20071004Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 1895
RECEIVED
1001 OCT - 4 P~1 2:
IDAHO PUBL1~
UTILITIES COMMI~SION
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR APPROVAL
OF A FIRM ENERGY SALES AGREEMENT
FOR THE SALE AND PURCHASE OF
ELECTRIC ENERGY BETWEEN IDAHO
POWER COMPANY AND HOT SPRINGS WINDFARMLLc.
CASE NO. IPC-O6-
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
Motion for Approval of Generation Interconnection Agreements, Notice of Modified Procedure
and Notice of Comment/Protest Deadline issued on September 18, 2007, submits the following
comments.
BACKGROUND
On September 12 2007, Idaho Power Company (Idaho Power; Company) filed Motions
with the Idaho Public Utilities Commission (Commission) in Case Nos. IPC-06-34 and IPC-
06-35 requesting approval of Generation Interconnection Agreement (GIA) dated September 13
2007 between the Company and Hot Springs Windfarm LLC (Hot Springs) and Bennett Creek
Windfarm LLC (Bennett Creek). A single GIA covers both the Bennett Creek and the Hot
STAFF COMMENTS OCTOBER 4, 2007
Springs Windfarm projects because a single interconnection will be built to interconnect both
projects and the same developer is developing both projects.
Interconnection service will be provided at 138 kV at a single point of interconnection for
the integration of 24 induction generator wind turbines for Bennett Creek/Hot Springs
Windfarms. The interconnect project's location is (Township 4S , Range 8E, Section 23) Elmore
County, Idaho. The collective capacity of both projects is 39.6 MW. Total interconnection
facilities cost is estimated to be $450 000. Transmission network upgrades cost is estimated to
be $2 155 000. The milestone date for construction completion is March 15 2008. Commercial
operation is scheduled for April 1 , 2008.
Firm Energy Sales Agreements (and First Amendments) were earlier approved by the
Commission between Idaho Power and Hot Springs in Case No. IPC-06-34 (Order Nos. 30246
and 30398) and Bennett Creek in Case No. IPC-06-35 (Order Nos. 30245 and 30399).
ANALYSIS
The Generation Interconnection Agreement is the first outside of the Twin Falls
transmission queue involving PURP A generating facilities subject to Idaho Power Schedule 72
that require substantial upgrades to Idaho Power s transmission system. The allocation of costs
from the transmission upgrades for the two projects was not addressed in Commission Order No.
30414 in Case No. IPC-06-21 (the Cassia Gulch Wind Park and Cassia Wind Farm
(collectively Cassia) case) because the two projects are not considered part of the Twin Falls
transmission queue.
In the Cassia case, the Commission approved a settlement which implemented a cost-
sharing arrangement (Cassia Formula) under which Idaho Power will contribute 25% ofthe cost
of the needed transmission upgrades, Cassia will make a non-refundable 25% contribution in aid
of construction (CIAC) to support the transmission upgrades and Cassia will make an advance in
aid of construction (AIAC) for the remaining balance of the cost of the upgrades. The AIAC will
be refunded to the Cassia projects over time if they fully perform their Firm Energy Sales
Agreements with Idaho Power.
In Order No. 30414, the Commission concluded that use of the Cassia Formula was
appropriate for the Cassia Wind Farms as well as the other PURP A generation projects in the
Twin Falls 138 kV transmission queue. However, the Commission did not authorize the
Company to automatically apply the Cassia Formula in other locations on its system where
STAFF COMMENTS OCTOBER 4, 2007
transmission upgrades would be required. Instead, the Commission indicated that the application
of any terms or conditions approved as a part of the settlement in the Cassia case to other QF
interconnection requests "will depend on the specific characteristics of that situation." Order No.
30414, p. 11.
As stated previously, neither the Hot Springs nor the Bennett Creek projects are
considered part of the Twin Falls transmission queue, therefore, neither was automatically
subject to the Cassia Formula. However, in the GIA between Idaho Power and Bennett Creek
and Hot Springs, the parties have agreed to apply the Cassia Formula to share the costs of the
transmission upgrades.
Justification for Use of the Cassia Formula
In concluding that it is appropriate to use the Cassia Formula for sharing costs of
transmission upgrades, Idaho Power applied the Commission findings and conclusions in Order
No. 30414 as follows:
1. But for the construction of the Hot Springs and Bennett Creek
Windfarms, Idaho Power would not have constructed the transmission
upgrades described in the Generator Interconnection Agreements to
provide adequate service to its native load customers. Therefore, a
contribution by the developer of a portion of the transmission upgrade
cost is appropriate.
2. Idaho Power believes that in Order No. 30414, the Commission directed
the Company to assess the benefits of individual transmission upgrades
taking into consideration "the system wide benefits that accrue to all
customers on an integrated transmission grid." Order No. 30414, p. 10.
One way to approach that assessment is to compare the level of benefits
that the upgrades will provide to the system with the level of benefits
provided in the Cassia case. The Company acknowledges that it is nearly
impossible to precisely quantify the relative system benefits conferred by
two distinct and geographically separate transmission upgrades.
However, transmission engineers can exercise their judgment and their
knowledge of transmission systems they have designed and operate.
Based on their informed judgment, Idaho Power s transmission engineers
are of the opinion that the transmission upgrades identified in the GIAs
will provide different benefits than the transmission system benefits the
Cassia upgrades will provide. Where the Cassia upgrade will install a
new transformer to interconnect the 230 and 138 kV transmission
systems in the western portion of the Magic Valley, the improvements
contemplated herein will upgrade (replace the line conductor) and update
(replace poles, insulators and hardware not capable of supporting the
larger conductor) an older transmission line. Some facilities on the line
interconnecting the Bennett Creek and Hot Springs projects may have
STAFF COMMENTS OCTOBER 4, 2007
been providing service since 1921. The use of the Cassia Formula is
reasonable in this circumstance.
