20140917Supplementary Reply Comments.pdf

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An IDACORP Company
DONOVAN E. WALKER
Lead Counsel
dwal ker@idahopower. com
September 17,2014
VIA HAND DELIVERY
Jean D. Jewell, Secretary
!daho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re: Case No. IPC-E-13-22
Update to Wind Integration Rates and Charges - Supplementary Reply
Comments of ldaho Power Company
Dear Ms. Jewell:
Enclosed for filing in the above matter are an original and seven (7) copies of the
Supplementary Reply Comments of ldaho Power Company.
VeryJruly yours, ,a|L€rl*
Donovan E. Walker
DEW:csb
Enclosures
1221 W. ldaho St
PO. Box 70
Boise, lD 83707
DONOVAN E. WALKER (lSB No. 5921)
JULIA A. HILTON (lSB No. 7740)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalker@ idahopower.com
[e-mail]
Attorneys for ldaho Power Company
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION TO UPDATE
ITS WIND INTEGMTION RATES AND
CHARGES.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. |PC-E-13-22
SUPPLEMENTARY REPLY
COMMENTS OF IDAHO POWER
COMPANY
ldaho Power Company ("ldaho Powe/' or "Company") respectfully submits the
following Supplementary Reply Comments in response to the Supplementary
Comments filed by the ldaho Public Utilities Commission ("Commission") Staff ("Staff'),
the American Wind Energy Association ("AWEA"), and Renewable Northwest ("RNW")
on September 4, 2014.
I. INTRODUCTION
On November 29,2013, Idaho Power filed its Application with the Commission
requesting authorization for ldaho Power to update its wind integration rates and
charges consistent with its 2013 Wind lntegration Study Report ("2013 Study"). The
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 1
following parties intervened in the case: ldaho Winds LLC ("ldaho Winds"); Snake River
Alliance ("SRq'1' Cold Springs Windfarm, LLC ("Cold Springs"); Desert Meadow
Windfarm, LLC ("Desert Meadow"); Hammett Hill Windfarm, LLC ("Hammett Hill");
Mainline Windfarm, LLC ("Mainline"); Ryegrass Windfarm, LLC ("Ryegrass"); Two
Ponds Windfarm, LLC ("Two Ponds"); Cassia Wind Farm LLC ("Cassia"); Hot Springs
Windfarm, LLC ("Hot Springs"); Bennett Creek Windfarm, LLC ("Bennett Creek");
Cassia Gulch Wind Park LLC ("Cassia Gulch"); Tuana Springs Energy, LLC ("Tuana");
High Mesa Energy, LLC ("High Mesa"); Renewable Northwest Project, which has since
changed its name to Renewable Northwest; AWEA; ldaho Wind Partners l, LLC ("ldaho
Wind Partners"); Meadow Creek Project Company LLC ("Meadow Creek"); and
Rockland Wind Farm, LLC ("Rockland"). The Commission granted intervention to each
of the above parties.
On January 31 , 2014, Cold Springs, Desert Meadow, Hammett Hill, Mainline,
Ryegrass, Two Ponds, Cassia, Hot Springs, Bennett Creek, Cassia Gulch, Tuana, and
High Mesa collectively filed a Motion to Dismiss ("Cold Springs Motion to Dismiss"). On
February 7, 2014, AWEA and RNW filed comments in support of the Cold Springs
Motion to Dismiss; Meadow Creek, Rockland, and ldaho Wind Partners filed to join in
the Cold Springs Motion to Dismiss with additional comments; and ldaho Winds filed a
separate Motion to Dismiss. On February 21,2014,|daho Power filed an Answer to the
various motions to dismiss, joinders, and comments.
On April 30, 2014, in Order No. 33030, the Commission denied the Cold Springs
Motion to Dismiss and all motions to partially and/or fully dismiss the matter. ln Order
No. 33030, the Commission clarified that any "Commission approved modifications to
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 2
ldaho Power's wind integration rate and charges will only apply prospectively - to new
contracts as they are entered into by the parties and submitted to the Commission for
approval." Order No. 33030, p. 8. The Commission stated that parties had 14 days to
withdraw as intervenors if any party believed it no longer had a direct and substantial
interest in the proceeding. Rockland, Meadow Creek, ldaho Wind Partners, and SRA
withdrew from the case; an Amended Notice of Parties was issued on May 20,2014.
