20200106Reply Comments.pdf

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an rDAcoRP company
DONOVAN E. WALKER
Lead Counsel
dwalker@idahooower,com
RECEIVEO
,0?0 JAlt -5 Pl{ t: t0
SSION
January 6,2020
VIA HAND DELIVERY
Diane M. Hanian, Secretary.
ldaho Public Utilities Commission
11331 West Chinden Blvd., Building 8
Suite 201-A
Boise, ldaho 83714
Re: Case No. IPC-E-19-39
Pico Energy, LLC
ldaho Power Company's Application Regarding Energy Sales Agreement
Dear Ms. Hanian:
Enclosed for filing in the above matter please find an original and seven (7)
copies of ldaho Power Company's Reply Comments.
Very truly yours,
Donovan E. Walker
DEW:cld
Enclosures
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
lnordstrom@ idahopower.com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
RECE'VED
i20 JAI{ -E pil l: trO
.lrssioN
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
PICO ENERGY, LLC FOR THE SALE
AND PURCHASE OF ELECTRIC
ENERGY FROM THE PICO ENERGY
DAIRY DIGESTER COGENERATION
FACtLtTY.
CASE NO. tPC-E-19-39
IDAHO POWER COMPANY'S
REPLY COMMENTS
I. INTRODUCTION AND BACKGROUND
On November 21 ,2019, ldaho Power received a Schedule 73 Qualifying Facility
("QF") Energy Sales Agreement ("ESA") Application from Pico Energy, LLC. The Pico
Energy QF is an existing small power production facility that is converting its plant to a
cogeneration facility pursuant to the Public Utilities Regulatory Policies Act ('PURPA).
Due to the conversion from a small power production QF to a cogeneration QF, the project
is no longer eligible for the published avoided cost rates contained in the QF's existing
PURPA ESA, as the rates contained in the existing ESA are based on the Surrogate
Avoided Resource ('SAR) for projects eligible for "non-fueled" rates. ldaho Power and
the QF have mutually agreed to terminate the existing ESA and enter into a new
replacement ESA that contains the proper SAR rates for a "fueled" QF over a ten-year
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
)
)
)
)
)
)
)
)
)
term. The anticipated date of the conversion as stated in the QF's Schedule 73
application was December 15,2019,
Pursuant the ldaho Public Utilities Commission's ("Commission") Notice of
Modified Procedure, Order No. 34508, Commission Staff ("Staff') filed comments in this
matter on December 3'l,2019. Staff recommends approval of the Energy Sales
Agreement ('ESA') with two modifications: 1) the adjustable component of the fueled
avoided cost rate should use year 2O2O rates to correspond with the 2020 operation date,
instead of using 2019 rates included in lhe contract; and 2) the nameplate capacity stated
in Appendix B of the contract should be corrected to represent the actual nameplate
capacity of the facility. Staff Comments, p. 2.
ldaho Power now respectfully submits the following reply comments.
III. REPLY COMMENTS
Nameplate Capacitv - Staff correctl y points out a typographical error in Appendix
B of the ESA related to nameplate capacity of the project. A period was incorrectly used
where a comma needed to be. The nameplate capacity of the project is 2,276 kW instead
of the stated 2.276 kW. ldaho Power Company ("ldaho Power") submits herewith as
Attachment 1 a corrected replacement page 38 to the ESA in both redline and clean
format.
Adiustable Component of Published Avoided Cost Rates for Fueled Proiects -
ldaho Power's position and understanding is that, as reflected in the submitted ESA, only
the currently published adjustable component rate is utilized until the Commission
publishes a new adjustable component rate in its annual SAR update which occurs on
June 1, of each year. Please see Attachment 2, which is the most recent (June 1, 2019)
published avoided cost rate table for fueled projects that is generated by the
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
Commission's SAR model. This is not only administratively efficient and transparent, but
also is consistent with the application of adjustable component - published rates that have
been implemented in past contractsl.
ldaho Power's past implementation and understanding of how the adjustable
portion of published avoided cost rate is applied is that the Commission publishes a single
amount as the current adjustable portion that is in effect, updated annually, and continues
in effect until the Commission updates the rate. Staffls proposal to bifurcate the
adjustable rate based upon calendar year results in ldaho Power paying the Pico Energy
QF an adjustable portion for a specific time period that is not an updated published
adjustable portion but is an escalated value from within the SAR model. ln other words,
Staffls recommendation is to apply a value that is not the currently published adjustable
rate value, but an escalation gas forecasts into a subsequent year. Because the annual
updates do no coincide with the calendar year, Staffls method not only improperly
escalates a value that is supposed to be fixed between Commission approved updates,
but it also requires a doubling down of administrative complexity by updating the value on
an annual basis with the Commission approved rate, and then a second time at the end
of the calendar year. ldaho Power submits that the intent of the adjustable portion of the
rate is to set that adjustable value once, on an annual basis, to coincide with the
Commission's approval and publishing of the applicable avoided cost rate tables.
