20200514Comments.pdf

STAFF COMMENTS 1 MAY 14, 2020
MATT HUNTER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 10655

Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR APPROVAL
OR REJECTION OF AN ENERGY SALES
AGREEMENT WITH THE CITY OF HAILEY
FOR THE SALE AND PURCHASE OF
ELECTRIC ENERGY FROM THE HAILEY
CSPP HYDRO PROJECT
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CASE NO. IPC-E-20-16

COMMENTS OF THE
COMMISSION STAFF

The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company’s Application.

BACKGROUND
On March 17, 2020, Idaho Power Company (“Idaho Power”) filed an Application
requesting consideration of an Energy Sales Agreement (“ESA” or “Agreement”) with the City of
Hailey for energy generated by the Hailey CSPP Hydro Project (“Facility”). The Facility is a
qualifying facility (“QF”) under the Public Utility Regulatory Policies Act of 1978. The Facility
has a scheduled First Energy Date under the ESA of June 25, 2020.
The Facility is a 37.3-kilowatt nameplate capacity hydro facility in Hailey, Idaho. The
Agreement contains published non-seasonal, non-levelized avoided cost rates for a 5-year term.
The Facility has been delivering energy to Idaho Power under a June 14, 1985 energy sales
agreement that expires June 24, 2020.

RECEIVED
2020 May 14PM1:27
IDAHO PUBLIC
UTILITIES COMMISSION

STAFF COMMENTS 2 MAY 14, 2020
STAFF ANALYSIS
Staff recommends approval of the proposed ESA between Idaho Power and the City of
Hailey. Staff’s justification is based upon its review of the ESA, which was focused on: 1) the
90/110 rule with at least five-day advanced notice for adjusting Estimated Net Energy Amounts;
2) eligibility for and the amount of capacity payments; and 3) verification of non-seasonal hydro
avoided cost rates.

90/110 Rule
Qualifying facilities provide a monthly estimate of the amount of energy they expect to
produce. If the QF delivers more than 110 percent of the estimated amount, energy delivered in
excess of 110 percent is priced at the lesser of 85 percent of the market price or the contract price.
If the QF delivers less than 90 percent of the estimated amount, total energy delivered is priced at
the lesser of 85 percent of the 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
for purposes of complying with 90/110 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, e.g., Case Nos. IPC-E-19-01, IPC-E-19-03,
IPC-E-19-04, IPC-E-19-07, and IPC-E-19-12. The Facility has been generating energy since the
mid-1980s, and the Company has a long generation history for the QF. Staff believes a five-day
advanced notice is sufficient.

Capacity Payment
Staff recommends that the Hailey CSPP Hydro Project be eligible for immediate capacity
payments in its renewal contract based on the current 37.3 kW nameplate capacity of the Facility.
In Order No. 32697, the Commission stated that, “If a QF project is being paid for capacity at the
end of the contract term, and the parties are seeking renewal/extension of the contract, the
renewal/extension includes immediate payment of capacity.” Although the original contract did
not contain a capacity payment, Staff believes the Facility should be granted capacity payment for
the full term of the replacement contract, as was granted by the Commission to the Black Canyon
#3 project in Case No. IPC-E-19-04.

STAFF COMMENTS 3 MAY 14, 2020
Similar to the Black Canyon #3 project, the Facility in its original contract included
avoided cost rates without a capacity payment as determined in Order No. 18190, effective
September 1, 1983, because Idaho Power was at that time energy constrained, not capacity
constrained. Since about the year 2000, the Company has added significant amounts of capacity
such as Danskin (2001 and 2008), Bennett Mountain (2005), and Langley Gulch (2012) gas
plants. Because the Company went through those multiple capacity deficiency periods during the
Facility’s 35-year contract term, Staff is confident that the project has contributed to meeting the
Company’s need for capacity.
Staff notes that the total nameplate capacity in the renewal ESA is 37.3 kW. This amount
is 40 percent less than the 62 kW nameplate capacity stated in the original contract that became
effective in 1985. Staff learned that the original 62 kW generator was replaced with a smaller
37.3 kW generator in 2016. Because the updated amount is less than the original amount and the
Company has included the project for purposes of resource planning as discussed earlier, the
Company should have avoided building new capacity by at least the smaller amount. Thus, Staff
believes the Facility should be granted capacity payments for all generation produced under the
updated nameplate capacity. Had the nameplate capacity increased from the last approved size,
instead of decreasing, Staff believes that the incremental amount may not have been eligible for
capacity payments until the Company becomes capacity deficient in the future. With the decrease
in nameplate capacity, Staff believes the Facility should be granted capacity payments based on
the nameplate capacity proposed in the Agreement for the full term of the replacement contract.
After discovering that the size of the project was reduced in 2016 during the term of the
original contract, Staff verified whether the change might have adversely affected the terms of the
original contract and should have triggered action from Idaho Power. In this case, Staff did not
find any cause for action. However, Staff notes the following provision in Appendix B of the
ESA would apply if the Facility’s nameplate capacity again changed:
Any modifications to the Facility, including but not limited to the generator or
turbine, that (1) increases or decreases the Facility Nameplate Capacity, or (2)
changes the Qualifying Facility Category, or (3) changes the Primary Energy
Source or (4) changes to the generator fuel and subsequently the Fueled Rate or
Non-Fueled Rate, will require a review of the Agreement terms, conditions and
pricing and Idaho Power, at its sole determination, may adjust the pricing or
terminate the Agreement. If the Agreement is terminated because of said
modifications, the Seller will be responsible for any Termination Damages.

STAFF COMMENTS 4 MAY 14, 2020
Staff believes that this provision in future agreements will prevent inaccurate rates and
violations of Commission orders or Federal Energy Regulatory Commission (FERC) rules due to
changes to the facility.
This issue is not unique to Idaho Power and can occur with Idaho’s other two electric
utilities. Staff verified that recent Avista and PacifiCorp PURPA contracts authorized by the
Commission1 do not include a similar provision. Staff plans to work with the other two utilities to
include similar language in their future contracts.

Verification of Non-Seasonal Hydro Avoided Cost Rates
Staff reviewed the non-seasonal hydro avoided cost rates contained in the Agreement and
verified that the proposed rates are correct and comply with existing orders.

STAFF RECOMMENDATIONS
Staff recommends the Commission approve the ESA. Staff also recommends the
Commission declare Idaho Power’s payments to the City of Hailey for the purchase of energy
generated by the Hailey CSPP Hydro Project under the ESA be allowed as prudently incurred
expenses for ratemaking purposes.

Respectfully submitted this 14th day of May 2020.

________________________________
Matt Hunter
Deputy Attorney General

Technical Staff: Yao Yin
Rachelle Farnsworth

i:umisc/comments/ipce20.16mhyyrf comments

1 For example, Case No. PAC-E-17-14 (City of Preston) and Case No. AVU-E-19-16 (Stimson Lumber).
CERTIFICATE OF SERVICE
CERTIFICATE OF SERVICE

I HEREBY CERTIFY THAT I HAVE THIS 14th DAY OF MAY 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-20-16, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:

DONOVAN E WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
[e-mail]

ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]

BRIAN YEAGER
PUBLIC WORKS DIR
CITY OF HAILEY
115 S MAIN ST
HAILEY ID 83333
E-MAIL: [e-mail]

/s/ Reyna Quintero __
SECRETARY