20210520Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9917
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
REYNOLDS IRRIGATION DISTRICT FOR
THE PURCHASE OF ELECTRIC ENERGY
FROM THE REYNOLDS IRRIGATION
HYDRO PROJECT
CASE NO. IPC.E.2I.O1
COMMENTS OF THE
COMMISSION STAFF
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Street Address for Express Mail:
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BOISE, ID 837I4
Attomey for the Commission Staff
BEFORE THB IDAHO PUBLIC UTILITIES COMMISSION
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STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On April 2,2021, Idaho Power Company ("Company"), requested the Idaho Public
Utilities Commission ("Commission") approve or reject an energy sales agreement ("ESA") with
Reynolds Irrigation District ("Seller") for energy generated by a 350-kilowatt ("kW") nameplate
capacity Reynolds Irrigation Hydro Project ("Facility") near Melba, Idaho. The Facility is a
quali$ing facility under the Public Utility Regulatory Policies Act of 1978.
Seller has been delivering energy generated by the Facility to the Company under a firm
energy sales agreement dated April 1, 1985 that expired on April 30,2021.
The new ESA has a2}-year term with non-levelized, non-seasonal hydro published
avoided cost rates as set by Order No. 34683.
1STAFF COMMENTS MAY 20,2021
The Company requests the Commission approve the ESA and declare all payments for
purchases of energy under the ESA be allowed as prudently incurred expenses for ratemaking
purposes.
STAFF REVIEW
Staff recommends approval of the proposed ESA between the Company and Seller.
Staffls justification is based upon its review of the ESA, which was focused on: l) the 90/110
rule; 2) capacity payments; 3) the lapsed contract period; and 4) the avoided cost rates.
90/110 Rule
Staff confirmed the ESA contains the 90/l l0 Rule as required by Order No. 29632. The
90/l l0 Rule requires a seller of a qualiffing facility to provide utilities with a monthly estimate
of the amount of energy the qualiSing facility expects to produce. If the seller delivers more
than 110 percent of the estimated amount, then the utility must buy the excess energy for the
lesser of 85 percent of the market price or the contract price. If the seller delivers less than 90
percent of the estimated amount, then the utility must buy total energy delivered for the lesser of
85 percent of the market price or the contract price. See Order No. 29632 at20.
Staff also confirmed the ESA requires the Seller to give the Company at least five days
advanced notice if the Seller wants to adjust its Estimated Net Energy Amounts for purposes of
complying with 90/l l0 firmness requirements. Five-day advanced notice has been authorized in
prior orders, including Order Nos. 34263 and 34870.
Capacity Payment
In Order No. 32697, the Commission stated that, "lf 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.
Similar to the Black Canyon #3 project, the original contract with the Facility included
avoided cost rates without a capacity payment as determined in Order No. I 8190, because the
2STAFF COMMENTS MAY 20,2021
Company was not capacity constrained. Since 2000, the Company has added capacity to meet its
capacity needs, including Danskin (2001 and 2008), Bennett Mountain (2005), and Langley
Gulch (2012) gas plants. Because the Facility has operated since the mid-1980s and has gone
through those capacity deficiency periods, Staff believes the project has contributed to meeting
the Company's need for capacity.
In addition, the nameplate capacity of the Facility, which has been 35O-kW since
construction, and the capacity of the step-up transformer, which has been 300-kW since
construction, remain unchanged in the proposed ESA. For this reason, Staff believes the Facility
is eligible for, and should be granted, capacity payments for its entire generation capacity amount
over the full term of the ESA.
Lapsed Contract Period
The original contract expired on April 30,2021. According to Article XXI of the ESA,
the ESA will not be effective until the Commission has approved all of the ESA's terms and
conditions and has declared that all payments the Company makes to the Seller for purchases of
energy are allowed as prudently incurred expenses for ratemaking purposes. Therefore, there is a
lapsed contract period between May 1 ,2021, and the final effective date of the Commission's
order.
In Case No. AVU-E-I9-16, the Commission approved both energy and capacity
payments during a lapsed contract period for Stimson Lumber, which never stopped operating.
In this case, the Seller desires to continue providing generation during the lapsed contract period.
The Company will accept the delivery and pay the Surplus Energy Price defined in Article7.2 of
the ESA, subject to any true-up, adjustment, or rejection of terms and provisions, or the contract
itself by the Commission. See Letter Agreement dated April 29 , 2021 , in Response to Staff s
Production Request No. 3. Surplus Energy Price is the price used for Surplus Energy. An
example of Surplus Energy is energy delivered outside of the 90/l l0 firmness band, and the
value is the lesser of 85 percent of the market price or the contract price. See Article 7.1 and
Article 7 .2 of the ESA. Essentially, the energy delivered during the lapsed contract period would
be treated as non-firm energy and would be paid accordingly. Staff believes this is a reasonable
approach.
JSTAFF COMMENTS MAY 20,2021
Section B-7 of the ESA states that the Company cannot accept or pay for generation from
this Facility if the Facility has not achieved the status of being an Idaho Power Designated
Network Resource ("DNR"). This Facility is a Company DNR pursuant to an existing energy
sales agreement. Section B-7 also provides that the DNR status will continue if this Agreement
is 1) executed and approved by the Commission, and 2) a Generator lnterconnection Agreement
("GIA") has been executed by both parties and 3) the Seller is in compliance with all
requirements of that GlA. The Company also confirmed that the Facility will be a DNR during
the lapsed contract period. See Response to Staffls Production Request No. 3. This is because
there is a fully executed contract applicable to the resource in place at the time the previous
contract expired. If the ESA is rejected by the Commission, then the Company would determine
the DNR status at that time as the ESA would not be fully effective.l
Avoided Cost Rates
Staff reviewed the avoided cost rates proposed in the ESA and verified that the proposed
rates are correct.
STAFF RECOMMENDATION
Staff recommends the Commission approve the ESA and declare the Company's
payments to the Seller for the purchase of energy generated by the Facility under the ESA be
allowed as prudently incurred expenses for ratemaking purposes. Staff also recommends using
the Surplus Energy Price for the energy delivered during the lapsed contract period.
@Respectfully submitted this day of May 2021.
Dayn Hardie
Deputy Attorney General
Technical Staff: Yao Yin
i :umisc/comments/ipce2 I . Tdhyy comments
I This understanding was obtained through email communication with ldaho Power on May 5,2021
4STAFF COMMENTS MAY 20,2021
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2OTH DAY OF MAY 2021,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC.E.2I-07, BY E.MAILING A COPY THEREOF, TO THE FOLLOWING:
DONOVAN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOrSE ID 83707-0070
E-MAIL: [e-mail]
dockets@ idahopower. com
ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-MAIL : energycontracts@,idahopower.com
J //,4,-,
SECRETARY /-
CERTIFICATE OF SERVICE