20190213Comments.pdf

EDWARD J. JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 10446
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER FOR APPROVAL OR
REJECTION OF AN ENERGY SALES
AGREEMENT WITH J.R. SIMPLOT
COMPANY _ POCATELLO COGENERATION
AND SMALL PURCHASED POWER PROJECT
FiECEIVED
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Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. IPC-E-19-01
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company' s Application.
BACKGROUND
On January 2,2019,Idaho Power Company ("Idaho Power" or "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 would purchase electric
energy generated by Simplot's Pocatello cogeneration and small power project ('iFacility"). The
Facility is a qualifying facility under the Public Utility Regulatory Policies Act of 1978.
Under the proposed ESA, Simplot would sell and the Company would purchase electric
energy generated by Simplot's Pocatello Cogeneration and Small Purchased Power Project. The
Facility has a nameplate capacity of 15.9 MW, but is operated so as not to exceed 10 aMW on a
monthly basis under normal conditions. Application at 4.
1STAFF COMMENTS FEBRUARY I3,2OI9
The Agreement contains proposed modifications to Simplot's generation forecasting
requirements under the 90/110 performance band. Id. at 5. The Agreement also contains
proposed modifications to Simplot's obligations to report generation disruptions. 1d.
The ESA is a replacement contract for a2016 Agreement approved by the Commission in
Order No. 33471. Because the ESA would replace a contract that paid the Facility capacity
payments, the ESA contains capacity payments for the entire term of the Agreement. Id. The
term of the Agreement is three years. Agreement at 12.
STAFF REVIEW
The proposed contract differs from the current contract in two areas: (1) A more detailed
procedure for declaring suspension of energy deliveries, and (2) A reduced lead time for
notification of adjustments to Estimated Net Energy Amounts needed for 90/110 firmness
requirements. Staff reviewed these two sets of modified provisions as well as other standard
terms in the proposed Agreement and recommends approval.
Seller Declared Suspension of Enerey Deliveries
The proposed Agreement provides greater detail in the procedure for declaring
suspension of energy deliveries than what is contained in the current contract approved in
IPC-E-I6-01. In a meeting with Staff, Simplot represented that the current contract did not
provide sufficient guidance and could lead to disagreements when declaring suspension of
energy deliveries. The proposed language does not change the basic nature ofthe current
provision, but provides additional clarity to the specific steps when the seller initiates a
declaration.
90/1 I 0 Performance Band
QFs provide a monthly estimate of the amount of energy they expect to produce in each
month. When a QF's monthly generation is either less than 90% of the estimated generation
amount, or more than 110% of the estimated generation amount, utilities pay QFs 85% of the
market price, or the contract rate, whichever is less. Order No. 29632. Staff verified that this
provision is included in the ESA.
Parties in the proposed Agreement reduced the notification period for adjustments to
Estimated Net Energy Amounts from at least one month in advance as approved in Order
2STAFF COMMENTS FEBRUARY 13,2019
No. 33103 to at least five business days in advance prior to the delivery month. Staff believes
this reduction in lead time has merit for the Simplot Facility and recommends approval of the
change.
Order No. 33 103 states, "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." Forecasts take place within various time
horizons. The Company states, and Staff believes, that a five-day lead time may improve the
accuracy ofthe generation forecasts for near-term operations. In its production response, the
Company states:
Idaho Power's forecasting processes would continue to utilize various sources
of data and information in moving from a month-ahead forecast to day-ahead
and real-time operations. If 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. If a change to a QF's monthly Net Energy Amount is
significant, the 'at least five days in advance' requirement allows for the
minimum amount of time to make any necessary changes to Idaho Power's
near-term forecasts/operations. Production Response to Request No. 3
(emphasis added).
