20061109Reply comments.pdf

McDevitt & Miller LLP
Lawyers
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RECE\VED
420 W. Bannock Street
20Gb tm'l -9 PM 2: 32
o. Box 2564-83701 Chas. F. McDevItt
Boise, Idaho 83702 IDAHO lJ ~!d \C p,ean J. (Joe) Miller
UTILITIES CUiViiVilSSIOI.
November 9 2006
Via Hand Delivery
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 W. Washington St.
Boise, Idaho 83720
=rrc E - 06- ~(
Re: Cassia Gulch Wind Park LLC and Cassia Wind Farm LLC v. Idaho Power Co.
Dear Ms. Jewell:
Enclosed for filing in the above matter please find the original and seven (7) copies of a
Comments of Cassia Wind in Reply to the Initial Comments of Idaho Power, A vista and
Pacificorp regarding the above referenced matter.
An additional copy of the documents and this letter is included for return to me with your
file stamp thereon.
In its initial pleadings, Cassia Wind requested the opportunity for oral argument and we
would appreciate if a date for argument could be scheduled as soon as it is convenient to the
Commission.
Very Truly Yours
r\evl & mlLP'J&ller
DJM/hh
Encls.
ORIGINAL
'""
r.EI ' 'r-
'.'
'\ r: 'oJ V ~: U
Dean J. Miller ISB #1968
McDEVITT & MILLER LLP
420 West Bannock Street
O. Box 2564-83701
Boise, ill 83702
Tel: [phone]
Fax: [phone]
i oe(Ci),mcdevitt -miller .com
2006 NaV -9 PN 2: 32
IDAHO PUbLiC
UTILITIES COMMISSIOU
Attorneys Cassia Wind Gulch Park LLC and
Cassia Wind LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASSIA GULCH WIND PARK LLC AND
CASSIA WIND FARM LLC Case No. IPC-06-
Complainants COMMENTS OF CASSIA WIND IN
REPL Y TO THE INITIAL
COMMENTS OF IDAHO POWER
VISTA AND P ACIFICORPIDAHO POWER COMPANY
Respondent
COMES NOW Cassia Gulch Wind Park LLC and Cassia Wind Farm LLC (collectively
Cassia Wind"), and pursuant to the Commission s Notice of Comment Deadlines, Order No.
30135, dated September 27, 2006, replies to the Comments ofIdaho Power, Avista and
PacifiCorp (the "Utility Comments ) regarding this Commission s policy on interconnections by
qualifying facilities" (or "QFs ) that sell all of their output to the host utility under the Public
Utility Regulatory Policies Act ("PURP A"), as follows, to wit:
Introduction
As required by Order No. 30135, Idaho Power, Avista and PacifiCorp filed Comments in
this matter on October 26, 2006. Taken together, the Utility Comments are lengthy, and in
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
A VISTA AND PACIFICORP-
Cassia s opinion, in some cases touch on matters oflimited relevance. Therefore, at the outset of
these Reply Comments, it is important to clearly re-state the policy issue before the Commission
as follows:
Recognizing that the QF will already be paying for all of the costs of the interconnection
of the QF's project to the utility s transmission system network, and will also be required
to disconnect its facilities from the network in certain circumstances to maintain
reliability, should the QF developer also be required to provide the initial funding of any
transmission system "network upgrades " instead of the utility, given that the costs of
those network upgrades will (if prudent) still be included in the utility s rate base and
recovered in the utility s rates?
For the reasons set forth in its Memorandum in Support of Complaint, Cassia asserts that
the network upgrades, as has traditionally been the case, should be initially funded by the utility
shareholders and debt-holders with the costs then rolled-into the utility s rates.l Idaho Power, on
the other hand, proposes that the QF developers provide the initial funding, which would be
treated as an Advance in Aid of Construction to be repaid to the QF over a period of time, with
interest. (Idaho Power Answer and Comments, Pg. 7).
Because ratepayers will ultimately pay for the transmission network upgrades, and
because the interconnection costs themselves are paid for fully by the QFs, there is no cross-
subsidy of ratepayers under the Cassia proposal. Indeed, the Cassia proposal regarding the
network upgrades is less expensive for ratepayers over time. The Cassia proposal also does not
discourage the development of environmentally beneficial wind energy resources by forcing the
wind QFs to act as the "banker" for the investor-owned utility on those transmission system
network upgrades. QFs should only have to be responsible for the development of their wind
projects and for the interconnection of those projects to the grid. This is a policy issue that the
The Commission should bear in mind that pursuant to the Jurisdictional Separations Process, a portion of
these costs will be assigned to the FERC jurisdiction for inclusion in the interstate rate base, not in the Idaho
jurisdiction rate base.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
Commission should resolve on an expedited basis, so that millions of dollars in new investment
in wind development in Idaho that is poised to begin almost immediately can in fact be realized.
