20071126Exergy additional comments.pdf

I .
Peter J. Richadson ISB 3195
RICHARDSON & O'LEARY PLLC
515 N. 27th Street
PO Box 7218
Boise, Idaho 83700
Telephone: [phone]
Fax: [phone]
peter~richrdsonandolear.com
Attorneys for Exergy Developnient Group of Idaho LLC
¿DUl NOV 26 P¡'Î 3: 44
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S PETITION TO MODIFY THE )
METHOl?OLOQr. FOR. DETERMINING )
FUEL COSTS USED TO ESTABLISH )
PUBLISHED RA TES FORPUPRA )QUALIFYING F:ACIEITIES )
)
)
)
CASE NO. IPC-E-07-15
EXERQr. DEVELOPMENT GROUP
OF IDAHO'S :ADITIONAL
COMMNTS
COMES NOW, Exergy Developmel't GrOUPi of Idao LLC ("Exergy") by and though
ìts attomeyofre.cørd, Peter J. RichardSOl'andpursuat to that Notice of Additinnal Conient
Period issued by theldao Public Utilities Commssion ("Coinission") on November 9,2007,
and hereby provides the Commssion with its additional comments regardil'gIdao Power
Company's ("Idaho Power") Petition to Modify the Methodology for Determining Fuel Costs
("Petition").
Exergy Development Group of Idaho LLC's Additiona Comments IPC-E..Q-15
1
I .
I
SUMMRY OF EXERGY'S POSITION
Upon review of the comments filed by the various entities, Exergy reiterates its position
that Idao Power's PetÌtion ought to be denied and the Commssion should updåtethe natúralgas
forecast in the avoided cost calculation pursuat to the existing methodology for doing so. In the
alternative, if Staf s methodology is adopted by the Commssion then the natual gas price
forecast should be based on the forecast Idaho Power is curently using in its pending genera
rate case.
II
INITIAL PROCEDUR ISSUE
The Commission issued its notice of Modified Procedure on Septembe:t27, 2007 in
which it made clear that the deadline for comments wås October23, 2007. Iuthat notice the
Commission declared that "ifconientsor protests are filed withn the deadline, the
Commission will consider them..." Notice at p. 4. It should be noted by the Commssion that
Idaho Power's Reply Comments were not fied with the deadline set by the Commission for
consideration in its deliberations. Nor did those comments seek leave of this Commission to fie
out of time conients. Indeed, Idaho Power's reply comments fail to identify the authority
under which they were fied or which requires this Commission to include them in its
deliberations. The status ofIdao Power's comments is unclear in light of its failure to adere to
the Commission's tieline.1 Nevertheless, on the assumption tht the Commission will be
lenient with the Power Company and permit it to operate outside of the bounds that others muSt,
Exergy addresses the issues raised by Idaho Power in its Reply Comments.
1 Striking them from the record would be an appropriate remedy.
Exergy Development Group ofIdaho LLC's AdditionalCommeIits IPC-E~07..15
2
I .
Idaho Power now ha the right to fie Reply Comments in light of the Commission's
Notice of Additiona Comment Period. Exergy urges ths Commission to permit ALL the sae
privilege as Idaho Power by being allowed the opportty to fie reply comments.
III
R. TEPA YER NEUTRAITY TEST HAS BEEN CONSISTENTL Y VIOLATED
It is tre, as observed by Idaho Power that PURP A requires ths Commission to set
avoided cost rates such that the ratepayers of the purchasing utilty are "economically
indiff~ent" as to whethe.r the utility púrchases from a QF or generates the same amount of
energy itself? The curent methodology for incorporating new natural gas forecasts into the
avoided cost rates has proven to be wrong every time. However it has proven to be wrong in
favor of the ratepayers ~ not the small power producers.3 This violates the concept of ratepayer
neutrality, but to the ben.efit of the ratepayer not the QF developer. Among the reasons the
methodology is wrong every time in favor of the ratepayers is the fact that it uses a very
conservative forecast. Indeed the natual gas price forecast used for avoided cost purses is not
