20190314Koyle Hydro Comments.pdf

NI|; T IVEI)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]
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azc)Attorneys for Koyle Hydro, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
KOYLE HYDRO INC. FOR THE SALE
AND PURCHASE OF ELECTRIC
ENERGY FROM THE KOYLE SMALL
HYDRO PROJECT
Case No. IPC-E-19-03
KOYLE HYDRO'S COMMENTS
COMES NOW Koyle Hydro, Inc., by and through its counsel of record, C. Tom Arkoosh
of Arkoosh Law Offices, and hereby adopts and incorporates the Comments of ldaHydro,
Shorock Hydro, Inc., and the Renewable Energt Coalition, filed in Idaho Public Utilities
Commission Case No. IPC-E-19-01 on February 8,2019, a true and correct copy of which is
attached hereto as Exhibit A, as the comments of Koyle Hydro, Inc., in the above entitled matter.
DATED this l4th day of Marchz0lg.
ARKOOSH LAW OFFICES
C. Tom Arkoosh
Attorney for Koyle Hydro, Inc.
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KOYLE HYDRO'S COMMENTS - Page I
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CERTIFICATE OF MAILING
I HEREBY CERTIFY that on the 14th day of March 2019,I served a true and correct
copy of the foregoing document(s) upon the following person(s), in the manner indicated:
Original and Jgap19$e.
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise, ID 83702
Copies to:
Edward Jewell
Deputy Attorney General
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83120-0074
472W. Washington
Boise, ID 83702
Donovan Walker
Regulatory Dockets
Idaho Power Company
1221 W. Idaho Street (83702)
P.O. Box 70
Boise, ID 83707
Energy Contracts
Idaho Power Company
P.O. Box 70
Boise, ID 83707-0070
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d iane.hariian@puc. idaho. gov
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edward j ewell@puc. idaho. eov
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E-mai I dwal ker(@idahopower-qqm
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KOYLE HYDRO'S COMMENTS - Page 2
C. Tom Arkoosh
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Orr r\pril l(;" 20llJ. ldalro l-lyrlroelcctric I'r.,rvcr Prrtiuccls -[-rust ("ltlah-tclrrr"]. Shorock
llyclro. lr:c. ("Slurrock"). and tlre Rcrrcu'able Lincrgy C.oalitiurr ("ltl:C") (colluctivcl5, the
'"Pcti1iuners"l pctitionecl thc Clornrnissir:n rsking that lhs 90ll l0 rcr;rrircrrrcnt inscrtccl into
l't.Jl{l'.,\ (Jlj errcrgy" Sales agrecnrcnts ("ISA") trc r-crrror,ed. ll)('-n-l.tl-07. (tlrc "latitittti'\'l-ltc
l'etititttr lllcucd.;ull()nS otltcl rrr*tlers. tlr:rt rrorr-aroirlcri cost plicing lor cncrgl'clclivcrt'ccl lrr:lo'.r'
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COMil,lHN]'S Ol" IDAI-IYDI{0. SHOITOC:K l'lYDIt0, lNC.. i\ND l-llI RfNIl.\\'Al]l.l:
IrNFll{GY COAl.l'fl0N * Pagc I
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 I, 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 (d)(2) of FERCs Regulation [8 C.F.R. $ 292.304(d)]. By contrast,
Qualifuing Facilities with non-firm power that cannot guarantee such delivery
may charge the utility only the cunent or 'as-available' market price for power.
Ibid. at page 386.
Thus, in IPC-E-18-07, 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 "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 thal 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:
Confiary 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-perfornance penalties . . .
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, TNC., 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.
9292.304(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 Qualifu 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
25s 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 Qualifuing Facilities closer to pegging the estimates between the 90 and ll0 percent
parameters, and simultaneously brought Idaho 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-I8-07 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, ond 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 ldaho 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 Staffs 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 Staffs Production Request No. 4 in this proceeding about whether ldaho 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-todate 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 StafPs Production Request No. 3 that:
COMMENTS OF IDAHYDRO, SHOROCK HYDRO,INC., AND THE RENEWABLE
ENERGY COALITION -Page 4
If a QF can provide estimates of generation deliveries neiuer 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-I8-07 represented
Idaho Power and some 60 developers and at least 24 ldaho 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
Qualiffing 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 Qualiffing
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/ll0 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, [NC., AND THE RENEWABLE
ENERGY COALITION -Page 5
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Order No. 29632,pa9e 14.
