HomeMy WebLinkAbout20071005Comments.pdfPeter J. Richardson ISB 3195
RICHARDSON & O'LEARY PLLC
99 East State Street
PO Box 1849
Eagle, Idaho 83616
Telephone: (208) 938-7900
Fax: (208) 938-7904
peter~richrdsonando eary. com
Attorneys for Exergy Development Group of Idaho LLC
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S PETITION TO INCREASE THE)
PUBLISHED RATE ELIGIBILITY CAP FOR
WIND-POWERED SMALL POWER
PRODUCTION FACILITIES; AND
CASE NO. IPC-07-
EXERGY DEVELOPMENT GROUP
OF IDAHO LLC'S COMMENTS
TO ELIMINATE THE 90%/110%
PERFORMANCE BAND FOR WIND-
POWERED SMALL POWER PRODUCTION
FACILITIES
COMES NOW, Exergy Development Group of Idaho LLC ("Exergy ) by and through
its attorney of record, Peter J. Richardson, and pursuant to that notice issued by the Idaho Public
Utilities Commission ("Commission ) on August 22, 2007, as amended on September 19 2007
and hereby provides its Comments in response to Idaho Power Company s ("Idaho Power" or the
Company ) above captioned Petition. In support hereof Exergy says as follows:
Exergy Development Group ofIdaho LLC's Comments IPC-O7-
SUMMARY OF EXERGY'S POSITION
Modified procedure should be utilized in this docket for the sole purpose of denying
Idaho Power s Petition. Absent outright denial, Exergy opposes the use of modified procedure to
prosecute this highly complex and technical case.
BACKGROUND AND STANDARD OF REVIEW
This Commission s rules require that a decision to proceed under modified procedure be
based upon a finding that "the public interest may not require a hearing to consider the issues
presented." IPUC Rules of Procedure IDAPA 31.01.01.201. (herein "Rule ) The Commission
decision must be based on the record before it as detailed in Rule 281 which provides that:
The Commission bases its decisions and issues its orders on the hearing record
(excluding exhibits denied admission), the Commissioners' record and items official
noted.
The "Commissioner s record" consists of "all pleadings, orders, notices, briefs, proposed orders
and position papers." Rule 284.01 The Commissioner s record also includes the "complete
hearing record of transcripts and exhibits." Rule 285.
The Commission is a fact finding, quasi-legislative body authorized to investigate and
determine issues presented by a utility s petition for increased (changed) rates. The
Commission s findings must be supported by competent and substantial evidence. Application
ofPacifiic Tel. Tel. Co.71 Idaho 476, 480, 233 P.2d 1024 (1951).
Exergy Development Group of Idaho LLC's Comments IPC-O7-
The substantive record in this docket consists solely! ofIdaho Power s Petition and the
attachments thereto. The first attachment is a document prepared by Idaho Power s hired experts
entitled "Operational Impacts of Integrating Wind Generation into Idaho Power s Existing
Resource Portfolio." (herein "Study ) The ultimate conclusion of the study is that Idaho Power
will experience high costs for which it is not compensated in order to integrate wind into its
electrical system. The second attachment is a proposed rate schedule that would reduce the
avoided cost rates paid to wind QFs.
In its Petition, Idaho Power seeks a reduction in the Commission approved avoided cost
rates by 10.72 mills per kwh produced by a wind-power QF. That reduction is based on
a proposed rate entitled the Wind Integration Cost Adjustment. The rate is 10.72 mills per
kilowatt hour produced. The level of wind integration costs depends, according to Idaho
Power s Study, on the magnitude of wind power connected to its system. Study p. 4. Idaho
Power s proposed Wind Integration Cost Adjustment is set based on the fiction that there are 492
megawatts of installed wind capacity on its system. Study p 4, Petition p. 7-
For the reasons stated below, Exergy asserts that Idaho Power s Petition is not supported
by substantial and competent evidence and that a full hearing must be held by this Commission
prior to issuing its order declaring what Idaho Power s wind integration rate is, or indeed if Idaho
Power has a wind integration cost in the first place.
III
IDAHO POWER'S PETITION SHOULD BE DENIED OUTRIGHT
Modified procedure in this docket is appropriate only if the outcome is the denial of
Idaho Power s Petition.
