20190213JR Simplot Company Comments.pdf

Gregory M. Adams, tSB No. 7454
Peter J. Richardson, ISB No. 3195
RICHARDSON ADAMS, PLLC
515 N. 27th Street
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
Email : greg@richardsonadams. com
Email : peter@richardsonadams. com
Attorneys for J.R. Simplot Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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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 J.R. SIMPLOT
COMPANY
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INTRODUCTION AND SUMMARY
The J.R. Simplot Company ("Simplot") respectfully submits these comments requesting
that the Idaho Public Utilities Commission ("IPUC" or o'Commission") approve the Energy Sales
Agreement ("ESA") submitted by Idaho Power Company ("ldaho Power") in this proceeding.
Simplot's qualifying facility ("QF") is powered by waste heat generated in industrial processes
that is in turn used in a cogeneration process that produces: ( I ) electric energy sold to Idaho Power,
and (2) steam used for purposes related to production of fertilizer in Simplot's Don Plant in
Pocatello, Idaho.
As explained below, the ESA contains newly developed revisions to the parties' previous
ESAs with respect to implementation of the Commission's 90-l l0 performance band. These
revisions were developed in the process of discussing the parties' divergent positions alleged in
COMMENTS OF J.R. SIMPLOT COMPANY
IPC-E-19-01
PAGE I
the competing petitions to make far more significant changes to the 90-l l0 performance band in
Case Nos. IPC-E-I8-07. Ultimately, the parties' agreement to propose Commission approval of
the relatively minor revisions contained in the ESA submitted here resulted in voluntary
withdrawal of the petitions in that case.
Aside from the two revisions to the 90-l l0 performance band in prior Simplot ESAs and
updated avoided cost rates, the ESA submitted for the Commission's approval contains
substantively identical terms to the currently effective ESA approved by the Commission in Order
No.33471, Case No. IPC-E-16-01. The revisions to the 90-ll0 performance band in the ESA
submitted for approval here will provide benefits to both Idaho Power and Simplot and reduce the
risk of disputes over implementation of the 90-l l0 performance band in the future. The revisions
fall into two different categories: (l) providing an opportunity for more accurate Monthly
Estimated Net Energy Amountsl for Idaho Power's use by allowing updates to be made closer in
time to the month of delivery; and(2) clarifying and improving the process by which Simplot may
exercise a Declared Suspension of Energy Deliveries which will result in adjustment to the
Monthly Estimated Net Energy Amounts within the month of delivery. Both of these revisions
are consistent with the spirit of the Commission's prior orders regarding the 90-l l0 performance
band. The proposed revisions were made based upon over a decade of experience with the
Commission's 90-l l0 performance band and the parties' good faith discussions to improve
implementation for both parties. Simplot respectfully requests that the Commission approve the
ESA as submitted without modification.
' Cupitalized terms in these comments have the same meaning as in the ESA submitted for
approval.
COMMENTS OF J.R. SIMPLOT COMPANY
IPC-E-19-01
PAGE 2
COMMENTS
As initially developed in Order No. 29632, the performance band requires the QF, in
advance of a given month of delivery, to forecast its expected monthly deliveries to the utility -
referred to as Monthly Estimated Net Energy Amount in Idaho Power ESAs. If the QF delivers
within 90 percent and I l0 percent of the Monthly Estimated Net Energy Amount, it is paid the
contract price for all of its output. However, if the QF delivers more than I l0 percent of the
Monthly Estimated Net Energy Amount, energy delivered in excess of 110 percent is priced at
the lesser of 85 percent of the market price at the time of delivery or the fixed contract price. See
Order No. 29632 at20. In contrast, if the QF delivers less than 90 percent of the Monthly
Estimated Net Energy Amount, it is paid the lesser of 85 percent of the market price at the time
of delivery or the fixed contract price for all of its outpul in that month. /d Additionally, the
Commission also allowed the QF to update its Monthly Estimated Net Energy Amounts in the
month of delivery in the case of an event of forced outage or event of force majeure. Id. at 20-
21.
Although the basic construct of the performance band has remained unchanged since
Order No. 29632 in 2004, the Commission has occasionally approved changes warranted by
experience with the performance requirement. The two 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.
