20200827Follow-Up Comments.pdf

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DONOVAN WALKER
Lead Counsel
[e-mail]
August 27,2020
VIA ELECTRONIC FILING
Jan Noriyuki, Secretary
ldaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A
Boise, Idaho 83714
Re Case No. IPC-E-20-02
ldaho Power Company's Petition to Establish Avoided Cost Rates and Terms
for Energy Storage Qualifying Facilities under PURPA
Dear Ms. Noriyuki
Attached for electronic filing in the above matter are Follow-Up Comments of ldaho
Power Company. lf you have any questions about the enclosed documents, please do not
hesitate to contiact me.
Very truly yours,
E*,€ast/4
Donovan Walker
DEW/ cld
Enclosures
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwa [e-mail]
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 QUALIFYING
FAC!LlTIES.
CASE NO. |PC-E-20-02
FOLLOW.UP COMMENTS OF
IDAHO POWER COMPANY
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Idaho Power Company ("ldaho Powe/'or "Company"), in accordance with RP 201,
ef seq., as well as the ldaho Public Utilities Commission's ("IPUC" or "Commission")
Notice of Modified Procedure in this matter, Order No. 34699, hereby respectfully submits
the following Follow-up Comments.
I. INTRODUCTION AND BACKGROUND
On July 16, 2020,ldaho Power filed initial comments, as did Commission Staff
("Staff') in this matter. On August6,2020, three parties: Renewable Northwest, ldaho
Conservation League, and Clenera, LLC filed comments in response the request for
public input and the Commission's Notice of Modified Procedure Order No. 34699. ldaho
Power's initial comments from July 16, 2020, recite the procedura! history and
background underlying the request to determine the proper avoided cost rates and
FOLLOW-UP COMMENTS
OF IDAHO POWER COMPANY - Page 1 of 9
contract term applicable to energy storage PURPAI Qualifying Facilities ("QF'or "QFs")
including the Memorandum Decision and Order issued January 17, 2020, in Franklin
Energy Storage One et al. v. Kjellander et a/., Case No. 1 :18-cv-00236-REB. Rather than
repeat that background here, ldaho Power incorporates herein by this reference the
lntroduction and Background from its initial comments filed on July 16, 2020.
II. COMMENTS
ldaho Power reiterates its request that the Commission adopt a 100 kW published
rate eligibility cap for energy storage QFs for two primary reasons: (1) to prevent or
combat the potential disaggregation of energy storage QFs into 10 aMW increments
seeking application of the surrogate avoided resource ("SAR') based published rates and
20 year contracts; and (2) to require the use of the lncrementa! Cost lntegrated Resource
Plan ("lClRP") methodology based upon the QFs specific hourly generation profile for
most energy storage QFs and limit the customer harm from over-application of the SAR
based rates. Additionally, the Commission should consider as an altemative request
setting a 100 kW published rate eligibility cap for energy storage QFs on an interim basis
and initiate a broader investigation docket into the overall revision of avoided cost rates
and methodologies for the implementation of PURPA in the state of ldaho to include the
potential adoption of FERC's recently updated federal rules on PURPA.
Disaoqreoation
Nothing presented in this matter in response to the request for public input refutes
the fact that energy storage projects, particularly battery storage QFs, are modular and
very easily disaggregated or sized to meet published rate eligibility limits - similar to the
l Public Utility Regulatory Policies Act of 1978 ('PURPA")
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OF IDAHO POWER COMPANY - Page 2 of 9
way in which wind and solar were configured before the Commission set a 100 kW
published cap for those resource types. The record shows that the battery storage
projects proposed to ldaho Power thus far are sized and/or disaggregated specifically
intending to attempt eligibility for SAR-based published rates and 20-year contracts as
"othe/'QFs. See, ldaho Power Comments, July 16,2020, p 8-13; Case No. IPC-E-20-
17, Black Mesa Complaint; Case No. IPC-E-17-01, Petition for Declaratory Order
Regarding Proper Contract Terms, Conditions, and Avoided Cost Pricing for Battery
Storage Facilities.
