20220427Comments - Redacted.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9917
Street Address for Express Mail:
I I33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OF SPECIAL CONTRACT AND
TARIFF SCHEDULE 33 TO PROVIDE
ELECTRIC SERVICE TO BRISBIE, LLC'S
DATA CENTER FACILITY
CASE NO. IPC.E.2I.42
REDACTED COMMENTS OF
THE COMMISSION STAFF
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COMES NOW the Staff of the Idaho Public Utilities Commission, ("Staff') by and
through its Attorney of record, Dayn Hardie, Deputy Attorney General, and submits the following
comments.
BACKGROUND
On December 22,202l,Idaho Power Company ("Company") applied to the Idaho Public
Utilities Commission ("Commission") seeking approval of a special contract for electric service
("Special Contract") between the Company and Brisbie, LLC ("Brisbie").
Because Brisbie will be taking electric service greater than 20,000 kilowatts ("kW";, -
20 megawatts ("MW"f-the Company and Brisbie have entered into a Special Contract.
Application at2. As outlined in Order No. 33038 at 1 l, "each special contract customer is
considered a separate class with different conditions and contract terms affecting their rates..."
Id. at2. The Special Contract is referred to as the Energy Services Agreement ("ESA"). Id. at2.
1REDACTED STAFF COMMENTS APRIL 27,2022
The Special Contract was negotiated with the intent to help Brisbie achieve its goal of
being served by 100% renewable energy. The Company and Brisbie have negotiated an ESA the
Company believes is in the public interest and supports Brisbie's objective of serving 100% of
its energy requirements with renewable energy. The Special Contract includes provisions that
outline a modified pricing framework that will cover the costs of adding Brisbie to the system.
The Company presents a No-Harm Analysis that potentially shows that the Special Contract with
Brisbie will benefit or hold retail customers harmless.
The Special Contract is similar in nature to the framework proposed in the Clean Energy
Your Way - Construction ("CEYW-Construction") offering, as outlined in Company's pending
Application. See Case No. IPC-E-21-40. The Company proposes to offer CEYW-Construction
options to current or future customers, providing an opportunity to buy or access renewable
resources to meet some or all their energy requirements. Brisbie is the first customer proposing
to take service under the framework of the CEYW-Construction option.
Proposed Tariff Schedule 33
The Company last filed for a base rate increase case in 201l. See Case No. IPC-E-l l-08,
The Company has not established a new base revenue requirement or updated its cost-of-service
("COS") methodology since then, but the Company has received Commission approval to adjust
its base rate revenue requirement since Case No. IPC-E-I1-08. The proposed Schedule 33
includes affributes similar to other Special Contract customers, including Hoku Materials
("Hoku") and J.R. Simplot Company's Caldwell Facility, Schedule 32. See Tatum Direct at 10.
Power Purchase Agreement ("PPA")
The Application includes a draft PPA for procurement of renewable resources. In the
Company's confidential response to Production Request No. 3 and during discussion with the
Company, Staff leamed
2REDACTED STAFF COMMENTS APRIL 27,2022
For each
signed PPA (or a resource construction agreementl;, the Company will update Schedule 33.
Each "ne#'renewable resource will be signed by the Company and Brisbie and will be
directly assigned to Brisbie. The Company will procure resources for Brisbie, and requests that
each "new" renewable resource not follow the Commission's procurement guidelines.2 With
Brisbie paying I of each PPA, the Parties have agreed that Brisbie will receive a credit
for the value from each "new" renewable resource. With each "new" renewable resource added,
the Company will incorporate it into the base planning analysis of each subsequent integrated
resource plan ("IRP"). See Tatum Direct at 13.
Energy Sales Agreement
The Special Contract and the ESA are used in conjunction with each other. The ESA
includes cost and credit components associated with retail electric service served to Brisbie. The
terms and conditions in the ESA include provisions that it will hold other customers harmless.
See Applicationat2.
Within the ESA, the Company and Brisbie have included a proposed rate schedule that
outlines a two-block rate structure. In Case No. IPC-E-08-21, the Commission approved a two-
block pricing structure for Hoku.
