20180416Petition.pdf

C. Tom Arkoosh, ISB No. 2253
ARKOOSH LAW OFFICES
802 W. Bannock Street, Suite 900
P.O. Box 2900
Boise,ID 83701
Telephone: [phone]
Facsimile: [phone]
Email : [e-mail]
Attorneys for Petitioners, Idahydro and
Shorock Hydro, Inc.
Peter J. Richardson, ISB No. 3195
Gregory M. Adams, ISB No. 7454
RICHARDSON ADAMS, P.L.L.C.
515 N. 27th Street
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
Email : [e-mail]
Email : greg@richardsonadams. com
Attomeys for Petitioner J.R. Simplot
Company
IN THE MATTER OF PETITION OF
IDAHYDRO, SHOROCK HYDRO, INC.,
J.R. SIMPLOT COMPANY, AND
RENEWABLE ENERGY COALITION FOR
MODIFICATION OF THE 9OlI IO
PERFORMANCE BAND AND
CALCULATION OF OPERATION AND
MAINTENANCE CHARGES FOR PURPA
QUALTFYTNG FACILITIES
J. Kahle Becker, ISB No. 7408
Attorney at Law ..., rr:
223 North 6th Street, # 325 ''r : u
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Irion Sanger, Pro Hac Vice Pending
SANGER LAW, P.C.
1117 SE 53'd Avenue
Portland, OR 97215
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Attorneys for Petitioner Renewable Energy
Coalition
CaseNo. IPC - E- tt-a7
IDAHYDRO, SHOROCK HYDRO,
INC., J.R. SIMPLOT COMPANY AND
RENEWABLE ENERGY
COALITION'S PETITION
R[CEIVED
$,PR 16 PH tr: 39
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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COMES NOW the Idaho Hydroelectric Power Producers Trust, an Idaho Trust, d/b/a
Idahydro ("Idahydro"), Shorock Hydro, Inc. ("Shorock"), the J.R. Simplot Company
("Simplot"), and the Renewable Energy Coalition ("REC") by and through their respective
counsel of record, C. Tom Arkoosh of Arkoosh Law Offices, Peter J. Richardson and Gregory
IDAHYDRO, SHOROCK HYDRO, INC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page I
M. Adams of Richardson Adams, PLLC, and J. Kahle Becker and Irion A. Sanger, and pursuant
to Rules of Procedure ("R.P") 53 and 326,hereby petition the Idaho Public Utilities Commission
("Commission") to modify, amend, or stay existing orders or rules, and to clarify rights and
obligations implementing Section 210 of the Public Utilities Regulatory Policy Act of 1978
("PURPA"), l6 U.S.C. $ 824a-3 et seq., as set forth herein.
Although Petitioners reserve the right to ascertain additional facts through discovery and
thereafter supplement the facts herein through testimony and evidence, Petitioners state the
following facts and claims in support of this Petition:
I.
PARTIES
l. Petitioner Idahydro is an Idaho Trust comprised of 12 members who own or
operate 28 small hydropower production plants of approximately 78.54 MW nameplate capacity
that are Qualifying Facilities ("QFs") under PURPA and sell power to Idaho Power Company
("IPCo") pursuant to energy sales agreements ("ESAs"), which are legally enforceable
obligations pursuant to PURPA.
2. Petitioner J.R. Simplot Company ("Simplot") is a Nevada corporation duly
registered to conduct business in Idaho, which is engaged in the agriculture and food industries
In addition to being a large energy user, Simplot directly or indirectly owns several energy
generation facilities, including two facilities in Idaho that currently sell their electrical output as
QFs to IPCo. Those two facilities are a cogeneration facility fueled by waste heat at the Simplot
fertilizer plant in Pocatello, Idaho, and the Magic Reservoir Hydroelectric Project located near
Shoshone, Idaho.
3. Petitioner Renewable Energy Coalition ("REC") was established in 2009, and is
IDAHYDRO, SHOROCK HYDRO, [NC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page2
comprised of nearly forty members who own and operate over fifty qualifying facilities or are
attempting to develop new QFs in Oregon, Idaho, Washington, Utah, Montana and Wyoming,
some of which sell power to IPCo pursuant to ESAs.
4. Petitioner Shorock is an Idaho corporation, owning a small hydro QF located in
Twin Falls County, Idaho, project number 3161514, having an ESA with IPCo approved by the
Commission in Order No. 33549 on December 13, 2017 . In part, the ESA results from a joint
stipulated motion of the parties approved by the Commission in Order No. 33918 on October 25,
2017, that the ESA would be subject to the outcome of this anticipated Petition. Further,
Shorock is a member of Idahydro and REC.
5. Petitioners name IPCo as Respondent to this Petition. See R.P. 53.05(d). IPCo is
an Idaho corporation, duly qualified to do and doing business in the states of Idaho and Oregon
as a public utility.
