20200814Reply Comments - Redacted.pdf

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An IDACORP Company
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DONOVAN WALKER
Lead Counsel
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Attachments
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August 14,2020
ELECTRONIC FILING
Jan Noriyuki, Secretary
ldaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A
Boise, ldaho 83714
Re: Case No. IPC-E-19-38
Big Wood Canal Company - Sagebrush Hydro Project
ldaho Power Company's Application Regarding Energy Sales Agreement
Dear Ms. Noriyuki:
Attached for electronic filing is ldaho Power Company's Reply Comments on
Clarification. Please handle the confidential information in accordance with the Protective
Agreement executed in this matter. A redacted copy has also been provided for your
convenience. lf you have any questions about the attached documents, please do not
hesitate to contact me.
Very truly yours,
Mzd*4
Donovan Walker
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwa I ker@ id ahopower. co m
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH BIG
WOOD CANAL COMPANY FOR THE SALE
AND PURCHASE OF ELECTRIC ENERGY
FROM THE SAGEBRUSH HYDRO
PROJECT.
CASE NO. IPC-E-19-38
REPLY COMMENTS OF
IDAHO POWER COMPANY ON
CLARIFICATION
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REDACTED
Idaho Power Company ("ldaho Power" or "Company"), in accordance with ldaho
Public Utilities Commission's ("|PUC" or "Commission") Order No. 34727 granting
clarification, and in response to the comments filed by Commission Staff ("Staff'), hereby
respectfully submits the following Reply Comments on Clarification.
!. INTRODUCTION AND BACKGROUND
On December 9, 2019,ldaho Power filed an application with the Commission for
approval or rejection of a replacement Energy Sales Agreement ('ESA") applicable to the
Sagebrush Hydro PURPA Qualifying Facility ("Sagebrush"). The ESA that was executed
by the Company and the Big Wood Cana! Company ("Parties") is for a 575 kW hydro
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 1
PURPA Qualifying Facility ("QF'). Sagebrush has been operating on the ldaho Power
system under a previous QF Firm Energy Sales Agreement ('FESA) that expired on May
31,2020. The expired FESA was for a 430 kW hydro QF.
On January 31, 2020, Commission Staff ("Staff') provided comments that
recommends the Sagebrush facility "be granted capacity payments for the full term of the
replacement contract, but only for the amount of capacity in the current contract." Staff
Comments, Jan. 31, 2020, p 3. Staff recalculated a blended rate for the Sagebrush
contract that removed the capacity payment on the incremental increase (145 kW) in
nameplate capacity in the replacement contract over and above the nameplate capacity
in the expired FESA. ln reply comments, ldaho Power agreed with Staffs
recommendation that only the nameplate capacity in the existing contract is entitled to
capacity payments during the Company's capacity deficiency period, for the full term of
the replacement contract, in compliance with past directives of the Commission. ldaho
Power also agreed to move forward with whatever rate the Commission determines to be
appropriate forthe Sagebrush contract. See Reply Comments of ldaho Power Company,
p2.
On May 28,2020, the Commission issued Order No. 34677, which approved the
ESA in this case but directed the Seller be paid for capacity only up to the nameplate
capacity of 430 kW that was existing from the expired contract, and that the incremental
145 kW increase in nameplate capacity not be eligible for capacity payments unti! ldaho
Power becomes capacity deficient in 2026.
The Commission finds it reasonable for the Seller to be paid
for capacity up to 430 kW forthe fullterm of this renewal ESA.
See Order No. 32697 at 21-22. The Commission also finds
thatthe 145 kW increase in capacityforthe Sagebrush Facility
comes at a time when the Company is not capacity deficient.
This "new" capacity is analogous to a new QF whose output
and pricing must be evaluated when an executed energy
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 2
sales agreement with an electric utility is filed with the
Commission for review. Therefore, the Commission finds that
the Seller shall not receive capacity payments for the 145 kW
increase to the nameplate capacity of the Sagebrush Facility
until the Company becomes capacity deficient.
/d., p 5-6. The Commission also rejected Staffs proposed blended rate as well as the
netting/offset proposed by Wood Hydro. /d., p 6.
