20210112Compliance Filing Reply Comments.pdf

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DONOVAN WALKER
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January 12,2021
VIA ELECTRONIC FILING
Jan Noriyuki, Secretiary
ldaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A
Boise, ldaho 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 is ldaho Power Company's Reply
Comments on Compliance Filing. lf you have any questions about the enclosed
documents, please do not hesitate to contiact me.
Very truly yours,
O*^taalL
Donovan Walker
DEW cld
Enclosures
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalkertOida hopower.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 QUALIFY]NG
FACILITIES.
CASE NO. |PC-E-20-02
IDAHO POWER COMPANY'S
REPLY COMMENTS ON
COMPLIANCE FILING
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ldaho Power Company ("ldaho Power" 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 and Order No. 34794,
hereby respectfully submits the following Reply Comments regarding the Company's
Compliance Filing pursuant to Order No. 34794.
I. INTRODUCTION, BACKGROUND, AND FACTS
On January 21,2020, ldaho Power filed a Petition to initiate a proceeding to
determine the proper avoided cost rates, as well as contract terms and conditions
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 1of 11
applicable to, and to be included in PURPAI contracts requested by energy storage
Qualifying Facilities ('QF" or "QFs"). ldaho Power's Petition, p 1 . On July 16, 2020,ldaho
Power filed initial comments, as did Commission Staff ("Staff'). On Augusl6,2020, three
parties: Renewable Northwest, ldaho Conservation League, and Clenera, LLC filed
comments in response to the request for public input and the Commission's Notice of
Modified Procedure Order No. 34699. ldaho Power's initialcomments from July 16,2020,
recite the procedural history and background underlying the request to determine the
proper avoided cost rates and contract term applicable to energy storage PURPA QFs
incfuding 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 repeating those facts and background here, ldaho Power incorporates herein by this
reference the Introduction and Background from its initial comments filed on July 16,
2020, as well as the Background and facts from its initial Petition in this matter.
On October 2,2020, the Commission issued Order No. 34794 that established an
energy storage QF category for avoided cost and contracting purposes, established an
eligibility cap of 100 kW for energy storage QF's eligibility for published avoided cost rates
and contract terms up to 20 years, and directed that energy storage QFs larger than 100
kW are entitled to rates calculated using the Company's lncremental Cost lntegrated
Resource PIan ("lClRP") Methodology and 2-year contract terms. ln addition, the
Commission directed the Company to file an updated avoided cost methodology that
identifies Peak Hours and pays for capacity only during the designated Peak Hours. On
October 30,2020, ldaho Power submitted its Compliance Filing that described ldaho
1 Public Utility Regulatory Policies Act of 1978 ('PURPA')
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 2 of 11
Power's implementation of the directives contained in Order No. 34794. ldaho Power's
Compliance Filing described the Company's process and procedures for determining
Peak Hours and Premium Peak Hours occurring on the ldaho Power system and
described a method of payment for capacity and other potential contract elements that
may be required to implement Peak Hours and Premium Peak Hours in an energy sales
agreement with a PURPA energy storage QF.
II. REPLY COMMENTS
Staff filed Comments on the Company's Compliance Filing on December29, 2020,
recommending adoption of the Company's detdrmination of Peak Hours and Premium
Peak Hours and the method of payment for capacity based on Peak Hours and Premium
Peak Hours. Staff Comments, Dec. 29, 2020, p 4-7. ldaho Power appreciates Staffs
consideration, investigation, discussion, and its recommendation regarding the
application of Peak Hours and Premium Peak Hours for payment of capacity to energy
storage QFs. Even though the Company is capacity sufficient to meet projected Ioad for
almost a decade, this will provide a significant price signal to any mandatory purchase
from energy storage QFs to deliver generation during hours the Company will have the
most use for the output from energy storage QFs. Order No. 34794 established
parameters for eligibility of avoided cost prices for energy storage QFs and associated
contract length, and a requirement to identify peak hours for payment of capacity to
energy storage QFs. ldaho Power believes its Compliance Filing adequately addresses
the requirements of Order No. 34794 regarding determination of peak hours. Therefore,
the Company is concerned that Staffs recommendations would result in inefficiencies
and inconsistencies across contracts for energy storage QFs using energy sales
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 3 of 11
agreements ("ESA") under published avoided cost rates versus those that are eligible for
ICIRP-based contracts. ln addition, some of Staffs recommendations would result in
discrepancies and missed opportunities; for example, locking in contractual provisions
related to Peak Hours and Premium Peak Hours for the term of a contract - removing
the ability to annually update Peak Hours and Premium Peak Hours - limits the ability to
utilize the dispatchable operational benefits of energy storage eFs.