The SAR methodology calculates avoided cost tables that include the non-
levelized and levelized prices that are available to QF's that meet the Commission's
1 This is not the first ESA containing fueled avoided cost rates and it is not the first ESA to have an
adjustable portion of the avoided cost rate that is updated annually. ln fact, ldaho Power has in the past
had ESAS with fueled projects, i.e. the Magic West and Magic Valley cogeneration QFs, and currently has
active ESAS with six hydro QFs that contain an adjustable portion that updates annually, including:
Horseshoe Bend, Falls River, Hazelton B, Mile 28, Shoshone ll, and Wilson Lake hydro.
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
eligibility for published avoided cost rates. These price tables are attached to the
Commission's order approving the current SAR published avoided cost rates each year.
For fueled projects, defined by the Commission as a QF that uses fossil fuel as its fuel
source, the SAR model produces a table of prices that are to be fixed for the term of the
ESA and an adjustable portion, representing the fuel cost, that is updated annually when
the Commission updates the published avoided cost tables.
Order No. 32697 requires that the SAR methodology be updated annually on June
1 of each year. See Order 32697, page 52. The most current published avoided cost rates
were approved in Order No. 34350 with an effective date of June 1, 2019. However, the
tables of avoided cost rates made available on the Commission's website do not include
fueled rates. ldaho Power believes the last time the Commission included fueled avoided
cost rates was in Order No, 32337 issued August 30, 201 1 . Since that order, if at any time
ldaho Power has needed fueled avoided cost prices, it has requested them from Staff.
ln Case No. GNR-E-11-03, and in response to concerns about access to published
rate tables for replacement contracts, the Commission provided direction in Order No.
32737 , page 5, where it states: ln order to avoid confusion that might result from 30 pages
of attachments, we direct Staff to provide rates for replacement contracts upon request
by any interested party.
On November 27, 2019, ldaho Power submitted a request for current published
avoided costs applicable to a replacement ESA with fueled rates. Staff did not provide the
requested published avoided costs but on December 1,2019, did provide instructions on
how to obtain the avoided cost tables from the SAR model.
ldaho Power applied the inputs required in the SAR model, as they would have
been applied when the current SAR based avoided costs were approved on June 1,2019,
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
resulting in an "adjustable portion" for fueled rates of 24.44 mills per kWh. See
Aftachment 2 table of published avoided cost prices, which includes examples of
application of the adjustable portion within the Commission's table. ldaho Power and
Pico Energy mutually agreed to the published pricing in the ESA and it was fully executed
on December 13,2019.
Staff's position is that it believes payments received by QFs should be based upon
rates for periods in which the facility operates. For example, payment received by Pico
in 2O2O should be based on 2020 rates instead of 201 9. ln addition, Staff believes that
in order to incorporate the annual adjustment for the adjustable component of the fueled
rates, each specific year should have two sets of rates: rates for the period from January
1 through May 31 using the latest version of the Surrogate Avoided Resource (SAR)
model; and rates for the period from June I through December 31 using a newer version
of the model after it is updated on June I to incorporate the new natural gas forecast from
the U.S. Energy lnformation Agency (ElA). Staff's Comments, p. 3-4.
Staff is correct that the SAR methodology can produce an adjustable portion for
each year in the calculations contained in the SAR model. However, ldaho Power
believes the Commission would need to publish an interim rate for the adjustable portion
from the model for the period January 1 - May 31 of each year to implement Staffs
proposal. The new adjustable portion of the fueled published avoided cost rates would
then be in effect until the Commission issues its annual update to published avoided
costs. ln addition, ldaho Power would need to adjust its payment processing systems to
be updated more frequently.
The Commission has a history of updating adjustable portions of published rate
contracts only once each year. The Commission annually updates the adjustable portion
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
of avoided cost rates for QFs executed before January 30, 1995, for QF contracts that
use a variable cost associated with the Colstrip facility in Montana. The Commission's
most recent update to the adjustable portion of the Colstrip related avoided costs occurred
on July 1,2019 and will remain in effectforthe 2019-2020 period until the Commission
issues its next update. See Order No. 34362. This adjustable portion has been applied
to past fueled rate ESAs and is currently in effect for six hydro QFs under contract with
ldaho Power.
