20191126Comments.pdf

EDWARD J. JEWELL
DEPUry ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
[phone]
IDAHO BAR NO. I0446
Street Address for Express Mail:
I I33I W CHINDEN BVLD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attomey for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
lT
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER FORAPPROVAL OFA
POWER PURCHASE AGREEMENT WITH
JACKPOT HOLDINGS, LLC, FOR THE SALE
AND PURCHASE OF UP TO 220 MEGAWATTS
OF RENEWABLE SOLAR GENERATION.
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COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on ldaho Power
Company's Application.
BACKGROUND
On April 4,20l9,ldaho Power Company ("ldaho Power" or "Company") filed an
Application seeking approval of a Power Purchase Agreement ("PPA" or "Agreement") with
Jackpot Holdings LLC, ("Jackpot Solar") for energy generated by the Jackpot Solar Facility
("Facility"). The Facility is located between Twin Falls and the Nevada border.
On April 25,2019, the Commission issued a Notice of Application and Notice of
Intervention Deadline. Order No. 34321 . No parties intervened.
On June 5,2019, the Commission issued a Notice of Modified Procedure and set a
comment deadline of July 23, 201 9, and a reply comment deadline of August 6, 2019. Order
No. 34353.
STAFF COMMENTS NOVEMBER 26.20191
CASE NO. IPC-E-I9.14
On July 19,2019, the Company submitted a letter to the Commission indicating that the
Company supported an adjustment to the comment deadline because the Company could not
provide a supplernental economic modeling analysis requested by Staffwithin the original
commant period.
On July 23, 2019, Staff filed comments recommending the Commission vacate the
comment deadline and set a revised comment deadline after the Company filed the supplemental
economic modeling analysis.
On August 5,2019, the Commission issued a Notice of Suspended Comment Period,
which ordered "that the previously established comment deadlines are vacated until the
Company files additional analysis and the Commission establishes new comment deadlines."
Order No. 34399 at 2. The Commission also notified the public that "the Company expects the
additional analysis to take until the end of August2019." Id.
On October 23, 2019, the Company submitted Comments of Idaho Power Company
Regarding PPA Elections ("Comments Regarding PPA Elections"). In its Comments Regarding
PPA Elections, the Company notified the Commission that pursuant to terms of the PPA the
Company elected to: l) decline its option to purchase the 100 MW output from the Option
Facility; and 2) exercise its right, through a non-regulated IDACORP afEliate of Idaho Power
Company, to negotiate for ownership of the Facility.
The Comments Regarding PPA Elections state that the Company "is completing and
providing to Staffthrough discovery updated portfolio analysis from its 2019 Integrated
Resource Plan ("IRP") relating to the inclusion ofJackpot Solar (120 MW) and Franklin Solar
(100 MW) as generation resources in the IRP." Id. at 3.
On November 7, 2019, the Commission re-established comment deadlines. Order
No. 321479.
The PPA prices Net Output at $21.75lMWh escalated at 1.5Yo for 20 years. This pricing
assumes the Facility owner can secure the 30% federal Investment Tax Credit, which would
require significant action before December 31,2019.
STAFF REVIEW
Introduction
The overall purpose of Staffs review is to make a recommendation on the prudence of
the Jackpot Solar PPA. Specifically, Staff s review consists of the following:
STAFF COMMENTS 2 NOVEMBER 26,2019
l. An economic analysis to determine if the resource and associated transmission
upgrade investrnents will likely provide a net benefit to customers;l
2. A review of the terms contained within the PPA to determine if there are specific
issues of concern; and
3. Identification of important considerations needed to protect Idaho Power's customers
given the potential purchase ofJackpot Solar facility by the non-regulated IDACORP
affiliate.
Through its review, Staffconcludes: l) Jackpot Solar is likely to provide a net economic
benefit to customers; 2) there are no contract terms that raised any major concerns; and 3) extra
scrutiny will be required to ensure that IDACORP is not unduly profiting from Idaho Power
customers because ofthe affiliated transaction with the regulated utility.
Economic Analysis
Staffbelieves Jackpot Solar is a resource decision based primarily on a time-limited
economic opportunity and not on the need of the resource to meet reliability requirements. The
opportunity is time-limited because the PPA contains contract prices that reflect investment tax
credits that are only available if a minimum threshold of investments are made by the developer
before the end of the 201 9 calendar year. The justification needs to be based on economics,
providing a net benefit to Idaho Power's customers, because the resource is not needed to meet
load over the next decade. Application at 8-9.
