20200121Petition.pdf

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]
dwalker@ idahopower.com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S PETITION TO ESTABLISH
AVOIDED COST RATES APPLICABLE
TO PURPA ENERGY STORAGE
QUALIFYI NG FACILITIES.
CASE NO. tPC-E-20-o2
PETITION TO ESTABLISH
AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY
STORAGE QUALIFYING
FACILITIES
ldaho Power Company ("ldaho Power" or "Company"), pursuant to RP 53,
hereby petitions the ldaho Public Utilities Commission ('IPUC' or "Commission") to
initiate a proceeding to determine the proper avoided cost rates as well as contract
terms and conditions applicable to, and to be included in the Public Utility Regulatory
Policies Act of 1978 ('PURPA") contracts requested by energy storage Qualifying
Facilities ("QF" or "QFs'; I
1On January 26,2017,ldaho Power received four separate Schedule 73 applications from
proposed battery storage projects requesting published avoided cost rate indicative pricing and 2o-year
contracts from: Franklin Energy Storage One, LLC (32 MW); Franklin Energy Storage Two, LLC (32
MW); Franklin Energy Storage Three, LLC (32 MW); and Franklin Energy Storage Four, LLC (32 MW).
See Attachments 14. All proposed Franklin Energy Storage pro.iects were submitted by the same
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES . 1
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ldaho Power is a vertically integrated public utility electric service provider
regulated in the state of ldaho by the IPUC and is the petitioner in this matter. PURPA
requires ldaho Power, as a public utility, to purchase generation from cogeneration and
small power production facilities that are certified as PURPA QFs at avoided cost rates
and under contractual terms and conditions determined by the IPUC.
The Proposed Battery Storage Facilities, all of which exceed 100 kilowatts ("kW')
in size and vary from 20 megawatts ("MW,) to 32 MW, claim they are entitled to
published avoided cost rates with a 2O-year contract term. ldaho Power asserts that the
Proposed Battery Storage Facilities and any other energy storage QFs be subject to a
published rate eligibility cap of 100 kW.
ldaho Power seeks a determination from the Commission that energy storage
QFs up to a maximum nameplate capacity of 100 kW are entitled to and eligible for
published avoided cost rates and a 2O-year maximum contract term - and that energy
storage QFs over 100 kW are entitled to and eligible for negotiated avoided cost rates
determined by the incremental cost lntegrated Resource Plan (''lClRP") methodology
and a maximum contract term of two years.
developer. On February 13, 2017, ldaho Power received another Schedule 73 application from a
separate proposed battery storage project from another developer: Black Mesa Energy, LLC (20 MW).
See Attachment 5 to the Petition for Declaratory Order, Case No IPC-E-17-01.
Additionally, on January 21, 2020, ldaho Power received two Schedule 73 applications that were
e-mailed over the Holiday weekend for two, 20 MW each, battery storage QFs from Black Mesa Energy 1
and Black Mesa Energy 2. These applications state, "Black Mesa Energy LLC, reiterates its previous
request for an Energy Seles Agreement pursuant to Schedule 73 as requested on ?11012017 ... The
project is an energy storage OF and qualifies for the "Other projects" avoided costs as found in 1:18-cv-
00236-REB (Franklin Energy Storage v. ldaho PUC & ldaho Power)."
These seven proposed projects are hereafter referred to collectively as "Proposed Battery
Storage Facilities."
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 2
ldaho Power asks that the Commission issue Notice of this Petition, establish an
lntervention Deadline, and set a formal Scheduling Hearing after the lntervention period
at which the procedural schedule and scope of proceedings can be established
ln support of this Petition, ldaho Power states as follows:
I. BACKGROUND
On February 27,2017,ldaho Power filed a Petition asking the Commission to
issue a Declaratory Order regarding the proper contract terms, conditions, and avoided
cost pricing for five battery storage facilities requesting contracts under PURPA. Case
No. IPC-E-17-01. On July 13,20'17, the Commission issued Order No. 33785 granting
ldaho Power's Petition for declaratory relief stating, "We find that, as storage facilities
with design capacities that will exceed 100 kW each and with solar as their primary
energy source, the projects are eligible for two-year, negotiated (lRP methodology)
contracts." Order No. 33785, p 12-13. Subsequently, the Franklin Energy Storage
projects ("Franklin") petitioned the IPUC for reconsideration alleging that the
Commission had improperly considered Franklin's QF status in its determination.2 On
August 29, 2017, the Commission denied Franklin's Petition for Reconsideration. Order
No. 33858.
