has
become evident is the fact that a significant permanent rate increase would slow the
rate of sales growth dramatically.
7. SHOSHONE FALLS
As noted in Staff's comments, Idaho Power identified the Shoshone Falls
Project expansion as a generation opportunity as early as the 1989 IRP. For various
reasons the Shoshone Falls expansion was discussed and postponed over the past 13
years. Idaho Power believes the Shoshone Falls expansion should be pursued at the
present time.
Idaho Power is continually looking to economically expand the capacity
and energy production at the licensed hydro projects. Idaho Power Company
recognizes that good stewards of the river are continually looking for opportunities to
optimize generation at existing dam locations and the Shoshone Falls expansion is
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currently the lowest cost opportunity to add additional generation at the Idaho Power
Company hydro facilities. The Shoshone Falls expansion is an opportunity to provide
additional renewable energy.
As identified in Staff comments, there is limited capacity associated with
the Shoshone Falls expansion during low water years. However, the Company
continues to spill significant volumes of water over Shoshone Falls during winter and
spring months, and during high water years Idaho Power Company may spill during the
entire year. While the Shoshone Falls expansion would provide limited peaking
capacity, Idaho Power Company projects that the increased energy generated will be at
or below market rates. The detailed financial analysis cannot be finalized until FERC
licensing is completed; however, the Company expects that future market prices will be
higher than levelized project development costs at Shoshone Falls. In the long term,
the Shoshone Falls Project is expected to reduce overall power supply costs.
Idaho Power included the Shoshone Falls expansion in the 2002 IRP as a
non-deferrable project because of FERC licensing rules. If Idaho Power declines to
pursue the expansion development at Shoshone Falls, the opportunity becomes
available to other generation developers and Idaho Power cannot preserve the
Shoshone Falls site as a future resource for our customers. The Shoshone Falls project
could be developed by other entities and sold to Idaho Power under PURPA rates, or
possibly sold to other utilities outside of Idaho wherever the developer can find the
highest price.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 16
Idaho Power believes expansion of the Shoshone Falls Project is prudent
and in our customers' best interest as a low cost source of energy. The Company will
continue to work with project stakeholders to develop a successful project.
8. MARKET PURCHASES
As noted in Staff's comments, Idaho Power Company plans to continue to
utilize market purchases throughout the planning period to supplement existing and
future company resources. The Company agrees with the Staff that excessive reliance
on the market, especially excessive reliance on the real-time or spot market, carries
excessive risk. The level of short-term market purchases identified in the 2002 IRP
(100 aMW for June, July, November and December) is reduced from the level identified
in the 2000 IRP.
Idaho Power Company intends to reduce the reliance on the short-term or
spot market during the 2002 IRP planning period by acquiring resources, including long­
term firm market purchases, from entities that own generating resources. Idaho Power
is presently investigating opportunities to secure long-term firm commitments for
capacity, energy, and transmission. The currently active alternatives are described in
the Garnet Report discussed earlier in these reply comments. The Company will
regularly update the Commission Staff on the status of the efforts to acquire these long­
term contracts.
A question raised during the IRP development process concerned Idaho
Power's reliance on Pacific Northwest market purchases and potential transmission
constraint impacts on serving system load. For determining system deficiencies, both
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 17
the 2002 and 2000 IRP assume that all market opportunities are in the Pacific
Northwest power market. The Northwest is Idaho Power's preferred market for two
reasons - liquidity and price. A transmission overload across the Brownlee East
transmission path during peak hours does not necessarily mean that Idaho Power will
be unable to purchase power from the market to cover peak hour needs. If Idaho
Power is unable to purchase from the Pacific Northwest because of transmission
constraints on the Brownlee East transmission path, there are still opportunities to
purchase from the northeast, east or south power markets located northeast, east or
south of Idaho Power's control area. Idaho Power recognizes that there is uncertainty
associated with pricing and availability of supply with real-time purchases. Typically,
purchases from the east and south will be more expensive than purchases from the
Pacific Northwest. However for short periods of time, markets other than the Pacific
Northwest may be the most economic solution to alleviate northwest transmission
constraints.
Idaho Power continues to support the use of both firm long-term and
short-term market purchases in supplementing existing and future company resources.
As long as the level of reliance on day-ahead and real-time market purchases are kept
to an acceptable level of risk, as in the 2002 IRP, market purchases as managed by the
Company's Risk Management Committee are a valuable planning tool for Idaho Power
customers.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 18
9. RENEWABLE RESOURCES
Several commenters were critical of the Company's analyses and
estimates of the costs of wind resources, generally suggesting that the cost figures in
the 2002 IRP were too high. Idaho Power does not dispute the fact that wind
developers with detailed analysis and monitoring of specific proposed projects should
have more accurate data than the more generic data Idaho Power relied on to develop
its estimates of the cost of wind generation. For future IRPs Idaho Power will meet with
local wind developers to gather additional site specific data. Idaho Power appreciates
their willingness to assist with the information.
As noted in the 2002 IRP, Idaho Power's resource needs in the near term
are primarily of a peaking nature, especially when considered under the zo" percentile
water planning conditions. Since wind is considered an intermittent resource, wind
generation is not Idaho Power's preferred resource to meet seasonal hourly peaking
needs. There has been some discussion that Idaho Power can use wind generation to
displace hydro generation, in effect storing the wind energy within the hydro system.