Because the time-limited nature of the project precludes the ability to evaluate other
altemative resources that could be more beneficial to customers,2 Staffbelieves the project needs
to pass increased scrutiny in terms of cost-savings and minimal risk.
Due to increased scrutiny for the project, Staffbelieves the "expected" analysis tbr
determining the prudence ofJackpot Solar, given the Company's modeling capabilities, should
be based on Net Present Value ('NPV") cost comparisons over the life of the contract with and
without the project. The analysis would be similar to the type of analysis the Company included
in its Application using models and data fiom the 2017 IRP.
' Although the Company's proposed cost of the proposed transmission upgrades was evaluated in the 2019 IRP
analysis and in the contract price to market p c€ comparison, a determination of prudence should be based on acnral
cost in the next general rate case,
2 Alternatiye resources would be identihed through a robust request-for-proposal process and included for evaluation.
STAFF COMMENTS NOVEMBER 26,20193
Unlike the 2017 IRP analysis, the "expected" analysis would use the most recent data and
assumptions and would be tested across a range of the most coslsensitive variables that could
change in the future in order to evaluate risk, such as natural gas prices, CO2 prices, and several
potential resource portfolios that the Company might implement in the future. The analysis
would start by first identifoing several portfolios that perform well under a range ofpotential
future conditions without including the resource in question. If the NPV cost for each of these
portfolios improves by adding the resource to each portfolio across a reasonable range of
alternative futures, then the resource is likely to be economically prudent.
For a range of reasons to be discussed, the Company was not able to provide Staffs
"expected" analysis for Jackpot Solar using data and assumptions from the 2019IRP. However,
the Company did provide 2019 IRP model runs that Staff analyzed indicating a cost saving to
customers. Because the 2019 IRP analysis was not as robust as needed to pass the increased
scrutiny required for a standalone analysis, Staff supplanented its review by performing
comparisons of forecasted market price vs. the PPA contract price, and by reviewing the
Company's analysis using the 2017 IRP included in the Company's Application. The sum-total
ofall three ofthese analyses indicate that the project is likely to be a cost-savings to customers
over the length of the contract. A more comprehensive description, results, and shortcomings, of
each analysis will be provided in the sections to follow.
20f 9 IRP Analysis
Historical Context and Method
The Company has used the hourly time-step dispatch module in the Aurora power cost
modeling software for longer than a decade. The dispatch module can only provide "what-if"
capability, returning relative cost differences between different feasible portfolios. 3 In past
IRPs, the Cornpany has developed portfolios outside the model. The best the Company can
provide using this functionality is the lowest cost feasible portfolio among a limited set of
portfolios provided as inputs.
In this year's IRP, the Company attempted to implement Aurora's Long-term Capacity
Expansion (*LTCE') module which is supposed to provide an optimal least-cost portfolio within
1A feasible ponfolio is a resource plan that meets load, retiability, environmental, and other operational constraints
needed by the system. A feasible portfolio may not be optimal, but an optimal portfolio must be feasible.
NOVEMBER 26,20194STAFF COMMENTS
a set of constraints as an output. For the LTCE module to work, the Company must input a wide
vadety ofpotential resources that the LTCE can select to fill resource deficits in the Company's
current load and resource balance. For the PPA filing and for the 2019 IRP, the menu of
potential resources included both Jackpot and Franklin Solar projects. lf the LTCE selected
either or both of the solar projects, it would indicate that the projects selected were cost effective
for a given natural gas forecast, CO2 price, and Boardman{o-Hemmingway ("B2H) scenario.
However, the analysis in the Company's Application showed that Jackpot Solar and/or
Franklin Solar was not included in 7 of the 12 optimized portfolios that included the B2H
Transmission Line. This concemed Staffbecause B2H is the resource the Company has chosen
to fill the first capacity deficit in the past several IRP's.