As reflected in our l0MW 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. 29632,page20
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 Idaho 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 Staffs 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
"much of the justification provided by Idaho Powef in defense of utilizing
monthly generation estimates has merit. Staff Comments at 7. Consequently,
COMMENTS OF IDAHYDRO, SHOROCK HYDRO, TNC., AND THE RENEWABLE
ENERGY COALITION - Page 6
based on our rcview of thc eviclenec prcscnlccl. rvr: lln<l th&t thc use oi rnontlrly
generation cstinlatcs is just and rcasorrablc. We encouragr: Iclalro Porvcr to be
rnindful of thc cl'ti:cts that this changc n1o1, [1;1vg on both its tipcrations ancl its
ratepiryers. \Yc cxpcut that the Cornpanl, rvill rvcigh tlrc benctrts ancl dclrimcnls
olr:rontlrly gcncraliorr cstimates as prr{ucts il'ith these provisions con:e on linc.l
COliCl.,LlSIOl\
When detining "lirr]I" po\ver lbr puqroscs of PUIlPA conrracts, inscltar as that c()ltcupl
has use to the utility, thc rnorc accuratc the estirnate, the nrore linn the powcr. lvlonth'ahcittl
cstimates of the porver to be delivered tlre fbllowing monlh provi<lc a reasonablc mo,lthly
e*tin:ute for the utilit1,. Estimates made closer lo the date of dclivcry. being morc accurittc,
ctrnscquently, arc nrorc reasonable. J'lrerc exists no reason not to adopt the industry's sclluliou
aucl nruve {bnvard. 'l'he Clon:nrission's llules "cncouragc thc use ol'' irrlhrrnal procccdirrgs lo
settle or deteminc cascs." IDAPA 31.01.01.022. It is respectfully rcqucstcd thc Cornrrission
aclvance tlTat directir,e ancl apprtive the ESA presently hefore it in tlris casc,
r,11n
DATED this **'.'clay of Fcbruary 3019.
ARKOOSFI I-AW OFFICES .I. KAI-ILE []ECI(IJII
AT-|ORNL.Y r\T l-i\W
C.clll"t Arkoush ti {jr
Attomcy ltrr ltlaFlydro Attomey lbr the Rcr:cu,able Energy
Coalition
irrtenclud to ureale n grurtitir'* pricing systurrt. it lras in fact hcen cosrll' tr: l:iS:\.r. "l'hc sceds ol'arr idua plarrtcd b;-
litrtttr:r Conrnrissiorrcr Srnitlr ptrccptions anrrolurced l{) ycilrs aeo in rlrc disscnr to (.)nlt No. fgtiJl halc bonr
cxpcnsivc fnrit fcrr "nrn ol'thc rivcr" llul{!].{ hydro project"':
I strongly opposc thc 9(l'lir'l l01t perl'r.lnrruncr lr"rrtd proposal ol'Idalro ['orvrr arrd also clo nor lirvor
thc .t0?i,i 1309,i, proposal of'thc Stafl. It is nry belief'tlrur projcor devck4rcrs rlrar sign PUI{l,A
contrxcls havc a lr:gally enft:rcE';tble obligatiorr. l"ltc irrccntivc lirr thcnr is to pror,ide all thc porr,cr
lhcy can. 'l'hcy nccd to be paid lo stav in operation and if they do nor producc. rhcv do nor gct
pnid. "l'hu bundiug prr:posal rvr:ruld operatc as a pcnaltv. nut an incr:ntive.
COJ\4MENTS OF IDAI.,IYDRO. SFIOROCK I..IYDI{O. INC.. AND'1'["IE IIENEIVAI]LE
ENERCY COALITION - Pagc 7
c IIRTIFICA:I' n, gI?. MAILING
I l-lElttltlY CHILl llY thaton,f',. -9hry of February 2019. I servecl a true and correct
copy ol'the foregoirrg document(s) upon the {bllowing person(s). in tlte tnanner inclicated:
0riginal and 7 copics to:
Diane llanian
Cclrnmissiort Sccretary
Idaho Public Utilities Corrrnission
472 W , Washington
Boise. ID 83702
Copies tcl:
Sean Costello
Deputy Attomey General
Idaho Public Utilities Commissiort
472W. Washington
Boise. lD 8i702
Donovan Walker
ldaho Power Companl'
l22l W. ldaho Strcet (83702)
P.O. llox 70
Boise, ID 8.i707
.1. R. Sin:plot Cr:rmpany
Gregory M. Adanrs
RiCI-IAIT DSON ADA N4 S. PLLC
515 North 27tr' Street t83?02)
P.O. Box 7218
Boise. lD 83707
Gerreral Counscl
Don Stuflcvant
J.l{. Simplot Company
P.O. Box 27
Boise. lD 83707
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CON4 N4 EN'|S O[. I DA I.I YDRO, S LIOROCK I"I Y DITO. I NC.. A N I)'I"11 L] I(I,JNI,JW AB I-L:
HNERCY COALll"l0N - Pagc B
.1. Kahle Becker. ISll No. 7408
Attorney'at I-au'
223 North 6th Strcet. # 325
Boise. lD 83702
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C.'l"onr r\rhoosh
COlVltulEN'fS OF lDAI{YDRO. SIIOROCK l-lYDR0, In"C., AND 1'l{E I{EN[WAl]LE
IjNERCY CO,,\LITION * Page 9