20140711Staff Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
BAR NO. 6618
Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR APPROVAL
OR REJECTION OF AN ENERGY SALES
AGREEMENT WITH NORTH SIDE ENERGY
COMPANY,INC., FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY FROM
THE HEAD OF U CANAL PROJECT.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC.N14.O7
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attomey of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Application and Notice Modified Procedure issued in Order No. 33056 on June 11,2014, in Case
No. IPC-E-14-07, submits the following comments.
BACKGROUND
On April 30,2014,Idaho Power Company filed an Application requesting that the
Commission accept or reject an Agreement between Idaho Power and North Side Energy
Company Q.{orth Side), Inc., for the sale and purchase of electric energy produced by the Head of
U Canal Project (Project). On April 23,2014,Idaho Power and North Side entered into an
Agreement pursuant to the terms and conditions of various Commission Orders applicable to
PURPA agreements for seasonal hydro projects. Idaho Power states that North Side proposes to
operate and maintain a 1.28 megawatt (MW) seasonal hydro energy facility to be located near
STAFF COMMENTS JULY II,2OI4
Jerome, Idaho. The Company maintains that the Project will be a qualified facility (QF) under the
applicable provisions of the Public Utility Regulatory Policies Act (PURPA).
Under the terms of the Agreement, North Side elected to contract with Idaho Power for a
2}-year term using the non-levelized published avoided cost rates as currently established by the
Commission in Order No. 32817 for energy deliveries of less than l0 average MW (aMW). North
Side has selected May I ,2015, as the Project's Scheduled Operation Date. Various requirements
have been placed upon North Side in order for Idaho Power to accept energy deliveries from this
facility. Idaho Power will monitor compliance with these requirements throughout the term of the
Agreement.
The Agreement provides that all applicable interconnection charges and monthly
operational or maintenance charges under Schedule 72 will be assessed to North Side. A Schedule
72 Generator Interconnection Agreement (GIA) between North Side and Idaho Power was
executed on July 29,2013.
Article 2l of the Agreement provides that the PPA will not become effective until the
Commission has approved all terms and conditions and declared that all payments Idaho Power
makes to North Side for purchases of energy will be allowed as prudently incurred expenses for
ratemaking purposes.
Idaho Power filed an Amendment to its initial Application on May 27,2014. The
Amendment provides a summary of terms and conditions contained in the proposed Agreement
that are different from prior agreements approved by the Commission.
STAFF ANALYSIS
In its Amendment to its initial Application, Idaho Power explains that the recent hydro
agreements are the first hydro-based agreements submitted for approval "that contains revised
terms and conditions subsequent to the Commission's final and reconsideration orders from Case
No. GNR-E-11-03. As such, the form of the Agreement has several terms and conditions that vary
from previously approved agreements in order to comply with the Commission's recent orders."
Amendment at 5. In addition, Idaho Power and the Seller have agreed to changes in some
provisions that the parties propose for Commission approval. Discussed below are each of the
significant differences between provisions in this Agreement and previous PURPA contracts for
hydro projects.
STAFF COMMENTS JULY II,2OI4
Revised Provisions for Entitlement to Firm Energy Rates
In Case No. IPC-E-04-08/10, Idaho Power proposed a performance band to firm up QF
power and make it more predictable and reliable. The Company contended that by providing
economic incentives for QF developers to more accurately estimate the amount of firm energy it
will deliver each month, the Company hoped to encourage developers to deliver firm rather than
non-firm energy. Obtaining better estimates of the monthly amounts of firm energy to be
provided, Idaho Power contended, will increase the Company's ability to predict when QF
generation will be available and will improve the Company's ability to integrate QF resources into
its resource planning and acquisition processes as firm resources. By including the firming
provisions in the QF contracts, the Company stated that it is attempting to more closely align the
firmness of the energy purchases under the QF contracts with firm energy purchases it makes
every day in the wholesale market.