After sharing Stafls concem, the Company agreed to perform additional model runs
comparing portfolios where the solar projects were both forced and eliminated for selection into
portfolios by the LTCE. After simulating the portfolios using the dispatch module, the results
showed that the projects were not economic under several alternative futures, but more
importantly indicated a problem with the LTCE model logic. The Company realized that
because the logic was designed to optimize the cost of the entire Western Electricity
Coordinating Council ("WECC") region, it can result in portfolios that are sub-optimal for Idaho
Power's system.a
Although the Company had to mostly abandon the LTCE module to evaluate the solar
projects and to produce optimal portfolios for the IRP, the Company re-ran all24 altemative
future scenarios through the LTCE to produce WECC-optimized portfolios as a starting point.
This created portfolios for evaluation in the dispatch module that, although not optimized, are
considered f'easible in Idaho Power's system. It also provided the opportunity, prior to running
the LTCE, for the Company to: l) update some of the assumptions used in the dispatch modules;
2) re-evaluate exercising the Company's right-of-firsrrefusal to purchase Jackpot Solar; and
3) decide if the Company wanted to purchase the output fiom the Franklin Solar facility.
The Company incorporated Renewable Energy Credits C'REC) generated by the project
as benefits and added about $l I million in "transmission upgrade" cost, neither of which were
included in the analysis in the original Application. According to the Company, it did not
include any value for the sale ofRECs generated from the projects originally because "if the
a Staffrepeatedly pointed out in IRP meetings that optimizing the WECC region in the LTCE was problematic.
5 NOVEMBER 26.2019STAFF COMMENTS
REC sales were to be included, the net benefit to customers would be even higher." (Larkin, DI,
p.16). Staffbelieves the value ofthe projecl's RECs were needed to offset the cost of
transmission upgrades that have since become the responsibility of the Company.
The Company did not include the cost of transmission upgrades at the time of
Application because the seller had executed a Generator Interconnection Agreement ("CIA") for
Jackpot Solar as an Energy Resource. Application at 7. However, according to the Company,
[O]nce the project contracted to sell all of its output to ldaho Power, Idaho Power
was required to request Network Integration Transmission Service. The network
upgrades for the associated Network Integration Transmission Service are funded
by the Transmission Provider pursuant to the OATT, which in this case is Idaho
Power Transmission. Therefore, these costs are appropriately included in the
updated Jackpot analysis, as they reflect a Company-funded investment in its
transmission system. Production Request No. 34.
Staffbelieves this is the proper treatment for upgrades required for a resource designated as a
Network Resource. According to FERC,
Most improvernents to the Transmission Systern, including Network Upgrades,
benefit all transmission customers, but the determination ofwho benefits liom such
Network Upgrades is often made by a non-independent transmission provider, who
is an interested party. In such cases, the Commission has found that it isjust and
reasonable for the Interconnection Customer to pay for Interconnection Facilities
but not for Network Upgrades. FERC, Docket No. RM02- 1 -000, Order No. 2003,
July 24,2003.
In addition to updating costs and benefits in the models, the Company decided to exercise
its contractual rights to purchase the Jackpot Solar facility through its affiliate, IDACORP, and to
forego its right to acquire the 100 MW output from Franklin solar. This eliminated consideration
ofFranklin Solar as a resource in any of the resource portfolios. But no other changes to the
economic analysis would be required as a result ofthe affiliate's purchase ofthe facility because
according to the Company, "the PPA with Idaho Power as presented to the Commission, along
with the associated benefits to Idaho Power customers, would not change." Idaho Power
Comments, October 23, 2019 at 8.
The top performing WECC-optimized portfolios with and without B2H were further
manually adjusted to lower the cost and to create additional feasible portfolios. 5 By manually
adjusting the WECC-optimized portfolios to achieve a better result when simulated in the
5 The manual adjustments included modifying iim Bridger retircment dates and the timing of additional future
resources to get lower cost portfolios.
STAFF COMMENTS NOVEMBER 26,20196
dispatch module, it provided validation that the LTCE module was not retuming optimized
portfolios for Idaho Power's system. Although the Company's decision has resulted in
significant rework and delays, the change has increased Staffs confidence in the Company's
overall modeling results.
Due to limited time to perform additional analyses and to meet the production tax credit
deadlines, Staffrequested NPV dispatch model comparisons both with and without Jackpot Solar
for: (1) the highest performing three manually-adjusted portfolios; (2) Plann'ing and MidJevel
gas price forecasts; (3) Plaruring and Zero CO2 cost assumptions; and (4) portfolios with and
without B2H. This request produced l8 different scenarios to help Staff evaluate the costs,
benefits, and risks associated with including the project in Idaho Power's System. The results of
this analysis are discussed in the following section.
