20160809final_order_no_33563.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION TO UPDATE
SOLAR INTEGRATION RATES AND
CHARGES
)
) CASE NO. IPC-E-16-11
)
) ORDER NO. 33563 ____________ )
Office of the Secretary
Service Date
August 9, 2016
On May 6, 2016, Idaho Power Company filed an Application asking the Commission
for authority to update its solar integration rates and charges consistent with its completed 2016
Solar Integration Study. The Commission issued a Notice of Application and Notice of
Modified Procedure, setting a deadline for comments and for the Company's reply, if any. Idaho
Conservation League (ICL) petitioned for and was granted intervention. ICL and Staff submitted
timely written comments, to which Idaho Power responded with a timely reply. The
Commission now grants Idaho Power's Application as discussed below.
BACKGROUND
Electric utilities that integrate solar generation into their systems incur costs based on
the amount of solar generation integrated, and on the other (non-solar) resources used to provide
needed operating reserves. Generally, the average cost of integrating solar generation increases
as the electric system's nameplate solar generation increases. Where the utility has contracted to
purchase solar power under the Public Utility Regulatory Policies Act (PURPA1), the rates for
such power must not exceed the utility's "avoided cost" -what the utility would have incurred
had it generated or acquired the power elsewhere. If solar integration costs are not calculated
and properly allocated to these PURPA project developers, those costs will be impermissibly
passed onto utility customers in the avoided costs.
In February 2015, the Commission approved a settlement stipulation which
implemented solar integration rates and charges for Idaho Power based on the Company's first
solar integration study, completed in 2014. The solar integration rates and charges were set forth
in a new tariff Schedule 87, Variable Generation Integration Charges, at the incremental cost of
solar integration for each 100 megawatts (MW) of solar nameplate penetration. The settlement
stipulation provided that Idaho Power would initiate a second solar integration study within the
next year, using a Technical Review Committee (TRC).
I 16 U.S.C. § 824a-3.
ORDER NO. 33563 1
The TRC was comprised of Idaho Public Utilities Commission (IPUC) Staff, Public
Utility Commission of Oregon Staff, personnel from Idaho Power, and a technical expert
designated by each of the parties to the settlement stipulation (including ICL). Representatives
from Renewable Northwest (RN) and National Renewable Energy Laboratory also participated
in the TRC. Application at 2. The TRC developed and finalized a study plan and was involved
throughout the development of the Study Report, completed April 2016. Staff noted that TRC
participants were collaborative and made good faith efforts to achieve accurate and reasonable
results, free from bias. Staff Comments at 6.
2016 SOLAR INTEGRATION STUDY AND REPORT
As a result of the 2016 Solar Integration Study, Idaho Power's Application proposed
updated incremental integration costs at each 100 MW of solar generation penetration, extending
out to 1,600 MW. Application at 5. The costs determined in the 2016 Study are substantially
less than those from the 2014 solar integration study, as shown in the following graph.
Id.
chart:
Incremental Solar Integration Charge Comparison
i
$500 r--­
$450 ,---
I $400
~
\li $350 0 CJ
i $300 ! i' $2 50 !
-$200 i5 Cl) 1 $150
! $100
.5
$0 50
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~--
-
---
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t-., .. -
$004
$1 25
so 16
2016 !) ________ _
$4 66
$4 01
$331
--
$263
$1 95 -2014 Solar lntegrat,on Study ----
-2016 Solar Integration Study
--· --
--$086 ________jl)~
Jg Zl I j
I~ :i! I
1934 I
0 100 200 300 400 500 600 700
Nameplate Penetration Level of Solar Capacity (MW)
The 100 MW incremental costs of solar integration to 1,600 MW are shown in this
ORDER NO. 33563 2
Id. at 6.
