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HomeMy WebLinkAbout20071019Reply comments.pdf-.. HEGE\' -- IDAHO~POWER~ An IDACORP Company I D'; '). 3 \ 'lnu1OC1 i 9 (ci Barton L. Kline Senior Attorney y' \ \ YHlg:) 0~~' ~~ ~ S \ 0. October 19 , 2007 Jean D. Jewell, Secretary Idaho Public Utilities Commission 472 West Washington Street P. O. Box 83720 Boise, Idaho 83720-0074 Re:Case No. IPC-07- In the Matter of Idaho Power Company s Petition to Increase the Published Rate Eligibility Cap for Wind Powered Small power Production Facilities; and To Eliminate the 90%/110% Performance Band for Wind Powered Small Power Production Facilities Dear Ms. Jewell: Please find enclosed for filing an original and seven (7) copies of Idaho Power Reply Comments in the above-referenced matter. I would appreciate it if you would return a stamped copy of this transmittal letter in the enclosed self-addressed, stamped envelope. Very truly yours Barton L. Kline BLK:sh Enclosures o. Box 70 (83707) 1221 W. Idaho St. Boise, ID 83702 BARTON L. KLINE, ISB # 1526 LISA D. NORDSTROM , ISB No. 5733 Idaho Power Company 1221 West Idaho Street O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-2682 FAX Telephone: (208) 388-6936 bkline (Q? idahopower.com mmoen (Q? idahopower.com Attorneys for Idaho Power Company Express Mail Address 1221 West Idaho Street Boise , Idaho 83702 f~ECEI\/ 2DUIOCT pq ?' ?? I II ...;' lrr I Li BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MA TIER OF IDAHO POWER COMPANY'S PETITION TO INCREASE THE PUBLISHED RATE ELIGIBILITY CAP FOR WIND POWERED SMALL POWER PRODUCTION FACILITIES; and TO ELIMINATE THE 90%/110% PERFORMANCE BAND FOR WIND POWERED SMALL POWER PRODUCTION FACILITIES ) CASE NO. IPC-07- IDAHO POWER'S REPLY ) COMMENTS d6~1:~I~slc: COMES NOW , Idaho Power Company ("Idaho Power" or "the Company ) and hereby responds to the Comments of Exergy Development Company of Idaho, LLC Exergy ) as follows: IDAHO POWER'S REPLY COMMENTS , Page RESPONSE TO EXERGY'S COMMENTS Exerqy s Comments Do Not Consider the Joint Settlement Aqreement. In its Comments, Exergy urges the Commission to conduct a full evidentiary hearing to investigate Idaho Power s wind integration costs. However, Exergy also acknowledges that prior to filing its Comments it did not have time to review the Joint Settlement Agreement that the Company, Renewable Northwest Project and Energy Coalition filed with the Commission on October 2 , 2007 ("Joint Settlement Agreement). The fact that Exergy s Comments were made without consideration of the Joint Settlement Agreement is important because most of the issues raised in Exergy Comments were addressed and , in Idaho Power s view, resolved by the Joint Settlement Agreement.However, there are still two points raised in Exergy Comments that require clarification by Idaho Power so that the Commission has all of the facts it needs to make an informed decision on Exergy request that the Commission conduct an evidentiary proceeding to analyze Idaho Power s wind integration costs. Wind Inteqration Cost Studies From Other Reqions and Continents Do Not Provide Valid Information Reqardinq Idaho Power s Inteqration Costs In its Comments Exergy includes a chart (Attachment A) which purports to compile the results of a number of wind integration cost studies that have been performed over the past several years , principally by utilities in the mid-west , California and Europe.Exergy presents Attachment A, which includes excerpts from two Department of Energy reports and the comments of Renewable Northwest Project, a wind generation advocacy group, to support its assertion that "Idaho Power s wind integration rate is wildly inaccurate.(Exergy Comments p. 8). Exergy immediately IDAHO POWER'S REPLY COMMENTS, Page 2 qualifies its prior statement by admitting that the comparison data it presents in Attachment A is "not designed to indicate what Idaho Power s integration costs really are. .." and "the attached table suggests that said inputs may actually overstate Idaho Power s true wind integration costs." (Emphasis added) (Exergy Comments p. 8). Exergy s assertion that the results of various wind integration cost studies undertaken principally in Europe, the mid-western United States and California, provide evidence of what Idaho Power s wind integration costs should be , does not pass the common sense test. Exergy s claim is similar to arguing that the fact that Pacific Gas & Electric charges its San Francisco residential electric