The remaining parties agreed that modified procedure could effectively process
the remainder of the case and set a procedural schedule that included a comment
deadline, settlement conference, and reply comment deadline. On July 2,2014, Staff
filed Comments and AWEA and RNW jointly filed Comments on the Company's
Application.
On July 9, 2014, the parties met to discuss settlement of the case. The parties
were unable to settle the case and desired additional time for discovery and comment
due to those discussions. On July 15, 2014, in Order No. 33075, the Commission
granted the parties' request for an additional procedural schedule, including deadlines
for additional discovery, supplementary comments, and supplementary reply comments.
On July 22, 2014, ldaho Power filed its Reply Comments in which it addressed
objections raised by AWEA and RNW, corrected statements from ldaho Powe/s initial
Application relevant to Staffs recommendation, and presented ldaho Power's
recommendation to implement wind integration charges on an hourly incremental cost
basis for every 100 megawatts ("MW') of penetration through an intermittent generation
integration charge tariff. Staff and AWEA/RNW filed Supplementary Comments on
September 4,2014.
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 3
II. SUPPLEMENTARY REPLY COMMENTS
A. Staff Comments and Recommendations.
ldaho Power commends Staff for its investigation, analysis, and
recommendations. ldaho Power agrees and accepts Staffs recommendations, in
particular, Staffs recommendations: (1) to accept the results of the Company's 2013
Wind lntegration Study (2013 Study"); (2) to recover the full incremental cost of
integration from new wind projects; and (3) to implement integration charges as a dollar
per megawatt-hour ("MWh") charge rather than as a percentage of avoided cost rates.
Additionally, the Company agrees with and accepts Staffs further recommendations to
apply wind integration costs from the 2013 Study using the Company's proposed tariff,
Schedule 87. ldaho Power accepts Staff's revision of the discount rate used in the
levelization of the integration charges from 6.7 percent to 8.8 percent, which is
consistent with the levelization of published avoided cost rates.
B. AWEA and RNW Obiections.
AWEA and RNW (hereafter, .AWEA") initially objected to the validity of the costs
identified by the 2013 Study, and cited two primary objections to the 2013 Study
methodology: (1) hour-ahead versus day-ahead wind forecast data and (2) netting the
reserve requirements for load and wind. AWEA characterizes the treatment of these
issues as ldaho Power taking a step backwards and abandoning utility "best practices"
by erroneously using day-ahead forecast data and not netting load and wind reserves
because these two items were addressed by using hour-ahead data and netting of
reserves in the 2007 Wind lntegration Study.
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY.4
Alarmingly, it appears that the Company's use of best
practices in its wind integration methodology has actually
diminished over the past seven years, as many of the errors
in the 2013 Study were not made in ldaho Powe/s 2OO7
Wind lntegration Study. . . . Most importantly, ldaho Power's
2013 Study does not incorporate the use of hour-ahead wind
forecasts and fails to net the reserve requirements of wind
and load; these methodological flaws are described in detail
in the following two sections.
AWEA Comments, p. 4.
ln its Supplementary Comments, AWEA continues to raise the same two issues
that it identified in its initial Comments (and which ldaho Power responded to in its
Reply Comments) and laboriously, and unsuccessfully, tries to tie the same issues into
an argument that the costs identified by the 2013 Study are "not wind integration costs."
AWEA attempts to bolster is strained arguments by characterizing the 2013 Study as
"abandonment of standard statistical analysis and industry standards on wind
integration analysis." AWEA Supp. Comments, p. 3. Despite such bold claims, the
dispute is not about "standard statistical analysis and industry standards." Nowhere has
AWEA demonstrated that any statistica! analysis is incorrect, or that the methodology is
an inappropriate methodology. AWEA's real argument is with the difference in choosing
to base integration costs upon the day-ahead, as opposed to the hour-ahead,
forecast-and the difference that would occur with netting the reserve requirements for
load and wind.
