20200716Comments.pdf

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DONOVAN WALKER
Lead Counsel
[e-mail]
July 1 6,2020
VIA ELECTRONIC FILING
Diane Hanian, Secretary
ldaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A
Boise, ldaho 83714
Case No. !PC-E-20-02
ldaho Power Company's Petition to Establish Avoided Cost Rates and Terms
for Energy Storage Qualifying Facilities under PURPA
Dear Ms. Hanian
Attached for electronic filing in the above matter are Comments of ldaho Power
Company. lf you have any questions about the enclosed documents, please do not
hesitate to contiact me.
Very truly yours,
Re
Donovan Walker
DEW/ cld
Enclosures
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwa I ker@ idahopower.com
Attomey 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 QUALIFYING
FACILITIES.
CASE NO. IPC-E-20-02
COMMENTS OF
IDAHO POWER COMPANY
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ldaho Power Company ("ldaho Powe/' or "Company"), in accordance with RP 201 ,
ef seg., as well as the ldaho Public Utilities Commission's ("|PUC" or "Commission")
Notice of Modified Procedure in this matter, Order No. 34699, hereby respectfully submits
the following lnitia! Comments.
I. INTRODUCTION AND BACKGROUND
ldaho Power filed the Petition in this matter on January 21,2020. This was the
next business day following the United States District Court for the District of ldaho's
("Federal District Court") Memorandum Decision and Order issued January 17,2020, in
Franklin Energy Sforage One et al. v. Kjellander et a/., Case No. 1:18-cv-00236-REB,
holding that the Commission's decision in Order No. 33785 "established an
implementation plan that impermissibly classified the QF status of Plaintiffs' energy
storage facilities that are certified under [PURPAI as energy storage facilities."
Memorandum Decision at 37. 'Classifying such facilities as 'solar QFs' is outside the
Commissioners'authority as state regulators and therefore in violation of federal law." ld.
While finding that the Commission could not treat these energy storage QFs as solar QFs,
the Court specifically declined "to order [the Commission] 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." /d. Both the Commission and ldaho
Power have appealed this decision to the United States Court of Appeals for the Ninth
Circuit. Case Nos. 20-35 146, 20-35144.1
ldaho Power's Petition in this matter was not only filed in response to the Federal
District Court's decision in the Franklin matter, but also in response to two new requests
for PURPA battery storage contracts that it received in less than one business day
between the release of the Federal District Court's decision and the filing of the Petition
herein. Part of the Federal District Court's ruling expressly stated, "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." However, ldaho Power received four separate requests
for four battery storage QF contracts from the same developer within days of the Court's
decision. Despite the above quoted express language of the Federa! District Court to the
contrary, each of those battery storage QF contract requests claims entitlement to
published avoided cost rates up to 10 aMW for a twenty-year term as an "other QF". The
l The fact that the Federal District Court's decision is currently under appeal does not obviate the need or
validity of IPUC action to establish the appropriate avoided cost for energy storage QFs as requested in
ldaho Powe/s Petition.
projects' letters/applications all state, "The project is an energy storage QF and qualifies
for the 'Other projects" avoided costs as found in 1:18-cv-00236-REB (Franklin Energy
Storage v. ldaho PUC & ldaho Power)." Additionally, two of the proposed projects, BIack
Mesa Energy 1 and Black Mesa Energy 2, have filed a formal complaint with the
Commission alleging under the same facts underlying the claims of Franklin Energy
Storage in the Federal District Court case that they have established legally enforceable
obligations entitling them to avoided cost rates and terms as "Othe/' QFs: committing
ldaho Power and its customers to purchase the net output of those proposed battery
storage projects utilizing the Commission's published avoided rates for "Othe/' QF
facilities and for a2O-year term. This matter is currently pending before the Commission.
Case No. IPC-E-20-17.
On February 10, 2020, the Commission issued Notice of ldaho Power's Petition
and a Notice of lntervention Deadline soliciting interested persons to intervene and
participate in this case by filing a Petition to Intervene by February 28,2020. Order No.
34552. No Petitions to lntervene were filed. On June 23, 2020, the Commission issued
a Notice of Modified Procedure, Order No. 34699. Because no parties intervened in the
case, Commission Staff recommended "an enhanced version of Modified Procedure
designed to solicit different viewpoints." Staff Decision Memorandum, June 2,2020, p 2.
Staff proposes to first file preliminary comments that state
preliminary Staff positions and seek public input on specific
issues that may lend valuable insight regarding the project
eligibility cap and contract length. Staff would then assess
whether and to what degree to incorporate the publicly
provided information in its analysis and file a revised set of
comments. Staff recommends the Company follow the same
procedure of issuing preliminary comments that seek
additional input and then filing revised comments after
reviewing the public input.
td.