Subsequent to the Commission's order, ldaho Power and Wood Hydro entered
into an Amendment of the ESA which was meant to provide the required changes to the
approved ESA necessary to provide for payment of a different rate (no capacity) for any
hourly delivery of generation in excess of 430 kW, in compliance with the Commission's
Order. The Motion also requested that should the Commission desire a different
compliant with its Final Order No. 34677, then the Company sought reconsideration
and/or clarification of the order for further guidance on compliance. ldaho Power Motion,
p2.
Staff requested that the Commission grant the altemative request by granting
reconsideration/clarification so that it could further conduct discovery as to the proposed
First Amendment. The Commission granted clarification and additional comment
deadlines for review of the First Amendment. Order No.34727. Staff filed comments on
the clarification on August 7, 2020, where Staff recommends further modifications to the
ESA and First Amendment. Specifically, Staff recommends that the Parties: (1) Modify
the eligibility limit for capacity payments from 430 kW to I kwh, based on actual
maximum hourly generation; (2) lncorporate the method described in the Company's
Response to Staff Production Request No. 1 for determining payments outside of the
901110 performance band into the final ESA; and (3) Correct the rates for the All Hours
Energy Price in the Amended ESA to those included as Attachment C to Staff comments.
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 3
II. IDAHO POWER REPLY COMMENT ON CLARIFICATION
ldaho Power appreciates Staffs detailed analysis and review of the ESA and First
Amendment. Staff has identified concerns shared by Idaho Power with the Sunogate
Avoided Resource ('SAR") methodology used to establish published avoided cost prices
for QFs, but ldaho Power disagrees that the ESA and First Amendment require further
modification - except for the inclusion of Replacement Page 4 of the First Amendment to
correct the all-hours rates found in Appendix H-3 as recommended by Staff.
The proposed rates in the First Amendment provide just what the Commission
directed in Order No. 34677: it pays full capacity up to 430 kW of nameplate capacity
which is the same amount of nameplate capacity from the expired ESA, and treats the
incremental increase in nameplate capacity (145 kW) as if it were a contract for new
nameplate capacity, where it does not receive a capacity payment untilthe utility becomes
capacity deficient in2026. Staffs proposalto set some other "limit" at a different kW level
based upon historical generation numbers is not consistent with past application of the
SAR methodology and how capacity payments are allocated to existing and new QFs in
their respective PURPA ESAs.
Eliqibilitv Limit for Capacitv Pavments
Under the expired FESA, the contracted nameplate capacity of the Sagebrush QF
was 430 kW. The Commission's Order No. 34677 approving the replacement ESA for
Sagebrush with prices containing capacity value is consistent with Commission Order No.
32697, and with the Commission's approval of more than 25 (twenty-five) previous
replacement ESAs. These previous ESAs have included value for capacity, as
determined by the SAR methodology, up to the nameplate capacity for the entire period
of the replacement ESAs, so long as the nameplate capacity is the same or lower than
the nameplate capacity of the QF as identified in the expiring ESA or other relevant
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 4
documentation. The difference in this case is that the QF has replaced its generator with
one that has a nameplate capacity of 575 kW, or an increase of 145 kW overthe previous
amount from the expired FESA.
Staff stated, "Staff believes that the parties' method with an eligibility limit set at
430 kW does not meet the Commission's intent and the Seller will likely receive capacity
payments for generation from the 145 kW of new incremental capacity prior to the
deficiency date." Staff Comments, Page 3. This statement is not sufficiently explained
and does not logically follow the facts. The nameplate capacity of the Sagebrush QF is
575 kW. lf the QF continues to operate consistent with its historical generation levels that
Staff bases its proposed capacity eligibility threshold of ! kWh on, it is unlikely that the
Project would be paid for capacity even up to the historical nameplate capacity of 430
kW. Further, even if the Project exceeds historical generation levels, in accordance with
Order No. 34677, the provisions of the Frist Amendment provide that it cannot be paid for
capacity for the increased capacity of 145 kW until the Company's first capacity deficiency
that occurs in2026. The First Amendment as filed does not allow for a capacity payment
of generation over 430 kW (the 145 kW of new incremental capacity) prior to the
deficiency date of the contract rates.
