HomeMy WebLinkAbout20041213Petition for Reconsideration of Schroeder - Lewandowski.pdf:CEI\'EO
Peter J. Richardson
RICHARDSON & O'LEARY PLLC
99 East State Street
Eagle, Idaho 83616
Telephone: (208) 938-7901
Fax: (208) 938-7904
peter~ri chardsonando eary. com
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Attorneys for the Industrial Customer of Idaho Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
BOB LEWANDOWSKI AND MARK
SCHROEDER
Complainants
IDAHO POWER COMPANY, an Idaho
Corporation
Respondent
CASE NO. IPC-04-
CASE NO. IPC-04-
PETITION BY MARK
SCHROEDER AND ROBERT
LEWANDOWSKI FOR
RECONSIDERATION
COMES NOW Bob Lewandowski and Mark Schroeder ("Petitioners ), through their
attorneys, Richardson and O'Leary, and, pursuant to Rule 331 of the Rules of Practice of the
Idaho Public Utilities Commission ("Commission ), and pursuant to Idaho Code Section 61-626
hereby respectfully petitions for reconsideration of Order No. 29632 issued on November 22
2004 in the above captioned matters.
This petition for reconsideration solely addresses the performance band and its associated
penalties for a QF's failure to stay within that band.
LEGAL STANDARD
Rule 331.01 provides that any person may petition for reconsideration on the grounds that
the Commission s order is "unreasonable, unlawful, erroneous or not in conformity with the
PETITION FOR RECONSIDERATION
law . Your petitioners respectfully submit that the Commission s order is both unreasonable and
not in conformity with the law in that it is based on an incomplete record. In support of their
Petition for Reconsideration your Petitioners say as follows:
INCOMPLETE RECORD
The issue before the Commission was whether Idaho Power s insistence on the concept of
shortfall" energy in the power purchase agreements (PP A) it offers to qualifying facilities was
unreasonable. The concept of shortfall energy is that whenever a QF's production falls below
90% of the amount called for in the PP A then that QF would pay Idaho Power for the lost
production. The shortfall energy price the QF owes to Idaho Power would then be either the
contract rate or the Mid-C price whichever is higher . This issue was litigated as to whether such
a price is acceptable. The impact of the shortfall energy penalty on the QF industry was well
documented by several witnesses.
In its decision, the Commission correctly observed that "such a shortfall energy pricing
method might have the potential of exacting too heavy a price." Order No. 29632 at page 20.
But then the Commission provides that
, "
We instead find it reasonable that when the QF fails to
deliver 90% of the monthly commitment amount to price all energy delivered at 85% of the
market price, or the contract price, whichever is less.Id.emphasis provided. This is a
solution' that no party to the proceeding proposed or even addressed. Therefore no party to the
proceeding had an opportunity to address the consequences of a pricing methodology which
severely penalizes a QF - even if it is only one tenth of one percent below the 90 percent target.
Because the Commission s decision is not based on the record it is not in conformity with the
law.
PETITION FOR RECONSIDERATION 2
The Idaho Supreme Court has clearly ruled that if the Commission s findings are not
based on the record, then those findings are not in conformity with the law. In Application of
Hayden Pines Water Co, the Court declared: "If the findings of the Commission are not
supported by substantial and competent evidence, or the Commission clearly abused its
discretion, then this Court must afford relief..." at 111 Idaho 331 , 335 (1986). The Commission
is very familiar with the substantial and competent evidence test. The record in this proceeding
contains no references to the solution adopted by the Commission and hence fails to meet this
basic threshold. Reconsideration is necessary in order for the Commission to fully understand
the consequences of its decision and to allow the parties an opportunity to present their positions
as to the impact of this decision on the industry.
THE COMMISSION'S RULING IS UNREASONABLE
Renewable resources, such as hydro, solar and \vind, are weather dependent for
the source of their "fuel". The only production-related aspect of a renewable QF that it has
control over is whether or not its plant is available to produce power when the resource is
available. As Commissioner Smith correctly pointed out in her dissent, imposition of a
production band is nothing more than a penalty. In fact, the shortfall energy concept would
actually be more desirable than penalizing the QF by pricing ALL OF ITS PRODUCTION at the
Mid-C rate for falling below the 90% target. Were a QF to produce 89.9% of its target then all of
its production is priced at 85% of Mid-C. Further exacerbating the price uncertainties introduced
by such a penalty is the fact that there is no floor below which the rate could go.
Idaho Power offered to cap the shortfall energy price at 150% of the contract rate.
PETITION FOR RECONSIDERATION 3
Renewable QFs will now be forced to attempt to mitigate the risk that all of its
production will be at risk of price uncertainty. In order to accomplish that goal, QFs will have to
contract for energy production levels considerably below what it would normally expect to
produce in order to avoid having all of its energy production at risk of price uncertainty. This
results in a defacto rate decrease in avoided cost rates for just renewable projects. The negative
impact of the penalty is compounded by the fact that there is no ability for the QF to make up the
downside because whenever its production exceeds 110% of the contract amount the price
penalty also applies.