II.
9O/IIO PERFORMANCE BAND
6. Until 2004, QFs provided [PCo estimates in their ESAs of the energy production
expected to be delivered to IPCo and thereafter received full avoided cost priced payment under
PURPA for all energy delivered, which energy all parties and the Commission considered firm
energy.
7. On or about November 22, 2004, the Commission issued Order No. 29632 in
consolidated cases IPC-E-04-08 and IPC-E-04-10 ("Consolidated Cases"), which redefined
"Firm" energy from the prospective of predictability of the quantity of energy delivered rather
than as a firm commitment to deliver all energy produced by the QF made in an ESA for the
delivery of energy and capacity over a specified period of time. This provision does not arise
IDAHYDRO, SHOROCK HYDRO, INC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page 3
from, and is contrary to, 18 C.F.R. 5 292.304(d), which distinguishes QF energy sold on an "as
available" basis at the time of delivery ("Non-firm") and energy sold pursuant to a ESA for
delivery over a specihed term ("Firm"). See Order No. 18190, U-I006-20.
8. Firm energy for purposes of PURPA projects has historically meant a firm
commitment to deliver the entire net output rather than a guarantee that the electricity will be
predictable and planned. As PURPA recognizes, even if an individual QF may not always
provide the equivalent of Firm power to the utility, the aggregation of all QFs committed to sell
their entire net output to the utility will constitute the equivalent of a larger Firm resource. 45
Fed. Reg. 12,214, 12,227 (Feb. 25, 1980). Thus, implementation of PURPA requires
consideration of the aggregate capacity value of such QFs in calculating the purchasing utility's
avoided costs over a specified term.
9. The Commission proceeded to further granulation in Order No. 29632 to require
predictability of delivery be refined to fall within a 90%o to ll0o band of estimates made three
months prior to delivery before a QF received full avoided cost payments for energy delivered in
the month in question (the "90/l l0 Performance Band"). Failure to deliver energy within this
performance band resulted in payment for energy at the lesser of the Non-firm, as available
pricing, or the ESA pricing. The 90/ll0 Performance Band has asymmetrical deadbands that
provide an incentive for QFs to inaccurately forecast. At this time, IPCo continues to require
this provision in new ESAs, and currently requires the energy schedules be locked in at least a
month in advance of the month of delivery.
10. Adoption of the 90/ll0 Performance Band resulted from claims by IPCo of five
changes of circumstance, all of which centered on IPCo's asserted need for improved ability to
integrate QF resources into IPCo's resource planning and acquisition by encouraging developers
IDAHYDRO, SHOROCK HYDRO, [NC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page 4
to deliver more predictable quantities of energy.l The timing of Idaho Power's proposal
coincided with the increasing economic viability of wind and solar QFs, which were expected to
provide more variable and less predictable energy production than the aggregate production of
Idaho's traditional portfolio of small hydropower, cogeneration, and baseload QFs.
11. The Commission adopted the 901110 Performance Band notwithstanding
PURPA's express purpose to divorce QFs from the constraints of traditional energy markets.
Ultimately, the Commission concluded that unplanned for and not easily integrated energy may
have to be sold in the surplus market or other more economic resources of the company backed
down, and thus imposed the 90/l l0 Performance Band.
12. The 90/110 Performance Band pricing results in payments for energy below the
avoided cost rates paid pursuant to an ESA with such rates calculated "at the time the obligation
is incurred," 18 C.F.R. 5 292.304(dx2xii), and instead substitutes an avoided cost "calculated at
the time of delivery," l8 C.F.R.5292.304(d)(2xi), thereby contravening the QF's o'option" to
sell its output at forecasted and fixed avoided cost rates under l8 C.F.R. 5 292.304(d)(2)(ii). As
stated by Commission Marcia Smith in her dissent in Order No. 29632 atp.24:
I strongly oppose the 90o/olll0% performance band proposal of Idaho Power
and also do not favor the 80%1120% proposal of the Staff. It is my belief that
project developers that sign PURPA contracts have a legally enforceable
obligation. The incentive for them is to provide all the power they can. They
need to be paid to stay in operation and if they do not produce, they do not get
' (l) Wholesale markets have standardized the terms and conditions of wholesale firm energy transactions.
As a result, wholesale firm energy purchases from creditworthy counterparties are now generally accepted as a
prudent and cost-effective way of meeting a portion of a utility's resource needs.
(2) Idaho Power has changed from an energy-constrained company to a capacity-constrained company.
Seasonal peaks require the Company to have a high degree ofconfidence that energy purchases will be delivered in
the amounts and at the times specified to match seasonal peak energy demands.
(3) Transmission constraints require that Idaho Power more precisely anticipate its needs for firm energy
imports.
