20041227Energy Vision Reply to Reconsideration.pdf

Glenn Ikemoto
Energy Vision , LlC
672 Blair Avenue
Piedmont, California 94611
Tel: [phone]
Fax: [phone]
glenni(g1pacbell.net
BEFORE THE IDAHO PUBLIC UTiliTIES COMMISSION
S. GEOTHERMAL, INC. AN IDAHO
CORPORATION,
Complainant
IDAHO POWER COMPANY, AN IDAHO
CORPORATION
Respondent
BOB LEWANDOWSKI and MARK
SCHROEDER,
Complainant
IDAHO POWER COMPANY, AN IDAHO
CORPORATION,
Respondent
CASE NO. IPC-E-O4-8
CASE NO. IPC-04-
REPLY TO P ACIFICORP'
AND IDAHO POWER
COMPANY'S ANSWERS
TO PETITION FOR
RECONSIDERATION
Energy Vision, LLC (EnVision) would like to file a brief reply to Pacificorp
and Idaho Power Company s (lPC) Answers to Petitions for Reconsideration.
1. Commission Authority
The utilities argue that the Commission had ample authority to make its
decision. Speaking only for ourselves, we agree with that position. However, we do not
Reply of Energy Vision, LLC - 1 -
agree that the record has been adequately developed regarding using market prices for
performance shortfalls. This has become even more important since IPC, in their wind
RFP, is requiring that "the performance of the proposed projects should be consistent
with Idaho PUC Order 29632.
As we feared, the performance band is the new weapon of choice to impede
renewables. Now the issue is no longer limited to projects selling at published prices (a
breakeven proposition for the ratepayers), but has been extended to resources acquired
through bidding. This is not a breakeven proposition. The ratepayers will pay higher bid
prices due to the performance band. There is insufficient information in the record for
the Commission to decide whether the extra cost to the ratepayers is worth it. In regards
to the subject proceedings, there is equally insufficient information for the Commission to
decide whether the financing barrier created by the new performance mechanism is
justified.
2. Economics versus Financing.
In IPC's answer, they point out that the increases in project size and
published prices will improve QF project economics. However the performance band is
not an economic issue It is a financing issue. It takes massive economic stimulus to
overcome financing problems , because you drive the QF from efficient project financing
to extremely expensive venture capital. Compared to fossil fuel plants renewable
energy facilities are highly capital intensive on a cents/kWh basis. So , increases in a
QF's cost of capital have a magnified impact on its ability to compete with avoided costs.
3. Red Herrings
In IPC's answer, we were accused of raising a "red herring" by pointing out
that the market based mechanism sends incorrect price signals. At the same time, wind
is resource dependent and cannot voluntarily increase output. We would like to note
that wind is not the only QF technology. Certainly biomass producers can take actions
that increase output. Also, in the case of wind , we face repair and maintenance
decisions that can reduce output. Both of these types of decisions would be made with
incorrect incentives with respect to the ratepayer.
The real red herring here is IPC pointing to their existing contracts to
demonstrate the acceptability of their own penalty mechanism and market risks. There
Reply of Energy Vision, LLC - 2-
are always special cases. For IPC, we understand that these include: a hydro project
with a firming arrangement, a biomass project which is one of the only renewable
technologies with fuel inventory and a wind project which is being used to help finance a
long transmission interconnection for the expansion of a core gravel business. If these
are the only types of projects which should receive published prices, then let the current
decision stand.
4. Conclusion
As the utilities noted , PURPA was intended to encourage the development of
renewable energy as long as the ratepayer is indifferent. That has not happened in
Idaho. Renewables have been generally cost effective for a long time yet there has
been little success here. The problem was not economic, but institutional. Although
utilities can negotiate anything they want, at any time, nothing happened - even as
neighboring states moved forward. The Commission boldly sought to remedy this by
increasing the availability of published prices to larger projects. It is our hope, that the
Commission s use of market prices as a performance incentive was intended to remove
the barrier created by the utilities' shortfall penalty. Unfortunately, this new mechanism
has unintended side effects which negate the Commission s objectives in raising thceiling in the first place.
We cannot implement renewables by forcing them to act exactly like fossil
fuels. They are different. Renewables typically tap a flow of energy rather than a store
(like a barrel of oil or a lump of coal). They also don t poison the environment. These
differences can be balanced and mitigated in effective ways which achieve ratepayer
indifference without blocking financing and implementation.
Submitted this day of December 2004:
Reply of Energy Vision, LLC - 3-
CERTIFICATE OF SERVICE
I hereby certify that on day of December 2004 , that I emailed and caused to
be mailed , U.S. Mail postage prepaid to all parties of record in the above captioned
matter.
enn Ikem
Energy Vision, LLC
Reply of Energy Vision , LLC - 4-