20190208Idahydro, Shorock Hydro and REC Comments.pdf

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C. Tom Arkoosh, ISB No. 2253
ARKOOSH LAW OFFICES
802 W. Bannock Street, Suite LP 103
P.O. Box 2900
Boise, ID 83701
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Admin copy: [e-mail]
Attorneys for ldaHydro
J. Kahle Becker, ISB No. 7408
Attorney atLaw
223 North 6th Street, # 325
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Attorneys for Renewable Energy Coalition
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
;:1r13 -B PH t: t3
TN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH J.R.
SIMPLOT COMPANY FOR THE SALE
AND PURCHASE OF ELECTRIC
ENERGY FROM THE SIMPLOT-
POCATELLO COGENERATION AND
SMALL PURCHASED POWER PROJECT
Case No. IPC-E-19-01
COMMENTS OF IDAHYDRO,
sHoRocK HYDRO,INC., AI\D THE
RENEWABLE ENERGY COALITION
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On April 16,2018,Idaho Hydroelecffic Power Producers Trust ("Idahydro"), Shorock
Hydro, Inc. ("Shorock"), and the Renewable Energy Coalition ("REC") (collectively the
"Petitioners") petitioned the Commission asking that the 90/ll0 requirement inserted into
PURPA QF energy Sales agreements ("ESA") be removed. IPC-E-18-07. (the "Petition-) The
Petition alleged, among other matters, that non-avoided cost pricing for energy delivered below
90%o and above ll0% of estimates made a month ahead of delivery of the energy was contrary to
l8 C.F.R 5292.304(d). Petitioners alleged the regulation distinguished only between energy sold
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, [NC., AND THE RENEWABLE
ENERGY COALITION - Page I
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on an'(as available" basis at the time of delivery (which the Petitioners viewed as non-firm) and
energy sold pursuant to and ESA for delivery over a specified term (which the Petitioners viewed
as firm). The regulation made no reference to guaranteed power deliveries at a specified time as
"firm" power.
Idaho Power differed. In its Cross-Petition, ldaho Power cited and argued the minority
position developed by Texas and narrowly upheld in Exelon Wind l, L.L.C. v. Nelson,766 F . 3d
380 (5th Cir.2014), which characterized the Texas "firm power" rule as follows:
[O]nly those Qualifying Facilities able to forecast when they will deliver energy
to the utility - and capable of delivering the specified amount of energy at the
scheduled time - are eligible to take advantage of the pricing options in
subsection (dX2) of FERCs Regulation [8 C.F.R. $ 292.304(d)]. By contrast,
Qualifying Facilities with non-finn power that cannot guarantee such delivery
may charge the utility only the current or 'as-available' market price for power.
Ibid. at page 386.
Thus, in IPC-E-18-A7,the parties occupied dichotomous poles. The Qualifying Facilities
advocated for the majority position, which is avoided cost payment for all energy delivered
pursuant to an ESA. Idaho Power advocated for the minority extreme, which is a limitation to
payment for energy on spot market o'as available" prices unless the facility could deliver a
specified amount of energy at specific, scheduled times.
Idaho Power made clear in its Cross-Petition that the issue under consideration for Idaho
Power was whether the Qualifying Facilities were selling "firm" energy, i.e., a guaranteed
quantity at a guaranteed time. Idaho Power quantified what was NOT under consideration at
page 5 of the Cross-Petition:
Contrary to what may be indicated by the areas of inquiry from the discovery
questions delivered to Idaho Power and Avista thus far, this case and question is
not a matter of integration costs, damages, replacement power costs, forecasts, the
utility's risk management, operating plans or non-performance penalties . . .
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 2
Rather, Idaho Power set out its perspective as quite something else:
[R]ather it is a matter of the proper and lawful implementation of eligibility for
firm versus non-firm avoided cost rates for purchases as set forth in l8 C.F.R.
i292.304(d) in a manner that is not harmful to Idaho Power retail customers.
Stated another way, the issue did not swirl around whether ldaho Power could effectively
integrate the Qualifying Facility power, but what the price would be.
Through the process of several settlement meetings, the parties settled on a compromise
that offered homage to the needs of both sides for as much stability, reliability, and predictability
as could be afforded to Qualify Facilities that were for the most part run off the river, and to
Idaho Power's insistence upon what it defined as "firm power." The parties retained the 90/100
pricing construct but moved the estimation date from the first of the month before delivery to the
25th of the month before delivery. The parties agreed to the realistic practicality that the closer in
time the estimate to the actual deliveries, the better and more reliable the estimate. This brought
the Qualifying Facilities closer to pegging the estimates between the 90 and ll0 percent
parameters, and simultaneously brought ldaho Power closer to assurance that the power estimate
would be the power delivered.