Idaho Power Company developed the 2002 Integrated Resource Plan assuming that
the hydro system's peaking capacity was fully used and it is unlikely that a wind
resource will significantly increase the peaking capacity of the hydro system given the
present physical and operating restrictions. If a wind site is developed, Idaho Power will
still be required to provide peaking capacity to serve customer loads in case the wind
isn't blowing during those hours.
Additionally, Idaho Power received comments in reference to the pilot
wind project mentioned in both the draft and final versions of the 2002 IRP. In general,
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 19
the comments suggested that since wind generation was a mature technology there
was no need for a pilot project, and secondly, that a small pilot project would be too
expensive and consequently a waste of money. Idaho Power agrees with these
comments. After reviewing the comments regarding the Draft 2002 IRP, Idaho Power
decided to remove the pilot wind project from the 2002 IRP for the reasons cited in the
comments. Unfortunately, the reference to a pilot wind project on page 45 was not
removed. We regret the error and the associated confusion.
The IRP states that Idaho Power anticipates adding a utility scale (50-100
MW) wind project within the service territory at some time and this is still the case.
However, considering the seasonal and peak nature of Idaho Power's near-term
projected deficiencies, Idaho Power does not believe that a wind project is the
appropriate resource to address near-term projected deficiencies.
Idaho Power agrees that wind generation will reduce the fuel related
volatility associated with its resource mix. However, a properly structured power
purchase agreement will also reduce the fuel-related volatility. Recent forward prices
for flat (Heavy-Load and Light-Load) firm power (with liquidated damages for non­
performance) for 2003 through 2007 indicate power prices around $35 per MWh. The
price for an equivalent product delivered to Idaho Power's Borah substation would most
likely add up to four dollars per MWh making the delivered power price approximately
$40 per MWh. Either a market purchase or a wind resource can reduce fuel volatility.
However a wind generation option provides an intermittent generation resource
whereas the power purchase agreement provides firm power.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 20
One major difference between wind generation and a market purchase is
that the wind generator is assumed to be internal to Idaho Power's control area whereas
the market purchase is not. Any generation produced during peak hours by a wind
generator located inside the Idaho Power control area and East of the Brownlee East
transmission constraint will reduce the need to import power from the Pacific Northwest,
thereby reducing the likelihood of encountering transmission constraints from the Pacific
Northwest. However, wind generation is an intermittent resource whereas a market
purchase agreement provides firm power.
The Company has developed a mechanism, the Green Power Program,
whereby customer demand for green energy, such as wind, can be fostered. It is
designed to provide a voluntary choice for customers who wish to support new,
renewable resources. The Green Power Program is a crucial first step in the
assessment of customers' interest in supporting a more expensive, renewable resource
and provides immediately access to those Northwest resources. At present Idaho
Power has approximately 1,600 customers participating in the Green Power program,
requiring about 1 aMW to serve.
While the economics of wind generation are steadily improving, the
decision to incorporate the higher-cost wind generation is primarily a societal and
political one. Idaho Power certainly supports renewable energy and will incorporate
wind generation in its portfolio as the Idaho Public Utilities Commission authorizes its
inclusion for ratemaking purposes.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 21
CONCLUSION
In a Motion filed contemporaneously with these Reply Comments, Idaho
Power has requested that the Commission take administrative notice of the Garnet
Report in making its final determination as to whether or not it will acknowledge the
Company's 2002 IRP. Copies of the Garnet Report (redacted version) have been
furnished to the interested parties in this case.
Idaho Power is hopeful, with the receipt by the Commission of the 2002
IRP as supplemented by the Garnet Report and the comments of the parties in this
case, that the Commission can expeditiously determine that it will acknowledge the
Company's 2002 IRP.
Respectfully submitted this 30th day of October 2002.
Isl
BARTON L. KLINE
Attorney for Idaho Power Company
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 22
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 30th day of October, 2002, I served a true
and correct copy of the within and foregoing REPLY COMMENTS OF IDAHO POWER
COMPANY upon the following named interested persons/commenters by the method
indicated below, and addressed to the following:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
4 72 W. Washington Street
P.O. Box 83720
Boise, ID 83720-0074
John J. McMahon
Attorney at Law
3339 S. Bridgeport Lane
Boise, ID 83706
Brad M. Purdy
Attorney at Law
2019 N. 17th Street
Boise, ID 83702
William M. Eddie
Land and Water Fund of the Rockies
P.O. Box 1612
Boise, ID 83701
Bill Chisholm
Idaho Rural Council
19073 E. Highway 30
Buhl, ID 83316
Jeffrey C. Brooks
1027 Cayman Drive
Meridian, ID 83642
Roald Doskeland, President
Windland, Inc.
10480 Garverdale Court, Suite 804A
Boise, ID 83704
CERTIFICATE OF SERVICE, Page 1
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Jonna L. Weber
Citizens for Responsible Land Use
1 01 05 Gabi ca Street
P.O. Box 192
Middleton, ID 83644
Rick S. Koebbe
WindWorks, Inc.
5356 N. Cattail Way
Boise, ID 83703
CERTIFICATE OF SERVICE, Page 2
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BARTON L. KLINE