AWEA once again raises the same objections that are admittedly based upon its
advocacy for general policy considerations for integration studies on the whole, and
from a national perspective. ldaho Power reiterates its response from its Reply
Comments:
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 5
ldaho Power did not abandon the use of "best practices" and
its understanding of wind integration and its associated costs
has not "diminished" over the years since the initial 2OO7
Study was conducted. ln fact, at the time of the 2007 Study,
Idaho Power had very little wind generation actually
operating on its system (just under 20 MW with only the
Fossil Gulch and Horseshoe Bend Wind projects on-line),
compared to the 678 MW of wind generation that it
successfully integrates onto its system today. It is exactly
the experience that ldaho Power has gained over the past
seven plus years of actual operations of its system, reliably
serving its customers in a least-cost manner as required byits regulatory compact, that specifically informed the
Company's conscious decisions to change to the day-ahead
wind forecast and to not net the reserve requirements of load
and wind in its 2013 Study. AWEA admittedly advocated for
general policy considerations for integration studies on the
whole, and from a national perspective. However, it fails to
take into account ldaho Power's own specific and real-world
operation of its system, the way that costs are incurred and
recovered (or not), and the way that the markets function
that ldaho Power has access to and participates in. The
decisions about how to conduct a proper wind integration
study is not a one-size-fits-all, plug-and-play endeavor that is
the same for Idaho Power as it is for another utility that may
reside inside of an RTO/ISO such as exists in other parts of
the country. ln addition, the fact that all but 101 MW of the
678 MW of wind on ldaho Poweds system is PURPA
generation makes a significant difference because the
Company does not have the operationa! flexibility with
PURPA generation that it may have (or another utility may
have) if its wind generation is non-PURPA. Because the
PURPA generation is a designated network resource to
serye load on the Company's system, and the Company
must accept delivery whenever it is delivered by QF projects,the decisions must be made about the
designation/undesignation of Idaho Power's other resources
in order to keep the system balanced and reliably serving
load. These decisions incur costs. The integration studies
attempt to quantify some of these costs.
ldaho Power Reply Comments, pp. 10-11.
ldaho Power also addressed AWEA's objection related to the netting of reserves
for load and wind that AWEA has not directly rebutted in its Supplementary Comments:
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 6
AWEA's characterization of day-ahead system scheduling as
"forecast" is not accurate. Day-ahead scheduling for ldaho
Power typically includes actual transactions with third
parties, and these transactions obligate the Company and
incur costs to provide or accept energy for the next day, and
are not merely forecasts. Additionally, day-ahead forecasts
for load and day-ahead forecasts for wind are not the same
thing as AWEA implies; forecasting wind generation a day
ahead is considerably more difficult. AWEA/RNW correctly
note in their Comments that wind energy forecast error is
greatly reduced as forecast lead time is reduced.
AWEA/RNW Comments pp. 5-6. ln fact, it is precisely the
magnitude and nature of the day-ahead wind forecast error
that requires ldaho Power, as an entity having a mandate to
reliably serve load, to set aside capacity day ahead to allow
response to wind forecast errors.
By comparison, system load is less difficult to forecast a day
ahead, and day-ahead load forecast errors are typically less
problematic. The National Renewable Energy Laboratory
("NREL') explains in a July 2012 conference paper on a
comparison between load and wind forecasting: "Load
generally follows a familiar pattern, reaching its peak during
the day and into the evening, with a nighttime nadir." A
Comparison of Wind Power and Load Forecasting Enor
Distributions, Bri-Mathias Hodge, Anthony Florita, Kirsten
Onruig, Debra Lew, Michael Milligan, National Renewable
Energy Laboratory, May 2012. NREL also importantly notes
that significant day-ahead load forecast errors are often auto
correlated, reflecting a tendency for day-ahead load forecast
errors to persist in magnitude and direction throughout the
day. Because of this tendency, day-ahead load forecast
errors are more readily addressed through the hour-by-hour
management in real time described by AWEA/RNW in their
Comments.
