20181106Reply Comments.pdf

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DONOVAN E. WALKER
Lead Counsel
[e-mail]
November 6, 2018
VIA HAND DELIVERY
Diane M. Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-18-12
McCollum Enterprises, Limited Partnership - Canyon Springs Hydro Project
ldaho Power Company's Reply Comments
Dear Ms. Hanian
Enclosed for filing in the above matter please find an original and seven (7)
copies of ldaho Power Company's Reply Comments.
Very truly yours,
E. Walker
DEW:csb
Enclosures
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwal ker@ ida hopower. com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
.trCr,VED
301$ fiSV -5 Pt{ S: tr3
sstotJ
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
MCCOLLUM ENTERPRISES, LIMITED
PARTNERSHIP, FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
FROM THE CANYON SPRINGS HYDRO
PROJECT
CASE NO. IPC-E-18-12
IDAHO POWER COMPANY'S
REPLY COMMENTS
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ldaho Power Company ("ldaho Power" or "Company"), in accordance with Idaho
Public Utilities Commission ("Commission") Order No. 34162, hereby respectfully submits
the following Reply Comments.
I. REPLY COMMENTS
The Commission's Notice of Modified Procedure, Order No. 34162, sets forth an
October 30,2018, comment deadline and a November 6, 2018, deadline for Company
reply comments. Staff filed Comments on October 30, 2018. McCollum Enterprises filed
Comments on November 2,2018, and Idaho Power now files these Reply Comments.
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
Staff recommends that the avoided cost prices contained in the Canyon Springs
hydro replacement Energy Sales Agreement ('ESA') should not include capacity value
until July 2026, based on Staffs belief that statements in Commission Order Nos. 32697
and 32871 "are in the context of firm QF contract renewals." (See Staff Comments at2).
ldaho Power believes that all Public Utility Regulatory Policies Act of 1978
(PURPA) Qualifying Facilities ("QF") deliver generation to the purchasing utility on an if,
as, and when available basis. ln the context of electrical generation, firm means power
or power-producing capacity intended to be available at all times during the period
covered by a commitment, even under adverse conditions. Although ldaho Power does
not believe that QF generation is considered firm, each ESA contains certain provisions
that allow for generation from the QF to be eligible for full contract prices, such as the 90-
110o/o eligibility criteria found within current ESAs. lnclusion or exclusion of a capacity
component in rates does not necessarily equate to defining generation as firm or non-
firm.
However, because generation from all QFs is delivered in the same manner, that
is on an if, as, and when available basis, ldaho Power includes all QFs that have signed
agreements with the Company in its cogeneration and small power production ('CSPP')
forecast, assuming the Company can reasonably rely on generation estimates from the
QF if it is a new project or historical actual deliveries for an existing project. As a result
of being included in ldaho Power's CSPP forecast, generation from the Canyon Springs
hydro project has been included in ldaho Power's determination of its load and resource
balance in the 2017 lntegrated Resource Plan ("lRP"), which identified a first capacity
deficiency of July 2026.
There are currently three avoided cost methodologies approved in ldaho. The
surrogate avoided resource ('SAR') avoided cost methodology for published rates and
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
the incrementa! cost integrated resource plan ("lClRP") avoided cost methodology for
negotiated contract pricing, both contain separate valuation components for avoided
capacity and energy. The Schedule 86 pricing methodology is based on a published
market index price that does not separately identify pricing components for capacity and
energy, and is available to projects that do not wish to commit to the contract terms and
conditions that permit eligibility for the prices available under the SAR or ICIRP avoided
cost methodologies.
Under its existing Schedule 86 Uniform Agreement between ldaho Power
Company and McCollum Enterprises, Limited Partnership, the Canyon Springs hydro
project currently receives ful! compensation pursuant to the Commission-approved
avoided cost price defined in Schedule 86 for all deliveries of generation that occur on a
non-firm, if, as, and when available basis.