1. Allowing Updates to the Monthly Estimated Net Energy Amounts Closer in
Time to the Month of Delivery Is Reasonable
The first change from Simplot's prior ESA is to allow for updates to the Monthly Estimated
Net Energy Amounts closer in time to the month of delivery. This change is reflected in Article
COMMENTS OF J.R. SIMPLOT COMPANY
IPC-E-19-01
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6.2.3.
Under the previously approved ESA, Simplot was allowed to update its Monthly Estimated
Net Energy Amounts up until the last business day of the month that was one month removed from
the month of delivery. For example, Simplot previously could update the Monthly Estimated Net
Energy Amount for the month of March up until the last business day of January.
Under Article 6.2.3 of the ESA submitted in this case, Simplot would be able to update the
Monthly Estimated Net Energy Amount up until the 25th day of the month immediately preceding
the month of delivery, or if the 25th day falls on a holiday or weekend, the last business day before
the 25th. For example, Simplot would now be allowed update the Monthly Estimated Net Energy
Amount for the month of March until February 25th. The parties arrived at this revision due to
their discussions and information exchanged in discovery in Case No. IPC-E- l8-07. In short, the
parties believe that the Monthly Estimated Net Energy Amounts submitted by QFs are likely to be
more accurate, and thus more useful for ldaho Power's planning purposes, if they can include
updated information that may become available closer to the month of delivery.
This proposal to allow for more accurate updates closer to the month of delivery is
consistent with the spirit of the last Commission order to address this same question. Specifically,
in Case No. IPC-E-14-12, the Commission considered a proposal to change the deadline for such
updated Monthly Estimated Net Energy Amounts from three months in advance of the month of
delivery to one month in advance of the month of delivery. Although Order No. 29632 had called
for the three-month deadline, the Commission found that a new deadline for submitting estimates
reasonable. The Commission found "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." Order No. 33104 at 6. Quoting
COMMENTS OF J.R. SIMPLOT COMPANY
IPC-E-19-01
PAGE 4
from Order No. 29632 itself, the Commission explained, "We find that the interest of the Company
in planning for QF resources is better served if the generation forecast is a reliable estimate." 1d
(quoting Order No. 29632 at 23). The Commission further declared that it "did not approve the
90/l l0 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." Id.
Thus, allowing for use of a deadline one month ahead of the month deliveries was "consistent with
that purpose." Id.
That same reasoning applies here. Both Idaho Power and Simplot agree that the change
will be helpful to both parties. Idaho Power will receive more accurate Monthly Estimated Net
Energy Amounts in the circumstances where Simplot may need to update those estimates during
the month prior to the month of delivery due to unexpected circumstances. Allowance for more
accurate estimates will reduce the possibility of the 90-110 performance band operating as a
punitive pricing provision. This proposed change is reasonable and consistent with the spirit of
the Commission's prior orders.
The Revisions to the Process for Declared Suspensions of Energy Deliveries
Are Reasonable
The second change to implementation of the 90-l l0 performance band in the ESA
submitted here are improvements to the process for exercising a Declared Suspension of Energy
Deliveries. Within the construct of the 90-110 performance band, the Commission allows for
adjustment to the QF's Monthly Estimated Net Energy Amount during the month of delivery in
the event of an outage or intemrption, which can include both events of Forced Outage or Force
Majeure. These provisions are contained in Articles 6.2.4 and 12.3, which use the term Declared
COMMENTS OF J.R. SIMPLOT COMPANY
IPC-E-19-01
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2.
Suspension of Energy Deliveries to describe events that qualify for such reductions to the Monthly
Estimated Net Energy Amounts.
These provisions of the 90-110 performance band are very important to Simplot. Simplot
experiences unexpected outages beyond Simplot's reasonable control at its cogeneration facility
in the Don Plant, and such outages can easily result in Simplot being unable to deliver 90 percent
of its pre-set Monthly Estimated Net Energy Amount for a given month, absent adjustments to
take these events into account.
In Order No. 29632, the Commission approved the use of adjustments to Monthly
Estimated Net Energy Amounts within the month of delivery where a forced outage or force
majeure event occurs, but the Commission provided only broad guidance on the topic. Order No.
