20061030PacifiCorp, corrected service list.pdf

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October 27 2006
RECEIVED
20Gb OC1 21 AM 9: 58
201 South Main , Suite 2300
Salt Lake City, Utah 84111
Idaho Public Utilities Commission
472 West Washington
Boise, ID 83702-5983
IDAHO eU8l)~~" ,
UTILITIES COM\V\I~~IOr"
Attention:Jean D. Jewell
Commission Secretary
Re:Comments ofPacifiCorp in Case No. IPC-06-
PacifiCorp (d.a. Rocky Mountain Power) hereby submits for filing an original and eight (8)
copies of its Comments in Case No. IPC-06-, Cassia Gulch Wind Park, LLC and Cassia
Wind Farm, LLC.
Service of pleadings, exhibits, orders and other documents relating to this proceeding should be
served on the following:
Dean Brockbank
Senior Attorney
Rocky Mountain Power
One Utah Center, Suite 2200
201 South Main
Salt Lake City, UT 84111
dean. brockbank~pacificorp.com
Brian Dickman
Manager, Idaho Regulatory Affairs
Rocky Mountain Power
One Utah Center, Suite 2300
201 South Main
Salt Lake City, UT 84111
brian. dickman~pacificorp. com
It is respectfully requested that all formal correspondence and Staff requests regarding this
material be addressed to:
Bye-mail (preferred):datareq uest~pac ifi corp. com
By regular mail:Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, Oregon, 97232
By fax:[phone]
Sincerely,d)~~IP.
D. Douglas Larson
Vice President, Regulation
Enclosures
cc: Service List
Dean Brockbank
PacifiCorp
201 S. Main Street, Suite 2200
Salt Lake City, UT 84111
Telephone: [phone]
Fax: [phone]
E-mail: dean. brockbank(7J),pacificoro.com
RECEIVED
200b OC1 21 ~M \0:
Di~,qo \jUUL.\C~
UTH~IT\ES COMM\SSlOl'~
Attorney for PacifiCorp
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASSIA GULCH WIND PARK, LLC AND
CASSIA WIND FARM, LLC,
COMMENTS OF
ACIFICORP
CASE NO. IPC-O6-
COMPLAINANTS,
IDAHO POWER COMPANY,
RESPONDENT.
COMES NOW PacifiCorp dba Rocky Mountain Power ("PacifiCorp" or the
Company ), by and through its attorney of record, and respectfully submits the
following comments in response to the Idaho Public Utilities Commission
Commission ) Notice of Complaint and Notice of Comment Deadlines issued in Order
No. 30135 on September 27 2006.
BACKGROUND
On September 13 2006, Cassia Gulch Wind Park LLC and Cassia Wind Farm
LLC (collectively referred to herein as "Cassia" or the "Projects ) filed a complaint
COMMENTS OF P ACIFICORP
against Idaho Power Company ("Idaho Power ) with the Commission requesting a
determination that, as a matter of policy, the cost responsibility for transmission system
upgrades to meet Idaho Power s N-l contingency planning conditions, required to
maintain standard reliability requirements under good utility practice, should not be
assigned to Public Utility Regulatory Policies Act of 1978 ("PURP A") qualifying
facilities ("QF") connecting to the system. Rather, Cassia contends the cost of system
upgrades should be rolled into the utility s plant-in-service rate base and recovered from
rates and charges for utility service of native load and other transmission customers. The
Projects are QFs within the meaning ofPURPA and each has signed Commission-
approved firm energy sales agreements with Idaho Power.
STATEMENT OF FACT
Although the Federal Energy Regulatory Commission ("FERC") has jurisdiction
with respect to interconnection for most generators, state commissions retain authority
with respect to interconnection terms for QFs when the facility s entire output is sold to a
regulated utility. See Standardization of Generator Interconnection Agreements and
Procedures.FERC Stats. & Regs. ~ 31 146 (2003) ("Order No. 2003"); and
Standardization of Small Generator Interconnection Agreements and Procedures, FERC
Stats. & Regs. ~ 31 180 (2005)("Order No. 2006"
(Remainder of page intentionally left blank.
COMMENTS OF P ACIFICORP
ACIFICORP COMMENTS
Ratevaver Neutralitv
PacifiCorp and all electric utilities have an obligation to purchase net output from
QF projects that satisfy the appropriate regulatory criteria. The fundamental premise of
PURP A is based on the standard that ratepayers should remain indifferent to purchasing
from a QF or from the utilities ' next available resource. The Commission s primary
responsibility regarding the purchase of power from a QF is to ensure that ratepayer
neutrality is preserved and that utilities should not pay "more than the avoided costs for
purchases" from QFs. 18 C.R. ~ 292.304(a)(2).