Thus, the challenges in forecasting wind and load for day-
ahead unit commitment are considerably different, requiring
the system to treat differently the possibility of errors in
forecasting these two elements of the load and resource
balance. Moreover, the different treatments necessary for
load and wind make impractical the netting advocated by
AWEA/RNW in the analysis of errors for load and wind.
ldaho Power Reply Comments, pp. 12-13.
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 7
!n its Supplementary Comments, AWEA attempts to argue that costs identified by
the 2013 Study are not "wind integration costs" because they
"are the costs of remarketing must-take PURPA energy when the utility is surplus on
energy." AWEA Supp. Comments, p. 3. AWEA further argues that, "to the extent that
ldaho Power believes there are additional costs associated with must-take PURPA wind
that are incremental to the integration costs identified in a proper study, those costs
should be captured through the Company's avoided cost methodology." ld., pp. 3-4.
AWEA proceeds to argue that "'integration costs' identified by ldaho Power belong in
the avoided cost methodology" and further that it "should not be applied to non-PURPA
circumstances." ld., pp. 4-6 (Section 2), pp. 12-14 (Section 4\. This not only
demonstrates a lack of understanding of Public Utility Regulatory Policies Act of 1978
('PURPA"), but also a lack of understanding of what the Company's request is in this
case.
First of all, the Commission's prior implementation of wind integration charges, as
well as the Company's request in this case is limited to PURPA qualifying facility ("QF")
generators. See, proposed Schedule 87, Applicability. Secondly, PURPA requires that
the Commission establish rates for mandatory utility purchases of QF generation set at
the utility's avoided cost. Avoided cost is defined as follows:
Avoided costs means the incremental costs to an electric
utility of electric energy or capacity or both which, but for the
purchase from the qualifying facility or qualifying facilities,
such utility would generate itself or purchase from another
source.
18 C.F.R. S 292.101(bXO). The lncremental Cost lntegrated Resource Plan ("lRP")
Avoided Cost Methodology was adopted by the Commission to meet the above-
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 8
referenced definition of avoided cost rates. Order No. 32697, p. 21 ("we find that the
modified methodology comports with the definition of avoided cost contained in FERC
regulations.")
ln addition to the avoided cost definition cited above, PURPA also requires that
the retail customers of the purchasing utility be held harmless by the PURPA
transaction. Order No. 32697, p. 16; 18 C.F.R. S 292.304(aX1), (a)(2). Because of this
requirement, a QF is responsible for paying the costs caused by its generation through
the required integration of the variable and intermittent nature of the generation it
provides. Similarly, a QF is required to pay for any required network upgrades required
for its generation to be a designated network resource on the utility's system. If these
costs were thrust upon the utility's other customers, they would be paying more than the
utility's avoided cost for that QF generation, which is contrary to the requirements of
PURPA. These are examples of costs that are specifically not included in the avoided
cost pricing methodologies, but that nonetheless are costs imposed by the QF and its
mandatory purchase transaction. The lncremental Cost IRP Methodology establishes
the cost of energy and capacity in conformance with the Federal Energy Regulatory
Commission's definition. The wind integration charge establishes the cost of holding
additional operating reserves and changes to the operation of the utility's system to
incorporate the QF's variable and intermittent generation. The combination of these
costs is required to arrive at a lawful purchase price for the mandatory QF transaction.
These costs must be borne by the QF, and not the utility's retail customers. As stated in
its initial Application for this matter, "Failure to calculate and properly allocate wind
integration costs to wind generators when calculating avoided cost rates impermissible
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 9
pushes those costs onto customers, making them no longer indifferent to whether the
generation was provided by a PURPA QF or otherwise generated or acquired by the
Company." Application, p. 3.