Updates to Peak Hours and Premium Peak Hours
ln ldaho Power's Compliance Filing, the Company described the method that is
used to determine Peak Hours and Premium Peak Hours for payment of capacity to
energy storage QFs. As described in the Company's filing, ldaho Power believes that the
load forecast that is updated annually for modeling the Company's avoided costs
available to PURPA QFs using the ICIRP Methodology should also serve as the basis for
identifying the peak hours to be used in the assignment of the avoided cost of capacity.
Therefore, the Company proposes to file annual updates to the Peak Hours and Premium
Peak Hours in eonjunction with the annual October 15 update to the ICIRP Methodology.
ln their Compliance Filing Comments, Staff concluded the determination of Peak Hours
and Premium Peak Hours as submitted in ldaho Powe/s Compliance Filing is reasonable.
However, Staff suggests that updates to Peak Hours and Premium Peak Hours should
occur when the Company makes a filing to request an updated first capacity deficiency
date after acknowledgment of the Company's lntegrated Resource Plan ("lRP"). This
creates several problems.
First, the Company's capacity deficiency filing is unrelated to the implementation
of Peak Hours and Premium Peak Hours in contracts with PURPA QFs. The purpose of
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 4 of 11
the capacity deficiency filing is to comply with the Commission's directives of Order Nos.
22697,33084, and 33159, (the timing of the filing was later changed by the Commission
until after the Commission has acknowledged the Company's IRP in Order No. 33914)
and used to establish the point in time that eligible QFs may begin to receive capacity
payment. Whereas, the directive of Order No. 34794 is to determine the hours that the
capacity component of avoided cost prices is to be paid. Specifically, Order No' 34794 is
not intended to change the fixed inputs of the avoided cost of capacity or the timing of
when an energy storage QF is eligible to receive payment for capacity. Order 34794 is
meant to re-allocate the total amount of capacity paid to an energy storage QF on an
annual basis from all hours the QF supplies its generation to Peak Hours and Premium
Peak Hours. These hours should be based on the most current and applicable load
forecast that is updated annually on October 15. Because there are so many other issues
involved with the review and acknowledgment of the lRP, there is less stability and
predictability in when that acknowledgment will occur. Updating the Peak Hours and
Premium Peak Hours coincident with the annual load forecast update brings more
predictability to timing of the update, as well as aligning the update directly with the update
to the basis of the determination, assuring timely use of the most up-to-date information.
Second, Order Nos. 32697 and 32802, established that updates to the load and
gas forecasts should occur annually on October 15. This is to ensure that the most current
basis for the load forecast input to the ICIRP Methodology is used, and because the final
annual update to the Company's load forecast is not completed until approximately
September of each year, October 15 was identified as reasonable timing to update that
input. The load forecast is updated annually and since it is the primary basis of
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 5 of 11
determining the Company's Peak Hours and Premium Peak Hours it is reasonable that
these elements are updated at the same time. Locking in the Peak Hours and Premium
Peak Hours for at least two years, as recommended by Staff, may result in missing an
opportunity to send appropriate price signals to energy storage QFs to deliver their
generation during hours that are estimated to be when the Company's peak load will
occur. ln addition, waiting until a capacity deficiency filing is processed and the
Commission has approved a new first capacity deficiency date may create further delay
and a separation from the intent of establishing peak hours for capacity payment. For
example, the Commission stated in Order No. 32697, issued on December 18, 2012,
"when a utility submits its lntegrated Resource Plan to the Commission, a case shall be
initiated to determine the capacity deficiency to be utilized in the SAR Methodology".