Similarly, ldaho Power believes in this situation for the Pico Energy project that the
published adjustable rate value from the fueled projects published rate table (Attachment
2) is used, without regard to changing with the calendar year, until the Commission
publishes the updated adjustable rate value with its annual SAR updates.
il. coNcLustoN
ldaho Power appreciates Staffs diligent and expedited review of the proposed
ESA with Pico Energy. ldaho Power has filed a corrected page to address the
typographical error in the nameplate capacity. Additionally, ldaho Power respectfully
requests that the Commission approve the ESA as filed, clarifying that QF contracts such
as the present cogeneration, fueled-rate contract, that contain an adjustable portion of
the rate - obtain and utilized the single published adjustable rate component from the
Commission's published rate table, until such time as the Commission updates and
publishes a new adjustable rate component with its annual SAR update.
DATED at Boise, ldaho, this 6th day of January 2020.
DONOVAN E. WALKER
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 6
I HEREBY CERT|FYthat on this 6th day of January 2O2O I served a true and correct
copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following named
parties by the method indicated below, and addressed to the following:
Commission Staff
Yao Yin
Mike Louis
Terri Carlock
Matt Hunter
ldaho Public Utilities Commission
P.O. Box 83720
Boise, ldaho 83720-007 4
Jamie Wallace
680 Anderson Drive,
Foster Building '10, Ste. 58
Pittsburg, PA 15220
Peter Richardson
515 N. 27th Street
Boise, lD 83702
c Daven IStant
IDAHO POWER COMPANY'S REPLY COMMENTS . 7
CERTIFICATE OF SERVICE
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXX Email
[e-mail]
[e-mail]
terri.carlock@puc. idaho.qov
Matt. h unter@puc. idaho.qov
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXX Email
[e-mail]
[e-mail]
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-19-39
IDAHO POWER COMPANY
ATTACHMENT 1
B-1
B-2
B-3
FACILITY AND POINT OF DELIVER\'
Project Name: Pico Ener6r, LLC
Project Number: 4056597 5
DESCRIPTION OF FACILITY
Two - GE Jenbacher 416 Gensets. 1,138 kW, 1,890 KVA 60 HZ 1693 A @ p.f. =.0E 4E0 V
Facility Nameplate Capacity: : : r1l L\l L I -atl. \\
Qualifoing Facility Category (Small Power Production or Cogeneration): Cogeneration
Primary Energy Source (Hydro, Wind, Solar, Biomass, Waste. Geothermal): Natural Gas
Fueled or Non-Fueled Rate (Generator primarily fueled with fossil or non-fossil fuel): Fueled
Any modifications to the Facility, including but not limited to the generator or turbine, that
(1) increases or decreases the F'acility Nameplate Capacity, or (2) changes the Qualiling Facility
Category, or (3) changes the Primary Energy Source or (4) changes to the generator fuel and
subsequcntly the Fueled Rate or Non-Fueled Rate, will require a review ofthe Agreement terms,
conditions and pricing and Idaho Power, at its sole determination. may adjust the pricing or
terminate the Agreement. Ifthe Agreement is terminated because ofsaid modifications, the Seller
will be responsible for any Termination Damages.
LOCATION OF FACILITY
Near: Jerome. Idaho
Sections: l9 Township: 8S Range: l6E County: Gooding, ID.
GPS Coordinates: Latitude Decimal Degrees 42.7156
LongitudeDecimalDegrees -114.6234
State: Idaho County: Gooding
Description of lnterconnection Location: The low-side bushings on the pad mounted transformer
(BBD6). Nearest ldaho Power Substation: HYDA-043.
FIRST ENERGY DATE AND OPERATION DATE
This Facility is interconnected and already delivering energy to Idaho Power in accordance with
an existing Firm Energy Sales Agreement ("FESA"). The existing FESA shall terminate at the
same date and time as the Operation Date that is granted under this Agreement. lt is expected that
the Scheduled First Enerry Date and Scheduled Operation Date, and the First Energy Date and
Operation Date for this Agreement shall occur at the same time. Both the First Enerry Date and
APPENDIX B
38
APPL,NDIX B
FACILITY AND POTNT OF DELIVERY
Project Name: Pico Energy, LLC
Project Number: 4056597 5
DESCRIPTION OF FACILITY
Two-GE Jenbacher4l6 Gensets. l,l38kW, l,890KVA 60 HZ 1693 A@p.f.=.08480V
Facility Nameplate Capacity:76 kW2
B-t
B-2
B-3
Qualifuing F'acility Category (Small Power Production or Cogeneration): Coqeneration
Primary Energy Source (Hydro, Wind, Solar, Biomass, Waste, Geothermal): Natural Gas
Fueled or Non-Fueled Rate (Generator primarily fueled with fossil or non-fossil fuel): Fueled
Any modifications to the Facility, including but not limited to the generator or turbine, that
( I ) increases or decreases the Facility Nameplate Capacity, or (2) changes the Qualifting Facility
Category, or (3) changes the Primary Energy Source or (4) changes to the generator fuel and
subsequently the Fueled Rate or Non-Fueled Rate, will require a review of the Agreement terms,
conditions and pricing and Idaho Power, at its sole determination, may adjust the pricing or
terminate the Agreement. If the Agreement is terminated because ofsaid modifications, the Seller
will be responsible for any Termination Damages.