See
Goralski Direct at 5-8
STAFF REVIEW
Staff reviewed the Application to ensure that other customers will not be harmed by
providing electrical service to Brisbie. Staff s review focused on: (1) the overall structure and
design of the rates; (2) the Company's No-Harm Analysis; (3) cost recovery for the construction
I The resource construction agreement referenced here is not the same as the Consffuction Agreement for
transmission upgrades included in the Application. This resource construction agreement refers to a contractual
agreement in case the Company builds a resource for a CEYW-Construction customer.2 The current guidelines are currently the same as Oregon's guidelines. However, IPC-E-21-41 seeks to change
those guidelines for upcoming Request for Proposals.
3 See confidential response to Production Request No. 5.
JREDACTED STAFF COMMENTS APRIL 27,2022
of related transmission facilities to connect Brisbie's data center to the Company's system; (4)
the treatment of Renewable Energy Credits ("REC") generated by Brisbie's renewable resources
and the allocation of system-generated RECs in the Power Cost Adjustment ("PCA"); (5) the
provisions in the ESA mitigating risk; (6) treatment of the costs and benefits in the PCA and in
base rates; and (7) the need for renewable resource PPAs to be authorized.
l. Rate Structure - The overall rate design framework provides a reasonable approach
for payments to the Company for supplemental generation provided to Brisbie for
electrical service and for credits to Brisbie for excess renewable generation exported
from Brisbie's renewable resource(s) to the Company's system with the following
exceptions:
a. An additional S5Yo adjustment should be applied to the proposed Excess
Generation Credit rate;a
b. The Excess Energy Generation Credit rate should be based on the lower of the
Excess Generation Credit Price or actual Mid-C market price (without the
85% adjustment) in each hour;
c. The Renewable Capacity Credit rate should be based on when the Company's
system becomes capacity deficient and not be paid until that date occurs;
d. The Renewable Capacity Credit rate should utilize the rate structure for IRP-
based energy storage projects (See Order No. 34913), which would provide
Brisbie avoided capacity cost payments on a dollar per kilowatt-hour ("kwh")
basis and only for energy delivered to the Company's system during system
peak and premium peak hours;
e. For Renewable Capacity Credits, the resource(s) used as a surrogate to
determine avoided capacity cost should be identified using the most recently
acknowledged IRP at the time that the PPA (or a resource construction
agreement) is signed and should use the lowest cost capacity resource
included for selection within the IRP;
f. For Renewable Capacity Credits, the peak and premium peak hours that are
authorized in the Load and Natural Gas Forecast Annual Update for Public
Utility Regulatory Policy Act of 1978 ("PURPA") as required by Order No.
a See Order No. 29093
4REDACTED STAFF COMMENTS APRIL 27,2022
34913 should be used to update the peak and premium peak per kWh rate on
the same schedule as the other IRP updates utilizing the peak and premium
peak hours authorized at the time of the IRP updates; and
g. The Company should provide a separate filing for the approval of the Avoided
Cost Averages and all other rate components determined from the IRP. This
filing should be submitted for Commission approval soon after the IRP is filed
so the Commission can process the application in parallel with the IRP filing
and the Commission can authorize them soon after IRP acknowledgment.
2. Company's No-Harm Analysis - The Company's No-Harm Analysis indicates the
Brisbie contract will hold other customers harmless but does not provide sufficient
evidence on its own.
3. Transmission Facility Construction Cost - The Company's proposed method for
recovering the cost of transmission to connect Brisbie to the Company's system to
enable electric service as contained in the separate Construction Agreement should
ensure other customers are held harmless.
4. REC Ownership -
Staff believes a workshop is needed to determine the
appropriate allocation for the value of system-generated RECs I and for
future CEYW-Construction offering customers.
5. Analysis of Provisions in the ESA - The provisions and guarantees in the ESA are
sufficient to mitigate stranded-asset cost risk and
6. Accountins Treatment in the PCA and the next General Rate Case -
To ensure timely processing of the next general
rate case, Staff recommends scheduling a workshop to discuss the treatment of
Schedule 33 costs, revenues, and loads.
7. Authorization of Renewable Resource PPAs by the Commission -
a. The Company should file each new PPA for review and approval by the
Commission.