Order 32697, p.23. This requirement was modified to include the ICIRP Methodology in
Order 33159. Then, on October 24,2017, in Order No.33917, the timing of the first
capacity deficiency filing was changed for each ldaho electric utility to "after the
Commission has acknowledged its IRP report, rather than upon its IRP filing, thus
amending Order No. 32697". As it relates to ldaho Power's Compliance Filing, there has
been at least two updates to the Company's load forecast since the 2019 IRP was initially
filed, which would likely result in too much inaccuracy of applying Peak Hours and
Premium Peak Hours to capacity payments.
Third, annual updates to Peak Hours and Premium Peak Hours allow for payment
of capacity to be based on the most current estimation of when the Company's peak
system loads will occur and when the potentia! operationa! benefits of energy storage
generation may be of benefit to the Company's system by sending a price signal.
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 6 of 11
Therefore, ldaho Power believes the Commission should issue an order that directs the
Company to include an update to Peak Hours and Premium Peak Hours for calculation
of the avoided cost of capacity for energy storage QFs with the Company's annual load
and gas updates filed on October 15 of each year.
Contract Provisions and Capacitv Pavment
Staffs Compliance Filing Comments present recommendations for different
applications of Peak Hours and Premium Peak Hours to ESAs based on published
avoided cost rates from contracts based on the ICIRP Methodology. Idaho Power does
not agree this is necessary or fair to its customers. To be clear, this case and the
implementation of Order No. 34794 is solely directed to energy storage QFs. The
technologies and operational capabilities are the same for this resource type regardless
of size. Order No. 34794 specifically established a separate energy storage QF category,
the eligibility cap for published avoided cost rates and contract term, and an updated
avoided cost methodology to include peak hours. ldaho Power believes any contract
terms and provisions needed to implement the Commission's directives from Order No.
34794 should be negotiated and included in any possible future ESAs that would be
required to be submitted to the Commission for its independent review and approval or
rejection. The major difference between ESA types is that energy storage QFs 100 kW
and smaller are eligible for published avoided cost rates and a 2}-year contract term while
energy storage QFs larger than 100 kW are eligible for ICIRP based rates and a2-year
contract term.
With regard to contract provisions that relate to the Peak Hours and Premium Peak
Hours, ldaho Power recommends that contracts - both published rate and ICIRP based
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 7 of 11
- contain the same Peak Hours and Premium Peak Hours that are updated annually on
October 15. Under the Company's recommendation, QFs with ICIRP based contracts
could update their hourly generation profile on the same annual basis if the QF desires.
QFs with ESAs that contain published avoided cost rates would not have an hourly
generation profile but would only need to dispatch their generation from the energy
storage facility during the Peak Hours and Premium Peak Hours in order to be paid the
highest capacity price.
ESAs based on published avoided cost rates or ICIRP rates for energy storage
QFs should not have the ability to lock in Peak Hours or Premium Peak Hours for the
duration of the contract term. Locking in a provision like Peak Hours and Premium Peak
hours, which can change over time, for the perception of simplicity exacerbates the
potentialfor retail customers to pay a high cost for capacity when capacity is not needed.
lf the Peak Hours and Premium Peak Hours are locked in for the duration of the contract
term, the potential benefit of controlled dispatch of generation from an energy storage
facility has less value because the timing of when the facility's output should be
dispatched can change. ldaho Power believes an annual update to Peak Hours and
Premium Peak Hours, and the payment of capacity during those specific hours, will
provide the price signal to deliver generation when its may be of most use, as intended
by the Commission in Order No. 34794.
