20220629Comments.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:
1 I33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OF A REPLACEMENT SPECIAL
CONTRACT WITH MICRON
TECHNOLOGY,INC. AND A POWER
PURCHASE AGREEMENT WITH BLACK
MESA ENERGY. LLC
CASE NO. IPC.E.22-06
COMMENTS OF THE
COMMISSION STAFF
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STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Riley Newton, Deputy Attorney General, submits the following comments.
BACKGROUND
On March l0,2022,Idaho Power Company ("Company") applied to the Commission for
an order: ( I ) approving a revised Special Contract ("Special Contract")for electric service
between the Company and Micron Technology, [nc. ("Micron"); and (2) a2}-year Power
Purchase Agreement ("PPA") between the Company and Black Mesa Energy, LLC ("Black
Mesa") to facilitate the provision of energy to the Company under the Special Contract.
Micron, as a Large Power Service customer receiving in excess of 20 Megawatts ("MW")
under Schedule 19, is required to make special contract arrangements with the Company.
The Special Contract is similar to the framework proposed in the Clean Energy Your
Way - Construction ("CEYW-Construction") offering, as outlined in the Company's pending
ISTAFF COMMENTS JI-INE 29,2022
Application in 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. Micron is the second customer
proposing to take service under the framework of the CEYW-Construction option.
The Company and Micron have been operating under a special contract agreement that
was replaced in 2009 ("Current Agreement"). Application at 2. The Company represents that
the Special Contract is intended to replace the Current Agreement . Id. T\e Company represents
that the Special Contract contemplates the Company procuring an "initial Renewable Resource
of 40 MW on behalf of--and to be paid for by-Micron." Id. at3.
Under the terms of the twenty-year Black Mesa PPA, Black Mesa will build, own,
operate, and maintain a 40 MW alternating current solar photovoltaic generation facility and will
supply the output to the Company's system. Id. at2-3. The PPA has a scheduled operation date
ofJune 1,2023.
The Company requests a Commission order before August 1,2022, approving the Special
Contract, the PPA, modifications to Schedde26 Electric Service Rate for Micron Technology,
Inc., the derivation of the capacity credit associated with the Renewable Resources and
compensation structure for excess renewable energy generation, authorization to treat bill credits
provided to Micron under the proposed compensation structure as prudently incurred expenses
for ratemaking purposes, and the Company's proposed accounting treatment. Id. at ll.
STAFF REVIEW
In reviewing the Company's Application, Staff s primary consideration was ensuring that
customers would not be harmed by the Company's proposal. After its review, Staff came to the
following conclusions:
1. Rate Structure - The overall rate design framework provides a reasonable
approach for payments to the Company for supplemental generation provided to
Micron for electrical service and for credits to Micron for excess renewable
generation exported from Micron's renewable resource(s) to the Company's
system with the following exceptions:
2STAFF COMMENTS JLINE 29,2022
I See OrderNo.29093
a. An additional S5% adjustment should be applied to the proposed Excess
Generation Price;l
b. The Excess Generation Credit rate should be based on the lower of the
Excess Generation Price (with the 85% adjustment) and actual high or low
load hour Mid-C market price (without any adjustments) for each hour;
c. The Renewable Capacity Credit Eligibility ("RCCE") date for additional
Micron renewable resources should be based on the PURPA first capacity
deficiency date authorized on the date that the PPA or construction
agreement is signed;
d. The Renewable Capacity Credit should utilize the rate and payment
structure for lRP-based energy storage projects (See Order No. 34913),
which would provide Micron 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. 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
JSTAFF COMMENTS JUNE 29,2022
parallel with the IRP filing and the Commission can authorize the filing
soon after IRP acknowledgment.
2. Company's No-Harm Analysis - The Company's No-Harm Analysis indicates the
Micron contract will hold other customers harmless (cost shifts to customers other
than Micron) but does not provide suffrcient evidence on its own.
3. Transmission Facilitv Construction Cost - The Company's proposed method for
recovering the cost of transmission to receive energy from Black Mesa Energy
should ensure other customers are held harmless.
4. Renewable Energy Credit ("REC") Ownership - Micron should retain 100% of
the RECs generated by its renewable resource(s). However, Staff believes a
workshop is needed to determine the appropriate allocation for the value of
system-generated RECs for all CEYW-Construction offering customers, including
Micron.
5. Analysis of ESA Provisions - The provisions and guarantees in the ESA are
sufficient to mitigate stranded-asset cost risk and Miuon's financial ability to
pay;
6. Supply Chain Investigation - There is a supply chain disruption in the Asian
territories that may have a material impact to Black Mesa Energy meeting the
June I ,2023, operation date. Staff recommends that the parties notifu the
Commission of the following:
a. Supply Chain disruption updates;
b. Inability to meet the extended timeframe of November 28, 2023; and
c. When Force Majeure is being requested.
