20141219Comments.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:
472 W . WASHINGTON
BOISE, IDAHO 83702.5918
Attomey for the Commission Staff
IN THE MATTER OF THE APPLICATION OF'
IDAHO POWER COMPANY FOR APPROVAL
OR REJECTION OF AN ENERGY SALES
AGREEMENT WITH CLARK SOLAR 4,LLC
FOR THE SALE AND PURCHASE OF
ELECTRIC ENERGY.
r Diiil l9 Fll
CASE NO. IPC-E-14.3I
COMMENTS OF THE
COMMISSION STAFF
t5
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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 Modified Procedure issued in Order No. 33 167 on November 6,2014, in
Case No. IPC-E-14-31, submits the following comments.
BACKGROUND
On October 17,2|l4,ldaho Power Company filed an Application with the Commission
requesting acceptance or rejection of a2)-year Energy Sales Agreement (ESA; Agreement)
between Idaho Power and Clark Solar 4, LLC (Facility, Project). The Application states that
Clark Solar 4 would sell and Idaho Power would purchase electric energy generated by the
Project's solar photovoltaic facility located in Elmore County, Idaho.
The Application states that the proposed Project expects to use mono crystalline solar
modules with Tier 1 inverters and utilize a single axis tracking system for its 19.98 megawatt
STAFF COMMENTS DECEMBER 19, 2014
(MW) solar project. Application at 3. The Facility will be a QF under the applicable provisions
of the Public Utility Regulatory Policies Act of 1978 (PURPA). The Agreement is for a term of
20 years and contains incremental, integrated resource planning (IRP) avoided cost rates
applicable to solar projects that exceed 100 kilowatts (kW). Idaho Power states that prices were
determined on an incremental basis with the inclusion of this Project in its queued position of
proposed projects on Idaho Power's system. Over the 2)-year term of the Agreement, the monthly
rates vary from approximately $34lmegawatt-hour (MWh) for light load hours in early months of
the Agreement to as high as $110/MWh for heavy load hours in the latter years of the Agreement
based on linear escalations of light load and heavy load monthly rates. The equivalent 20-year
levelized avoided cost rate is approximately $61.07lMWh.
The Agreement also contains negotiated solar integration charges as directed by the
Commission in Order No. 33043. The solar integration charge starts at a charge of $4. I 3/MWh
for the first year of the Agreement (2017) and escalates to $7.24lMWh in2036 in the same manner
as the monthly energy rates (linear escalation). The equivalent 2}-year levelized solar integration
charge is approximately $5.21lMWh. The 20-year estimated contractual obligation based upon
the estimated generation levels applied to the avoided cost rates and solar integration charges is
approximately $68, 1 54,665.
The Project has selected December 31, 2016, as its Scheduled Operation Date. Id. at 4.
Idaho Power asserts that various requirements have been placed upon the Facility in order for
Idaho Power to accept the Project's energy deliveries. Idaho Power states that it will monitor the
Facility's compliance with initial and ongoing requirements through the term of the Agreement.
Idaho Power explains that the Agreement contains several terms and conditions that vary from
previously approved agreements in order to comply with the Commission's recent orders and in
order to properly implement the negotiated rates and integration charges. In addition, Idaho Power
and Clark Solar 4 have agreed to changes in some provisions that the parties propose for
Commission approval.
STAFF ANALYSIS
Revised Avoided Cost Rates in the Agreement
The avoided cost rates contained in the Agreement were computed using the Incremental
Cost, Integrated Resource Plan pricing methodology. Many of the details related to application of
that methodology were addressed in Order No. 32697, issued on December 18, 2012 (Case No.
STAFF COMMENTS DECEMBER 19, 2014
GNR-E-11-03). At the time this Agreement between Idaho Power and Clark Solar 4 was
submitted for Commission approval, no other solar contracts had yet been approved with rates
determined using the methodology.
Recently, the Comments of the Commission Staff in Case No. IPC-E-14-19 (Grand View
Solar) and Case No. IPC-E-14-20 (Boise City Solar) recommended that the rates contained in the
Energy Sales Agreement (ESA) between Idaho Power and each solar Quali$,ing Facility (QF) be
revised to account for energy cost computation issues identified by Staff. Staff recommended two
modifications, related to assumptions about the fuel forecast and assumptions about displaceable
resources, to the computation of avoided cost rates utilized by the approved Incremental Cost IRP
methodology. Idaho Power incorporated Staff s recommended adjustments into the model, and
submitted replacement pricing for each ESA. Each QF agreed to replace the pricing in its
respective ESA with the replacement pricing that incorporated the revisions recommended by
Staff. The Commission then subsequently approved each modified ESA containing the
replacement pricing. Order No. 33179 (Grand View Solar); Order No. 331 80 (Boise City Solar).