2019 IRP Analysis Results
Staffrequested an analysis similar to its "expected" analysis using 2019 IRP models with
the intent to functionally isolate the economic effect ofadding Jackpot to already high
performing portfolios without the project. Instead, the Company provided results of an analysis
that economically compares portfolios with Jackpot Solar to similar portfolios substituting
Jackpot with other resources to meet future load. Staff anal yzed two sets of NPV comparisons
from the results of this analysis: the first was the NPV differential results provided by the
Company as a result of Staffs production request; the second was a more conservative
comparison calculated by Staff. The results ofboth ofthese analyses showed a net positive
benefit to customers in all scenarios except for one. However, the best conclusion that these
analyses can provide is that adding Jackpot Solar at the end of2022 is better than altemative
resources that may or may not be least-cost, least risk resources added later. Staff believes this
provides some indication that Jackpot Solar is economic, but on its own is not sufficient. The
results ofthis analysis and its shortcomings are discussed further.
The net present value differential results (NPV(d))6 of the Company's analysis using
different combinations of with and without B2H, Planning and MidJevel gas price forecasts, and
Planning and Zero carbon prices are shown in Table I below.
7STAFF COMMENTS NOVEMBER 26,2019
6 The NPV(d) shows ifthe project is a benefit to customers, a negative Yalue, or a cost to customers, a positive value,
over the 20 year time frame of the IRP analysis.
Scenarios NPv(d)
with B2H
NPv(d)
without B2H
lst Portfolio - Planning Cas, Planning Carbon 5 (70,t77)$ (36,006)
s (3s,130)$ (52,936)2nd Portfolio - Planning Gas, Planning Carbon
3rd Portfolio - Planning Gas, Planning Carbon $ (s2,22s)$ (482)
I st Portfolio - Mid Cas, Planning Carbon $ (69,s82)$ (47,8s1)
2nd Portfolio - Mid Gas, Planning Carbon $ (41,91s)648S()62
3rd Portfolio - Mid Gas, Planning Carbon $ (s2,613)$ (2,990)
lst Portfolio - Planning Gas, Zero Carbon 294S()$ (28,919)
s (36,s49)$ (48,902)2nd Portfolio - Planning Gas, Zero Carbon
3rd Portfolio - Planning Gas, Zero Carbon $ (s2,486)$ (3,121)
$ (54,219)$ (31,539)
$ (42,879)
Table 1- Company 2019IRP Analysis NPV(d)
Results
Benefit Cost $ x1000
Average
All Scenario Average
The analysis shows that the pottfolios with Jackpot Solar compared against altemative
portfolios for each modeled altemative future results in a net benefit. Staffbelieves there is
value in this analysis, but the analysis is not sufficient for determining the pure economic benefit
as described by Staffs expected analysis. For example, some of the results reflected in Table I
are counter-intuitive. Jackpot Solar, which is a zero carbon-emitting resource, shows lower
benefits with planning carbon than it does with the zero carbon scenarios with B2H. Although
explainable, the counter-intuitive results reflect the fact that the resources substituted for Jackpot
Solar into portfolios used for comparison were not least-cost alternatives.
8STAFF COMMENTS NOVEMBER 26,2019
Table 2- Staff 2019IRP Analysis NPV(d) Results
Benefit Cost $ x1000
Average
All Scenario Average
Utilizing results from the Company's analysis, Staffperformed a more conservative set
ofcomparisons illustrated in Table 2 above. This analysis compares the results for each model
run with Jackpot Solar to the best performing portfolio without Jackpot Solar for a given
altemative future. As can be seen in Table 2 above, these comparisons show that all NPV
differences result in a net positive savings in all cases except for one.
Shortcomings of the 2019 IRP Analysis
Although the results of this analysis provide some indication that Jackpot Solar will
provide a net benefit to customers, Staffbelieves the analysis is insufficient for several reasons
including: (1) the method ofanalysis does not reflect the intent to show that Jackpot Solar is
justified based on economics and not a need to meet load; (2) there is no evidence that the
resources used to compare to Jackpot Solar are least-cost without some type of competitive
bidding; and (3) the analysis does not cover a sufficient range of natural gas and CO2 prices to
evaluate risk.
