20190228final_order_no_34263.pdf

Office of the Secretary
Service Date
February 28,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.IPC-E-19-01
OF IDAHO POWER FOR APPROVAL OR )
REJECTION OF AN ENERGY SALES )AGREEMENT WITH J.R.SIMPLOT )ORDER NO.34263
COMPANY -POCATELLO )COGENERATION AND SMALL )PURCHASED POWER PROJECT )
On January 2,2019,Idaho Power Company ("Company")filed an application seeking
approval of an Energy Sales Agreement ("ESA"or "Agreement")with the J.R.Simplot Company
("Simplot").Under the Agreement,Idaho Power will purchase electric energy generated by
Simplot's Pocatellocogenerationand small power project ("Facility").The Facility is a qualifying
facility under the Public Utility Regulatory Policies Act of 1978 ("PURPA").
On January 23,2019,the Commission issued a Notice of Application and Notice of
Modified Procedure setting comment deadlines.Order No.34235.With this Order,the
Commission approves the Application.
BACKGROUND
PURPA was enacted in 1978 "to lessen the country'sdependence on foreign oil and to
encourage the promotion and development of renewable energy technologies as alternatives to
fossil fuels."FERC v Mississippi,456 U.S.742,745-46 (1982).Under PURPA and its
implementing regulations,utilities must purchase the power produced by QFs.16 U.S.C.§824a-
3(b);18 C.F.R.§292.303(a).The utility must purchase the power at the avoided cost rate.18
C.F.R.§292.304(a).The avoided cost represents "the incremental costs to an electric utility of
electric energy or capacity or both which,but for the purchase from the qualifying facility or
qualifying facilities,such utilitywould generate itself or purchase from another source."18 C.F.R.
§292.101(b)(6).State utilities commissions have broad discretion to set the avoided cost rates
within their respective jurisdictions.RosebudEnterprises,Inc.x Idaho PUC,128 Idaho 624,627,
917 P.2d 781,784 (1996).
QFs have the option to sell energy either (1)as it becomes available,or (2)pursuant to
a legally enforceable obligation.18 C.F.R.292.304(d).If a QF opts to sell energy as it becomes
ORDER NO.34263 1
available,the QF sells the energy under a standard tariff for non-firm energy.See Order No.
33053.In the case of Idaho Power,that tariff is Schedule 86.If a QF opts to sell energy pursuant
to a legally enforceable obligation,the QF sells the energy under terms established by the
Commission.See e.g.,Order No.33357.The Commission must establish published avoided cost
rates for all QFs 100 kW and smaller.18 C.F.R.292.304(c)(l).The Commission,in its discretion,
may also establish published avoided cost rates for QFs above 100 kW.18 C.F.R.292.304(c)(2).
The Commission has established published avoided cost rates for non-wind and non-
solar QFs up to 10 aMW.Order No.32697 at 14.Wind and solar QFs up to 100 kW are entitled
to published avoided cost rates.Id.at 13.Published avoided cost rates are determined by the
Surrogate Avoided Resource methodology ("SAR").The Commission uses a combined-cycle
combustion turbine as the proxy resource in calculating published avoided cost rates under the
SAR methodology.Id.at 17.These published avoided cost rates are updated annuallyto reflect
updated natural gas forecasts.Order No.32802.
THE APPLICATION
The ESA is a renewal contract for a 2016 agreement approved by the Commission in
Order No.33471.See Applicationat 4.The Facility has a nameplate capacity of 15.9 MW,but
is operated so as not to exceed 10 aMW a month under normal conditions.Id The ESA contains
published avoided cost rates for projects of 10 aMW or less adjusted to compensate for capacity
payments for the entire term of the Agreement because it is a renewal contract receiving capacity
payments at the expiration of its prior contract.Id at 2.The term of the Agreement is three years.
Agreement at 12.
The ESA contains modifications to 1)Simplot's generation forecasting provision for
the 90/110 performance band (called the "Seller's Adjustment of Estimated Net Energy Amounts
After the Operation Date"in the ESA),and 2)the process for Simplot to declare suspensions of
energy deliveries.Id at 5.These provisions,as submitted,are compromise changes following
Case No.IPC-E-18-07,a case that challengedthe 90/110 performance band but was withdrawn by
the parties after numerous rounds of production requests and responses and discussions between
the parties.Because these provisions differ from prior Commission-approved contract terms,the
comments focus on these two provisions,in particular the generation forecasting provision.
The generation forecasting provision approved by the Commission requires the QF
provide its monthly generation forecast one month ahead of the month estimated.Order No.
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33104.In this Agreement,the QF has until "the 25th day of the month that is prior to the month to
be revised.If the 25th day of the month falls on a weekend or holiday,then written notice must be
received on the last business day prior to the 25th day of the month."For ease of expression,the
submitted generation forecasting provision is referred to herein as the "5-Day Ahead"provision.
The process for declared suspensions of energy deliveries ("Declared Suspensions"),
as submitted,allows Simplot more time to make a claim of Forced Outage to Idaho Power-seven
days instead of 24 hours followingan outage event that lasts 48 hours or more-and provides more
specificity on how to make the claim.
COMMENTS
A.Commission Staff
Staff recommended the Commission approve the ESA and declare Idaho Power's
payments to Simplot under the ESA to be allowed as prudentlyincurred expenses for ratemaking
purposes.Regarding the 5-Day Ahead provision,Staff recommended the Company provide more
data to justify the Company's position that five-day notification will provide more accurate data
and will not negatively impact the Company's planning operations or ratepayers.Staff expressed
particular concern about new ESAs using the 5-Day Ahead provision,because the Company would
not have the benefit of historical generationdata from the QF to inform its forecasts for those QFs.