On November 20,2jl4,Idaho Power submitted "Initial Comments" in this docket. The
purpose of the Initial Comments is to submit for Commission consideration a Replacement
Appendix E to the ESA that contains revised prices consistent with pricing methodology changes
recommended by Staff and approved for the Grand View and Boise City solar contracts. For
comparison purposes, the 20-year levelized rate for the Agreement as originally submitted is
$61.07lmegawatt-hour (MWh) and the rate from the Replacement Appendix E is $60.87lMWh.
The estimated2}-year contractual obligation based upon the originally submitted prices is
$68,154,665 and the estimated 2)-year contractual obligation with the revised prices is
$67,863,931. The levelized integration charge contained in the ESA is the same in both instances
at $5.21lMWh.
Staff stands by its comments made in the Grand View and Boise City Solar cases regarding
modifications to the Incremental Cost IRP methodology. Staff s proposed modifications were
approved by the Commission for both contracts, and Staff believes those modifications are
reasonable and appropriate for all future solar contracts, including this one between Idaho Power
and Clark Solar 4. Consequently, Staff believes that the avoided cost rates contained in
Replacement Appendix E included as Affachment I to the Initial Comments of Idaho Power
should be approved instead of the rates included in the original Agreement accompanying the
Company's Application. Idaho Power states in its Initial Comments that it is unaware of whether
STAFF COMMENTS DECEMBER 19,2OI4
Clark Solar 4 agrees to adopt the Replacement Appendix E which incorporates Staff s
recommended changes to the pricing model.
Staff Review of the Purchase Prices in Replacement Appendix E
Staff thoroughly reviewed the purchase prices contained in Replacement Appendix E. The
rates are composed of three components: an energy component, a capacity component, and an
integration charge.
Energy Component
The energy component is derived from results of a simulation made using the AURORA
dispatch model, in conjunction with extensive spreadsheet analysis consistent with the Incremental
Cost IRP methodology. Staff carefully reviewed the input data used to perform the AURORA
simulation, and Staff also matched the Company's results with its own simulation. Staff also
thoroughly reviewed the spreadsheet analysis performed by Idaho Power, and ensured that Staff s
recommended modifications were properly made consistent with recommendations made for the
Grand View and Boise City Solar contracts. Staff is confident that the energy component of the
rates is fair, reasonable, and properly calculated.
Capacity Component
The capacity component of the rates was computed by Idaho Power consistent with the
approved Incremental Cost IRP methodology. However, in making the computations, the
Company assumed two different capacity deficiency periods because Idaho Power and Clark Solar
4 disagreed on which deficiency period assumption is correct. First, Idaho Power assumed a
capacity deficiency period extending until July 2021. In other words, no capacity component is
included in the avoided cost rates until July 2021. Rates in Appendix E are based on this
assumption. Second, Idaho Power assumed a capacity deficiency extending only until July 2016.
Rates in Appendix F are based on this assumption. The parties agreed to submit two alternative
pricing schedules to the Commission with the ESA, and further agreed that each party will accept,
abide by, and be bound by the Commission's determination as to the appropriate pricing schedule
for the ESA.
The determination of the proper capacity deficiency to use in the avoided cost calculations
has recently been an issue in two separate Commission dockets. First, in Case No. IPC-E-13-21,
STAFF COMMENTS DECEMBER 19, 2014
the Commission approved use of July 2021 as Idaho Power's first capacity deficit in the SAR
methodology by allowing up to 400 MW of demand response to be counted as a resource. (Final
Order on Reconsideration No. 33084, July 30, 2014). The SAR methodology is used to compute
avoided cost rates for solar and wind projects 100 kW or smaller, and for other types of projects
smaller than 10 aMW. Second, in Case No. IPC-E-14-22, the Commission approved use of July
2021 as the first capacity deficit for purposes of the Incremental Cost IRP methodology. (Order
No. 33 I 59, October 29, 2014).
In both of the cases cited above, Idaho Power had not included demand response programs
in its 2013 IRP, but had already achieved an enrolled demand response capacity in excess of 400
MW in 2014 at the time the Commission approved a July 202l capacity deficit period. Staff
believes use of a July 2021 first capacity deficit is appropriate because it accurately reflects Idaho
Power's resource/deficit position. Moreover, selection and use of this capacity deficiency
assumption is consistent with the findings in Case No. IPC-E-14-22. Consequently, Staff
recommends that Appendix F rates be rejected in favor of Appendix E rates consistent with the
energy rate adjustments discussed previously and reflected in Idaho Power's Replacement
Appendix E.