used by Idaho Power in its integrted resource plan. It uses a natual gas price forecast that
predicts significantly higher natual gas prices than the forecast used for avoided cost puroses.
Since history shows that the curent methodology is skewed in favor of the ratepayers,
changing it to provide fuer subsidies to the råtepayers is ilogical. It also violates the
ratepayer neutrality concept cited by Idao Power, however Ìt violates Ìt in favor ofthe
ratepayers not the QFs.
2 Idaho Power Reply Comments, November 5, 2007. P.4. ("Reply Comments")
3 See the Comments of Idaho Windfars, LLC in this docket pp 2-4 for a discussion of
how the avoided cost rates are biased against the QF industr.
Exergy Development Group ofIdaho LLC'sAdditionalCöiients IPC-E-07~ 15
3
I .
iv
THIS COMMISSION HAS EXCLUSIVE JURISDICTION
TO · SET IDAHO POWER'S :AVOIDED COST iRA rES
Idaho Power addresses Exergy's Comments beginng at page 11 ofìts Reply Comments.
In its Comments Idaho Power misstates, obfuscates and misconstres Exergy's argUents to
bolster ìts own self-serving view of how avoided cost rates are calculated - and by whom.
First Idao Power miss-states Exergy's posìtion in such a way that it is able to make an
arguent that Exergy has overstepped the legal bounds for setting avoided cost rates:
Apparently, Exergy equates compliance with the State Energy Plan with
maintanigthe published rates at a level that is sufcientto.make.all QF:proJ.ects
economically attactive.
Reply Conientsat p. 11, emphasis provided. Apparently, Idaho Power did not fuly understad
Exergy's Comments. Exergy did not assert anywhere in its comments the concept of making all
(or any) QF projects economically attactive. Exergy is cognizant that this Commission is not
permitted to engage in avoided cost ratemakng based on the economics of the QF industr.
What Idaho Power misconstres and obfuscates is this Commssion's role in setting those rates.
The very case cited by Idaho Power actualy supports Exergy's comments and position in
this docket. Connecticut Light and Power Company, FERC ir 61,012 does make clear that states
may not set avoided cost rates higher than a utìlty's tre avoided costs. However ìt also makes
clear that it is the states, and not FERC and not even Idaho Power, that make the determination
as to what a utility's tre avoided costs are. In Connecticut the state had mooe a determination
that the rates to be paid to a QF were higher tht the utìlty's tre avoided costs. FERC correctly
ruled that such a rate violates basic tenants ofPURPA, but it reiterated the role of the states in
makng that determination:
Exergy Development Group ofIdaho LLC's AdditionaLCömments IPC-E-07~15
4
I .
Accnrdingly~the Muneipal Rate Statute at issue here cannot be applied to impose
a rate exceeding avoided cost on sales by QFs, such as the Preston Facilty, to
eleetcutilìties, such as CL&P, beeause such a rate wouldviol¡¡te PUR A and
this Commission's reguations under PURP A. However, whether the rates
I,posedbythe Muncipal Rate Statute (which are CL&P's retal tates)do OJ; do
not exceed avoided cost (which is determned by the state) is a matter of fact that
in ths case is best left to the appropriate state or judicial foru
¡d. at 16, emphasis provided.
Idaho Power asserts that the avoided cost methodology produces an avoided cost rate
higher th its actual.avoided costs. That is Idaho Power's opinon, nothing more. It is not fact
and it is not subject to objective prof because it is based on a prediction of economic conditions
twenty year into the futue. Idaho Power's tre avoided cost rates are what this Commssion
finds them to be based on a supportble record.. The curent methodology has produced avoided
cost rates that some believe are too low and some believe are too high. The question is wha ths
Commssion fids to be a reasonable methodology when setting those rates. The curent