5REDACTED STAFF COMMENTS APRIL 27,2022
b. The Company should provide the following items annually with the PCA
filing: (1) the amount of consumption and generation from the renewable
resonrces serving Brisbie and future CEYW -Construction projects, and (2) an
annual Brisbie load forecast that is compared to Brisbie's annual generation
forecast for all signed PPA's broken down on a monthly basis.
Analysis of Rate Structure and Design
The Company plans to procure enough renewable resources to meet Brisbie's initial
annual energy requirements in the short-term (first tranche) through a PPA and to procure or
build additional resources to meet Brisbie's energy requirements going forward. As discussed
earlier, the primary criteria Staff used to evaluate the ESA is whether the structure of the deal
and-in particular-the design of the rates will prevent cost shifting to the Company's other
retail customers. This is especially critical for the following reasons:
2. The resource will be connected to the system and will be used to serve system
load as though it is a Company resource, but
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and
4. The rate design for this contract will likely be used as a model for other CEYW-
Construction customers fuither
One of Staff s greatest concerns is the amount of excess energy from this and other
CEYW-Construction projects. Although, Staff believes this should be priced at the Company's
6REDACTED STAFF COMMENTS APRIL 27,2022
avoided cost, the avoided cost of energy-which is priced at the margin-is higher than the
Company's average embedded energy cost. Due to the size of Brisbie and future CEYW-
Construction renewable resources, Staff believes there will evenfually be upward pressure on all
customer rates as the penetration of these projects become a greater proportion of the Company's
overall energy cost.
StafPs Standard of Analysis
The capacity of the renewable resource(s) is being sized to meet
Because Brisbie will have relatively steady load during the day and
its resource (Staffassumes solar) will not be able to produce during many of those hours, Brisbie
will need to lean on the Company's system when its resources are not meeting its demand.
Application at 5.
As depicted in Diagram A, the Company's proposed rate design can be analyzed based
on a "virtual behind the meter" framework, as if Brisbie's resource is generating into its own
load.
Diasram A -Staf?s Ideal Framework
Virtual Meter Boundary
Excess Solar Generation (Net Energy & Capacity)
Legend:at+e*
Physical Flows
Financial Flows
This is appropriate for two reasons. First, the structure of the ESA requires
similar to other large customers that have
7
BRISBIE SYSTEM
Brisbie Brisbie
DAIA CTRGenerationt-'l
lTotal Solar PPA Passthru Cost I
I TotalSolarPPAGeneration I
I
I
I
I
I
I
I
I
L
{-+
I<-+
I
I
_e+L__l
Credit to Brisbie for Excess Solar Generation (Net Energy & Capacity Value)
IPC SYSTEM
rr+
---G
<Supplemental Generation (Net Energy & Capacity)
Payment to IPC for Supplemental Generation (Net Energy & Capacity Value)
REDACTED STAFF COMMENTS APRIL 27,2022
generation capability and generate into their own load.7 Second, although the renewable
resource(s) the Company will procure for Brisbie will connect directly to the Company's system
separate from the Brisbie's data center, the data center consumption and the production from its
renewable resource can and will be
7 Examples include Clearwater Paper in Avista's system and Amalgamated Sugar in the Company's system.
8 Indep. Energt Producers Ass'n, Inc. v. Cal. Pub. Utils. Comm'n,36F.3d 848, 858 (gth Cir. 1994) ("If purchase
rates are set at the utility's avoided cost, consumers are not forced to subsidize QFs because they are paying the
same amount they would have paid if the utility had generated energy itself or purchased energy elsewhere.")
8REDACTED STAFF COMMENTS APRIL 27,2022
Energy Treatment
Ioiagram B,
IStaff s ideal frameworkf
Diagram B - Energv Treatment
Virtual Meter Boundary
Excess Solar Generation (Net Energy Only)
Payment to IPC for Supplemental Generation (Net Energy Only)
Legend:a-+Physical Flows
Financial Flows
BRISBIE SYSTEM
Brisbie
Generation
Brisbie
Data CTR
t---'l lTotal Solar PPA Passthru Cost ItltlI Total Solar PPA Generation I
I
I
I
I<-l
L__l L--r
Credit to Brisbie for Excess Solar Generation (Net Energy Value Only)
Supplemental Generation (Net Energy Only)
IPC SYSTEM
--a
Supplemental Energ,t
Staff reviewed the Company's proposed method for determining Supplemental Energy
rates and recofilmends approving the method as proposed.
