20140724Comments.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 F'OR APPROVAL
OR REJECTION OF AN ENERGY SALES
AGREEMENT WITH EIGHTMILE HYDRO
CORPORATION FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY FROM
THE EIGHTMILE HYDRO PROJECT.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC.E-I4.I2
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 33063 on June 26,2014, in
Case No. IPC-E-14-12, submits the following comments.
BACKGROUND
On May 27,2014, Idaho Power Company filed an Application requesting that the
Commission accept or reject an Agreement between Idaho Power and Eightmile Hydro
Corporation (Eightmile Hydro), for the sale and purchase of electric energy generated by the
Eightmile Hydro Project. On May 5, 2014,Idaho Power and Eightmile Hydro entered into an
Agreement pursuant to the terms and conditions of various Commission Orders applicable to
PURPA agreements for non-seasonal hydro projects. Idaho Power states that Eightmile Hydro
proposes to operate and maintain a 360 kilowatt (kW) non-seasonal hydro energy facility to be
STAFF COMMENTS JULY 24,2014
located near Leadore, 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, Eightmile Hydro elected to contract with Idaho Power
for a2l-year terrn using the non-levelized published avoided cost rates as currently established by
the Commission in Order No. 32817 for energy deliveries of less than 10 average MW (aMW).
Eightmile Hydro has selected August 30, 2014, as the project's Scheduled Operation Date.
Various requirements have been placed upon the project 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 \vill be assessed to Eightmile Hydro. A
Schedule 72 Generator Interconnection Agreement (GIA) between Eightmile Hydro and Idaho
Power was executed on December 4,2013.
Article 21 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 Eightmile Hydro for purchases of energy will be allowed as prudently incurred expenses
for ratemaking purposes.
STAFF ANALYSIS
Idaho Power explains that the recent hydro agreements are the first hydro-based
agreements submitted for approval "that contain 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." Application at 4. In
addition, Idaho Power and Eightmile Hydro also agreed to changes in some standard 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.
Revised Provisions for Entitlement to Firm Enerry 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
STAFF COMMENTS JULY 24,2014
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. 2963 the Commission adopted provisions
for a901110 percent performance band in order for QFs to be entitled to hrm 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 90/110 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
However, in this Energy Sales Agreement atl6.2.3,Idaho Power proposes to adopt a
monthly, rather than quarterly timeframe for making revisions to generation estimates . Table 2
Month I 2 3 4 5 6 7 8 9 l0 lt l2 I 2 .,4 5 6 7 8 9
1"'opportunity at the end of
month 3 allows revision for
Julv. Aue. and Seo
2"d opportunity at the end of
month 6 allows revision for
Oct, Nov, and Dec
3no opportunity at the end of
month 9 allows revision for
Jan. Feb. and March
STAFF COMMENTS JULY 24,2014
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.l
Table 2. New Method to Make Estimate Revisions Proposed by ldaho Power and Eightmile
Hydro
Notification Month Future Monthly Net Enerry Amounts
Elisible to Be Revised
November January and any future months
December February and any future months
January March and anv future months
February Aoril and anv future months
March Mav and any future months
April June and anv future months
Mav July and any future months
June Ausust and anv future months
Julv September and any future months
Aueust October and any future months
September November and any future months
October December and anv 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.
I 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 24,2014
Table 3. Opportunities to Make an Estimate Revision as Proposed by ldaho Power and
Eightmile Hydro
In the Application (See Page 5 and Page 6), Idaho Power admits that the new method
allows revision to occur 'oon a monthly, rather than quarterly, basis" and that the change is
'ocontrary to" and "vades 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:
l. 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 I 2 J 4 5 6 7 8 9 l0 il t2 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 24,2014
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/l l0 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 24,2014
While not stated in its Application, the Company attempts to justiS 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 90/1 10 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, L39,3.4 and 7.6 to
incorporate definitions of "non-seasonal hydro facility" and "seasonal hydro facility" as well as
o'seasonal 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-I1-
03.
2 This change is relevant to the 90/l l0 performance requirement.
STAFF COMMENTS JULY 24,2014
Under the terms of the Agreement, Eightmile Hydro elected to contract with Idaho Power
for a 2O-year term using the non-levehzed 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 Enerry Credits
The Agreement incorporates changes to Article VIII, "Environmental Attributes," to
indicate that Eighmile Hydro owns all Environmental Attributes or Renewable Energy
Credits/Certificates. This is consistent with Commission decisions in Case No. GNR-E-11-03
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 revisednI2.4 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 24,2014
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 parties 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.
A. Sasser
Attorney General
Respectfully submitted this M'U day of July 2014.
Deputy
Technical Staff: Rick Sterling
Yao Yin
i:umisc:comments/ipce14. l2ksrps)ry comments
STAFF COMMENTS JULY 24,2014
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24Th DAY OF JULY 2014,
SERVED THE FOREGOING COMMENTS OF' THE COMMISSION STAFF, IN
CASE NO. IPC.E-I4.I2,BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOVAN E. WALKER
IDAHO POWER COMPANY
P.O. BOX 70
BOISE,ID 83707
E-MAIL: [e-mail]
[e-mail]
RANDY C. ALLPHIN
TDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL : [e-mail]
CERTIFICATE OF SERVICE