Franklin then filed a Petition for Declaratory Order and Petition for Enforcement
action against the IPUC at the Federal Energy Regulatory Commission ("FERC") to
which FERC declined to act. FERC Docket EL-18-50-000. On May 30,2018, Franklin
filed a Complaint for Violation of the Federal Power Act, PURPA, and FERC
Regulations with the United States District Court for the District of ldaho.3 The Federal
2 Franklin Energy Storage Projects' Petition for Reconsideration, Aug. 3, 2017, Case No. IPC-E-17-01
3 Case No. 1:'18-cv-00236-REB.
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 3
Court heard argument on the IPUC's and ldaho Power's Motions to Dismiss, as well as
cross-motions for summary judgment on February 7, 2019. On January 17, 2O20, the
Federal Court issued its Memorandum Decision and Order, denying the IPUC's and
ldaho Power's motions to dismiss and for summary judgment, and granting in part
Franklin's motion for summary judgmentl stating as follows:
3. Plaintiffs' [Franklin's] Motion for Summary Judgment (Dkt
24) is GRANTED lN PART:
a. The Court finds that the Defendant IPUC Commissioners
violated the Public Utility Regulatory Policies Act of 1978, 16
U.S.C. SS 2601 et seq., when they issued final order
numbers 33785 on July 13, 2017 and 33858 on August 29,
2017. Such orders established an implementation plan that
impermissibly classified the QF status of Plaintiffs' energy
storage facilities that are certified under such Act as energy
storage facilities. Classifying such facilities as "solar QFs"
is outside the Commissioners' authority as state regulators
and therefore in violation of federal law.
b. Defendants are permanently enjoined from enforcing or
applying either of such IPUC final orders to Plaintiffs'
facilities as if such facilities are classified as something other
than energy storage QFs, to include but not be limited to
classifying Plaintiffs' facilities as if they are "solar QFs" under
the IPUC's prior implementation plan. Defendants are further
permanently enjoined from considering the energy source
input into Plaintiffs' energy storage QFs for the purpose of
classifying the QFs in any way other than as energy storage
OFs.
Memorandum Decision and Order, p 36-37, Case No. 1:18-cv-00236-REB, Document
62, Jan. 17,2020.
a Case No. 1 :1 8-cv-00236-REB, Document 62
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 4
However, the Federal Court also stated that it will not Order the IPUC to place
storage QFs5 stating:
4. Plaintiffs' Motion for Summary Judgment (Dkt. 24) is
otherwise DENIED. The Court specifically declines to order
Defendants flPUCI to require utilities under their jurisdiction
to afford energy storage QFs all rights and privileges
afforded to "other QFs" under the IPUC's PURPA
implementation plan.
ld., at p 37.
As previously referenced in footnote 1, subsequent to the Federal Court's
January 17,2020, Order, ldaho Power received two requests for PURPA contracts for
proposed "energy storage QFs" citing to the Court's Order. On January 21,2020,ldaho
Power received two Schedule 73 applications that were e-mailed over the Holiday
weekend for two, 20 MW each, battery storage QFs from Black Mesa Energy 1 and
Black Mesa Energy 2. These applications state, ''Black Mesa Energy LLC, reiterates its
previous request for an Energy Sales Agreement pursuant to Schedule 73 as requested
on 2l1Ol2O17 ... The project is an energy storage QF and qualifies for the "Other
projects" avoided costs as found in 1 :1 8-cv-00236-REB (Franklin Energy Storage v.
ldaho PUC & ldaho Power)."
Consequently, in light of the Federal Court's Order as well as Black Mesa's
ensuing request for PURPA contracts, ldaho Power requests that the IPUC initiate a
proceeding to determine the proper avoided cost rates as well as contract terms and
conditions applicable to, and to be included in the PURPA contracts requested by
energy storage QFs.
5 Case No. 1:18-cv-00236-REB, Document 62, at p 35
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 5
any specific terms upon any power supply contract ldaho Power must enter with energy
il. prscusstoN
ldaho Power has received seven requests for PURPA contracts with energy
storage QFs, configured as battery storage facilities. Two such requests have been
made less than one day after the Federal Court's Order. Additionally, since April of
2019 to the present, ldaho Power has received requests from multiple developers
proposing solar, wind, and battery storage facilities including 6'15 MW of wind, 574 MW
of solar, and 150 MW of battery storage. ldaho Power currently has just under 6,000
MW of wind, solar, and battery storage requests to interconnect to ldaho Power's
system in ldaho for Network Resource lnterconnection Service in its generator
interconnection queue. Given the current requests for PURPA contracts, as well as the
potential for more requests from currently developing projects, and in light of the
Federal Court's Order, a proceeding establishing the proper avoided cost rate eligibility
for energy storage QFs is required.6
Energy Storage QFs should be eligible for published avoided cost rates up to the
required minimum of 100 kW pursuant to FERC regulations. 18 C.F.R. $ 292.304(c).,
After separate lengthy and contested proceedings, the IPUC determined as part of its
implementation of PURPA for the state of ldaho: (1) it will make published rates
available to QFs up to the published rate eligibility cap, and that such published rates
6 ldaho Power has not yet determined if it will appeal the Federal Court decision, and it is unknown if the
Commissioners will do so. However, any possible appeal or outcome on appeal does not obviate the
need or validity of IPUC action to establish the appropriate avoided cost for energy storage QFs as
requested in this Petition.