Anmment
Cassia Wind's Proposal Does Not Create a Ratepayer Subsidy
The Utility Comments each contend that Cassia Wind's proposal will create some kind of
subsidy flowing from ratepayers to wind QFs? This is simply not the case. It is important to
emphasize, again, that the issue in this case is who, as between the QF and the utility, should be
responsible for the up-front financing of the utility s network upgrades, as opposed to the costs to
interconnect the QF project to the utility network (for which the QFs are already fully
responsible). Under both Cassia Wind's and Idaho Power s proposals, ratepayers will have
ultimate responsibility for the cost ofthe network upgrades, either sooner at the utility s cost of
capital, or later as refunds are made to QF's with capitalized interest. And Idaho Power
proposal to capitalize interest at the Federal Energy Regulatory Commission ("FERC") approved
rate of 8.17% will be more expensive to ratepayers than Cassia s proposal for the utility to
finance the network upgrades at the Idaho Commission approved rate of return of 8.1 % over the
20 year life ofthe QF contract, assuming the relative relationship between the FERC rate and the
Idaho approved rate of return remains more or less constant during that period of time.
Along similar lines, the Utility Comments observe that avoided costs as currently
approved by the Commission do not include a component for transmission.3 This is true, but
irrelevant. Under previous versions of the Idaho Surrogate Avoided Resource, the avoided cost
rate included a component for the recurring annual cost of sending energy from a remote location
to Idaho Power s load center. When the Surrogate Avoided Resource was changed to one
Idaho Power Comments, Pgs 17-20; PacifiCorp Comments, Pgs. 3--4; Avista Comments, Pgs. 3--4.
Idaho Power Comments, Pg. 18; Avista Comments, Pg. 4.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
A VISTA AND P ACIFICORP-
assumed to be located closer to the load center, the rate component for the annual cost of moving
energy was eliminated.
This case does not involve the question of what should or should not be included in the
rate paid by utilities to acquire energy from QF resources. Rather, it involves responsibility for
the one-time, up-front financing responsibility for costs associated with "network upgrades" to
the utility grid. Again, these are costs that will still ultimately be borne by ratepayers in Idaho
Power s rate base.
Idaho Power s Schedule 72 Does Not Impose Responsibility for Network Up2rades
Idaho Power s principal legal assertion is that its Schedule 72, governing interconnection
ofQF facilities, requires QF's to fund the utility s own transmission system "network upgrades.
(Idaho Power Answer and Comments, Pgs. 9-13). This assertion is wrong, for at least three
reasons.
First, the tariffs language, on its face, addresses only interconnection costs, not
transmission system network upgrades. Schedule 72 defines interconnection facilities as
follows:
Interconnection Facilities are the facilities which are reasonably required by prudent
electrical practices and the National Electric Safety Code to interconnect and to allow the
delivery of energy from the Seller s Generation Facility to the Company s system
including, but not limited to, Special Facilities, Disconnection Equipment and Metering
Equipment."
The operative language is "to interconnect and to allow delivery of energy from the
Seller s Generation Facility to the Company s system." The tarifflanguage does not indicate "
the Company s system and to the Company s load center.
Similarly, the definition of Special Facilities addresses the costs of connecting to the
system, not the costs of delivering energy to a load center:
See Order No. 25883
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
Special Facilities are additions to or alterations of transmission and/or distribution lines
and transformers, including, but not limited to Upgrades and Relocation, to safely
interconnect the Seller s Generation Facility to the Company s system. (emphasis
added).
In the context of Schedule 72, the word "Upgrades" also has a defined meaning. The
Schedule defines them as:
. . . those improvements to the Company s system which are reasonably required by
Prudent electrical practices and the National Electric Safety Code to safely interconnect
the Seller s Generation Facility. Such improvements include, but are not limited to
additional or larger conductions, transformers, poles and related equipment."
In this tariff context
, "
Upgrades" refers to improvements to the Company s system
required to safely interconnect the generation to Idaho Power s system. In other words, it
addresses upgrades on the utility system at the point of interface between the utility facilities and
the QF's facilities. Again, this does not include upgrades to deliver the energy to the Company
load center. As discussed further below, there is a similar sounding phase "Network Upgrades
which is a term of art with a defined, and different, meaning in the context of non-QF or
merchant" power plants, and which reaches beyond the interconnection interface to the kind of
network improvements that Idaho Power is proposing now for QFs. If Idaho Power when it
proposed Schedule 72, and the Commission when it approved Schedule 72, had intended to
include those kinds of "Network Upgrades " Schedule 72 could have said so, but it does not.