The Commission's Notice of Modified Procedure establishes that parties to the
case, ldaho Power and Commission Staff, file initial comments and requests for public
input by July 16, 2020. The initial comments are to state the parties' initial positions
regarding the Petition and to solicit additional information from interested parties by
August 6,2020. The parties will then have until August27,2020, to file follow-up
comments taking into consideration any public comments that may have been filed.2
ldaho Power's initial position is no different than that which was filed in its Petition.
There are no intervenors in this case, and the Company is not aware of what position
Staff may take with regard the issues raised in the Petition. The Company has a good
idea of the position of Franklin Battery Storage and Black Mesa Energy, the two
developers that have submitted 9 different proposed battery storage QF projects seeking
PURPA contracts: they believe they are entitled to published avoided cost rates up to 10
aMW in size and twenty-year contracts as if they were a baseload type of resource in the
"other QF" category such as geotherma!, cogeneration, biogass, landfill gas, or biomass.
Additionally, as referenced above, they persist in this belief even though the Federal
District Court's did not support their position. Without any other positions yet voiced by
others in this mafter, ldaho Powe/s position for these preliminary comments remains the
same. ldaho Power's position, in addition to being supported by the law and the record,
is necessary to protect customers from overpaying for potentially Iarge amounts of
generation that are not needed untilwell into the future, and thus the Commission should
2ldaho Power has no objection to Staff and the Commission's chosen method of Modified Procedure with
the reservation that ldaho Power may seek leave to file Reply Comments to any new items raised by Staff
in its August 27,2020, follow-up comments.
apply the federally required 100 kilowatt ('kW') standard/published rate eligibility cap to
battery/energy storage QFs.
II. COMMENTS
The Commission should adopt a 100 kW published rate eligibility cap for energy
storage 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 and is not dispatchable by ldaho Power,
from the energy storage QF; and (2) the 100 kW published rate cap is the only effective
measure to combat the potential disaggregation of energy storage QFs into 10 aMW
increments in order to seek published rates over ICIRP based rates and 20-year contracts
over 2-year contracts.
The ICIRP Methodoloqv and Neqotiated PURPA Contract
The Federal District 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 declines 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 !PUC's PURPA implementation plan." /d. (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. ld., at p 35-36. Consequently,
according to the Federal District Court determination, the IPUC must establish 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 sellto the utility. 18 C.F.R.
S 292.304(c)(3)(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. $ 292.30a(e).
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
projectwill provide scheduled, dispatchable poweroutput in forward looking time intervals
ranging from 5-240 minutes pending final system design." Notably, 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, and is not scheduled, not
dispatchable, and not proposed in forward-looking time intervals ranging from 5-240
minutes. See, Attiachment 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. To realize
the potential benefits of economically viable, utility-scale energy storage facilities it would
first be necessary for the project to be configured and operated in such a manner that it
could/would provide such things as ancillary grid services including reserve capacity,
surge capacity, load-balancing, or voltage support; firming of variable generation; or time-
shifting of generation to match load. 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 QF seeking PURPA
contracts with ldaho Power, 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. Even assuming the
Proposed Battery Storage Facilities can provide all of the referenced "benefits" and be
"dispatchable"-the Proposed Battery Storage Facilities have not proposed doing so, and
it is not possible to realize, recognize, or provide for these possibilities under the published
avoided cost rates and standard contract. lf any of these possible benefits were to be
considered at all it is only by classifying the Proposed Battery Storage facilities over 100
kW as being subject to the negotiated rates determined by the incremental cost IRP
methodology, which starts with consideration of the actual output profile of the proposed
facilities. 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, priced at the avoided cost of a natural gas combustion
turbine, and using standard PURPA 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.
Disaoqreoation to Obtain Hioher Rates and/or Lonqer Contract Terms
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-11-01. For
instance, the four proposed Franklin Energy Storage facilities were 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 Janu ary 21 , 2O2O, 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, 20-year contracts. ln fact, all of the proposed battery storage QF projects submitted
the exact same or adjacent location coordinates as accompanying projects as shown on
the table below. They are disaggregated. All Franklin projects shared the same
developer, and all Black Mesa and Frederick projects shared the same developer.
