20161031final_order_no_33638.pdf

Office of the Secretary
Service Date
October 3 I, 2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION TO ) CASE NO. IPC-E-16-14
APPROVE NEW TARIFF SCHEDULE 63, A )
COMMUNITY SOLAR PILOT PROGRAM ) ORDER NO. 33638
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In June 2016, Idaho Power Company filed an Application with the Commission to
authorize it to implement an optional program, Schedule 63, Community Solar Pilot Program.
Under the Program, the Company proposes to build a 500 kilowatt (kW) single-axis tracking
community solar array in southeast Boise that will allow a limited number of Idaho Power's
customers to subscribe to the generation output. The parties to this matter entered a Settlement
Stipulation, about which the parties and members of the public submitted comments, and the
Company submitted a reply. Having reviewed the record, we now approve the Settlement
Stipulation as reasonable and in the public interest.
BACKGROUND
A. The Application: Proposed Schedule 63, Community Solar Pilot Program
In its Application, Idaho Power stated that the proposed Program would enable
customers to invest or participate in the "operation of solar resources" without "requir[ing]
upfront capital costs . . . [ and] long-term expenses and liabilities associated with system
operation and maintenance." Application at 2-3. The proposal would permit participation in a
solar power program by those for whom "rooftop or ground-mounted solar installations" are not
feasible. Id. at 2. According to the Company, the Program is being offered in response to
customer input, and is separate from Idaho Power's existing Green Energy Purchase Program
Rider. Id.
The Company stated that the proposed Community Solar Program would be open to
the following customer service classes on a first-come, first-served basis: residential, small
general, large general, large power, agricultural irrigation, Micron special contract, Simplot
special contract, and Department of Energy special contract. Application at 3-4. Under the
Program, individual customer subscriptions would allow expected annual production up to 100%
of a participant's usage for the prior 12 months on a kilowatt-hour (kWh) basis. Id. at 4.
ORDER NO. 33638 1
The Company's Application stated that, if approved, participants' monthly energy
production would be calculated as per kWh "Solar Energy Credits" (SEC) that participants
receive for their share of the solar production each month. Application at 5-6; Larkin Direct at
12. The Company proposed calculating its per kWh SEC as the product of the rate specified in
tariff Schedule 63, and the participant's share of the total monthly production for the month.
Application at 10. The Company would base the SEC on "its embedded energy-related costs
recovered through base rates," and would update them as needed. Id. Participation in the
Program would be reflected in participants' bills "as a dollar offset to the total bill, not as a kWh
credit that offsets billed kWh consumption." Application at 6; Pengilly Direct at 13. "[E]xcess
production [would] be carried forward on a kWh basis to be credited on a participant's bill in a
future month." Id.
The Company proposed that the Program's facility would be built adjacent to Idaho
Power's Boise Bench substation. Application at 7. Testimony by David Angell, attached to the
Application, described the request for bid process that the Company used to secure a contractor
for the design, procurement, and construction of the solar photovoltaic (PV) system. Id.; see
Angell Direct at 4-8. The successful bidder gave a cost-estimate for the project of $1,158,769.
Application at 7; Angell DI at 6. In April 2016, Idaho Power completed the facility study -
required in order for the facility to interconnect with the Company, consistent with Idaho
Power's Open Access Transmission Tariff with the Federal Energy Regulatory Commission.
Application at 7-8. According to the study, the preliminary interconnection costs for the
Program's facility are about $81,000. Id.
Because the Company does not have a current load-serving need for the proposed
solar resource, the Program was designed such that participants would cover the cost of the
project, less a 15 percent Company-shareholder subsidy, thus the Program would have a nominal
impact on non-participating customers. Larkin Direct at 5-6. The Company would not earn a
return on the Program. Application at 9.
B. Procedural History
The Commission issued a Notice of Application and Order setting a deadline for
interested parties to intervene, Order No. 33552, and granted intervention to the following
parties: Idaho Conservation League (ICL ), Idaho Irrigation Pumpers Association (IIP A),
Industrial Customers of Idaho Power (ICIP), Sierra Club, Snake River Alliance (SRA), and the
ORDER NO. 33638 2
City of Boise. Order Nos. 33552, 33557, 33560, 33562. The parties agreed upon a schedule to
process the matter by Modified Procedure, and to engage in settlement discussions to address the
parties' concerns about the project as initially proposed. The Commission issued a Notice of
Modified Procedure adopting the parties' agreed schedule. Order No. 33569.
