20220824Reconsideration Comments.pdf

RILEY NEWTON
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. II2O2
Street Address for Express Mail:
1I331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAIIO POWER COMPANY FOR
AUTHORITY TO ESTABLISH A NEW
SCHEDULE TO SERYE SPECULATIVE
HIGH.DENSITY LOAD CUSTOMERS.
CASE NO. IPC.F,.2I.37
RECONSIDERATION
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Riley Newton, Deputy Attomey General, submits the following reconsideration
comments.
BACKGROUND
On November 4,2021,Idaho Power Company ("Company" or o'Idaho Power") applied to
the Commission for authority to establish a new schedule to serve what it characterized as high-
density load customers operating in a speculative industry. ("HDL Customers"). Application at
)
On December 1, 2021, the Commission issued aNotice of the Company's Application
and Notice of an Intervention Deadline. Order No. 35276. The Industrial Customers of Idaho
Power ("ICIP") and2l40 Labs, LLC ("2140 Labs") intervened. Order No. 35276.
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1RECONSIDERATION COMMENTS AUGUST 24,2022
On February 2,2022, the Commission issued aNotice of Modified Procedure and set
public comment and Company reply deadlines. Order No. 35308
On April 12,2022, Commission Staff ("Staff') and 2140Labs filed comments to which
the Company replied. The Commission received one public comment expressing support for the
Company's proposed Schedule 20.
OnJune 15,2022,the Co-mission approved the Company's Application as filed. Order
No.35428.
On July 6,2022, GeoBitmine, LLC ("GeoBitmine") petitioned the Commission to
reconsider Order No. 35428 and to grant it intervention into the case ("Petition").
On July 13,2022, the Company filed an Answer to GeoBitmine's Petition ("Answer").
On August 3,2022, the Commission issued No. 35488 therein granting GeoBitmine's
Petition to Reconsider but denying it intervenor status.
GeoBitmine's Petition
GeoBitmine stated that it was in the process of constructing a cryptocurrency "mining
operation in conjunction with high-capacity indoor farming at the recently idled J. R. Simplot
Company ("Simplot") potato processing plant in Aberdeen, Idaho." Petition at 3. GeoBitmine
explained that it intended to use the waste-heat from its cryptomining operation to create a
climate for food'production, potato storage, and seed research.
GeoBitmine stated that it began negotiating with the Company in April. GeoBitmine
represented that it sought service "for a consistent year-round electrical load of approximately
6,000 kilowatts ("kW"), which would be sufficient electrical power and energy to operate both
cryptocurrency and indoor farming/university research operations." Id. at 4. GeoBitmine
explained that it initially sought service under Schedule 19, but that the Company required it to
take service under Schedule 20 which was "problematic and unrealistic for its proposed Idaho
operations." Id. at5.
GeoBitmine argued that there were practical and legal problems with Schedule 20 and the
process by which the Commission approved Order No. 35248. Therefore, GeoBitmine requested
the Commission deny the Company's Application for approval of Schedule 20 and grant
GeoBitmine's status as an intervening party.
RECONSIDERATION COMMENTS 2 AUGUST 24,2022
GeoBitmine was concerned with the Company's ability under Schedule 20 to implement
a mandatory intemrption period for up to 225 hours a year. GeoBitmine explained that
intemrpting service would have devasting impacts on its goal of facilitating indoor food
production, potato storage, and seed research.
GeoBitmine also took issue with the marginal energy rates under Schedule 20 which it
argued place it at a competitive disadvantage and was inconsistent with the Company's other
similarly situated ratepayers.
In addition to mandatory service intemrption and marginal energy rates, GeoBitmine
argued that Schedule 20 was problematic because the Company had "unfettered" discretion to
determine who took service under Schedule 20 and there were no clear guidelines dictating who
must take service under Schedule 20.
GeoBitmine argued that "Schedule 20 is an illegally discriminatory classification,and
hence in violation of law and beyond the Commission's authority to approve." Id. at 11 (citing
Idaho Code $ 61-315.)
GeoBitmine cited ldaho State Homebuilders v Washington Water Power
("Homebutlders") 107Idaho 415,417,690P.2d 350,354 (1984) forthepropositionthatany
discrimination in rates and charges must be 'Justified by a corresponding classification of
customers that is based upon factors such as cost of service, quantity of electricity used,
differences in conditions of service, or the time, nature and pattern of the use." Id at 13.
GeoBitmine argued that Schedule 20 discriminated between old and new customers without any
reasonable justification and was approved by the Commission without any consideration of the
factors listed in the Homebuilders decision. Id. at 14.
In sum, GeoBitmine argued that the Commission lacked a sufficient record demonstrating
that Schedule 20's customers' usage characteristics distinguish them from Schedule 19
customers and, therefore, the Commission failed to make a reasoned decision supported by
sufficient findings of fact and substantial evidence in its order approving Schedule 20.
The Companv's Answer
The Company replied that: (l) Schedule 20 complied with ldaho Code $ 6l-315; (2)
based on the information before it, the Company properly determined that Schedule 20 applied to
RECONSIDERATION COMMENTS 3 AUGUST 24,2022
GeoBitmine; and (3) GeoBitmine's Petition to reconsider Order No. 35248 and to intervene
should be denied.
1. Idaho Code $ 61-315
The Company noted that ldaho Code $ 61-3 15 precluded a public utility from
establishing or maintaining o'unreasonable difference as to rates, charges, service, facilities or in
any other respect, either as between localities or as between classes of service." Company
Answer at 3 (emphasis in the original). The Company argued that the rates and terms of service
Schedule 20 imposes on cryptomining customers was reasonable.
In addition, the Company noted that the Courts' decisions in the Homebuilders case,
Grindstone Butte Mutual Canal Co. v. Idaho Public Utilities Commission, ("Grindstone") 102
Idaho 175,180-181, 627 P.2d 804, 809-810 (1981), and Utah-ldaho Sugar Company v.
Intermountain Gas,l00 Idaho 368,597 P.2d 1058 (1979),lent support for the creation of
Schedule 20's distinct customer classification.
The Company pointed out that GeoBitmine's concern that marginal energy rates
presented a devastating risk to its operation was exaggerated and potentially inaccurate.
To GeoBitmine's concern relating to the mandatory intemrptible service provision under
Schedule 20,the Company pointed to other customers in its service area who repeatedly choose
to operate with intemrptible service. The Company also pointed out that intemrptible service
with o'inter,ruptible rates tailored for cryptocurrency mining operations," was not uncommon and
existed in other jurisdictions. Id. at ll.
2. The Company's determination that Schedule 20 applies to GeoBitmine
After applying Schedule 20's criteria to the information it had received from GeoBitmine
regarding its Idaho plans, the Company determined that GeoBitmine should be classified as a
customer under Schedule 20.
3. GeoBitmine's Petition to Intervene and Reconsider
The Company explained that many of the issues raised in GeoBitmine's Petition
pertained to how the Company applied Schedule 20 and are outside of the scope of the current
case
RECONSIDERATION COMMENTS 4 AUGUST 24,2022
STAFF ANALYSIS
Staff believes Schedule 20 provides a reasonable structure for service to HDL Customers
Since submitting its initial comments, Staffls perspective on the need and design of Schedule 20
has not changed. In its initial comments, Staff reiterated that Schedule 20 was a necessary
implementation to "[m]inimize the risk of stranded assets by treating them as non-firm and
requiring intemrptible service during summer On-Peak Hours to avoid the need to invest in
resources to meet their capacity need." Staff Comments at 3.