When the Canyon Springs hydro project requested to terminate its existing
Schedule 86 ESA and enter into a replacement ESAwith SAR-based prices, ldaho Power
agreed to include the capacity value for all years of the new ESA, as the project's output
had been included in the CSPP forecast. The Commission's orders make several
references to the way QF generation and payment for capacity should be managed upon
the expiration of an existing ESA. ln Case No. GNR-E-11-03, the Commission states:
It is logical that, if a QF project is being paid for capacity at the
end of the contract term and the parties are seeking
renewal/extension of the contract, the renewal/extension
would include immediate payment of capacity. An existing
QF's capacity would have already been included in the utility's
load and resource balance and could not be considered
surplus power. Therefore, we find it reasonable to allow QFs
entering into contract extensions or renewals to be paid
capacity for the full term of the extension or renewal.
Order No. 32697 at21,22
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
Order No. 32737 in the same case states:
However, when an existing QF under a current contract
desires to continue to sell energy to the same utility after
expiration of the current contract, and the parties enter into a
new contract for the sale and purchase of energy, the QF is
entitled to be paid capacity for the ful! term of the new
agreement.
Order No. 32737 at 5.
The issue of when capacity payments are included in the avoided cost calculation
for QFs was further discussed by the Commission in Case No. IPC-E-15-01, where it
states:
Therefore, we find it reasonable for utilities to establish
capacity deficiency at the time the initial !RP-based contract
is signed. As long as the QF renews its contract and
continuously sells power to the utility, the QF is entitled to
capacity based on the capacity deficiency date established at
the time of its initial contract. For example, if the QF comes
on-line in 2017 and the utility [becomes] capacity deficient in
2020, the QF would be eligible for capacity payments in the
second year of its second contract l(i.e.,2020)] and thereafter
if in continuous operation. This adjustment recognizes that in
ensuing contract periods, the QF is considered part of the
utility's resource stack and will be contributing to reducing the
utility's need for capacity.
Order No. 33357 at25,26
The Commission went on to state in its reconsideration order in Case No. IPC-E-15-01
When a QF enters into its initial contracUobligation with the
utility, the capacity adjustment entitles the QF to know the
exact date when itwi!! be eligible to receive capacity payments
as long as the QF continues to contribute to the utility resource
stack. Thus, the Commission created the adjustment in
conjunction with the standard two-year term for lRP-based
contracts to prevent utilities from circumventing their
obligations to pay for capacity when the utility becomes
capacity deficient.
Order No. 33419 at 26
IDAHO POWER COMPANY'S REPLY COMMENTS.4
It is ldaho Power's understanding that the Commission's orders intend that QF
projects which have been included in ldaho Power's load and resource balance since
their initial contract dates meet the requirements to include value for capacity in their
replacement contracts according to the Company's capacity deficit in place at the time of
the QFs' initial contracts. For Canyon Springs hydro, which was previously under an as-
delivered Schedule 86 QF agreement and included in the load and resource balance in
the same manner as all other QFs with signed contracts, the replacement ESA contains
payment for capacity for the entire term of the replacement contract.
il. coNcLUStoN
ldaho Power respectfully requests that the Commission issue an order accepting
or rejecting the ESA between ldaho Power and McCollum Enterprises and, if accepted,
declaring that all payments for purchases of energy under the ESA between ldaho Power
and McCollum Enterprises be allowed as prudently incurred expenses for ratemaking
purposes.
Respectfully submitted this 6th day of November 2018.
E. WALKER
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
CERTIFICATE OF SERVICE
! HEREBY CERTIFY that on this 6th day of November 20181 served a true and
correct copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following
named parties by the method indicated below, and addressed to the following:
Commission Staff
Edward Jewell
Deputy Attorney General
ldaho Public Utilities Commission
47 2 W est Wash ington (83702)
P.O. Box 83720
Boise, Idaho 83720-007 4
McCollum Enterprises, Limited Partnership
Owen H. Orndorff
ORNDORFF LAW OFFICES
1087 West River Street, Suite 230
Boise, ldaho 83702
W. David McCollum
McCollum Enterprises, Limited Partnership
Canyon Springs Hydro
P.O. Box 5492
Twin Falls, ldaho 83303
Joseph D. McCollum, Jr.
1110 Warm Springs Avenue
Boise, ldaho 837 12-7949
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Email dave@canvonspringsqolf. com
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Christa Bearry, Legal Assistant
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IDAHO POWER COMPANY'S REPLY COMMENTS - 6
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