First, as mentioned above, the analysis performed by the Company does not isolate the
effect of adding Jackpot Solar to an already high-performing feasible portfolio without the
resource. lnstead, it essentially compares how Jackpot Solar portfolios compare to a
hypothetical set of resources within an altemative portfolio. Staffbelieves there is no way to
NOVEMBER 26,2019o
NPV(d) with
B2H
NPV(d) rvithout
82H
1st Portfolio - Planning Gas, Planning Carbon $ (s3,462)$(ts,712)
2nd Portfolio - Planning Gas, Planning Carbon $ (35,130)$ (2,3e3)
3rd Portfolio - Planning Gas, Planning Carbon s (24,848)$ (482)
l st Portfolio - Mid Gas, Planning Carbon $ (s3,491)s (3,s48)
2nd Portfolio - Mid Gas, Planning Carbon $ (4r ,915)$ (13,768)
3rd Portfolio - Mid Gas, Planning Carbon s (30,s35)$ (2,990)
l st Portfolio - Planning Cas, Zero Carbon $ (2s,427)$ 2,020
2nd Portfolio - Plaruring Gas, Zero Carbon s (36,54e)s (1,822)
3rd Portfolio - Planning Gas, Zero Carbon $ (18,729)S (3,r21)
$ (3s,s6s)$ (4,646)
$ (20,106)
Scenarios
STAFF COMMENTS
determine if the combination of these resources substituted for Jackpot Solar are least-cost
resources which can lead to a high-cost portfolio used for comparison, biasing the result.
This leads to the second shortcoming: the 2019 IRP analysis does not compare Jackpot
Solar to resources that are competitively bid. While the 2019 IRP-based analysis did compare
Jackpot Solar against other resources included in the lRP, it did not compare the project against
actual altematives that are determined through a robust request-for-proposal process. As stated
by the Company,
The Commission requires Idaho Power to comply with the competitive
procuremeart rules applicable in the Company's Oregon service area in the
acquisition ofnew supply-side resources. Case No. IPC-E- 10-03, Order No. 32745.
However, there was not sufficient time to conduct a full competitive procurement
request for proposals process for the generation, and as a timelimited opportunity
that benefits customers, tlis resource acquisition is exernpt from the competitive
procurernent rules of the Public Utility Commission of Oregon. Application at 3.
Staff agrees the timeJimited nature of this project restricted a full request for proposal, but
because of this constraint, Staffbelieves that a different but increased scrutiny for determination
of prudency is required.
Third, the analysis did not cover a full enough range ofvalues for risk variables that can
affect the cost of the portfolios. Staff only requested two levels of natural gas and CO2 prices
given the amount of time left to meet safe harbor requirements to obtain the investment tax
credits.
Market Price to Contract Price Analvsis
Staff conducted a market price to contract price comparison, mainly because ofissues
and shortcomings in the Company's 2019 IRP analysis. Normally, Staff would have used a 2019
IRP-modeled analysis on a stand-alone basis to evaluate Jackpot Solar, but due to deficiencies,
Staffplaced increased weight on this analysis to determine its recommendation. Staffbelieves
this analysis adds validity because the cost ofJackpot Solar is primarily energy cost with only a
small amount of capital. The analysis showed a $145,000 savings during the first year ofthe
PPA, and increased savings thereafter.
STAFF COMMENTS l0 NOVEMBER 26,2019
Analysis Method and Results
Staff performed several comparisons between tie contract price and market prices
generated for the Mid-Columbia market hub (Mid-C) generated by Aurora. The analysis include
both average hourly and monthly comparisons over likely altemative futures. If the assumption
is made that market prices are an acceptable surrogate for the marginal energy cost ofldaho
Power's system, then customers should see a cost saving with the addition ofJackpot Solar to the
Company's resource mix.