customers approximately 20 cents per kWh or Hawaiian Electric charges its Honolulu residential customers approximately 18 cents per kWh is evidence that Idaho Power residential electric rates of approximately 5.2 cents per kWh are too low.1 Wind integration costs, like residential electric rates , depend on the individual cost-causation factors and circumstances of the individual electric utilities providing the wind integration. Exergy admits that the information it presents in Attachment A does not demonstrate what Idaho Power s actual wind integration costs are. (Exergy Comments p. 8). Unfortunately Exergy does not make any effort to put the data it presents in context by explaining why the wind integration studies cited in Attachment A do not provide information that can be used to compute the costs Idaho Power will incur as it integrates more wind generation resources into its system. There are multiple reasons why Idaho Power s wind integration costs will be higher than the wind integration costs contained in the studies identified by Exergy. The following are the four primary ones: 1 Electric rate data taken from EEl Comparison of Residential Electric Rates, dated January 1 , 2007. Average price based on usage of 1000 kWh per month. IDAHO POWER'S REPLY COMMENTS, Page 3 (a).Wind Inteqration Costs Should be Lower for Utilities that Have Access to Larqe Power Pools with Intra-Hour Markets A significant number of the utilities whose wind integration studies are cited in Exergy s Comments operate in areas where the integrating utilities have access to large , diverse secondary power markets where the utilities can buy and sell energy in as little as ten minute intervals. It is not difficult to understand how this would allow a utility to integrate intermittent wind resources at much lower costs than a utility like Idaho Power that only has access to hourly markets. If Idaho Power could utilize a large diverse, intra-hour market to quickly acquire resources when intermittent wind energy resources rapidly reduce their generation or could quickly sell resources into the market when the wind increases, Idaho Power could reduce its wind integration costs. In the future , if regional intra-hour markets develop and Idaho Power increases its interstate transmission capabilities, Idaho Power may be able to participate in such intra-hour markets. But at the current time such a market is not available to Idaho Power and the Company must rely on its own hydro generation to follow rapid increases and decreases in wind generation. It is the use of the hydro system for wind integration that was the basis for the costs identified in Idaho Power s wind integration study. The predominance of hydroelectric generation in the Company generation resource portfolio sets Idaho Power apart from the utilities cited in Exergy s Comments. (b).Wind Inteqration Cost Should be Lower for Utilities that Have Hiqh Fuel Cost Thermal Generatinq Resources Operatinq at the Marqin The generating resource portfolios of many of the utilities whose wind integration cost studies are cited in Attachment A to Exergy s Comments include a large proportion IDAHO POWER'S REPLY COMMENTS, Page 4 of thermally-fueled base load generating resources, many of which are natural gas-fired resources. These natural gas-fired resources operate at a high capacity factor and their fuel costs represent the system marginal costs of the cited utilities. As a result, when wind resource generation increases , the utility can quickly reduce its natural gas-fired generation and save the cost of the fuel that otherwise would have been burned by the marginal gas-fired generating facility. Idaho Power does not have natural gas-fired thermal generating resources that it can operate in that same way. The vast majority of Idaho Power s thermal resources are coal-fired resources that operate as base load plants. Ramping coal-fired plants up and down to follow the intermittent generation from wind resources is inconsistent with good operating practices for base load coal-fired generating resources. Idaho Power s current natural gas-fired resources are simple cycle peaking resources that are not Idaho Power s best economic choice for load following. In the future, if Idaho Power acquires a base load natural gas-fired resource that operates for a significant part of the time as the Company s marginal resource, the cost of the natural gas to fuel this resource would become a significant portion of the cost of