20190917Final_Order_No_34441.pdf

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Scrvlce Date
SEP I 7 Z0tg
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER FOR APPROVAL OR
REJECTION OF AN ENERGY SALES
AGREEMENT WITH PIGEON COVE
POWER COMPANY FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY FROM
THE PIGEON COVE HYDRO PROJECT
CASE NO.IPC.E-I9.24
ORDER NO. 34441
On July 24,2019,Idaho Power Company ("Idaho Power" or "Company") filed an
Application requesting consideration of an Energy Sales Agreement ("ESA" or "Agreement") with
Pigeon Cove Power Company ("Pigeon Cove") for energy generated by the Pigeon Cove Hydro
project ("Facility"). The Facility is a qualifying facility ("QF") under the Public Utility Regulatory
Policies Act of 1978.
. On August 14,2019, the Commission issued a Notice of Application and Notice of
Modified Procedure. Order No. 34413. Staff filed the only comments, and recommend 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's dependence 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. 142, 145-46 (1982). Under PURPA and its
implementing regulations, utilities must purchase the power produced by QFs. l6 U.S.C. $ 824a-
3(b); 18 C.F.R. * 292.303(a). The utility must purchase the power at the avoided cost rate. l8
C.F.R. 5 292.304(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(bX6). 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,
9t1 P.2d 7 8t, 7 84 ( 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
available, the QF sells the energy pursuant to a standard tariff for non-firm energy. See Order No.
IoRDER NO. 34441
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. l8 C.F.R.292.304(cX1). The Commission, in its discretion,
may also establish published avoided cost rates for QFs above 100 kW. 18 C.F.R. 292304@)(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 11 . These published avoided cost rates are updated annually to 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 l'1. The Commission annually updates certain inputs to the IRP methodology such as natural
gas forecasts, utility load forecasts, and long-term contract commitments. Order No. 32691 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 at2l.The first capacity deficit date is determined through the IRP planning
process. Order No. 33357 at25-26.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. 32131 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-do not have a separate energy and capacity component.
2ORDER NO. 34441
THE APPLICATION
The Facility has a 1.75 megawatt ("MW") nameplate capacity and is near Filer, Idaho.
The Facility has been delivering energy under a PURPA Firm Energy Sales Agreement executed
on May 1 1 , 1983, which has an expiration date of October 3l , 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 2}-year term of the Agreement. The ESA has a 5-Day Ahead provision for
the Facility to provide monthly generation forecasts for the 90i 110 performance band.
COMMENTS
Staff recommended approval of the ESA. Staff s review of the ESA focused on the
implementation of the 90/110 performance band, the eligibility for and amount of capacity
payments, the Facility's non-seasonal hydro status, and the Facility's etigibility for published rates
as determined by the capacity size threshold. Staff verified the Facility's non-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 notes 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 verified that Pigeon Cove is being paid for capacity at the end of its original
contract. Therefore, Staff believes that the proposed avoided cost rates may include a capacity
payment for the full term of the replacement contract. See Order No 32697.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under ldaho Code *$ 6l-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,
discriminatory, or in violation of any provision of law, and to fix the same by order. Idaho Code $$
6l-502 and 6l-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 authority under Title 61 and
PURPA.
aJORDER NO. 34441
The Commission has reviewed the record, including the 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 prudently incurred expenses for ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the ESA between Idaho Power and Pigeon Cove 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 prudently incurred 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 ldaho Code 5 6l-
626.
4oRDER NO. 34441
4-DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this / 7
day of September 2019.
PAUL PRESIDENT
ti;i,,^" Ran, ^ffi#inqe RnpER, c offiiNror.rER
ERIC ANDERSON, COMMISSIONER
ATTEST:
Diane M. Hanian
Commission Secretary
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5oRDER NO. 34441
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