To the extent that a shift of the estimation dates closer to the delivery dates can be in any
way perceived as interruptive of Idaho Power's integration needs, as opposed to serving its
integration needs because the information is more accurate, Idaho Power made clear in its
discovery responses in IPC-E-18-07 that such a perception would be inaccurate. In its Answer to
Interrogatory No. 2, Idaho Power Company's Answers and Responses to J.R. Simplot's First
Interrogatories Requests for Admission, and Requests for Production to ldaho Power Company,
Idaho Power noted it started estimating its needs with its must-run resources, including PURPA
energy, starting with a five-year rolling average, and then adjusting that average "as necessary
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 3
due to information known to Idaho Power or by changes in adjusted monthly net energy amounts
provided by the projects." Thus, the more accurate the monthly energy amounts provided by the
projects, the better Idaho Power's estimates of its needs.
Idaho Power confirmed in this proceeding in its discovery responses to the Commission
Staff that the modest revisions to 90/100 pricing construct are reasonable modifications that can
be accommodated with Idaho Power's operations. In response to Staff s Production Response
No. 3, Idaho Power explained that, from its perspective, the 90/ll0 provisions are to serve as a
measure of "firmness" and:
Idaho Power's monthly Operating Plan and risk management process would not
change if the Net Energy Amount notification process is modified as contained in
the Simplot ESA, which would require that any changes to monthly Estimated
Net Energy Amounts be provided no later than the earlier of the 25th day in
advance of the month being changed or the last business day prior to the 25th day.
Idaho Power would continue to forecast generation deliveries from QFs in the
same manner it has in the past and would continue to have long-term projections
of generation deliveries from projects.
Thus, the change will not have any operational, forecasting, or risk management harm on
Idaho Power.
Idaho Power further explained that the changes would not harm customers. In response
to Stafls Production Request No. 4 in this proceeding about whether Idaho Power would lose
any benefits, Idaho Power explained that:
The Company does not anticipate losing any benefits associated with the change
in the Net Energy Amount notification process as contained in the ESA with
Simplot but gaining more up-to-date and accurate information and moving the
estimates closer to a firm scheduled delivery.
If anything, the change would benefit Idaho Power by providing better information
Idaho Power also stated in response to Staff s Production Request No. 3 that:
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 4
lf a QF can provide estimates of generation deliveries nearer to the month of
actual deliveries, it stands to reason that the estimated Net Energy Amount may
be more accurate than if it is providing it a month in advance.
The parties to the discussions that resolved the controversy in IPC-E-18-07 represented
Idaho Power and some 60 developers and at least 24ldaho Qualifying Facilities, presenting the
Commission a broadly adequate representation of small hydroelectric and cogeneration energy
interests. It is fair to say that the settlement and agreement among all these parties to draw
Qualifying Facility delivery estimates into tighter, more accurate parameters for the mutual
benefit of the Qualifying Facilities, the utilities, and, consequently, the utility rate payers, in
addition to extricating the industry from protracted litigation, provides universal benefits to all
involved. To unwind this understanding will again needlessly cast the industry into a conflict
and uncertainty. Thus, the modest changes before the Commission with this contract approval
reflect a mutually beneficial compromise supported by the hydroelectric and biomass Qualifying
Facility industry. This is a classic "win-win" situation of agreement among the stakeholders that
is so rare in the area of PURPA.
Determining the reasonableness of moving estimate deadlines closer to delivery dates
necessarily entails reviewing just what goal the 90/ll0 band attends. Initially created in Order
No. 29632 after years of ESA's which operated through their life with only one, initial,
immutable estimate of deliveries, the 90/110 pricing and monthly estimate concept arose from
the Commission's reasoning concerning the idea of "firmness."
The Commission finds that the firm/non-firm issue raised is really one of
predictability, not capacity factor. The Company has accepted monthly
predictability as reasonably firm.
Order No. 29632, page 13.
The Commission finds it is reasonable to define firmness as predictability on a
monthly basis.
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 5
Order No. 29632, page 14.
As reflected in our lOMW cap discussion, the Commission finds that a legally
enforceable obligation translates into contractual obligations of both parties. For
a QF it translates into an obligation or commitment to deliver its monthly
estimated production.
Order No. 2963 2, page 20.
