20071126Intermountain Wind more comments.pdf

McDevitt & Miller LLP
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4;~O~ B::~~:~~8~~~~OU1 NOV 26 Pêì 3=56
Boise, Idaho 83702
Chas. F. McDevitt
Dean J. (Joe) Miler
November 26, 2007
Via Hand Delivery
Ms. Jean Jewell, Secretary
Idaho Public Utilities Commssion
472 W. Washington
Boise, ID 83720
Re: Case No. IPC-E-07-15
Dear Ms. Jewell:
Enclosed for filing in the above matter, please find the original and seven (7) copies of
Intermountain Wind LLC's Additional Comments.
An additional copy of the document and this letter is included for return to me with
your fie stamp thereon.
Thank you for you assistance.
Very truly yours,
McDEVITT & MILLER LL
~~Dean J. Miler
DJM/hh
Enclosures
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DeanJ.Miller ISB#1968
McDEVI & MILLER LLP
420 West Banock Street
P.O. Box 2564-83701
Boise, il 83702
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joeifcdevitt -miller. com
Attorns for Intermuntain Wind LLC
ORIGINAL
t: "'I'v
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER'S
PETITION TO MODIFY THE
METHODOLOGY FOR DETERMINING
FUEL COSTS USED TO ESTABLISH
PUBLISHED RATES FOR PURPA
QUALIFYING FACILITIES
Case No. IPC-E-07-15
ADDITIONAL COMMENTS OF
INTERMOUNTAIN WIND
Background and Introduction
Ths proceeding was initiated on September 10, 2007, when Idaho Power Company
("Idaho Power") filed a Petition entitled, "In the Matter of Idaho Power's Petition to Modify the
Methodology for Deterining Fuel Costs Used to Establish Published Rates for PURP A
Qualifyng Facilties" ("Petition").
On September 27,2007, the Commission issued its Notice of Petition proposing to
process the matter under Modified Procedure and soliciting wrtten comments. Thereafter,
several pares fied comments. In response, on November 9,2007, the Commission issued a
Notice of Additional Comment Perod.
Interountain Wind files these Additional Comments in reply to the Commission's
November 9,2007 Notice.
ADDITIONAL COMMENTS OF INTERMOUNTAI WI - 1
.Jr
ARGUMENT
The Commssion Should Keep in Mind the Policy Objective
On its face, the Petition appears to present a narow techncal issue-how to deterine
fuel costs that are used to compute published avoided cost rates. Whle the techncal
methodology used to compute fuel prices is an importt issue, Interountan Wind urges the
Commission to keep in mind a broader policy perspective.
Specifically, it should be remembered that PURP A development in Idaho has been stalled
since September 2005, by the issuace of Order No. 29872 in Case No. IPC- E-05-22. In that
case, the Commission held that published avoided costs rates would be available only to projects
of 100 kW or smaller, pending investigation of wind integration costs. At the time, Idaho Power
estimated a moratorium perod of nine (9) months would be adequate to investigate the issue.
Only projects that meet the Commission's "grandfatherng" critera contaned in Order No.
29872 have been able to proceed. The moratorium is now stretching into its thd year.
Interountain Wind respectfully suggests that a legitimate policy objective should be to
re-star PURP A implementation in Idaho and that accepting Idaho Power's proposal for
downward adjustment of one element of avoided cost rates would put that objective in jeopardy.
In ths regard, Interountai Wind concur with the Comments of Idaho Windfars, LLC, filed
herein:
"Ths Petition represents the single most importt decision on the futue of renewable
energy in Idaho that the Commission wil face for the next several years. Since it issued
Order No. 29029 on May 21, 2002, which re-established long ter contracts for PURP A
projects, the wind industr has had to fight one reguatory battle after another. It has
addressed the issues of firm energy (90/110 Perormance Band), integration costs and
transmission system upgrades. In the more than five years since the Commission's
decision to move forward with PURP A projects, wind projects have effectively only had
access to Published Prices for six months.
ADDITIONAL COMMENTS OF INTERMOUNTAI WID - 2
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Now, on the eve of completing the latest two year suspension to resolve the integration
cost issue, Idaho Power raises yet another new issue. The continuous reguatory delays
are simply kiling the wind industr in Idaho and costing the ratepayers real money. IWF
hopes the Commission sees through ths attempt to continue the suspension of PURP A
wind projects by using multiple price reductions."
Ths is not to suggest that the Commission should set rates that are above the utilties'
avoided costs in order to achieve the goal of re-staring PURP A. Interountain Wind
understands that, in principle, avoided costs canot exceed the utility's incremental cost of
alterative energy. However, as discussed below, the deterination of avoided cost rates
requires the exercise of judgment based on competing methodologies that produce a range of
reasonable results. The curent methodology was adopted in a fully litigated proceeding (GNR-
01-1,2002) and is supported by a complete record. The Petition proposes an unproven and
untested change to a single rate element without takng into account the overall reasonableness of
the resulting rate. In this circumstance the goal of re-starng PURP A should take precedence.
