20211104Reply Comments.pdf

rem";qrfl E lvm
u01l H*,J -h PH 3:23
r.-.,,i:: !i'r'- ,lia:!'r'Lili-t!,
, 1r i:: . r
- ^.3h+i,fiS310l{
Donovan E. Walker
An IDACORP Company
DONOVAN E. WALKER
Lead Counsel
dwa lke [e-mail]
November 4,2021
VIA ELECTRONIC IIIAIL
Jan Noriyuki, Secretary
ldaho Public Utilities Commission
11331 West Chinden Blvd., Building 8
Suite 201-A
Boise, ldaho 83714
Re: Case No. IPC-E-21-30
MC6 Hydro LLC - MC6 Hydro Project
ldaho Power Company's Application re the Second Amendment to the
Energy Sales Agreement
Dear Ms. Noriyuki:
Attached for electronic filing please find Reply Comments of ldaho Power
Company in the above entitled matter. lf you have any questions about the attached
documents, please do not hesitate to contact me.
Very truly yours,
2da!/<-
DEW:cld
Enclosures
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221 West ldaho Street (837021
P.O. Box 70
Boise, Idaho 83747
Telephone: [phone]
Facsimile: [phone]
dwalker@ idahopower.com
Aftorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF THE
THIRD AMENDMENT TO THE ENERGY
SALES AGREEMENT WTH MC6 HYDRO
LLC FOR THE SALE AND PURCHASE OF
ELECTRIC ENERGY FROM THE MC6
HYDRO PROJECT
CASE NO. !PC-E-21-30
REPLY COMMENTS OF
IDAHO POWER COMPANY
)
)
)
)
)
)
)
)
)
ldaho Power Company ("ldaho Powef or "Company'), in response to the
comments filed by Commission Staff ("Staff), hereby respectfully submits the following
Reply Comments.
I. INTRODUCTION AND BACKGROUND
On August 26, 2021, ldaho Power filed an application with the Commission for
approval or rejection of the Third Amendment ("Amendment') to its Energy Sales
Agreement ('ESA) with MCO Hydro LLC ("MC6'or'Sellef). MCG sells energy to the
Company from the MC6 Hydro Project ("Facility'). The Facility is a qualiffing facility under
the Public Utility Regulatory Policies Act of 1978. The Amendment that was executed by
the Company and MC6 ('Parties") is to allow the Facility to adjust the monthly Net Energy
REPLY COMMENTS OF IDAHO POWER COMPANY - 1
Amount ("NEA") by the 25th of each month, and to update the identified nameplate
capacity to match the actualturbine that was installed at the project. Section 6.2.3 of the
ESA provides the Seller with the option to adjust the monthly estimated NEA within a
specified time period. After the execution and approval of the ESA, the Seller requested
a change to the time period for making the NEA adjustments, such that they can make
adjustments by the 25th day of the month preceding the month for which a change is
requested. The Commission has previously approved similar amendments to other
energy sales agreements to incorporate the same change.
On October 27, 2021, Commission Staff ("Staff') recommended approval of the
provision reflected in the Parties'Amendment, but also recommended the Commission
require additionalchanges to the ESA:
Staff notes the ESA does not contain any provision addressing
modifications to the Facility during the contract term. Therefore, Staff
recommends updating the Amendment by including the following provision,
which has been included in recent PURPA contracts filed by the Company
with the Commission:
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 Qualiffing
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 ldaho Power, at
its sole determination, may adjust the pricing or terminate the
Agreement. lf the Agreement is terminated because of said
modifications, the Seller will be responsible for any
Termination Damages.
The Staff also recommended approval of the provision updating the nameplate capacity
from2.1 MW to 2.3 MW, but also recommends adopting two sets of avoided cost rates
and implementing the 90/100 Rule based on two sets of avoided cost rates for the
incrementa! addition of 200 kW.
REPLY COMMENTS OF IDAHO POWER COMPANY - 2
II. IDAHO POWER REPLY COMMENT
The Company appreciates Staffs analysis, review, and recommendation to
approve both the five-day notification provision and the change in nameplate capacity as
provided in the Amendment. However, the Company disagrees with Staffs
recommendations to update the Amendment by including an additional provision in the
ESA to address modifications of the Facility during the term of the contract. ("Staff
Provision") and Staffs recommendation to implement a bifurcated avoided cost rate
structure for the incremental 0.2 MW increase in nameplate capacity.
Future Modifications to Facility Language; MC6 requested an amendment to
the ESA so that they could adjust the monthly NEA at any point up to the 25th day of the
preceding month, and to update the nameplate capacity to match the final manufactured
hydro turbine. ldaho Power has received numerous such requests to move the NEA
forecasts to the 25th day of the month from several other QFs, has executed the same
change reflected in this Amendment in amendments to the ESAs with other QFs, and
received approvalfrom the Commission in each case without modiffing other sections of
the ESA or updating other sections of the ESA to current "standards". The Company
believes that Staffs recommendation to update the ESA by adding the Staff Provision
goes beyond the scope of the review and consideration of the Amendment and is
inconsistent with Commission practice regarding changes to a previously approved
PURPA ESA.
Further, absent a particular reason to do so, it is not appropriate to open up
contracts for a de novo review and inclusion of new provisions simply because an
amendment is requested. ldaho Power has over 100 Commission approved contracts
that have been executed over the past 35 years. Many of these contracts will have
REPLY COMMENTS OF IDAHO POWER COMPANY.3
numerous provisions that have changed over the years, and that may not have been
contemplated when the ESA was originally entered into and agreed to by parties. The
Company does not believe it is proper to open up PURPA contracts whenever an
amendment is requested and require the parties to update other sections of the contract
to the most current language, especially when these other sections have nothing to do
with the amendment requested by the Seller.
The Company is willing to include the Staff Provision in any new contracts, and
has included such a provision in several, but ldaho Power objects to adding this Provision
to a previously approved ESA in the context of the Commission's review of a contract
amendment to an unrelated provision.
Bifurcated Avoided Cosf Rafes and 90/110 Rule implementation: Staff also
recommends in this case that the Commission bifurcate the avoided cost rates such that
the previously approved avoided cost rate, locked in atthe time of contracting only applies
to the originally stated 2.1 MW and a more current avoided cost rate - the one in place
at the time of executing the amendment changing the nameplate capacity to 2.3 MW be
applied to the incremental 0.2 MW variance in nameplate capacity. Staff also
recommends adjustment to the implementation of the 901110 rule to accommodate for
the bifurcated rate.
While ldaho Power appreciates Staffs initiative in theorizing a unique application
of avoided cost rate structure to an incremental increase in nameplate capacity, the
Company disagrees with Staffs recommendation to adopt two sets of avoided cost rates
and implement the 90/100 Rule based on two sets of avoided cost rates in this case.
First of all, the change in nameplate capacity in this instance is a relatively minor, or de
minimis, change for a hydro generator. ldaho Power does not believe this variance in
REPLY COMMENTS OF IDAHO POWER COMPANY .4
nameplate to be a situation in which the developer is playing games or trying to
manipulate eligibility and pricing components of the avoided cost rate and contracting
process in order to get 200 kW more generation in at a higher avoided cost rate. This
variance in nameplate capacity is a common variance that can and does happen in the
manufacture of hydroelectric turbines. The situation here is not the same as in other
instances where the Commission has bifurcated the eligibility for capacity payment in a
replacement contract of a previously existing QF that has replaced or upgraded their
generation equipment with that of higher capacity. Here we have a new generator that
has not previously been under contract. This particular project's hydro turbine was
manufactured in Wuhan, China, and was the subject of the force majeure provisions as
discussed in Staff Comments. ln the development of a new hydroelectric project such as
this, it is common for the developer to review the water resource, the head, and determine
approximately what size the plant wil! be and send such specifications to a manufacturer
who will build the generator. The manufacturer will build a generator that is at least 2.1
MW if that is what was specified, but in the winding of the stator and rotor and
manufacturing process things are not necessarily toleranced to a zero deviation standard
and it is typical to have some variance above that minimum so that it does not come in
under specifications.
Given the understanding and belief that this in not a situation where the developer
was acting in bad faith to try and manipulate an additional amount of generation under a
previously effective or a higher avoided cost rate, Idaho Power believes that the bifurcated
rate and 90/110 implementation should not be directed in this instance. As a comparative
example, the Commission has and currently allows QFs to size themselves with a
nameplate capacity that can in some instances far exceed the published rate eligibility
REPLY COMMENTS OF IDAHO POWER COMPANY - 5
cap and still be eligible for published avoided rates if their generation meets the monthly
average eligibility cap, for example in the past where a 20 MW wind QF obtains a
published rate contract under the 10 average MW standard. Idaho Power finds this type
of activity to be much more detrimental to customers, and much more materia! than a
manufacturing variance of 200 kW in the construction of a hydroelectric turbine for a new
small hydro QF.
Additionally, given the de minimis nature of the variance and rate impact of the
present case in relation to the administrative burden of tracking, maintaining, paying, and
implementing such a bifurcated rate and 90/110 provisions, the Company does not
support implementation of the bifurcated structure. \Mrile ldaho Powerappreciates Staffs
initiative and thought process in developing a recommendation for a bifurcated rate, or a
rate that could be updated during the term of the contract, the Company does not believe
the present case under its unique facts, and its posture as being before the Commission
on a contract amendment, warrants such a modification. ldaho Power does believe that
there may be situations where it may be appropriate and a just and reasonable
implementation of avoided cost rates and a PURPA pricing structure whereby the rates
that are locked in at the time of contracting can be modified, updated, or otherwise
changed through the contract term. However, the Company does not believe that the
present situation is one of those instances.
III. CONCLUSION
The Company believes Staffs recommendation to add a facility modification
provision is outside the scope of this Amendment. The Amendment as written, is
consistent with past amendments to the monthly NEA which the Commission has
approved for several QFs without changes to additional provisions. The Company also
believes Staffs recommendation to adopt two sets of avoided cost rates and implement
REPLY COMMENTS OF IDAHO POWER COMPANY.6
the 90/100 Rule based on two sets of avoided cost rates is not appropriate in this case.
Idaho Power respectfully requests that the Commission issue an order approving the
Amendment without modification, and without inclusion of the additional Staff Provisions
regarding Facility modifications and adjusting the avoided cost rate tables.
Respectfully submitted this 4h day of November 2021.
Mzd*4-
DONOVAN E. WALKER
Attorney for ldaho Power Company
REPLY COMMENTS OF IDAHO POWER COMPANY - 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 4th day of November 2021, I served a true and
correct copy of the within and foregoing REPLY COMMENTS OF IDAHO POWER
COMPANY upon the following named parties by the method indicated below, and
addressed to the following:
Ted Sorenson
MC6 Hydro LLC
711 E Turtle Point Dr
lvins UT 84738
Riley Newton
Deputy Attorney General
ldaho Public Utilities Commission
P.O. Box 83720
Boise, lD 83720-0074
_Hand Delivered
_U.S. Mail
_Overnight Mail_FAXX Email [e-mail]
_Hand Delivered
_U.S. Mail
_Overnight Mail
_FAXX Email -rilev.newton@puc
Christy Davenport, Legal Assistant
REPLY COMMENTS OF IDAHO POWER COMPANY. s