Staff first compared the contract price against average monthly market prices for several
altemative futures modeled in Aurora. One of the main functions of Idaho Power's
implementation of Aurora is to predict hourly market prices across all the hubs in the WECC
region. Predicted Mid-C market prices were used for the comparisons because Idaho Power
transacts most of its market purchases through the Mid-C hub. Although in the initial years of
the contract, the forecasted monthly average market price reflects some months of the year that
are lower than the contract price, this is not the case in the majority of future years since market
prices are predicted to increase faster than contract prices. Price comparisons for three
altemative futures across the 2019 IRP planning horizon are reflected in the graph below: (l)
Planning Gas/Planning Carbon; (2) Planning Gas/Zero Carbon; and (3) Mid Gas/Planning
Carbon.
s70,00
s50.00
ss0.00
s40.00
s30.00
s20.00
s10.00
$0.00 N m6<l < rnI^(D(o F. F-oo@O1 oiO Oi i..l .\mmt' trl^ l^@(or'\ F- cO cOm m m m.n.6.o.n tn m m m.n (n an m m
3:3:3:3:3:3:3:3:3:3:3:3:3:3:3:3:3
-Jackpot -Planning
Gas/Zero Carbon
-Planning
cas/Planning Carbon
-
Mid-level Gas/Planning Carbo n
Comparing average monthly prices gives a general indication ofhow the contract pnces
compare with overall market prices, but does not provide the granularity needed to compare
STAFF COMMENTS ll NOVEMBER 26,2019
prices when Jackpot Solar will be producing energy. To compare the price when Jackpot Solm
will be producing energy, Staff compared several years of average hourly market prices to the
contract price only when Jackpot Solar is producing energy. This comparison for the first full
year of the contract uses Planning gas/Plaruring carbon Mid-C prices as illustrated as an example
in the graph below.
s70.00
s60.00
5s0.00
540.00
s30.00
s20.00
$10.00
s0.00
*.$..$*.f .$..f .{.dot.!..f..i1..f ..*'*
d},d', &,oa,&,,& /dr /o! /& /& /d,, /do /()6 i C)6,,(\ /d\ /os/o$ /or /O /oq /\o /ro, *, i',*, *,3 / 3, 3 / 3 / 3 / 3,/ :\ / :\ / 3 / 3, 3 / 3. :\ / :\, 3 / 3 / 3, A / 3 / 3 / s / S / 3. 3./ 3 / 3, s /
10, "!o! .ro, aov aou ao, "rov 1ov ao, 10, "rov asv "ror .rov 10! "ro, ,rs, aov ao, aov "ro, ,1o, 1ov 10|, ao, 1oy 1o,
-
Planning Gas/Planning Carbon
-lackpot
Although the market price is lower than the contract price for 52% ofhours during the
first year of the contract, the total cost difference when market prices are higher than the contract
price is much greater than when market prices are lower than the contract price. In other words,
if the Company had to pay market prices instead of the contract price for the same amount of
Jackpot Solar generation, the cost would be much higher. This is made clear by examining how
much larger the orange area is above the contract price line (green line) compared to the orange
area below the line in the graph above.
Staffquantified the cost difference by calculating the cost of energy produced by Jackpot
Solar using the contract price and compared it against the cost for an equivalent amount of
energy using the market price. The results show that the cost of energy using the contract price
is approximately $145,000 less. For the second year ofthe contract, the annual cost is $492,000
lower using the contract price. The difference continues to grow for subsequent years since the
average market price increases at a rate faster than the contract price.
STAFF COMMENTS 12 NOVEMBER 26,2019
/L
Shortcomings of the Market Price-to-Contract Price Analysis
Staffidentified two shortcomings that can affect the validity ofthis analysis. First,
neither the REC benefits generated by the project nor the transmission upgrade capital costs are
included in this analysis. However, Staffdid compare the annual'ized cost of the hansmission
upgrades and determined that the annualized REC benefits more than covered the additional
transmission upgrade cost, minimizing the effect of this shortcoming.
Second, as mentioned earlier, a market price to contract price comparison assumes that
market prices are equivalent to the marginal energy cost in Idaho Power's system. This
assumption only holds true if the market is consistently the maryinal cost resource in Idaho
Power's system. This is not always the case. The Company's IRP model captures the marginal
resource in the Company's resource stack for every hour modeled over the planning horizon. By
performing model runs with and without Jackpot Solar, as described in Staff s "expected"
analysis, the savings generated by including Jackpot Solar will always reflect the marginal
avoided cost for whatever resource is at the margin and available to meet load. The additional
benefit ofan IRP-modeled analysis is that it captures potential changes in future resources that
can affect the marginal cost.
Analysis Based on 2017 IRP
The Company performed an analysis ofJackpot Solar using models from its 2017 IRP.