To continue the analogy suggested by Cassia in its Memorandum in Support of
Complaint, Schedule 72 requires contributions from the QF to construct the "driveway
necessary to reach the transmission "highway," and it does not address changes to the "highway
beyond the interface between the "driveway" and the "highway." The "driveway" and the
interface-type of upgrade costs are "interconnection costs" under Schedule 72; the changes to the
highway" beyond the interface are "network upgrades" not included in Schedule 72.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
A VISTA AND P ACIFICORP-
Contrary to Idaho Power s attempt to blur the distinction between "interconnection costs
and "network upgrade costs" (Idaho Power Comments, Pg. 13-, Sikes Affidavit, Pg. 7), the
distinction between the two is well-established by Idaho Power s own interconnection
procedures for merchant plants (as opposed to pure QF plants). As required by FERC in Order
No. 2006, Idaho Power adopted FERC-mandated procedures for connection of small generators
who will utilize Idaho Power s transmission services under its FERC-regulated "Open Access
Transmission Tariff' (or "OA TT"). 5 The following definitions may be found in Attachment 1 to
the Idaho Power Small Generator Interconnection Procedure ("SGIP"
Interconnection Facilities- The Transmission Provider s Interconnection Facilities and
the Interconnection Customer s Interconnection Facilities. Collectively, Interconnection
Facilities include all facilities and equipment between the Small Generating Facility and
the Point of Interconnection, including any modification, additions or upgrades that are
necessary to physically and electrically interconnect the Small Generating Facility to the
Transmission Provider s Transmission System. Interconnection Facilities are sole use
facilities and shall not include Distribution Upgrades or Network Upgrades.
Network Upgrades - Additions, modifications, and upgrades to the Transmission
Provider s Transmission System required at or beyond the point at which the Small
Generating Facility interconnects with the Transmission Provider s Transmission System
to accommodate the interconnection with the Small Generating Facility to the
Transmission Provider s Transmission System. Network Upgrades do not include
Distribution Upgrades.
Thus, Idaho Power s own documents and procedures for dealing with both QFs
(Schedule 72) and merchant plants (the SGIP) recognize the distinction between "network
upgrade" costs, on the one hand, and "interconnection" costs, on the other. Idaho Power
attempt to now claim that there is no difference between the two is feeble, at best.
The second reason in support of the conclusion that Schedule 72 does not address
network upgrade" costs is found in the history of the adoption and modification of the schedule
These interconnection procedures are published on Idaho Power s "OASIS" website. (See:
http://www.idahopower.com/pdfs/aboutus/business/small Gen InterconnectionProcedures. pdt)
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
A VISTA AND PACIFICORP-
by the Commission. The schedule was first approved by the Commission in 1990 by Order No.
29092 and later modified in 2001 by Order No. 29092 (the "Orders
A review of the Orders indicates that the issues before the Commission had to do with the
costs of interconnecting the QF to the Company s system. Responsibility for "network upgrades
was not an issue presented to the Commission and, therefore, the Commission did not decide that
particular issue.
Third, Idaho Power s proposed treatment of "network upgrade" costs departs from
Schedule 72 in an important way. Under Schedule 72, the QF is fully responsible for the
Interconnection Costs through a non-refundable Contribution in Aid of Construction ("CIAC"
Under Idaho Power s proposal for treatment of "network upgrade" costs, however, the QF would
fund those costs through a refundable Advance in Aid of Construction ("AIAC"), as if the QF
were being interconnected under Idaho Power s OATT rather than under Schedule 72.6 For
clarity, Cassia is not proposing that "network upgrade" costs be recovered through a CIAC;
rather Cassia points out the distinction between an AIAC and a CIAC to further illustrate that
network upgrades" and "interconnection costs" are different types of costs from each other and
are to be recovered in different ways. Cassia does not dispute that interconnection costs may
appropriately be recovered from the QF through a CIAC. Cassia does, however, strongly dispute
that "network upgrade" costs may be imposed on the QF through an AIAC, because it is a QF
and not a merchant plant, and thus is subject only to Schedule 72 and not to Idaho Power
OATT procedures.
The distinction between Contributions in Aid of Construction (CIAC) and Advances in Aid of
Construction (AlAC) is well established from an accounting point of view. See Vniform System of Accounts 18
C. Part 101, IDAPA 31.12.
In early Reply comments, PacifiCorp did suggest that a CIAC might also be imposed on QFs for "network
upgrades " but of course that would simply make it even more difficult for the QF to sell directly to the utility who
owns the control area.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP- 7
Orders 2003. 2003-A and 2006 Do Not Alter FERC's Policy Favorin2 Rolled-In Treatment
of Network U p2rade Costs.
As pointed out in Cassia Wind's Memorandum in Support of Complaint, and as Exergy
further explains in its Comments in this case, FERC has consistently held that all transmission
customers share the responsibility for the ultimate cost of "network upgrades.
Idaho Power suggests that FERC Orders 2003 , 2003-A and 2006 abandoned the rate-
making policy of rolled-in treatment. (Idaho Power Answer and Comments Pgs. 14-17). The
contrary is true. In Order No. 2003-, Para. 580, FERC stated
, "
In Order No. 2003 , the
Commission did not intend to abandon any of the fundamental principles that have long guided
our transmission pricing policy." Although FERC altered the financing scheme for new
generators connecting under an open access transmission tariff by requiring refundable advances
the refunded advances would ultimately be rolled into rates and become the responsibility of all
Transmission Service Customers (the ratepayers in an OATT regime).
