20141212Comments.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 THB APPLICATION OF
IDAHO POWER COMPANY FOR APPROVAL
OR REJECTION OF AN ENERGY SALES
AGREEMENT WITH AMERICAN FALLS
SOLAR II, LLC FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC.E.I4.35
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 Attomey General, and in response to the Notice of
Application and Notice Modified Procedure issued in Order No. 33 171 on November 6,2014, in
Case No. IPC-E-14-35, submits the following comments.
BACKGROUND
On October 17,2ll4,Idaho Power Company filed an Application with the Commission
requesting acceptance or rejection of a2}-year Energy Sales Agreement (ESA; Agreement)
between Idaho Power and American Falls Solar II, LLC (Facility, Project). The Application states
that American Falls Solar II would sell and Idaho Power would purchase electric energy generated
by the Project's solar photovoltaic facility located in Power County, Idaho.
The Application states that the proposed Project expects to use JA 305w photovoltaic
panels with SMA inverters and utilize a single axis tracking system for its 20 megawatt (MW)
STAFF COMMENTS DECEMBER 12,2OI4
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 cost 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 $34imegawatt-hour (MWh) for light load hours in early months of the Agreement
to as high as $144lMWh for heavy load hours in the latter years of the Agreement. The equivalent
2}-year levelized avoided cost rate is approximately $63.3244Wh.
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 $4.01/\4Wh
for the first year of the Agreement (2016) and escalates to $7.24lMWh in2036. The equivalent
2}-year levelized solar integration charge is approximately $5.05/MWh. The 2}-year estimated
contractual obligation based upon the estimated generation levels applied to the avoided cost rates
and solar integration charges is approximately $60,691,949.
The Project has selected December 1,2016, 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 American Falls Solar II 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.
GNR-E-I1-03). At the time this Agreement between Idaho Power and American Falls Solar II
STAFF COMMENTS DECEMBER 12,2014
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 Qualifying 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. 33180 (Boise City Solar).
On November 20,20l4,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 pu{poses, the 20-year levelized rate for the Agreement as originally submitted is
$63.32lmegawatt-hour (MWh) and the rate from the Replacement Appendix E is $62.66lMWh.
The estimated 20-year contractual obligation based upon the originally submitted prices is
$60,69 1 ,91 9 and the estimat ed 2}-year contractual obligation with the revised prices is
$60,246,677. The levelized integration charge contained in the ESA is the same in both instances
at $5.05/MWh.
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 American Falls Solar II. Consequently, Staff believes that the avoided cost rates contained in
Replacement Appendix E included as Attachment 1 to the Initial Comments of Idaho Power
should be approved instead of the rates included in the original Agreement accompanying the
Company' s Application.
STAFF COMMENTS DECEMBER 12,2OI4
Idaho Power states in its Initial Comments that it is unaware of whether American Falls
Solar II agrees to adopt the Replacement Appendix E which incorporates Staff s recommended
changes to the pricing model. On December 3, 2014, however, American Falls Solar II filed its
own Initial Comments with the Commission concurring to the rates contained in Replacement
Appendix E. Should the Commission order that the rates in Replacement Appendix E be
substituted for the rates in the original Agreement, Staff believes the parties should be directed to
prepare and submit for Commission approval a contract amendment incorporating Replacement
Appendix E.
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.
Energlt 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. In making the computations, the Company
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.
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,
the Commission approved use of July 2021 as Idaho Power's first capacity deficit in the SAR
STAFF COMMENTS DECEMBER 12,2OI4
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 proj ects I 00 kW or smaller, and for other types of proj ects
smaller than l0 aMW. Second, in Case No. IPC-E-14-22, the Commission approved use of July
2027 as the first capacity deficit for purposes of the Incremental Cost IRP methodology. (Order
No. 33159, October 29,2014).
In both of the cases cited above, Idaho Power had not included demand response programs
in its 201 3 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 2021 capacity deficit period. Through
their respective signatures, each party has agreed to the rates computed on the basis of a July 2021
first capacity deficit. 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 establishment of July 2021 in Case No.
rPC-E-l4-22.
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 $4.0l/MWh for the first year of the Agreement (2016)
and escalates to $7.24lMWh in2036. The equivalent 20-year levelized solar integration charge is
approximately $5.05/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
28,2014, 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.
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.
STAFF COMMENTS DECEMBER 12,2OI4
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 2O-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,
there must be a power purchase agreement associated with its transmission service request that
STAFF COMMENTS DECEMBER 12,2OI4
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 American Falls Solar II, incorporating the avoided cost rates contained in
Attachment 1 of Idaho Power's November 20,20l4lnitial Comments (Replacement Appendix E
to the original Agreement). 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 nF day of December 2014.
Technical Staff: Rick Sterling
Yao Yin
i :umisc:commens/ipce I 4.35ksrpsyy comments
Deputy Attorney General
STAFF COMMENTS DECEMBER 12,2OI4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 12TH DAY oF DECEMBER 2014,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-14-35, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOVAN E. WALKER RANDY C. ALLPHIN
REGULATORY DOCKETS ENERGY CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY IDAHO POWER COMPANY
P.O. BOX 70 PO BOX 70
BOISE, ID 83707 BOISE ID 83707-OO7O
E-MAIL: [e-mail] E-MAIL: [e-mail]
[e-mail]
AMERICAN FALLS SOLAR II LLC SARAH LOVELL DIR
C/O ARTHUR SNELL COMMERCIAL ASSET MGMNT
179 LINCOLN ST STE 5OO I2OO FOLSON ST STE lOO
BOSTON MA 02111 SAN FRANCISCO CA 94103
E-MAIL: [e-mail] E-MAIL: [e-mail]
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
1015 W HAYS ST
BOISE ID 83702
E-MAIL : ron@wi lliamsbradbury.com
SECRETARY /
CERTIFICATE OF SERVICE