20070208Press release.pdf

February 7 2007
An IDACORP Company
For Immediate Release
Corporate Communications
Dennis Lopez
208-388-2464
dlopez~idahopower.com
:1fJC-o7-
Idaho Power Files Wind Study; Recommends Removal
Of Temporary Limitation on Wind Projects
BOISE-Idaho Power yesterday submitted to the Idaho Public Utilities Commission (IPUC) a major
analytical report outlining the operational impacts associated with integrating intermittent supplies of
energy produced at wind power projects with supplies produced by Idaho Power s generation.
Submission of the study paves the way for the removal of temporary limitations to wind development
authorized by the IPUC in August of2005 at Idaho Power s request.
In an accompanying IPUC filing, the company proposed that the commission increase the size of wind
projects that qualify for published avoided cost rates under the Public Utility Regulatory Policies Act
(PURPA). The filing seeks to increase the size from 100 kilowatts (kW) to 10 000 average kW (10
average megawatts, or aMW) - the same level that is applicable to other PURP A resources - and to
decrease the avoided cost rate paid to wind developers by the amount identified in the study for
integration costs.
The results of the study indicate that Idaho Power sustains an increased cost by using the company
hydro system as the backup for the integration of wind generation. To offset a portion of these additional
costs, the company proposes to pay wind developers $10.72 per megawatt-hour (MWh) less than the
current average rate of approximately $64 per MWh for projects coming on line in 2008. However, due
to its variability, the more wind that is added to the company s system, the higher the cost of integration
and the greater the impact to Idaho Power s overall system stability and reliability. The report was jointly
prepared by Idaho Power and EnerNex Corporation, a private wind energy consulting firm based in
Knoxville, Tenn.
We undertook this study to help the IPUC, wind developers, our customers and our company better
understand the economic impacts of using our hydroelectric generation system to backup wind power
said Idaho Power Senior Vice President of Power Supply Jim Miller. "Wind power is a valuable resource
that can displace fossil-fuel generation and thus reduce the level of air emissions that would otherwise
have been produced. We strongly support society's desire to have a significant portion of future energy
supplies come from clean, renewable energy sources.
Wind energy will be a part of our balanced generation portfolio going forward. However, the study
makes it clear that there is still a great deal of uncertainty surrounding the ultimate impact and costs of
adding large amounts of intermittent wind generation to our resource portfolio.
More-
In its accompanying filing, the company cited the need in the future to:
quantify how the firming requirements of wind will affect operations and maintenance costs at the
company s low-cost hydro facilities;
consider the impacts on the operations and investment requirements of the company s transmission
system; and
assess the need for new, more expensive backup energy resources once wind energy growth
exhausts the ability of the company s hydro system to support it.
In addition to the changes in qualifying project size and avoided cost rates, the company also is:
seeking IPUC authorization to remove wind generation contract provisions that reduce payments
to wind producers generating less than 90 percent of their estimated monthly generation amount
or more than 110 percent of that amount
requesting authorization to charge wind developers their share of the costs associated with
purchasing wind forecasting services to provide the company with forecasts of wind conditions in
the geographic areas in which the company has wind interests, and
include in future qualifying facility contracts a provision requiring developers to demonstrate
monthly that its facility was mechanically capable of generating at full output during 85 percent
of the hours of the month, with exceptions for scheduled maintenance.
Idaho Power is advising the commission that the company may need to ask for the implementation of a
safety net" in the event that the number of wind projects on its system reaches a point where system
reliability becomes threatened. The company cautioned that the integration process was dynamic and that
integration analysis would be ongoing. As more wind is integrated, Idaho Power will update the study and
file new relevant cost information Our primary concern in integrating wind is to minimize any unintended
consequences of wind development on both our customers and our company," Miller said. "If the number
of future projects grows to the point that our system is being umeasonably impacted, we again would seek
remedy from the IPUC.
Workshop Proposed
The company proposed that the commission sanction at least one public workshop including all interested
parties for the purpose of reviewing the company s study and accompanying filings and exploring
settlement of any outstanding issues.
Hydro Limited As A Firming Resource
At the center of the study is how Idaho Power s controllable hydro resources would be used as the
primary backup energy or "firming" generation resource to support wind energy-a practice necessary to
compensate for increases or decreases in wind levels.
