20160707Reply Comments.pdf

DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalker@ idahopower.com
Attorney for ldaho Power Company
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION TO UPDATE
SOLAR INTEGRATION RATES AND
CHARGES
NECEIVED
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. !PC-E-16-11
REPLY COMMENTS OF
IDAHO POWER COMPANY
ldaho Power Company ("ldaho Power" or "Company") respectfully submits the
following Reply Comments in response to the comments filed by the ldaho Public
Utilities Commission ("Commission") Staff ("Staff'), and the joint comments filed by the
ldaho Conservation League and Renewable Northwest ("!CURN") on June 30, 2016. ln
these Reply Comments, ldaho Power will address recommendations made by Staff and
correct some assumptions and recommendations made by ICURN.
I. INTRODUCTION
On May 6, 2016, Idaho Power filed its Application with the Commission
requesting the Commission authorize ldaho Power to update its solar integration rates
and charges consistent with its completed 2016 Solar lntegration Study Report ("Study"
REPLY COMMENTS OF IDAHO POWER COMPANY - 1
ot "2016 Solar Study"). In support of its Application, ldaho Power presented its 2016
Solar Study and the Direct Testimonies of Philip B. DeVol and Michael J. Youngblood.
The Company asked that its Application be processed by Modified Procedure.
On June 2, 2016, the Commission issued Order No. 33530 ordering the
Application be processed by Modified Procedure, with written comments due no later
than June 30, 2016, and reply comments by ldaho Power, if any, due July 7,2016.
On June 8, 2016, the ldaho Conservation League petitioned to intervene, which
the Commission granted on June 21,2016, in Order No. 33544.
On June 30, 2016, comments in this matter were submitted by Staff and ICURN.
II. REPLY COMMENTS
A. Staff Comments and Recommendations.
ldaho Power appreciates Staffs analysis and recommendations and agrees, in
particular, with Staff's recommendation to approve the solar integration charges as
proposed by ldaho Power in its Schedule 87. The Company also agrees with Staff's
recommendation that clarifying language be added to Schedule 87 in order to:
1. Clarify that the tariff rates wil! be included in qualifying facility
contracts at the time those contracts are executed and, once added, shall remain
unchanged in the contract for its duration. Subsequent changes to the tariff rates only
apply to new contracts at the time those contracts are executed.
2. Clarify that the tariff rates wil! be applied to all Public Utility
Regulatory Policies Act of 1978 (PURPA) contracts, both Surrogate Avoided Resource
(SAR)-based and lntegrated Resource Plan ("lRP")-based.
The Company's proposed revision of Schedule 87, Sheet No. 1, is attached and
includes the Company's proposed clarifying language.
REPLY COMMENTS OF IDAHO POWER COMPANY - 2
B. ICURN Comments and Recommendations.
ldaho Power also agrees with ICL/RN's recommendation that the Commission
adopt Schedule 87. However, the Company does not agree with ICURN's
recommendation to develop an average cost approach rather than the incremental
cost approach presented by the Company. The Company also does not agree with
ICURN's recommendation to expand on the Energy lmbalance Market ("EIM')
sensitivity with a complete review in the 2017 IRP or the recommendation to apply the
improved methodology and analysis used in the 2016 Solar Study to update the wind
integration study. These issues are discussed below.
1, Averaqe Cost Approach Versus lncremental Cost Approach.
On page 2 of their Comments, ICURN recommend using an average integration
cost approach based on the cumulative nameplate solar and to apply an equal cost to
each operating project. ICURN state that "applying an average integration rate to all
projects is more fair and accurate." ICURN Comments p. 2. They acknowledge that as
new projects join the system, there would be a change in the average integration cost,
which would result in an update to all operating projects. ICURN also recognize that
adopting a full average integration cost approach may not be feasible at this time, based
on their understanding of existing power purchase contracts and the fact that the
Commission would have to reopen those contracts to adjust the integration charge.
The Company does not agree with ICURN's recommendation to use an average
integration cost approach in setting the solar integration rates. The Company continues
to advocate that the incremental integration cost approach proposed by the Company is
more appropriate.