The impact of the Commission s decision is less onerous on thermal projects because
they have control over their fuel supply. Renewable projects do not have that control and are
hence treated differently by the Commission s order. Requiring renewable projects to predict the
weather while not also requiring thermal project to predict the weather is discriminatory. The
analogy is not as absurd as it appears. If the Commission and Idaho Power are truly concerned
about the predictive ability and reliability of Idaho Power s QF projects, then the penalty for
failure in those areas should only be imposed on QFs for events over which they have some
control. The weather is not such an event.
The penalty for failure to meet the 90% threshold is also illogical and counter intuitive.
When Mid-C prices are below the contract price, Idaho Power is likely in a market in which there
is surplus energy and falling prices. At those times it is actually beneficial to Idaho Power to
have fewer resources to dispose of. However, the penalty works to incent the QF to be most
reliable in energy deliveries at just the time Idaho Power would prefer the QF to be less reliable.
At times when the Mid-C price is higher than market Idaho Power is likely to be either in deficit
PETITION FOR RECONSIDERATION 4
or would like to have additional resources to sell in a bullish market. However because of the
one-sided nature of the penalty there is no incentive for the QF to increase production above the
110% level because it is capped at market price or contract price whichever is less
The Commission s ruling is inherently unreasonable as it is completely unrelated to the
problem Idaho Power initially attempted to solve when it came up with the shortfall energy
concept in the first place. Were this Commission to adopt a band for plant availability factor, the
QF industry would be better equipped to comply. As it is, the Commission has placed the
industry in a position of being penalized for events completely out of its control. The practical
effect of which will be to severely restrict development of renewable resources in Idaho.
PROPOSED SOLUTIONS
The best solution to both Idaho Power s and the Commission s concern is to impose the
penalty on QFs whose availability factor falls below a certain level- say 90%. Availability
factors are in the control of the owner of the generating station. They are a common utility
standard for measuring reliability that all parties will be able to easily ascertain. Requiring a QF
to maintain a certain level of availability will insure that they are as reliable as they possibly can
be. Regardless, however, no penalty should be based on market prices. Any penalty should be
based on a fixed scale of gradually decreasing rates that corresponds to the QFs decreasing plant
availability factor. With a such a graduating scale based on contract rates, the QF will be able to
understand, in advance, the consequences of failure to maintain its plant availability factor.
A second possible solution would be for the Commission to require that weather may be
claimed as an event of force majeure. If a QF could claim weather as an event of force majeure
PETITION FOR RECONSIDERATION 5
then the penalty would not be imposed when the renewable resource was not available due to
drought and the like.
PRAYER FOR RELEIEF
WHEREFORE Mr. Lewandowski and Mr. Schroeder respectfully pray for this
Commission s order granting reconsideration in Dockets Nos. IPC-04-08 and IPC-04-10.
Your petitioners stand ready to proceed to hearings in this matter on reconsideration.
Respectfully submitted this 13th day of December, 2004.
RICHARDSON & O'LEARY PLLC
By:
~ ~
Peter J. Richardso , ISB #3195
RICHARDSON AND 0 'LEARY
Attorneys for Mark Schroeder and
Robert Lewandowski
PETITION FOR RECONSIDERATION 6
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 13th day of December, 2004, I caused a true
and correct copy of the foregoing PETITION BY MARK SCHROEDER AND BOB
LEWANDOWSKI FOR RECONSIDERATION to be served by the method indicated below
and addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 West Washington Street
Post Office Box 83720
Boise, Idaho 83720-0074
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Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W Washington
Boise, ID 83702
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Monica B. Moen, Attorney II
Barton L. Kline, Seniior Attorney
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
bkline~idahopower. com
mmoen~idahopower. com
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John Prescott
Vice-President - Power Supply
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
prescott~idahopower. com
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James F. Fell
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland Oregon 97204
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IPC-O4-10 & IPC-O4-
CERTIFICATE OF SERVICE -
Daniel Kunz, President
U. S. Geothermal
1509 TYrell Lane
Boise, Idaho 83706
glaspey~us geothermal. com
Bob Lively
PacifiCorp
One Utah Center, 23rd Floor
201 S. Main Street
Salt Lake City, UT 84140
R. Blair Strong
Paine, Hamblen, Coffin, Brooke & Miller LLP
717 W. Sprague Ave, Ste 1200
Spokane WA 99201-3505
Clint Kalich
Manager of Resource Planning & Analysis
A vista Corporation MSC- 7
PO Box 3727
Spokane W A 99220-3727
Conley Ward
Givens Pursley LLP
PO Box 2720
Boise ID 83701-2720
IPC-O4-10 & IPC-O4-
CERTIFICATE OF SERVICE - 2
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Signed 02.JD
()
Jf\
Nina M. urtis