AWEA makes misleading and incorrect statements in its Supplementary
Comments regarding its belief as to the "remarketing" of PURPA QF generation. The
2013 Study identifies costs associated with the modified operation of ldaho Power's
system because of the must-take addition of PURPA generation, which is not
scheduled, not dispatchable, and is delivered in any amount at any time and in any
quantity that the QF chooses. As stated in ldaho Power's Reply Comments, PURPA
QF generation is a designated network resource to serve load on ldaho Powefs
system. QF generation is not "remarketed" by the Company as AWEA suggests and
assumes. ln practice, the product marketed for surplus sales is sourced from a
generator (or generators) capable of making a firm transaction and delivering an
expected amount of power with a high level of dependability. During periods of energy
surplus, QF generation may add to the surplus; however, for reliability and dependability
reasons, as well as market conditions (no market for non-firm, as-delivered energy),
generators other than PURPA QF generators must be utilized to source the additional
surplus sales. While the PURPA generation is not technically sourcing surplus sales, it
is still necessary to incur extra operational costs in firming the PURPA generation in
order to reliably meet network load demands and surplus sale obligations. The extra
operational costs to firm PURPA generation are not captured by the IRP methodology,
but are addressed with the integration studies and charge.
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 10
ilt. coNcLusroN
Idaho Power agrees with Staff's recommendations: (1) to accept the results of
the Company's 2013 Wind lntegration Study; (2) to recover the full incremental cost of
integration from new wind projects; and (3) to implement integration charges as a dollar
per MWh charge rather than as a percentage of avoided cost rates. Additionally, the
Company agrees with and accepts Staffs further recommendations to apply wind
integration costs from the 2013 Study using the Company's proposed tariff, Schedule
87. ldaho Power accepts Staffs revision of the discount rate used in the levelization of
the integration charges from 6.7 percent to 8.8 percent, which is consistent with the
levelization of published avoided cost rates AWEA/RNW's objections to the study
methodology are without merit as it pertains to the use of day-ahead forecast data and
the netting of reserves for ldaho Power because of the way costs are actually incurred
in the operation of ldaho Powe/s system on a day-ahead basis, with a very limited
ability to recover them as the system balances into real time.
Idaho Power respectfully requests that the Commission approve the updated
wind integration costs as set forth in the 2013 Study and the proposed Schedule 87 as
modified by Staff.
DATED at Boise, ldaho, this 17th day of September 2014.
DONOVAN E. WALKER
Attorney for ldaho Power Company
SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER COMPANY - 11
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 17th day of September 20141 served a true and
correct copy of the SUPPLEMENTARY REPLY COMMENTS OF IDAHO POWER
COMPANY upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Kristine A. Sasser
Deputy Attorney General
ldaho Public Utilities Commission
47 2 W est Washi ngton (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
ldaho Winds LLC
Dean J. Miller
McDEVITT & MILLER LLP
420 West Bannock Street (83702)
P.O. Box 2564
Boise, Idaho 83701
Rick Koebbe, President
ldaho Winds LLC
5420 West Wicher Road
Glenns Ferry, ldaho 83623
Bob Eggers, Legal Counsel
ldaho Winds, LLC
15850 Jess Ranch Road
Tracy, California 95377
Cold Springs Windfarm, LLC; Desert
Meadow Windfarm, LLC; Hammett Hill
Windfarm, LLC; Mainline Windfarm, LLC;
Ryegrass Windfarm, LLC; and Two Ponds
Windfarm, LLC
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street
Boise, ldaho 83702
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Benjamin G. Huang, Manager
c/o Mountain Air Projects
6000 North FoxtailWay
Glenns Ferry, ldaho 83623
Cassia Wind Farm LLC; Hot Springs
Windfarm, LLG; Bennett Greek Windfarm,
LLC; Cassia Gulch Wind Park LLC; Tuana
Springs Energy, LLC; and High Mesa
Energy, LLG
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27th Street
Boise, ldaho 83702
Paul Ackerman
Assistant General Counsel
Exelon Business Services Corporation
100 Constellation Way
Baltimore, Maryland 21202
American Wind Energy Association and
Renewable Northwest Project
Teresa A. Hill
K&L GATES, LLP
One S.W. Columbia Street, Suite 1900
Portland, Oregon 97258
Dina M. Dubson
Renewable Northwest Project
421 SW 6h Avenue, Suite 1125
Portland, Oregon 97204
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