20100819Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
POBOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 1895
REC:E.l
ZOlOAUG 19 Pr'l 3= 02
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR APPROVAL )
OF A FIRM ENERGY SALES AGREEMENT )
WITH GRAND VIEW SOLAR PV 1, LLC FOR )
THE SALE AND PURCHASE OF ELECTRIC )ENERGY )
)
CASE NO. IPC-E-10-19
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice ofComment/rotest Deadline issued on July
1,2010 in Case No. IPC-E-I0-19, submits the following comments.
BACKGROUND
On June 14,2010, Idaho Power Company (Idaho Power; Company) fied an Application
with the Idaho Public Utilities Commission (Commission) requesting approval of a 20-year Firm
Energy Sales Agreement1 between Idaho Power and Grand View Solar PV One, LLC (Grand View)
dated June 8, 2010 (Agreement).
i The Agreement was included as Attachment No. i with Idaho Power's Application to the Commission. The
Agreement contains Appendices A, B, C, and D.
STAFF COMMENTS 1 AUGUST 19,2010
Under the terms of the Agreement, Grand View wil sell and Idaho Power wil purchase
electric energy generated by the Grand View photovoltaic solar power project (Facilty) located on
approximately 180 acres, 16 miles west of Mountain Home, Idaho. The nameplate rating of the
Facilty is 20 MW. Agreement, Appendix B-1. However, due to the diural and intermittent
generation of a solar resource, the Facilty's generation is not expected to generate more than 10
average MW on a monthly basis under normal and/or average conditions. Grand View warrants
that the Facility is a qualifying facility (QF) under applicable provisions of the Public Utilty
Regulatory Policies Act of 1978 (PURPA). Agreement at ii 3.2.
The Agreement contains the non-Ievelized published avoided cost rates approved in Order
No. 30744 and comports with the terms and conditions of Order Nos. 30738 (SAR non-fueled cost
variables) and 30415 (daily load shape adjustment). ¡d. at ii 7.1. Grand View has selected a
Scheduled Operation Date of January 1,2011. Agreement, Appendix B-3.
STAFF ANALYSIS
Nearly all of the rates, terms and conditions in the Agreement are the same as those
contained in other PURPA contracts recently approved by the Commission. Consequently, Staff
does not believe it is necessar to address them in detaiL. However, there are two issues that Staff
does believe need to be addressed: 1) Whether the project should be grandfathered to be eligible to
receive the published avoided cost rates in effect prior to March 16,2010, and 2) Whether an
integration cost discount should be applied to the published rates due to the intermittency of solar
generation.
Grandfathering
Idaho Power notes that on the June 8, 2010, date of contract signing the purchase rates set
forth in the Agreement (consistent with Order No. 30744) had been replaced by the lower rates of
Order No. 30125 approved by the Commission on March 16, 2010, in Case No.
GNR-E-I0-0l. Idaho Power recites that the Commission has previously determined grandfathering
eligibility for (older and higher) published avoided cost rates by requiring (1) a signed power sales
agreement executed prior to the change in rates; or (2) a meritorious complaint fied prior to the new
rates effective date demonstrating project maturity and that, but for the actions of the utility, a sales
agreement would have been signed prior to the change in rates. Although no complaint has been
fied with the Commission, by signing the Agreement and voluntaily presenting it to the
STAFF COMMENTS 2 AUGUST 19,2010
Commission, Idaho Power represents that it believes Grand View meets the second criteria
established by the Commission and should be entitled to the rates contained in Order No. 30744.
In determining that Grand View was entitled to grandfathering under the higher rates of
Order No. 30744, the Company contends that Grand View satisfied the following grandfathering
criteria prior to March 16, 2010:
a. Interconnection and Transmission
1. Filed an interconnection application; and
11. Received and accepted an interconnection feasibilty study report for the
project and paid any requested study deposits (or established credit) for the
next phase of the interconnection process in accordance with Schedule 72;
and
11. Received confirmation from Idaho Power that transmission capacity is
available for the project and/or received accepted transmission capacity
study results and cost estimates.
b. Purchase Power Agreement
1. An agreement was materially complete prior to March 16, 2010, and
except for routine Idaho Power final processing, an agreement would have
been executed by both parties prior to March 16,2010.
Application at p. 5.
With respect to the Power Purchase Agreement criteria, the Company represents that Grand
View and Idaho Power had resolved all material outstanding contract issues prior to March 16,
2010. Shown below is a timeline outlining events associated with Grand View's contract
negotiations with Idaho Power:
. December 24,2009:Idaho Power receives a letter and signed
agreement from Grand View Solar. Because
the agreement is not in the most curent form,
Idaho Power treats this communication as an
invitation to negotiate.
. February 18,2010:Idaho Power presents a negotiated PURP A
agreement to Grand View Solar.
. March 8, 2010:Grand View Solar suggests discussion of a
non-PURP A agreement for this project. The
STAFF COMMENTS 3 AUGUST 19,2010
initial offer (price, RECs, etc.) appears to have
merit so Idaho Power begins evaluating the
non- PURP A agreement suggested by Grand
View Solar.
. March 9, 2010:Idaho Power's previously fied Transmission
Service Request is accepted by the Idaho
Power Transmission group, granting 20 MW of
Transmission Capacity with no significant
network upgrades required.
. March 16,2010:The Commission issues Order No. 31025
changing the avoided cost rate.