The design features of Schedule 20 that reduce stranded asset risk include:
o Treating Schedule 20 customers' energy demand as non-firm and requiring
intemrptible service during summer On-Peak Hours to avoid the need to invest in
resources to meet their capacity needs;
. Fully recovering Schedule 20 customers' share of demand-classified cost throughout
the.year by requiring intemrptible service during summer On-Peak hours; and
o Recovering energy cost using marginal cost energy rates.
Schedule 20 allows service to HDL Customers and simultaneously mitigates the risk that
customers will be burdened with stranded asset costs should HDL Customers no longer require
service. The Company classifies potential customers for inclusion in Schedule 20 based on the
following characteristics: (1) the ability to relocate quickly in response to short-term economic
signals; (2) high energy use, density, intensity, andlor high load factor; (3) the ability to relocate
and/or disaggregate; (4) volatile load size; (4) sensitivity to volatile commodity or asset prices;
(5) sudden need for alarge amount of capacity; and (6) a lack of credit history or ability to
demonstrate fi nancial viability.
In response to GeoBitmine's Petition, Staff highlights three main points:
l. Schedule 20 is a reasonable measure to mitigate the risks of stranded asset cost and
cost shifts to customers and does not violate ldaho Code $$ 61-3 I 5 and 61-502;
2. HDL Customels have unique characteristics including the nature 4nd number of
inputs required for operation, and infrastructure that is easy to disaggregate; and
3. Without special contracts, Schedule 20 protections are necessary.
Schedule 20 complies with ldaho Code S8 6l-315 and 61-502
RECONSIDERATION COMMENTS 5 AUGUST 24,2022
Staff supports the Company's assertion that the Commission has the authority to establish
Schedule 20 per Order No. 35428 and that it complies with ldaho Code $$ 61-3151 and 61-502.2
Staff believes that HDL Customcrs can be classified under Schedule 20 consistent with the
criteria elucidated in the Grindstone and Homebuilders cases.
Staff believes the combination of relatively large and volatile loads on the Company's
system fits within "the nature of the use . . .the differences in the conditions of service ... . and
.
the actual differences in the situation of the consumers for the furnishing of the service" criteria
in the Grindstone case. 102 Idaho at 180, 627 P.2d at 809. When the primary input for a set of
customers is electricity and there is an absence of other inputs and infrastructure needed to
sustain their operations, there is little preventing these customers from relocating to other service
territories with less expensive electricity. Staff believes these characteristics-a single input of
electricity and little to no additional infrastructure requirements--qualiff as an "actual
difference.
Although GeoBitmine focuses on traditional cost of service differentiators in its
arguments, as the Court in Grindstone explained, oocost of service is but one criterion among
many considerations in forming a basis for rate differentiation between classes of service and
between classifications of customers within a certain schedule." Id. at 181,627 P.2d at 810. The
Court further explained that "one criterion" is not "necessarily more essential than another[,]"
nor exclusively determinative in creating a customer class. Id. at 180, 627 P.2d at 809.
.
The
Grindstone Court cited Kiefer v. City of ldaho Falls,49 Idaho 458,476,289 P.81, 84 (1930) for
the principal that every classification and rate differentiation between customer classes depends
on the particular facts and circumstances of the case and a due consideration of a combination of
factors. Id.
Idaho Code $ 61-315 precludes a public utility from establishing or maintaining
"unreasonable difference as to rates, charges, service, facilities or in any other respect, either as
between localities or as between classes of service." Staff does not believe the stranded-asset
cost risk posed by these customers constitutes an "umeasonable" difference under ldaho Code $
61-3 15 and the caselaw interpreting it. Staff recommends retaining Schedule 20 as a class for
1 ldaho Code $$ 61-3 l5 provides guidance regarding the proper differentiation of customer classes of service.
2 ldaho Code $$ 6l-502 provides guidance regarding the determination of rates for customer classes of service.
RECONSIDERATION COMMENTS 6 AUGUST 24,2022
HDL Customers because it is reasonable, prudent, and protects other ratepayers from
unreasonable costs.
Distinguishable HDL Customer Characteristics
Staff believes there are two characteristics useful in distinguishing Schedule 20
customers from Schedule 9 and l9 customers:
1. The primary input into the customer's operation is electricity; and
2. The core infrastructure of the operation can be easily disaggregated.
Electricity as the Primary Input
Unlike Schedule 9 and l9 customers, Schedule 20 customers have electricity as a primary
input and lack other locational factors. As a result, Schedule 20 customers have a strong
economic incentive to relocate to service territories with the lowest-cost electricity. In contrast,
Schedule 9 and 19 cuitomers require many locational factors and inputs that creates barriers to '
relocation.
For example, depending on the commercial operation of Schedule 9 and l9 customers,
location of their site can depend on: (l) investments in infrastructure, such as land and buildings;
(2) access to waste treatment; (3) other energy inputs, such as renewable energy and natural gas,
(4) logistics, such as air cargo, trucking and rail; (5) a trained labor force; (6) local suppliers of
goods and services; (7) access to raw materials; and (8) local customer markets as a source of
revenue. For Schedule 9 and 19 customers, the cost of electricity is typically much less of a
consideration when all other locational factors are required, thus making relocation undesirable
and, in many cases, infeasible.
In contrast, a Schedule 20 customer will have very few locational factors that create
barriers to relocation. With the primary input being electricity, the incentive to relocate is driven
by the cost of electricity. Without Schedule 20 or a special contract in place, the Company
would be required to procrire additional resources to always serve HDL Customerd. If these
customers then relocated, the cost of resources the Company procured to serve these customers'
loads would be borne by the remaining ratepayers.
RECONSIDERATION COMMENTS 7 AUGUST 24,2022
Ability to Disaggregate
Staff believes the unique ability of HDL Customers to disaggregate, expand and contract
their electric service needs, and relocate to other service territories differentiates them from other
Schedule 9 and 19 customers. The ability to disaggregate is characterized by scalable
infrastructure requiring little or no integration with other infrastructure elements, except for
electricity and data connections. In addition, disaggregation allows HDL Customers to expand
and contract through self-iontained modules of capacity
For example, traditional data centers invest in significantly more capital infrastructure to
provide redundancy and backup generation to ensure data is not lost and to maintain key
operating systems in case of power outages. It is reasonable that an HDL Customer would not
make these additional capital investments since they are unnecessary expenses for their business
model. GeoBitmine demonstrated this lack of infrastructure investment when it stated, "[t]he
loss of electricity during the hottest part of the day in the hottest months of the year will be
catastrophic for indoor food production, potato storage and seed research facilities."3 While this
comment was made in regard to intemrptible service, the time duration of an interruptible event
included in Schedule 20 is not outside the range that any Idaho Power customer could be without
power in the case of a power outage. Most businesses would make the capital investments
required to protect their operation if a power outage is "catastrophic" to their business.
The Commission has considered the ability to disaggregate as a factor to justi$ different
avoided cost rates for quali$ing facilities ("QF") under the Public Utility Regulatory Policies
Act of 1978 ("PURPA"). The Commission established an eligibility cap based on the unique
characteristics of wind, solar, and energy storage resources to disaggre gate.a This eligibility cap
was set to prevent large wind and solar QFs (Case No. GNR-E-11-03) and energy storage QFs
(Case No. IPC-E-20-02) from disaggregating into smaller projects to qualify for better rates and
contract terms that could harm ratepayers. Staff believes the Commission's justifications for
using disaggregation as a criterion to establish the eligibility cap can be applied to differentiate
HDL Customers from Schedule 9 and 19 customers.
In addition, HDL Customers can disaggregate, similar to wind, solar, and energy storage
QFs, to fit into a different schedule. For example, if a new 100 megawatt ("MW") HDL
3 GeoBitmine LLC Petition for Reconsideration at 5
a Order No. 32697 at 13 and Order No. 34794 at 11.
