20071126RNP comments.pdf

Ken Dragoon
Renewable Northwest Project
917 SW Oak, Suite 303
Portland, OR 97205
Phone: [phone]
Fax: [phone]
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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 PURPA )
QUALIFYING FACILITIES )
)
IPC-E-07- 15
COMMENTS OF RENEWABLE NORTHWEST PROJECT
Renewable Northwest Project ("RNP") appreciates this
supplemental opportunity to submit comments in this proceeding. i
RNP supports a viable standard contract program under PURPA for
small renewable energy projects in Id.aho. An appropriate update to
the inputs to the. published rate is now needed in order to ensure the
purposes of PURPA are met, and that small renewable energy projects
are not competitively disadvantaged against large thermal energy
projects. RNP submits the overarching policy goal of this proceeding is
Established in 1994, RNP promotes the responsible expansion of solar, wind
and geothermal energy in the Northwest. RNP works to establish policies that
support renewable energy development and nurture the development of a market for
renewables. RNP's unique coalition of members includes renewable energy project
developers, public and consumer interest groups, turbine manufacturers,
environmental organizations and others.
COMMENTS -- 1
not to ensure that small renewable energy projects can obtain a high
enough price to justify their construction, but rather to ensure that
such projects can obtain a price that is essentially equivalent to the
price utilities would pay to obtain the power from other incremental
sources.
The Commission's core methodology for creating the published
avoided cost rate, which uses the estimated costs to build and operate
a combined cycle combustion turbine ("CCCT") facility as a surrogate
avoided resource, continues to be fully appropriate. Based on
information from the Northwest Power and Conservation Council, at
least 1,336 MW of new CCCT facilties will come online in 2007 and
2008 alone, including Grays Harbor/Satsop (650 MW), Mint Farm
Energy Center (286 MW), and PGE Port Westward (400 MW).
Moreover, IdaCorp's recent 10-Q filing with the Securities Exchange
Commission included a statement of intent to build a CCCT: "IPC has
shifted its focus to the development of a natural gas-fired combined
cycle combustion turbine located closer to its load center in southern
Idaho." IdaCorp Form 10-Q for quarter ending 9/30/07. Both
PacifiCorp's and Avista's most recent Integrated Resource Plans
("IRPs") propose significant additional CCCT resource additions. In
short, current information demonstrates the cost of power from CCCT
COMMENTS -- 2
facilities remains a reasonable measure of the avoided cost of energy
and capacity for purposes of PURPA.
Idaho Power's filing in this case poses a very narrow question:
Whether the methodology by which the Council's gas forecast is
applied to the published rate should be changed in order to account for
an expected decline in gas prices. RNP believes the Commission
needs to look beyond the narrow question presented by Idaho Power,
and determine whether the final published rate resulting from the
Company's proposal remains a reasonable estimate of the cost of
building and operating a CCCT facility. We submit the rate fails that
fundamental test.
As updated under the revised methodology put forth by Idaho
Power revised methodology, the new published rate is at least 9% less
than Idaho Power's own estimate of the cost of power from a CCCT,
according to the Company's most recent IRP.2 Idaho Power's
proposed published rate is even further (more than 13%) below
PacifiCorp's IRP estimated cost of power from a CCCT. Staff, Avista,
and PacifiCorp proppse an even steeper discount for renewables,as
compared against the utilities' own CCCT cost estimates.
2 The comments filed by Idaho Windfarms in this case
(10/24/07) already recount utility IRP estimates of levelized cost of
power from a CCCT, which range from about $75 to nearly $79/MWh
before environmental adders are included.
COMMENTS -- 3
Thus, the fundamental problem with the narrow proposal put
forth by Idaho Power is that the proposed gas forecast methodologies
result in a published rate which simply is not a realistic estimate of the
cost of power from a CCCT. If the utility/Staff proposal is adopted,
we submit the published rate available to small renewable energy
projects will be significantly below the utilities incremental avoided
cost of energy and capacity. This is best demonstrated by utilities'
own intention to acquire CCCT facilitíes over the next few years,
despite estimated power costs that far exceed the price proposed for
renewable energy.
RNP recognizes that the published rate will never perfectly match
IRP cost estimates, and nor do we recommend that the Commission
use utility IRPs to set the published rate. But the utility IRP estimates
of the cost of CCCT provide an objective test of whether the published
rate is a reasonable measure of avoided energy costs.
We submit that the difference between the published rate
proposed by the utilities and Staff versus the IRP estimates has simply
become too stark. The difference is particularly stark when one
considers that the gap discussed above between the proposed
published. rate and the IRP estimates excludes environmental adders.
COMMENTS -- 4
For example, environmental adders boosted the estimated cost of
power from a CCCT by another $5.00/MWh in Idaho Power's IRP.3
Even with environmental adders raising the estimated cost of
power from CCCTs to nearly $80/MWh, all three major utilities are now
planning to build CCCTs.
The National Association of Regulatory Utility Commissioners'
recent adoption of a Resolution on CIirnate Change (adopted November
14, 2007) bears noting here. NARUC's Resolution supports both Idaho
Power's and PacifiCorp's use of environmental adders to numerically
express the likelihood of some form of carbon regulation in the near
future. NARUC's resolution also strongly supports the maintenance of
a viable PURPA standard offer program in Idaho, wherein small
renewable energy projects can obtain a price for their power that is
commensurate with the price that utilities are demonstrably willing to
pay for fossil fuel resources.
Recommendation
In light of the above discussion, RNP makes the following
proposal:
1. On an interim basis, the Commission should use the existing
published rate methodology to update the published rates with the NW
RNP supports the utilties' inclusion of estimated costs associated
with future regulation or taxation of carbon emissions for integrated
resource planning.
COMMENTS -- 5
Power and Conservation Council's new fuel forecast. This results in a
published rate of approximately $72/MWh - a rate that would remain
roughly $3/MWh below (at minimum) the utilities' IRP estimates of the
cost of power from CCCTs, even after excluding environmental adders.
2. The Commission should more broadly examine the
published rate, including (a) whether the published rate methodology
should use a fuel forecast that is updated more regularly than the
Council's forecast, (b) whether an averaging method such as that
proposed by the utilities and Staff is appropriate, (c) whether capital
costs or other factors in the published rate should also be updated,
and (d) whether the published rate should include a value for the
absence of fuel price risk from renewable energy.
Again, RNP appreciates this opportunity for comment.
Dated: November 21, 2007
Respectfully submitted,
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Ken Dragoon
COMMENTS -- 6
CERTIFICATE OF SERVICE
I certify that on this 21st day of November 2007, true and correct
copies of the foregoing Comments were served upon the following
persons:
Bart Kline
Lisa Nordstrom
Idaho Power Company
P.O. Box 70
Boise, ID 83707-0070
John R. Gale
Idaho Power Company
P.O. Box 70
Boise, ID 83707-0070 ~Qo1~
Ken Dragoon
COMMENTS -- 7