7. Accounting Treatment in the Power Cost Adjustment ("PCA") and the next
General Rate Case - The Company did not propose treatment of Schedule 26
costs, revenues, and loads in the development of future base rates. To ensure
timely processing of the next general rate case, Staff recommends the Company
and Staff work together to scheduling a workshop to discuss the treatment of
Schedule 26 costs, revenues, and loads.
4STAFF COMMENTS JUNE 29,2022
8. Authorization of Renewable Resource PPAs by the Commission - The Company
included the Black Mesa PPA while seeking blanket approval for future PPAs
without Commission review of any signed PPA that will serve Micron.
a. The Company should f,rle each new PPA for review and approval by the
Commission.
b. The Company should provide the following items annually with the PCA
filing: (l) the amount of consumption and generation from the renewable
resources serving Micron and future CEYW-Construction projects, and (2)
an annual Micron load forecast that is compared to Micron's annual
generation forecast for all signed PPA's broken down on a monthly basis.
Additional details of Staff s analysis and its rational for its conclusions are provided in
the following sections.
I. Analysis of Rate Structure and Design
The Company has secured an initial40 MW renewable resource through the Black Mesa
PPA and plans to work with Micron to develop additional renewable resources to meet Micron's
renewable goals. As mentioned above, Staff focused its evaluation of the Special Contract on
whether the structure of the deal, particularly the design of the rates, will prevent cost shifting to
the Company's other retail customers. This type of evaluation is especially critical for the
following reasons:
1. The acquisition of Micron's renewable resource(s) will be driven by Micron's
need to meet its load with renewable energy and not necessarily based on needs of
the overall system;
2. The resource(s) will be connected to the system and will be used to serve system
load as though it is a Company resource, but Micron will claim 100% of the
environmental attributes (i.e. RECs), and will be paid 100% for the capacity
contribution and for any excess energy from its renewable resources; and
3. Micron is one of the Company's largest customers with a large impact to the
Company's system and cost structure, increasing the overall risk to customers.
A continuing Staff concern is the amount of excess energy from this and other CEYW-
Construction projects. Although Staff believes excess energy should be priced at the Company's
5STAFF COMMENTS JLINE 29,2022
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 Micron and future CEYW-
Construction renewable resources and because all credits will be included as net power cost paid
by all customers, Staff believes there will eventually be upward pressure on all customer rates as
these projects become a greater proportion of the Company's overall energy cost.
A. Staffs Standard of Analysis
The capacity of the proposed and future renewable resource(s) has the potential to meet
ll0% of Micron's annual energy requirements. Because Micron has a relatively steady load and
its resource(s), assumed to be solar, will not be able to produce during periods of time without
sunlight, Micron will need to lean on the Company's system when Micron's resource(s) are not
meeting its demand.
As depicted in Diagram A, the Company's proposed rate design can be analyzed based
on a "virtual behind the meter" framework, as if Micron's resource is generating into its own
load.
Diagram A: Staff's ldeal Framework
Virtual Meter Boundary IPC SYSTEM
Excess Solar Generation (Net Energy & Capacity)
Creditto Micron for Excess Solar Generation (Net Energy& CapacityValue)
Supplemental Generation (Net Energy & Capacity)
Payment to I PC for Supplemental Generation (Net Energy & CapacityValue)
Legend:o{Physical Flows
Financial Flows
This framework is appropriate for two reasons. First, the structure of the Special
Contract requires 100% of the renewable PPA costs to be passed through to Micron before
medits for Excess Generation and charges for Supplemental Generation are applied. This is
6
MICRON SYSTEM
llotal Solar PPA Passthru CostlltltI TotalSolar PPAGeneration I
_l
Micron
Load
t---l
Micron
Generationr--1
L__
STAFF COMMENTS JUNE 29,2022
similar to other large customers that own generation capability and generate into their own load,2
whereby the resources selected will likely be based on Micron's preferences and dedicated for its
benefit. These resources may not necessarily be selected as a least cost resource for the benefit
of all customers. Second, although the renewable resource(s) the Company will procure for
Micron will connect directly to the Company's system separate from the Micron's load,
Micron's consumption and the production from its renewable resource(s) will be netted
mathematically on an hourly basis using metered data.
Utilizing a "virtual behind the meter" framework for Staff s analysis is ideal because: (1)
Supplemental Generation (consumption net of generation) can be analyzed to ensure that the
rates charged for electricity delivered to Micron from the Company's system should be based on
principles of cost of service ("COS"); and (2) Excess Solar Generation (production net of
consumption) exported to the Company's system from Micron should be analyzed based on
principles of avoided cost.