RECONSIDERATION COMMENTS 8 AUGUST 24,2022
Customer requested service on the Company's system, a special contract would be required. To
avoid the longer lead time and terms of a special contract under Schedule 19, the 100 MW HDL
Customer could seek to disaggregate into ten 10 MW customers under Schedule 19. However,
Schedule 20 endeavors to prevent an HDL Customer from disaggregating to avoid a special
contract.
Withorrt Snecial Schedule 20 is Necessarv
The Company currently uses special contracts to serve customers with large loads in an
effort to reduce risk ofstranded asset costs.
Hoku is an example of a large load customer whose operation had large economies of
scale requiring substantial infrastructure and startup costs. Hoku was established as a special
contract customer because it required more than 20 MW of electrical service. This contract
protected customers from stranded asset costs. The special contract included provisions that
ensured that upgrades to the distribution line, and other parts of the Company's system, were to
be paid for by Hoku. Although Hoku never took service from the Company, had there not been
provisions within the special contract, current and future customers would have had to pay for
upgrades to the distribution line, substations, and transmission lines that were never used.
Unlike Hoku who required significant startup and infrastructure costs, Geobitmine
provides an example of a company that can ramp up or down due to its modularity and ability to
relocate easily. According to the Company, GeoBitmine first requested service at the old Hoku
facility in Pocatello, Idaho. Answer at 12. This request was initially for energy in an amount
exceeding 20 MW which mandated it execute a special contract with the Company.s
After being informed about the timeframe to negotiate a special contract, the Company
represented that GeoBitmine was able to find a new location in Aberdeen, Idaho. Id. at 13.
GeoBitmine then resubmitted a new request for electric service of 6 to 7 MW. Id. at 12.
GeoBitmine was able to redesign its inputs, i.e., land, equipment, and electricity, from 20 MW to
a minimum of 6 MW. The example of GeoBitmine's ability to redefine its requirements and
adapt to a new location highlighting Stafls concern that providing service to HDL Customers
s Idaho Power Electric Service No. 29, Tariff No. l0l , Schedule l9- I . Special contracts are negotiated between the
Company and potential customer, and then submitted to the Commission for approval.
RECONSIDERATION COMMENTS 9 AUGUST 24,2022
with similar characteristics could result in stranded asset costs being incured by Idaho
ratepayers.
STAFF RECOMMENDATIONS
Staff believes the criteria outlined in Schedule 20 meet the requirements in ldaho Code
$$ 6l-315 and 6I-502; Staff therefore recommends that the Commission deny GeoBitmine's
request to iejeOt'Idahd Power's Application for approval of Schedule 20.
Respectfully submitted this L|l^ day of Aug ust2O22.
Riley Newton
Deputy Attorney General
Technical Staff: Michael Eldred
Travis Culbertson
Chris Hecht
i: umisc/commentVipce2 1 .3 Tmjhkkchmetnc reconsiderationcomments
RECONSIDERATION COMMENTS 10 AUGUST 24,2022
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF AUGUST 2022,
SERVED THE FOREGOING RECONSIDERATION COMMENTS OF THE
COMMISSION STAFF, IN CASE NO. IPC-E-2|-37, By E-MAILING A COpy
THEREOF, TO THE FOLLOWING:
LISA NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-MAIL: [e-mail]
dockets@,idahopower. com
PETER J RICHARDSON
RICHARDSON ADAMS PLLC
515 N 27TH ST
PO BOX 7218
BOISE ID 83702
E-MAIL: [e-mail]
ELIZABETH A KOECKERITZ
GIVENS PURSLEY LLP
60I W BANNOCK ST
BOISE ID 82702
E-MAIL: [e-mail]
CONNIE ASCHENBRENNER
RATE DESIGN SENIOR MGR
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
DON READING
6070 HILL ROAD
BOISE ID 83703
E-MAIL : [e-mail]
J" /1,h,'-
SECRETARY
CERTIFICATE OF SERVICE