20020830Idaho Rivers United Comments.pdf

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William M. Eddie (ISB # 5800)
LAND AND WATER FUND OF THE ROCKIES
O. Box 1612
Boise, ID 83701
[phone]
FAX: [phone]
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FILING BY
IDAHO POWER COMPANY OF ITS
2002 INTEGRATED RESOURCE PLAN(IRP) CASE NO. IPC-02-
COMMENTS OF IDAHO RIVERS UNITED. NW ENERGY COALITION. and LAND
AND WATER FUND OF THE ROCKIES
On June 28 , 2002, Idaho Power Company (IPC) filed its year 2002 Integrated Resource
Plan (IRP). These are the comments of Idaho Rivers United, NW Energy Coalition, and the
Land and Water Fund of the Rockies on that filing.
We ask that the Commission reject the 2002 IRP, and hold fonnal proceedings in this
matter1 for at least three reasons:
(I) IPC' s failure to identify and analyze potential load management and conservation
resources with any specificity or rigor borders on the comical, and must be corrected. IPC'
customers and the Commission deserve to understand through the Integrated Resource Planning
See Motion to Initiate Fonnal Proceedings by Clean Energy Advocates, filed herewith.
ORIG
HAL
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE I
process all potential resources that could be employed to ensure that electric service is provided
in the most economical and dependable manner.
(2) The IRP obviously was grounded on the assumption that IdaCorp s "Gamet"
combined cycle facility would be constructed in the near future. With the Commission s recent
dismissal of Idaho Power s application for approval of a power purchase contract from the
facility - and Idaho Power s own admissions that construction of the plant is now unlikely - we
strongly believe that the IRP must be re-drafted, following investigatory hearings, to address the
need to acquire new resources. Again, such review should follow a primary careful look at load
management and conservation resources. We understand the Company is initiating a peak load
conservation analysis through the Energy Efficiency Advisory Group - this analysis must be
incorporated into the IRP.
(3) Idaho Power s new planning criteria for IRP development (moving to more extreme
water and weather conditions) represents a significant change, which we believe deserves closer
scrutiny by the Commission and interested parties.
In general, we are concerned that the IRP does not outline a plan to meet customer energy
needs in a cost effective manner, but instead is presented as a justification for IPC to sell more
energy from IdaCorp-controlled. facilities.
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 2
PLANNING CRITERIA
IPC's past failure to plan for drought conditions helped lead to poor environmental
stewardship (e.
g.
dewatered secti~ns of the Snake River, deployment of diesel generators, et
cetera) and record-breaking rate increases oflast year s energy crisis. It is critical that Idaho
Power develop a contingency plan for the years of poor water and weather conditions.
However, the IRP gives scant attention to contingency planning. Under "Contingency
Plans" the IRP merely mentions that its Energy Exchange Program with industrial customers and
irrigation buy back can be reactivated on short notice if necessary to respond to extreme
conditions. IRP at 3. There is no analysis of these programs and their cost-effectiveness or
whether other programs are better suited for addressing extreme conditions. The IRP also fails to
discuss what "extreme" conditions would trigger reactivation of these programs.
Instead of developing a contingency plan to meet load under poor water and weather
conditions, IPC has chosen to plan under the fiction that every year will in fact involve such
conditions. In our view, this planning protocol may be used to justify over-building generation
resources -- not to reasonably and cost-effectively meetIPC customer s needs. This risk is
compounded by IPC's failure to seriously analyze any demand-side measures to address any
potential shortages under the new planning criteria.
The threat of over-building generating resources is further exacerbated by IPC's use of
even more extreme water conditions for forecasting peak hour deficiencies and transmission
overloads. While the IRP uses 70th percentile load and 70th percentile water conditions for
forecasting energy surpluses and deficits, it uses extreme 90th percentile water conditions for
forecasting peak hour deficiencies and transmission overloads.
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 3
This disparity only serves to exacerbate the perceived shortages, providing justification
for construction of a new peaking facility. Indeed, the company states that "peak-hour loads, and
ultimately, peak-hour transmission overloads, will drive the need for additional internal
generation and targeted demand side measures that focus on peak reduction." IRP at 57.
Notably, the IRP goes into some depth in discussing "additional internal generation " but
mentions "targeted demand side measures" only in the vaguest of tenus.
Contingency planning should be the cornerstone ofIPC's approach. IPC should plan for
critical water and load conditions using varied and innovative approaches. Several innovative
approaches were proposed by stakeholders during IPC's public meetings that would help IPC
cover supply short falls in extreme conditions without having to build pennanent new generation.