Staffs comments address issues surrounding contracts containing levelized
contract rates. ldaho Power agrees that historically, levelized contract rates have created
numerous challenges and disputes among parties due to the additional contract
provisions required for levelized contracts. Levelized contracts essentially front Ioad
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 8 of 11
contracts with "highe/' payments during earlier years Ieaving a risk that project owners
could walk away from the project during later years when being paid "lowe/' payments.
Therefore, these contracts require additional provisions that include items such as
additional insurance, escrow reseryes, Iump sum repayment amounts, second liens, etc.
ln fact, a c€lse is currently pending, Case No. IPC-E-20-28, regarding a dispute with QFs
over lump sum repayment amounts. However, ldaho Power does not fully understand
Staffs conclusion regarding Ievelized rates as the Company's understanding of the
Surrogate Avoided Resource ('SAR') Methodology used to establish published avoided
costs allows for a separate calculation of capacity and energy components and a levelized
calculation of those components. Regardless, ldaho Power does not believe additional
process is needed to calculate the SAR based price at this time, but iflwhen an energy
storage QF is proposed that seeks SAR based avoided cost prices, the Company shall
work with Staff to provide the proper rate to the proposed QF using the SAR Methodology.
For example, a similar situation occurred in Case No. IPC-E-19-39, where a cogeneration
QF required a fueled rate that was calculated using the SAR Methodology, but such rate
was not published on the Commission's website. ldaho Power worked with Staff to
calculate the fueled rate included in the cogeneration QF's ESA that was subsequently
approved by the Commission.
Staff correctly points out that ldaho Power's Compliance Filing primarily focuses
on the calculation of capacity prices based on the ICIRP Methodology. However, the
allocation of the capacity component of avoided cost prices can be properly made to peak
hours in both the SAR Methodology and the ICIRP Methodology. In addition, the payment
of capacity during Peak Hours and Premium Peak Hours can be made under both
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 9 of 11
contract types. ldaho Power believes a consistent application of this concept is essential
to send the proper price signal to energy storage QFs that have the ability to provide their
must-tiake generation during specific hours.
III. CONCLUSION AND RECOMENDATIONS
ldaho Power appreciates Staffs input and recommendation to establish peak
Hours and Premium Peak Hours and the Commission's directives in this case. ldaho
Power recommends that the Commission issue a final order accepting the Company's
Compliance Filing for determining Peak Hours and Premium Peak Hours and that
payment of capacity in contracts for QFs that are sized below and above the eligibility cap
is allocated to the Peak Hours and Premium Peak Hours. The Commission has not
directed ldaho Power, and the Company has not proposed, to make any changes to the
underlying inputs or calculations of avoided costs in either the ICIRP Methodology or the
SAR Methodology, but to only allocate the capacity component of the avoided cost to
Peak Hours and Premium Peak Hours. ldaho Power believes the application of peak
Hours and Premium Peak Hours can and should be applied to all energy storage QFs,
including those above and below the eligibility cap for published avoided cost rates. The
Company also believes that contract provisions required to implement these concepts
should be evaluated if or when an ESA with an energy storage QF is presented to the
Commission for its approval or rejection.
Respectfr.rlly submitted this 12th day of January 2021.
fufila!/<,
DONOVAN E. WALKER
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS ON
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 12th day of January 2021,1 served a true and
correct copy of the within and foregoing IDAHO POWER COMPANY'S REPLY
COMMENTS ON COMPLTANCE FILING upon thefollowing named parties bythe method
indicated below, and addressed to the following:
Edward Jewell
Deputy Attorney General
ldaho Public Utilities Commission
11331W. Chinden Blvd., Bldg. No. I
Suite 201-A(83714
PO Box 83720
Boise, lD 83720-0074
_Hand Delivered
_ U.S. Mail
_Overnight Mail
_FAXX Email
[e-mail]
Christy Davenport, Legal Assistant
IDAHO POWER COMPANY'S REPLY COMMENTS ON
COMPLIANCE FILING - Page 11 of 11