20200131Final_Order_No_34539.pdf

Office of the Secretary
Service Date
January 31,2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER'S )CASE NO.IPC-E-19-35
PETITION FOR APPROVAL OR DENIAL OF )AN ENERGY SALES AGREEMENT WITH )
LITTLE WOOD IRRIGATION DISTRICT )FOR THE SALE AND PURCHASE OF )ELECTRIC ENERGY FROM THE LITTLE )ORDER NO.34539
WOOD RIVER RESERVOIR HYDRO )PROJECT )
On November 8,2019,Idaho Power Company ("Idaho Power"or "Company")asked
the Commission to approve or deny an Energy Sales Agreement ("ESA"or "Agreement")with
Little Wood Irrigation District ("Little Wood")for energy generated by the Little Wood River
Reservoir Hydro project ("Facility").The Facility is a 2.85-megawatt ("MW")nameplate capacity
hydro facility near Carey,Idaho,and a qualifying facility ("QF")under the Public Utility
Regulatory Policies Act of 1978 ("PURPA").The Facility has a scheduled First Energy Date under
the ESA of March 1,2020.The Company asked the Commission to review its Application through
Modified Procedure and to issue a decision by February 29,2020.
On December 23,2019,the Commission issued a Notice of Application and Notice of
Modified Procedure setting public comment and Company reply comment deadlines.Order No.
34511.Commission Staff filed the only comments and supported the Company's Application.The
Company did not reply.
With this Order we approve the Company's 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
qualifying facilities,such utilitywould 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
ORDER NO.34539 1
within their respective jurisdictions.Rosebud Enterprises,Inc.v.Idaho PUC,128 Idaho 624,627,
917 P.2d 781,784 (1996).
QFs may opt 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 IdahoPower,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 annually to 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'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 filingchanged 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.
ORDER NO.34539 2
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.
APPLICATION
The Facility has been delivering energy to the Company under a firm energy sales
agreement dated August 17,1984 ("Initial Agreement"),which expires February 29,2020.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
contains a five-day Ahead provision for the Facility to provide monthlygeneration forecasts for
compliance with the 90/110 performance band.
STAFF COMMENTS
Commission Staff filed the only comments and recommended Commission approval
of the ESA.Staff's review of the ESA focused on using the 90/110 rule with a five-day advanced
notice for adjusting Net Energy Amounts,the eligibility for and duration of immediate capacity
payments,non-seasonal hydro rates,and requirements for Designated Network Resource.
Staff verified that the 90/110 rule was included in the ESA.Staff noted that the ESA
had adopted a five-day advance notice for adjusting the Estimated Net Energy Amounts for
purposes of 90/110 rule compliance.Staff believed the five-day advanced notice was appropriate
and recognized that the Commission had approved the same notice period in other cases while
citing that adjustments made closer to the period of delivery improve accuracy and short-term
operational planning.
Staff mentioned Little Wood was not being paid for capacity payments for the Facility
during the Initial Agreement.Staff believed the Facility should be eligible for and paid capacity
payments during term of the ESA.Staff noted that although the Initial Agreement did not include
capacity payments,the Company became capacity constrained during the life of the Initial
Agreement.'Staff noted its confidence that the Facility had contributed to offsetting the
Company's need for additional capacity and should therefore be eligible for immediate capacity
payments under the ESA.Staff also noted that the stated nameplate capacity for the Facility in the
The Company has added significant capacity since the year 2001,including:Danskin (2001 and 2008),Bennett Mountain
(2005),and Langley Gulch (2012).
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ESA is listed as 2.85 MW,which is less than the 3.0 MW nameplate capacity listed in the Initial
Agreement and therefore the stated nameplate capacity should qualify for capacity payments.2
Staff made note of Little Wood's election ofnon-seasonal hydro rates althoughit could
have qualified for seasonal rates.In Staff's review,it learned that Little Wood could not comply
with the requirements for ongoing seasonal rates without changing the operation of the Facility.
Besides recommending the Commission approve the ESA,Staff also recommended the
Commission declare the Company's payments to Little Wood for energy generated by the Facility
under the ESA be allowed as prudentlyincurred expenses for ratemaking purposes.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter underIdaho 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,
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 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,ESA,and Staff's
comments.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.
Additionally,we agree with Staff that the Facility has contributed in offsetting the Company's
need for additional capacity investments.We therefore find including capacity payments for the
duration of the Agreement to be just and reasonable.We also find that the Company's payments
for purchases of energy and capacity under the ESA are prudently incurred expenses for
ratemaking purposes.
2 Staff noted that had the nameplate capacity increased from the amount of the Initial Agreement,i.e.exceeded 3.0 MW,Staff
would not have recommendedthe amount in excess of the originally stated nameplate capacity for capacity payments.
ORDER NO.34539 4
ORDER
IT IS HEREBY ORDERED that the ESA between the Company and Little Wood is
approved.
IT IS FURTHER ORDERED that all payments made by the Company 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
reconsiderationwithin twenty-one (21)days of the service date of this Order regarding 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 §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this $/
day of January 2020.
PAUL KJELL ER,PRESIDENT
KRIS PER,COM SIONER
ERIC ANDERSON,COMMISSIONER
ATTE :
Diane M.Hani
Commission Secretary
I:\Legal\ELECTRIC\IPC-E-19-35\orders\IPCEl935_final_dh.docx
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