! Yesterday s filings in this docket was not made in time for Exergy to respond by the
close of comment according to the notice. Exergy will respond thereto according to
Commission direction.
Exergy Development Group ofIdaho LLC's Comments IPC-O7-
The gist of Idaho Power s Petition is that large amounts of wind generation on its system
will result in high costs to integrate that intermittent resource in a reliable manner. Idaho Power
has not averred that it HAS a large amount of wind connected to its system. It avers that it MAY
have a large amount of wind at some time in the future. It has not averred that it currently is
experiencing any problems with integrating wind into its system at this time. Indeed, Idaho
Power s proposed Wind Integration Rate is based on the assumption that it has 492 megawatts of
installed wind. In reality it has less than 15 megawatts of installed wind. This is the flip side of
retroactive ratemaking. Idaho Power is asking that today s rates be set based upon contingent
events that may or may not happen at some point in the future. Given that Idaho Power has (a)
successfully stymied all new wind development in Idaho for over two years and (b) that it only
has 15 megawatts on its system today; its assertion that it must immediately impose a Wind
Integration Rate based on almost five hundred megawatts of wind on its system is simply not
credible. The Petition should be denied.
Setting rates based on assumptions that are known to be false would violate the most
basic of ratemaking tenants. To that end, setting rates to be effective immediately based on a
contingent that has not occurred, may not occur and if it does occur, it may not do so for many
years is simply reckless and illegal. Idaho Code Section 61-622 requires a showing that "any
rate" be "justified". Setting a rate to recover a non-existent cost is unjustifiable.
An alternative to denying Idaho Power s Petition outright, would be to implement a
system by which the Wind Integration Rate varies as the company s wind integration costs vary
(both up and down). It is widely anticipated that integration costs may go up as penetration
levels go up. On the other hand it is also widely anticipated that wind integration costs will go
down as utilities gain experience with this renewable resource. Setting a fixed rate today based
Exergy Development Group ofIdaho LLC's Comments IPC-O7-
on an assumed penetration rate of almost five hundred megawatts is, candidly, a blunt
unsophisticated and inaccurate attempt to solve for a problem that doesn t exist at this time, and
indeed, may never exist.
If the Commission chooses to proceed with a wind integration rate that actually is an
attempt to accurately reflect wind integration costs at the time they occur, it would have to set a
variable wind integration rate. Such a rate would need to have a ceiling in order to provide
certainty to the developer that the project can be financed without the potential for an unlimited
and unknown reduction in operating revenues. That ceiling would presumably be the expected
wind integration rate at an assumed build-out of wind projects on the system. The ceiling would
not be a target, but rather a cap above which the wind integration cost rate would not exceed.
course, working out the details of such a program would take a process and require a record be
developed before the Commission for review and approval. Modified procedure is not the
appropriate vehicle for developing such a record.
MODIFIED PROCEDURE IS INAPPROPRIATE
Idaho Power filed its Petition in this matter on February 6, 2007, as a result of failing to
reach a settlement of the issues raised in its wind integration suspension proceeding in Docket
No. IPC-05-22 which was opened back in June of2005. In that docket, Idaho Power asked the
Commission for a "suspension of the company s obligation under. . . PURPA to enter into new
contracts to purchase energy generated by qualifying wind-powered small power production
facilities." Order No. 29872 at p. 1. (the "Suspension Docket") Technically, this Commission
did not suspend the Company s obligations under PURPA. Rather, it eliminated the opportunity
for any wind QF larger than 100 kw to entitlement to the Commission s published avoided cost
rates. The real-world effect of the Suspension Docket was to excuse the company s obligations
Exergy Development Group of Idaho LLC's Comments IPC-O7-
under PURP A to offer its avoided cost rates to qualifying wind power small power production
facilities.
The Commission observed that:
Based on the record established in this case the Commission finds reason to believe that
wind generation presents operational integration costs to a utility different from other
PURPA qualified resources. We find that the unique supply characteristics of wind
generation and the related integration costs provide a basis for adjustment to the
published avoided cost rates, a calculated figure that may be different for each regulated
utility. The procedure to determine the appropriate amount of adjustment, we find, and
the identification of what studies, if any, need to be performed to provide such a number
is a matter appropriate for further proceedings. The record reflects that a wind
integration study, if required, may take six months to develop. Idaho Power has asked for
a suspension period from six to nine months.
