HomeMy WebLinkAbout20061109Reply comments.pdfRECEIVED
Peter J. Richardson
Mark R. Thompson
RICHARDSON & 0' LEARY PLLC
515 N. 27th Street
Boise, Idaho 83702
Telephone: (208) 938-7901
Fax: (208) 938-7904
peter~richardsonandoleary .com
2006 NOV -9 PM~:
IDAHO f-'IJbUC
UTILITIES COMMISSION
Attorneys for Exergy Development Group of Idaho LLC
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASSIA GULCH WIND PARK LLC AND
CASSIA WIND FARM LLC Case No. IPC-O6-
Complainants REPLY COMMENTS OF EXERGY
DEVELOPMENT GROUP OF
IDAHO
IDAHO POWER COMPANY
Respondent
INTRODUCTION
COMES NOW, Exergy Development Group ofIdaho LLC, hereinafter referred to as
Exergy," and pursuant to the Commission s Notice of Comment Deadlines issued on
September 27 2006 hereby submits these Reply Comments to the Comments of Idaho
Power Company, Avista, and PacifiCorp.
1. Transmission System Upgrades are to be Born by the Utility's Transmission
Customers
Both Avista and PacifiCorp argue in their comments to the Commission that QF
generators should be the entities ultimately responsible for paying transmission system
upgrade costs when those costs are necessitated by a QF's interconnection to a utility'
system.! In light of those comments, it is important to emphasize that under both Cassia
Gulch Wind Park's (Cassia s) and Idaho Power s proposals for financing the relevant
transmission system upgrades, Idaho Power s customers would ultimately be responsible
for the costs of those upgrades. While Idaho Power believes that Cassia and other
similarly situated developers should be responsible for paying the costs up-front, even
Idaho Power s proposal would result in its customers being responsible for the upgrade
costs through transmission credits to the developers over time. The comments filed by
A vista and PacifiCorp introduce arguments additional to those raised by Idaho Power and
Cassia. Exergy addresses PacifiCorp s and Avista s comments as well as Idaho Power
argument that QF developers should be responsible for paying transmission system
upgrade costs up-front.
a. There is a Strong Policy Reasonfor Rolling Transmission Upgrade Costs
into Transmission Rates
As explained in Exergy s Comments filed in this proceeding on October 27, there
is good reason for FERC's longstanding precedent that the costs of upgrades to a utility'
transmission system are to be born by the utility's transmission customers, not individual
generators. Customers share in all costs of the transmission grid "because all grid
additions benefit all customers using the grid.2 FERC has clarified that this policy holds
even where the facilities would not have been installed but for a particular customer
service.3 Exergy believes this policy should be followed in the Commission s QF
interconnection procedures and that the Commission should not require QF developers to
See Avista Comments p. 1 (explaining Avista's position that such payments should be negotiated, and
then determined subject to Commission review if negotiations fail); See also PacifiCorp 's Comments p. 4.
Alabama Power Co.66 FERC ~ 61 309, pp. 7-8 (1993).
Appalachian Power Company, 66 FERC ~ 61 151, pp. 3-4 (1993).
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shoulder the costs of upgrading utilities' transmission systems since the benefits of those
upgrades accrue to all of a utility's customers.
b. It is Inequitable to Require QFs to Finance or Pay for Transmission
System Upgrades
Idaho Power s comments in this proceeding acknowledge the real issue facing the
Company. Cassia and Exergy suggested that as an alternative to the transmission system
upgrades certain wind generators could be tripped off the system in the event of an actual
1 contingency as part of a remedial action scheme. In response, Idaho Power states
Idaho Power does not agree that deferring transmission system upgrades by the use of
generation shedding schemes is a prudent, long-term approach to the problem of
inadequate transmission capacity.4 Idaho Power does not argue that the proposal to shed
generation would not work, rather, it argues that it does not believe it would be a long-
term solution to the real problem on Idaho Power s system-inadequate transmission
capacity. QF developers should not be required to pay for ensuring adequate
transmission capacity on the grid when all customers benefit from it, and when Idaho
Power acknowledges that it is seeking a solution to a long-term problem, one that will
eventually need to be resolved whether or not the instant generation projects are
constructed.
2. Idaho Power s Schedule 72 Does Not Support the Position that QFs are
Required to Pay for or Finance Transmission System Upgrades
Idaho Power argues that its Schedule 72 (Interconnections to Non-Utility
Generation) demonstrates that QFs are responsible for paying for transmission system
upgrades that Idaho Power believes are necessary in order to get the QF power to their
load since Schedule 72 contemplates QF funding of the costs of "Interconnection
Comments of Idaho Power p. 31.
