20150717Decision Memo.pdf

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSION SECRETARY COMMISSION STAFF
FROM: DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
DATE: JULY 17, 2015
SUBJECT: IDAHO POWER’S APPLICATION TO APPROVE CAPACITY
DEFICIENCY FOR AVOIDED COST CALCULATIONS, CASE NO. IPC-
E-15-20
On July 2, 2015, Idaho Power Company filed an Application with the Commission
for an Order approving the capacity deficiency period to be used for the Company’s avoided cost
calculations under the Public Utility Regulatory Policies Act (PURPA). The Company asked
that the Application be processed under Modified Procedure.
BACKGROUND
Under PURPA, electric utilities must purchase electric energy from qualifying
facilities (QFs) at rates approved by the applicable state regulatory agency – in Idaho, this
Commission. 16 U.S.C. § 824a-3; Idaho Power Co. v. Idaho PUC, 155 Idaho 780, 789, 316
P.3d 1278, 1287 (2013). The purchase or “avoided cost” rate shall not exceed the “‘incremental
cost’ to the purchasing utility of power which, but for the purchase of power from the QF, such
utility would either generate itself or purchase from another source.” Order No. 32697 at 7, citing
Rosebud Enterprises v. Idaho PUC, 128 Idaho 624, 917 P.2d 781 (1996); 18 C.F.R. §
292.101(b)(6) (defining “avoided cost”).
The Commission has established two methods of calculating avoided cost, depending
on the size of the QF project: (1) the surrogate avoided resource (SAR) methodology, and (2)
the integrated resource plan (IRP) methodology. See Order No. 32697 at 7-8. The Commission
uses the SAR methodology to establish what is commonly referred to as “published” avoided
cost rates. Id. Published rates are available for wind and solar QFs with a design capacity of up
to 100 kilowatts (kW), and for QFs of all other resource types with a design capacity of up to 10
average megawatts (aMW). Id. For QFs with design capacity above the published rate
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eligibility caps, avoided cost rates are “individually negotiated by the QF and the utility using the
[IRP methodology].” Order Nos. 32697 at 2; 32176. In 2012, the Commission authorized the
use of revisions to the IRP methodology which “focus on identifying the incremental costs that
[Idaho Power’s] system would incur.” Order No. 32697 at 21.
In calculating avoided cost, the Commission found it “reasonable, appropriate and in
the public interest to compensate QFs separately based on a calculation of not only the energy
they produce, but the capacity that they can provide to the purchasing utility.” Id. at 16. As to
the capacity calculation, the Commission found it appropriate “to identify each utility’s capacity
deficiency based on load and resource balances found in each utility’s IRP.” Id. The
Commission elaborated:
In calculating a QF’s ability to contribute to a utility’s need for capacity, we
find it reasonable for the utilities to only begin payments for capacity at such
time that the utility becomes capacity deficient. If a utility is capacity surplus,
then capacity is not being avoided by the purchase of QF power. By including a capacity payment only when the utility becomes capacity deficient, the
utilities are paying rates that are a more accurate reflection of a true avoided
cost for the QF power.
Id. at 21.
The Commission directed that “when a utility submits its [IRP] to the Commission, a
case shall be initiated to determine the capacity deficiency to be utilized in the SAR
Methodology.” Id. at 23. The Commission also stated “utilities must update fuel price forecasts
and load forecasts annually – between IRP filings. . . . We find it reasonable that all other
variables and assumptions utilized within the IRP Methodology remain fixed between IRP filings
(every two years).” Id. at 22.
In 2014, the Commission confirmed July 2021 as Idaho Power’s capacity deficiency
period for use in the incremental cost IRP methodology. Order No. 33159 at 9.
THE APPLICATION
In its Application, Idaho Power states it “currently utilizes a first capacity deficit of
July 2021.” Application at 2. Also, the Company notes that it filed its 2015 IRP (Case No. IPC-
E-15-19) with the Commission on June 30, 2015. According to Idaho Power, its 2015 IRP
“identifies the first capacity deficit occurring in July 2025.” Id.
Idaho Power’s Application includes Table 1, which “shows a first capacity deficiency
of 14 [MW] occurring in July 2025.” Id. at 3. According to the Company, this “includes 461
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MW of PURPA solar that was under contract when the analysis of Table 1 was completed for the
2015 IRP.” Id. However, after Table 1 was developed in the 2015 IRP, “four PURPA Energy
Sales Agreements (“ESAs”) were terminated due to failure of the projects to perform” per their
terms and provisions. Id., citing Case Nos. IPC-E-14-28, IPC-E-14-29, IPC-E-14-30, and IPC-
E-14-31. Idaho Power provides that the “total amount of capacity for these four terminated
ESAs was 141 MW.” Id. at 3-4.
Idaho Power’s Application also includes Table 2, which shows an “updated peak-
hour surplus/deficit chart,” reflecting removal of the 141 MW of PURPA. Id. at 4. Idaho Power
states, “Removal of the 141 MW of terminated PURPA solar projects results in a first capacity
deficit of 47 MW in July 2024, one year earlier than that shown in Table 1 and the 2015 IRP.”
Id. Consequently, the Company asks that “a first capacity deficit of July 2024 be utilized for
avoided cost calculations for both the SAR and IRP methodologies.” Id.
STAFF RECOMMENDATION
Staff recommends that this matter be processed under Modified Procedure with a 28-
day comment period.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Petition and Notice of Modified
Procedure with a 28-day comment period?

Daphne Huang Daphne Huang
Deputy Attorney General

M:IPC-E-15-20_djh
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