20210929Comments.pdf

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Street Address for Express Mail:
I 133I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ERICK SHANER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLTC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5214
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
MICHAEL BRANCHFLOWER, FOR THE
SALE AND PURCHASE OF ELECTRIC
ENERGY FROM THE TROUT-CO HYDRO
PROJECT
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CASE NO.IPC.E-21-26
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its attorney of record,
Erick Shaner, Deputy Attorney General, submits the following comments.
BACKGROUND
On August 76,202l,ldaho Power Company ("Company") applied to the Commission for
approval or rejection of an energy sales agreement ("ESA") with Michael Branchflower,
("Seller") under which Seller would sell and the Company would purchase electric generation
from the Trout-Co Hydro Project ("Facility"). The Facility is a qualifuing facility ("QF") under
the Public Utility Regulatory Policies Act of 1978.
The Facility is under contract for a nameplate capacity of 240 kilowatts ("kW") but is
operating at a nameplate capacity of 280 kW. The Facility is located near the city of Hagernan,
Idaho. The Company and Seller entered into the ESA to replace the previous contract with the
ISTAFF COMMENTS SEPTEMBER 29, 2O2I
Company that was executed on January 7, 1985 and expires on November 30, 2021. The
replacement ESA was signed by the Seller on August 9,202I, and by the Company on August
12,2021. The replacement ESA has a2}-year term with non-levelized, non-seasonal hydro
published avoided cost rates as set in Order No. 35052, for replacement contracts and for energy
deliveries of less than l0 aMW. The ESA contains capacity payments for its entire term.
STAFF ANALYSIS
Staff s review has focused on: (1) eligibility for and the amount of capacity payments;
(2) the 90/110 Rule with at least five-day advanced notice for adjusting Estimated Net Energy
Amounts; and (3) avoided cost rates. Staff recommends that the following two sets of avoided
cost rates be used in the ESA between the Company and the Seller from 2021 through 2025t:
first, any hourly generation equal to or less than240 kilowatt hours ("kWhs") will receive
immediate capacity payment, and second, any hourly generation above 240 kWhs will not
receive capacity payments until the Company becomes capacity deficient in2026. Staff also
recommends implementing the 90/110 Rule based on two sets of avoided cost rates.
Capacitv Payments
Staff recommends that the Facility be granted capacity payments for the full term of the
replacement contract. However, Staff believes that the Facility should only receive immediate
capacity payments for any hourly generation equal to or less than240 kWhs and should not be
eligible for capacity payments for any hourly generation above 240 kWhs until the current
authorized first deficit date of 2026.
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." The original contract
did not contain capacity payments. However, consistent with the Black Canyon #3 project in
Case No. IPC-E-19-04,the Seller's original contract for this Facility included avoided cost rates
without capacity payments as determined in Order No. 18190, because the Company was energy
constrained, not capacity constrained. Since 2000, the Company has added significant amounts
of capacity to meet its capacity needs, including Danskin (2001 and 2008), Bennett Mountain
I These two sets of rates will be the same starting in2026, which is the Company's first deficit year
2STAFF COMMENTS SEPTEMBER 29, 2O2I
(2005), and Langley Gulch (2012) gas plants. Because the Facility has operated since mid-1980s
and during these capacity deficiency periods, Staff is confident that the Facility has contributed
to meeting the Company's need for capacity and should be granted immediate capacity payments
for any hourly generation up to 240 kWhs.
According to the Application, the Facility has operated at a nameplate capacity of 280 kW
since the Facility began operation, and the ESA reflects this amount for determining the amount
of immediate capacity payments. The Company uses estimated or actual QF generation data in its
Integrated Resource Plan to determine its capacity deficits (see Production Request No. 86 in
Case No. IPC-E-19-19). In this case, the Company has avoided capacity from the actual hydro
generation that is less than the 280kW nameplate. The original 1985 contract approved by the
Commission listed the nameplate capacity of the Facility at240 kW, and the contract has never
been amended to update the nameplate capacity of the Facility.
Staff believes that the information contained in a legally enforceable contract provides
the parameters for the operation of the Facility and forms the basis for the rates and the amount
of compensation that should be earned throughout the contract term. It also stands to reason that
information contained in the original contract forms the basis for rates and compensation in a
renewal contract, unless the information was amended in the original contract and subsequently
approved by the Commission during the term of the original contract.
Therefore, one alternative is to treat the incremental 40 kW of nameplate capacity as a
separate new project, which will not receive capacity payments until the Company becomes
capacity deficient, similar to what was ordered in the Sagebrush Hydro project in Case
No. IPC-E-19-38. This would encourage accuracy in contracts to reflect the "as-built"
description of a facility, necessitating approval of a contract amendment if the facility description
in the original contract differs from what was actually built.
In the Sagebrush Hydro case, the Commission capped the amount of capacity payments
in its renewal contract based on the nameplate capacity contained in the original contract, and the
incremental nameplate capacity will not receive capacity payments until the first deficit date
authorized at the time of the contract renewal. See Order No. 34956. Staff believes that this
treatment can and should be used in this case. Therefore, Staff recommends that the ESA be
modified so that any hourly generation above 240 kWhs will not receive capacity payments until
the authorized deficit date of 2026.
JSTAFF COMMENTS SEPTEMBER 29, 2O2I
In addition, Staff believes that all contracts need to reflect the actual facility parameters
such as the nameplate capacity. Although the ESA contains provisions to address modifications
to the actual Facility and the need for amendments during its contract term (see Section B-1 in
Appendix B), it does not address the problem that occurred in this case and ones that are similar;
the installed Facility does not match the Facility description as approved. The Company should
review all QF contracts to ensure they reflect their actual facility parameters, and if they do not
match, an amended contract should be submitted for approval. Staff recommends that all new
QF contracts include a provision requiring the QF to submit an "as-built" description of the
facility by its first operation date. If the "as-built" description does not match the description in
the original approved contract, then the contract should be amended to reflect the "as-built"
description.
The 90/l l0 Rule and 5-Day Advanced Notice for Adjusting Estimated Net Energy Amounts
Staff confirmed the ESA contains the 90/l l0 Rule as required by Commission Order
No. 29632. The 90/l l0 Rule requires a QF to provide utilities with a monthly estimate of the
amount of energy the QF 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.
However, Staff recommends implementing the 90/l l0 Rule based on two sets of avoided
cost rates. Similar to how the Sagebrush Hydro project implemented the 90lll0 Rule in Case
No. IPC-E-19-38, Staff proposes to blend the two sets of All Hours Energy Price.
First, for each month, the Company will determine the total generation amount (kWhs)
generated equal to or less than240 kWhs at the hourly level and multiply the corresponding All
Hours Energy Price. Then, the Company will determine the total generation amount (kwhs)
generated above 240 kWhs at the hourly level and multiply the corresponding All Hours Energy
Price. The sum of the two items will be divided by the total generation for that month to
calculate a single, blended All Hours Energy Price. Last, the blended rate will be compared
against 85 percent of the market price, and the lower number will be applied to the energy
4STAFF COMMENTS SEPTEMBER 29, 2O2I
generated outside the 90/l l0 band in that month. Starting in2026, there will be only one set of
rates, so no blending is needed.
Staff also confirmed the ESA requires the Seller to give the Company at least five-day
advanced notice if the Seller plans to adjust its Estimated Net Energy Amounts for purposes of
complying with the 90/110 Rule. Five-day advanced notice has been authorized in prior
Commission orders such as Order Nos. 34263 ,34870 and 34937 .
Avoided Cost Rates
Staff verified that the avoided cost rates contained in the ESA are correct. However,
Staff proposes the rates, which include immediate capacity payments, only apply to hourly
generation equal to or less than240 kWhs. For hourly generation above 240 kWhs, Staff
proposes another set of rates in Attachment A, which do not include capacity payments until
2026.
STAFF RECOMMENDATIONS
Staff recommends the Commission approve the ESA with the following modifications:
1. The ESA should use two sets of avoided cost rates between the Company and the
Seller from202l through 2025: any hourly generation equal to or less than240
kilowatt hours ("kWhs") will receive immediate capacity payment, and any
hourly generation above 240 kWhs will not receive capacity payment until the
Company becomes capacity deficient in2026.
2. The 90/l l0 Rule should be implemented as described above based on two sets of
avoided cost rates from202l through 2025 until the Company becomes capacity
deficient.
If the modifications are approved by the Commission and the parties make such
modifications, Staff recommends the Commission 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.
5STAFF COMMENTS SEPTEMBER29,2O2I
Staffalso recommends that the Commission order the Company to include a provision to
all new QF contracts requiring the QF to submit an "as-built" description of the facility by its
first operation date. If the o'as-built" description does not match the description in the original
approved eontract, then the eontract should be amended to reflect the 'oas-builf' description
Respecttully submitted fin Aq n*rof
Septemb er 2021.
Erick Shaner
DeputyAttomey General
Technical Staff: Yao Yin
i:umisc:comments/ipce2l.26esyy eommonf
6STAIT COMMENTS SEPTEMBERzg,2O2I
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Attachment A
Case No. IPC-E-21-26
Staff Comments
09129121 Page 1 of I
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 29th DAY OF SEPTEMBER 2021,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC.E.2I-26, BY E-MAILING A COPY TIIEREOF, TO THE FOLLOWING:
DONOVAN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-MAIL: [e-mail]
[e-mail]
MICHAEL BRANCHFLOWER
TROUT-CO HYDRO PROJECT
1991 S DOE CREEK WAY
BOISE ID 83709
E-MAIL: msbranchfl ow'[e-mail]
ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE