20161018Settlement Comments.pdf

DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8370
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
REC =1 VED
2016 OCT 18 PM 2: 06
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APLICATION TO APPROVE )
NEW TARIFF SCHEDULE 63, A COMMUNITY )
SOLAR PILOT PROGRAM. )
)
)
CASE NO. IPC-E-16-14
COMMENTS OF THE
COMMISSION STAFF ON
PROPOSED SETTLEMENT
The Staff of the Idaho Public Utilities Commission, submits the following Comments on
the Proposed Settlement in this case, to which Staff stipulated.
BACKGROUND
On June 23, 2016, Idaho Power Company filed an Application with the Commission for
authorization to implement an optional, 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 Commission issued a Notice of Application and Order setting a deadline for interested
parties to intervene. Order No. 33552. The Commission received and granted petitions for
intervention from Idaho Conservation League (ICL ), Idaho Irrigation Pumpers Association (IIP A),
STAFF COMMENTS
ON PROPOSED SETTLEMENT OCTOBER 18, 2016
Industrial Customers of Idaho Power (ICIP), Sierra Club, Snake River Alliance (SRA), and the
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 Parties met for an initial settlement conference on August 23, 2016 and subsequently
filed comments on September 1, 2016. After the comments were filed, Parties met again on
September 9, 2016 to discuss settlement. The comments filed by Staff and other Parties formed
the basis of the agreement reached at the second settlement conference. On September 26, 2016,
Idaho Power filed a Settlement Stipulation and Agreed Motion to Approve Settlement Stipulation,
signed by all parties in the case. The Company filed supporting documents with the motion
including the revised proposed Schedule 63 .
The Settlement Stipulation addresses the following main concerns, among other issues,
raised in filed comments and discussed by the Parties in settlement conference: (1) calculation of
the Program's solar energy credit; (2) the Program's subscription fee; (3) a Company-facilitated
monthly fee option; and ( 4) the Company's cost recovery.
All parties agree that the Settlement Stipulation represents a fair, just, and reasonable
compromise of the issues and is in the public interest. Staff comments in support are provided
below.
STAFF ANALYSIS
Staff believes that the Settlement Stipulation is a reasonable compromise that effectively
addresses the concerns of Staff and other Parties. Staff expressed in both comments and at
settlement that its primary concern with the Company's original proposal was that the Solar Credit
did not properly value the community solar resource. Staff also maintained that the high
subscription fee with no monthly or electronic payment options would create a significant barrier
to residential customer participation. The Settlement Stipulation reflects a compromise proposal
that addresses Staffs concerns regarding program design and the Company's concerns regarding
cost-recovery.
STAFF COMMENTS
ON PROPOSED SETTLEMENT 2 OCTOBER 18, 2016
1. Solar Energy Credit
The Parties have agreed 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 aspect of the Settlement reflects the
Company's original proposal rather than Staff's position expressed in comments that the Solar
Credit should be based on the DSM avoided costs plus the value of deferred transmission
investments. However, Staff is comfortable maintaining this part of the original proposal because
Staff's positions regarding the DSM avoided costs and deferred transmission investments are fully
reflected in the reduced subscription fee paid by participants, as detailed below.
2. Subscription Fee
In written comments and in both settlement meetings, Staff expressed concern that the
large subscription fee of $740 would create an unreasonable barrier to participation for many
residential customers. The Settlement Stipulation effectively addresses Staff's concerns by
lowering the subscription fee from $740 to $562 to reflect three reductions, as follows.
First, the subscription fee is reduced by the net present value of the incremental difference
between the forecasted embedded cost of energy and the DSM avoided costs over the 25-year
project-life. This reflects Staff's position in comments that the value of the project is best
quantified by the DSM avoided costs and should be reflected as a credit to participants.
Second, the subscription fee is reduced by the net present value of the projected deferral of
transmission and distribution investments over the 25-year project-life. Staff maintained in
comments that the credit to customers should include the value of deferred transmission-but not
distribution-investments since the energy produced by the Community Solar Project will be
delivered using the Company's distribution system. Staff agrees that using the combined value of
both deferred transmission and distribution as a reduction to the subscription fee is a reasonable
compromise.