methodology has been found by ths Commission to be both reasonable and workable. .It ha
been adopted by ths Commission and used multiple times without complait by either the QF
indus or the investor owned utilties. The fact tht it now produces avoided cost rates that are
higher than Idaho .Power likes is not evidence sufficient to thow the curent methodology out.
Idaho Power blatantly miss-states Exergy's arguent regarding ths Commission's
obligations under PURPAand the newly adopted State Energy Plan:
Despite Exergy' surging, federal law does not permit the State of Idaho to
arificially stiulate the development of QF resources by requirig the
C.ommssion to setQF purhaseprìces above avoided costs.
Reply Comments at p. 11, emphasis provided. Exergy did correctly point out that this
Commission has an obligation under PURP A to "encourage" the development of the QF
industr. Exergy also correctly pointed out that the State ofIdaho's energy pla places the
Exergy Development Group ofIdao LLC's Additional Coinents IPC-E-07-15
5
I .
highest priority on renewable energy development.4 However, Exergy never asserted, despite
Idaho Power's claim, that this Commission ought to be required to "set QF purhase prices
above avoided costs." Such an asseron is blatatly in error and is only deservng of such
consideration by this Commission as such.
What Exergy did point out is that when this Commission is confronted with competing
methodologies for setting avoided cost rates, and when those competing methodologies produce
reasonable results and can be supported on the record as producing rates that comply with
PURP A, then this Commssion IS OBLIGATED under federa law to select the methodology
that encourages the development of QFs and IS OBLIGATED under the new State Energy Plan
to select the metodology that first develops renewable energy projects. Ratemaking based on
twenty year natual gas forecasts is at best a judgment call as to the validity of the hundr of
inputs and assumptions involved in makng such a forecast - at worst it is nothng more than a
shot in the dark.
The curent methodology is a proven methodology that this Commission has found on
several occasions to be reasonable. The proposed methodology, on the other hand, has never
been tested, litigated or examined in open hearg. Its usefuess in setting reasonable avoided
cost rates is therefore uncertn at best. What is certn however is that it produces a lower rate
than the Commission's curent methodology which does not satisfy the Commission's Federal
obligation to encourage QF development and nor does it fuer the Commssion's State
obligation to put renewable projects at the top of the list of new generation in Idaho.
4 After conservation.
Exergy Development Group ofIdåño LLC's AdditioDalCóminên.ts lPC-E-07-15
6
,.
V
IDAHO POWER USES A DIFFERENT - HIGHER ~
NATURAL GAS PRICE FOREC:AST FOR ITS GENERAL RATE CASE
WHICH SHOULD BE USED WHEN SETTG ITS AVOIDED COST RATES
In its curently pending general rate case,.IPC~E-07-08., Idaho Power uses a natual gas
forecast for purses of setting ìts retail rates that is different from, and much higher than the
natual gas forecast used in setting ìts avoided cost rates. Attchment A is a copy of the Staf's
Request for Production No.3 to Idaho Power and Idaho Power's response from Idaho Power's
general rate case. That question asked Itlaho Power to identify the gas prices used in its
economic modeling in the rate case. Attchment B is a copy ofIdaho Power's natual gas
forecast used in ìts pending general rate case. The gas price forecast used by Idaho Power in
seekig a retal rate increase is signficantly different from the forecast used in setting its avoided
cost rates. Dr. Reading used Idaho Power's own forecast of natual gas prices in the
Commission's avoided cost model, incorporating the new methodology recommended by Staff to