9REDACTED STAFF COMMENTS APRIL 27,2022
The Commission approved a pricing structure in the Hoku special contract based on two
blocks using embedded and marginal cost rates.l0 In the Hoku contract, Block I embedded rates
were based on Schedule 19 retail rates and Block 2 marginal rates were based on PURPA
published avoided cost rates. The load limit threshold between the two blocks in the Hoku
contract was 25 MW, which was the size limit under Schedule l9 when the Hoku contract was
negotiated.
ro See CaseNo. IPC-E-08-21
REDACTED STAFF COMMENTS 10 APRIL 27,2022
Excess Energt Generation
Staff reviewed the Company's proposed method for determining the rates used to pay
Excess Energy Generation (generation net consumption) credits and recommends approving the
method as proposed in the Application,
REDACTED STAFF COMMENTS l1 APRIL 27,2022
rr See Response to Staff s Production Request No. 29.
12 See Application at 3 in Case No. IPC-E-01-40.
REDACTED STAFF COMMENTS t2 APRIL 27,2022
Capacity Treatment
Diagram C - Capacitv Treatment
Virtual Meter Boundary
100% of Solar Generation Capacity Va lue
Payment for 100% of Capacity Supplied by IPC System
Legend:o_>PhysicalFlows
Financial Flows
BRISBIE SYSTEM
Brisbie Brisbie
Data CTRt--lIr
Generation.I
i
L__L__
Credit to Brisbie for 100% of Solar Generation Capacity
100% of Capacity Supplied by IPC System
IPC SYSTEM
....,.}
..r{
REDACTED STAFF COMMENTS l3 APRIL 27,2022
Renewable Capacity Credit
13 See Order Nos. 33377, 33159, and 33898
REDACTED STAFF COMMENTS l4 APRIL 27,2022
ra See OrderNos. 34794 and34913.
15 See Order Nos.32262,32697, and34794.
REDACTED STAFF COMMENTS 15 APRIL 27,2022
Demand Charges
Staff reviewed the Company's proposed method for determining demand charges and
recommends approving the demand charges as proposed. Staff believes the proposed demand
charges are reasonable because the methods used to determine the charges are like other
approved special contracts and are based on COS.
REDACTED STAFF COMMENTS 16 APRIL 27,2022
Company's No-Harm Analysis
Staff reviewed the Company's No-Harm Analysis and believes it indicates that the
Brisbie contract will hold other customers harmless but does not provide sufficient evidence on
its own.
The Company compared the net present value results of Aurora production cost model
runs both with and without the Brisbie ESA. The results of the Company's analysis show that
the system with the Brisbie contract could provide a
However, Staff believes the analysis is insufficient because the analysis relies on a single
set of input assumptions that could change over the life of the Brisbie contract. Because the
analysis does not evaluate a range of values for the different risk variables that could affect the
results of the analysis, Staff did not rely on the results of the No-Harm Analysis as a primary
consideration in determining a recommendation for the Company's rate proposals.
Transmission Facility Construction Costs
Staff reviewed the Construction Agreement included as Confidential Exhibit No. 2 and
believes that the costs necessary to provide ongoing electric service to the Brisbie data center,
including transmission construction cost and ongoing operation and maintenance cost up to the
point of delivery, will not be borne by other ratepayers.
REC Ownership and Treatment of System-Generated RECs
REDACTED STAFF COMMENTS t7 APRIL 27,2022
Analysis of Provisions in the ESA to Mitigate Risk
REDACTED STAFF COMMENTS l8 APRIL 27,2022
Authorization of Renewable Resource PPAs by the Commission
In the Application, the Company proposes that future PPA's with Brisbie will not be filed
for review or approval by the Commission. For the following reasons, Staff recommends the
Company file all CEYW-Construction PPA contracts with the Commission for its review and
approval.