Order No. 39839 at p. 8. Emphasis provided.
Twenty six months later we are asked to comment on whether the wind integration study filed in
this docket accomplishes the goals established for Idaho Power in IPC-05-22. The intervening
two years, during which the wind industry in Idaho has been effectively frozen, have seen
construction costs skyrocket and have cost Idaho many millions of dollars in lost economic
benefits and will cost Idaho many untold millions into the future due to the lost opportunities
suffered by the wind industry in this state. With that said, it is nevertheless critical that if this
Commission decides to impose a wind integration rate on wind powered QFs, that it get it right
the first time. That is one reason why Exergy opposes the use of modified procedure in this
matter for all outcomes except for a denial of the petition.
In its final report to the Commission2 regarding progress in working with interested
parties to reach a consensus settlement of its wind integration costs, Idaho Power provided a list
of individuals and firms who participated in its wind integration workshops. The participants
2 IPC-05-22 filed January 31 , 2006.
Exergy Development Group of Idaho LLC's Comments IPC-O7-
included the following individuals, companies, state agencies, federal agencies, advocate groups
wind developers and public utilities:
Advocates for the West
A vista
Batt & Fisher
B.R.E. Inc.
Cassia Wind
Elmore County Agribusiness
Energy Vision
Exergy
Hanson, John
Idaho National Laboratory
Idaho Power
Idaho Public Utilities Commission
Idaho Wind
Idaho Wind Farms
IDWR-Energy Division
Magic Wind
McDevitt & Miller
NW Energy Coalition
PacifiCorp
Paine Hamblen
Renaissance Engineering
Renewable Northwest Project
Richardson & O'Leary
Ridgeline Energy
Snake River Alliance
Windadvantage
Windland
Windlogics
Wirt, John
After five workshops and settlement conferences and with the combined efforts ofthe above list
of experts no consensus was reached. Idaho Power s current filing is not the result of a
consensus - either as to methodology or its ultimate conclusions. The wind development
industry is opposed to Idaho Power s filing because the industry does not believe it accurately
reflects Idaho Power s integration costs.
Exergy Development Group of Idaho LLC's Comments IPC-O7-
Attached (Attachment A) is a compilation of wind integration study results from multiple
jurisdictions indicating that, on its face, Idaho Power s wind integration rate is wildly inaccurate.
The table was prepared by Dr. Reading as part of a search of the literature on comparable wind
integration rates.3 Idaho Power s rate of$10.74 MW integration rate is twice as high as the next
highest integration rate Dr. Reading was able to locate. In some instances it is more than twenty
times higher than other utility wind integration costs. While the comparison is not designed
indicate what Idaho Power s integration costs actually are, it is offered to show that an
evidentiary hearing is necessary in order to determine whether the assumptions and inputs
contained in Idaho Power s study are fair, just and reasonable. The attached table suggests that
said inputs may actually overstate Idaho Power s true wind integration costs. The validity of
Idaho Power s wind integration rate should be subjected to close Commission scrutiny. Idaho
Power s study contains many factual assertions that have not been tested nor has this
Commission created a record upon which such assumptions have been subject to review.
For all of the foregoing, Exergy respectfully requests that Idaho Power s Petition be
denied or in the alternative that a full evidentiary hearing be conducted to investigate the true
level of wind integration costs for the Idaho Power system.
Respectfully submitted this s th day of October 2007.
