20190531final_order_no_34348.pdf

Office of the Secretary
Service Date
May 31,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-19-12
CONSIDERATION OF AN ENERGY SALES )
AGREEMENT WITH LITTLE MAC POWER )
COMPANY FOR THE SALE AND )
PURCHASE OF ELECTRIC ENERGY FROM )ORDER NO.34348
THE CEDAR DRAW HYDRO PROJECT )
On March 19,2019,Idaho Power Company ("Idaho Power"or "Company")filed an
Application seeking Commission approval of an Energy Sales Agreement ("ESA"or
"Agreement")between the Company and Little Mac Power Company,Inc.("Little Mac")under
which Little Mac would sell and the Company would purchase electric energy generated by the
Cedar Draw Hydro Project ("Facility").The Facility is a qualifying facility ("QF")under the
Public Utility Regulatory Policies Act of 1978 ("PURPA").
On April 4,2019,the Commission issued a Notice of Application and Notice of
Modified Procedure.Order No.34298.Staff filed the only comments and recommended approval
of the Application.
Now,based on our review of the record,the Commission approves the Application.
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
qualifyingfacilities,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.34348 1
available,the QF sells the energy pursuant to 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 eligible for 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's need 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 determined that 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 (clarifying that 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 available-<lo not have a separate energy and capacity component.
ORDER NO.34348 2
THE APPLICATION
The Facility has a 1.55 megawatt ("MW")nameplate capacity and is near Twin Falls,
Idaho.The Facility has been delivering energy under a PURPA Firm Energy Sales Agreement
executed on May 10,1984,which has an expiration date of May 31,2019.The ESA contains
published non-levelized avoided cost rates for non-seasonal projects of 10 average MW or less
with capacity payments for the entire 20 year term of the Agreement.The ESA has a 5-Day Ahead
provision for the Facility to provide monthly generation forecasts for the 90/110 performance
band.
COMMENTS
Commission Staff filed the only comments and recommended Commission approval
of the ESA.Staff's review of the ESA focused on implementation of the 90/110 performance
band,the eligibilityfor and amount of capacity payments,the Facility's non-seasonal hydro status,
and the Facility's eligibilityfor published rates as determinedby the capacity size threshold.Staff
verified the Facility'snon-seasonal hydro status and its compliance with the capacity size threshold
for published avoided cost rates.Staff verified the 5-Day Ahead monthly generation forecast
provision complies with the provision approved by the Commission in IPC-E-19-01.Staff noted
the Facility has been delivering energy to the Company since the 1980s,and therefore has
extensive historical production data that the Company can use for both short-term and long-term
planning.
Staff noted that Little Mac is not being paid for capacity at the end of its original
contract,but asserts the Facility should receive immediate payment for capacity based on the recent
approval of the Wood Hydro ESA in Case No.IPC-E-19-04,which contained a similar original
contract as the proposed ESA in this case.See Order No.34295 at 5.Staff stated its belief that
the rationale used in Commission Order No.34295 for Wood Hydro also applies to the Little Mac
ESA.During the 35-year term of both contracts,the Company has procured capacity and included
the QF's capacity in the utility's load and resource balance.Therefore,Staff recommended
approval of immediate capacity payments in the proposed ESA.
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,
and contracts of public utilities and to determine whether they are just,reasonable,preferential,
ORDER NO.34348 3
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 authority under 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 authorityunder Title 61 and
PURPA.
The Commission has reviewed the record,includingthe Application,the ESA,and the
comments of Commission Staff.Based on our review,we find it reasonable to approve the ESA
because the ESA contains Commission-approved terms that the Facility is eligible for based on its
characteristics such as fuel source,project size,generation output profile,and renewal contract
status.We also find that the Company's payments for purchases of energy and capacity under the
ESA are prudentlyincurred expenses for ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the ESA between Idaho Power and Little Mac is
approved,effective on service date of this Order.
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.34348 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 6
day of May 2019.
PAUL K LAN ,PRESIDENT
KRISTINE RAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\lPC-E-19-l2\IPCE1912jmal order ej
ORDER NO.34348 5