$250 -
i I $200 r
t;
0 u
Proposed Incremental Solar Integration Charge
--1191
g $150 ----
1
----------1
I> _g I $1 oo -
Cl)
iB i ! $0 50 -
.5
$-
ll 36
0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600
Nameplate Penetration Level of Solar Capacity (MW)
Exhibit 4 to Mr. Youngblood's testimony contains tables that would, if approved,
replace the current Schedule 87, Sheets 87-9 through 87-15, and create new Sheets 87-16
through 87-24. Id. The charges in Schedule 87 are amounts to be deducted from avoided cost
rates beginning the year a project comes on-line, and based on the nameplate capacity
penetration level of solar generation at the proposed project's scheduled operation date. Id.
Each 100 MW increment or penetration level has its own table, set forth in Schedule 87, which
identifies the levelized integration charge and the non-levelized stream of integration charge
amounts listed by year. Id.
The Company asked that the Commission approve the updates to the solar integration
costs in Schedule 87, Variable Generation Integration Charges, as set forth in Mr. Youngblood' s
Exhibit 4, based on the 2016 Study.
STAFF COMMENTS
Staff observed that the 2016 Study focused almost exclusively on within-hour
impacts caused by the variability and uncertainty of solar generation. However, Staff believes
"there could also be costs in the greater-than-hour-ahead time frame that are not being captured,
either as an integration cost or as an avoided cost." Staff Comments at 6. Staff suggested that
ORDER NO. 33563 3
the Company "more closely examine whether all costs in all time frames are being captured,"
and how and where they are captured. Id. at 7.
Also, Staff suggested that costs due to variability and uncertainty should "arguably be
captured as an avoided cost." Id. However, Staff noted that the method for computing small
facilities' published avoided cost rates (surrogate avoided resource or SAR methodology) does
not account for intermittency at any time interval. Id. Staff observed that intermittency is also
not modeled in AURORA, the forecasting tool used in calculating avoided cost rates for larger
projects (Integrated Resource Plan or IRP methodology). Id.
Staff recommended approving Idaho Power's proposed solar integration charges with
the following clarifications to Schedule 87 to address how rates in the tariff are to be applied:
1. Clarify that the tariff rates will be included in QF contracts at the time
those contracts are executed and, once added, shall remain unchanged in
the contract for its duration; subsequent tariff rate changes only apply to
new contracts at the time those contracts are executed.
2. Clarify that the tariff rates will be applied to all PURP A contracts, both
SAR-based and IRP-based.
COMMENTS OF IDAHO CONSERVATION LEAGUE (ICL)
AND RENEWABLE NORTHWEST (RN)
RN joined in intervenor ICL' s written comments. ICL and RN (which both
participated in the TRC) stated that they "appreciate and support the changes that Idaho Power
made to the methodology in the 2016 Solar Integration Study." ICURN Comments at 1. "In
general, we support updating the Schedule 87 rates to reflect the results of the 2016 Study." Id.
However, ICL and RN proposed it would be more "fair and accurate" to apply "an average
integration rate to all projects," rather than an incremental approach, as used by Idaho Power. Id.
at 2. ICL and RN also proposed that Idaho Power "expand on the EIM sensitivity [from the
2016 Study] through a complete evaluation in the 2017 Integrated Resource Plan of the costs and
benefits of joining the EIM." Id. at 3-4. Finally, ICL and RN recommended that Idaho Power
"apply the improved methodology and analysis used in the 2016 Solar Integration Study to
update the wind integration study." Id. at 4.
IDAHO POWER'S REPLY
The Company agreed with Staffs proposed clarifications to its Schedule 87, and
submitted a proposed revised Schedule 87, Sheet No. 1, attached to its reply. The Company
ORDER NO. 33563 4
joined with Staff, ICL, and RN in requesting that the Commission approve its solar integration
charges as proposed in Schedule 87. However, the Company does not agree with ICL and RN's
other recommendations and analysis.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over this matter under Idaho Code § 61-307 and
PURPA. We have reviewed the record, including the comments of Staff, ICL and RN, as well as
Idaho Power's reply. We find the Company's proposed solar integration charges to be
reasonable and hereby approve the Company's revised Schedule 87. We further find it just and
reasonable for integration rates to be determined at the time of contracting and remain fixed for
the duration of the contract. These rates should be applied to both SAR and !RP-based PURP A
contracts. We direct the Company to consider the following for future study updates:
1. The potential impacts of Idaho Power joining the Western Energy
Imbalance Market.
2. Transmission changes, such as the Boardman to Hemingway project.
3. Resource changes or additions, including demand response.
4. Energy storage.
5. Self-provided integration services, to the extent qualifying facilities (QFs)
can and are willing to provide them.
6. Future changes in curtailment of QFs, through policy changes or
contractual arrangements.
7. The combined effects of new solar and new wind.
8. Changes in gas/fuel prices, actual build-out of wind and solar, other
changes in study assumptions.
9. The effects of distributed and community solar as it develops.
10. The cost of new highly-flexible resources, and who should pay for them.
11. Methods for easy updates to models used to perform solar and wind
integration studies, to ensure Schedule 87 rates are updated periodically.
ORDER NO. 33563 5
ICL and RN asserted that the Company's incremental cost approach incorrectly
assumes that newer/later projects inherently bring higher incremental integration costs, and that
older/earlier projects are less costly to integrate. ICL/RN Comments at 2. According to ICL and
RN, "subsequent projects may have features that reduce integration costs." Id. The two also
argued that applying an average integration rate would provide "an incentive to reduce
integration costs and treat[ ] each project in the cumulative solar capacity fairly." Id.
Recognizing that "adopting a full average integration cost approach may not be feasible at this
time," ICL and RN recommended that Idaho Power be directed to "revise Schedule 87 to apply
an average cost approach to all future projects" only. Id. at 3.
We are disinclined to adopt ICL and RN's proposal to employ an average integration
cost approach. Averaging costs would work to the detriment of early projects and to the benefit
of later developers. We find no reasonable basis to adopt such an approach. We find that the
incremental costs used in the existing and revised Schedule 87 more accurately align costs
incurred by the Company to integrate intermittent resources with the sources of those costs.
ICL and RN also recommended that the Commission "direct Idaho Power to expand
on the EIM sensitivity [from the 2016 Study] through a complete evaluation in the 2017
Integrated Resource Plan [IRP] of the costs and benefits of joining the EIM." ICL/RN
Comments at 3-4. Idaho Power responded that "[a]ny benefit or cost associated with EIM
participation as related to integration costs of intermittent resources would be more appropriately
included in future integration cost studies, not the IRP planning process." Reply at 5-6. We find
that this case is not the appropriate forum to address requirements for the Company's 2017 IRP.
The parties' concerns are more appropriate for discussion within the TRC or the IRP advisory
committee (IRPAC). We therefore decline to adopt ICL and RN's suggestion.
Finally, ICL and RN recommended that Idaho Power "apply the improved
methodology and analysis used in the 2016 Solar Integration Study to update the wind
integration study." ICL/RN Comments at 4. The Company disagreed. Idaho Power noted that,
"Qualitatively, the Study data suggests solar is more predictable than wind generation connected
to Idaho Power's system." Reply at 6. We find there are notable differences between wind and
solar power generation. These differences make it impracticable to apply the methodology and
analysis from the 2016 Solar Integration Study to a wind integration study update. Accordingly,
we reject ICL and RN's invitation to apply the Company's solar study to wind.
ORDER NO. 33563 6
ORDER
IT IS HEREBY ORDERED that Idaho Power's Application to update its solar
integration rates and charges is granted. The Revised Schedule 87 filed with the Commission on
July 7, 2016, is approved.
IT IS FURTHER ORDERED that requests by ICL and RN are denied, consistent with
the Commission's findings above.
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 § 61-626.
ORDER NO. 33563 7
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this </-HI
day of August 2016.
~-ERIC ANDERSON, COMMISSIONER
ATTEST:
O:JPC-E-16-11 _djh2
ORDER NO. 33563 8