Suggestions included employing financial instruments as an effective "low water insurance
creating interruptible power rates to deal with transmission constraints or supply short falls, and
other load management programs. The IRP does not grapple with these ideas.
Contingency planning should be focused on load management. Targeted load
management programs to flatten peak demands would be much cheaper than building new
generating resources needed only for short periods of the year, if at all. Interruptible power rates
and time-of-use metering could go a long way to help flatten peak loads.
II.RESOURCE STRATEGIES
Weare concerned with the resource strategy that IPC has chosen. The proposed resource
strategy does not seriously address demand-side measures, nor does it seriously consider non-
hydropower renewable energy. A rational, risk-minimizing resource strategy would rely on a
diversity of tools and resources to plan for future power needs, including both demand-side and
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 4
supply-side measures and a diversity of power sources. Instead IPC has focused on supply-side
measures from traditional generating resources.
The IRP states that "( u Jnder the 70th percentile planning criterion, additional resources or
transmission is inevitable." While it may be inevitable that IPC must add new generating
resources and/or transmission at some point in the future, that does not preclude IPC from
preparing for future shortfalls with a variety of tools.
Load analysis
One of the most glaring deficiencies in the IRP is its failure to include a load analysis.
IPC cannot effectively plan for meeting its load in the most cost effective manner without
adequately understanding the character of that load. Understanding the types, manner, and
amount of energy uses which are responsible for load will help the Company detennine how best
to respond to that load. It can particularly assist the company in detennining whether to respond
with supply-side measures or demand-side measures.
This is indicative ofIPC's lack of any rigorous analysis ofDSM measures in the IRP.
The IRP states that DSM measures must be carefully targeted, yet it fails to include this crucial
data which would help target those measures. A load analysis would help IPC detennine what
type and what scale ofDSM measures would be effective in reducing both base loads and peak
loads.
Weare certain that DSM measures will be more cost effective than increased power
acquisition in addressing loads - particularly peak loads. IPC currently has no ongoing programs
or pricing structures (apart from a small pilot time-of-use plan) to encourage customers to shift
their energy use to off-peak hours. Construction of new generating resources is expensive and, if
IPC relies on fossil fuels, exposes customers to fluctuating fuel prices. Market purchases may
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 5
require construction of new transmission lines, in addition to the cost of acquiring the power at
uncertain market prices. There are many circumstances in which it will be more cost effective to
use targeted DSM programs to shave load peaks rather than engaging in these expensive
investments.
Selected resource strategy
After laying out four resource strategies that rely heavily on supply-side measures, the
IRP concludes that there is no clear optimum choice among the strategies because uncertain
market prices make it difficult to detennine the least cost strategy. This uncertainty could be
lessened by more reliance on demand-side measures, and distributed and utility-scale
renewables, which are not dependent on market fuel prices.
IPC chose a resource strategy that would include seasonal market purchases, unspecified
DSM measures "where economical" to address short tenn peaks, a 100 MW peaking facility, 250
MW from the Gamet facility, upgrade of the Shoshone Falls project, and construction of the
Brownlee to Oxbow transmission line.
The IRP states that "a blended approach based on a portfolio of options is the most cost-
effective and least-risk method of addressing increasing energy demands." However, IPC goes
on to adopt a resource strategy that maintains status quo reliance on hydropower and thennal
production. A truly blended approach would include demand side management and consideration
of other renewable and distributed sources of energy, such as wind power.
IPC's proposed resource strategy is not the kind of innovative and varied approach that
would best shield IPC's customers from the kind of financial and environmental disaster we
experienced last year.
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 6
Demand-side management
The IRP says that by 2005 IPC must acquire additional pennanent resources. It notes that
the three options are market purchases, new generation and transmission resources, or DSM
programs. IRP at 4. However, the IRP only seriously considers market purchases and new
generation and transmission.
The IRP states that population growth is the main driver in the need to increase
generation. However, this ignores the fact that Idaho has the highest per capita energy use of any
state in the nation. Thus, DSM measures could go a long way to reducing the impact of
population growth on IPC's system. Indeed, the Northwest Power Planning Council has
estimated 2250 aMW of energy efficiency and conservation savings in the northwest at a cost of
5 cents/kWh or less. See Direct Testimony of Thomas Power, IPC-01-, at pages 11-12.
With Idaho Power serving about 9% of the northwest load - and now engages in only the most
minimal ofDSM efforts - a conservatively estimated 203 aMW of savings are available in the
Company s service territory on a very cost-effective basis. Id.
The IRP pays lip service to the need for DSM measures, but provides no analysis ofDSM
or any solid proposals. The IRP states that IPC "anticipates" the addition of targeted DSM and
targeted energy conservation programs if the PUC approves its conservation measures.