Thus, the Commission found satisfaction and fairness by adopting monthly estimated
production in the reasoned and reasonable compromise struck between just one estimate at the
initiation of an ESA and the moment by moment predictability.
Ten years later, when reconsidering the time of providing a monthly estimate production,
moving the estimate from three months before production to one month before production, the
Commission found that a closer estimate continued to serve the initial purpose of providing
monthly estimate production.
Specifically, we find that monthly, as opposed to quarterly, reporting of energy
generation estimates is a reasonably negotiated term between the parties and not
inconsistent with the Commission's guidance and findings in Order No. 29632.
As we stated in the Order, "it is reasonable and operationally expedient to require
QFs to provide ldaho Power with monthly kWh production estimates. . . . The
Commission finds it reasonable to provide more frequent opportunities to revise
generation estimates than [the two years] proposed by the Company. We find that
the interest of the Company in planning for QF resources is better served if the
generation forecast is a reliable estimate." Order No. 29632 at 23. The
Commission did not approve the 90/ll0 provisions in order to implement a
punitive pricing mechanism. The intent of a QF providing generation estimates
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. We find
that a provision allowing for monthly generation estimate updates is consistent
with that purpose.
We acknowledge Stafls concerns that monthly generation estimates would likely
allow more energy production to fall within the 90/ll0 band. However, no
evidence was presented that this result is unreasonable or would work to the
detriment of Idaho Power's ratepayers. Moreover, Staff ultimately agreed that
'omuch of the justification provided by Idaho Power'o in defense of utilizing
monthly generation estimates has merit. Staff Comments at 7. Consequently,
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 6
based on our review of the evidence presented, we find that the use of monthly
generation estimates is just and reasonable. We encourage Idaho Power to be
mindful of the effects that this change may have on both its operations and its
ratepayers. We expect that the Company will weigh the benefits and detriments
of monthly generation estimates as projects rvith these provisions come on line.l
CONCLUSION
When defining "firm" power for purposes of PURPA contracts, insofar as that concept
has use to the utility, the more accurate the estimate, the more firm the power. Month-ahead
estimates of the power to be delivered the following month provide a reasonable monthly
estimate for the utility. Estimates made closer to the date of delivery, being more accurate,
consequently, are more reasonable. There exists no reason not to adopt the industry's solution
and move forward. The Commission's Rules "encourage the use of informal proceedings to
settle or determine cases." TDAPA 31.01.01.022. It is respectfully requested the Commission
advance that directive and approve the ESA presently before it in this case.
DATED ttris 4 day of Febru ary 2019.
ARKOOSH LAW OFFICES J. KAHLE BECKER
ATTORNEY AT LAW
C Arkoosh ecker
Attorney for ldaHydro Attorney for the Renewable Energy
Coalition
I Although the Commission noted in Order No. 33104 that implementation of the 90/l I0 pricing system was not
intended to create a punitive pricing system, it has in fact been costly to ESAs. The seeds of an idea planted by
former Commissioner Smith perceptions announced l0 years ago in the dissent to Ordcr No. 29632 have born
expensive fruit for "run of the river" PURPA hydro projects:
I strongly oppose the 90%/l l0% performance band proposal of Idaho Power and also do not favor
the 80%/120% 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
paid. The banding proposal would operate as a penalry, not an incentive.
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 7
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on ,n. -9huy of Februar y 2019,I served a true and correct
copy of the foregoing document(s) upon the following person(s), in the manner indicated:
Original and 7 copies to:
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washinglon
Boise, ID 83702
Copies to:
Sean Costello
Deputy Attomey General
Idaho Public Utilities Commission
472W. Washington
Boise, ID 83702
Donovan Walker
Idaho Power Company
l22l W. Idaho Street (83702)
P.O. Box 70
Boise,ID 83707
J.R. Simplot Company
Gregory M. Adams
zuCHARDSON ADAMS, PLLC
515 North 27th Street (53702)
P.O. Box 7218
Boise, ID 83707
General Counsel
Don Sturtevant
J.R. Simplot Company
P.O. Box 27
Boise, ID 83707
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diane.han ian@ puc. idaho.gov
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sean.costel lo@puc. idaho. gov
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COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 8
J. Kahle Becker, ISB No. 7408
Attorney at Law
223 North 6th Street, # 325
Boise, ID 83702
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E-mail kahle@kah lebeckerlaw.comx
C. Tom Arkoosh
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, INC., AND THE RENEWABLE
ENERGY COALITION - Page 9