arive at revised avoided cost rates on Attachment C.
If Idaho Power is actually concerned that its avoided cost rates be set using the most
accúrate and curent forecast of natual gas prices, it should be required to ùtìlze the forecast it
uses in setting ìts retail rates. It should not have its avoided cost rates set using a low natual gas
price forecast while at the same time be permitted to set ìts retal rates based on a high forecast of
natural gas prices.
VI
CONCLUSION
The Commssion is respectfuly urged to, as stated in Exergy's original Comments, deny
Idaho Power's petìtion. In the alternative, Exergy recommends the Commssion adopt Stas
Exergy Development Group ofIdaho LLC's AdditioIll Comments IPC-E-07-15
7
,.
revised methodology using the natual gas price forecast that Idaho Power uses in ìts general rate
case that is curently pending before this Commssion.
Respectfuly submitted this 26th day of November 2007.
RICHASON & O'LEARY PLLCBy(llj~
Peter J. Richardson
:Attorneys for Exergy Developmentûrotip
of Idaho
~
Exergy Development Group of IdaIo LLC's Addìtional Comments IPC-E-07 -15
8
,.
CERTIFICATE OF SERVICE
I hereby certify that on this 26th day of November 2007, I served a true and correct copy
of the within and foregoing by hand delivery to:
Bar Kline
Ric Gale
Idaho Power Company
1221 West Idaho Street
Boise, Idaho 83702
I fuher certify that on this 26th day of November 2007, I served a true and correct copy
of the within and foregoing by electronic copy (pdf fie) to:
Intermountain Wind LLC
DeanJ. Miler
joe!ßmcdevìtt -miler .com
Rocky Mountan Power
Jordan A. White
Brian Dickman
Jordan. white!ßpacificorp .com
Brìan.dickman!ßpacificorp.com
Avista
Kelly Norwood
Kelly.norwood!ßavistacorp.com
INL
Gary Seifert
Kur Myers
Gary. seifert!ßinl. gov
Kurt.myers!ßinl.gov
iihadSOn
ISB # 3195
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S PETITION TO MODIFY THE )
METHODOLOGY FOR DETERMINING )
FUEL COSTS USED TO ESTABLISH )
PUBLISHED RATES FOR PUPRA )
QUALIFYING FACILITIES )
)
)
)
CASE NO. IPC-E-07-15
EXERGY DEVELOPMENT GROUP
OF IDAHO'S ADDITIONAL
COMMENTS
ATTACHMENT A
REQUEST FOR PRODUCTION NO.3: What gas prices have been assumed for
the AURORA simulations? Please cite the source for these gas prices and discuss any
adjustments or assumptions made by Idaho Power with regard to the gas prices used.
RESPONSE TO REQUEST FOR PRODUCTION NO.3:
For 2007, a range of gas prices was used. At Henry Hub, that range was from
$5.87 per mmbtu to $9.99 per mmbtu. At Danskin and Bennett Mountain the range was
from $5.67 per mmbtu to $9.79 per mmbtu.
The 2006 IRP Gas Price Forecast was the basis for the prices used in the
AURORA simulations. The PIRA, NYMEX, IGI, EIA and Global Insight prices for
Sumas that had been obtained for the IRP analysis were updated and converted to
2007year dollars. The prices were averaged to produce a single price at Sumas for
each of the years 2007 through 2016. A basis adjustment was made to the Sumas
price to produce prices at Henry Hub. The prices for the years 2007 through 2016 were
then averaged to produce a single price at Henry Hub of $7.93 per mmbtu.
The range described above was produced by examining the standard deviation
in actual prices at Sumas from January 1, 2001 to December 31 ,2006. That value was
$2.05 per mmbtu, or 26% of $7.93. The low price in the range equals (1-.26) times
$7.93 and the high price equals 1.26 times 7.93.
The price range was escalated by 2.1 % to produce 2008 year dollars for the
2008 AURORA run.
RESPONSE OF IDAHO POWER TO THE FIRST PRODUCTION REQUEST OF
THE COMMISSION STAFF, Page 4
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S PETITION TO MODIFY THE )
METHODOLOGY FOR DETERMINING )
FUEL COSTS USED TO ESTABLISH )
PUBLISHED RATES FOR PUPRA )
QUALIFYING FACILITIES )
)
)
)
CASE NO. IPC-E-07-15
EXERGY DEVELOPMENT GROUP
OF ID:AO'S ADDITIONAL
COMMENTS
ATTACHMENT B
ID
A
H
O