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Facilities.s Even a cursory reading of Schedule 72, however, reveals that this assertion
is unfounded.
Schedule 72 defines "Interconnection Facilities" as "facilities which are
reasonably required. . . to interconnect and to allow the delivery of energy from the
Sellers Generation Facility to the Company s system.6 This definition clearly speaks of
the costs of getting the power from the generator to the utility's transmission system, not
the costs of getting the power to the utility's load once it is on the utility's system.
Further, Idaho Power argues that the definition of "Special Facilities" in Schedule 72
(which are listed as an example of potential Interconnection Facilities) gives it authority
to charge transmission upgrade costs to QFs as Interconnection Costs. However, the
definition of Special Facilities also only speaks to upgrades to "interconnect the Seller
Generation Facility to the Company s system." Again, the plain words of this definition
limit Special Facilities to upgrades required to connect to the Company s system. It does
not speak to upgrades required in order to get power from the Company s system to its
load. Additionally, Schedule 72 requires disconnect equipment to allow the Company to
disconnect a QF's "Interconnection Facilities" under certain circumstances.7 This
provision would make little sense if Interconnection Facilities included upgrades to Idaho
Power s backbone transmission system.
Idaho Power seeks to blur the distinction between interconnection facilities and
transmission system upgrades and implies that the issue in this case has already been
resolved, when that is plainly not the case. To the contrary, Schedule 72 demonstrates
that transmission system upgrades were never contemplated as interconnection facilities.
Idaho Power Comments p. 9-13.6 Schedule 72 at Original Sheet No. 72-
7 Schedule 72 at Original Sheet No. 72-
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Idaho Power s Small Generator Interconnection Procedures also provides support
that transmission system upgrades are not appropriately characterized as Interconnection
Facilities. Those procedures define Interconnection Facilities as "sole use facilities " and
affirm that they do "not include Distribution Upgrades or Network Upgrades.
3. FERC Regulations Do Not Support a Responsibility for QFs to Pay for
Transmission System Upgrades
PacifiCorp and Idaho Power also rely on FERC regulations for their claim that
transmission upgrade costs can be considered interconnection costs, chargeable to QFs.
Again, the plain language or those regulations disproves truer assertions.
18 C.R. 9 292.101(b)(7), to which PacifiCorp and Idaho Power point 9 defines
interconnection costs as including transmission costs "incurred by the electric utility
directly related to the installation and maintenance of the physical facilities necessary to
permit interconnected operations.(emphasis added). Idaho Power and PacifiCorp
twisted reading of the regulation argues that it contemplates transmission costs necessary
to upgrade the grid when the regulation actually limits recovery of costs to those
necessary to interconnect. Neither Exergy nor Cassia dispute that interconnection costs
are assignable to the QF-the issue in this proceeding is responsibility for transmission
system upgrades required under N-1 conditions to transport power to load. These costs
are not contemplated in the FERC regulations as interconnection costs.
4. Requiring Utilities to Pay for Transmission System Upgrades Does Not
Remove QFs' Incentives to Make Efficient Project Location Decisions
Idaho Power argues that under Cassia s proposal, QF developers could "ignore
transmission interconnection costs when they select the least expensive location for them
See Small Generator Interconnection Procedures, Attachment 1, p. 1 available at
http://www. idahopower. com/pdfs/ aboutuslbusiness/ small Gen Interconnecti onProcedures. pdf
PacifiCorp Comments p. 3; Idaho Power Comments pp. 9-10.
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to site a generation resource even in extremely remote locations.lo This is untrue
however, since QF developers must consider the costs of interconnection to the utility'
system when determining the feasibility of a project. Locating a project in an extremely
remote location would necessarily entail more costs to the QF of reaching a utility'
system to interconnect. Where a utility's transmission system is nearby, interconnection
costs would presumably be lower, and the QF would have an incentive to choose such a
site relative to a more remote location with otherwise equal potential.
It is inappropriate for Idaho Power to argue that a site can be close to a utility'
transmission system, yet be "remote" because it ignores the integrated transmission grid
which as noted above, is an integrated "cohesive network moving electricity in bulk."
QFs should be responsible for the costs of getting to the utility's system, but not the costs
of upgrading that system to allow the utility to fulfill its service obligation.