ldaho Power does not fully understand Staff's concern for not allowing the project
to be eligible for capacity value up to the existing nameplate capacity (430 kW) or Staffs
rationale for implementing a limit based on historical generation of the QF. ldaho Power
does understand Staffs concern that the project may not have historically delivered
capacity up to its ful! nameplate capacity, but the Company has concerns about
introducing this new capacity limit based upon historica! generation amounts in this case
that is not consistent with previous Commission orders approving replacement contracts
that allow for a project to be paid for capacity up to its nameplate capacity. Whether ldaho
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 5
Power or the Staff agrees with the methodology or not, under the Commission's
implementation of PURPA, there is nothing that prevents a hydro QF from delivering
lOOo/o of its nameplate capacity during any or all hours, but for the eligibility cap for
published avoided cost rates (Article 7 .7 of the ESA) and limitations of the motive force,
i.e. wind, water, etc., or fuel supplied to the generating unit of the facility. The Company
believes this issue is more appropriately addressed in an avoided cost case that takes
into consideration the shortcomings of the SAR methodology.
As Staff correctly points out, the SAR methodology provides a fixed capacity value
regardless of nameplate capacity. However, nameplate capacity is a direct input to the
SAR model and is used to determine when new capacity is assigned capacity value,
based on the Company's first capacity deficiency. The SAR methodology also adjusts
capacity value based on assumed capacity factors of various resource types. For
example, a seasonal hydro facility has a summer capacity factor of 78%. The eligibility
limit Staff proposes - including Staff's alternative suggestion of a 10% efficiency
adjustment - results in the same capacity factor already applied in the determination of
capacity value for a seasonal hydro facility under the SAR methodology.
Staff further suggests that ldaho Power "bases its need for capacity by determining
the QF's contribution of capacity primarily based on historical generation from the old,
less efficient generating unit." Staff Comments, p 6. This is not entirely correct. As ldaho
Power has described in past discovery responses, ldaho Power derives its cogeneration
and small power production ('CSPP") forecast from a variety of sources. The most
reliable source has generally been historical generation. However, if a QF delivers
increased generation, whether from installation of a new, more efficient generating unit or
increased motive force, the increased generation is captured in the CSPP forecast and
adjustments are made as needed to recognize the increased generation output. The
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 6
Company's lntegrated Resource Plan ("lRP') is updated every two years and the
Company's need to acquire new capacity resources is identified through the lRP process.
If a QF's generation increases, then the QF's contribution to ldaho Power's capacity
sufficiency period in its load and resource balance is increased by the appropriate
amount.
Pavments for oeneration below 90%o or above 110%o
Staff recommends that the Parties to the ESA should, "lncorporate the method
described in the Company's Response to Staff Production Request No. 1 for determining
payments outside of the 901110 performance band into the final ESA." Staff Comments,
p 9. ldaho Power does not agree that this is necessary. There is no change required to
the language of the ESA or First Amendment in order to properly administer the 90/110
provisions. As described in ldaho Power's Response to Staff Production Request No. 1,
the First Amendment to the ESA contains language specific to the determination of the
All-Hours Energy Price. ldaho Power provided a description of how the single applicable
All-Hours Energy Price can be determined and compared with the Market Energy
Reference Price in order to meet the contract provision described in Article 7 .2 of the ESA
which states, "for al! Surplus Energy, ldaho Power sha!! pay to the Seller the current
month's Market Energy Reference Price or the applicable All Hours Energy Price,
whichever is lower."
A simpler explanation of how to ensure the proper price is paid for Surplus Energy
is to review end-of-month payment amounts calculated using the monthly net generation
from the QF multiplied by the applicable month's Market Energy Reference Price
compared with the monthly net generation multiplied by the applicable month's All-Hours
Energy Price as described in Article 7.6 of the First Amendment. Because the monthly
net generation is constant, the lower payment amount for Surplus Energy results in the
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 7
lower of the current month's Market Energy Reference Price or the applicable All-Hours
Energy Price, thus meeting the contractual provision of Article 7.2 of the ESA. !n either
case, the components consist of actual generation and Commission approved avoided
cost prices and comply with requirements of the ESA and First Amendment.