However, the IRP does not include any analysis ofDSM measures or their cost effectiveness.
IPC proposes to rely almost entirely on constructing new generating resources or market
purchases to meet deficiencies. However, these strategies will not necessarily lead to a more
reliable power supply or result in the least cost to customers. There has been a huge surge in
demand for natural gas in response to last year s energy crisis, which could trigger bottlenecks in
natural gas supply that could both limit supply as well as drive natural gas prices up. As
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 7
customers learned last year, relying on market purchases is inherently risky and also raises
transmission constraint issues. Investing in demand-side measures can help insulate customers
from these impacts. DSM measures will reduce customer s bills, protect them against unstable
energy prices, and reduce the environmental impact of meeting power demands.
During last year s energy crisis, western states demonstrated how demand-side
management can effectively reduce loads during critical conditions. In addition to long tenn
pennanent energy efficiency measures, IPC should have a rapid response demand-side
management plan for extreme conditions - and we believe such programs can be carried out at
far less economic and societal cost than IPC's "buyback" programs of2001.
IPC acknowledges that there are "distinct advantages" for customers of a more diverse
approach including both supply-side and demand-side measures. However, the company states
that "the issue of customer funding for DSM must be resolved for further progress to be made.
Of course, the issue of customer funding for DSM is now substantially resolved through the
Commission s recent approval of some $2.5 million in new DSM funding. But as a general
matter, lack of Commission approval is no excuse to avoid analyzing potential cost effective
DSM resources the Company could acquire. Indeed, the Company proposes and analyzes a host
of generation resources for which it does not yet have Commission approval.
The Company s payment of some $1.2 millionto the Northwest Energy Efficiency
Alliance is laudable. Yet at page 3 of its so-called Conservation Plan, the Company admits it
does not estimate the energy savings associated with its expenditures to participate in the
Alliance." We support NEEA's important work, and finnly believe the Company s investments
in NEEA could be leveraged through complimentary conservation programs to more effectively
deliver benefits in Idaho.
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 8
The IRP should include an analysis of specific demand-side measures to assess how
much power could be saved through those measures and at what cost. This should include
analysis of a variety ofDSM measures, including conservation and efficiency measures as well
as load shifting measures. The analysis should also look at the relative cost effectiveness of
different DSM measures amongst different customer classes. IPC cannot assess the benefits of
DSM without this kind of rigorous analysis. There are a variety of efficiency resource
assessments that could provide guidance to IPC in its analysis.
The IRP notes that peak-hour loads and transmission constraints are the primary drivers
of the need for new resources in the planning period. DSM measures would be ideally suited for
such short-tenn deficiencies. Price signals combined with efficiency measures, distributed
renewables, and other demand-reducing measures may sufficiently flatten out peaks in demand
to avoid the need for expensive new peaking power sources. The IRP must be supplemented to
include such analysis.
Renewable energy
Another glaring deficiency of the IRP is its failure to seriously consider any non-
hydropower renewable energy. The IRP merely states that in addition to the measures identified
under its chosen strategy, IPC will take steps "to meet the needs of customers who want green
power." These steps consist of participating in "educational and demonstrational energy
projects " putting $50 000 towards exploring the feasibility of a pilot anaerobic digester project
and offering customers a Green Power purchase program. The IRP also states that IPC "believes
it would be prudent to pursue a pilot wind generation project." Idaho Power appears to view
non-hydro renewable sources of generation as charitable undertakings, not as real resources.
Thus, instead of seriously considering renewable energy as part of its base energy supply, IPC
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 9
has merely proposed expensive piecemeal measures that would not benefit its customers or
improve the reliability of the power system.
Constructing small pilot wind or anaerobic digester projects would be expensive and
provide little in the way of system benefits. IPC proposes a small pilot wind project in order to
assess the costs and benefits of a larger wind project. However, this proposal would predestine
the outcome of any investigation into the cost effectiveness of wind. A small pilot project would
not accurately reflect the costs of a utility scale project, which would strongly benefit from
economies of scale. Smaller wind projects produce power at 7 to 8 cents/KWh, while a larger
utility-scale project could produce power at 4 cents/KWh.
Furthennore, a pilot project is simply not necessary and would be a waste of money.
Wind is not an experimental source of energy, as utility scale projects are being developed
throughout the west. In the past two years, five (5) competitively priced wind projects have
come online in Washington and Oregon, totaling over 380 MW. In addition, two more wind
projects are under construction and a handful more are in the pennitting process, adding about
150 megawatts to the regional energy mix.