The Commission has addressed these issues before for wind and solar QFs and
previously determined :
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.
Furthermore, 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 Iarge 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).
This Order shortens the length of IRP-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. lt is appropriate and within the exclusive authority of the
Commission to act in the public interest to protect customers from potential manipulation
FOLLOW-UP COMMENTS
OF IDAHO POWER COMPANY - Page 3 of 9
of the rules and to assure a more accurate avoided cost determination - and establish a
100 kW published rate eligibility cap for energy storage projects.
Avoided Cost Rate Methodoloqv and Contract Term
It is important to note that a determination establishing a 100 kW published rate
eligibility cap does not mean that the utility is relieved of its obligation to purchase. Under
the Commission's current implementation of PURPA it means that projects above that
size threshold are entitled to avoided cost rates set, not by the SAR methodology, but by
the more accurate and superior ICIRP methodology. Staff agrees and acknowledges that
the ICIRP methodology "more accurately reflects avoided costs and minimizes potential
harm to customers." Staff Comments, p 4. A 100 kW published rate cap ensures that
the great majority of energy storage QFs would be priced with the more accurate pricing
methodology. Battery storage QFs have thus far been proposed by professional energy
facility developers, are not typical "mom-and-pop" shops, and possess a level of
sophistication whereby they can easily produce a generation profile required for ICIRP
pricing. The ICIRP methodology is capable of capturing and pricing the differentiated
delivery timing from battery QFs and properly pricing the same according to the particular
avoided cost of specific displaceable Company resources that are operating during those
same hours of delivery. The potential benefits of utility-scale battery storage facilities
cannot be recognized when the Proposed Baftery 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 possible to determine the value of proposed energy storage QFs in a
manner that protects utility customers through the project-specific avoided cost
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OF IDAHO POWER COMPANY - Page 4 of 9
determinations of the ICIRP methodology and the negotiated rate and contract process
required of proposed QFs that exceed the published rate eligibility cap.
A major rationale underlying the Commission's determination to !imit the maximum
contract term for all QFs above the published rate eligibility cap to two years was the
limitation and inability of the Commission to update the avoided cost rates during the term
of the contract.
Based upon our record, we find that 20-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 potential 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 and allow QFs and
ratepayers to benefit from normal fluctuations in the market...
This Order shortens the length of lRP-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. FERC has now revised its rules and specifically authorized
state Commissions to allow the energy rate to be updated throughout the term of the
mandatory purchase or contract. FERC referred to the ldaho Commission in its order
adopting this revision and several other PURPA rule changes.
Further, the Commission [FERC] pointed to evidence that the
desire to limit the effect of fixed QF contract rates had directly
led to PURPA implementation issues that affected QF
financing in other respects, particularly with respect to length
of QF contracts. For example, a commissioner of the ldaho
Commission testified at the Technical Conference that the
ldaho Commission's decision to limit QF contracts to a two-
year term was based on the ldaho Commission's concern that
longer contract terms at fixed rates would lead to payments
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OF IDAHO POWER COMPANY - Page 5 of 9
above avoided costs.
172 FERC fl 61,041 , Qualifying Facility Rafes and Requirements, lmplementafion /ssues
Under the Public Utility Regulatory Policies Act of 1978, FERC Docket No. RM 19-15-000
and AD 16-16-000, Order No. 872, 11243, p 145 (citing n384 (citing Technical Conference
Tr. at 14243 (ldaho Commission)("No matter the starting point, allowing QFs to fix their
avoided cost rates for long terms results in rates which will eventually exceed and
overestimate avoided cost rates into the future. The longer the term, the greater the
disparity. ... [The ldaho Commission] recently reduced PUPRA contract lengths to two
years in order to correct the disparity. We didn't reduce contract lengths to kill PURPA.
We did it to allow periodic adjustment of avoided cost rates.")). !t may be appropriate to
authorize contracts for a term longer than two years if there is an authorized provision
that allows for the update of avoided cost rates during the term of the contract.