RICHARDSON & O'LEARY PLLC
By A(). Peter . Richardson
Attorneys for Exergy Development Group
of Idaho, LLC
3 Accompanying the table are supporting documents from which the table was derived.
Exergy Development Group of Idaho LLC's Comments IPC-O7-
ATTACHMENT A
Exergy Development Group ofIdaho LLC's Comments IPC-O7-
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New Studies Find
That Integrating Wind
into Power Systems
Is Manageable, But
Not Costless
Table 6. Key Results from Major Wind Integration Studies Completed 2003-2006
Date Study
2003 Xcel-UWIG
2003 We Energies
2003 We Energies
2004 Xcel-MNDOC
2005 PacifiCorp
2006 CA RPS (multi-year)
2006 Xcel-PSCo
2006 Xcel-PSCo
2006 MN-MISO 20%
During the past several years,
there has been a considerable
amount of analysis on the poten-
tial impacts of wind energyon
power systems, typically respond-
ing to concerns about whether the
electrical grid can accommodate
significant new wind additions,
and at what cost. The sophistica-
tion ofthese studies has increased
year averagedramatICally In recent years,
' ,
Source: Naffonal Renewable Energy Laboratory-resu Ing In a e er accoun Ing 0
wind's impacts and costs (recall that these "integration costs werenot included in the busbar wind power prices presented earlier),
Table 6 provides a selective listing of results from major wind
integration studies completed from 2003 through 2006, Because
methods vary and a consistent set of operational impacts has not
been included in each study, results from the different analyses are
not perfectly comparable, Nonetheless, the key findings of two
major new studies completed in 2006 in Colorado and Minnesota
are broadly consistent with those in earlier work, and (at a mini-
mum) show that wind integration costs are generally approximately
$5/MWh, or less, for wind capacity penetrations30 up to about 15%
of the local/regional peak load in which the wind power is being
delivered.31 Regulation and load-following impacts are generally
found to be small, whereas the impacts of wind on unit commit-
ment are more significant,
Wind
Capacity
Penetration
Cost ($IMWh)
Regulation Load Unit Gas TOTALFollowingCommitmentSupply
0.41
0.45*trace 0.45
1.45
41**
29%
15%
20%
10%
15%
31%
..
highest over 3-year evaluation period
Transmission Is an Increasingly
Significant Barrierto Wind , but Solutions
Are Emerging
Relatively little investment has been made in new transmission
over the past 15 to 20 years, and in recent years it has become clear
that lack of transmission access and investment are major barriers
to wind development in the U.s, New transmission facilities are
particularly important for wind resource development because
of wind's locational dependence and distance from load centers,
In addition, there is a mismatch between the short lead times for
developing wind projects and the lengthier time often needed to
develop new transmission lines, Furthermore, wind's relatively low
capacity factor can lead to underutilization of new transmission
lines that are intended to only serve wind, The question of "who
pays?"for new transmission is also of critical importance to wind
developers and investors. Transmission rate pancaking, charges
imposed for inaccurate scheduling, and interconnection queuing
procedures have also sometimes been identified as impediments
to wind capacity expansion,
A number of developments occurred in 2006 that promise to
help ease some of these barriers over time, The U.s. DOE issued a
national transmission congestion study that designated southern
California and the mid-Atlantic coastal area from New York City to
northern Virginia as critical congestion areas," Under the Energy
Policy Act of 2005 (EPAct 2005), the U.s. DOE can nominate National
Interest Electric Transmission Corridors, and the Federal Energy
Regulatory Commission (FERC) can approve potential new transmis-
sion facilities in these corridors if states do not act within one year
or do not have the authority to act, among other conditions,
Separately, FERC issued a rule allowing additional profit incentives
for transmission owners on a case-by-case basis, also as required
by EPAct 2005, and thereby potentially encouraging greater
transmission investment,
In the West, the Western Governors Association adopted a
policy resolution through its Clean and Diversified Energy Advisory
Committee that included a goal of 30,000 MW of clean energy by
2015, with potentially significant contributions from wind power,
The recommendations ofthis committee to advance wind included
30 Wind penetration on a capacity basis (defined as nameplate wind capacity serving a region divided by that region
s peak electricity demand) is frequentlyused in integration studies. For a given amount of wind capacity, penetration on a capacity basis is typically higher than the comparable wind penetration inenergy terms.
31 The recently completed study in Minnesota found that a 25% wind penetration within the state, based on energy production (31% based on
capacity), wouldcost $4.41/MWh or less, This low cost at such a high penetration rate is caused, in part, by the extensive interactions with the Midwest Independent System
Operator (MISO) markets, The low cost found in the California study is partly a reflection of the limited number of cost factors that were considered in theanalysis,
32 A number of additional wind integration analyses are planned for 2007, including a study of even-
higher wind power penetrations in Colorado, thecompletion of the California Intermittency Analysis Project, and further work in the Pacific Northwest. Studies evaluating wind integration in the Southwest,and perhaps throughout the West, are also in the early planning stage,
33 The U,S. DOE has since issued draft National Interest Electric Transmission Corridor designations for the two regions identified above and, as of this writing, isreceiving comments on this draft designation.