Request
Number
Project Name Nameplate
Capacity
Date
Received
Location Location
Coordinates
1 Franklin Energy
Storaoe One
32 MW 1126117 Jackpot, NV 42.206,114.6
2 Franklin Energy
Storaoe Two
32 MW 1126117 Jackpot, NV 42.206,114.6
3 Franklin Energy
Storaoe Three
32 MW 1t26t17 Jackpot, NV 42.206,114.6
4 Franklin Energy
Storaoe Four
32 MW 1t26t17 Jackpot, NV 42.206,114.6
5 Black Mesa Enerov 20 MW 2110117 Glenn's Ferrv, lD 42.91,115.18
6 Black Mesa Energy
1
20 MW 1118120 Glenn's Ferry, lD 42.91,115.18
7 Black Mesa Energy
2
20 MW 1t18t20 Glenn's Ferry, lD 42.907,115.207
8 Frederick Enerov 1 20 MW 1t20t20 Grand View. lD 43.009, 116.018
I Frederick Enerov 2 20 MW 1120120 Grand View. lD 43.009, 116.018
Total 228 MW
This was the practice that the Commission determined to prevent when it first
implemented a temporary reduction to a 100 kW published rate eligibility cap forwind and
solar projects, Order No.32176, and then made that 100 kW published rate cap
permanent for wind and solar QFs. Order No.32262. See Case Nos. GNR-E-10-04,
GNR-E-1 1-01 .
Based upon the re@rd, the Commission finds that a
convincing case has been made to temporarily reduce the
eligibility cap for published avoided cost rates from 10 aMW
to 100 kW for wind and solar onlv while the Commission
further investigates the implications of disaggregated QF
projects ...
Wind and solar resources present unique characteristics that
differentiate them from other PURPA QFs. Wind and solar
generation, integration, capacity and ability to disaggregate
provide a basis for distinguishing the eligibility cap for wind
and solar from other resources ...
At a minimum, FERC regulations require that standard or
published rates be set for purchases from QFs with a design
capacity of 100 kW or less. These regulations also grant the
Commission the discretion to set the published rate eligibility
cap at a higher level. 18 C.F.R. S 292.304(c). Whether it is a
published rate or a rate for a larger QF, FERC requires that
the avoided cost rates for all QF purchases be just and
reasonable to utility customers and in the public interest; and
not discriminate against qualifying cogeneration and small
power production facilities. 18 C.F.R. S 292.304(aX1). !n
establishing a published rate, the Commission may
differentiate among QFs using various technologies on the
basis of supply characteristics of the different technologies;
the availability of capacity and energy during daily and
seasonal peaks; dispatchability; reliability; and other factors.
18 C.F.R. S 292.304 (cX3) ...
This Commission established a clearand reasoned distinction
between smalland Iarge QFs in 1995 when itadopted the use
of the IRP methodology for larger QFs. Order Nos. 25882,
25883, 25884. The Commission explained that requiring
larger QF projects "to prove their viability by market standards
ensures that utilities will not be required to acquire resources
priced higher than would result from a least cost planning
[RFP] process. Ratepayers will not be disadvantaged and
QFs will be treated fairly and consistently with the
requirements and goals of PURPA." /d. at 6. The purpose,
then and now, of distinguishing between smal! and large QFs
with the application of the IRP methodology for large QF
projects is to more precisely value the energy being delivered
- not encourage or discourage QF resources.
Order No. 32176, pp. 9-10 (citations omifted, emphasis in original). In extending the 100
kW published rate eligibility cap from temporary to permanentforwind and solar QFs, the
Commission stated
Based upon the record in this case and after carefu!
consideration of the positions presented, the Commission
finds it appropriate to maintain the 100 kW eligibility cap for
published avoided costs rate for wind and solar QFs. We find
that any attempt to implement criteria in an effort to prevent
disaggregation would be met by attempts to circumvent such
criteria. The economic incentive for the projects is obvious.
QF developers are working within the current structure
provided by this Commission. However, we emphasize that
PURPA and our published rate structure were never intended
to promote large scale wind and solar development to the
detriment of utility customers. Avoided cost rates are to be
just and reasonable to the utility's ratepayers. 18 C.F.R. S
292.3O4(aX1). PURPA entitles QFs to a rate equivalent to the
utility's avoided cost, a rate that holds utility customers
harmless - not a rate at which a project may be viable. 18
C.F.R. S 292.304(aX2). lf we allow the current trend to
continue, customers may be forced to pay for resources at an
inflated rate and, potentially, before the energy is actually
needed by the utility to serve its customers. This is clearly not
in the public interest.
PURPA and the implementing regulations require only that
the published/standard avoided cost rates be established and
made available to QFs with a design capacity of 100 kW or
less. 18 C.F.R. S 292.304(c) ... Wind and solar projects
largerthan 100 kW continue to be entitled to PURPA contracts
at avoided cost rates calculated using the IRP Methodology.
Furthermote, a 100 kW threshold for wind and solar QFs
provides a certainty to the parties in negotiations that
disaggregation criteria would not. While we recognize the
impact that this decision will have on small wind and solar
projects, it would be erroneous, and illegal pursuant to
PURPA, for this Commission to allow large projects to obtain
a rate that is not an accurate reflection of the utility's avoided
cost for the purchase of the QF generation.