The Commssion Should be Hesitant to Adjust Only One Component of the Avoided Cost
Rate
In its initial Comments, Intermountain Wind pointed out legal and policy reasons that
lead to "single issue rate cases" being disfavored. Generally, adjustment of a single rate element
is appropriate when the item is uncontrollable by the utility (income taxes, for example) and
when the adjustment would not affect the utility's rate of retu. In its Reply Comments, Idaho
Power urges a more expansive interretation of the single issue rate case prohibition.
Interountain Wind respectfully suggests it is not necessar to debate the theoretical
limits and contours ofthe single issue rate case policy because, in ths case, there are specific
facts in the record demonstrating it would be unwise to make a single element adjustment to
avoided cost rates. The Comments of Interountain Windfars LLC point out that the effect of
adopting Idaho Power's proposal would be to reduce the avoided cost rate to $68.15/MWh,
ADDITIONAL COMMENTS OF INTERMOUNTAI WID - 3
r ,J
compared to the curent methodology which produces a rate of$73.22/MWh. In contrast, Idaho
Power's actual cost of combined cycle generation, as deterined by its Integrated Resource Plan,
is $75. 13/MWh. The end result of accepting Idaho Power's proposal to adjust a single element is
to produce an overall rate that is obviously uneasonable. (And, if the Commission accets the
proposed settlement of integration costs, the avoided cost rate wil be reduced by another
approximated 8%, putting the effective rate below curent rates).
The Comments of the INL Engineers, filed herein, ilustrate the same point in a different
way. The Engineers point out that since avoided costs were last established in 2002 the fixed or
capital costs of electrc generation have risen substantially and those costs are not reflected in
curent avoided cost rates. According to the Engineers,
"The last avoided costs were calculated with much lower fuel costs, and installed costs of
facilties were approximately 50-75% lower than they are today. As an example, since
that time perod steel costs have grown nearly 300%, installed costs for concrete are up
nearly 400%, motor fuel costs are up 225%, and copper prices are up over 300%. These
price increases represent the overall increased capitalization requirements to place gas
plants in operation and significantly impact avoided costs. While it is important to
recalculate avoided costs and somethng we have been requesting for some time, ths
proposal does not provide a fair and reasonable basis for a 20 year change in rates and
does not provide the Commission reasonable information to make a informed judgment."
Accordingly, there is substatial reason to believe that adjusting only one element of
avoided cost rates would produce an overall rate that is uneasonably low.
Conclusion
Keeping in mind the goal of re-staing PURP A and considerng the likelihood that
adjusting only the fuel cost compound would produce an uneasonably low rate, the Commission
should deny Idaho Power's Petition and leave in place the curent methodology until such time
as all components of avoided cost rates can be examined.
ADDITIONAL COMMENTS OF INTERMOUNTAI WID - 4
.'
DATED ths:i day of November, 2007.
Respectfully submitted,
McDEVITI & MILLER LLP
~i~L
McDevitt & Miler LLP
420 W. Banock
Boise, ID 83702
Phone: [phone]
Fax: [phone]
Counsel for Intermuntain Wind LLC
ADDITIONAL COMMENTS OF INTERMOUNTAI WI - 5
,.
CERTIFICATE OF SERVICE
I hereby cerify that on the ~fdy of November, 2007, I caused to be sered, via the
metodes) indicated below, tre and correct copies of the foregoing document, upon:
Jean Jewell, Secretar
Idaho Public Utilties Commssion
472 West Washington Street
P.O. Box 83720
Boise,ID 83720-0074
ijewell(áuc.state.id. us
Hand Delivered
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Baron Kline
Lisa Nordstrom
Ric Gale
Idaho Power Company
POBox 83720
Boise, ID 83702
bkline(íidahopower.com
Inordstrom(íidahopower.com
rgale(íidahopower.com
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Scott Woodbur
Deputy Attorney General
Idaho Public Utilties Commission
P.O. Box 83720
Boise, ID 83702
Scott. woodbury(ípuc.idaho. gOY
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Ken Dragon
Renewable Nortwest Project
917 SW Oak, Suite 303
Portland, OR 97205
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Jordan A. White
Brian Dickman
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, UT 84111
Jordan. white(áacificoro.com
Brian.Dickman(íPacifiCoro.com
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ADDITIONAL COMMENTS OF INTERMOUNTAI WID - 6
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ADDITIONAL COMMENTS OF INTERMOUNTAI WID - 7