REPLY COMMENTS OF IDAHO POWER COMPANY.3
The 2016 Solar Study determines an average integration cost per megawatt-hour
('MWh") for each of the solar build-out scenarios. ln fact, Table 9 on page 21 of the
Study shows the average integration costs, in 2016 dollars. lf the Commission were to
use an average integration cost per MWh for all solar contracts, the average cost per
MWh for all projects up to the 1,600 megawatts ("MW') build-out level would be $0.85
per MWh. This average cost approach would mean that earlier projects would pay
more in integration costs than what the Company actually incurs in order to integrate the
intermittent resource and that projects coming on at higher levels of solar penetration
would pay less than the costs incurred to integrate the additional intermittent resource.
lf the average cost of integration shown on Table 9 were broken down into
smaller segments, the average cost of integration would be less for the earlier projects
coming on-line at lower penetration levels and higher for later projects at higher
penetration levels. Table 10 on page 22 of the Study shows the average cost per 400
MW block for each of the solar build-out scenarios. The integration costs for each of
these blocks are averaged across the 400 MW block. The Company uses these
benchmark numbers to develop even smaller average blocks and the 100 MW
incremental integration costs proposed by the Company. As shown in Exhibit No. 1 of
Mr. Youngblood's Direct Testimony, both the average dollars per MWh and the
incremental dollars per MWh recover the same amount of integration costs from the
intermittent resource. However, with the costs being allocated on an incremental basis,
the individual costs per MWh are more closely aligned with the cause of those costs;
thus, the initial generation is assigned a lower cost than the later generation, which is
more costly to integrate.
REPLY COMMENTS OF IDAHO POWER COMPANY - 4
The Company recommends the Commission adopt the incremental pricing as
proposed by the Company in Schedule 87, which uses the same incremental cost
methodology as is currently included in Schedule 87, both for solar and wind integration
costs.
2. EIM Sensitivitv Review in the 2017 lRP.
ICURN recommend the Commission instruct Idaho Power to expand on EIM
sensitivity with a complete review in the 2017 IRP of the costs and benefits of joining the
EIM.
The California lndependent System Operator and ldaho Power have signed an
agreement for the Company to participate in the western EIM beginning April 2018,
contingent upon necessary regulatory approvals. ldaho Power believes it is appropriate
to provide the Commission with timely information regarding potentia! benefits of EIM
participation; however, the Company does not believe the recommended cost-benefit
analysis should be included in the 2017 IRP or evaluated within the context of the lRP
process. While EIM participation will ultimately impact the dispatch of the Company's
resources, the evaluation of the costs and benefits of participation is not directly related
to the long-term resource plan of the lRP. As noted in the 2016 Solar Study on page
22, the Study did incorporate an EIM sensitivity analysis. The Study recognized both:
(1) the potentia! benefit of wholesale energy market trading on a 1S-minute window
instead of hourly to potentially reduce required operating reserves and thus integration
costs and (2) the fact that the contemplated ElMs are not expected to trade capacity
products (i.e., operating reserves) and thus the potential capability to satisfy all or part
of the INC/DEC reserve requirements through EIM participation is not anticipated. Any
benefit or cost associated with EIM participation as related to integration costs of
REPLY COMMENTS OF IDAHO POWER COMPANY - 5
intermittent resources would be more appropriately included in future integration cost
studies, not the IRP planning process.
3. Applv Solar lnteqration Studv Methodolosv to New Wind Studv.
ICL/RN recommend the Commission direct the Company to apply the improved
methodology and analysis used in the 2016 Solar Study to update the wind integration
study. The Company disagrees with this recommendation.
The Company discusses the comparison of solar integration to wind integration
within the Study itself. The Study states that the lower integration costs associated with
solar are fundamentally the result of less variability and uncertainty and the related
effect on operating reserve requirements arising because of the lesser variability and
uncertainty exhibited by solar. On page 23, the Study states:
Compared to wind, system operators managing a balancing
authority integrating solar would have the benefit of at least 6
hours at the start of day with no or little solar production.