One of the fundamental mechanisms built into the PURP A regulatory regime is
that in order to maintain this ratepayer neutrality, a QF developer is required to pay for all
associated interconnection costs on a non-discriminatory basis that are required to
interconnect the QF to the utility s system and maintain system reliability levels at pre-
interconnection standards. 18 C.R. ~ 292.306(a). "Interconnection costs" are defined
broadly to include "the reasonable costs of connection. . . transmission, safety provisions
and administrative costs incurred by the electric utility directly related to the installation
and maintenance ofthe physical facilities." 18 C.R. ~ 292.101(7). Importantly, the
federal regulations promulgated by the FERC state that "to the extent such
(interconnection) costs are in excess of the corresponding costs which the electric utility
would have incurred if it had not engaged in interconnected operations (with the QF), but
instead generated an equivalent amount of electric energy itself or purchased an
equivalent amount of electric energy or capacity from other sources " the QF must pay
those costs. Id.18 C.R. ~ 292.306(a).
COMMENTS OF P ACIFICORP
In other words, if the utility incurs costs by purchasing from a QF that are in
excess of the costs that a utility and its ratepayers would incur by virtue of obtaining the
generation from another source, the QF must pay for those costs-that is the only way to
maintain ratepayer neutrality. The all-in price paid by the utility to a QF should be set so
that the cost of the QF to the utility, including any transmission-related costs, is not
greater than other resource alternatives. The Commission should not require the utility
and its customers to shoulder the cost of transmission upgrades to enhance the economics
of any QF proj ect-if it does, the ratepayers will pay for those costs in violation of the
ratepayer indifference standard.
Commercial Considerations
PacifiCorp currently applies the PURP A requirements in interconnecting and
serving QF generators. PacifiCorp follows a process and uses agreements that are
virtually identical to the FERC interconnection process and agreements, respectively,
contained in FERC Order No. 2003 and Order No. 2006. This process and set of
agreements include feasibility, system impact, and facility studies to determine the
required infrastructure needed to complete a proposed QF interconnection. In order for
PacifiCorp to maintain a safe and reliable transmission system, the interconnecting QF is
obligated to abide by the findings in the various study stages.
In following the PURP A and FERC-like rules, PacifiCorp maintains that it is the
QF generator s responsibility to pay for all study costs, and all costs associated with
permitting, engineering, procurement, and installation of infrastructure additions
identified as required to maintain a safe and reliable system with the addition of the QF
COMMENTS OF P ACIFICORP
generator being connected and integrated into the transmission system. PacifiCorp
currently includes provisions in its QF agreements indicating that the developer is
responsible for all costs associated with the QF interconnection. Any costs resulting from
transmission constraints or transmission upgrades necessary to move the QF power from
the point of receipt to a point of use for serving network load would be included in the
interconnection costs to be born by the QF.
Like Idaho Power, PacifiCorp designates QFs as network resources to serve
network load and PacifiCorp maintains the right to curtail QF deliveries for system
reliability. In the event a resource is added and there is insufficient load, the added power
that a QF delivered to PacifiCorp must be moved elsewhere to be useful to the system.
This scenario is primarily expected to be the case in the off-peak time period, but also
may occur with the addition of numerous or large QF projects.
In the case where the QF locates in a load pocket or cannot be fully integrated into
PacifiCorp s system, the Company has the following options: 1) curtail QF generation if
it exceeds load; 2) acquire transmission to move generation to serve network load; or 3)
upgrade the transmission system to get generation to load. Under options 2 and 3, above
the QF is responsible for the cost of acquiring incremental transmission or upgrading the
transmission system. If there is inadequate transmission capacity to move the power
elsewhere in the system, the Company has the option of backing down use of its own
low-cost resources to serve load in the area. Under this scenario, the avoided cost the QF
receives should be adjusted downward to reflect the Company s obligation to accept the
QF's higher cost power and back down a lower cost resource. However, ifthere are not
COMMENTS OF P ACIFICORP
Company resources to curtail, the Company may ultimately be faced with not being able
to accept QF power.
While PacifiCorp recognizes that locational transmission constraints and the need
for transmission upgrades should not prevent project development, the incremental cost
reflecting the constraint or upgrade should be born by the developer and not the
ratepayer. Analysis of transmission system constraints and the cost of options for dealing
with those constraints should be made available to QF project developers as part of the
QF pricing and contract process so that appropriate adjustments can be made.
developers are not responsible for such costs, their incentive to make efficient project
siting decisions would largely be lost. For example, a QF would simply choose the least
expensive location to site its project, without regard to the purchasing utilities
transmission system. As a consequence, retail customers would shoulder the increase in
cost for transmission infrastructure and Company resources that would otherwise be
engaged in system planning and investment would be diverted to facilitate project siting
in sub-optimal locations from a system perspective.
To illustrate, PacifiCorp has processed interconnection requests
for eleven potential wind generation projects of various sizes through its interconnection
queue over the past three years. These customers formally applied for interconnection to
PacifiCorp s system and PacifiCorp conducted studies to define the interconnection and
reliability requirements for five ofthe proposed projects (queue positions Nos. 32 , 33, 38
, and 46). These eleven potential projects have all dropped their requests due to the
high cost of transmission infrastructure required to reliably deliver their energy to loads.