If our customers are using 2 200 MW of electricity and we re getting 200 MW of that from wind and the
wind unexpectedly drops off, we need to quickly replace the lost wind generation or reduce loads " said
Miller. "The study assumes that we will be able to use power from the hydro system to instantaneously-
take the place of any lost generation caused by the intermittent nature of wind resources.
More-
One of our concerns is that our hydro system is already being used to the fullest extent possible for the
benefit of our customers. To the extent we use our hydro resources to integrate wind for the benefit of
wind developers rather than to optimize our existing generation system to meet the needs of our
customers, there will be increased costs in operating our generating system. In fact, we ultimately will see
a requirement for more generating resources in the future.
Miller said that although significant issues still remain concerning the integration of wind, lifting the
current limitation would clear the way for additional projects to be developed and would give developers
some assurance that there would be a market for the power produced at the various wind farms proposed
to Idaho Power.
Companion Filing Applies To All PURP A Qualifying Projects
Idaho Power also has submitted a companion filing seeking two changes that would affect all future
contracts with PURP A developers. They are:
a request for the establishment of rules to prevent wind developments larger than 10 aMW from
artificially restructuring into smaller projects to qualify for the published avoided cost rate
designed for projects 10 aMW and smaller, and
a request that the rate structure for PURP A qualifying facilities be revised to reflect the difference
in value between electricity produced during heavy load hours and light load hours.
Access Today s Filings
The company s complete filings are available on the IPUC Web site; www.puc.state.id.. Copies of
the company s petitions and its Wind Integration Study are available at Idaho Power s Web site;
www.idahopower.com/windstudv.
Wind History and Background
In June 2005, Idaho Power asked the IPUC to temporarily suspend the company s federal obligation to
buy wind power from independent developers of wind projects smaller than 10 aMW. The PURP
requires that electric utilities offer to buy power produced by small power producers at an "avoided-cost
rate" equal to the cost the electric utility avoids if it would have had to generate the power itself or
purchase it from another source. At that time, Idaho Power proposed to conduct a study to assess the total
amount of additional wind resources the company could absorb without negatively impacting its overall
power supply costs and grid reliability. The study filed yesterday provides this data.
The current avoided-cost rate that Idaho Power pays qualifying wind developers for 20-year
a project coming on-line in 2008 is approximately $64 per megawatt-hour. The IPUC determined the
parameters for wind and geothermal contracts in a major case that concluded in November 2004. At that
time, the commission ruled that PURPA projects 10 aMW and smaller would qualify for the avoided-cost
rate.
More-
Several Factors Contribute To Influx Of Wind Developers
Since the current avoided costs were determined and since Congress approved a number of tax incentives
for wind projects, Idaho Power has signed PURP A contracts for wind projects with a total nameplate
rating of 227 MW. In addition, there are three PURP A wind projects with a nameplate rating of 60 MW
currently before the commission seeking approval.
Before the combination of rates and tax incentives mentioned above, Idaho Power had less than one MW
of PURP A wind-powered generation under contract. The company also recently signed a contract with
TelocasetiHorizon Wind Energy to build 100 MW of wind generation in response to the utility's request
for proposals.
Wind Energy Costs May Be Included In Annual Power Cost Adjustment
The money that Idaho Power pays wind developers is included as part of the overall power supply cost
that is eventually recovered from customers in the company s power cost adjustment (PCA) process every
spring. The cost of operating thermal resources and purchasing power, both resources that will be needed
to support wind energy, also are included in the PCA cost recovery.
IPUC Responds
In August 2005, the IPUC responded to Idaho Power s moratorium request by reducing the size of non-
firmed wind projects that could qualify for the avoided cost rate paid small-power producers by regulated
utilities such as Idaho Power. In the commission s August 4 order, small, non-firm wind projects could be
no larger than 100 kilowatts to qualify for the rate. The previous limit was 10 aMW. A kilowatt (kW)
equals 1 000 watts. A MW is one million watts.
The 100 kW limit did not apply to all PURPA contracts, but only wind contracts that are not "firm
meaning they are not backed up by other energy sources.
Also exempt from the 100 kW limit were non-firm projects that signed power purchase agreements with
Idaho Power before August 4, 2005 or that had submitted a completed interconnection application and
paid the required fee, and had taken other substantial steps to further their projects.
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