Results showed approximately $90 million in total savings. The Company's methodology is
similar to Staf}'s "expected" analysis, but was insufficient on a standalone basis for reasons
discussed below. Staffreviewed the analysis to substantiate Staffs final conclusions, but due to
shortcomings, Staff gave it an appropriately reduced weight. A description ofthe Company's
methodology, the results, as well as shortcomings of the analysis are provided.
Analysis Method and Results
The Company compared the dispatch cost of the Company's prel'ened portfolio liom the
2017 IRP with the dispatch costs ofthe preferred portfolio including Jackpot Solar. The models
were run over a 20-year period (2017 -2036) using contract prices with escalation rates included
in the contract and under the planning case for natural gas. The method was similar to Stafl s
"expected" analysis because it started by deterrnining the cost with a high performing portfolio,
in this case the Company's preferred portfolio, and then by adding Jackpot Solar to the portfolio.
STAFF COMMENTS l3 NOVEMBER 26,2019
By keeping everything constant and only changing the portfolio by adding Jackpot Solar, the
Company was able to quantifo the economic benefit ofJackpot Solar in isolation.
The results from the ana'lysis showed a net customer savings in dispatch costs ofabout
$90 million, which is sigrificantly higher than the $20 million average savings generated from
the 2019 IRP analysis desoibed above.
Shortcoming of the 2017 IRP Analysis
Staffreduced the weight it gave the 2017 IRP analysis performed by the Company
because: 1) the method did not evaluate different tlpes of risk that could likely affect the results;
and 2) it used outdated and missing information.
Staffexpects that a prudence analysis ofJackpot Solar needs to be tested across a
reasonable range of the most cost-sensitive variables that could change in the future such as
natural gas price, CO2 prices, and other potential firture resource alternatives. According to the
Company, they only ran their dispatch model using the planning case for natural gas. This is
insuffrcient to test the economics ofthe project across altemative future natural gas prices or
CO2 prices. In addition, the Company only compared the cost results using the Company's 2017
IRP preferred portfolio. Staffbelieves that the resources contained in the preferred portfolio are
not likely to be the resources the Company actually implements due to dynamically changing
conditions. Evaluating the amount of cost savings ought to be tested across multiple high-
performing portfolios with and without Jackpot Solar to determine if the savings are durable
using different resource portfolios.
Another source of deficiency is the data used as inputs in the models. Data from the 201 7
IRP is over 2 years old. The Company also did not include the cost of the transmission upgrades,
which became the Company's responsibility when the interconnection was designated a Network
Resource.
PPA Contract Terms
Company Opt-out qfthe Franklin Solar Project
As part ofthe Jackpot Solar PPA, the Company had the option to add 100 MW of
capacity liom the Franklin Solar Facility. In Comments to the Commission on
STAFF COMMENTS 14 NOVEMBER 26, 2019
October 23, 2019,7 the Company stated that it decided not to purchase an additional 100 MW
from the Franklin Solar Project for the following reasons: l) Preliminary Company IRP analysis
(optimized for the WECC region and including Franklin Solar) showed benefits to customers,
but additional assessment ofthe Project revealed that more specific variable integration and
system studies are needed to integrate solar beyond 173 MW;8 2) A220 MW facility would be
among the largest solar facilities in the nation; 3) The incremental 100 MW in the PPA causes an
overall contract price increase and the Company has received offers that are priced lower than
the Franklin Solar Project; 4) The Company has received several existing and potential customer
requests for large incremental additions ofsolar generation that are not already committed solar
installations, as Jackpot Solar and the Franklin Project would be; and 5) The Company's credit
rating agencies take an unfavorable view oflarge, non-PURPA, PPA obligations. Staffwas
presented with several iterations of Company IRP analysis that were difficult to interpret and
believes the Company was unable to determine fiom supplemental IRP analyses if the Franklin
Solar Project would provide overall system benefit. Given the issues outlined in Company
Comments, Stafffinds that the decision not to pursue the additional 100 MW output from
Franklin Solar is reasonable. Staff would point out that the IRP and integration study, the size of
the solar facility with the Franklin Project, and the credit rating impact for the PPA, were all
existing issues when the Company submitted the PPA Application.
Right of First Ofer/Purchase Option
Comments to the Commission on October 23, 2019 also included notice that Idaho Power
has acted on Right of First Offer and the Ownership/Purchase Options for Jackpot Solar. Staff
recognizes that the Company has a right to exercise these components ofthe PPA, and although
ownership of Jackpot Solar may change, Staff expects the terms of the PPA and assigred
obligations will remain the same.