To address Idaho Power's concerns, in Order No. 29632 the Commission adopted
provisions for a 90/110 percent performance band in order for QFs to be entitled to firm energy
rates. Under the adopted provisions, monthly QF deliveries of energy in excess of 110 percent of
scheduled "net energy" receive only 85 percent of the market price, or the contract rate, whichever
is less. If the QF delivers less than 90 percent of the scheduled "net energy" amount, existing
contracts provide for liquidated damages to compensate the utility and its customers for having to
acquire energy to make up the shortfall. Under the 90/l l0 provisions, QFs must provide monthly
generation estimates that, after the first year, can only be revised every three months. Moreover,
QFs are not allowed to revise their generation estimates in the immediate three months of the
forecast period. Table I below graphically illustrates how monthly generation estimates may be
revised based on Order No. 29632.
Table 1. Opportunities to Make an Estimate Revision According to Order No. 29632
Month I 2 3 4 5 6 ,7 8 9 l0 ll t2 2 3 4 5 6 7 8 9
l'r opportunity at the end of
month 3 allows revision for
Julv. Aus. and Seo
2no opportunity at the end of
month 6 allows revision for
Oct. Nov. and Dec
3"" opportunity at the end of
month 9 allows revision for
Jan, Feb. and March
ifllffi
STAFF COMMENTS JULY II,2OI4
However, in this Energy Sales Agreement at|[ 6.2.3,Idaho Power proposes to adopt a
monthly, rather than quarterly timeframe for making revisions to generation estimates . Table 2
below, reproduced from the Agreement, illustrates the proposed schedule for revisions. In
proposing the change, Idaho Power states that the Seller gains more clarity and flexibility in
adjusting its estimated energy deliveries and Idaho Power maintains the stability in the estimates
necessary for its planning and operation. Idaho Power admits that this change deviates from Order
No. 29632, but both the Company and the Seller propose Commission adoption of the change.r
Table 2. New Method to Make Estimate Revisions Proposed by Idaho Power and Head of
U Canal Project
Notification Month Future Monthly Net Energy Amounts
Elieible to Be Revised
November Januarv and anv future months
December Februarv and anv future months
January March and anv future months
February Aoril and anv future months
March Mav and anv future months
Aoril June and any future months
May Julv and any future months
June Ausust and any future months
Julv September and any future months
Aueust October and any future months
September November and anv future months
October December and any future months
In order to compare the two methods effectively, Staff created Table 3 to visually illustrate
the new timeframes mentioned above. As can be seen, one major difference is the time lapse
between the point when revision is made and the point when the estimates begin. Order No.29632
requires a three-month gap, whereas the new method proposes a one-month gap. For example, the
estimate for the month of April and later can be revised at the end of December under Order No.
29632; the estimate for the month of April and later can be revised at the end of February under the
new method.
t In its Application, Idaho Power stated that "with the proposed change, the Seller must still provide 12 months of
estimated Net Energy Amounts, and still cannot revise the immediate three months of estimated Net Energy
Amounts." However, in response to Staff production requests, Idaho Power admitted that this statement was incorrect
and that the Agreement does, in fact, permit monthly revisions to estimated energy generation amounts.
STAFF COMMENTS JULY II,2OI4
Table 3. Opportunities to Make an Estimate Revision as Proposed by Idaho Power and
Head of U Canal
In the Amended Application (See p.6), Idaho Power admits that the new method allows
revision to occur "on a monthly, rather than quarterly, basis" and that the change is "contrary to"
and "varies from" Order No. 29632. Because this new timeframe fails to comply with the Order,
Staff recommends that the proposed Agreement be rejected by the Commission.
Besides not complying with a prior Commission order, Staff opposes approval of a change
to the 90/110 requirements in this case for the following additional reasons:
1. There are already approximately 17 existing non-wind contracts that comply with
Order No. 29632. These projects can only revise their generation estimates three
months ahead of time. If the Commission approves a change in requirements for this
Agreement, Staff would expect existing contracts to seek similar treatment or
amendments.
