20190329final_order_no_34294.pdf

Office of the Secretary
Service Date
March 29,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF APPLICATION OF )CASE NO.IPC-E-19-03
IDAHO POWER COMPANY FOR )APPROVALOFANENERGYSALES )
AGREEMENT WITH KOYLE HYDRO )ORDER NO.34294
On February 6,2019,Idaho Power Company ("Idaho Power"or "Company")filed an
Application seeking approval of an Energy Sales Agreement ("ESA"or "Agreement")with Koyle
Hydro Inc.("Koyle Hydro")for energy generated by the Koyle Small Hydro Project ("Facility").
The Facility is a 1.4 MW nameplate capacity hydro facility near Gooding,Idaho.The Facility is
a qualifying facility ("QF")under the Public Utility Regulatory Policies Act of 1978.Id
On February 21,2019,the Commission issued a Notice of Application and Notice of
Modified Procedure that set a comment deadline of March 14,2019,and a reply deadline of March
21,2019.See Order No.34244.Staff and Koyle Hydro were the only persons or parties to file
comments.
With this Order we approve the application and ESA between Idaho Power and Koyle
Hydro.
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 utility would 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.Rosebud Enterprises,Inc.v.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.34294 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 Commission uses the Integrated Resource Plan ("IRP")methodology to determine
avoided cost rates for QFs that are not entitled to published avoided cost rates.The IRP
methodology "assesses the value of each QF project in terms of its capability to deliver resources
in relation to the timing and magnitude of the utility'sneed of such resources."Order No.32697
at 17.The Commission annuallyupdates certain inputs to the IRP methodology such as natural
gas forecasts,utility load forecasts,and long-term contract commitments.Order No.32697 at 22
(timing of filing changed from June 1 to October 15 of each year by Order No.32802 at 3).
For both SAR-based and IRP-based rates,the Commission has determinedthat it is in
the public interest to compensate QFs separately for the energy they produce and the capacity they
contribute to the purchasing utility.Id.at 16.QFs selling energy under a SAR-based or an IRP-
based contract are not entitled to compensation for capacity until the utility's first capacity deficit
date.Order No.32697 at 21.The first capacity deficit date is determinedthrough the IRP planning
process.Order No.33357 at 25-26.If a QF renews its contract with the utility,the capacity deficit
date is still determined as of the date the original contract was executed.Order No.33419 at 26.
See also Order No.32737 at 5 (clarifyingthat Staff will tailor SAR-based rates to include capacity
for renewal contracts from the outset).Schedule 86 contracts-for QFs that sell energy to Idaho
Power as it becomes availabledo not have a separate energy and capacity component.
ORDER NO.34294 2
THE APPLICATION
The Agreement is a renewal contract.The Facility has been delivering energy to Idaho
Power under a Power Purchase Agreement dated February 15,1983,which expires March 31,
2019.The renewal ESA contains published non-levelized avoided cost rates for non-seasonal
hydro projects of 10 aMW or less for a 20 year term.The Agreement contains capacity payments
for the entire term of the Agreement.The Agreement contains a Net Energy Amount monthly
adjustment identical to the provision approved in Order No.34263 ("5-Day Ahead provision").
The Company requests the Commission issue an order accepting the ESA,and declare all
payments made by Idaho Power for purchases under the ESA be allowed as prudentlyincurred
expenses for ratemaking purposes.
COMMENTS
Commission Staff and Koyle Hydro both filed comments in support of Commission
approval of the Application.
A.Commission Staff
Staff reiterated that the 5-Day Ahead provision probably is a better estimate of
generation for the Company's short-term planning process.Staff also noted that,in this case,the
Company has 35 years of historical production data from the Facility to rely on for its long-term
plans.Therefore,Staff has no concern that the Company might harm its long-term planning by
moving from the month-ahead Net Monthly Adjustment in this case.Staff verified the Facility is
eligible for capacity payments from the outset of the replacement ESA consistent with Order No.
32697.Staff also verified the Facility's eligibilityfor published non-seasonal hydro rates.
B.Koyle Hydro.
Koyle Hydro's comments incorporated the comments of Idahydro,Shorock Hydro,
Inc.,and the Renewable Energy Coalition in IPC-E-19-01 regarding the 5-Day Ahead provision.
Those comments explained that the 5-Day Ahead provision was the result of compromise between
the QFs and the Company,that the Company has repeatedly stated that it foresees no operational
challenges in moving to the 5-Day Ahead provision,and that the 5-Day Ahead provision is in line
with the spirit and intent of the 90/110 performance band.
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,
ORDER NO.34294 3
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 authorityunder 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 authority under Title 61 and
PURPA.
The Commission has reviewed the record,includingthe Application,the ESA,and the
comments of Commission Staff and Koyle Hydro.Based on our review,we find it reasonable to
approve the ESA.We find Koyle Hydro is eligible for published non-seasonal hydro avoided cost
rates.We also find that Koyle Hydro is eligible for capacity payments for the duration of the
renewal contract consistent with our reasoning in Order No.32697.We further find that the ESA
contains acceptable contract provisions consistent with PURPA,FERC regulations,and this
Commission's prior orders.We find it reasonable to allow payments made under the new ESA as
prudentlyincurred for ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the ESA between Idaho Power and Koyle Hydro is
approved,effective on April 1,2019.
IT IS FURTHER ORDERED that all payments made by Idaho Power for purchases of
energy and capacity under the ESA are allowed as prudentlyincurred 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.
ORDER NO.34294 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of March 2019.
PAUL KJ LAND ,PRESIDENT
KRISÚNERAPER,CO MISSI'ONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\lPC-E-19-03\IPCE1903_finalorder_ej
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