7 "(cl "Standard rales for purchases. (1)Thereshall be put into effect (with respect to each electric utility)
standard rates for purchases from qualifying facilities with a design capacity of 100 kilowatts or less. (2)
There may be put into effect standard rates for purchases from qualifying facilities with a design capacity
of more than 100 kilowatts." 18 C.F.R. S 292.304(c).
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 6
are based upon a surrogate avoided resource ('SAR) methodology,s (2) QFs that
exceed the published rate eligibility cap are eligible for avoided cost rates established
by the incremental cost lntegrated Resource Plan ("lClRP") methodology;s (3) the
published, or standard, avoided cost rate eligibility cap for wind and solar QFs is set at
100 kW, consistentwith 18 C.F.R.292.304(c), Order No.32262; (4) the published rate
eligibility cap for "other QF" generation types is set at 10 average megawatts ("aMW")
on a monthly basis; (5) QFs that are eligible for published rates may have a maximum
contract term of up to 20 years; and (6) the maximum contract term for proposed QF
projects that are larger than the published rate eligibility cap is two years. Order No.
33357. The Commission also previously directed that published avoided cost rates be
distinguished by resource type. Order No. 32697, p. 15; Order No. 32802, pp. 5-8
The Federal Court stated that the IPUC is "permanently enjoined from
considering the energy source input into Plaintiffs' energy storage QFs for the purpose
of classifying the QFs in any way other than as energy storage QFs." Memorandum
Decision and Order, supra, p 37. At the same time, the Federal Court has stated that,
"The Court specifically declin* to order Defendants [the IPUC] to require utilities
under their jurisdiction to afford energy storage QFs all rights and privileges afforded to
"other QFs" under the IPUC's PURPA implementation plan." ld. (emphasis added).
The setting of avoided cost rates and the contractual terms and conditions of purchase
are the exclusive jurisdiction and responsibility of the IPUC. /d, at p 35-36.
Consequently, according to the Federal Court determination the IPUC must establish
8 SAR methodology avoided cost rates are established as the avoided cost of an assumed combined-
cycle natural gas combustion turbine.
e ICIRP methodology avoided cost rates are established by a comparison ofthe specific, hourly
generation profile ofthe proposed QF to the displaceable resources used to serve load in the Company's
resource stack during that same hour to arrive at an avoided cost.
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 7
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 8
the proper avoided cost rate eligibility for energy storage QFs without regard to the
source of generation used by the energy storage QF. However, the IPUC can properly
consider the output of the energy storage QF that such QF proposes to sell to the utility.
18 C.F.R. S 292.304(cX3)(ii). ln establishing avoided costs rates for purchases from
QFs the IPUC can expressly "differentiate among qualifying facilities using various
technologies on the basis of the supply characteristics of the different technologies"
(/d.), including the availability of capacity and energy during daily and seasonal peaks;
dispatchability; reliability; and otherfactors. 18 C.F.R. S 292.304(e).
The Commission should adopt a 100 kW published rate eligibility cap for energy
slorage QFs for two primary reasons: (1)the ICIRP methodology based upon the QFs
specific hourly generation profile is the only way to protect customers by properly
considering the output, which can vary greatly, from the energy storage QF; and (2) the
1 00 kW published rate cap is the only effective measure to combat the potential
disaggregation of energy storage QFs into 10 aMW increments rn order to seek
published rates over ICIRP based rates.
The output from an energy storage QF could vary greatly depending upon both
the configuration and the operation of the facility. For example, current battery storage
technology allows for a discharge of the batteries for differing, but limited intervals.
Some are limited to four hours of discharge, or for instance, from Black Mesa's
proposal, "The project will provide scheduled, dispatchable power output in forward
looking time intervals ranging lrom 5-240 minutes pending final system design." As
further example the output profile submitted for each of the Proposed Battery Storage
Facilities generally matches the shape and timing of the generation profile of a solar
generator. See, Attachment 1-5 to the Petition for Declaratory Order, Case No IPC-E-
17-01. None of the Proposed Battery Storage Facilities propose to operate in a manner
that would realize the potential benefits of energy storage facilities-they simply
propose to operate with substantially the same generation profile as a solar generator.