The principles of COS ratemaking are generally accepted by the Commission as the
method for determining fair, just, and reasonable customer rates. As long as the Company bases
its rates for Supplemental Generation from the Company's system on these same principles, Staff
generally assumes rates are reasonable.
However, for energy exported or "sold" to the Company, the principles established
through PURPA for not harming customers is to base the rates on avoided cost. Under PURPA,
utility customers must be economically indifferent to purchases of Quali$ing Facility ("QF")
power by paying no more for power than the amount they would have paid but for the purchase
from the QF.3
Diagram A illustrates the boundary between Micron's system and the Company's system
and the transactions across that boundary that Staffused to evaluate both Excess (solar)
Generation rates and Supplemental Generation rates. Ideally, the amount of energy and capacity
consumed and exported by Micron would occur on a net basis to minimize any asymmetry or
double counting of its value. As discussed below, the Company proposes to track and price
energy production and consumption on a net basis. In the case of capacity and capacity-driven
2 Examples include Clearwater Paper in Avista's system and Amalgamated Sugar in the Company's system.3 Indep. Energt Producers Ass'n, Inc. v. Cal. Pub. Iltils. Comm'n,36F.3d 848, 858 (9th Cir. 1994) ("lf 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.")
7STAFF COMMENTS JLTNE 29,2022
costs, the Company proposes 100% of Micron's resource(s) capacity contribution be sold to the
Company's system, while 100% of Micron's capacity-related needs for consumption are to be
sourced from the Company's system.
B. Energy Treatment
The Company's proposed treatment for energy is consistent with StafPs ideal framework
since the amount of renewable generation and Micron's consumption are netted on an hourly
basis. Diagram B, depicts the energy treatment in Micron's Special Contract and is consistent
with Staff s ideal framework for rates.
Diagrom B: Energy Treatment
MICRON SYSTEM
Micron Micron
[oad
l---tGeneration
1lrotal Solar PPA Passthru Costl
1 TotalSolar PPAGeneration IH
I4-J
I
I*i
I
s=+L--l L
Credit to Micron for Excess Solar Generation (Net EnergyValue Only)
IPCSYSTEM
r+
**@
raSupplemental Generation (Net Energy Only)
Payment to I PC for Supplemental Generation (Net Energy Only)
Virtual Meter Boundary
Excess Solar Generation (Net Energy Only)
Legend:a-r)
e*-&
The Company plans to track the metered hourly net differences in kWhs and has
developed its rate proposals for Supplemental Energy generation and Micron's excess solar
generation (net exports to the Company's system) reflecting the differences in hourly value
depending on whether Micron is a net consumer or net producer. Staff supports netting energy
on an hourly basis to capture the significant differences in the value of energy depending on the
time of daya and if the energy is being imported to or exported from Micron.
4 Although the time of day drives the largest differences in the value of elecricity because of the amount of solar
generation present in the market and customer consumption patterns, day of the week and seasons are also
differentiated in the rates.
Physical Flows
Financial Flows
8STAFF COMMENTS JUNE 29,2022
l. Supplemental Enerey
Staff reviewed the Company's proposed method for determining Supplemental Energy
rates and recommends approval. Staff believes the proposed method is reasonable because it is
based on Micron's currently approved service schedule, which is based on COS. This proposed
treatment is consistent with the proposed treatment for CEYW-Construction customers in Case
No. IPC-E-21-40. Staff supported this proposed treatment in Case No. IPC-E-21-40 and believe
it is appropriate to use in this case for the same reasons discussed in StafPs comments in that
case.
2. Excess Energy Generation
Staff reviewed the Company's proposed method for determining the rates used to pay
Excess Generation (generation net consumption) credits and recommends approving the method
as proposed in the Application, but with an additional S5Yo adjustment consistent with Schedule
86. Because these are forecasted energy prices generated through the Company's IRP, Staff
recommends that the hourly rates should also be backstopped by actual Mid-C high and low
load-hour market prices so the price for the energy credits is determined by the lower of the
proposed Excess Generation Prices (with the additional 85% adjustment) and actual Mid-C high
and low load hour market prices for each hour.
The Company's proposed method for determining Excess Generation payments is based
on the amount of Excess Generation in each hour using the IRP forecasted Mid-C prices in place
of the ICE Mid-C Index prices used in Schedule 86. The Excess Generation credit Micron
receives will be calculated using the amount of Excess Generation each hour multiplied by the
Excess Generation Price for that hour. The Excess Generation Price is determined by taking the
hourly Mid-C price forecast from the IRP, assumed to be a firm-energy market price, and then
adjusted by 82.4% to determine a non-firm energy market price. The 82.4%o non-firm
adjustment mirrors the non-firm adjustment in the Company's Cogeneration and Small Power
Production Non-Firm Energy - Schedule 86.s Staff believes the proposed Aurora-generated firm
price provides a reasonable avoided cost of energy price for non-firm energy when adjusted by
the 82.4%o adjustment factor as proposed; however, Staff believes that the 85% adjustment
consistent with Schedule 86 needs to also be included in Schedule 26.