In the FERC proceeding, Idaho Power apparently understood this was the effect of Order
No. 2003 and unsuccessfully argued for "direct assignment" of "network upgrade" costs to
generators. Order No. 2003-, Para. 570, recites that "Idaho Power argues that assigning the
Costs of Network Upgrades to Transmission Customers (i., ratepayers) is discriminatory
because, while they are held responsible for the costs they cause, the Interconnection Customer
(i., generators) is not being made responsible for the costs it causes." FERC rejected Idaho
Power s contention. See Order No. 2003-, Para 585, Pg.130 ("For this reason the Commission
has consistently priced the transmission service of a non-independent Transmission Provider
based on the cost ofthe grid as a whole, and has rejected proposals to directly assign the cost of
Network Upgrades.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
A VISTA AND P ACIFICORP-
With Respect to Network Um!rade Costs. The Idaho Commission Mav Properly Adopt for
OF Projects a Policy Different From t:tJ.e Policy FERC Adopted for Merchant Plants
All parties to this case agree that PURP A, the FERC's regulations implementing PURP A
and the FERC Orders 2003 and 2006 leave state commissions free to set appropriate
interconnection policies for QF's that, like Cassia Wind, will sell their entire output to the host
utility under PURP A. FERC' s policy under the Federal Power Act of requiring merchant plants
to provide up-front financing for "network upgrades" is, arguably, sensible in that non-QF
context. A merchant plant, using the host utility system to transfer electric power to a third party
purchaser, provides only incidental benefit to the retail customers of the transmitting utility.
QF selling its entire output to the host utility is different-it provides a direct benefit to the host
utility s customers - the supply of the energy they consume - along with the environmental and
other societal benefits that come from that energy in the case of renewables such as wind power.
Creating a barrier to entry for projects that directly benefit the host utility s customers in the
form ofQF responsibility for up-front financing of "network upgrades" is not appropriate.
FERC's policy requiring up-front financing of "network upgrades" by merchant plants
was first adopted in Order No. 2003, the proceeding addressing Large Generation
Interconnections (projects greater than 20 MW). The Commission in Order No. 2006
addressing polices for Small Generation Interconnections, decided to carry forward the up-front
financing policy in the interest of consistency and because FERC assumed these requirements
would not be burdensome to small generators. "However, we expect that for most Small
Generating Facilities there will be no Network Upgrades." Order No. 2006-, Para 52, Pg. 28.
PURP A, and state implementation of it, would be meaningless if it could only be
implemented in a manner identical to how the Federal Power Act is implemented by FERc.
Schedule 72 already provides for inclusion in "interconnection costs" of those upgrades that are
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
necessary to safely connect the QF to the network (i.e.. at the interface), and does not include
upgrades to the network used to deliver the energy to load centers. To now require QFs to also
provide the financing for Idaho Power for the "network upgrades" that Idaho Power will still
ultimately include in its rate base negates PURP A, and discourages QF development, contrary to
the federal statutory policy under PURP A of encouraging QFs.
The Utility Comments I2nore the Law of Idaho Re2ardin2 Cost Causation
Each ofthe Utility Comments argue, in slightly different ways, that responsibility for
network upgrades should be assigned to Cassia Wind and similarly situated QFs because they
cause" the need for the upgrades.
All of the Utility Comments, however, fail to address head-on the Idaho Supreme Court
decision in Building Contractors of Southern Idaho v. IPUC, 128 Idaho 534, 916 P .2d 1259
(1997), discussed in Cassia s Memorandum in Support of Complaint. They instead attempt to
distinguish the case "factually" just because it does not involve generation interconnections. The
Building Contractors Court held that existing customers contribute just as much as new ones to
the need for system expansions and assigning costs of system expansion to new entities
connecting to the system is discriminatory, as a matter oflaw. In other words, the State ofIdaho
follows the principle of "rolled-in average pricing" rather than "direct assignment" for utility
system expansions. And Building Contractors is not an aberration. It follows the nearly
identical case of Idaho State Homebuilders v. Washington Water Power 107 Idaho 415, 690
P.2d 350 (1984). The law of cost causation in Idaho is therefore well settled. While Building
Contractors and Homebuilders did not involve the precise question of QF interconnection to the
grid, they established the applicable legal principle of non-discrimination regarding system
expansions.
Idaho Power Comments, Pg. 16; PacifiCorp Comments, Pg. 4; Avista Comments, Pg. 3.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
AVISTA AND PACIFICORP-
Precedent From Other States Provides Little Guidance.