Staff agrees with Idaho Power that forecasts may be more accurate five days in advance
compared to one month in advance and believes the reduced lead time is sufficient for the
Company to make any necessary changes to its near-term forecasts and operations. Although
Idaho Power did not address how a five-day lead time can affect its month-ahead planning, Staff
believes the Company can rely on Simplot's historic generation data for its longer-term planning.
Idaho Power indicated in its production responses that it finds it reasonable to apply the
five day ahead lead time to all ESAs with 90/110 provisions. Response to Production Request
No. 5, No. 6, No. 7, No. 8, and No. 9. For existing contracts, Idaho Power acknowledged that
the change would require a commission-approved amended contract. Response to Production
Request No. 10.
Staff believes that it is likely reasonable for other renewal ESAs to contain the f,rve day
ahead lead-time notification, but will continue to evaluate ESAs with the provision on a case-by-
case basis. Staff would like to see more information on how the change will affect the
Company's month-ahead planning and longer-term planning. In addition, Staff is concerned
whether it is appropriate for new ESAs to contain only a five day ahead lead-time notification.
JSTAFF COMMENTS FEBRUARY I3,2OI9
In those circumstances, the Company does not have historical generation information from those
projects to rely upon for month-ahead and longer-term planning purposes. If the Company
submits new ESAs with the five day ahead lead-time notification to the Commission for
approval, Staff expects to see supporting data and strong reasoning why the five day ahead
lead-time notification should be approved.
As a consequence to this change, Staff believes that a five day lead-time notification
would likely allow more of Simplot's energy production to fall within the 90/l 10 performance
band, resulting in better compliance with 90/110 requirements.
Capacity Pa),ment
This Facility is being paid for capacity at the end of the original contract. "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 includes immediate payment of
capacity." Order No. 32697. Staff verified that the proposed avoided cost rates include capacity
payment for the full term of the replacement contract.
Capacity Size Thrcshqkl
In order for a cogeneration project to qualify for published rates, the project capacity
cannot exceed l0 aMW. Project capacity is determined on a monthly basis under normal or
average design conditions. In other words, the maximum monthly generation that qualifies for
published rates is capped at the total number of hours in the month multiplied by 10 MW. Order
No. 29632 at 14. The Facility has a nameplate capacity of 15.9 MW, but is operated under
l0 aMW on a monthly basis under normal conditions. Thus, Staff verif,red the project is eligible
for the published avoided cost rates.
Published Avoided Cost Rates
Page 3 of the Application states that "Simplot elected to contract with Idaho Power for a
three-year term using the non-levelized, non-seosonal hydro published avoided cost rates..."
Idaho Power admits through Response to the First Production Request that this is not correct. It
should read "non-levelized 'other 'published avoided cost rates." Despite the mistake, Staff
confirms that the avoided cost rates included in the ESA are the published avoided cost rates for
"other" resources.
4STAFF COMMENTS FEBRUARY 13,2019
STAFF RECOMMENDATIONS
Staff recommends the Commission approve the ESA. Staff also recommends the
Commission declare Idaho Power's payments to Simplot under the ESA be allowed as prudently
incurred expenses for ratemaking purposes.
Respectfully submitted this 13tt^ day of Febrwry 2019.
Edward
Deputy General
Technical Staff: Yao Yin
Rachelle Farnsworth
i:umisc/comments/ipce 19. I ejyyrf comments
5STAFF COMMENTS FEBRUARY I3,2OI9
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 13TH DAY OF FEBRUARY 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN
CASE NO. IPC-E-I9-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWNG:
DONOVAN WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail : dwalker@ idahopower. com
dockets@idahopower. com
DON STURTEVANT
GENERAL COUNSEL
J R SIMPLOT CO
PO BOX 27
BOISE ID 83707
E-mail: [e-mail]
don. sturtevant@ simplot. com
ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail: [e-mail]
GREGORY M ADAMS
RICHARSON ADAMS PLLC
PO BOX 7218
BOISE ID 83707
E-mail: [e-mail]
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CERTIFICATE OF SERVICE