Even though many of the eleven requests exceeded the maximum size for qualification as
COMMENTS OF P ACIFICORP
a QF, if the Cassia proposal had been in place over the past three years, it is highly likely
that these projects would have been built with retail customers required to fund the
necessary upgrades through significantly increased rates. PacifiCorp s transmission
upgrade costs for the five projects for which PacifiCorp conducted studies were estimated
to total $571 956 000. The impact of implementing the Cassia proposal would have a
profound impact on retail customers and their rates.
Discrimination
The requirement to pay for upgrade costs is applied equally to all new resources
regardless of fuel used, including wind generators. All resources, regardless of fuel type
are subject to location-specific costs that are factored into an economic analysis for a
particular proj ect. For example, the economic analysis of a coal plant is affected by
altitude and its proximity to coal resources and rail transportation, among other factors.
All proposed resources are considered in a public queuing process. In PacifiCorp
service territory the queue is posted on OASIS. The queue process serves to establish the
first applicant's claim over subsequent applicants to available capacity on PacifiCorp
infrastructure. Importantly, new resources cannot take away capacity (or reliability
power quality) from any existing customers relying on that segment ofPacifiCorp
infrastructure. In essence, the queue is an orderly process for reserving unused capacity
on finite elements of the Company s distribution and transmission systems. In cases
where there is no remaining capacity, the proposed QF resource is responsible for all
costs to add new capacity to serve the output of the generator to the appropriate load.
COMMENTS OF P ACIFICORP
Assif!nment of Cost
Other state utility commissions have supported the position that QF developers
are responsible for costs associated with interconnecting to utilities' systems. In Order
No. R-509, Docket No. A030832, the Washington Utilities and Transportation
Commission stated that all costs associated with the interconnection of a QF generator
are to be born by the QF generator customer. Utah schedule 38 states "Consistent with
PURP A, the owner is responsible for all interconnection costs assessed by the Company
on a non discriminatory basis." In Oregon, OAR 860-029-0060, states "Any
interconnection costs shall be the responsibility of the owner or operator of the qualifying
facility." PacifiCorp believes that all costs resulting from interconnecting and integrating
QF resources must be taken into account and appropriate adjustments made to the
avoided cost rate in order to maintain ratepayer neutrality.
If all incremental costs that arise due to interconnecting and integrating a QF
project onto the Company s system are not paid for by the QF, the Company will
experience significant upward pressure on rates charged to its retail customers. In
addition, due to lag inherent in the regulatory system, a transfer of wealth would occur
between the Company s shareholders and those of the QF developer until such costs
could be reflected in retail rates.
CONCLUSION
PacifiCorp respectfully requests that the Commission require QFs to pay for all
interconnection and system upgrade costs associated with their respective projects. All
COMMENTS OF P ACIFICORP
communications regarding these comments should be directed to Brian Dickman at (801)
220-4975.
Respectfully submitted this 2ih day of October, 2006.
~~c1\tJ~
Dean Brockbank
Attorney for PacifiCorp
COMMENTS OF P ACIFICORP
PROOF OF SERVICE
I hereby certify that on this 27th day of October 2006 I caused to be served, via E-mail and
u.s. mail, a true and correct copy of the foregoing COMMENTS OF PACIFICORP in Case No. IPC-
06-21 to the following parties as shown:
Barton L. Kline
Lisa Nordstrom
Idaho Power Company
O. Box 70
Boise, ID 83707-0070
Email: bkline~idahopower.com
lnordstrom~idahopower. com
Dean J. Miller
McDevitt & Miller, LLP
420 W. Bannock Street
PO Box 2564 (83701),....;I
BOIse, ID 83 702
Email: ioe~mcdevitt-miller.conbC:i ~
):P CJrn~ -t
Ronal? K. AI:ington ~o ~
Associate ChIef Counsel c '2
r'~ :P"eere re It ;e~
::g:
6400 NW 86th Street 'P.
Johnston IA50131
Email: arringtonronaldk~i ohndeere. com
(")
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 West Washington
Boise, Idaho 83702
Email: iiewell~puc.state.id.
.:::::
\II
David Sikes
Idaho Power Company
O. Box 70
Boise, ID 83707-0070
Email :dsikes~idahopower .com
Brian Dickman
Dean Brockbank
PacifiCorp/dba Rocky Mountain Power
201 S. Main St. Suite 2200
Salt Lake City, UT 84111
Email: brian.dickman~pacificorp.com
dean. brockbank~pacificorp. 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
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
Peter Richardson
Richardson & O'Leary
515 N. 27th Street
Boise, Idaho 83702
[phone]
Email: peter~richardsonandoleary.com
Pegg
Supe 'sor, Regulatory Administration