PacifiCorp and Idaho Power direct the Commission s attention to other states to try to
support their contentions that QFs should be responsible for "network upgrade" costs. Closer
examination ofthe PacifiCorp and Idaho Power citations reveals that they add little to the
utilities' contentions regarding Idaho law and policy.
PacifiCorp (Pg. 8) refers, first, to WUTC Order No. R-509. This Order appears to be a
ministerial order correcting cross reference inconsistencies, not a substantive discussion of cost
responsibility.9 PacifiCorp next refers to "Utah schedule 38." This, apparently, is PacifiCorp
own tariff schedule which spells out general procedures for negotiating interconnection
agreements, but contains no discussion of upgrade costs, network or otherwise, let alone a
Commission determination regarding those costS.l0 The Oregon administrative rule cited by
PacifiCorp, OAR 860-029-0060, contains a generalized statement of QF responsibility for
interconnection costs, but no discussion of network upgrade costs. 11 Idaho Power is correct that
in Colorado QFs are responsible for transmission system upgrades. 12 However, the Colorado
avoided cost regime is much different from Idaho s. For example, Colorado utilizes a Request
for Proposals and bidding process as part of the utility s integrated resource planning efforts.
Idaho has rejected bidding as a method ofQF resource acquisition.
In any event, regardless of what other states mayor may not choose to do, it is clear that
the State ofIdaho has the right and opportunity to select a policy that makes sense for Idaho.
Otherwise, the FERC would not have given states the discretion in its PURP A regulations to
httP://www.wutc. wa.gov/rms2.nsf/vw20050penDocket!B7 55EC73BB69F7B088256DD5007153BF
httP://www.pacificoro.comlRegulatory Rule Schedule/Regulatory Rule Schedule28325.pdf
11 httP://arcweb.sos.state.or.us/rules/OARS 800/0AR 860/860 029.html12 Idaho Power Comments, Pg. 21.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
AVISTA AND PACIFICORP-
make the determination as to the interconnection costs for which a QF is responsible. Indeed, the
Idaho Commission has already made that determination in Schedule 72, when it approved a tariff
that imposes the full cost of interconnection to the grid on the QF, including the costs of
upgrading the portion of the transmission system that interfaces with the interconnection
facilities. Indeed, absent a tariff change authorization, Idaho Power cannot impose the financing
responsibility for its "network upgrades" on QFs just because other jurisdictions, including
FERC, may do that to certain generators.
Idaho Power s Concern About FERC "Compatibility" Problems is Overblown
Idaho Power is concerned that a policy refusing to impose on QF's the obligation to
provide up-front funding of the utility s "network upgrade" costs will expose it to potential
compatibility" liability at FERC. By this, Idaho Power seems to indicate that state
interconnection policies regarding QF interconnection under PURP A must exactly mirror FERC
interconnection policies for merchant generators under the Federal Power Act. The FERC
however, has expressly stated that interconnection policies under PURP A for QF generators
selling their entire output to the transmitting utility (such as Cassia Wind) are within the
jurisdiction of the state commissions, and not within the FERC's jurisdiction under the Federal
Power Act. (See FERC Order No. 2006, Para. 516.) Idaho Power agrees with this. (See Idaho
Power Answer and Comments, Pgs. 8-9). It would not be consistent for FERC to recognize
state jurisdiction for QF interconnection policies and then penalize Idaho Power for
implementing an Idaho Commission policy, which Idaho Power opposed. Moreover, the
concept of "undue discrimination" allows for factual differences, such as different jurisdictional
requirements, to be taken into account. Therefore, Idaho Power s contention is a red herring.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
A VISTA AND P ACIFICORP-
The Affidavit of Jared Grover Should be Accepted as True for the Limited Purpose of
EstablishiB1:~ the Proper Context for This Policy Proceedin2
In his Affidavit, filed with the Complaint herein, Mr. Grover states that requiring Cassia
Wind to provide up-front financing of Upgrade Costs would seriously impair or destroy the
project economics. In particular, Mr. Grover states:
The cost of a $55 million dollar upgrade is much more than the total investment
(including costs for Turbines, electrical collection system, local interconnection costs
construction, road improvements, and local pennits) of the Cassia projects. Even
Cassia were responsible for 20% of the $55 to $60 million in upgrade costs, that would
still be a $10 to $12 million burden, on top of the multimillion direct interconnection
costs and the multi-million wind turbines and construction investment. It is simply
unbearable for a small QF to proceed with such a cost burden.
Idaho Power has not submitted an Affidavit disputing these facts, but instead asks the
Commission to give the Affidavit little weight based on the generalized, un-authenticated
assertion that QF developers sometimes make "dire predictions" about the consequences of a
Commission decision. (See Idaho Power Answer and Comments, Pg. 32).
