20191231Comments.pdf

rTEC:IVED
MATT HLTNTER
DEPUTY ATTORNEY GENERAI,
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 10655
Street Address for Express Mail:
I I331 W CHINDEN BLVD, BLDG 8, SUITE 20I-A
BOISE, ID 837I4
Attomey for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
II'DEC3I fiH 9:55
I ta
,irssloN
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OF AN ENERGY SALES
AGRE,EMENT WITH PICO ENERGY, LLC
FOR THE SALE AND PURCHASE OF
ELECTRIC E,NERGY FROM THE PICO
ENERGY DAIRY DIGESTER
COGENERATION FACILITY
COMMENTS OF THE
COMMISSION STAFF
)
)
)
)
)
)
)
)
The Staffof the Idaho Public Utilities Commission comments as follows on Idaho Power
Company's Application.
BACKGROUND
On December 16,2019,Idaho Power Company ("ldaho Power" or "Company") filed an
Application requesting consideration of a replacement Energy Sales Agreement ("ESA" or
"Agreement") with Pico Energy, LLC ("Pico Energy") for energy generated by the Pico Energy
dairy digester cogeneration project ("Facilit "). The Facility is a qualifoing facility ("QF") under
the Public Utility Regulatory Policies Act of 1978 C'PURPA).
The Facility is a 2.276 megawatt nameplate capacity PURPA small power production
facility near Jerome, Idaho. The Facility has been delivering energy to Idaho Power under a ten-
year energy sales agreement dated May 4,2010. See Order No. 32024.
Pico Energy is reconfiguring the Facility lrom a small power production facility to a
cogeneration facility. As the cogeneration facility will use fossil fuel as its fuel source, it will no
S1'AFF COMMENTS DECEMBER 3I.2OI9
CASE NO. IPC-E-I9.39
longer be eligible for the small power production avoided cost rates established by the
Commission. See Order No. 34350. Under the ESA, the Facility will use published avoided cost
fueled rates. The ESA will be for a ten-year term, and will replace the existing energy sales
agreement with Idaho Power.
The Company believes the Scheduled First Energy Date, Scheduled Operation Date, First
Energy Date, and Operation Date for Facility will occur simultaneously; the parties will mutually
agree in writing on a date after Commission approval ofthe ESA and append the agreed date to
the ESA.
STAFF'ANALYSIS
Staff recommends approval of the proposed ESA between Idaho Power and Pico Energy
conditioned on the parties making two modifications: 'l) the adjustable component of the fueled
avoided cost rate should use year 2020 rates to correspond with the 2020 operation date, instead
ofusing 2019 rates included in the contract; and 2) the nameplate capacity stated in Appendix B
ofthe contract should be corrected to represenl the actual nameplate capacity of the facility.
Staffs review of the ESA was focused on: l) the 90/l l0 rule with at least five-day
advanced notice for adjusting Estimated Net Energy Amounts; 2) eligibility for and the amount of
capacity payments; 3) adherence to the capacity size threshold to qualiff for published rates; and
4) the avoided cost rates.
I l0 Rul
Qualifoing facilities (QF) provide a monthly estimate of the amount of energy they expect
to produce. Ifthe QF delivers more than 110 percent ofthe estimated amount, energy delivered
in excess of 110 percenl is priced at the lesser of85 percent of the market price or the contract
pdce. If the QF delivers less than 90 percent of the estimated amount, total energy delivered is
priced at the lesser of85 percent ofthe market price or the contract price. Order No. 29632. Staff
verified that this provision is included in the ESA.
The ESA adopted a five-day advanced notice for adjusting Estimated Net Energy
Amounts lbr purposes of complying with 90/l l0 firmness requirements. The Commission has
approved a five-day revision to monthly generation estimates in previous cases. recognizing that
Estimated Net Energy Amounts that are closer to the time of delivery can improve the accuracy of
input used by the Company for short-term operational planning. See Case Nos. IPC-E-19-01,
STAFF COMMENTS DE,CEMBER 31.20197
IPC-E-I9-03, IPC-E-I9-04, IPC-E-I9-07, and IPC-E-19-12. The Facility has been generating
energy since at least 2009, and the Company has a long generation history for the QF. Staff
believes a five-day advanced notice is appropriate.
Capacitv Pavment
In Order No. 32697 , the Commission stated that, "If a QF project is being paid for
capacity at the end ofthe contract term, and the parties are seeking renewal/extension of the
confiact, the renewaVextension includes immediate payment ofcapacity." Staffverified that this
project is being paid for capacity at the end ofthe original contract, and thus the project should be
allowed to receive capacity payment for the full term ofthe replacement contract.
Capacity Size Threshold
In order for a cogeneration project 10 qualify for published rates, the project capacily
cannot exceed 10 aMW. Project capacity is determined on a monthly basis under normal or
average design conditions. In other words, the maximum monthly generation that qualifies for
published rates is capped a1 the total number of hours in the month multiplied by l0 MW. Order
No.29632 at 14. This project has a2,276kW mmeplate capacity, thus, produces less than l0
aMW on a monthly basis under normal or average conditions. Staff verified the project is eligible
for published avoided cost rates.