III. CONCLUSION AND REQUESTED RELIEF
The record supports, and ldaho Power respectfully requests, that the Commission
issue an order establishing a 100 kW published avoided cost rate cap for energy storage
QFs. This is required in order to ensure customers are not harmed, that a proper and
more accurate avoided cost rate is established for energy storage over 100 kW, and to
discourage/prevent the disaggregation or manipulation of project size by battery storage
QFs in order to gain access to published rates or a 20-year contract term. As Staff
recognized there is a current and present need to set a Commission-authorized avoided
cost rate and contract term for energy storage QFs for ldaho Power, Staff Comments, p
3, and in the present context of the Federal Court decision in Franklin, supra, as well as
the current requests for battery storage PURPA QF contracts, a proper and authorized
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OF IDAHO POWER COMPANY - Page 6 of 9
rate is required today.
However, in recognition of the new rules promulgated by FERC that no longer
require avoided cost rates to be fixed for the entire term of a purchase contract and allows
the state commission to establish avoided cost methodologies that may periodically
update avoided cost rates during the term of a mandatory purchase contract, ldaho Power
proposes an alternative and/or additional request for relief in this docket. Staff made
reference in its Comments to a "follow-on docket to examine refinement or alteration of
avoided cost rate methodologies for battery QFs for all electric utilities in ldaho ..." Staff
Comments, p 3. lndeed, ldaho Power believes that a follow-up docket should be opened,
but broadened to look at the possible revision, refinement, alteration, or abandonment of
the existing avoided cost methodologies and establishment of a more refined and
accurate avoided cost methodology applicable to all QFs that examines incorporation of
the expressed expanded authority granted to state commissions by the recently directed
FERC PURPA rule changes. The ICIRP is acknowledged as a more accurate and better
approximation of avoided cost rates than the SAR methodology. The ICIRP methodology
could also possibly be refined or modified as well. As mentioned, FERC rules now
authorize state commissions to periodically update avoided cost rates during the term of
a contract. The new rules also authorize state commissions to utilize other metrics to
approximate a utility's avoided cost such as Locational Marginal Pricing, competitive
prices from liquid market hubs, or competitive solicitations conducted pursuant FERC
rules. The ICIRP may also benefit from refinement based upon the long-term capacity
expansion modelling, and other updates to the Company's integrated resource planning.
To meet the current need for project pricing and requests for contract, ldaho Power
FOLLOW-UP COMMENTS
OF IDAHO POWER COMPANY - Pase 7 of 9
alternatively requests that the Commission establish a 100 kW published rate cap and
application of the cunent avoided cost pricing methodologies and contract terms on an
interim basis - and conespondingly open a general PURPA avoided cost methodology
docket to examine possible revision of the avoided cost methodologies and incorporation
of the new FERC PURPA rules.
Respectfully submitted this 27h day of August 2020.
fuzilot4-
DONOVAN E. WALKER
Attorney for ldaho Power Company
FOLLOW.UP COMMENTS
OF IDAHO POWER COMPANY - Page 8 of 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 27th day of August 2020,1 served a true and
correct copy of the within and foregoing FOLLOW-UP 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
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. No. 8
Suite 201-A(83714
PO Box 83720
Boise, lD 83720-0074
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edward.iewel ouc.idaho.oov
Max Greene
Sashwatt Roy
Renewable Northwest
421 SW Sixth Ave. #975
Portland, OR97204
(no email indicated in Comments)
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Email
Benjamin J. Otto
ldaho Conservation League
710 N.6th Street
Boise, lD 83701
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Clenera, LLC
800 W. Main St., Suite 900
Boise, lD 83702
(no email or author indicated in
Comments)
botto@ ida hoconse rvatio n. orq
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Email
FOLLOW-UP COMMENTS
OF IDAHO POWER COMPANY - Page 9 of 9
Christy Davenport, Legal Assistant