2. The change of the timeframe is inconsistent with the reasoning of prior positions taken
by Idaho Power and Staff in cases IPC-E-04-08 and IPC-E-04-10 in2004. Back then,
Idaho Power proposed to allow QFs to revise their energy estimates three times during
the first year of operation and every two years thereafter, because a two-year interval
allows the Company to more easily integrate the QF resource into its biennial IRP
planning process. Staff, on the other hand, recommended a six-month interval for the
duration of the contract. The Commission adopted a three month interval stating, "The
Commission finds it reasonable to provide more frequent opportunities to revise
generation estimates than proposed by the Company. We find that the interest of the
Company in planning for QF resources is better served if the generation forecast is a
reliable estimate." (See Order No. 29632).
Month 2 3 4 5 6 7 8 9 l0 ll l2 I 2 3 4 5 6 7 8 9
Notification made in Nov
allows revision for Jan and any
future months
Notification made in Dec
allows revision for Feb and
any future months
Notification made in Jan
allows revision for March and
any future months
STAFF COMMENTS JULY II,2OI4
3. Currently, as a standard to distinguish firm vs. non-firm, the 90/110 requirements are
only utilized in non-wind projects, although wind projects with the 90/110 band do
exist. For all practical purposes it applies mostly to hydro projects because there are so
few other types of facilities (e.g., solar, biomass, cogeneration, landfill gas). Changing
to monthly generation estimates would likely accommodate nearly all seasonal
variations in hydro production, significantly diminishing the purpose of the 90/110
requirement.
Staff believes there must continue to be some method to distinguish firm from non-firm
energy for specific resources based on their operating characteristics. Integration
charges have been adopted as a reasonable substitute to the 90/1 10 requirements for
wind projects, and are now also being proposed for solar projects. Staff does not
consider a monthly forecast revision schedule to be a reasonable substitute for a
quarterly forecast revision schedule; instead, it is simply a much less rigorous
requirement.
Idaho Power's planning for generation from its own hydro facilities is still done on a
quarterly or seasonal basis. Without a well-reasoned explanation of why monthly
revisions are more beneficial for the project, the utility and the utility's ratepayers, it
seems reasonable to apply the same planning standards to non-utility hydro facilities.
Any change in the existing 90/110 forecasting requirements should apply to all three
utilities. All interested persons and parties should have an opportunity to weigh in so
the Commission can make a decision based on a fully developed record. In addition,
any changes should apply not only to hydro, but also other resource types such as
geothermal, cogeneration, biomass, and landfill gas. Therefore, a generic case under a
separate docket may be a more appropriate procedure so that all utilities and interested
parties could participate.
Although the hydro facility in this contract might be too small to cause critical
planning issues, several other contracts containing the same forecasting requirements
were filed with the Commission concurrently with this matter. Because larger hydro
facilities or other projects may have greater effects on the planning process if monthly
forecasting is approved, Staff does not believe the Commission should consider this
forecasting change on a case-by-case basis.
4.
5.
6.
7.
STAFF COMMENTS JULY 11,,2014
While not stated in its Application, the Company attempts to justify the forecasting
requirement by stating in production request responses that the three-month notification process
has caused significant confusion with QFs and that, even though Idaho Power has worked with
each project individually, the issue still persists. Idaho Power also states that by allowing the
Seller to revise the net energy estimates on a more frequent basis, there is a greater chance that
these estimates will be more reliable values that will be more useful in the Company's short-term
planning process. Idaho Power further states that it does not believe that a change to a 30-day
notification period will have a significant impact on the 12 months of estimated generation data or
on its long-term planning process.
Staff agrees that much of the justification provided by Idaho Power in response to Staff
production requests has merit. Nonetheless, Staff believes that a change to the notification
requirements associated with the 90/110 rules is more properly addressed in a separate proceeding
that includes all of the potential stakeholders.
Change to the Definition of Mid-Columbia Market Energy Cost
The definition of "Mid-Columbia Market Energy Cost" has been changed to replace the
reference to the Dow Jones index with reference to the Intercontinental Exchange (ICE) index and
formula. This change is consistent with Order No. 33053 issued on June 10,2014 in Case No.