Third, the Settlement Stipulation removes the cost of the smart inverters from the project
costs that will be recovered through subscription fees. While this was not proposed by the
Company in its original application, nor by Staff in its written comments, Staff agrees that all
customers will benefit from the operational lessons the Company will derive from owning and
STAFF COMMENTS
ON PROPOSED SETTLEMENT 3 OCTOBER 18, 2016
operating the smart inverters. Thus it is reasonable that the cost associated with these inverters be
collected from all customers, as explained below, rather than assigned only to community solar
participants.
3. Monthly Payment Option
Staff recommended in its written comments that the Company make available or provide a
plan by which participants may pay their subscription fee over 12 or 24 months in order to
minimize the hurdle to participation that a large, upfront subscription fee creates. Based on the
initially proposed $740 subscription fee, Staff's recommendation was to allow customers to pay
$31 for 24 months or $62 for 12 months, plus an electronic transaction fee and the current interest
rate on deposits of 1 %. Staff also recommended that the Company allow electronic payment
rather than only accepting payment by check.
In response to these recommendations, the Settlement Stipulation specifies that the
Company will offer a "Bill Me" electronic payment option and a 24-month fee option for
residential customers, which may also be paid electronically. With the total subscription fee being
lowered from $740 to $562 based on the previously noted reductions, the monthly fee will be
$26.31. This includes the revenue requirement of the subscription and the Company's carrying
charge at the current Allowance for Funds Used During Construction (AFUDC) rate plus a $1 per
month administrative charge. Staff believes this provides a reasonable path to participation for
residential customers who may have been deterred by the large, upfront cost.
In order to alleviate concern that participants on the monthly option may not complete all
24 payments, the agreement states that "participants who choose the 24-month fee option may
transfer their subscription(s) to eligible customers within the 24-month time period ... " Settlement
Stipulation at 5. The agreement also states that, "[i]f eligible participants elect to utilize the 24-
month fee option and fail to complete all 24 payments or request an eligible subscription transfer,
Idaho Power will utilize a waitlist if customer interest has exceeded the amount of available
subscriptions." Id.
Staff believes that using a waitlist will provide an effective backstop against participants
who do not complete all of their required payments. The parties agreed the waitlist for the
program will be established on a first-come , first-served basis, and will give customers the option
STAFF COMMENTS
ON PROPOSED SETTLEMENT 4 OCTOBER 18, 2016
to purchase the remainder of any unpaid subscriptions that become available through a one-time
payment for the full amount of the unpaid balance.
Staff encourages the Company to include references to the waitlist in its program
marketing materials because the option to purchase partially-funded subscriptions could be
enticing for potential participants and reduce the risk of under-subscription. Staff believes that
these modifications adequately address Staffs concerns regarding the barrier to participation
created by the large, upfront subscription fee.
4. Cost Recovery
With respect to cost recovery, the Settlement Stipulation includes two provisions that were
not part of the Company's original proposal or in any parties ' written comments: 1) recovery of
unfunded project costs through the PCA; and 2) rate base treatment for the three categories of
previously mentioned project costs that will be funded by Idaho Power rather than program
participants.
First, in the event that the project is not fully subscribed, the Settlement allows the
Company to recover the portion of the project cost not provided through subscription fees in the
next year's PCA. Staff believes this is a reasonable way to mitigate the potential risk of an under­
subscribed program because it allows the Company ample time to market the program and acquire
subscriptions while not interfering with project construction. Further, Staff believes the following
factors improve the likelihood of full participation: the lower subscription fee, faster payback
period resulting from correctly valuing the resource, the option for monthly payments, and the
possibility of securing a third-party to act as a backstop against unsubscribed units. Consequently,
Staff believes it is unlikely that the Company will need to recover unfunded subscriptions through
the PCA.