5. Other States' Policies Do Not Support the Utilities' Proposals
In its Comments, Idaho Power argues that "(0 Jther states nearby have recently
confirmed that they will require QFs to pay for the costs of the system upgrade facilities
necessary to integrate generation.12 Idaho Power then cites a 1988 decision from the
Colorado Public Utilities Commission. (In its comments, Idaho Power incorrectly states
that the Colorado Commission s decision was issued in 1998; Its formal citation is
accurate, however). In that decision the Colorado Commission found that the Public
Service Company of Colorado could require QFs to pay for internal transmission
10 Idaho Power Comments p. 25.
11
Appalachian Power Company, 66 FERC ~ 61 151, pp. 3-4 (1993).12 Idaho Power Comments p. 20.
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upgrades required to move QF power to Denver load. 13 Colorado s regulations, on which
that Commission relied, however contain a significant difference from Idaho Power
Schedule 72 and also from FERC's QF interconnection regulations.
Colorado s definition of "Interconnection costs" generally parallels 18 C.R. 9
292.101(b)(7), FERC's definition of interconnection costs. However, the Colorado
regulation specifically inserts a phrase stating that interconnection costs "includ( e J the
cost of installing equipment elsewhere on the utility's system necessitated by the
interconnection.14 Arguably, this language allows a practice of charging certain
transmission upgrades to QFs in Colorado. However, no such language exists in FERC'
regulations. And, Schedule 72 contains no language paralleling the FERC definition, let
alone adopting language similar to the Colorado provision. Idaho Power s attempt to
offer the Colorado case as precedent, therefore, inappropriately tries to import provisions
into Idaho s regulations which do not exist.
Idaho Power also observes that last year the Colorado Commission reaffirmed its
findings that QFs will be required to pay for all Company transmission system
upgrades. IS In support of that assertion Idaho Power cites to Re: The Investigation and
Suspension of Tariff Sheets Filed by Public Service Company with Advice Letter No.
1411 - Electric 240 P.UR. 4th 323 , 2005 WL 850285. That order does not address the
issue Idaho Power asserts it addresses. In fact, that order is a final order in a general rate
case filed by Public Service Company of Colorado. It does not address QF transmission
Issues.Interestingly, however the Commission was presented with the question of
13 Idaho Power Comments p. 20.14 Re Public Service Company of Colorado Decision No. C88- 726 93 P.R. 4th 384 395 (Colo. P.
1988).
15 Idaho Power Comments p. 20.
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whether transmission voltage lines that are directly assigned to a customer or a customer
class should be rolled into the total transmission system or should be directly assigned to
the customer using that radial transmission line.
The Colorado Commission observed:
Consistent with the position it took in the Phase I portion ofthis
proceeding, Public Service (Public Service Company of Colorado
reclassified certain radial transmission lines as central transmission system
which were previously directly assigned to the rate class served by the
radial transmission line.
Public Service contends that FERC requires radial transmission lines to be
rolled-up" into central transmission system because it is always possible
for these lines to be looped back into the grid, making them an integrated
part of the transmission system.
The Commission duly noted its Staffs objections:
Staff witness Ms. Fischhaber disagreed with the Company s proposed roll
up of radial transmission lines into the central transmission system. She
believes radial lines should be directly assigned to those customers being
served by those lines as Public Service has historically done. She reasons
that if radial lines are rolled-up into the total transmission system, the
general body of ratepayers are paying for parts of the system that are of no
benefit to them, while customers that solely benefit from the radial
transmission line do not pay the appropriate cost for their exclusive use of
that radial transmission line.
The Commission, after considering arguments that are similar to the arguments
before this Commission on allocation of costs of transmission system investment, ruled
that "we adopt Public Service s proposal to treat radial transmission lines as general
transmission.lS Of course, in this case the transmission facilities that Exergy and Cassia
are asking to be rolled-in are being used by all customers, unlike the Colorado
transmission systems which benefited only a select few customers. The Colorado
16 Re: The Investigation and Suspension of Tariff Sheets Filed by Public Service Company with Advice
Letter No. 1411 - Electric 240 P.R. 4th 323 338-3392005 WL 850285.
17 !d.
18 1d.
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Commission s findings last year cited by Idaho Power actually support Exergy and
Cassia s position regarding the proper treatment of transmission system investment. The
Commission should therefore not rely on the Colorado Commission s 1988 order as
precedent for determining how to do allocate transmission investment.