Conection of All Hours Enerov Price in the First Amendment
Staff has correctly identified that typographical errors resulted in incorrect All-
Hours Energy Prices being listed in the table underAppendix H-3 of the First Amendment.
Attached hereto as Attachment 1 is a Replacement Page 4 to the First Amendment, with
corrected All-Hours Energy Prices as recommended by Staff.
ril. coNcLusroN
ldaho Power believes the First Amendment, as modified by Replacement Page 4,
(Attachment t hereto) complies with Commission Order No. 34677, approving the ESA
and directing that capacity be paid only up to 430 kW of nameplate capacity consistent
with the expired contract. This is also consistent with past replacement ESAs for PURPA
QFs. ldaho Power respectfully requests that the Commission issue an order approving
the First Amendment to the ESA including Replacement Page 4.
Respectfully submitted this 14th day of August 2020.
M?da!4-
DONOVAN E. WALKER
Attorney for ldaho Power Company
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 14h day of August 2020, I served a true and
correct copy of the within and foregoing REPLY COMMENTS OF IDAHO POWER
COMPANY ON CLARIFICATION upon the following named parties by the method
indicated below, and addressed to the following:
David Stephenson
Big Wood Canal Company
409 N. Apple Street
Shoshone, ldaho 83352
Ted Sorenson
Wood Hydro LLC
1032 Grandview Drive
lvins, UT 84738
C. Thomas Arkoosh
Arkoosh Law Offices
802 W. Bannock Street
Suite LP 103
P.O. Box 2900
Boise, lD 83701
John Hammond Jr.
Deputy Attomey General
Idaho Public Utilities Commission
P.O. Box 83720
Boise, lD 83720-0074
IDAHO POWER COMPANY
REPLY COMMENTS ON CLARIFICATION - 9
via emailto:
davidstephenson@cableone. net
via email to:
[e-mail]
via emailto:
tom. a rkoosh@a rkoosh. com
tavlor. pestel l@a rkoosh.co m
via emailto:
iohn. hammond@puc. idaho.qov
Christy Davenport, Legal Assistant
BEFORE THE
IDAHO PUBLIC UT]LITIES COMM]SSION
cAsE NO. IPC-E-19-38
IDAHO POWER COMPANY
ATTAGHMENT 1
Replacement Page 4 ofthe
First Amendment to
The Energy Sales Agreement Between
Idalro Power Company and Big Wood Canal Company
Year Millsftwh Mills/kWh
2020
202t
2022
2023
2024
2025
21.15
2t.37
22.4t
24.14
26.2E
28.39
?,.{A.34.53
3e$434.89
3.H336.s8
34#39.4t
38#4291
4{-5e46.35
Mills/kWh
243428.78
2W29.07
W
x&32.84
3+-;235t_6
345838.62
1. Commiseion Approval The obligations of the Parties under this First Amendment are subject
to the Commission's approval ofthis First Amendment and such approval being upheld on appeal,
if any, by a court of competent jurisdiction. The Parties will submit this First Amendment to the
IPUC and request approval or rejection in its entirety pursuant to RP 274.
2. Etrwtof Amendment Except as expressly amended by this First Amendment, the ESA shall
remain in full force and effect.
3. Capitalized Terms. All capitalizedterms used in this First Amendment and not defined herein
shall have the same meaning as used in the ESA.
4. Scope of Amendment This First Amendment shall be binding upon and inure to the benefit
of the Parties hercto, and their respective heirs, executors, administatonL successont, and assigns,
who are obligated to take any action which may be necessary or proper to carry out the purpose
and intent thereof.
5. Authority. Each Party represents and warrants that (i) it is validly existing and in good
standing in the state in which it is organized, (ii) it is the proper party to amend the ESA, and (iii)
it has the requisite authority to execute this First Amendment.
6. Counterparts. This First Amendment may be executed in any number of counterparts, each
of which shall be deemed an original and all of which taken together shall constitute a single
instnunent.
Enerry Sales Agrcement
Project 31515105 Sagebrush Hydro Project
Fint Amendment - Page 4 of 5