20211028Comments-Redacted.pdf

RILEY NEWTON
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720.0074
[phone]
IDAHO BAR NO. II2O2
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BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAIIO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPAIYY'S APPLICATION FOR
APPROVAL OR REJECTION OF THE THIRD
AMENDMENT TO ITS ENERGY SALES
AGREEMENT WITH MC6ITYDRO LLC
CASE NO. IPC.E.21.3O
REDACTED COMMENTS OF
THE COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Riley Newton, Deputy Attorney General, submits the following comments.
BACKGROUNI)
On August 26,202l,Idaho Power Company ("Company") applied to the Commission
requesting approval or rejection of the Second Amendment to its Energy Sales Agreement
("ESA") with MC6 Hydro, LLC ("MC6" or "Seller"). MC6 sells energy generated by the MC6
hydro facility ("Facility") to the Company. The Facility is a qualiffing facility under the Public
Utility Regulatory Policies Act of 1978 ("PURPA").
The Commission approved the Company's ESA with the Seller on July 21,2018, for the
purchase and sale of energy from the Facility in Case No. IPC-E-1 8-09, Order No. 34106. On
June 21, 2019, the Commission approved the Company's First Amendment to the Scheduled
First Energy Date and Scheduled Operation date in the ESA due to the unexpected passing away
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IREDACTED STAFF COMMENTS ocToBER 28,2021
of one of the principal developers of the project. Order No. 34425. The Commission also
allowed the delayed damages to be calculated from the original Scheduled Operation Date of
July 30, 2019. Id.
The Application indicates that, as a result of the COVID-I9 pandemic, the Facility was
unable to obtain its generator unit from Wuhan, China, causing a Force Majeure event, which
changed the Operation Date to April 5,2021. Application at2. T\e project received and
installed a generator with a Nameplate Capacity of 2.3 megawatts ("MW"), which is 0.2 MW
larger than the 2.1 IvIW generator capacity listed in the ESA. Accordingly, the Second
Amendment provides for a change to Appendix B, Article B-1 of the ESA so that the designated
nameplate rating of the generator is 2.3 MW rather than 2.1 IVIW.
The Second Amendment also modifies when the Seller must notiff the Company to
revise future monthly Estimated Net Energy Amounts ("NEA"). Currently, Section 6.2.3
requires the Seller to notifu the Company at least one-month before the Seller revises a given
month's Estimated NEA. The Second Amendment states that "[a]fter the Operation Date, the
Seller may revise any future monthly Estimated Net Energy Amounts by providing written
notice no later than 5 PM Mountain Standard time on the 25tr day of the month that is prior to
the month to be revise d.' Id. at i. lf the 25h day falls on a weekend or holiday, written notice
must be received by the Company by the last business day before the 25tr day of the month. The
Second Amendment provides this example: ".. .. if the Seller would like to revise the Estimated
Net Energy Amount for October, they would need to submit a revised schedule no later than
September 25fi or the last business day prior to Septemb er 25fi ." Id. at 2.
STAFF REVIEW
StafPs review has focused on the five-day advanced notice, potential modifications to the
Facility, the delay damages, the change in nameplate capacity, the avoided cost rates, the 90/110
Rule, and a lapsed period of operation under incorrect rates. Staff recorlmends that the 5-day
advanced notice be approved and that the Company and the Seller use the following two sets of
avoided cost rates.l First, any hourly generation equal to or less than2.l megawatt hours
("MWhs") will use the avoided cost rates contained in the ESA and approved in Order
I Both sets of avoided cost rates are based on the 2026 first deficit year, and thus, this new Facility will receive
capacity payments n2026 for all its generation outputs.
2REDACTED STAFF COMMENTS ocToBER 28,2021
No. 34106. Second, any hourly generation above 2.1 MWhs will use the avoided cost rates
effective August 11,2021, when the Second Amendment was signed by both parties. Staffalso
recommends implementing the 90/110 Rule based on two sets of avoided cost rates.
S-day Advanced Notice
Staff recommends the five-day advanced notice be approved because monthly estimates
provided closer to the time of delivery can improve the accuracy of input used for short-term
operational planning. In addition, the five-day advanced notice provision has been authorized in
prior Commission Orders Nos. 34263,34870 and34937.
Potential Modifications to Facility
Staffalso notes that the ESA does not contain any provision to address modifications to
the Facility during the contract term. Therefore, Staff recommends updating the Second
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 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.
The ESA includes an update to the facility and it is reasonable to do the same for any
future modification.
Delay Damages
Order No. 34425 allowed delayed damages to be calculated from the original Scheduled
Operation Date of July 30,2019. Idaho Power examined each month in the delay period
between the original Scheduled Operation Date and the actual Operation Date and recognized
that no delay damages were triggered. Staff has analyzed the two phases in the delay period (i.e.,
3REDACTED STAFF COMMENTS ocToBER 28,2021
the Force Majeure phase and the Non-Force Majeure phase) and believes no delay damages were
triggered in either phase.
Force Maieure Phase
On February 10,2020, MC6 Hydro notified Idaho Power of a subsequent Force Majeure
event-the delayed shipment of its turbine and generator from Wuhan, China, due to the novel
coronavirus epidunic. On March 13,2020, MC6 provided additional information. On March
20,2020,Idaho Power notified MC6 Hydro that it accepted the request for a Force Majeure
event due to the delayed shipment. Idaho Power considered the Force Majeure event to end
when the generator and turbine arrived at the project construction site, by Septernber 30, 2020.
A Force Majeure event suspends performance of the obligations under the contract for
the duration of the event. As a result, MC6 Hydro's obligation to meet the scheduled operation
date-and Idaho Power's obligation to calculate delay damages for delays in the date-were
suspended while the Force Majeure events were ongoing. See Response to StafPs Production
Request No. l. Staffbelieves no delay damages should be collected during the Force Majeure
phase.
Non-Force Majeure Phase
For months during the Non-Force Majeure phase, no delay damages were triggered due
to two reasons: (1) the contract's monthly estimated generation amounts were zero from
November through February of each year; and (2) the Delay Price is less than zero for the
remaining months.
"Delay Damages" in the ESA are defined as "[c]urrent month's Initial Year Monthly
Estimated Net Energy Amount as specified in paragraph6.2.l as of the Effective Date divided
by the number of days in the current month multiplied by the number of days in the Delay Period
in the current month multiplied by the current month's Delay Price." See ESA at2, Case
No. IPC-E-18-09. Because the Initial Year Monthly Estimated NEA are zero from November
through February, delay damages would be zero for these months.
Delay Price in the ESA is defined as "[t]he current month's Mid-Columbia Market
Energy Cost minus the current month's All Hours Energy Price as specified in Appendix D of
this Agreement. If this calculation results in a value less than zero ("0"), the result of this
4REDACTED STAFF COMMENTS ocToBER 28,2021
calculation will be zero ("0")." Id. Based on this definition, delay damages are calculated to be
zero during months for the remaining months. See Response to StafPs Production Request
No. l. Therefore, Staffbelieves no delay damages should be collected during the Non-Force
Majeure phase.
Change in Nameplate Capacity
The proposed Second Amendment changes the nameplate capacity from 2.1 MW to
2.3 MW. Staffrecommends approval of this change because the installed generator is 2.3 MW.
Avoided Cost Rates
Because the installed generator is 0.2 MW larger than originally approved, Staff believes
it reasonable to recognizethe original avoided cost rates in the ESA for the original nameplate
capacity of 2.1MW and use the avoided cost rates that were effective when the Second
Amendment was signed for the incremental 0.2 MW. Staff specifically recommends the
following two sets of avoided cost rates be used between the Company and the Seller. First, any
hourly generation equal to or less than 2.1 MWhs will use the avoided cost rates contained in the
ESA and approved in Order No. 34106. Second, any hourly generation above 2.1 MWhs will
use the avoided cost rates (in Attachment A) effective August 11,2021, when the Second
Amendment was signed by both parties.
90/110 Rule
Staffrecommends implementing the 90/t 10 Rule by blending two sets of All Hours
Energy Price contained within the two sets of avoided cost rates described above: one set of All
Hours Energy Price for any hourly generation equal to or less than2.l MWhs and one set of All
Hours Energy Price for any hourly generation above 2.1 MWhs.
To calculate the blended All Hours Energy Price, the Company will multiply the total
amount generated equal to or less than 2.1 MWhs for each hour by the first set of All Hours
Energy Price. Then, the Company will determine the total amount generated above 2.1 MWhs
for each hour and multiply it by the second set of All Hours Energy Price. The blended All
Hours Energy Price is calculated by dividing the sum of the two amounts by the total generation
for that month. Last, the blended rate will be compared against 85 percent of the market price,
5REDACTED STAFF COMMENTS ocroBER 28,2021
and the lower number will be applied to the energy generated outside the90ll10 band for that
month.
Lapsed Period Operating under Incorrect Rates
The Facility has been operating since April 5,2021, with rates contained under the ESA
that does not have a two-part rate reflecting the higher nameplate capacity. Staffis not
concerned because the hourly generation amount has not exceeded 2.1 MWhs over the past 6
months. However, the Facility did making
it likely that the Facility will generate above 2.1 MWhs in an hour again. This generation data
reinforces StafPs recommendation that the facility should operate with the two-part rate to
ensure the Seller is compensated fairly and accurately.
STAFF RECOMMENDATIONS
Staff recommends the Commission approve the Second Amendment contingent upon
including the following updates:
l. Include the provision that addresses modifications to the Facility;
2. Adopt two sets of avoided cost rates described above; and
3. Implement the 90/100 Rule based on two sets of avoided cost rates.
If approved by the Commission, Staffalso recommends that after the Amendment is
updated and signed by both parties, the Commission require the Company to file the updated
Amendment with the Commission as a compliance filing.
Respecttully submitted this X$ day of October 2021.
RileyNewton
Deputy Attorney General
Technical Staff: Yao Yin
i:r'misc/comme,nts/ipce2l.3Ornyy comments
6REDACTED STAFF COMMENTS ocToBER 28,2021
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Attachment A
Case No. IPC-E-2I-30
StaffComments
10/28/21 Page I of I
CERTIFICATE OF SERYICE
I HEREBY CERTIFY THAT I HAVE THIS 28th DAY OF OCTOBER 202I,
SERVED THE FOREGOING REDACTED COMMENTS OF THE COMMISSION
STAFF, IN CASE NO. IPC-E-21-30, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
DONOVAN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-MAIL: [e-mail]
do ckets@i datropower'. com
TED SORENSON
MC6HYDRO LLC
7II E TURTLE POINT DR
rVINS UT 84738
E-MAIL: [e-mail]
ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-MAIL: enere.vcontacts@idahopower. com
CERTIFICATE OF SERVICE