6. Requiring Utilities to Pay for Transmission System Upgrades Does Not
Result in Ratepayers Paying More than Established Avoided Costs Rates for
Power
Idaho Power, A vista, and PacifiCorp all argue that requiring a utility to pay for
transmission system upgrades in order to bring QF power to load violates PURP A, or
PURP A principles, because it would result in charges for the power that would exceed
the established avoided cost rates. 19 Indeed, the utility's rates for QF power is
determined by the utility's established avoided cost rate, but that rate is not exceeded
simply due to the fact that the utility must, or chooses to make upgrades to its system in
order to make retail deliveries. The cost of the utility in upgrading its system such that it
can transport that power to its ultimate retail load is not the cost of the power-it is
simply the cost to the utility of maintaining a system that allows it to fulfill its service
obligation. The costs at issue in this proceeding are the costs of the utility maintaining its
ability to deliver the benefit of QF power to its customers, not the appropriate rates for
QF power.
The utilities' customers currently pay the costs of bringing the utilities ' diverse
resources to load, and QF power should not be singled out as somehow not "deserving
similar treatment, especially when those costs benefit the transmission grid. The utilities
19 See Idaho Power Comments p. 17; Avista Comments pA ; PacifiCorp Comments p. 2-
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attempt to pile transmission upgrade costs into power supply costs is artificial and should
be disregarded.
The comments of Avista and Idaho Power further argue that QFs must bear the
cost of transmission system upgrades since the current avoided cost rates do not include a
component for transmission expense.20 They reason that because the current surrogate
avoided resource is a combined cycle combustion turbine, which is deemed to be able to
be sited at an optimal location on the utility's transmission system, Idaho Power
ratepayers should not be responsible for any transmission upgrades associated with QFs.
Idaho Power s position is undermined by its recent application to construct the Evander
Andrews natural-gas fired combustion turbine, for which the Company seeks to charge its
ratepayers nearly $23 million in transmission upgrades because the Company determined
that it was not reasonable to construct a combustion turbine near its load center.21 Again
QFs should not be singled out as ineligible for transmission costs when other resources
likewise require grid expansions and upgrades.
7. Requiring Utilities to Pay for Transmission System Upgrades Does Not
Violate FERC's Comparability Standards
Idaho Power warns that if Cassia Wind's proposal is adopted in this proceeding
and the utility is required to finance transmission system upgrades necessary to transport
QF power under N-1 conditions, FERC could find that Idaho Power was giving
preferential treatment to QFs compared to Idaho Power s own new generation and new
merchant generation developers. Idaho Power fails to recognize the significance ofthe
fact, which it refers to in its comments, that FERC has expressly left interconnection
20 Avista Comments p. 3 Idaho Power Comments p. 18.
21 See Application ofIdaho Power for a Certificate of Convenience and Necessity for the Evander Andrews
Power Plant, p. 5, . filed in Case No. IPC-06-09.
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policies for QF generators up to the state utility commissions. FERC obviously does not
require that interconnection procedures be the same for QFs as they are for FERC'
interconnection procedures for large generators.
CONCLUSION
For all ofthe reasons stated herein, Exergy urges the Commission to find that QFs
are not required to finance the utility s network upgrade costs in addition to paying for
the costs of interconnecting their projects to the utility's system.
Respectfully submitted this 9th day of November, 2006.
Of Attorneys for Exergy Development
Group of Idaho
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 9th day of November, 2006 a true and correct
copy of the within and foregoing REPLY COMMENTS OF EXERGY DEVELOPMENT
GROUP OF IDAHO, was served by U.S. Mail, postage prepaid, to:
Dean J. Miller
McDevitt & Miller LLP
O. Box 2564
Boise, Idaho 83701
Barton L. Kline
Monica B. Moen
Idaho Power Company
O. Box 70
Boise, Idaho 83707-0070
David J. Meyer
Senior Vice President
A vista Utilities
O. Box 3727
Spokane, W A 99220
Ronald K. Arrington
Assoc. Chief Counsel
John Deere Credit
6400 NW 86th Street
Johnston, IA 50131
David Sikes
Idaho Power company
O. Box 70
Boise Idaho 83707-0070
Brian Dickman
Dean S. Brockbank
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Lawrence R. Lieb
Exergy Development Group of Idaho LLC
910 W. Main St., Suite 310
Boise, ID 83702
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
O. Box 83720
Boise, Idaho 83720-0074
And hand-delivered to:
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 West Washington
Boise, Idaho 83702
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