integrating wind resources. But until Idaho Power s generation fleet includes a significant portion of higher capacity factor natural gas-fired resources , it is misleading to compare Idaho Power s wind integration cost to the costs of utilities that operate a different portfolio of resources. (c).Wind Inteqration Costs Should be Lower for Utilities that Operate a Larqe, Diverse Control Area. Several of the utilities whose wind integration studies Exergy cites in its Comments are substantially larger than Idaho Power and operate large control areas IDAHO POWER'S REPLY COMMENTS, Page 5 that have significantly more diversity in loads and resources than does Idaho Power control area. As a result, generation changes from intermittent wind resources have a much lower impact on these systems than they will on Idaho Power s system. This is why PacifiCorp, with its larger and more diverse control area can expect to experience wind integration costs significantly lower than Idaho Powers' wind integration costs. There are preliminary efforts currently underway in the western United States to better integrate the multiple control areas currently operated by the various utilities to provide a greater level of transmission efficiency and risk mitigation among resources on a regional basis. If these efforts are successful , Idaho Power s wind integration costs could be mitigated by the ability of the Company to spread costs and risks over a more diverse portfolio of wind resources in a larger control area. (d).Idaho Power s Substantial Hydroelectric Base. Transmission Constraints and Load Profiles are Different than the Utilities Cited in Exerqy Comments. Idaho Power s wind integration study recognizes the unique circumstances associated with Idaho Power s system. Because of the predominance of hydroelectric generation in the Company generation resource portfolio and the transmission constraints that limit access to regional markets , Idaho Power must utilize its hydroelectric system to manage the rapid changes in generation coming from intermittent wind resources. But to do this, the Company has to reallocate the use of water and shift generation from time periods when the generation is more valuable to time periods when it is less valuable. This shifting of water to integrate wind resources is the primary driver of Idaho Power s wind integration costs and is unique to Idaho IDAHO POWER'S REPLY COMMENTS, Page 6 Power because the Company s hydroelectric resources are such a large percentage of its resource portfolio. This unique hydroelectric reliance is not present in the integration costs of the other utilities cited by Exergy and explains, to a large extent, the differences between the wind integration costs cited by Exergy and the wind integration costs identified in Idaho Power s study. Idaho Power Will Have a Larqe Amount of Wind Generation to Inteqrate into its System Exergy argues that Idaho Power only has a small amount of wind resources currently on its system and should not be permitted to compute wind integration costs based on the assumption that it will be required to integrate a substantial amount of wind generation. (Exergy s Comments p. 4). To a large extent, this portion of Exergy s Comments has been rendered moot by the filing of the Joint Settlement Agreement. In the Joint Settlement Agreement Idaho Power has agreed to tie the level of wind integration costs collected from OFs to the number of megawatts of \l\(ind generation that are actually interconnected to the Company s system.However, because the Company currently has 366 MWs of Commission-approved contracts with wind developers, it would not be reasonable for the Company to establish long-run wind integration costs based on the assumption that only a very small portion of those contracts will ultimately result in the construction of wind generation projects.2 Because wind developers desire 20-year contracts , Idaho Power must look at the long-run impact of wind integration costs. To do otherwise carries a considerable risk of adverse consequences for customer rates. 