20190507Comments.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 CONSIDERATION OF AN
ENERGY SALES AGREEMENT WITH LITTLE
MAC POWER COMPANY FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY FROM
THE CEDAR DRAW HYDRO PROJECT.
RECEIVED
1$l9l{[Y -1 PH 2! 0ll
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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-8.19-I2
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company's Application.
BACKGROUND
On March 19,2019,Idaho Power Company ("Idaho Power" or'oCompany") filed an
Application requesting consideration of an Energy Sales Agreement ("ESA" or "Agreement")
with Little Mac Power Company, Inc. ("Little Mac") for 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. The Facility is a 1.55 MW nameplate capacity hydro facility
near Twin Falls, Idaho.
Under the proposed ESA, Little Mac would sell and Idaho Power would purchase electric
energy generated by the Cedar Draw Hydro Project. The ESA is a replacement contract for a
power purchase agreement dated May 10, 1984, which expires May 31,2019.
1STAFF COMMENTS MAY 7,2019
The Agreement contains published non-seasonal, non-levelized hydro avoided cost rates
for a20-year term. The ESA contains capacity payments for the entire term of the Agreement.
The Company requests the Commission issue an order accepting or rejecting the ESA
prior to the expiration of the current contract on May 31,2019. If accepted, the Company
requests that all payments for purchases under the ESA be allowed as prudently incurred
expenses for ratemaking purposes.
STAFF RE,VIEW
Staff recommends approval of the proposed ESA between Idaho Power and Little Mac
Staff s justification is based upon its review of the ESA, which focused on: 1) 90lll0 rule;2)
eligibility for, and the amount of, capacity payments; 3) verification of non-seasonal hydro
status; and 4) adherence to the capacity size threshold to qualify for published rates.
90/110 Rule
Qualifying facilities are required to provide a monthly estimate of the amount of energy
they expect to produce. If the QF delivers more than I l0 percent of the estimated amount,
energy delivered in excess of I l0 percent is priced at the lesser of 85 percent of the market price
or the contract price. If the QF delivers less than 90 percent of the estimated amount, total
energy delivered is priced at the lesser of 85 percent of the market price or the contract price.
Order No. 29632. Staff verified that this provision is included in the ESA.
The ESA adopted five-day advance notice, instead of one-month advance notice, for
adjustments to monthly estimated amounts used for the 90/110 rule. This change in the amount
of advance notice was first proposed and subsequently approved in a renewal ESA between
Simplot, Co. and Idaho Power for generation from Simplot's Pocatello cogeneration plant in
Case No. IPC-E-I9-01. Order No. 34263. Consistent with Commission Order No. 34263, Staff
recommends approval of a five-day advance notice for reasons described below.
Staff determined that a five-day advance notice is reasonable and could be more accurate
for the Company to use in its short-term planning as they enter into the delivery month. This
would be true for any contract regardless of whether it is a new or renewal contract because
forecasts are usually more accurate closer to the time of delievery. In addition, the Cedar Draw
Hydro 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
STAFF COMMENTS MAY 7 ,20192
planning. In future requests where extensive QF historic generation data is absent, Staff plans to
investigate if it is still reasonable to reduce the notification period for revisions to monthly
generation estimates.
Capacity Payment
Commission Order No. 32697 states that "[i]f 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." Little Mac is not being paid for
capacity at the end of the original contract, but Staff believes the facility should receive
immediate payment of capacity as proposed in the ESA. Staff s justification is based on the
recent approval of the Wood Hydro ESA in Case No. IPC-E-19-04, which contained a similar
original contract as Little Mac. See Order No. 34295.
Based on the following rationale, the Commission approved capacity payments for the
Wood Hydro ESA:
Regarding capacity payments for the duration of the renewal contract, a
consistent application of the rationale in Order Nos. 32697 and 34200
supports approval of the ESA. Idaho Power procured capacity after the QF
entered its original contract, and the QF's capacity has been included in the
utility's load and resource balance. Therefore, the QF's energy has helped
the Company avoid building or procuring more capacity and cannot be
considered surplus power. See Order Nos. 34200 at 5,32697 at2l. We
find it reasonable to allow payments made under the replacement ESA as
prudently incurred for ratemaking purposes. Order 34295 at 5.
Staff believes the rationale used in Commission Order No. 34295 for Wood Hydro
applies to the Little Mac ESA. The original contracts were both signed within 3 months of each
other in 1984 and neither received capacity payments for the 35-year term of their contracts.
During the 35-year term of both contracts, Idaho Power has procured capacity and included the
QF's capacity in the utility's load and resource balance. Based on this information, Staff
recommends approval of immediate capacity payments in the proposed Little Mac ESA.
Non-Seasonal Hvdro Status
A "seasonal hydro" project is a hydro generation facility that produces at least 55% ofits
annual generation during the months of June, July, and August. Staff verified that this project
does not generate 55o/o of its annual generation during the three months according to its Monthly
aJSTAFF COMMENTS MAY 7 ,2019
Estimated Net Energy Amounts provided, and thus it is categorized as a "non-seasonal hydro"
project. Staff confirmed that the ESA is based on the avoided cost rates of non-seasonal hydro
resources.
Capacit), Threshold
In order for a hydro 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 l0 MW. Order
No. 29632 at 14. This project has a 1,550 kW nameplate capacity and therefore produces less
than l0 aMW on a monthly basis under normal or average conditions. Staff verified the project
is eligible for published avoided cost rates.
STAFF RECOMMENDATIONS
Staff recommends the Commission approve the ESA. Staff also recommends the
Commission declare Idaho Power's payments to Little Mac Power Company for the purchase of
energy generated by the Cedar Draw Hydro Project under the ESA be allowed as prudently
incurred expenses for ratemaking purposes.
714,^-
Respectfully submitted this day of May 2019
Edward
Deputy General
Technical Staff: Yao Yin
Michael Eldred
Rachelle Famsworth
Travis Culbertson
i : umisc/comments/ipce I 9. I 2ejyymerftnc comments
STAFF COMMENTS 4 MAY 7,2019
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 7th DAY OF MAY 2019,
SERVED THE FOREGOTNG COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-19-12, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
DONOVAN WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail : dwalker@idahopower. com
dockets@idahopower. com
KENDAL EGBERT LPA
LITTLE MAC POWER CO INC
CEDAR DRAW HYDRO
812 MAIN AVENUE NORTH
TWIN FALLS ID 8330I
ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
CERTIFICATE OF SERVICE