The facility consists of two 1,138 kW tubines, giving the facility 2,276 kw of total
nameplate capacity. However, Appendix B ofthe proposed ESA mistakenly states that the
nameplate capacity is 2.276 kW. Staff recommends the Commission order Idaho Power to file
replacement Appendix B that corrects the mistake.
Avoided Cost Rates
This contract is the first contract where fueled rates will be implemented by Idaho Power.
Idaho Power verbally clarified that they propose to adjust lueled rates annually on June l. Since
annual updates on June I are being proposed, Idaho Power used the 2019 published rate effective
June 1,2019.
Staff disagrees with Idaho Power's plan for implementing fueled rates. Staffbelieves
payments received by QFs should be based upon rates for periods in which the facility operates.
For example, payment received by Pico in 2020 should be based on 2020 rates instead of 201 9.
3STAFF'COMMENTS DECEMBER 3I.2019
In addition, Staff believes that in order to incorporate the annual adjustment for the adjustable
component ofthe fueled rates, each specific year should have two sets ofrates: rates for the
period from January I through May 3l using the latest version ofthe 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 Information Agency (EIA).
Pico is in the process ofreconfiguring the facility from a PURPA small power production
facility to a PURPA cogeneration project, and the reconfiguration will be completed before the
original contract expires. Thus, parties agreed to terminate the approved agreement early and
enter into a replacement contract with new avoided cost rates. Because the cogeneration facility
will utilize fossil fuel as its fuel source, the parties adopted tLeled rates in compliance with
Schedule 73 and Order No .28945.
Fueled rates include a non-adjustable component and an adjustable component.
According to Order No. 28945, the non-adjustable component is equivalent to the fixed cost ofa
combined cycle combustion turbine (CCCT) generator, and the adjustable component is intended
to track the price of the natural gas fuel for a CCCT. Currently, published avoided cost rates use
EIA's natural gas forecast, and the forecast is updated annually on June l.
The proposed contract lists the non-adjustable rates for the entire l0-year contract term
and the adjustable rates only for the year 201 9. Idaho Power explained to Staff through telephone
conversations that the Company plans to update the adjustable component annually on June I and
apply the 2019 adjustable rates to the period from January l, 2020 through May 3 I , 2020, until
the next adjustment that takes place on June I , 2020. Staff verihes that the non-adjustable
component of the rates is correct, but disagrees with ldaho Power on t}re adjustable component.
According to the most recent SAR model approved in Order No. 34350, the adjustable
component is 24.44 MillsikWh for the year of 2019 and 26.53 Mills/kWh for the year of 2020.
Since the project will start operation as a cogeneralion facility in the beginning of2020, Staff
believes 26.53 Mills&Wh should be used until a newer version of the SAR model is approved on
June 1,2020. Ifnot corrected, the facility will be compensated using 2019 rates for generation
produced by the facility during the first halfofyear 2020.
To continue this logic and to ensure that the facility is always being paid for operation that
corresponds with the Commission-approved adjustable component ofthe fueled avoided cosl rate,
the facility will necessarily need to be paid two sets of rates for each year remaining in the
STAFF- COMMENTS DECEMBER 31,20I9I
contract. The first is a change in rates that normally occurs each new calendar year due to annual
cost and rate buckets used to calculate avoided cost rates embedded in the Surrogate Avoided
Resource (SAR) model. The second is a change in the rates stafiing June I due to the update
from the new natural gas price forecast. Staff believes this proposal will ensure that the facility
will always be paid the Commission-approved avoided cost rate.
STAFF RECOMMENDATIONS
Staff recommends the Commission approve the proposed ESA between ldaho Power and
Pico Energy conditioned on the following:
1. The parties file replacement Appendix B in the ESA correcting the nameplate
capacity.
2. The parties update the avoided cost rates in the ESA based on Stalf s proposal.
Respecttully rrt-itt"a tni, 3l* day of December 2019.
Hunter
Deputy Attorney General
Technical Staff: Yao Yin
i:umisc/commenlripcel 9.39mhry comments
)S]'AFF COMMENTS DECEMBER 31.2019
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 3IST DAY OF DECEMBER 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-19.39, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOVAN E WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-00'.10
ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: cnergvcortracts(a)idahopower.com
E-MAIL: drvalkcr(dridahoDorler.con.r
dock ets(.Did ahopou,cr. com
JAMIE WALLACE
680 ANDERSON DR
FOSTER BLDG 10 SUITE 58
PITTSBURG PA I5220
PETER RICHARDSON
RICHARDSON ADAMS PLLC
515 N 27TII STREET
BOISE ID 83702
E-MAIL: peterlrrtrichardsonadanrs.cornE-MAIL: iu,allacc [r]montauk \/.com
J-,4b--*Srcnrreyr'
CERTIFICA I'E OF SERVICF