Second, the Settlement allows the Company to collect the revenue requirement associated
with applying the Company 's authorized rate ofreturn to project costs funded by Idaho Power and
excluded from subscription fees. These costs are the three previously referenced reductions to the
subscription fee: 1) the net present value of the incremental difference between the forecasted
embedded cost of energy and the DSM avoided costs over the 25-year project life, 2) the net
present value of the projected deferral of transmission and distribution investments over the 25-
year project life, and 3) the cost of the smart inverters. The Settlement Stipulation states that the
STAFF COMMENTS
ON PROPOSED SETTLEMENT 5 OCTOBER 18, 2016
revenue requirement associated with these "Rate Base Amounts" will be collected through each
annual PCA following the project in-service date. The annual revenue requirement will be moved
from the PCA into base rates in the Company's next general rate case.
The total amount of investment subject to rate base treatment is $311 ,031 . Applying the
Company's authorized rate ofreturn of 7.86% to this investment results in a first-year revenue
deficiency of $45,405. Staff believes that the benefit to all customers from this pilot project both
in terms of the resource acquired and operational lessons for the Company justifies the small
annual dollar amount provided by all customers through rate base treatment.
CONCLUSION
In addition to the Solar Energy Credit, Monthly PayJ11ent Option, and Cost Recovery
provisions, Staff notes that the Settlement Stipulation satisfies Staffs concerns regarding the
collection of Operations and Maintenance expenses, Annual Reporting requirements that allow all
parties to track both the program's participation and energy production of the Community Solar
project, and improved Bill Presentment. Staff acknowledges the Company's effort to craft a
compromise that addresses Staffs concerns and believes the Settlement Stipulation is a reasonable
resolution of all issues in this case.
RECOMMENDATION
Staff recommends that the Commission approve the Community Solar Settlement
Stipulation.
Respectfully submitted this /~ day of October 2016.
Technical Staff: Stacey Donohue
i:umisc:comments/ipce l 6.14djhsd settlement comments
STAFF COMMENTS
ON PROPOSED SETTLEMENT 6 OCTOBER 18, 2016
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 181h DAY OF OCTOBER 2016,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF ON
PROPOSED SETTLEMENT IN CASE NO. IPC-E-16-14, BY MAILING A COPY
THEREOF, POSTAGE PREPAID, TO THE FOLLOWING:
LISA D NORDSTROM
REGULA TORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
[e-mail]
PETER J RICHARDSON
GREGORY MADAMS
RICHARDSON ADAMS PLLC
PO BOX 7218
BOISE ID 83702
E-mail: [e-mail]
[e-mail]
ERIC L OLSEN
ECOH HA WK & OLSEN
PO BOX 6119
POCA TELLO ID 83205
E-mail: [e-mail]
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
710 N 6TH STREET
BOISE ID 83702
E-mail: [e-mail]
MATT LARKIN
PETER PENGILL Y
IDAHO POWER COMPANY
POBOX70
BOISE ID 83707-0070
E-mail: [e-mail]
[e-mail]
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-mail: [e-mail]
ANTHONY Y ANKEL
12700 BLAKE A VE
UNIT 2505
LAKEWOOD OH 44107
E-mail: [e-mail]
KEN MILLER
SNAKE RIVER ALLIANCE
PO BOX 1731
BOISE ID 83701
E-mail: [e-mail]
CERTIFICATE OF SERVICE
SIERRA CLUB
C/0 ZACK WATERMAN
DIRECTOR ID SIERRA CLUB
503 W FRANKLIN ST
BOISE ID 83702
E-mail: zack. [e-mail]
ELIZABETH A. KOECKERITZ
DEPUTY CITY ATTORNEY
BOISE CITY ATTORNEYS OFFICE
PO BOX 500
BOISE ID 83701-0500
E-mail: [e-mail]
MICHAEL HECKLER
3606 N PROSPECT WAY
GARDEN CITY ID 83714
E-mail: [e-mail]
CERTIFICATE OF SERVICE