Order No. 32262, p. 8 (citations omitted)
Once again, the Commission is faced with a large amount of proposed PURPA
projects - this time battery/energy storage QFs - that appear to be configuring themselves
in such a manner as to circumvent the Commission's rules implementing PURPA to the
direct detriment of ldaho Power customers, which is contrary to PURPA. The Proposed
Battery Storage Facilities share the modular, and easily disaggregated, nature of wind
and solar generation output referenced by the Commission in its orders limiting those
resource types to 100 kW for published rate eligibility. The 228 MW of Proposed Battery
Storage Facilities' requests for energy sales agreements also came in a large amount of
proposed MWs in a very short time, again similar to the previous wind and solar
development.
ln its order reducing the maximum contract term for proposed projects that exceed
the published rate eligibility cap, the Commission stated
Based upon our record, we find that 2O-year contracts
exacerbate overestimations to a point that avoided cost rates
over the long-term period are unreasonable and inconsistent
with the public interest. We find shorter contracts reasonable
and consistent with federal and state law for multiple reasons.
First, shorter contracts have the potentia! to benefit both the
QF and the ratepayer. By adjusting avoided cost rates more
frequently, avoided costs become a truer reflection of the
actual costs avoided by the utility 49[ allow QFs and
ratepayers to benefit from norma! fluctuations in the market.
Second, shorter contract lengths do not ultimately prevent a
QF from selling energy to a utility over the course of 20 years
- or longer. PUPRA's "must purchase" provision requires the
utility to continue to purchase the QF's power ... A shorter
contract length merely functions as a reset for calculation of
the avoided costs in order to maintiain a more accurate
reflection of the actual costs avoided by the utility over the
long term ...
This Order shortens the length of !RP-based PURPA contract
in order to maintain a more accurate avoided cost ... This
Order strikes a balance between just and reasonable rates for
ratepayers, the public interest and interests of QFs, as is
mandated by PURPA and FERC regulations.
Order No. 33357, p. 23, 32 (emphasis in original). lt is appropriate and within the
exclusive authority of the Commission to act in the public interest to protect customers
from this manipulation of the rules and extend the 100 kW published rate eligibility cap to
battery storage projects.
Since the time the Commission issued orders that established size requirements
for current avoided cost eligibility and contract terms, the Company has been approached
by numerous renewable projectdevelopers seeking to sellgeneration from their proposed
generation facilities, including energy/battery storage, at project sizes that are larger than
10 aMW and in many cases larger than PURPAs 80 MW size limit for renewable QFs at
prices that are much more economic for ldaho Power's customers, and in many cases
substantially lower than any PURPA avoided cost calculation. !n fact, in 2019 Idaho
Power entered into a non-PURPA Power Purchase Agreement ("PPA") with one such
proposed project, Jackpot Holdings, LLC, for the purchase of generation output from the
120 MW Jackpot Solar project at prices that were among the lowest in the nation and
nearly half the cost of any current avoided cost methodology for fixed rates implemented
in ldaho. Although the Company has not entered into other PPAs as its lntegrated
Resource Plan ("lRP") has not identified a specific need for additiona! generation
resources, ample opportunities exist for ldaho Power to acquire renewable generation at
prices that are far more beneficia! to customers, whereas new and unneeded PURPA
QFs on ldaho Power's electricalsystem increases costs to customers.
The prevention of disaggregation "gaming" in order to seek application of higher
rates and/or a longer contract terms is necessary to prevent substantial customer harm
from over-paying larger projects by applying published rates that are supposed to be
applicable to smaller QFs - or by locking in long-term, fixed-rates with no ability to adjust
such rates during the contract term. 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.
il. coNcLUSroN
Because of the nature of the output of PURPA energy/battery storage QFs the
Commission should exercise its authority to direct that energy/battery storage QFs are
entitled to published/standard rates up to the federally required minimum of 100 kW. The
ICIRP methodology based upon the QFs specific hourly generation profile is the only
current way to protect customers under the Commission's implementation of PURPA by
properly considering the characteristics of the output, which can vary greatly, from the
energy storage QFs; and the 100 kW published rate cap is the only effective measure to
mitigate the customer harm resulting from potential disaggregation of energy storage QFs
into 10 aMW increments in order to seek published rates over ICIRP based rates and 20-
year contracts over 2-year contracts.
Respectfully submitted this 16h day of July 2020.
h*1datt<
DONOVAN E. WALKER
Attorney for ldaho Power Company
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 16h day of July,2020, I served a true and conect
copy of the within and foregoing COMMENTS OF IDAHO POWER COMPANY upon the
following named parties by the method indicated below, and addressed to the following:
Edward Jewell
Deputy Attomey General
ldaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. No. 8
Suite 201-A(83714
PO Box 83720
Boise, lD 83720-0074
_Hand Delivered
_ U.S. Mail
_Ovemight Mail
_FAXX Emai!
edwa rd . iewel I @ o uc. ida ho.qov
Christy Davenport, Legal Assistant