However,
there are other elements within the PPA Staff believes should be reviewed and authorized by the
REDACTED STAFF COMMENTS 19 APRIL 27,2022
Commission-including the interconnection agreement within the PPA-to ensure no costs are
passed on to the general body ofratepayers.
To ensure that Brisbie meets this criterion and does not overproduce, Staff
recommends that the Company provide the following items annually with the PCA filing: (l) the
amount of consumption and generation from the renewable resources serving Brisbie and other
CEYW-Construction projects; and (2) an annual Brisbie load forecast that is compared to
Brisbie's annual generation forecast for all signed PPA's broken down on a monthly basis. The
recommended items will allow Staff and the Commission to ensure that Brisbie does not become
a net producer of energy, which could result in a cost shift to other retail customers.
STAF'F RECOMMENDATIONS
Staff recommends approval of the ESA between the Parties contingent on the following
modifications if approved by the Commission as outlined below:
l. All pricing components determined from the IRP should be filed separately for
Commission approval soon after the IRP is filed so the Commission can process the
application in parallel with the IRP filing and authorize them soon after IRP
acknowledgement;
2. For Excess Energy Generation credits, apply an additional85% adjustment consistent
with Schedule 86;
3. For Excess Energy Generation credits, utilize the lower of the proposed Aurora-based
rates (with the additionalS5o/o adjustment) and actual Mid-C market prices on an
hourly basis;
4. For Renewable Capacity Credits, Brisbie not receive any payments for avoiding
capacity cost until the Company's system is capacity deficient;
5. For Renewable Capacity Credits, the rate structure should be based on the avoided
capacity cost rate and payment structure used to compensate PURPA IRP-based
energy storage QF projects as approved in Case No. IPC-E-20-02;
REDACTED STAFF COMMENTS 20 APRIL 27,2022
6. For Renewable Capacity Credits, the resource(s) used as a surrogate to determrne
avoided capacity cost should be identified using the most recently acknowledged IRP
at the time that the PPA (or a resource construction agreement) is signed and should
use the lowest cost capacity resource included for selection within the IRP;
7. For Renewable Capacity Credits, the peak and premium peak hours that are
authorized in the Load and Natural Gas Forecast Annual Update for PURPA as
required by Order No. 34913 should be used to update the peak and premium peak
per kWh rate on the same schedule as the other IRP updates utilizing the peak and
premium peak hours authorized at the time of the IRP updates;
8. Schedule a workshop to discuss the treatment of Schedule 33 costs, revenues, and
loads in base rates prior to the next general rate case;
9. The Company hold a workshop to evaluate how system-generated REC benefits are
passed on to CEYW-Construction customers in the PCA;
10. Every CEYW-Construction customer PPA--or a resource construction agreement-
be reviewed and authorized by the Commission; and
11. The Company provides the following items annually with the PCA filing: (1) the
amount of consumption and generation from the renewable resources serving Brisbie
and other CEYW-Construction projects; and (2) an annual Brisbie load forecast that
is compared to Brisbie's annual generation forecast for all signed PPA's broken down
on a monthly basis.
ZILRespectfully submitted this day of April2022.
Deputy Attorney General
Technical Staff: Travis Culbertson
Michael Eldred
Kathy Stockton
i : umisc/comments/ipce2 I .42tbtncklsttme comments
REDACTED STAFF COMMENTS 2t APRIL 27,2022
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 27th DAY OF APRIL 2022,
SERVED THE FOREGOING REDACTED COMMENTS OF THE COMMISSION
STAFF, IN CASE NO. IPC-E-21-42, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
DONOVAN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
[e-mail]
MICHAEL HECKLER
COURTNEY WHITE
CLEAN ENERGY OPPORTUNITIES FOR
IDAHO INC
3778 PLANTATION RIVER DR SUITE IO2
BOISE,ID 83703
E-MAIL : [e-mail]
courtney @cl eanenergyopportunities.com
TIM TATUM
VP REGULATORY AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-MAIL: [e-mail]
KELSEY JAE
LAW FOR CONSCIOUS LEADERSHIP
920 N. CLOVER DR.
BOISE,ID 83703
E-MAIL: [e-mail]
J, /"A,,"\
SECRETARY//
CERTIFICATE OF SERVICE