20160224final_order_no_33471.pdf

Office of the Secretary
Service Date
February 24,2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
CONIPANY’S APPLICATION TO APPROVE )CASE NO.IPC-E-16-O1
OR REJECT ENERGY SALES AGREEMENT )
WITH J.R.SIMPLOT COMPANY FOR THE )
SALE AND PURCHASE OF ELECTRIC )ORDER NO.33471
ENERGY )
_________________________________________________________________________________
)
On January 6,2016,Idaho Power Company flied an Application asking the
Commission to accept or reject its Energy Sales Agreement with J.R.Simplot Company.The
Agreement falls under the Public Utility Regulatory Policies Act of 1978 (PURPA),and is a
contract for the sale and purchase of electric energy generated by the Simplot-Pocatello
cogeneration project near Pocatello,Idaho.The Commission issued a Notice of Application and
Notice of Modified Procedure.Order No.33451.Staff timely filed comments.Idaho Power did
not file a reply.The Commission now approves the Company’s Application.
BACKGROUND
Under PURPA,electric utilities must purchase electric energy from “qualifying
facilities”(QFs)at rates approved by 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 -which applies to the Simplot-Pocatello cogeneration project to
establish “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.;see also 18 C.F.R.§
292.304(c).The Simplot-Pocatello Project is a QF under the “all other resource type”category.
Application at 2.
ORI)ERNO.33471 1
In calculating avoided cost.the Commission has 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.”Order No.32697
at 16.In calculating capacity,the Commission considers “each utility’s capacity deficiency
based on load and resource balances found in each utility’s [Integrated Resource Plan]IRP,”as
well as “a QF’s ability to contribute to a utility’s need for capacity.”Id.at 16,21.
THE AGREEMENT
The Agreement between Idaho Power and Simplot replaces an existing contract that
expires March 1,2016.Application at 2.Under the terms of the Agreement,Simplot elected to
contract with Idaho Power for a three-year term using the non-levelized published avoided cost
rates.Id.at 4.Idaho Power’s Agreement with Simplot uses the “other”published avoided cost
rates,for energy deliveries of less than 10 aMW.Id.;see Order No.33305.Because the
Agreement in this case is a replacement contract,its rates include capacity payments throughout
the contract’s term.1 Application at 3.
Although the nameplate rating of the Simplot-Pocatello Project is 15.9 megawatts
(MW),Simplot agrees not to exceed 10 aMW on a monthly basis.Id.at 4.If the facility does
exceed the monthly 10 aMW limit,Simplot agrees that “Idaho Power will accept the energy
(Inadvertent Energy)that does not exceed the Maximum Capacity Amount,but will not purchase
or pay for this Inadvertent Energy.”Id.
The facility is already interconnected and selling energy to Idaho Power,thus the
Agreement specifies a Scheduled First Energy Date and Scheduled Operation date of March 1,
2016,2 but no later than 120 days after Commission approval in a final,non-appealable Order.
Id.at 5.The terms and provisions of the Agreement include that “applicable interconnection
charges and monthly operation and maintenance charges under Schedule 72 will be assessed to
Simplot.”Id.Also,PURPA QF generation “must be designated as a network resource (DNR)to
serve Idaho Power’s retail load on its system.”Id.at 5-6.To maintain DNR status,“there must
be a power purchase agreement associated with [the project’s]transmission service request that
The Simplot-Pocatello cogeneration project has been in operation since at least 1991,and has thus been
contributing to Idaho Power’s system capacity for many years.See Order Nos.23552,25353,28730,29577,30028,
32790,and 33240.
2 See Appendix B at 38.The Application contains a typographical error,indicating a First Energy and Scheduled
Operation Date of March 1,2015.
ORDER NO.33471
maintains compliance with Idaho Power’s non-discriminatory administration of its Open Access
Transmission Tariff (OATT)and maintains compliance with [Federal Energy Regulatory
Commission]FERC requirements.”Id.at 6.The Agreement provides that it will not become
effective “until the Commission has approved all of [its]terms and conditions and declared that
all payments Idaho Power makes to Simplot for purchases of energy will be allowed as prudently
incurred expenses for ratemaking purposes.”Id.
STAFF COMMENTS
Staff confirmed that the proposed rates are correct,and that all other terms and
conditions in the proposed Agreement are consistent with prior Commission orders.Staff
recommended that the Commission approve the Agreement and find that all payments from
Idaho Power to Simplot be allowed as prudently incurred expenses for ratemaking purposes.
FINDINGS AND CONCLUSIONS
The Idaho Public Utilities Commission has jurisdiction over Idaho Power,an electric
utility,and the issues raised in this matter under the authority and power granted it under Title 61
of the Idaho Code and PURPA.The Commission has authority under PURPA and Federal
Energy Regulatory Commission (FERC)regulations to set avoided costs,to order electric
utilities to enter into fixed-term obligations for the purchase of energy from QFs,and to
implement FERC rules.
The Commission has reviewed the record in this case,including the Application and
replacement Agreement,and the comments and recommendations of Commission Staff.We find
that the J.R.Simplot project is qualified to receive the non-levelized published avoided cost rates
contained in the Agreement.We further find that the proposed Agreement contains acceptable
contract provisions consistent with PURPA,FERC regulations,and this Commission’s prior
Orders.We find it reasonable to allow payments made under the Agreement as prudently
incurred expenses for ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the January 4,2016 Energy Sales Agreement
between Idaho Power Company and J.R.Simplot for a three-year term is approved without
change or condition.We further declare that all payments made by Idaho Power to Simplot for
purchases of energy will be allowed as prudently incurred expenses for ratemaking purposes.
ORDER NO.33471 3
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §6 1-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of February 2016.
ATTEST:
/1J
J4n D.Jewell(/
Cmmission Secretary
O:JPC-E-1 6-Oldjh2
KRISER,COONER
ERIC ANDERSON,COMMISSIONER
ORDER NO.33471 4