29632 at20-21. The order establishes that, in the case of a force outage event, the outage must be
at least 48 hours in duration. Id. The Commission described forced outages generally as including
"generating equipment breakdowns, geothermal well breakdowns, Idaho Power line maintenance
outages, etc." Id. The order also noted that Idaho Power had naturally included allowance for
adjustments to the Monthly Estimated Net Energy Amounts during the month of delivery in the
case of an event of force majeure. Id. at 14-15,20.
In the prior Simplot ESAs, the process for Declared Suspension of Energy Deliveries was
somewhat unclear and challenging to use in practice. The previous clause was problematic
because it stated Simplot must report and describe the cause of the outage in writing within 24
hours of the start of the outage. Another difficulty was that the previous clause stated Simplot had
to prove a negative to claim a Forced Outage because a Forced Outage must not be caused by a
lack of preventive maintenance. In practice, Simplot's facility experiences outages for which the
eventual duration and cause are not known within 24 hours. Often, it is not possible to ever identify
COMMENTS OF J.R. SIMPLOT COMPANY
rPC-E-19-01
PAGE 6
the precise cause of such an outage in a complex cogeneration system like that at Simplot's Don
Plant.
In the newly proposed ESA, revisions were made to improve the process for both parties.
Under the proposed Article 12.3, Simplot provides a preliminary notice to Idaho Power's
contractual personnel during the next business day after an outage lasting for 48 hours, thus
potentially qualifying it as a Forced Outage exempted from the 90-l l0 performance band. This
preliminary notice provides ldaho Power with preliminary information available at that time,
including the outage start time and date, the level of reduction of deliveries, the cause (if known
at the time), and Simplot's best estimate of when the outage will end. But Simplot will have up to
seven days after conclusion of the outage to determine if it will exercise its right to make a formal
Declared Suspension of Energy Deliveries by providing ldaho Power with its written notice with
details supporting the claim. This will prevent issuance of such claims before it is even known if
the outage will last more than 48 hours and will provide additional time to investigate and
accurately present the basis for the claim.
Additionally, given the difficulty of proving a negative, the proposed Article 12.3.3 allows
Simplot to establish its outages are not the result of lack of preventive maintenance by periodically
providing ldaho Power with evidence of ongoing maintenance at the facility. Unlike the prior
clause, the proposed Article 12.3 also clarif,res that an Event of Force Majeure may also result in
an adjustment to the Monthly Estimated Net Energy Amount. Finally, as with the current contract
and the requirements of the interconnection agreement, Simplot also provides Idaho Power's
operational personnel with immediate notice at the start and stop of all outages. The provisions
are collectively consistent with the original requirements described in Order No.29632,and, from
Simplot's perspective, an improvement over the prior contracts.
COMMENTS OF J.R. SIMPLOT COMPANY
rPC-E-19-01
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In sum, the changes to the provisions for the Declared Suspension of Energy Deliveries
reflect the experience of the parties since initial adoption of the 90-ll0 performance band and
should be approved as reasonable provisions within the scope of the initial policies set forth in
Order No. 29632.
CONCLUSION
For the reasons set forth herein, Simplot respectfully requests that the Commission
approved the ESA submitted by ldaho Power in this proceeding.
r?t4^DATEDthis l. day of February 2019
RICHARDSON ADAMS, P.L.L.C.
M. Adams
Peter J. Richardson
Attorneys for Petitioner J.R. Simplot Company
COMMENTS OF J.R. SIMPLOT COMPANY
IPC-E-19-01
PAGE 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the Itout of February 2019, 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:
Sean Costello
Deputy Attorney General
Idaho Public Utilities Commission
472 W . Washington
Boise, ID 83702
Donovan Walker
Idaho Power Company
l22l W. Idaho Street (83702)
P.O. Box 70
Boise, ID 83707
General Counsel
Don Sturtevant
J.R. Simplot Company
P.O. Box 27
Boise, ID 83707
J. Kahle Becker
Attorney atLaw
223 North 6th Street, # 325
Boise, ID 83702
C. Tom Arkoosh
Arkoosh Law Offices
P.O. Box 2900
Boise, ID 83701
Adams
COMMENTS OF J.R. SIMPLOT COMPANY
IPC-E-19-01
PAGE 9
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