The potential benefits and possible promise of economically viable, utility-scale energy
storage facilities is in the unique operational characteristics to, for example: provide
ancillary grid services such as reserve capacity, surge capacity, load-balancing, or
voltage support; firming of variable generation; or time-shifting generation to match load.
However, to realize these benefits, it would first of all be necessary for the project to be
configured and operated in such a manner, and secondly it would be necessary for
operational control and dispatchability of the facility to be with the utility charged with
serving load. When operated as proposed by the Proposed Battery Storage Facilities, it
appears to be structured in a way that passes through as many kW hours as possible in
order to maximize revenue under the must-purchase provision of PURPA. This is the
developer's prerogative, but it should be considered by the IPUC when determining
whether such projects should be subject to a SAR avoided cost methodology, or the
ICIRP avoided cost methodology. Such a determination does not consider the source
of generation that charges, or is stored by the energy storage QF, but considers the
output that the energy storage QF is able to make available to the purchasing utility,
which is properly before the IPUC when exercising its exclusive jurisdiction and
authority to determine the proper avoided cost. Any of the potential benefits of utility-
scale battery storage facilities cannot be recognized when the Proposed Battery
Storage Facilities are configured in such a manner as to come under published rates,
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 9
priced at the avoided cost of a natural gas combustion turbine, and standard contract
terms and conditions. lt would only be through the project-specific avoided cost
determinations of the incremental cost IRP methodology and the negotiated rate and
contract process required of proposed QFs that exceed the published rate eligibility cap
where it may be possible to determine the value of proposed energy storage QFs in a
manner that protects utility customers.
Lastly, energy storage QFs, particularly battery storage facilities share the
modular, and easily disaggregated, nature of wind and solar generation referenced by
the Commission in its orders limiting those resource types to 100 kW for published rate
eligibility. Order No. 32176, Case No. GNR-E-10-04; Order No. 32262, Case No. GNR-
E-1 1-01 . For instance, the four proposed Franklin Energy Storage facilities are all
located immediately adjacent to each other in a contiguous manner, with the only
apparent segmentation into four increments done with the intent to disaggregate into 10
aMW sizes attempting to get 20-year published rate contracts as "other QFs." Similarly,
Black Mesa's most recent submissions of January 21 , 2020, propose two separate 20
MW facilities that are next to each other and segmented in order to attempt to get two
10 aMW published rate, 2O-year contracts. The prevention of disaggregation "gaming"
in order to seek application of higher rates is necessary to prevent substantial customer
harm from applying and over-paying larger projects with published rates that are
supposed to be applicable to smaller QFs. lt is appropriate and within the exclusive
authority of the Commission to act in the public interest to protect customers from
manipulation of the rules and to assure that the proper avoided cost rates and contract
terms and conditions are implemented for the mandatory utility purchases from QFs.
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 1O
III. CONCLUSION/REQUESTED RELIEF
ldaho Power respectfully requests that the Commission initiate a proceeding to
determine the appropriate avoided cost rates applicable to PURPA energy storage QFs.
ldaho Power seeks a determination from the Commission that energy storage
QFs up to a maximum nameplate capacity of 100 kW are entitled to and eligible for
published avoided cost rates and a 20-year maximum contract term - and that energy
storage QFs over'100 kW are entitled to and eligible for negotiated avoided cost rates
determined by the incremental cost lntegrated Resource Plan ("lClRP") methodology
and a maximum contract term of two years.
ldaho Power asks that the Commission issue Notice of this Petition, establish an
lntervention Deadline, and set a formal Scheduling Hearing after the lntervention period
at which the procedural schedule and scope of proceedings can be established.
Respectfully submitted this 21st day of January 2020.
a
DONOVAN E. WALKER
Attorney for ldaho Power Company
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES . 11
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 21st day of January 2020 I will cause to be
served a true and correct copy of the within and foregoing PETITION TO ESTABLISH
AVOIDED COST RATES APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING
FACILITIES upon the following by the method indicated below, and addressed to the
following:
Franklin Energy Storage One
through Four, LLG
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Black Mesa Energy, LLC
Brian Lynch
Black Mesa Energy, LLC
P.O. Box 2731
Palos Verdes, Calitornia 90274
DONOVAN E. WALKER
Attorney for ldaho Power Company
PETITION TO ESTABLISH AVOIDED COST RATES
APPLICABLE TO PURPA ENERGY STORAGE QUALIFYING FACILITIES - 12
Edward Jewell
Deputy Aftorney General
ldaho Public Utilities Gommission
P.O. Box 83702
Boise, lD 83702-0074
11331 W. Chinden Blvd.
Building 8, Suite 201-A
Boise, lD 83714
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