2 Idaho Power currently has Commission-approved contracts with Exergy in which Exergy has committed to develop more than 150 MW of wind generation which it intends to sell to Idaho Power. IDAHO POWER'S REPLY COMMENTS, Page 7 The Joint Settlement Aqreement Addresses All of Exerqy s Concerns In its Comments, Exergy also argues that wind integration costs should be variable and increase or decrease over time. Idaho Power agrees with that proposition. In fact, the Joint Settlement Agreement specifically calls for continuing analysis of the Company s wind integration costs and a recognition that wind integration costs could go up or down depending on the acquisition of additional scientific data and a reasonable period of experience with integrating wind resources. Exergy also advocates placing a cap (but not a floor) on the ability of Idaho Power to recover its wind integration costs. Again , the Joint Settlement Agreement addresses Exergy s concern. The Joint Settlement Agreement includes a cap on wind integration cost increases. Conclusion For the foregoing reasons, Idaho Power respectfully requests the Commission deny Exergy s request that the Commission conduct a full evidentiary hearing regarding the cost of integrating wind integration resources onto Idaho Power s system. Respectfully submitted this 19th day of October, 2007.(:ltR-BARTON L. KLINE Attorney for Idaho Power Company IDAHO POWER'S REPLY COMMENTS , Page 8 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 19th day of October 2007, I served a true and correct copy of the within and foregoing document upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Scott Woodbury Deputy Attorney General Idaho Public Utilities Commission 472 W. Washington (83702) O. Box 83720 Boise, Idaho 83720-0074 Hand Delivered - U.S. Mail Overnight Mail FAX -X. Email scottwoodburv(Q?puc.idaho.qov Exergy Development Group of Idaho Peter J. Richardson, Esq. Richardson & O'Leary 515 N. 2ih Street O. Box 7218 Boise, Idaho 83702 Hand Delivered --LU.S. Mail Overnight Mail FAX Email peter(Q? richardsonandolearv.com Don Reading Ben Johnson Associates 6070 Hill Road Boise, Idaho 83702 Hand Delivered --LU.S. Mail Overnight Mail FAX Email dreadinq (Q? mindsprinq.com Renewable Northwest Project and NW Energy Coalition William M. Eddie Advocates for the West 610 SW Alder Street, Suite 910 Portland , OR 97205 Hand Delivered --LU.S. Mail Overnight Mail FAX Email beddie (Q? advocateswestorq Natalie Mcintire Renewable Northwest Project 917 SW Oak Street, Suite 303 Portland, OR 97205 Hand Delivered --L U.S. Mail Overnight Mail FAX Email Ridgeline Energy, LLC Rich Rayhill 720 W. Idaho, Suite 39 Boise , Idaho 83702 Hand Delivered --LU.S. Mail Overnight Mail FAX Email rrayhill (Q? rl-en.com IDAHO POWER'S REPLY COMMENTS, Page 9 Robert M. Ellis, Esq. 4 Nickerson , Suite 301 Seattle, WA 98109 Blue Ribbon Energy LLC J. Humpries Blue Ribbon Energy LLC 2630 Central Ave. Idaho Falls, Idaho 83406 A vista R. Blair Strong Jerry K. Boyd Paine Hamblen, LLP 717W. Sprague , Suite 1200 Spokane , VVA 99220 Michael G. Andrea A vista Corporation 1411 East Mission Ave., MSC- Spokane, OA 99202 Cassia Gulch Wind Park LLC Cassia Wind Farms LLC Dean J. Miller McDevitt & Miller, LLP O. Box 2564 Boise , Idaho 83701 Ronald K. Arrington Associate Chief Counsel John Deere Renewables, LLC 6400 NW 86th Street O. Box 6600 Johnston , IA 50131 Idaho Windfarms LLC Glenn Ikemoto Authorized Manager Idaho Windfarms , LLC 672 Blair Ave. Piedmont, CA 94611 IDAHO POWER'S REPLY COMMENTS , Page 10 Hand Delivered -LU.S. Mail Overnight Mail FAX Email rellis (Q? rl-en.com Hand Delivered -LU.S. Mail Overnight Mail FAX Email blueribbonenerqy(Q?qmail.com Hand Delivered -LU.S. Mail Overnight Mail FAX Email r.blair.stronq(g)painehamblen.com Hand Delivered -LU.S. Mail Overnight Mail FAX Email Michael.andrea(gJavistacom.com Hand Delivered -LU.S. Mail Overnight Mail FAX Email ioe(Q?mcdevitt-miller.com Hand Delivered -L U.S. Mail Overnight Mail FAX Email Hand Delivered -LU.S. Mail Overnight Mail FAX Email qlenni (Q? pacbell.net Snake River Alliance Ken Miller Clean Energy Program Director Snake River Alliance O. Box 1731 Boise, Idaho 83701 Renaissance Engineering & Design Brian D. Jackson Renaissance Engineering & Design, PLLC 2792 Desert Wind Road Oasis, Idaho 83647-5020 Gerald Fleischman Gerald Fleischman 11535 W. Hazedale Ct. Boise, Idaho 83713 INL Gary D. Seifert, P. Kurt Myers, P. INL 2525 S. Fremont Ave. O. Box 1625, MS 3810 Idaho Falls, Idaho 83415 IDAHO POWER'S REPLY COMMENTS, Page 11 Hand Delivered ---2LU.S. Mail Overnight Mail FAX -X Email kmiller(Q?snakeriveraliiance.orq Hand Delivered ---2LU.S. Mail Overnight Mail FAX Email brian(Q?clever-ideas.com Hand Delivered ---2LU.S. Mail Overnight Mail FAX -X Email qfleisch986(Q?hotmail.com Hand Delivered ---2LU.S. Mail Overnight Mail FAX -X Email qarv.seifert(Q? inl.qov Kurt.myers(Q? inl.qov oo~- BARTON L. KLINE