IPC-E-13-252.
Incorporation of Seasonal and Non-Seasonal Hydro Definitions and Rates
The Agreement includes the addition of paragraphs 1.29, 1.38, 1.39, 3.4 and7.6 to
incorporate definitions of "non-seasonal hydro facility" and "seasonal hydro facility" as well as
'oseasonal hydro facility test periods"; to incorporate and maintain separate rates for seasonal and
non-seasonal hydro projects; and to ensure that seasonal hydro projects perform within the
requirements of generating 55 percent of their annual generation in the months of June, July and
August. These additions are consistent with Order Nos. 32697 and32802 in Case No. GNR-E-11-
03.
2 This change is relevant to the 90/l l0 performance requirement.
STAFF COMMENTS JULY 7T,2OI4
Under the terms of the Agreement, North Side elected to contract with Idaho Power for a
2l-year term using the non-levelized published avoided cost rates as currently established by the
Commission in Order No. 32817 for energy deliveries of less than l0 aMW. Staff has reviewed
the rates contained in the Agreement and agrees that they are correct.
Removal of Provisions for Delay Liquidated Damages
Provisions providing for delay liquidated damages have been removed because of the
Commission's adoption of the partial stipulation in Commission Order No. 32697. The stipulation
required that delay damages be based on the difference between market rates at the time the QF
fails to achieve its scheduled operation date and the avoided cost rates contained in the contract,
rather than being based on a predetermined amount of liquidated damages specified at the time of
contract signature. Similarly, termination damages are to be based on actual damages, rather than
on a predetermined amount. The Agreement maintains provisions to provide for delay security,
however, so that funds will be available to pay Idaho Power in the event delay or termination
damages are actually incurred.
Revised Provisions for Ownership of Renewable Energy Credits
The Agreement incorporates changes to Article VIII, "Environmental Attributes," to
indicate that North Side owns all Environmental Attributes or Renewable Energy
Credits/Certificates. This is consistent with Commission decisions in Case No. GNR-E-l l-03
Order No. 32697 (December 18,2012), and Order No. 32802 (Order on Reconsideration; May 6,
2013). Those orders require that RECs for SAR based projects will be owned by the QF, and
RECs produced by projects utilizing the IRP methodology will be equally apportioned between the
utilities and the QF absent an alternative agreement by the parties.
Other Minor Revisions
The parties have revisedltl2.4 relating to Scheduled Maintenance to give the Seller the
option to claim maintenance will be scheduled at the same time each year with one notification, in
order to eliminate the requirement of sending multiple notifications for maintenance that is
scheduled for the same time every year. Several other minor revisions have been made to the
Agreement in an attempt to add clarity. Staff believes all of the minor revisions are reasonable
and appropriate.
STAFF COMMENTS JULY 7I,2OI4
RECOMMENDATIONS
Staff recommends that the proposed Agreement be rejected because it fails to comply with
the requirements of Order No. 29632. Staff does not believe that Idaho Power provided adequate
justification to carve out an exception to a prior Commission order. However, Staff believes that a
separate proceeding, in which all utilities and interested parties can actively participate, would
provide a good opportunity to discuss the benefits and detriments of Idaho Power's proposed
modifications to the existing generation estimate requirements.
However, if the panies to the Agreement wish to revise its 90/110 requirements so as to be
consistent with Order No. 29632, Staff believes all other proposed changes from prior hydro
contracts are acceptable.
Respectfully submitted this I lTl day of July 2014.
Technical Staff: Rick Sterling
Yao Yin
i:umisc:comments/ipce l4.Tksrpsyy comments
9
Deputy Attorney General
STAFF COMMENTS JULY TI,2OI4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS l1TH DAY oF JULY 2014,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-14-07, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOVAN E. WALKER
IDAHO POWER COMPANY
P.O. BOX 70
BOISE, TD 83707
E-MAIL: [e-mail]
[e-mail]
RANDY C. ALLPHIN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE