20210520Comments.pdf

JOHN R. HAMMOND, JR.
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83]20-0074
(208) 334-03s7
IDAHO BAR NO. 5470
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
HYDROLAND OMEGA LLC, FOR THE
SALE AND PURCHASE OF ELECTRIC
ENERGY FROM ELK CREEK HYDRO
PROJECT
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Street Address for Express Mail:
I133I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, ID 837I4
Attomey for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. IPC.E.21.O8
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its attorney of record,
John R. Hammond, Jr., Deputy Attorney General, submits the following comments.
BACKGROUND
On April 5,2021, [daho Power Company ("Idaho Power" or "Company"), requested the
Idaho Public Utilities Commission ("Commission") approve or reject an energy sales agreement
(the "ESA") with Hydroland Omega LLC ("Hydroland") for energy generated by a 2350-kilowatt
hydroelectric facility ("Facility") near New Meadows, Idaho. The Facility is a qualified facility
under the Public Utility Regulatory Policies Act of 1978.
Hydroland has been delivering energy generated by the Facility to the Company under a
firm energy sales agreement dated August 31,1984 that expires on April 30,2021. The new ESA
has a 20-year term with non-levelized, non-seasonal hydro published avoided cost rates as set by
Order No. 34683.
ISTAFF 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 AIYALYSIS
Staff recommends approval of the proposed ESA between ldaho Power and Hydroland.
Staff s justification is based upon its review of the ESA, which was focused on: l) the 90/l l0
rule; 2) eligibility for and the amount of capacity payments; 3) the lapsed contract period; and 4)
the avoided cost rates.
90/l l0 Rule
Staff confirmed the ESA contains the 90/110 Rule as required by Commission Order
No. 29632. The 90/110 Rule requires a qualifuing facility ("QF") to provide utilities with a
monthly estimate of the amount of energy the qualifuing facility expects to produce. If the QF
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 QF 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-day
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 Commission orders such as Order Nos. 34263 and 34870.
Staff noted that the Monthly Estimated Net Energy Amounts for months of January,
February, August, September, October, November, and December are zero. This is Hydroland's
intention to not generate in those months. It is consistent with historical generation under the
previous firm energy sales agreement. According to Article 6.2 of the ESA, after the Operation
Date, Hydroland may adjust future Monthly Estimated Net Energy Amounts, if it intends to
deliver different amounts of monthly generation than what are listed in the ESA. See Response to
Stafls Production Request No. 4.
2STAFF COMMENTS MAY 20,2021
Capacity Payment
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.
Like the Black Canyon #3 project, the Facility's original contract included avoided cost
rates without a capacity payment as determined in Order No. 1 8190, because Idaho Power was
energy not capacity constrained at the time. Since 2000, the Company has added significant
capacity to meet its capacity needs, such as 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 the Company's capacity deficiency periods, Staff is confident that the Facility
has contributed to meeting the Company's need for capacity.
In addition, the nameplate capacity of the Facility, which has been 235O-kW since
construction, remains unchanged in the proposed ESA. Therefore, Staff believes the Facility
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 ldaho Power 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 l, 2021, and the final effective date.
In Case No. AVU-E-19-16, 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. Idaho
Power will accept the delivery and pay the Surplus Energy Price defined in Article 7.2 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 Apri|29,2027, in Response to Staff s
JSTAFF COMMENTS MAY 20,2021
Production Request No. 3. Surplus Energy Price is the price used for Surplus Energy, such as
energy delivered outside of the 90/ I I 0 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 taken between the parties.
Section B-7 of the ESA states that Idaho Power 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
l) executed and approved by the Commission; 2) a Generator Interconnection Agreement
("GIA") has been executed by both parties; and 3) the Seller is in compliance with all
requirements of that GIA. Idaho Power also confirmed that the Facility will be a DNR during the
lapsed contract period because there is an executed ESA for the Facility. See Response to Staffls
Production Request No. 3. If the ESA is rejected by the Commission, then Idaho Power 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 RECOMMENDATIONS
Staff recommends the Commission approve the ESA and declare Idaho Power's payments
to Hydroland Omega LLC 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.
I This understanding was obtained through email communication with Idaho Power on May 5,2021
4STAFF COMMENTS MAY 20,2021
Respecttully submitted this e d\*, of May 2021.
Hanrmond
Attonrey General
Technical Staff: Yao Yin
i :umisc : commentiy'ipce2 l. $hyy oomnents
5STAFF COMMENTS MAY 2A,2021
CERTIFICATE OF SERYICE
I HEREBY CERTIFY THAT I HAVE THIS 20th DAY OF MAY 2021,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-2I.08, 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
BOISE ID 83707-0070
E-MAIL : [e-mail]
CERTIFICATE OF SERVICE