The Commission received timely comments from Staff, ICL, ICIP, Sierra Club, and
SRA. On September 26, 2016, Idaho Power filed a Settlement Stipulation and Agreed Motion to
Approve Settlement Stipulation signed by all parties to the matter. With the Motion, the
Company filed supporting documents, including the revised proposed Schedule 63. The
Commission issued a Notice of Settlement Stipulation, and Notice of Comment Deadline. Order
No. 33616.
The Commission received comments on the Settlement Stipulation from Idaho
Power, Staff, ICL, ICIP, Sierra Club, and SRA, as well as four comments from members of the
public. Idaho Power filed a reply, clarifying points raised in comments on the Settlement
Stipulation, after which the matter became fully submitted.
SETTLEMENT STIPULATION
The Settlement Stipulation sets forth terms to which the parties agreed to resolve their
concerns about the Program as originally proposed. The agreed terms mainly concern: (1)
calculation of the solar energy credit; (2) the subscription fee; (3) a Company-facilitated monthly
fee option; and (4) the Company's cost recovery. The parties' Agreed Motion asked the
Commission to issue notice of the Settlement Stipulation, set a deadline for comments on the
Stipulation, and -on expiration of the comment period -to approve the Settlement Stipulation
without material change or condition. Motion at 11.
A. The Solar Energy Credit
In the Settlement Stipulation, the parties agree that the Program "will use the on-bill
Solar Energy Credit reflecting the embedded cost of energy, as well as the proposed application
of each participant's portion of monthly generation as an offset to billed kilowatt-hours subject to
the Power Cost Adjustment (PCA)." Settlement Stipulation at 3. This agreed term is as the
Company originally proposed.
1. Idaho Power Comments. The Company "believes that the embedded cost of
energy rate is an important aspect of the original proposal because it aligns with actual energy-
ORDER NO. 33638 3
related costs included in base rates and acts as a hedge against future energy-related price
changes for the 25-year term of the Program." Idaho Power Settlement Comments at 10.
2. Sta(( Comments. In its initial comments, Staff expressed that the Company's cost­
of-service credit methodology "incorrectly assumes that adding a new resource would reduce
existing Company generation at average embedded energy costs rather than the most expensive
(incremental) resources." Staff Comments at 5. Staff proposed that the solar credit should be
based instead on the demand-side management (DSM) avoided costs plus the value of deferred
transmission investments. Id. at 7-9. However, Staff believes that its concerns regarding the
calculation of the solar energy credit are addressed by the change in the subscription fee to which
all parties agreed in the Settlement Stipulation. Staff Settlement Comments at 3.
3. !CL Comments. ICL also expressed, in its initial comments, that the Company's
cost-of-service credit methodology was "not an accurate way to determine the value of the solar
energy credit." ICL Comments at 6. Like Staff, ICL proposed using DSM alternate costs for
calculating the value to customers "of a subscriber reducing their demand on the existing
system." Id. at 7-8. In agreeing to the Settlement Stipulation, ICL agreed that "part of the value
of the solar output is rolled forward and used to reduce the subscription costs," adding that this
"portion of the value represents the long-term benefits that accrue from investing today in an
alternative resource." ICL Settlement Comments at 2.
4. SRA Comments. SRA had the same concern as Staff and ICL, in its initial
comments. SRA stated, "We believe a more accurate and meaningful basis for the [solar energy]
credit would be tied to Idaho Power's Commission-approved DSM avoided costs." SRA
Comments at 4. In supporting the Settlement Stipulation, SRA stated that it is "pleased that
Parties in this case were able to satisfactorily craft a Settlement Stipulation that addresses
Parties' concerns, ... [including] calculation of the program's solar energy credit." SRA
Settlement Comments at 2.
5. Sierra Club Comments. Likewise, Sierra Club asserted in initial comments that it
disagreed with Idaho Power's valuation of the output from the Program with historic annual
average energy values, and instead proposed using the DSM value methodology. Sierra Club
Comments at 2. In supporting the Settlement Stipulation, Sierra Club stated it believes the
parties' agreement is a valuable "launching point ... in the public interest." Sierra Club
Settlement Comments at 1.
ORDER NO. 33638 4
6. ICIP Comments. ICIP also disagreed with the Company's method for calculating
the solar energy credit amount, ICIP Comments at 3, but ultimately signed the Settlement
Stipulation without submitting additional comments.
B. Subscription Fee and Monthly Payment Plan Options
In the Settlement Stipulation, the parties agreed to lower the $740 subscription fee
originally proposed, to $562, through three reductions: (1) a reduction reflecting the net present
value of the incremental difference between the DSM alternate costs and projected embedded
energy costs; (2) a reduction reflecting the present value of the projected deferral of transmission
and distribution (T&D) investments for the 25-year life of the project; and (3) a reduction
reflecting the removal of the smart inverter cost from the subscription fee calculation.
Further, the parties agreed that the Company would provide a "Bill Me" electronic
payment option, and also a 24-month fee option for residential customers (also available
electronically). In the event a participant using the monthly fee option does not complete all 24
payments, the participant "may transfer their subscription(s) to eligible customers within the 24-
month time period." Settlement Stipulation at 5. For such transfers, Idaho Power will maintain a
waitlist of customers (if any) who wish to participate in the Program, but for whom subscriptions
are no longer available. If the waitlist is exhausted and partially-paid 24-month subscriptions
still exist, an as-yet unidentified third-party institution will cover the unpaid amounts to Idaho
Power in exchange for the corresponding subscriptions. Id at 6. If no institution agrees to
indemnify Idaho Power, the parties agreed that the Company should be allowed to recover
unpaid amounts of partially-paid 24-month subscriptions through the next year's PCA.
l. Idaho Power Comments. The Company believes the subscription fee modification
"represents a reasonable compromise between holding non-participating customers harmless
while providing reasonable compensation to participants for their subscribed portion of the solar
generation." Idaho Power Settlement Comments at 10. The Company believes that "reducing
the upfront cost ... may also allow for increased participation in the Program." Id at 11. As to
the stipulated T&D deferral, the Company believes that it "appropriately recognizes the potential
T&D benefits offered by a solar facility without unduly compensating participants at the expense
of non-participating customers." Id at 12. Regarding the smart inverter, the Company stated
that the knowledge and experience gained from having and controlling it "will ultimately benefit
all customers." Id at 13, citing Angell Direct at 13.
ORDER NO. 33638 5
Regarding the monthly fee option, Idaho Power had omitted such option in its initial
proposal to avoid the financial risks of participants dropping out of the Program prematurely.
Idaho Power Settlement Comments at 14. The Company noted that, under the Settlement
Stipulation, if its waitlist is exhausted, and if no third-party agrees to indemnify the Company,
"the Parties agree that Idaho Power should be authorized to recover 100 percent of the unpaid
subscription amounts in the next year's PCA."1 Id. at 15. Also, "ownership of the associated
subscriptions would remain with Idaho Power and the net power cost benefits would
automatically flow through the PCA to the benefit of all customers." Id. The Company believes
these terms address the parties' concerns about generating sufficient customer participation, and
also limit risk to the Company and non-participating customers, related to unsubscribed amounts.
Id. at 16.
2. Staff Comments. Staff welcomed the subscription fee reduction from $740 to
$562, stating that it addresses what would have been "an unreasonable barrier to participation for
many residential customers." Staff Settlement Comments at 3. Staff believes the first reduction
-the net present value of the incremental difference between forecasted embedded energy costs
and the DSM avoided costs reflects its position "that the value of the project is best quantified
by the DSM avoided costs and should be reflected as a credit to participants." Id. Also,
although Staff had supported including the value of deferred transmission investments but not
distribution investments, "Staff agrees that using the combined value of both deferred
transmission and distribution as a reduction to the subscription fee is a reasonable compromise."
Id. Finally, about removing the cost of smart inverters from the Program costs (that are
recovered through subscription fees), Staff believes it is appropriate to recover the cost from all
customers, because "all customers will benefit" from the lessons derived from the Company's
ownership and operation of the smart inverters. Id. at 3-4.
About the monthly fee options, Staff believes the payment option will "minimize the
hurdle to participation that a large, upfront subscription fee creates." Id. at 4. Staff also believes
"that using a waitlist will provide an effective backstop against participants who do not complete
all of their required payments." Id. In its settlement comments, Staff "encourages the Company
to include references to the waitlist in its program marketing materials" as an enticement for
1 In its Reply, Idaho Power noted that it contacted Staff and confirmed the parties' understanding that, under the
Settlement Stipulation, only unpaid amounts remaining from 24-month subscriptions, would be recoverable through
the PCA. Idaho Power Reply at 2.
ORDER NO. 33638 6
potential participants that could further reduce the risk of under-subscription. Id. at 5. As
clarified in Idaho Power's Reply, Staff agrees with the Company that, "under-subscription" or
"costs not provided through subscription fees" that are recoverable in the next year's PCA refer
to unpaid amounts remaining from 24-month subscriptions. Staff Settlement Comments at 5;
Idaho Power Reply at 2. Costs flowed through the PCA are costs borne by all customers. But
Staff believes the risk-exposure to Idaho customers is offset by the improved likelihood of full
subscription due to the lower subscription fee, payment options, and possibility of a third-party
backstop. Staff Settlement Comments at 5.
3. !CL Comments. ICL's chief concern about the originally-proposed project was
that the "lump sum, upfront payment for subscriptions [ would] greatly limit residential
participation." ICL Comments at 3. ICL believes the monthly payment plan option "better
aligns with the financial situation of most Idahoans," and "serves the public interest by enabling
potential subscribers [to participate] while holding non-subscribers harmless." ICL Settlement
Comments at 1.
4. SRA Comments. SRA was also concerned that the initially-proposed "lump sum,
one-time, up-front" cost to participate in the project would "hinder customer participation and
the project's chances of success." SRA Comments at 2. SRA supports the Settlement
Stipulation reached on the issues of the subscription fee and payment terms.
5. Sierra Club Comments. Sierra Club had expressed concerns about the barrier to
participation caused by the original proposal's requirement to provide "the entire capital cost for
25 years of solar benefits" upfront. Sierra Club Comments at 4. In supporting the Settlement
Stipulation, Sierra Club noted the parties made joint efforts to "expand opportunities for
customer participation by lowering the upfront subscription fee and providing a monthly
payment option." Sierra Club Settlement Comments at l.
C. Idaho Power's Cost Recovery
In the Settlement Stipulation, the parties agreed that Idaho Power should be allowed
to include in rate base ( and collect 100 percent of the revenue requirement associated with) the
three subscription fee reduction amounts -the three amounts by which the parties agreed to
reduce the subscription fee. Per the Settlement Stipulation, these three "rate base amounts" will
be collected through each annual PCA following the project in-service date, and the annual
revenue requirement will be moved from the PCA into base rates in the Company's next general
ORDER NO. 33638 7
rate case. In addition, the parties agreed that unpaid amounts remammg from 24-month
subscriptions (but not costs from subscriptions that are never filled) would be recovered through
the following year's PCA mechanism, and thus recovered from all customers.
1. Idaho Power Comments. The Company believes that recovery of the rate base
amounts from all of Idaho Power's customers is appropriate "because each of these items
represents a benefit provided to the Company's overall electrical system," and because "the level
of recovery is commensurate with the system benefits expected to be provided by the solar
facility." Idaho Power Settlement Comments at 14. The Company believes the parties'
agreement that Idaho Power "should be authorized to recover 100 percent" of unpaid amounts
remaining from 24-month subscriptions, in the next year's PCA, is a fair compromise to limit
risk to the Company and non-participating customers. Id. at 15-16; Idaho Power Reply at 2.
2. Staff Comments. Staff supports allowing the Company to recover the rate base
amounts, stating that "the benefit to all customers from this pilot project both in terms of the
resource acquired and operational lessons for the Company justifies [ what Staff believes will be
a] small annual dollar amount provided by all customers through rate base treatment." Staff
Settlement Comments at 6. As to allowing the Company to recover unpaid amounts remaining
from 24-month subscriptions, Staff states "this is a reasonable way to mitigate [the Company's]
risk" based on the potential for a third-party backstop and use of a waitlist. Id. at 5.
3. SRA Comments. SRA believes the Settlement Stipulation appropriately addresses
the parties' concerns regarding the Company's cost recovery. SRA Settlement Comments at 2.
D. Support for Community Solar Pilot Program
In addition to supporting the terms of the Settlement Stipulation, the parties generally
praised Idaho Power for proposing the Community Solar Pilot Program, and expressed
satisfaction with the parties' mutual efforts to address one another's concerns. ICL stated it
appreciated "Idaho Power's initial proposal, and the compromises reached by all parties through
the negotiation process," and urged the Commission to adopt the parties' Stipulation. ICL
Settlement Comments at 2.
Sierra Club noted that "the revised proposal . . . addresses changing customer
preferences and represents a valuable opportunity for Idaho Power Company to learn about
benefits that can [be] offered by clean distributed energy resources" throughout Idaho. Sierra
Club Settlement Comments at 1. Sierra Club stated it "enthusiastically supports the proposed
ORDER NO. 33638 8
Community Solar Pilot Project outlined in the Settlement Stipulation as a launching point for
community solar in Idaho." Sierra Club Settlement Comments at 1.
SRA continues to "encourage stakeholders to more creatively explore avenues to
include Idaho Power customers on low or fixed incomes to participate in the pilot," but
commended Idaho Power "for its flexibility and willingness to hear suggestions about the
program's design." SRA Settlement Comments at 2. Further, SRA believes the Settlement
Stipulation "furthers the objectives of the 2007 and 2012 Idaho Energy Plans as adopted by the
Idaho Legislature." Id. at 4.
The Commission also received four comments in favor of the Program from members
of the public. Echoing the parties' comments, input from the public included the following
comments: "I sincerely appreciate the initiative taken by Idaho Power to integrate more solar
power into the Treasure Valley's electrical grid." "Bravo to the PUC, Idaho Power, and other
organizations who brainstorm[ ed] this creative solution and are making it happen." "We are
extremely concerned about climate change and what this means for our and our children's future .
. . . We are very excited to sign up for Idaho Power's community solar program and feel the cost
is reasonable ... we are very happy Idaho Power has made the effort to take this important step."
COMMISSION DECISION
The Commission has jurisdiction over this matter under Idaho Code § 61-503. Under
Rule 276, a settlement proposal is not binding, but must be reviewed and approved by the
Commission as "just, fair, and reasonable, in the public interest, or otherwise in accordance with
law or regulatory policy." IDAPA 31.01.01.276. The proponents of a settlement have the
burden of showing the settlement is "reasonable, in the public interest, or otherwise in
accordance with law or regulatory policy." IDAPA 31.01.01.275.
Having thoroughly reviewed the record, we find that the Settlement Stipulation
entered by the parties is just, fair and reasonable, and in the public interest. We appreciate the
intervening parties' participation in the matter, as well as all parties' willingness to engage in
settlement negotiations to address the various concerns raised from the parties' varying
perspectives. In this way, the public interest is best served. In addition, we thank the members
of the public who offered comments for the record. Our service to the public in hearing and
deciding these matters is better informed when it includes input from the public itself. Thus, we
ORDER NO. 33638 9
welcome and value public participation, and appreciate the time and effort taken by members of
the community in providing their comments.
The record demonstrates that there is great interest and enthusiasm for the Company's
proposed Community Solar Pilot Program. The issues raised by the parties were valid concerns
that touch on the viability of the project itself. We find that the resolutions reached in the
Settlement Stipulation represent fair and reasonable compromises intended to help the proposed
pilot program succeed. We further find that pilot programs such as that proposed here, on a
small-scale, are valuable for learning what works and what does not, to inform future projects
with similar offerings.
Accordingly, we approve the Settlement Stipulation and revised tariff Schedule 63, as
submitted and already on file at the Commission, without modification.
ORDER
IT IS HEREBY ORDERED that the Settlement Stipulation entered into by all parties
concerning Idaho Power's Application to approve new tariff Schedule 63, a Community Solar
Pilot Program is approved, effective on the service date of this Order.
IT IS FURTHER ORDERED that the deadline for intervenor funding shall be
fourteen (14) days after the service date of this Order. Any motions opposing intervenor funding
shall be due within fourteen (14) days after a request for intervenor funding is filed. IDAPA
3 1. 0 1. 0 1.164.
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. 33638 10
1/ DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this -
day of October 2016.
PAULKJ , PRESIDENT
ERIC ANDERSON, COMMISSIONER
ATTEST:
Commission Secretary
O:IPC-E-I6-14_djh
ORDER NO. 33638 11