3. The Company is also of the opinion that the application of the Cassia
Formula in this case will maintain the balance between "the benefits
accruing to the customers of the grid with the cost responsibility of the
QF necessitating the timing and the construction of the upgrade." Order
No. 30414, p. 11.
4. Hot Springs and Bennett Creek, like the QF projects in the Twin Falls
queue, will displace or defer the need for other or similar generation
projects in the Company s Integrated Resource Plan (IRP) that would
likely require related transmission investment by the Company. Order
No. 30414, p. 11.
5. Idaho Power believes that application ofthe Cassia Formula in this
instance will allow it to successfully defend a comparability claim
brought by a Federal Energy Regulatory Commission (FERC)
jurisdictional customer claiming that Idaho Power and the Commission
had given unlawful, preferential treatment to QF resources.
Staff agrees with all of the reasons cited by Idaho Power as justification for applying the
Cassia Formula to the Hot Springs and Bennett Creek projects. Although not cited by Idaho
Power, Staff believes that another reason for supporting use of the Cassia Formula in this
instance is because it creates an incentive for QFs to consider economic efficiencies in the siting
of their generating facilities and reduces the potential for the shifting of costs from QFs to the
Company and its customers that might occur if no transmission upgrade costs were assessed
against the QF. Order No. 30414, p. 10.
Differences Between Cassia and Hot Springs/Bennett Creek
The primary difference between the Hot Springs/Bennett Creek GIA and the Cassia case
is that the Hot Springs/Bennett Creek GIA has no provisions for redispatch. In the Cassia case
the parties were able to negotiate an arrangement wherein Cassia and other projects using the
same transmission facilities could potentially have their generation reduced when transmission
capacity was limited. In exchange for this redispatch ability by Idaho Power, Cassia and the
other projects in the Twin Falls queue are responsible for a much lower transmission upgrade
cost than would otherwise be required. In this case, however, by agreeing to bear its share of the
cost to fully upgrade the capacity of the transmission line, Hot Springs/Bennett Creek will
always be able to deliver their output. Thus, there will be no need for redispatch.
STAFF COMMENTS OCTOBER 4, 2007
Transmission Interconnection and Network Upgrade Costs
There are two cost categories in the GIA, a) interconnection costs and b) network
upgrade costs. Interconnection costs are the costs of those facilities necessary to get the project'
generation to the transmission system. Network upgrade costs are the costs of improvements to
the transmission system itself. The Hot Springs and Bennett Creek projects will be located
immediately adjacent to each other. There will be a single point of interconnection, therefore
there is only one set of interconnection and network upgrade costs. The estimated
interconnection cost for both projects together is $450 000. The estimated network upgrade cost
for both projects together is $2 155 000.
Under the terms of the GIA, network upgrade costs are subject to sharing consistent with
the Cassia Formula. Hot Springs/Bennett Creek and Idaho Power will share the actual network
upgrade costs attributable to the project as follows:
(a) 25% of the costs will be provided by Hot Springs/Bennett Creek as a non-
(b)
refundable contribution in aid of construction ("CIAC"
25% of the costs will be funded by Idaho Power and included in Idaho Power
rate base.
(c)50% of the costs will be funded by Hot Springs/Bennett Creek as an advance in
aid of construction ("AIAC") subject to refund as discussed below. As refunds are
made, the refunded amounts will be included in rate base using standard
regulatory accounting principles.
A summary of the estimated costs and the proposed sharing is shown below.
Idaho Power Costs
Non-reimbursable CIAC Costs
Reimbursable AIAC Costs
25%
25%
50%
$538 750
$538 750
077 500
Repayment of AIAC for Network Upgrades
Hot Springs and Bennett Creek will be entitled to a cash repayment, in monthly, equal
installments, for the total AIAC amount Hot Springs and Bennett Creek advance to Idaho Power
for Network Upgrades. Reimbursement will occur over a term not to exceed ten years after the
date the Hot Springs and Bennett Creek projects achieve their Operation Date under the Firm
Energy Sales Agreement ("FESA"
).
Repayments will be made in accordance with Article 11.4
STAFF COMMENTS OCTOBER 4, 2007
of the Standard Large Generator Interconnection Agreement, included in Idaho Power s OATT.
Repayments in any month will be contingent on the FESAs being in good standing (no uncured
defaults) and Hot Spring s and Bennett Creek's generating facilities achieving a mechanical
availability in that month in excess of 50%.
The Hot Springs and Bennett Creek power sales agreements include the 90/110%
performance requirements that provide for discounted payments in the eventthe project's
predicted monthly performance falls outside of the performance band. Because the power sales
agreements contain this provision, Staff does not object to the requirement for only a 50%
mechanical availability guarantee as a condition for Hot Springs and Bennett Creek to receive
repayment for AIAC network upgrades. However, in possible future instances where a higher
mechanical availability guarantee is required as a condition for receiving firm energy rates in a
power sales agreement, Staff believes that the same higher mechanical availability guarantee
should be required in order for the projects to receive repayment for AIAC network upgrades.
RECOMMENDATION
Staff recommends approval of the Hot Springs/Bennett Creek Generation Interconnection
Agreement.
Respectfully submitted this 7h day of October 2007.
Scott Woodbury
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:comments/ipceO6.34swrps comments 2
STAFF COMMENTS OCTOBER 4, 2007
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 4TH DAY OF OCTOBER 2007
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN CASE
NO. IPC-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
MONICA B MOEN
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
RIC GALE
VP - PRICING & REGULATORY
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
CERTIFICATE OF SERVICE