. May 6, 2010:Idaho Power completes its evaluation of a non-
PURP A agreement with Grand View Solar and
elects not to proceed. The Company notifies
Grand View Solar that it should advise the
Company if it wishes to pursue a PURP A
agreement.
. June 8, 2010:Grand View Solar and Idaho Power execute
the PURP A agreement originally contemplated
and negotiated in February 2010.
. June 14,2010:Idaho Power fied an Application seeking
Commission approval of the PURP A
agreement entered into with Grand View Solar.
As noted above, a complete contract was negotiated and presented to Grand View Solar on
approximately February 18,2010. Shortly thereafter, at Grand View's suggestion, the paries
engaged in discussions regarding an alternative non-PURP A power purchase agreement. Idaho
Power completed an evaluation and review of a non-PURP A agreement for the project, and on or
about May 6, 2010, elected not to proceed furter. The effect of pursuing the evaluation of a non-
PURP A power purchase with the Facility, the Company states, essentially placed the otherwise
complete, but unexecuted, PURPA Agreement on hold, during which time the Commission's Order
No. 31025 was issued changing the published avoided cost rate. In Idaho Power's opinion the
Agreement would have been signed by both paries prior to March 16,2010, if the Company had
not taken additional time to evaluate and pursue a possible non-PURP A power purchase agreement.
Application at p. 6.
STAFF COMMENTS 4 AUGUST 19,2010
Staff has reviewed the timeline and the information exchanged by the parties. Staff is
convinced that, despite not having a signed agreement prior to March 16, 2010, the draft contracts
that were exchanged prior to that date were materially the same as the Agreement eventually signed
by both parties. Indeed, a negotiated PURP A agreement was presented by Idaho Power to Grand
View on February 18, 2010. If PURP A negotiations had not been put on hold in order for the
paries to consider a non-PURPA agreement, Staff is reasonably convinced that the paries would
have otherwise consummated the PURP A Agreement prior to the change in avoided cost rates.
Based on the facts presented, Staff believes that the Facility should qualify for a contract
incorporating the Order No. 30744 rates (i.e., the rates in effect prior to March 16,2010).
With respect to the Interconnection and Transmission criteria, Idaho Power represents that
Grand View is current in all its interconnection study payments. So long as Grand View continues
to provide requested information in a timely manner and pay invoices on time, Idaho Power
believes that the interconnection can be completed in time for Grand View to achieve its January 1,
2011, Scheduled Operation Date for the Facilty.
In further support of its Application, Idaho Power states that the Facilty Agreement contains
the most recent contract terms and conditions, including the liquidated damages and security
provisions previously approved by the Commission in the contracts for the Arena Drop hydro
project and the Dry Creek anaerobic digester project. Order Nos. 31060 and 31034, respectively.
Integration
Clearly, solar PV generation can be intermittent due to cloud cover, especially when the
entire project is concentrated in one area. Some intermittency may be predictable hours or perhaps
days in advance, while intermittency due to individual clouds may be highly unpredictable at any
time scale. The upward and downward ramps of generation can present operational challenges for
the utility, similar to the challenges of integrating wind. As more wind and solar projects are added
to a utilty's system, the integration challenges increase.
Although numerous studies have been conducted to attempt to quantify the costs of
integrating wind, Staff is not aware of any studies in the region that have attempted to quantify the
costs of integrating intermittent solar generation. Even in the desert southwest where central station
solar generation is rapidly emerging, little data has been collected and no research has been done to
study and quantify solar integration costs. Although wind and solar may share some of the same
STAFF COMMENTS 5 AUGUST 19,2010
intermittent characteristics, they are not exactly the same. In comparison to each other, Staff is
uncertain whether solar integration is more or less costly than wind integration.
All recent QF contracts for wind projects have included a wind integration cost that is
applied as a discount to reduce published avoided cost rates. For Idaho Power for example, the
wind integration discount varies from approximately $4.20 to $6.50 per MWh depending on the
length of the contract and the time of the year. The first few wind contracts approved by the
Commission, however, did not include a wind integration adjustment because the costs of wind
integration had yet to be quantified.
This Agreement does not include any discount to account for solar integration costs. While
there are undoubtedly some integration costs, they cannot be quantified at this time. Because of the
lack of data and studies on solar integration, Staff sees the Grand View project as an opportunity to
begin acquiring the needed data and to start performing the analysis necessary to quantify solar
integration costs. If the Grand View project proves successful, additional solar development is sure
to follow. When Idaho Power eventually has the data and analysis to support a solar integration
charge, Staff recommends those charges be included in PURP A contracts. Until then, however,
Staff supports not including an integration charge in the Grand View Solar Agreement. Staff urges
the Commission to strongly encourage Idaho Power to collect data from this project that might be
used in the future to assess solar integration costs.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Firm Energy Sales Agreement between
Idaho Power Company and Grand View Solar PV One, LLC, without change or condition and
declare that all payments for purchases of energy under the Agreement be allowed as prudently
incurred expenses for ratemaking puroses.
IqlHRespectfully submitted this - day of August 2010.
~. £iI.' ~R' -UiA
JÆ ~ttWOodbury
f) Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentslipce 1 0.1 9swrps comments
STAFF COMMENTS 6 AUGUST 19,2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 19TH DAY OF AUGUST 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-I0-19, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOV AN E WALKER
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(iidahopower.com
lnordstrom(iidahopower.com
RANDY C ALLPHIN
ENERGY CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rallphin(iidahopower.com
Ja~
SECRETARY ~
CERTIFICATE OF SERVICE