B.Idahydro,Shorock Hydro,Inc.and the RenewableEnergy Coalition.
Idahydro,Shorock Hydro,Inc.and the Renewable Energy Coalition ("QF
Commenters")filed comments supporting adoption of the 5-Day Ahead provision.The QF
Commenters point out that the provision results from compromise between the Company and the
QF industry in IPC-E-18-07.The QF Commenters state that the compromise helped avoid
litigation,is mutually beneficial,and therefore should be seen in a positive light.Comments of
QF Commenters at 5.The QF Commenters also point to numerous production responses from the
Company to Commission Staff that state that the Company sees the 5-Day Ahead provision as not
only a reasonable compromise but also as more beneficial to the Company's operations and
planning.Id.at 4.The QF Commenters also point to the history of the generation forecast
provision and assert that the proposed change furthers the policy behind the requirement.The QF
Commenters note that when the Commission moved the timeframe to provide generationforecasts
from three-months ahead to one-month ahead in Order No.33104,the Commission stated,"The
Commission did not approve the 90/110 provisions in order to implement a punitive pricing
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mechanism.The intent of a QF providing generationestimates has always been to assist the utility
in forecasting and operational planning so that the utility can provide the most reliable service
possible to its customers."Id at 6 (citing Order No.33104).
C.J.R.Simplot Company.
Simplot asserted that the changes submitted to the Commission in this proceeding "are
reasonable and within the spirit of the purpose of the performance band as initially conceived by
the Commission."Comments of Simplot at 3.Simplot,like the QF Commenters,Staff,and Idaho
Power in their reply comments,also points to the proposition that allowing forecasts more close
in time to the time of delivery increases the chances that the forecast will be accurate.Id at 4.
Simplot also states that the 5-Day Ahead provision is within the spirit of the 90/110 performance
band."Allowance for more accurate estimates will reduce the possibility of the 90-110
performance band operating as a punitivepricing provision."Id.at 5.
Regarding the Declared Suspensions provision,Simplot emphasizes the importance of
the revised provision to its operations.The previous clause required Simplot to report and describe
the outage within 24 hours after it starts,yet the length of the outage and its cause rarely are known
within 24 hours.Nor is it known whether the outage will last at least 48 hours and potentially
qualify as a Forced Outage.See Simplot Comments at 6-7.Under the submitted provision,
Simplot would preliminarily notify Idaho Power on the next business day after an outage lasting
at least 48 hours.Simplot would have up to seven days after the outage ends to determine whether
it will provide the Company with a written notice declaring a suspension of energy deliveries and
detailing the support for its claim.Id.at 7.
D.Idaho Power Reply Comments.
Idaho Power submitted comments reaffirmingits belief that the 5-Day Ahead provision
is reasonable and might result in more accurate forecasts,and would not affect its planning process.
Idaho Power rebuts Staff's concern that the 5-Day Ahead provision would be inappropriate for
new ESAs."To clarify,the modification in [generation estimates]does not change in any way the
manner and process used by Idaho Power to estimate QF generation.The Company will continue
to receive 12 months of Estimated Net Energy Amounts in each QF ESA and will utilize the same
processes previouslydescribed to make estimates of QF generationfrom a monthlybasis through
real-time operations."Reply Comments of Idaho Power at 2.Idaho Power emphasizes there
would be no change to their planning operations with the 5-Day Ahead provision,for new or
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replacement QF contracts.Id.at 4.To demonstrate the feasibility of the 5-Day Ahead provision
and to respond to Staff's concern that the provision may not be appropriate for new ESAs,Idaho
Power described how the QF generationforecasts fit into its planning operations.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§61-502 and 61-
503.The Commission is empowered to investigate rates,charges,rules,regulations,practices,
and contracts of public utilities and to determine whether they are just,reasonable,preferential,
discriminatory,or in violation of any provision of law,and to fix the same by order.Idaho Code §§
61-502 and 61-503.In addition,the Commission has authority under PURPA and Federal Energy
Regulatory Commission ("FERC")regulations to set avoided costs,to order electric utilities to
enter into fixed-term obligations for the purchase of energy from QFs,and to implement FERC
rules.The Commission may enter any final order consistent with its authorityunder Title 61 and
PURPA.
The Commission has reviewed the record,including the Application,the ESA,the
comments of Commission Staff,the comments of Idahydro,Shorock Hydro,Inc.,and the
Renewable Energy Coalition,the comments of J.R.Simplot Company,and the reply comments of
Idaho Power.Based on our review,we find it reasonable to approve the ESA.We commend the
parties for reaching a compromise agreement regarding implementation of the 90/110 performance
band.It is reasonable to believe that forecasts provided five days in advance will result in more
useful information for the Company to use in its planning and operations.As the Company and
the industry gain more experience using the 5-Day Ahead provision,we anticipate more data being
available to support or refute the proposition that the 5-Day Ahead provision provides more
accurate generation forecasting than the month-ahead provision.Likewise,we find the parties'
Declared Suspensions provision reasonable given Simplot's operations.We will continue to
evaluate Agreements submitted to us on a case-by-case basis and will evaluate the reasonableness
of the provisions in those Agreements in lightof the data and information presented to us.
ORDER NO.34263 5
ORDER
IT IS HEREBY ORDERED that the ESA between Idaho Power and Simplot is
approved,effective on today's date.
IT IS FURTHER ORDERED that all payments made by Idaho Power for purchases of
energy and capacity under the ESA are allowed as prudently incurred expenses for ratemaking
purposes.
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 with regard to any
matter decided in 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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of February 2019.
PAUL KJ LAND ,PRESIDENT
KRISTINE RAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
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