20191224Final_Order_No_34512.pdf

Office of the Secretary
Service Date
December 24,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )COMPANY'S APPLICATION FOR )CASE NO.IPC-E-19-30
APPROVALOFANENERGYSALES )AGREEMENT WITH DAVID SNEDIGAR )FOR THE SALE AND PURCHASE OF )ELECTRIC ENERGY FROM THE )ORDER NO.34512
SNEDIGAR HYDRO PROJECT )
On October 4,2019,Idaho Power Company ("Idaho Power"or "Company")filed an
Application requesting considerationof an Energy Sales Agreement ("ESA"or "Agreement")with
David Snedigar for energy generated by the Snedigar Hydro project ("Facility").
On October 31,2019,the Commission issued a notice of Application and Modified
Procedure,setting a December 5,2019 comment deadline and a December 12,2019 reply
comment deadline.Commission Staff filed the only comments,and the Company did not file reply
comments.
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 qualifying facilities
("QF").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 qualifying facilities,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
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
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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)(1).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 IntegratedResource 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'sneed of such resources."Order No.32697
at 17.The Commission annuallyupdates certain inputs to the IRP methodology such as natural
gas forecasts,utilityload forecasts,and long-term contract commitments.Order No.32697 at 22
(timing of filing changed from June l 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 (clarifyingthat 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.
THE APPLICATION
The Facility is a QF under the Public Utility Regulatory Policies Act of 1978,and has
been delivering energy to Idaho Power under a firm energy sales agreement dated February 24,
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1984,which expires December 31,2019.The Facility is a 495 kW nameplate capacity hydro
facility near Bliss,Idaho.The Company stated that the Agreement contains published non-
seasonal,non-levelized avoided cost rates for a 20-year term.The Facility has a scheduled First
Energy Date under the ESA of January 1,2020.The Company requested the Commission declare
all payments for purchase of energy under the ESA be allowed as prudentlyincurred expenses for
ratemaking purposes.
THE COMMENTS
Staff's Comments
Staff's review of the ESA focused on the 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 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 notes the Facility is not being paid for capacity at the end of its original contract,
but asserts the Facility should receive immediatepayment for capacity based on the recent approval
of the Black Canyon #3 project energy sales agreement in Case No.IPC-E-19-04.See Order No.
34295 at 5.Staff believes the rationale used in Commission Order No.34295 for the Black Canyon
#3 project also applies to the Facility,and recommends 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 investigaterates,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 §§
61-502 and 61-503.In addition,the Commission has authorityunder 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
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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.
Regarding capacity payments,we held in Order No.32697 that it is reasonable "for the
utilities to only begin payments for capacity at such time that the utility becomes capacity
deficient."In the same order,however,we stated an exception:"if 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 would include immediate payment of capacity."Our reason for
this exception was that an existing QF's capacity cannot be considered surplus power because its
capacity has already been included in the utility'sload and resource balance.More recently,we
found including immediate capacity payments in the replacement energy sales agreement for the
Black Canyon #3 project reasonable-even though the previous agreement had not included
capacity payments-because the QF had been included in Idaho Power's load and resource balance
for decades.Order No.34295;see 34200.Similar to the Black Canyon #3 project,Idaho Power
has relied on the Facility's capacity for 35 years-through multiplecapacity deficiency periods.
Therefore,we find the immediate capacity payments in the ESA reasonable.
ORDER
IT IS HEREBY ORDERED that the ESA between Idaho Power and Mr.Snedigar 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
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reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of December 2019.
PAUL KJ LAND ,PRESIDENT
KRISTINE RAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
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