During this period of no or Iittle solar production, system
operators could evaluate the day-ahead solar production
forecast using information from updated weather forecast
products and begin to plan for necessary actions to manage
deviations from the day-ahead solar production forecast.
Qualitatively, the Study data suggests solar is more predictable than wind
generation connected to ldaho Power's system. Sunrise and sunset times, as well as
the time of solar noon, are a certainty. The theoretical maximum level of production can
be readily derived, reflecting patterns on daily, monthly, and seasonal time scales. In
addition, land requirements for a solar power plant are likely to promote a relatively high
level of dispersion, which is critical to the mitigation of impacts from severe and abrupt
ramps in production exhibited by individual panels in response to passing clouds.
While the Company continually strives to develop the best and most appropriate
analysis possible, and incorporates new techniques and lessons learned from previous
REPLY COMMENTS OF IDAHO POWER COMPANY - 6
studies, the assumption that the techniques used in the 2016 Solar Study are
appropriate for a wind integration study is not correct. The Company does not
recommend the Commission direct the Company to apply the improved methodology
and analysis used in the 2016 Solar Study to update the wind integration study.
il. coNcLustoN
ldaho Power agrees with Staffs and !CURN's recommendation that the
Commission approve the solar integration charges as proposed by ldaho Power in its
Schedule 87, including Staffs recommendation for clariffing language. The Company's
proposed revision of Schedule 87, Sheet No. 1, is attached and includes the Company's
proposed clarifying language.
The Commission should reject ICURN's recommendation to develop an average
cost approach to apply to new solar projects and retain the existing and more equitable
incremental cost distribution for every 100 MW of solar penetration. The Commission
should also reject ICURN's recommendations to expand EIM sensitivity in the 2017 IRP
and to apply the 2016 Solar Study methodology and analysis to update the wind
integration study.
ldaho Power respectfully requests the Commission authorize ldaho Power to
update its solar integration rates and charges consistent with its completed 2016 Solar
lntegration Study Report and as set forth in the proposed Schedule 87.
DATED at Boise, ldaho, this 7th day of July 2016.
Attorney for ldaho Power Company
REPLY COMMENTS OF IDAHO POWER COMPANY - 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 7th day of July 2016 I served a true and correct
copy of the REPLY COMMENTS OF IDAHO POWER COMPANY upon the following
named parties by the method indicated below, and addressed to the following:
Commission Staff
Daphne J. Huang
Deputy Attorney General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-007 4
ldaho Conselation League
Benjamin J. Otto
ldaho Conservation League
710 North Sixth Street
Boise, ldaho 83702
X Hand Delivered
U.S. Mail
Overnight Mai!
FAXX Email [e-mail]
Hand DeliveredX U.S. Mail
Overnight Mai!
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Email [e-mail]
REPLY COMMENTS OF IDAHO POWER COMPANY - 8
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-16-1 1
IDAHO POWER COMPANY
ATTACHMENT 1
SCHEDULE 87, SHEET NO. 1
ldaho Power Company First Revised Sheet No. 87-1
Cancels
|.P.U.C. No. 29. Tariff No. 101 Orioinal Sheet No. 87-1
SCHEDULE 87
INTERMITTENT GENERAT]ON INTEGRATION CHARGES
APPL!CABILlTY
This schedule is applicable to all qualifying facility ("QF") generators interconnected to the
Company that have generation of an intermittent nature, such as wind and solar generation. The initial
charges within this schedule are to be assessed to intermittent generation based upon the total
nameplate capacity of a specific type of intermittent generation interconnected to the Company's
system.
The appropriate charqes within this schedule will be included in all QF contracts, both published
and neqotiated. at the time those contracts are executed and. once added. shall remain unchanqed in
the contract for its duration. Subsequent chanqes to the charoes within this schedule will onlv applv to
new QF contracts at the time those contracts are executed.
PART 1 -WIND INTEGRATION CHARGES
The following tables are applicable to all QF wind generation contracts that come online after
October 10,2014:
Continued on next page
!DAHO
lssued per Order No.€3227Effectivew
lssued by IDAHO POWER COMPANY
Gregory W. Said, Vice President, Regulatory Affairs
1221 West ldaho Street, Boise, ldaho