What other developers at other times and places may have said in un-verified statements
, of course, wholly irrelevant to the content of Mr. Grover s Affidavit. Moreover, it does not
take a trained economist to see that, when the "network upgrade" cost which Idaho Power
proposes that Cassia Wind fund up front ($55 million) is much more than the total investment in
the Cassia Wind projects themselves, the economics of the wind projects are obviously impacted
in a most serious and adverse manner. Mr. Grover s Affidavit simply establishes the fact that
Idaho Power is proposing that Cassia Wind projects become a "banker" to Idaho Power on its
network upgrades" in an amount greater than what the financier for the Cassia Wind projects is
having to finance for the installation of the wind fanns themselves. Common sense allows the
Commission to judge whether this makes for good policy.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
And, with respect to the factual assertions Idaho Power itself advances, Idaho Power asks
the Commission to accept them as true and to follow the procedure courts utilize in considering
motions for summary judgment, which Idaho Power describes this way: "In considering a
motion for summary judgment, a court assumes that the facts alleged by the entity against whom
the motion for summary judgment is directed are correct." (Idaho Power Answer and
Comments. Pg. 30). Idaho Power should not have it both ways. By asking the Commission to
accept its factual allegations as true, Idaho Power may not then ask the Commission to disregard
Cassia Wind's sworn factual allegations.
To be clear, the Grover Affidavit is simply providing the factual context for the policy
decision the Commission must make in this proceeding. Neither Cassia Wind nor Idaho Power
are asking the Commission to render any factual determination in this proceeding based on the
respective affidavits. To the extent there is conflict between the affidavits, this simply highlights
the need for a bright-line rule regarding cost responsibility by QFs interconnecting to the host
utility s grid in order to sell their entire output to the host utility under PURP A. That bright-line
test, again, should be that the QF is responsible for the interconnection cost to connect to the
grid, and is not responsible for financing the costs of "network upgrades.
Imposin2 Up-Front Financin2 Responsibility on OFs Will Not Encoura2e More Efficient
Sitin2 Decisions
The Utility Comments argue that placing responsibility for "network upgrades" upon
QF's will create an incentive for QF's to locate their projects at places where such network
upgrade costs will be minimized. 13 This argument, which might seem plausible in the abstract
has little bearing on wind QF's in practice, for three reasons.
13 Idaho Power Comments, Pg.4; PacifiCorp Comments, Pgs.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
AVISTAAND PACIFICORP-
First, wind QF's have little lee-way in determining where to locate a project-the project
must be located where there is sufficient wind resource to provide motive force. A publication
of the American Wind Energy Association explains it this way:
A second key characteristic of wind projects is that they must be located at the site of
the wind resource. Wind cannot be piped or sent by rail like coal, uranium or natural gas.
Moreover, good wind sites are often located remotely from electric loads. This means
that wind facilities are more dependent upon long-distance transmission and less able to
avoid transmission problems than other technologies.
Second, as the sequence of events in this case illustrates, at the time siting decisions are
made, the extent of any "network upgrades" is both unknown and unknowable. The
interconnection procedures adopted by Idaho Power, as required by Schedule 72 for QF projects
and by FERC Orders 2003 and 2006 for merchant plants, contemplate that studies of
transmission system impacts are made long after, not before, the project location decision has
been made.
Third, QFs do not have the ability to simply add investment to rate base and pass higher
costs through to ratepayers, unlike utilities. Instead, QFs are by their nature required to be
efficient in order to be successful. This includes locating a wind farm in a manner that not only
captures the wind resource but is also located as close as possible to available transmission
facilities. In this way, QF projects are already concerned with siting projects economically.
Avista s Proposal for Individual NeS!otiations is Not Clear
In its comments, A vista suggests that a utility should be free to individually negotiate
transmission agreements with QFS.15 The FERC-mandated Small Generator Interconnection
Procedures, within certain parameters, already permit negotiations that would take into account
the individual needs and configuration of any specific project. Schedule 72 also appears to
14 American Wind Energy Association Fair Transmission Access for Wind: A Brief Discussion of Priority
Issues. http://www.awea.org/policy/documents/transmission.PDF.15 Avista Corporation Comments, Pgs. 1-
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
provide some negotiating latitude. If A vista is only suggesting that these interconnection
opportunities be confirmed for dealings with QF projects, Cassia Wind does not disagree.
, however, A vista is suggesting that a utility be given unfettered discretion to impose or
require varying and onerous interconnection requirements for QFs, including proposal that go
beyond the terms of the utility s current tariffs, with the only recourse for QFs being expensive
complaint proceedings to this Commission, the proposal should be rejected. Otherwise, the
possibility for discrimination and creation of barriers to entry is too great.
Remedial Action Schemes Obviate the Need for More Expensive "Network Up2rades.
In the Sikes Affidavit (pg. 6), Idaho Power admits that a remedial action scheme ("RAS"
is an engineering method to prevent system instability and outages, and is willing for RAS
deployment to serve as a "temporary solution" to the "network upgrades" it wants to construct.