Annual Report on U.S. Wind Power Installation, Cost, and Performance Trends: 2006
..
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February 9, 2007 ILJ;\dij H..:UL\G
UTiLlT;::: COL~:.13SI(;."
Renl!W~ Northwest PnIjt!ct
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise, ll) 83720-0074
Via email
Re: Operational Impacts of Integrating Wind Generation into Idaho Power's
Existing Resource Portfolio
Dear Ms. Jewell:
We appreciate the time and effort Idaho Power Company expended in
preparing their study Operation Impacts of Integrating W"md Generation into
Idaho Power s Existing Resource Portfolio (Study). In addition, Idaho Power
Company s analysts have been generous in sharirig their intermediate results
and discussing their methodology with the Northwest Wind Integration Action
Plan (NWIAP) Peer Review Committee of which we are participants.
Unfortunately, due to perceived urgency felt by Idaho Power, the Study was
filed with the Idaho Commission prior to completing the NWIAP peer review
process. Taking extra time would allow parties on the Peer Review Committee
to have confidence in the results.
We believe this report is premature and we urge the Commission not to accept
it until the peer review process is complete. We also feel it is critical not to
base any other decisions, such as those proposed in Idaho s filing on PURPA
rules, on the study results until the report has been fully vetted. Allowing
Idaho Power extra time, and extra funding for their consultant if needed, is
important to this process. We also hope the Commission will encourage Idaho
Power to continue to share complete details of their wind data and analysis
methodology with regional stakeholders.
The timing was particularly unfortunate because the peer review group
identified some areas of concern in the calculations and methodology that had
the effect of systematically overestimating the reserve requirements. The peer
review committee wished to investigate further. Some of the concerns
identified include:
Inflated Market Price Data. We appreciate that Idaho Power was
interested in understanding the differences in system operations under low
average, and high water years. However, the market prices that corresponded
to the average water year are inflated because of the 2000-2001 energy crisis.
These high prices result in integration costs for those years that are
unreasonably high.
;-..,
- Dr:":'!-Jt:,,~:
':::, ~:;;:::',' :'
'"C~
::::"~:~:::'
:;C
5 "
:'!';;
, 2005
Mar 2005
May 2003
Sep 2004
Jun 2003
Jun 2003
Apr 2006
Apr 2006
Nov 2006
Nov 2006
Dee 2004
Dee 2004
Attachment
Recent Wind Integration Studies Summary
PaeifiCorp
puget Sound Energy
Xcel-UWIG
Xeel-MNDOC
WE Energies
WE Energies
Xeel-PSCo
Xeel-PSCo
Enemex- MN
Enemex- MN
VfT - Scandinavia
VfT - Scandinavia
15*
25*
10*
20*
1.85
1.9
4.41
1.29**
58**
Notes
*Penetration based on MWh generation / MWh load
**Euros/MWh converted to dollars ~ 1.29 Euro/dollar
Sources:
Grid Impacts of Wind Power Variability: Recent
Assessments froma Variety of Utilities in the UnitedStates," Parsons/Milligan et ai, NREL, July 2006
Final Report- Minnesota Wind Integration Study,
Minnesota Public Utility Commission, November 302006
The Impact of Large Scale Wind Power Production on
the Nordic System " Holtinen, V1T Processes,
December 2004
Short-term Operational Impacts of Wind Generation
on the Puget Sound Energy Power System , Golden
Energy Services, Inc., March 3, 2005.
...
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this day, October 5, 2007, I caused a true and
correct copy of the foregoing EXERGY DEVELOPMENT GROUP OF IDAHO LLC
COMMENTS IPC-O7-03 to be served by the method indicated below, and addressed to the
following:
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
POBox 83720
Boise 10 83720-0074
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Barton L. Kline
Idaho Power Company
PO Box 70
Boise ID 83707-0070
bkline~idahopower. com
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Idaho Power Company
PO Box 70
Boise ID 83707-0070
mmoen~idahopower, com
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Renewable Northwest Project
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Portland, OR 97205
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Idaho Public Utilities Commission
424 W Washington Street
Boise ID 83702
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EXERGY DEVELOPMENT GROUP, LLC
CERTIFICATE OF SERVICE COMMENTS IPC-07-
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Staff Attorney
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Rocky Mountain Power
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Ridgeline Energy
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