IPC should invest money in analyzing potential wind sites, then use that data to actually
construct a utility-scale wind project; or enter long-tenn contracts to purchase power from
commercial wind developers in Idaho. There is a plethora of infonnation available on the costs -
and benefits of wind power, including detailed Idaho-specific maps of wind potential in this
state. The company did not propose constructing a pilot gas plant to detennine whether it is a
cost effective generating resource-it simply looked at existing data on these sources. It is not
financially prudent for the company to spend money on a pilot project that would not benefit
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE IO
customers or the reliability of the power system or provide accurate infonnation regarding a
utility scale project.
IPC also indicates that it would only build a full utility-scale wind project if there was an
increase in customer demand for green energy, the PUC or legislature required construction of a
wind project, or if the company s projected surplus/deficiency changed to indicate a need for an
additional energy resource. In fact, this very IRP repeatedly states the Company s need for
additional energy resources, yet IPC does not even consider a non-hydro renewable energy
project in any of its resource strategies.
While IPC does include a wind resource in its cost comparison of alternative generating
resources, it skews the comparison by looking at resources of vastly different sizes. It compares
a 61.2 MW and 88.6 MW conventional combustion turbine resource with a 10 MW wind
resource. Using a 10 MW wind project results in an inaccurate comparison with other generating
resources. As IPC noted in its most recent IRP meeting, a utility-scale wind project is more
likely a minimum of 50 MW, which would be much more cost effective because of economies of
scale. Furthennore, in its cost comparison, IPC does not consider the financial benefits of more
stable sources, such as wind, which are not subject to market fluctuations, versus sources with
more variable costs such as natural gas. In fact, a new study by the Lawrence Berkeley National
Laboratory found that utilities pay a premium of about 0.5 cents per kWh to lock in stable prices
for natural gas when the gas is used for power generation. The study assigns that 0.5 cents/kWh
to renewable energy technologies, particularly wind power, as a hedge value for price stability.
To the extent that new generating resources are necessary, IPC should focus on creating a
more diversified power base to include more renewable energy such as wind, solar, and biogas.
Currently IPC relies almost exclusively on thennal and hydropower generation. This
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 11
homogenous generation base can only exacerbate extreme conditions. Our over-reliance on
hydropower contributed to supply shortfalls last year. Reliance on thennal generation puts
customers at the mercy of a highly variable fuel market. It is inappropriate to plan for extreme
conditions by increasing our reliance on a resource that involves highly variable fuel costs.
Distributed renewable generation should also be an integral part of diversifying IPC'
generation sources. This would help relieve supply shortfalls as well as relieve transmission
constraints, provide voltage support, and boost grid reliability. Currently, the only distributed
generation in IPC's plan is mobile diesel generators which are very expensive and can cause
extreme air quality problems for local communities. Further investment in strategically
distributed renewable generation could help reduce congestion and potentially delay new
transmission and distribution needs.
Thermal Generation
The IRP is slanted very much in favor of new thennal generation from facilities owned
by IdaCorp. However, there are certain key factors that IPC should have included in evaluating
new thennal resources. Most importantly, IPC should consider carbon dioxide emissions in
evaluating thennal resources. IPC should implement mitigation of all carbon emissions, which
would add financial value to sales of surplus power on the open market. It would also provide
important environmental benefits to IPC's customers. As noted above , in comparing costs of
different generating resources, the IRP fails to consider the variable nature of fossil fuel prices.
If IPC chooses to construct new thennal generation, we strongly believe that IPC, and not
ratepayers, should cover the variable costs of fuel. IPC has the ability to obtain generation with
fixed fuel costs, including wind, solar, and other renewable resources. IfIPC chooses to forgo
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 12
those sources for thennal generation with highly variable fuel costs, the company must bear the
risk of that decision.
Shoshone Falls Upgrade
We object strongly to the proposal to expand the Shoshone Falls hydropower facility.
While we favor efficiency upgrades at existing hydropower facilities, we do not favor this kind
of expansion that would more than quintuple the capacity of the project, diverting even more
water away from the natural stream channel at Shoshone Falls, one ofIdaho s treasures.
Furthennore, relying even more on the hydropower system to meet energy demands will not
address the conditions that led to last year s energy crisis. Indeed, it would only exacerbate those
conditions by putting ratepayers even more at the mercy of unpredictable water conditions.
Dated this~ day of August, 2002.
On behalf of the IRU, NW Energy Coalition, and LAW Fund
(for) William M. Eddie
Land and Water Fund of the Rockies
COMMENTS OF CLEAN ENERGY ADVOCATES - PAGE 13