Solar Integration Charges
Idaho Power states that the solar integration charges incorporated in the Agreement are
negotiated rates agreed upon by the parties, and exactly match the solar integration charges
proposed by Idaho Power in Case No. IPC-E-14-18. The integration charges proposed in
IPC-E-14-18 were based on the results of the Company's 2013 Solar Integration Study. The
proposed solar integration charge starts at $4.13/MWh for the first year of the Agreement (2017)
and escalates to $7.24lMWh in2036. The equivalent 2O-year levelized solar integration charge is
approximately $5.2 I /MWh.
The Commission has yet to approve the solar integration charges proposed by Idaho Power
in Case No. IPC-E-14-18. Direct Testimony was filed by Staff and other intervenors on October
28,2074, and a technical hearing was initially scheduled for November 13, 2014. The technical
hearing was vacated, and instead the parties met for a settlement conference on November 17,
2014. No settlement has yet been submitted to the Commission for approval as of the date of
filing of these comments, yet Staff believes such a filing is imminent.
STAFF COMMENTS DECEMBER 19, 2014
Because the proposed integration charges have been agreed to by both parties, and because
they also exactly match the solar integration charges proposed by Idaho Power in Case No.
IPC-E-14-18, Staff believes the solar integration charges are reasonable and recommends
approval.
90/110 Firmness Requirement
The Agreement contains provisions for a90l110 firmness requirement, solar integration
charge and pricing adjustment. Idaho Power states that the 90/l l0 requirement addresses the
Commission's definition of firmness for entitlement to avoided cost rates determined at the time
of contracting for the duration of the contract. The solar integration charge addresses the
increased system operation costs (holding reserves, upward and downward regulation) because of
the variable and intermittent nature of the generation. The parties further negotiated and agreed to
provisions that provide for a new type of price adjustment that is uniquely applicable to contracts
that utilize the incremental IRP pricing methodology. The purpose of this price adjustment
mechanism is to require that the Project performs in conformance with the generation profile that
the Project submits, which forms the basis for the avoided cost pricing that is contained in the
Agreement and locked in for the 20-year term. If the Project does not perform in conformance
with the generation profile as submitted, then a corresponding adjustment is made to the price paid
for that month of generation. The Agreement allows for a two percent deviation in the monthly
Adjusted Estimated Net Energy Amount from the generation profile estimates before a price
adjustment is applied. Consistent and material deviations from the hourly energy estimates in the
generation profile will be considered a material breach of the Agreement.
Additional Contract Provisions
New provisions providing for actual delay damages as opposed to liquidated damages are
included in the Agreement, consistent with Order No. 32697. The parties negotiated a 50/50 split
of environment attributes (aka renewable energy credits). As with all PURPA QF generation, the
Project must be designated as a network resource (DNR) to serve Idaho Power's retail load on its
system. Consequently, the Agreement contains provisions requiring completion of a Generator
Interconnection Agreement (GIA), compliance with GIA requirements, and designation as an
Idaho Power network resource as conditions of Idaho Power accepting delivery of energy and
paying for the same under the Agreement. In order for the Project to maintain its DNR status,
STAFF COMMENTS DECEMBER 19, 2OI4
there must be a power purchase agreement associated with its transmission service request that
maintains compliance with Idaho Power's non-discriminatory administration of its Open Access
Transmission Tariff (OATT) and maintains compliance with FERC requirements.
Staff believes these additional contract provisions are reasonable and comply with prior
Commission orders.
RECOMMENDATIONS
Staff recommends that the Commission issue an order accepting the Agreement between
Idaho Power and Clark Solar 4, incorporating the avoided cost rates contained in Attachment 1 of
Idaho Power's November 20,2014Initial Comments (Replacement Appendix E to the original
Agreement for the purposes of capacity deficiency). Staff recommends no other changes to the
terms and conditions of the Agreement. Finally, Staff recommends that the Commission declare
that all payments for purchases of energy under the Agreement be allowed as prudently incurred
expenses for ratemaking purposes.
Respecttully submitted this nIH day of December 2014.
Technical Staff: Rick Sterling
Yao Yin
i :umisc:comments/ipce I 4.3 I ksrpsyy comments
Deputy Attorney General
STAFF COMMENTS DECEMBER 19, 2014
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 19TH DAY oF DECEMBER 2014,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, CASE
NO. IPC.E-14-31, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DONOVAN E. WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
P.O. BOX 70
BOISE, ID 83707
E-MAIL: dwalker@,idahopower.com
dockets@ idahogower. com
MARK VAN GULIK
CLARK SOLAR 4,LLC
PO BOX 7354
BOISE TD 83707
E-MAIL : mvan gulik@ sunergyworld. com
RANDY C. ALLPHIN
ENERGY CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-MAIL: [e-mail]
DEAN J MILLER
McDEVITT & MILLER
420 W BANNOCK ST
BOISE TD 83702
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE