20220822Petition for Clarification and Reconsideration.pdf

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An DAOOf,P Cornpany
DONOVAN WALKER
Lead Counsel
[e-mail]
August 22,2022
VIA ELECTRONIC FILING
Jan Noriyuki, Secretary
ldaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg 8,
Suite 201-A(83714)
PO Box 83720
Boise, ldaho 83720-0074
Re Case No. IPC-E-Z?-O6
ln the Matter of ldaho Power Company's Application for Approval of a
Replacement Special Contract with Micron Technology, lnc. and A Power
Purchase Agreement with Black Mesa Energy, LLC
Dear Ms. Noriyuki
Attached for electronic filing is ldaho Power's Petition for Clarification and
Reconsideration in the above-entitled mafter.
Please feel free to contact me directly with any questions you might have about this
filing.
Very truly yours,
j." L
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Donovan E. Walker
DEW:cd
Enclosure
DONOVAN E. WALKER (lSB No. 5921)
MEGAN GOICOECHEA ALLEN (lSB No. 7623)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwa !ker@ ida hopower.com
mooicoecheaa llen @ ida hopowe r. com
Attorneys for ldaho Power Company
IN THE MATTER OF IDAHO POWEF.
COM PANY'S APPLICATION FOR
APPROVAL OF A REPLACEMENT
SPECIAL CONTRACT WITH MICRON
TECHNOLOGY, INC. AND A POWER
PURCHASE AGREEMENT WTH BLACK
MESA ENERGY, LLC.
BEFORE THE IDAHO PUBLIC UTILIT!ES COMMISSION
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oASE NO. rPC-E-22-06
IDAHO POWER COMPANY'S
PETITION FOR CLARIFICATION
AND RECONSIDERATION
ldaho Power Company ("ldaho Powe/' or "Company"), pursuant to ldaho Code $
61-626 and RP 325 and 331, ef. seg., respectfully petitions the Idaho Public Utilities
Commission (.Commission") for clarification and reconsideration of final Order No. 35482,
issued on August 1, 2022 ("Orde/'), as articulated herein. Specifically, the Company
seeks clarification regarding the Commission's determination that Renewable Capacity
Credits ("RCC') be quantified utilizing the rate and payment structure for Public Utilities
Regulatory Policies Act ("PURPA') lntegrated Resource Plan ("lRP") based energy
storage projects; and reconsideration of the Commission's finding that the credits for
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND RECONSIDERATION. 1
excess energy and capacity included in the Company's power supply expense be subject
to 95 percent sharing in the Power Cost Adjustment ('PCA').
I. CLARIFICAT!ON
Order No. 35482 approved the Micron Energy Services Agreement and Schedule
26 with certain modifications, which were consistent with some of the recommendations
filed in Staffs Comments.l Specifically, Staff recommended, and the Commission
ordered, that "the RCC utilize the rate and payment structure for IRP-based energy
storage projects." However, both the Staff recommendation and the Commission order is
silent on the method for determining the Capacity Contribution Factor, which is a
necessary component of the RCC calculation in the ESA. As such, the Company requests
the Commission clariff the following: Was it the Commission's intent to only modiff the
manner in which RCC payments are made to Micron through utilization of peak and
premium peak hours (which will allow for payments to be provided on a dollar per kilowatt-
hour ("k\ffh") basis, rather than a flaUfixed monthly amount) or did the Commission also
intend for the Company to modifo the determination of Capacity Contribution Factor.
Capacity Contribution Factor is defined in the proposed ESA as "the capacity
contribution methodology and preferred portfolio resource addition timing of the most
recently acknowledged |RP...," and differs from the PURPA lRP-based storage project
methodology, which may not account for the diminishing capacity contribution of
additional non-dispatchable resources. The PURPA IRP-based storage project
methodology results in higher capacity contribution than either the NREL top 100 hours
methodology utilized in the 2019 IRP or the Effective Load Carrying Capability
1 Staff Comments, p. 21
IDAHO POWER COMPANY'S PETITION FOR CI.ARIFICATION AND RECONSIDERATION - 2
methodology utilized in the 2021 IRP. ln the case of the Black Mesa PPA and consistent
with the definition contained in the proposed ESA, ldaho Power would apply the NREL
top 100 hours methodology to quantify the Capacity Contribution Factor.
Given the Company's uncertainty related to the Commission's modification relative
to the RCCs under the ESA, it requested a meeting with Staff seeking clarification, which
took place on August 17 ,2022. During that call, Staff advised that their intent was for the
Capacity Contribution Factor to be determined using the methodology from the most-
recently acknowledged lRP, consistent with the filed ESA definition. Staff further clarified
that their recommendation was only to apply "time of output" rate structure for payments.
The result of this change to Micron's RCC would be that, instead of receiving twelve,
equa! monthly payments of $147,124.66 for an annual value of $1,765,496, the annual
value would instead only be paid on a dollars-per-kWh basis for energy delivered in peak
and premium peak hours as identified by the PURPA IRP-based storage project
methodology.
The Company believes that the Commission's modification to the Micron RCC was
intended to implement Staffs recommendation in this regard, and as such, it intends to
only modifo the rate and payment structure in the revised ESA. If, however, the Company
is misinterpreting the Commission's Order with respect to this issue, it respectfully
requests that clarification be issued. The Company believes this clarification is important
not only in how it will determine Micron's RCC as part of this filing, but to ensure a
consistent approach that could be applied in other agreements.
II. RECONSIDERATION
ln addition to seeking clarification of the Commission's Order No. 35482 pursuant
IDAHO POWER COMPANY'S PETITION FOR CISRIFICATION AND RECONSIDERATION.3
to RP 325 related to the RCC structure under the Micron ESA, ldaho Power is requesting
reconsideration pursuant to RP 331 of the Commission's finding relative to the annual
PCA treatment. Specifically, the Company believes the Commission's determination that
the credits for excess energy and capacity included in power supply expense be subject
to 95 percent sharing in the PCA is unreasonable, erroneous, and inconsistent with other
Commission orders. !n accordance with Rule 331, in the event the Commission
determines that excess generation and capacity payments being subject to 95 percent
sharing is appropriate for reconsideration, ldaho Power believes that the evidentiary
record could be augmented, if necessary, by written comments or oral argument at the
discretion of the Commission.
!n determining that credits for excess energy and capacity should be subject to 95
percent sharing in the PCA, the Commission indicated it was not persuaded by the
Company's statement that it has "no ability to influence the performance of power supply
expense, as in the case of excess energy and capacity credits."2 Rather it concluded that
those "credits are based on an avoided cost and therefore an integra! part of the
Company's overall power supply expense cost structure, which the Company has the
responsibility to manage."3 However, it is important to note that the Company has no
control over the two components that comprise excess energy payments: excess energy
volumes and market prices at the time excess energy occurs. Excess energy exists when
the intermittent renewable generation exceeds consumption at Micron's facility, however
the Company has no contro! over the operating characteristics at Micron's facility, nor
does it possess the ability to manage the quantity and timing of intermittent generation
2Order No. 35482, p. 18 (citing ldaho Power Company's Reply Comments, p. 17).3ld.
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND RECONSIDERATION - 4
from the Black Mesa solar project. Because the Company does not have the ability to
manage when excess generation occurs, it has no control over the subsequent market
conditions that occur coincident with this generation. ln its order, the Commission
approved contract terms that ensures customers and the Company will be held harmless
by quantiffing the compensation to Micron based on the lower of a forecasted non-firm
market price or the actual market price in each hour. This structure ensures that Micron
is compensated at a market-based price for excess energy whenever it may occur, while
eliminating the risk of compensation exceeding the market value of the generation. The
application of a 95 percent sharing provision to this amount results in ldaho Power either
under-recovering 5 percent of the excess energy payments (regardless of the Company's
actions), or Micron is only compensated for 95 percent of the market-based value of its
excess generation. ln either case, the Commission's order does not create an incentive
for the Company to responsibly manage its overall power supply expense cost structure,
but rather creates a recovery shortfall for prudently incurred expenses that are entirely
outside of the Company's control.
Further, in all other arrangements where the Company utilizes avoided costs as a
basis for establishing pricing or compensation for contracted energy and capacity, the
Company is permitted to collect these costs - in their entirety - from all customers. This
is the case for all PURPA compensation, demand response incentive payments, and
energy efficiency incentive payments. Similarly, the Commission has approved a
prescribed avoided cost-based method for capacity compensation in the Micron ESA
which is based on resource values from the !RP. Authorizing cost recovery assurance in
this case, as it does with other avoided cost-based pricing, is critically important to ensure
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND RECONSIDERATION - 5
those customers who receive the benefits are responsible for the costs necessarily
incurred to procure them. As these situations demonstrate, there is no basis for
disallowing recovery of the avoided-cost based energy and capacity payments from all
customers.
il. coNcLustoN
The Company appreciates the opportunity to clariff that the determination of the
annual RCC value is unchanged through incorporation of payment methodology used for
PURPA lRP-based energy storage projects as ordered by the Commission. ldaho Power
requests clarification that the Commission's intent is to only include a performance
mechanism to provide payment for capacity on a dollars-per-k\ffh basis for energy
delivered in peak and premium peak hours as identified bythe PURPA !RP-based storage
project methodology, and not change the underlying Capacity Contribution Factor
definition.
ldaho Power also respectfully requests that the Commission reconsider its
directive to apply the PCA's 95 percent sharing mechanism to excess energy and
capacity payments. Avoided cost-based payments for PURPA, demand response
incentive payments, and energy efficiency incentive payments are allavoided-cost based,
and the Commission has approved 100 percent recovery of those costs. The
Commission's application of the 95 percent sharing mechanism only creates a recovery
shortfall for prudently-incurred expenses that are entirely outside of the Company's
contro!, it does not create an incentive for the Company to responsibly manage its overall
power supply expense cost structure. The Company requests the Commission reconsider
Order No. 35482 on this issue and, further, that it consistently applies the same recovery
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND RECONSIDERATION .6
standard br excees energy and capacity paymenb in similar situations.
Respectftrlly submitted this 22nd day of August 2022.
A,*Z.detl+-
DONOVAN E. WALKER
Attomey for ldaho Power Company
I DA}IO POVI'ER COMPANYS PETITION FOR CLARI FICATION AND RECONS ! DERATION - 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 22nd day of August 2022, I served a true and
correct copy of the foregoing ldaho Power Petition for Clarification and Reconsideration
upon the following named parties by the method indicated below, and addressed to the
following:
Riley Newton
Deputy Attorney Genera!
Idaho Public Utilities Commission
Po Box 83720
Boise, Idaho 83720-0074
lndustrial Customers of ldaho Power
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, lD 83703
Emailed to:
rilev. newton@puc. idaho.qov
Emailed to:
pete r@ rich a rd son adams. com
Emailed to:
dread [e-mail]
Christy Davenport
Legal Administrative Assistant
IDAHO POWER COMPANY'S PETITION FOR CLARIFICAT]ON AND RECONSIDERATION - 8