5 Staff Comments at12,Case No. IPC-E-21-42
STAFF COMMENTS 9 JUNE 29,2022
The value of generation for Schedule 86 is determined using the monthly average daily
Intercontinental Exchange ("ICE") Mid-C Peak Avg and Mid-C Off-Peak Avg index prices.
These prices are discounted by 82.4% to adjust for non-firm energy and discounted again by
85Yo to adjust for transmission, losses, and transaction costs associated with moving non-firm
energy to sell into the market. The adjustment was originally proposed by the Company in Case
No. IPC-E-0l-40. In that case, the Company stated the following in support of establishing the
discount:
By establishing the purchase price as a percentage discount from the
Mid-C Index, Idaho Power's customers can be confident that non-firm
energy Idaho Power is obligated to purchase under Schedule 86 can be
resold in the wholesale market at a price that will recover Idaho Power's
purchase costs plus transmission costs. Conversely, the Company
contends that when Idaho Power desires to retain the non-firm energy
delivered by a seller under Schedule 86, Idaho Power can be assured
that the purchase price will be at least as beneficial as a wholesale non-
firm market purchase.6
The Company's reasons for proposing the adjustment for Schedule 86 are applicable in
this case because the Company is obligated to take the excess generation from Micron's
renewable resource(s). The Excess Generation amount could be substantial given the potential
for up to ll}Yo of the Micron's annual requirements being offset by renewable resource(s) as
proposed in the CEYW-Construction option.T This could require the Company to sell energy in
the market and incur additional transmission-related costs. Including the 85% adjustment factor
will ensure customers are not harmed by these circumstances.
Staff is also concerned with the use of IRP-forecasted Mid-C prices to determine the
Excess Generation Price. Using forecasted prices instead of actual market prices introduces a
risk that could cause other customers to pay more than their avoided cost. Therefore, Staff
recommends using the lower of the Excess Generation Prices (with the additional 85%
adjustment) and actual Mid-C high and low load hour market price on an hourly basis to
safeguard other customers from overpaying for excess generation from Micron's renewable
resource(s).8
6 Application at 3 in Case No. IPC-E-01-40.7 Application - Attachment I in Case No. IPC-E-21-40.
8 The actual high and low load hour Mid-C prices would be compared to the Excess Generation Price with the 85%
adjustment.
STAFF COMMENTS 10 JUNE 29,2022
C. Capacity Treatment
The Company's proposed treatment for capacity is inconsistent with Staff s ideal
framework because the capacity of Micron's renewable resource is not netted from the capacity
needed to serve Micron's load. The Company assumes 100% of the capacity needed for Micron
will be provided by the Company's system and that 100% of the contribution of capacity from its
renewable resources will be provided to the Company's system and compensated through a
capacity credit. While the treatment of capacity is not netted in the Micron contract, Staff
believes the separate evaluation treatment can still accomplish Staff s main principle of holding
other customers harmless.
Diagram C illustrates the capacity treatment in the Micron Contract.
Diogram C: Capacit.y Treatment
Virtual Meter Boundary
100% of Solar Generation CapacityValue
Payment for 100% of Capacity Supplied by I PC System
Legend:
Physical Flows
Financial Flows
The capacity treatment in the Micron contract has two components: (l) Renewable
Capacity Credits; and (2) recovery of capacity-related cost consisting of demand charges and an
Embedded Energy Fixed Cost Charge. The Renewable Capacity Credit is the credit Micron will
receive for the value of capacity contribution from its resources provided to the Company's
system that avoids future additions of capacity. Staff believes that PURPA provides the most
appropriate standard to evaluate the Company's capacity credit proposal. The recovery of
capacity-related cost is designed to primarily recover the cost of capacity that the Company must
hold to meet Micron's load.
Creditto Micron for 100% of Solar GenerationCapacity
100% of CapacitySupplied by IPC System
I PC SYSTEMMICRON SYSTEM
1
MMicron
Generation
L__L__
Load
t---l
STAFF COMMENTS ll JUNE 29,2022
1. Renewable Capacitv Credit
Staff reviewed the Company's proposed method for determining the Renewable Capacity
Credit rate structure and agrees that Micron should have an RCCE date of July 1,2023, for the
Black Mesa PPA allowing payments of Renewable Capacity Payments starting the month
following the project's commercial operation date. Aschenbrenner, Direct at 15. However, Staff
recommends two changes to the Company's Renewable Capacity Credit proposal:
1. Future renewable resources acquired for Micron (beyond the Black Mesa PPA)
should only begin receiving credits based on the PURPA first capacity deficiency
date approved by the Commission at the time a PPA or a construction agreement
is signed; and
2. The payments for the contribution of capacity should be based on the "time of
output" rate structure used for IRP-based energy storage PURPA projects.
a. Establishment of the RCCE Date
The Commission does not allow PURPA projects to receive capacity payments for
avoided capacity cost until the Company's system first becomes capacity def,rcient.e The
Commission explained this principle when it stated:
In calculating a QF's ability to contribute to a utility's need for capacity,
we find it reasonable for the utilities to only begin payments for capacity
at such time that the utility becomes capacity deficient. If a utility is
capacity surplus, then capacity is not being avoided by the purchase of
QF power. By including a capacity payment only when the utility
becomes capacity deficient, the utilities are paying rates that are a more
accurate reflection of true avoided cost for the QF power.
Order No. 33159, p.7 .
As stated earlier, Staff believes PURPA provides the best standard of comparison for
compensating Micron for avoiding capacity cost. Since the Application proposes to compensate
Micron for 100% of its capacity contribution, it is like the capacity contributions of a QF through
PURPA. QF capacity payments are based on the date authorized through the Company's
biannual PURPA deficiency date filing at the time of executing the PPA and the payments do not
begin until this date occurs.
e Order Nos. 33377, 33 I 59, and 33898.
STAFF COMMENTS t2 JUNE 29,2022
The Company proposed that Micron begin receiving Renewable Capacity Credit
payments for future resources starting with the next capacity deficiency date from the load and
resource balance of the most recently acknowledged IRP. Aschenbrenner, Direct at 15.
However, Staff believes the Company needs to further clarifu the timing of when this occurs to
ensure the timing coincides with a dehciency date that has been authorized by the Commission
and when commitments for resources have been made. Staff recommends that future renewable
resources acquired for Micron (beyond the Black Mesa PPA) begin receiving the credit based on
the capacity deficiency date approved by the Commission for PURPA at the time of a future PPA
or construction agreement is signed.
For the Black Mesa PPA, the Company is proposing to use the first capacity deficiency
date proposed in Case No. IPC-E-21-09 as the RCCE date, which is July 2023.10 Id. at 15.
Although Staff agrees that the July 2023 date should be used for the RCCE date, the Company's
rationale for determining the RCCE date is not aligned to Staff s recommended timing for future
resources. The authorized first deficiency date was July 2026 at the time that the Black Mesa
PPA was signed on February 16,2022. Application Attachment 1. Furthermore, the updated
July 2023 first deficiency date was not authorized until May 25,2022, more than 2 months after
this case was filed.
Staff believes that the circumstances surrounding the Company's 2019 IRP provides an
exception to Staff s RCCE date recommendation for future Micron resources. The original
application filed in Case No. IPC-E-21-0911 proposed an August2028 first deficiency date as a
result of the 2019 IRP. Due to the 2019 IRP being filed approximately 15 months late, there was
significant overlap between the 2019IRP and the202l IRP development cycles. Because of
several improvements and updates between the two IRPs, the Company amended the application
in Case No. IPC-E-21-09 after discovering that deficits were going to occur as early as2023,
much earlier than originally anticipated in the 2019IRP. As a result, the Company submitted its
2021 Request for Proposal ("RFP"1 for capacity resources to resolve its 2023 capacity deficits.
r0 Schedule 26 included in the Application states that the Renewable Capacity Credit will be provided starting the
month of the project's RCCE date or the month following the respective project's commercial operation date,
whichever is later.rr Case No. IPC-E-2 I -09 was the biannual first deficiency date case the Company was required to file after
acknowledgment of the 2019 IRP.
STAFF COMMENTS 13 JUNE 29,2022
Black Mesa was one of the resource proposals submitted and selected to meet the
Company's 2023 deficit. Because of this, the selection of Black Mesa was based on the need for
system capacity and then opportunistically used to fulfill Micron's clean energy goals.
Application at7-8, Case No. IPC-E-22-13. In addition, Micron's load needs to be served
regardless of whether Black Mesa is allocated to meet all customer needs or dedicated to Micron.
As such, Staff agrees with the Company that Micron should receive immediate renewable
capacity credit payments based on a July 2023 RCCE date.
b. Time of Output Rate Structure
Staff recommends that the rate structure for capacity credits should be based on the
avoided capacity cost rate and payment structure used to compensate PURPA lRP-based energy
storage QF projects as approved in Order No. 34794 and 34913. Staff believes that the IRP-
based implementation of this rate structure should be used because the size of Micron's resources
are larger than the 100 kW published rate limit approved by the Commission for solar, wind, and
energy storage QFs." This rate structure only allows capacity payments for generation that
occurs during peak and premium peak hours, hours which are determined through the Load and
Natural Gas Forecast Annual Update filings. The peak and premium peak hours are the hours in
the year that determine the need for incremental capacity in the Company's system. By only
allowing capacity payments for energy delivered during these hours, resources are compensated
for the capacity avoidance they deliver ensuring accountability for their compensation.
Staff also recommends that the surrogate resource used to determine the capacity credit
should be based on the lowest cost capacity resource included for selection within the
Company's IRP. However, the type of resource and its avoided capacity cost should not change
for the life of the contract. Staff further recommends that this resource and its capacity cost
should be identified using the most recently acknowledged IRP at the time that the PPA or a
resource construction agreement is signed. However, the peak and premium peak hours
authorized in the Load and Natural Gas Forecast Annual Update for PURPA could change the
number of hours that the avoided cost of the surrogate resource is spread, necessitating a change
in the per kWh rates every year. Because the structure of the Special Contract requires changes
t2 See Order Nos. 32262, 32697, and34794.
STAFF COMMENTS t4 JUNE 29,2022
every two years with acknowledgment of the IRP, Staff recommends that the per kWh rate
change on the same schedule utilizing the peak and premium peak hours authorized at that time.
Staff believes its proposed rate and payment structure is appropriate for several reasons.
As discussed earlier, this structure ensures accountability by only compensating Micron for the
capacity avoidance it delivers. Second, this rate and payment structure was developed to provide
compensation for avoiding capacity cost, specifically for energy storage resources, and the ESA
mentions that storage resources could potentially be added in the future. Idaho Power Exhibit
No. I at 8. However, because solar plus battery and wind plus battery combinations are likely to
occur in the future, this structure can be applied regardless of its source because it is based on the
output of the resources and not on the resource type. As the Company provides additional
CEYW-Construction offerings in the future, the use of this rate structure can provide consistency
across similar projects.
2. Recovery of Capacitv-Related Cost
Staff reviewed the Company's proposed method for recovery of capacity-related cost and
recommends approving them as proposed. The recovery of capacity-related cost is normally
accomplished through demand charges and through the volumetric rate. The Company has
proposed demand charges based on Micron's currently approved Schedule 26. To ensure full
recovery of capacity-related costs embedded in the Micron's volumetric rate, the Company has
proposed an Embedded Energy Fixed Cost Charge applied to energy from its renewable
resource(s) that offsets Micron's load. The proposed demand charges and the Embedded Energy
Fixed Cost Charge are reasonable because the methods used to determine them are consistent
with the Company's CEYW-Construction proposal and are based on COS.
a. Demand Charges
The Company's proposal for demand charges includes the Monthly Contract Demand
Charge, the Monthly Billing Demand Charge, and the Daily Excess Demand Charge from
Micron's currently approved Schedule 26. The Company's proposal is appropriate because
Micron's use of capacity from the system is not likely to change since Micron needs that
capacity to be available, whether its resources are producing or not.
STAFF COMMENTS l5 JUNE 29,2022
b. Embedded Energt Fixed Cost Charge
In addition to the demand charges, Micron will pay an Embedded Energy Fixed Cost
Charge to recover fixed costs that are currently embedded in Micron's volumetric energy rate.
Because a portion of the Company's capacity cost is recovered through the volumetric rate, any
production from Micron's resource(s) consumed by Micron will cause the Company to under
recover capacity cost allocated through the volumetric charge. The Company proposes Micron
be charged an Embedded Energy Fixed Cost Charge for generation from their resource(s) that
offsets their consumption. Without this charge, Micron would under pay for its use of capacity
from the system, ultimately shifting cost to other customers. The proposed Embedded Energy
Fixed Cost Charge provided in Attachment 1 to the Application is reasonable because these
charges are determined based on embedded costs using the most recent COS information.
II. Company's No-Harm Analysis
Staff reviewed the Company's No-Harm Analysis and believes it indicates that the
Micron contract with the Black Mesa PPA will not harm other customers but the analysis 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 Micron contract with the Black Mesa PPA. The results of the
Company's analysis show that the system with the Special Contract could provide a $4.1
millionr3 benefit to customers over a2}-year period.
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 Micron 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.
III. Transmission Facility Construction Costs
Staff reviewed the Special Contract and the PPA and believes that the costs necessary to
receive electric service from Black Mesa Energy, including transmission construction cost and
13 See Company response to Staff Production Request No. I
STAFF COMMENTS t6 JUNE 29,2022
ongoing operation and maintenance cost up to the point of delivery, will not be borne by other
ratepayers.
IV. REC Ownership and Treatment of System-Generated RECs
Any environmental attributes (also known as RECs) associated with the output from the
renewable resources acquired by the Company for Micron will be transferred directly from the
project or developer to Micron. Application at 9. Allowing Micron to maintain ownership of
RECs is one of the primary purposes of the CEYW-Construction offerings, which Staff generally
supports.
In IPC-E-21-42, Staff took issue with the treatment of the value of system-generated
RECs and how they are allocated to CEYW-Construction customers through the PCA. In
particular, Staff questioned if it was fair for CEYW-Construction customers, who are using the
system as a battery,14 to receive the benefits of system-generated RECs in the same way as other
customers who receive REC value through the PCA. Because this question was never addressed
in the prior filings and in this Application, Staff, again, recommends the Company hold a
workshop with Staff and other interested parties to evaluate how REC benefits in the PCA
should be allocated to Micron and other CEYW-Construction offering customers before they
begin generating renewable energy.
V. Analysis of Provisions in the Special Contract to Mitigate Risk
In prior CEYW-Construction filingsls, the Special Contract included parent guaranties
against each PPA. Staff recommended that each power purchase agreement with "new" or
existing customers include parent guaranties for the life of the agreement. The Company
included such guaranties in this Application.
Each guaranty is to protect the Company's other customers from any potential cost
shifting that may arise when a contract terminates. The Company and Micron have written into
the Special Contract additional provisions that should financially protect customers. With
guarantees in place, the Special Contract should protect other retail customers. Again, Staff
would like to see similar contract provisions and guaranties in future CEYW-Construction
14 See, e.g., Staff Comments at l7- l8 in Case No. IPC-E-2 I -42.
r5 See Staff Comments in Case No. IPC-E-21-42.
STAFF COMMENTS l7 JLINE 29,2022
contracts for "new" and existing customers and Staff will continue to review future CEYW-
Construction filings to ensure that guaranties are adequate.
VI. Solar Supply Chain Investigation
On March 28,2022, the Department of Commerce ("Department") initiated an
investigation to consider whether the United States should impose additional duties on imports of
solar cell and modules coming from Cambodia, Malaysia, Thailand, and Vietnam ("CMTV")
due to its investigating the claim that CMTV are selling Chinese-made solar panels in attempt to
circumvent tariffs. l6 A preliminary decision on whether to impose anti-circumvention duties is
due by August 29,2022. Numerous manufacturers, solar installers, and other U.S. companies
have halted most of their imports of solar cells and modules from CMTV, which provide roughly
80% of foreign solar cells and modules to United State markets.
Multiple reports state that the supply of solar cell and modules has declined and that most
large-scale solar projects have been delayed or cancelled. Therefore, Staff is concemed that
Black Mesa will have a difficult time acquiring the equipment it needs to be ready for its
anticipated commercial operation date. Staff asked the Company about the potential impact of
the Department's investigation, and Black Mesa Energy reiterated it will meet the commercial
operation date of June 1,2023.t7
Staff recommends that the Company notifu the Commission and provide an update and
any known impacts to the project due to changes or issues regarding supply of solar cells and/or
solar modules. Notification should include updates of supply chain issues, a list of supplies
cancelled or delayed, and/or if force majeure is being considered.
VII. Accounting Treatment in the PCA and the next General Rate Case
Staff supports the Company's proposed accounting treatment in the PCA, but
recommends that the credits for excess energy and capacity credits included in net power cost be
subject to 95o/o sharing. The Company will pay the contract rate for the PPA and will pay 100%o
of the output-matching these costs with corresponding revenue.
16 Department of Commerce Anti-Circumvention Inquiry, Barcode 4225929-02 A-570-9791C-570-980, into
assembled modules of solar panels in Cambodia, Malaysia, Vietnam, and Thailand.
17 Company response to Staff hoduction Request Nos. 3, 4, 5,6, I 8 and 23.
STAFF COMMENTS l8 JUNE 29,2022
In Case No. IPC-E-21-42, Staff made recommendations regarding CEYW-Construction
renewable resources being booked to the PCA. As it did in that case, Staff recommends that the
Company provide the following items annually with the PCA filing: (1) the amount of
consumption and generation from the renewable resource(s) serving Micron and other CEYW-
Construction projects; and (2) an annual Micron load forecast that is compared to Micron'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 Micron does not become
a net producer of energy, which could result in a cost shift to other retail customers.
Regarding the accounting treatment in base rates, Staff recommended in Case No. IPC-E-
2l-42 that the Company schedule a meeting with Staffto discuss the treatment of Schedde 26
costs, revenues, and loads in base rates prior to the next general rate case. Staffreiterates this
recommendation.