Idaho Power says that a RAS is not a long-term solution, but never says why. If a RAS can
protect the system, then it should be a solution, short-term or long-term. And as PacifiCorp
comments note (at pg. 5), it gives QFs the option of generation curtailment (which is what an
RAS would implement) instead of network upgrades.
While Cassia Wind, therefore, does not believe that the "network upgrades" which Idaho
Power wants to build are necessarily required, for purposes ofthis proceeding it is not asking this
Commission to make that determination. Instead, Cassia Winds points out this difference of
opinion, so that the Commission can see that there is another policy reason for adopting a bright-
line rule regarding cost responsibility by QFs interconnecting to the host utility s grid in order to
sell their entire output to the host utility under PURP A. That bright-line test, again, should be
that the QF is responsible for the interconnection cost to connect to the grid, and is not
responsible for financing the costs of "network upgrades." Such a bright-line test will eliminate
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
AVISTAAND PACIFICORP-
the need for arguments between QFs and the utility (and thus avoid time-consuming complaint
cases at the Commission) over whether or not the "network upgrades" are in fact necessary.
Finally, the availability of a RAS transforms the "cost" issue from one of "cost-
causation " as the utilities would have it be viewed, to one of unnecessary cost imposition, as
Cassia Wind posed it in its Complaint. Implementation of a RAS at each QF wind farm is
consistent with, indeed required by, Schedule 72. Because a Remedial Action Scheme fully
protects the reliability of the network, as even Idaho Power admitted for "temporary purposes
that form of system protection obviates the need for multi-million dollar "network upgrades.
Indeed, because under the Idaho Power proposal the utility will ultimately roll in the cost of the
network upgrades" into its rates along with the carrying costs paid with the refunds to the QFs
it in theory should be indifferent to whether it funds those costs or QFs fund those costs
(assuming no significant different in the time value from the different carrying costs). But it is
not indifferent, simply because the imposition ofthe funding obligation on QFs can stymie their
wind developments, and thus helps protect the integrated utility s generation assets from non-
utility generation competition. Indeed, that appears to be exactly what happens, given that
PacifiCorp s Comments (at p. 6) indicate all!! potential wind projects dropped their
interconnection requests when PacifiCorp sought to impose "the high cost of transmission
infrastructure" on them. Again, this Commission should adopt a bright-line test that makes the
QF only responsible for the "driveway" and thus eliminates the ability to use "network upgrades
as a means of suppressing competition from wind development.
The True Purpose of "Network Up2rades" Can be Unclear. at Best
Idaho Power alleges that the "network upgrades" that it proposes are necessary solely
because ofthe QF projects such as those of Cassia Wind that are proposed for development.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
AVISTA AND PACIFICORP-
contrast, it appears that public information indicates that those upgrades were apparently already
previously planned as reliability upgrades. 16 In addition, one ofthe other utility s comments
A vista (at p. 2), even admitted that "transmission arrangements may be influenced by the utility
plans to expand transmission." Therefore, it is often hard to tell whether or not and to what
extent a "network upgrade" is being constructed to serve QF projects, utility generation projects
or other reasons, and those reasons can also change over time. As a result, it is not only difficult
to identify precisely why a "network upgrade" may be needed, but it is subject to potential abuse
by a utility that seeks to use it in a manner that prevents the development of non-utility
generation on its integrated generation, transmission, and distribution utility system.
Again, Cassia Wind is not asking this Commission to determine what is, in fact, the case
with the "network upgrades" at issue here, but simply points to this conflicting information as
further policy support for a bright-line rule regarding QF interconnection cost responsibility
under PURP A that does not include financing the costs of "network upgrades.
Ratepayer Neutrality" Are:uments l\ljsapprehemJ the
The PacifiCorp comments (at pgs. 3-4) argue that the Cassia Wind proposal would
violate the principle of "ratepayer neutrality" that is represented by "avoided cost" rates under
PURP A. This argument stretches the principle beyond its recognized and intended meaning.
A. W Brown v. Idaho Power IPC-88-, Order No. 23271 , the Commission explained the
principle as follows:
Under PURP A a state commission cannot authorize a rate which exceeds the
incremental cost to the electric facility of alternative energy. This ceiling is
defined as "the cost to the electric utility of the electric energy, which but for the
purchase from such cogenerator or small power producer, such utility would
generate itself or purchase from another source." 16 U.c. ~824(A)-3(d). This
16
See Assessment of Load Service Capability of the NW Transmission System " Reliability Assessment ofthe NW Transmission System Subcommittee (Sept. 2006), found at
http:/ /209 .221.152.82/pdtl2006%20rants%20report%20final%20draftpdf.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
A VISTA AND P ACIFICORP-
is the utility s avoided cost. With this ceiling upon rates, the ratepayer is
indifferent or neutral as to whether the utility purchases energy from a
cogenerator or generates electricity itself. The price to the ratepayer is the same.