(4) The growing prominence of intermittent generating technologies, such as wind and solar, require a new
approach in the Company's PURPA contracting procedures.
(5) The Company's increased use of firm market purchases as hedges to manage risk escalates the
importance of predictable resource availability.
See, Order No. 29632, pp. l5-16 [internal citations omitted].
IDAHYDRO, SHOROCK HYDRO, [NC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page 5
paid. The banding proposal would operate as a penalty, not an incentive.
See also PaTil Wind Farm, LLC v. Portland General Electric Co., l5l FERC 161,223 (2015),
generally disapproving of such performance bands.
13. Circumstances have changed once again, obviating the need for a 90/ll0
Performance Band to integrate power, including:
a. The variability of hydro QFs in the aggregate is within the range of variability
exhibited by IPCo hydropower facilities.
b. Hydropower and other non-wind and non-solar QFs are sufficiently
predictable in the aggregate that IPCo can reasonably incorporate their
variability into its planning and operations.
c. The individual, non-wind and non-solar QF is so small in the IPCo system that
any monthly excess energy or shortfall energy amounts would be de minimis
(lost in the "noise") of operating IPCo's system.
14. The Commission should also revisit the 90/110 Performance Band because it was
not designed to address the unique situation regarding the predictable, aggregated value of small
hydropower, biomass, cogeneration, and baseload QFs. While Order No. 29632 explicitly and
implicitly intended to address the less Firm deliveries of increasing numbers of wind QFs,
subsequent events and Commission orders have more directly addressed this concem by offering
wind QFs, as well as solar QFs, reduced fixed avoided cost rates to account for the integration
costs and the reduced capacity value supplied by those resources. See Order No. 30488; Order
No. 32697. Accordingly, wind QFs (and some solar QFs) have obtained ESAs without the
90/110 Performance Band in exchange for such reductions to their fixed prices and a mechanical
availability guarantee - largely removing the underlying basis for the 90/110 Performance Band
IDAHYDRO, SHOROCK HYDRO, INC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page 6
in the first place. Only Idaho's traditional fleet of small hydropower, cogeneration, biomass, and
baseload QFs remain limited to long-term ESAs that contain the 90/110 Performance Band and
thus deprive the QF of a forecasted, fixed avoided cost rates calculated at the time the obligation
is incurred and reflecting their aggregate value to the utility under l8 C.F.R. g 292.304(dx2xii).
15. For the reasons set forth above and additional reasons Petitioners may present
through testimony and other evidence, Petitioners allege that the Commission should modify its
existing policy and orders approving of use of the 90/110 Performance Band's applicability to
small hydropower, cogeneration, biomass, and baseload QFs that choose to enter into an ESA or
otherwise legally enforceable obligation. Instead, the Commission should determine that after
the date of the order issued in this proceeding small hydropower, cogeneration, biomass, and
baseload QFs may elect to sell their electrical energy and capacity to electric utilities regulated
by the Commission at forecasted, fixed avoided cost rates calculated at the time the obligation is
incurred under l8 C.F.R. 5 292.304(d)(2xii) under long-term ESAs that do not contain the
90/l l0 Performance Band requirement.
III.
SCHEDULE 72 OPERATION AND MAINTENANCE COSTS
16. On December l, 1991, Order No. 24025, Case No. IPC-E-90-20, the Commission
approved operation and maintenance ("O&M") charges to be paid by QFs to IPCo on QF-
provided, utility-owned interconnection facilities as set forth in Schedule 72. The O&M charge
was intended to recover ongoing operational and maintenance costs over and above the initial
upfront costs of interconnection construction assessed to the QF.
17. As approved in the compliance tariff by Order No. 24172, on February l, 1992,
the O&M charge is assessed at monthly amounts escalating from 0.47% of the initial
IDAHYDRO, SHOROCK HYDRO, INC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page 7
interconnection costs for facilities interconnecting at voltages below 138 kV and 0.26Yo on
facilities interconnecting at voltages equal to or above 138 kV. The payments are progressively
increased over the life of the facility's interconnection. For example, in the 20th year of a
facility interconnected below 138 kV, the QF pays [PCo an annual O&M charge of 13.08% of
the initial interconnection construction cost (e.g., $13,080 if initial construction cost was
$100,000). The charge applies even if IPCo perforrns no O&M at all on the interconnection
facilities in that year. The Schedule 72 O&M percentages are based upon the then-current
(1991) financial assumptions and average O&M costs for IPCo's entire distribution and
transmission plant, and not just QF costs for individual QFs, or QF costs as a class in the
aggregate.
18. The Schedule 72 O&M monthly percentages have not changed since they were
first approved in 1992. The currently approved version of Schedule 72 applied to any new or
existing QF still contains the fixed monthly O&M charge based on assumptions from 1991.