P
O
W
E
R

C
O
M
P
A
N
Y
GA
S

P
R
I
C
E

F
O
R
E
C
A
S
T
20
0
7

$
/
M
M
B
T
U
I
DE
L
I
V
E
R
E
D
8l
s
i
s

A
d
j
WI

B
a
i
s
r
a
n
s
p
o
r
i

A
d
Su
m
a
s

W
g
t
Su
m
a
s

W
g
t
Su
m
a
s

W
g
t
Su
m
a
s

W
g
t
Su
m
a
s
Wg
t
Wg
t
s
$l
M
B
t
u
Fi
x
e
d
Vo
l
u
m
e
t
r
i
c
Fu
e
l

G
a
s
-
2
.
0
1
%
$I
M
M
B
t
u
$I
M
M
B
T
u
$I
M
M
B
t
u
20
0
7
$
6
.
8
6
14
%
$
7
.
5
4

2
9
%
$
7
.
5
0

2
9
%
$
8
.
4
8
14
%
$
8
.
6
9
14
%
10
0
%
$
7.
7
2
$
0.
3
7
9
8
$
0.
0
3
0
0
$
0.1
6
$
8.
2
9
$
(0
.
4
)
$
8.
2
0
20
0
8
$
6
.
4
14
%
$
7
.
6
9
29
%
$
7
.
6
5

2
9
%
$
8
.
1
2
14
%
$
9
.
2
4
14
%
10
0
%
$
7.
8
5
$
0.
3
7
9
8

$
0.
0
3
0
0
$
0.1
6
$
8.
4
2
$
(0
.
3
1
)
$
8.
1
6
20
0
9
$
6
.
7
4
14
%
$
8
.
1
5

2
9
%
$
7
.
9
9

2
9
%
$
7
.
5
2
14
%
$
8
.
8
9
14
%
10
0
%
$
7.
9
2

$
0.
3
7
9
8

$
0.
0
3
0
0
$
0.
1
6
$
8.
4
9
$
(0
.
2
3
)
$
8.
1
5
20
1
0
$
6
.
7
4
14
%
$
8
.
6
3
29
%
$
8
.
6
7

2
9
%
$
7
.
2
6
14
%
$
8
.
2
9
14
%
10
0
%
$
8.
1
4

$
0.
3
7
9
8

$
0.
0
3
0
0
$
0.
1
6
$
8.
7
1
$
(0
.
2
5
)
$
8.
3
9
20
1
1
$
6
.
7
4
14
%
$
9
.
4
3
29
%
$
9
.
4
2

2
9
%
$
6
.
8
14
%
$
8
.
0
6
14
%
10
0
%
$
8.
5
0
$
0.
3
7
9
8

$
0.
0
3
0
0
$
0.
1
7
$
9.
0
8
$
(0
.
2
5
)
$
8.
7
5
20
1
2
$
7
.
0
8
54
%
$
6
.
6
9
23
%
$
7
.
8
5
23
%
10
0
%
$
7.
1
7
$
0.
3
7
9
8

$
0.
0
3
0
0
$
0.
1
4
$
7.
7
2
$
(0
.
2
5
)
$
7.
4
2
20
1
3
$
7
.
2
7
54
%
$
6
.
7
4
23
%
$
7
.
6
4
23
%
10
0
%
$
7.
2
3
$
0.
3
7
9
8

$
0.
0
3
0
0
$
0.
1
5
$
7.
7
9
$
(0
.
2
5
)
$
7.
4
8
20
1
4
$
7
.
4
2
54
%
$
6
.
6
5
23
%
$
7
.
4
3
23
%
10
0
%
$
7.
2
5

$
0.
3
7
9
8
$
0.
0
3
0
0
$
0.
1
5
$
7.
8
0
$
(0
.
2
5
)
$
7.
5
0
20
1
5
$
7
.
7
3
54
%
$
6
.
4
1
23
%
$
7
.
2
3
23
%
10
0
%
$
7.3
1
$
0.
3
7
9
8
$
0.
0
3
0
0
$
0.
1
5
$
7.
8
7
$
(0
.
2
5
)
$
7.
5
6
20
1
6
$
7
.
9
0
54
%
$
6
.
3
5
23
%
$
7
.
2
4
23
%
10
0
%
$
7.
3
9
$
0.
3
7
9
8
$
0.
0
3
0
0
$
0.
1
5
$
7.
9
5
$
(0
.
2
5
)
$
7.
6
4
AV
E
R
A
G
E
20
0
7

t
o

2
0
1
6
$
7
.
1
4
$
8
.
2
9
$
8
.
2
5
$
7
.
1
1
$
8
.
0
6
$
7.
6
5
$
(0
.
2
8
)
$
7.
9
3
$
(
0
.
2
8
)
$
(
0
.
2
8
)
$
(
0
.
2
8
)
$(
0
.
2
8
)
$
(
0
.
2
8
)
$
7
.
4
2
HH
$
8
.
5
6
HH
$
8
.
5
2
HH
$
7
.
3
9
HH
$
8
.
3
3
HH
20
0
7

d
o
l
l
a
r
s
Hi
g
h
:

$

7
.
9
3
Lo
w
:

$

7
.
9
3
x x
1.
2
6
0.
7
4
$
7.
9
3
$
2.
0
5
25
.
8
6
%
$
9.
9
9
$
5.
8
7
St
a
n
d
a
r
d

D
e
v
i
a
t
i
o
n

i
n

a
c
t
u
a
l

p
r
i
c
e
s

a
t

S
u
m
a
s

f
r
o
m

J
a
n
u
a
r
y

1
,

2
0
0
1

t
o

D
e
c
e
m
b
e
r

3
1
,
2
0
0
6
:
NO
T
E
S
:
1)

N
W
P

T
r
a
n
s
p
o
r
t

i
n
c
l
u
d
e
s

r
a
t
e

c
a
s
e

a
d
j
u
s
t
m
e
n
t

o
f

3
.
5

c
e
n
t
s

i
n

2
0
0
6

a
n
d

7
.
0

c
e
n
t
s

t
h
e
r
a
a
f
t
r
2)

B
a
s
i
s

A
d
j
u
s
t
m
e
n
t

f
r
o
m

I
G
I

R
e
s
o
u
r
c
e
s

f
o
a
s
t

(
2
0
0
7
-
2
0
0
9
)
Ga
s

P
r
i
c
e

F
o
r
e
c
a
s
t

G
a
s

S
u
m
m
a
r
y

2
0
0
7
BEFORE THE
ID:AO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF ID:AO POWER )
COMPANY'S PETITION TO MODIFY THE )
METHODOLOGY FOR DETERMINING )
FUEL COSTS USED TO ESTABLISH )
PUBLISHED RATES FOR PUPRA )
QUALIFYING FACILITIES )
)
)
)
CASE NO. IPC-E-07-15
EXERGY DEVELOPMENT GROUP
OF ID:AO'S ADDITIONAL
COMMENTS
ATTACHMENT C
20
-
v
r

L
e
v
e
l
i
z
e
d

A
v
o
i
d
e
d

C
o
s
t

R
a
t
e

f
o
r

I
d
a
h
o

P
o
w
e
r
Up
d
a
t
e
d

P
r
i
c
i
n
g
Pr
o
p
o
s
a
l
St
a
f
f

P
r
o
p
o
s
a
l
EX
E
R
G
Y

P
r
o
p
o
s
a
l
Us
i
n
g

E
s
t
a
b
l
i
s
h
e
d
Us
i
n
g

a
l
l

2
0

y
e
a
r
s
Po
w
e
r

Ga
s

Cu
r
r
e
n
t

P
r
i
c
i
n
g
Me
t
h
o
d
Us
i
n
g

a

2
0

y
r

A
v
g
.
of

f
o
r
e
c
a
s
t
Fo
r
e
c
a
s
t
On
-
l
i
n
e
NW
P
C
C

2
0
0
4
NW
P
C
C
2
0
0
7
NW
P
C
C

2
0
0
7
NW
P
C
C
2
0
0
7
IP
C
O

I
P
C
-
E
-
0
7
-
0
8
Da
t
e
Fo
r
e
c
a
s
t
Fo
r
e
c
a
s
t
Fo
r
e
c
a
s
t
Fo
r
e
c
a
s
t
Ga
s

F
o
r
e
c
a
s
t
20
0
7
62
.
4
0
72
.
2
2
67
.
7
7
66
.
8
8
74
.
3
0
20
0
8
63
.
8
4
73
.
2
2
68
.
1
5
67
.
1
4
74
.
8
5
20
0
9
65
.
3
1
74
.
2
3
68
.
5
4
67
.
6
5
75
.
5
1