Thus, when properly understood, the phrase "ratepayer neutrality" is a short-hand description of
the statutory requirement that avoided cost rates for energy purchases not exceed the cost to the
utility which, but for the purchase from such cogenerator or small power producer, such utility
would generate itself or purchase from another source. The principle is inapplicable to the
separate question of how to allocate costs of connecting the QF to the electric grid. Indeed, the
FERC's PURP A regulations make clear that "(i)nterconnection costs do not include any costs
included in the calculation of avoided costs." 18 C.R. ~ 292.101(b)(7)." And under Schedule
, QFs are already required to pay the full amount of the interconnection costs. It thus is
mixing apples - network upgrade costs - and oranges - interconnection costs - to argue as
PacifiCorp does that rate payer neutrality issues apply to the network upgrades, as opposed to the
interconnection costs.
In a related argument, PacifiCorp (at p. 7) and Avista (at p. 3) suggest that treating QFs
different from merchant plants is somehow unlawful discrimination. To the contrary, QFs and
merchant plants operate under two different sets of statutes - PURP A versus the Federal Power
Act - and two different sets of implementing rules - FERC's PURP A regulations as
implemented in varying manners by each of the 50 states versus FERC's open access
transmission regulations and tariff requirements. In addition
, "
small power production" QFs
unlike merchant plants, are by definition smaller in size than conventional power plants. Finally,
as to renewable resources, they are much different from conventional generation, as Cassia
Wind's Memorandum in Support (at pp. 8-9) pointed out:
Renewable resources are distinctly different from coal or natural gas. The wind
and solar energy not captured and used today vanishes and can not be recovered.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
In addition, they are distinctly different in their ability to be transported. Coal and
gas can be transported to a suitable location for conversion to electricity, but most
renewable resources must be exploited where they are found. .... Using these
resources will improve the air quality, yet their environmental benefits are wasted
unless they are exploited.
25 Tex.Reg. 82, 99 (2000).
Something that also should not be lost in the discussion of "costs" is the fact that the
Utilities Comments' focus on "costs" from an accounting perspective only. They completely
ignore the beneficial economics for ratepayers from the development of wind energy,
specifically the fuel cost savings, price stability, reduced dependence on fossil-fuels, and the
water consumption savings, given that wind does not consume fuel and water to generate
electricity, unlike coal and natural gas.
ReQuest for Expedited Consideration
Cassia Wind continues to believe that the straight-forward policy question presented by
this Complaint can be resolved without an evidentiary hearing. Cassia Wind is poised to
immediately move forward with construction ofthe project, which will result in the investment
oftens of millions of dollars in this State. Accordingly, Cassia Wind again, respectfully,
requests that the Commission issue its Order as promptly as is possible in the circumstances.
Conclusion
Based on the reasons and authorities cited herein, Cassia Wind respectfully
requests the Commission to detennine and declare that QFs selling their entire output to the host
utility and already paying for their interconnection costs should also not be required to finance
the utility s cost of "network upgrades.
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
DATED this 9th day of November, 2006.
Respectfull y submitted
McDEVITT & MILLER LLP
Dean . ller
McDevitt & Miller LLP
420 W. Bannock
Boise, ID 83702
Phone: [phone]
Fax: [phone]
Counsel for
Cassia Wind Gulch Park LLC
and Cassia Wind LLC
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-
CERTIFICATE OF SERVICE
I hereby certify that on the~day of November, 2006, I caused to be served, via the
methodes) indicated below, true and correct copies of the foregoing document, upon:
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
o. Box 83720
Boise, ID 83720-0074
ii ewell(Ci),puc. state.id. us
Barton L. Kline
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise, ID 83707
BKline(ip,idahopow er. com
David Sikes
Idaho Power Company
O. Box 70
Boise, ID 83707-0070
Email: dsikes~idahopower. com
David J. Meyer
Vice President, Chief Counsel for
Regulatory and Governmental Affairs
O. Box 3727
1411 E. Mission Avenue
Spokane, W A 99220-3727
Email: dmeyer~avistacorp.com
Peter Richardson
Richardson & O'Leary
515 N. 27th Street
Boise, Idaho 83702
[phone]
Email: peter~richardsonandoleary.com
Hand Delivered
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COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER,
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Brian Dickman
Dean Brockbank
PacifiCorp/dba Rocky Mountain Power
201 S. Main St. Suite 2200
Salt Lake City, UT 84111
Emai1: brian.dickrnan~pacificorp.com
dean. bro ckb ank~paci fi corp. com
Lawrence R. Lieb
Exergy Development Group of Idaho
LLC
910 W. Main Street, Ste. 310
Boise, ID 83702
Telephone: [phone]
Fax: [phone]
Email: sbcglobal.net
Hand Delivered
S. Mail
Fax
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Email
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Fax
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Email
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BY:
COMMENTS OF CASSIA WIND IN REPLY TO THE INITIAL COMMENTS OF IDAHO POWER
A VISTA AND P ACIFICORP-