7 Comments of ldaho Power Company Regarding PPA Elections. October 23, 2019.
E The Company filed a Variable Energy Resource Study in Oregon that identified 173 MW could be integmted without
compromising ldaho Power Company system reliability. Larkin Dl at 20-22. The Company stated that 2019 IRP
Aurora analysis allowed a more dynamic study of reserves and indicated the Company had sufficient regulating
reserves to integrate more than 173 MW ofrenewable generation. Larkin DI at 25-26.
STAFF COMMENTS 15 NOVEMBER 26,2019
Output Guarantee
The PPA includes a performance provision in the form of an Output Guarantee. Jackpot
Solar is obligated to deliver a defined Net Output each month. If the delivered energy is less
than 90% of the estimated generation amount, Jackpot Solar must pay an "Output Shortlhll"
multiplied by Idaho Power's "Cost to Cover" as Liquidated Damages. Agreement, Section
7 .12.1 at 40. Staffbelieves the output stability provision provides a degree ofprotection from
excessive peak market pricing for replacement energy caused by any output shortfall, and that
the amount ofliquidated damages be reflected as reduced net power cost in the Power Cost
Adjustment C'PCA) Mechanism.
Forecasting
Idaho Power has agreed to provide the Solar Energy Forecast ofmonthly net output for
Jackpot Solar, which has commonly been provided by the generation facility to the Company.
Jackpot Solar will pay the cost of the Solar Energy Production Forecasting, with a first-year cap
at 0. I % of total energy payments made to Jackpot Solar. After the first contract year, the
Company will estimate the Annual Solar Energy Production Forecasting Cost based on the
previous year's cost and expected costs. Agreement, Section 7.7.2. Stafffinds it reasonable for
Jackpot Solar to pay Idaho Power to create the monthly output forecast.
STAFF COMMENTS 16 NOVEMBER 26,2019
Affiliate Transaction
On October 23, 2019, ldaho Power filed comments in this case regarding elections under
the PPA contract. Specifically, Idaho Power notified the Commission that it intends to
"commence negoliations for the purchase ofthe Facility through a non-regulated IDACORP
affiliate, and would leave the PPA in place as submitted, with the only change being the
IDACORP affiliate as the ultimate owner of the Facility and counter-party to the Idaho Power
Company in the contract." 1d at 7.
In order to avoid affiliated companies ofa regulated utility from unduly profiting offthe
customers of the utility, transactions between affiliates must be included in customer rates at the
lower of cost or market. Any additional benefits gained by an affiliated transaction should be
passed onto ratepayers, while any loss incurred by an affiliated transaction should not be bome
by customers. If IDACORP is successful in its negotiations to purchase Jackpot Solar, Idaho
Power should only be allowed to recover through the PCA the lower ofthe contract price in the
PPA, or IDACORP's cost to produce the electricity.
Idaho Power has stated in its October 23 comments that if IDACORP concludes the
purchase of the Facility, Idaho Power will make a subsequent filing with the Commission
regarding the affiliate transaction. Staff looks forward to the subsequent filing so that it can
outline appropriate cost recovery and any required risk mitigation for the affiliated PPA
transactions,
STAFF RECOMMENDATIONS
Staffrecommends the Commission approve the PPA by December 20,2019, to allow
investment tax credit deadlines to be met. If approved, Staff recommends that all payments for
purchases of generation under the PPA be allowed as prudently incurred expenses for raternaking
purposes and be included for collection in future Power Cost Adjushnent filings.
Respectfully submitted this 16F auy of Uovernber 2019.
Edw J
Deputy Ceneral
Technical Staff: Michael Eldred
Travis Culbertson
Rachelle Famsworth
Michael Louis
Stacey Donohue
i:umisc/comments/ipcel9. l4ejmetnfffsd commmts
STAFF COMMENTS t7 NOVEMBER 26,2019
CERTIFTCATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 26Ih DAY OF NOVEMBER 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-19-14, BY MAILNG A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
SECRET Y
CERTIFICATE OF SERVICE
DONOVAN WALKER
REGULATORY DOCKETS
IDAHO POWERCOMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail : [e-mail]
[e-mail]
MATT LARKIN
IDAHO POWERCOMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]