19. The approval of an average O&M cost was based on the belief that a separate
accounting for each individual QF project was too complex in 1991. However, there have been
computing and technological advances since l99l that make it entirely feasible to separately
account for each QF's actual O&M costs. [n fact, IPCo and other Idaho utilities assess actual
O&M costs to interconnection customers under interconnections subject to the Federal Power
Act, consistent with the Federal Energy Regulatory Commission's directives in its Order No.
2003 and Order No. 2006, issued in 2003 and2006, respectively.
20. Additionally, actual O&M costs for QF interconnected interests instructs that
annual, percentage-based charges in most, if not all, cases far exceed the actual O&M expenses
for QF interconnection facilities, thus indicating that the average O&M on IPCo system-wide
IDAHYDRO, SHOROCK HYDRO, INC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page 8
transmission and distribution facilities is either inapplicable or inaccurate as a reflection of the
cost of O&M actually performed on QF interconnection facilities.
21. The Schedule 72 O&M charges are not reasonable charges under the regulations
for QF interconnections. In this context "interconnection costs" are those costs "directly related
to the installation and of the physical facilities necessary to permit interconnected operations
with a qualifying facility to the extent such costs are in excess of corresponding costs which the
electric utility would have incurred if it had not engaged in interconnected operations, but instead
generated an equivalent amount of electric energy itself or purchased an equivalent amount of
electric energy or capacity from other sources." l8 C.F.R. S 292.101(7). The interconnection
charges must also be reasonably assessed and non-discriminatory to the QF. See 18 C.F.R. $
292.303(c), 5 292.306. In the case of IPCo, this Commission has "the responsibility and
authority to ensure that the interconnection requirements are reasonable, and that associated costs
are legitimately incurred." 45 Fed. Reg. at 12,230.
22. For the reasons set forth above and additional reasons Petitioners may present
through testimony and other evidence, Petitioners allege that the Commission should modify its
existing policy and orders approving of use the current regime for Schedule 72 O&M charges for
QFs. Instead, the Commission should require IPCo to assess only the actual O&M costs
expended by IPCo for each individual QF interconnection and be limited to the interconnection
facilities of that QF, so that the O&M is neither arbitrary nor discriminatory.
Iv.
PRAYER
WHEREFORE, Petitioners pray that the Commission order:
1. That the 90/l l0 Performance Band is no longer a just and reasonable requirement
IDAHYDRO, SHOROCK HYDRO, INC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page 9
for inclusion in ESAs offered to small hydropower, cogeneration, biomass, and baseload QFs.
2. That small hydropower, cogeneration, biomass, and baseload QFs that choose to
enter into an ESA or otherwise legally enforceable obligation after the date of such order issued
in this proceeding may elect to sell their electrical energy and capacity to electric utilities
regulated by the Commission at forecasted, fixed avoided cost rates calculated at the time the
obligation is incurred under l8 C.F.R. 5 292.304(d)(2)(ii) under a long-term ESAs that does not
contain the 90/110 Performance Band requirement.
3. That the O&M charges adopted by Order No. 24025, Order No. 24172 and
included in Idaho Power's Schedule 72 as of the date of this Petition are no longer a just and
reasonable charge to assess to QFs subject to Schedule 72.
4. That Idaho Power shall revise Schedule 72 such that it only allows charges to QFs
for actual O&M expenses at the time of occurrence.
DATED ttris -(aay of April ,2018.
ARKOOSH LAW OFFICES RICHARDSON ADAMS, P.L.L.C.
C. Tom Arkoosh
Attomey for Petitioners Idahydro & Shorock
Hydro, Inc.
M. Adams
Peter J. Richardson
Attorneys for Petitioner J.R. Simplot
Company
J. KAHLE BECKER ATTORNEY AT LAW
SANGER LAW P.C.
Becker (Local Counsel)
Irion A. Sanger (Pro Hac Vice Pending)
Attorneys for the Petitioners Renewable
Energy Coalition
IDAHYDRO, SHOROCK HYDRO, [NC., J.R. STMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page l0
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on,t.lgfOay of April, 2018,I served a true and correct
copy of the foregoing document(s) upon the following person(s), in the manner indicated:
Orieinal and 7 copies to:
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise, ID 83702
Copies to:
Donovan Walker
Idaho Power Company
PO Box 70
Boise, ID 83707
U.S. Mail, Postage Prepaid
Overnight Courier
Hand Delivered
Via Facsimile
E-mail
diaqs.ha!1alr@puaJd
U.S. Mail, Postage Prepaid
Ovemight Courier
Hand Delivered
Via Facsimile
E-mail d! alkgl@Ldilhopo r,r'er. co m
x
x
x
M. Adams
IDAHYDRO, SHOROCK HYDRO, INC., J.R. SIMPLOT COMPANY AND RENEWABLE
ENERGY COALITION'S PETITION - Page I I