LOCATION OF FACILITY
Near: Jerome, Idaho
Sections: l9 Township: 8S Range: l6E County: Gooding, ID.
GPS Coordinates: Latitude Decimal Degrees 42.7156
LongitudeDecimalDegrees -114.6234
State: ldaho County: Gooding
Description of Interconnection Location: The low-side bushings on the pad mounted transformer
(BBD6). Nearest Idaho Power Substation: HYDA-043.
FIRST ENERGY DATE AND OPERATION DATE
This F'acility is interconnected and already delivering energy 10 Idaho Power in accordance with
an existing Firm Energy Sales Agreement ('FESA"). The existing FESA shall terminate at the
same date and time as the Operation Date that is granted under this Agreement. It is expected that
the Schedulcd First Energy Date and Scheduled Operation Date, and the First Energy Date and
Operation Date for this Agreement shall occur at the same time. Both the First Energy Date and
38
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. |PC-E-19-39
IDAHO POWER COMPANY
ATTACHMENT 2
IDAHO POWER COMPANY
AVOIDED COST RATES FOR FUELED PROJECTS
Juno 01,2019
$/luwh
Replacement Contracts with Full Capacity Payments
Eligibility for these rates is limited to proiects smaller than '10 aMW
LEVELIZED NON-LEVELIZED
CONTRACT
LENGTH
(YEARS)
ON.LINE YEAR
CONTRACT
YEAR
NON-LEVELIZEO
PETES2019 2020 2021 2022 2023 2024
1
2
3
4
5
6
7I
9
10
11
12
13
14
15
16
17
18
19
20
22.20
22.36
22_52
22.68
22_94
23_13
23.28
23.42
23.55
23.69
23.42
23.95
24.07
24.20
24.31
24.43
24.54
24_65
24_76
22.54
22.70
22.87
23.02
23.18
23.33
23_44
23.63
23_77
23.91
24.05
24.18
24.31
24_44
24.56
24_64
24.80
24.92
25.03
25.13
22 88
23.O5
23.53
23.63
23.84
23 99
24.13
24_28
24_41
24.65
24.68
24.8',l
24.94
25.06
25.18
25_41
25_52
23.40
23.57
23.73
23.89
24.05
24.20
24.35
24.50
24.65
24.79
24.92
25.06
25.44
25.56
25.68
25.79
25.91
23.58
23.75
23.92
24.09
24.25
24.41
24.57
24.72
24.87
25.02
25.16
25_30
25_44
25.57
25 70
25.83
25 95
26.07
26.19
26.30
23 94
24_12
24.29
24.46
24.62
24.78
24.94
25.10
25.40
25.69
25.83
25.e6
26.0S
26.22
26.35
26_47
26.59
26_70
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
20/0
20d1
2U2
204.3
2044
22_20
22_54
22.44
23.58
23.94
24.31
24_67
25.05
25.43
25.62
26.21
27.O2
27 _43
27 _45
24.27
24.71
2914
29.59
30.04
30.50
30.97
31.44
31.92
32.41
ADJUSTABLE COMPONENT
$24.44
The total avoided cost rate in each year is ths su m ol the adjLrsla ble component and the fixed componenl from e ither of the lables abov
Examplel. A 20-y6ar lovelized contract wilh a on-line dal6 would roceave the following ral€sYear Rate1 524.76 + 524 M2-2O S24.76 + Adjustable componenl in each year
Example 2. A 3-year non-levelized conlracl wilh a 2019 on-lino dato would receive the following ralesYear 8aE1 $22.20 + $24.442 $n.54 + Adjustabl€ component i^yeat 20203 $22.88 + Adjustable compononlir, yeat 2O2l
Note: The rates shown in this table have been crmputed using lhe U.S. Energy lnformation Administration (ElA)'s Annual Energy
Outlook 2019, released January 2019. Sse Annual Energy Outlook 2019, Table 3.8 Energy Prices by Seclor-Mountain at
https://www.eia.gov/outlooks/aeollables ref.php