VIII. Prudence and Authorization of Renewable Resource PPAs by the Commission
The Company has proposed that future PPA's dedicated to Micron should not be required
to be filed for review or approval by the Commission. As recommended in Case No. IPC-E-21-42,
Staff disagrees with the Company's proposal and recommends the Company file all CEYW-
Construction PPA contracts with the Commission for review and approval. Furthermore, in
reviewing the specific provisions included in the Black Mesa PPA, Staff identified concerns
regarding the circumstances under which the Company identified Black Mesa as a resource to fill
its 2023 capacity deficiency, further supporting the need for Commission review.
Staff agrees that the selection of renewable resources and rates in the PPA do not need to
be authorized by the Commission because the cost of the PPA will be 100 oZ passed through to
Micron and because Staff believes the rates for import and export of capacity and energy
between Micron and the Company are reasonable if Staff s modifications are implemented.
However, there are other reasons Staff believes each PPA should be reviewed and authorized by
the Commission. Examples include: (l) ensuring that interconnection costs are not passed on to
the general body of ratepayers; (2) CEYw-Construction customers are not being favored with
lower cost resources that could potentially be used for the system; and (3) that contract
provisions are included to protect customers from unnecessary risks.
STAFF COMMENTS t9 JUNE 29,2022
Staff identified risks in the Black Mesa PPA associated with the operation dates included
in the contract that could affect both the reliability and cost for the Company's customers. The
Parties established a Scheduled Operation Date of June 1,2023, but negotiated a Guaranteed
Operation Date up to 180 days after the Scheduled Operation Date. Application at 8. If Black
Mesa does not become operational until after the summer of 2023, the project will not be able to
provide contribution of capacity during the Company's2023 summer critical capacity period.
As discussed above, Black Mesa was primarily contracted as a result of the Company's 2023
need for capacity resources through its 2021 RFP. This could impact customer reliability if the
Company cannot find alternative capacity to replace Black Mesa or, if alternative sources are
found, the cost could be significantly higher causing all customers to pay premium prices in the
PCA.
In addition, if the Black Mesa Energy solar project is not operational by November 28,
2023, Black Mesa Energy must be charged the full contracted delay damagesls and the PPA be
terminated and/or renegotiated with Commission approval. Staff is concerned that with supply
chain constraints and the short timeline that Black Mesa Energy is working against, that
customers must be protected, and Black Mesa Energy be held to the operational dates as outlined
in the PPA.
STAFF RECOMMENDATIONS
Staff recommends approval of the Special Contract, the Black Mesa PPA, and
modifications to Schedule 26 contingent on the following modifications if approved by the
Commission as outlined below:
1. The Company should provide a separate filing for the approval of the Avoided
Cost Averages and all other rate components determined from the IRP and it
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. An additional85o/o adjustment should be applied to the proposed Excess
Generation Price consistent with Schedule 86;
18 See Confidential Company Response to Production Request No. 5
STAFF COMMENTS 20 JUNE 29,2022
3. The Excess Generation Credit rate should be based on the lower of the Excess
Generation Price (with the 85%o adjustment) and the actual high or low load hour
Mid-C market price (without any adjustments) for each hour;
4. For Renewable Capacity Credits, future Micron renewable resources RCCE
date(s) should be based on the first capacity deficiency date approved by the
Commission at the time the PPA or a resource construction agreement is executed
by the Company;
5. The Renewable Capacity Credit should utilize the rate and payment structure for
IRP-based energy storage projects (See Order No. 34913), which would provide
Micron avoided capacity cost payments on a dollar per kilowatt-hour ("kwh")
basis and only for actual energy delivered to the Company's system during system
peak and premium peak hours;
6. 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;
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. The Company schedule a meeting with Staff to discuss the treatment of Schedule
26 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 resource construction agreement be
reviewed and authorized by the Commission;
11. The Company provides the following items annually with the PCA filing: (1) the
amount of consumption and generation from the renewable resources serving
Micron and other CEYW-Construction projects; and (2) an annual Micron load
STAFF COMMENTS 2t JUNE 29,2022
forecast that is compared to Micron's annual generation forecast for all signed
PPA's broken down on a monthly basis; and
LZ.Any change or issues regarding supply of solar cells and/or solar modules that the
Company notiff the Commission and provide an update and any known impacts
to the project.
Respecttully submitted this aq*L day of Jwrc2022
Riley
Deputy ttorney General
Technical Staff: Michael Eldred
Travis Culbertson
i:umisc/comments/ipoe22.6mmehc comments
STAFF COMMENTS 22 JUNE 29,2022
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 29th DAY OF JUNE 2022,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC.E.22-06, BY E-MAILING A COPY TI{EREOF, TO THE
FOLLOWING:
DONOVAN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-MAIL: [e-mail]
dockets@idahopower. com
TIM TATUM
CONNIE ASCHENBRENNER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
caschenbrenner@ idahopower. com
ARY
CERTIFICATE OF SERVICE