HomeMy WebLinkAbout20221012Reply Comments.pdfEric L. Olsen (ISB# 4811)
ECHO HAWK & OLSEN, PLLC
505 Pershing Ave., Ste. 100
P.O. Box 6119
Pocatello,Idaho 83205
Telephone: (208) 47 8 -1624
Facsimile: (208) 47 8-167 0
Email: elo@echohawk.com
Attorneyfor Intervenor ldaho lrrigation Pumpers Association, Inc.
BEFORE THE IDAIIO PUBLIC UTILITIES COMN{ISSION
riICEIVED
i;;; i;il l2 Pl'l 12: 58
I,i:'i ;,.1 PLIBLIi: i'nlIItl.r t- \.'llrllil sr0t.l
(/
S
IN THE MATTER OF IDAEO POWER
COMPANY'S APPLICATION TO
COMPLETE TIIE STTJDY REYIEW PHASE
OF THE COMPROIIENSIVE STTJDY OF
COSTS AND BENEFITS OF ONSITE
GENERATION & FOR AUTHORITY TO
IMPLEMENT CHANGES TO SCHEDTJLES
CASE NO.IPC-8.22.22
IDAIIO IRRIGATION PT]MPERS
ASSOCIATION, INC.'S REPLY
COMMENTS RE: ICL,S &
CROSSBORDER ENERGY'S
REVIEW OF IPC'S VODER STUDY
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AND 84 FOR NON.LEGACY SYSTEMS
INTRODUCTION AI\ID STJMMARY
PLEASE STATE YOUR NAME AI\[D OCCUPATION.
My name is Lance D. Kaufrnan. I am a consultant representing utility customers before
state public utility commissions in the Northwest and Intermountain West. I have a Ph.D.
in economics and have ten years of experie,nce analyzrng and testiffing on energy and
regulatory maffers.
PLEASE IDENTIFY TIIE PARTY ON WIIOSE BEHALF YOU ARE
TESTIFYING.
I am testiffing on behalf of the Idaho Inigation Pumpers Association ("IIPA"). IIPA is
an Idaho non-profit trade association representing farm interests in electric utility rate
matters affecting farmers in southem and cental Idaho who use electricity to pressurize
their irrigations systoms.
IDAHO IRRIGATION PUMPERS ASSOCIATION,INC.'S COMMENTS - Page I
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Wrra.*T IS THE PURPOSE OF YOUR TESTIMONY?
I respond to comments filed in this docket by the Idaho Conservation League ("ICL").
The majority of IIPA's members are Idaho Power Company ("IPC") customers. As
customers, our primary interest in this docket is to ensure that IPC's customer generation
tariffs lead to safe, reliable, and economical rates. [n my initial comments, I voiced
general support for IPC's VODER study, and provided specific recommendations for
ensuring that rates paid for excess generation are fair and equitable to both generating
customers and non-generating customers. I am concerned that the recommendations
made in the ICL comments will not lead to fair and equitable rates.
TIIE ICL COMMENTS ALLEGE THAT THE COMPANY'S USE OF
DISCRESSION IN DEVELOPING TIIE VODER STUDY WERE DGRCISED IN
rAVOR OF IPC'S PROGRAMATIC AI\ID BUSII\IESS AIMS AT THE EXPENSE
OF DISTRIBUTED GENERATION DEYELOPMENT. DO YOU AGREE WITII
THIS ASSESSMENT?
ICL does not dispute the validity of the assumptions or modeling choices made by IPC in
the VODER study, but ICL's comments state the IPC's modeling choices and
assumptions disfavor distributed generation. The comme,nts further imply that the
VODER study was biased in favor of IPC's business interests. The ICL's comments
inappropriately frame this case as a process intended to develop distributed generation.
The Commission should instead approach this issue with a focus on establishing
mechanisms and rates that lead to safe, reliable, and affordable energy for customers. I
believe that distributed energy, when properly priced and tariffed, can play an important
role in the IPC's energy portfolio. But this role should be the outcome of economically
supportable analysis, and not the outcome of a general policy goal to increase distributed
generation for its own sake.
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IDAHO IRRIGATION PIIMPERS ASSOCIATION, [NC.'S COMMENTS -Ptge2
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As I note in my initial comments, the results of the VODER study, and the
specific model selections recommended in my comments, can be expected to result in a
fair measure of the value and benefits of net generation. The [PC's motivation is a moot
point if the outcome of the study is fair, just, and reasonable rates.
AVOIDED ENERGY COSTS
WIIA'T IS YOUR RESPONSE TO ICL'S STATEMENT THAT DISRUPTION TO
FOSSIL FUEL MARKETS MAKES THE [VODERI STIIDY'S nPUTS AI\ID
ESTIMATES OF AVOIDED COSTS OUTDATED AI\[D INSUFFICIENT TO
MEAI\TINGFULLY INFORM TI{E COM}trSSION.
The VODER study appropriately provided a range of market price measures, one of
which, the EIM price, is supported by both the ICL and IIPA's initial comments. The
ICL's support of one of the VODER study's proposed price measures, the EIM, is
inconsistent with the ICL's assertion that the VODER study's price assumptions were
inappropriate. The ICL notes that market prices are volatile and change yearly. I agree
with ICL's assessment and addressed this iszue in my initial comments by recommending
prices be updated and tnred up annually. A true up mechanism will ensure that
unexpected price shocks do not unfairly be,nefit either IPC or net exporting customers.
ARE ICL'S AVOIDED COST ESTIMATES REASONABLE?
The ICL recommended value of net energy avoids $183 per MWh in utility costs and an
additional $87.20 per MWh in avoided societal costs, for a total avoided cost of $270.20
per MWh. For context, the proposed avoided cost is nearly triple Idaho Power's average
retail rate. This is an irational cost estimate, particularly when compared to other
avoided cost measures across the country. ICL asserts that the "Crossborder [study]
demonstrates that differing analytic choices by reasonable, competent industry
professionals produce widely varying figures...." While the Crossborder study may have
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IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 3
been conducted by a reasonable, competent industry professional, the analytic choices
thernselves are not reasonable and should not be adopted. I caution the Commission
against attempting to find a middle ground between the VODER study and the
Crossborder study. The Commission should instead disregard all aspects of the
Crossborder study. [n my comments below I provide additional specific criticism of the
assertions and proposals in the Crossborder study, however, given the length of this study
and the scope available to me, I may not fully address every flaw in these comments.
Omitted discussion of any aspect of the Crossborder study in my comments should not be
interpreted as agreement with that aspect as these comments specifically note where I
agree with ICL and the Crossborder study.
ADDITIONAL RECOMENDATIONS
a. DrD youR REvrEw oF THE CROSSBORDER STUDY CAUSE YOU TO HAVE
AIIY ADDITIONAL RECOMMENDATIONS FOR THE COMMISSION?
A. Yes, in my initial Comments I supported a decision to modifu participation caps and
defened to IPC to craft appropriate changes. However, after reviewing the Crossborder
study I have determined that there is some risk that the net generation tariffcould become
a substitute for solar developers that currently rely on the Qualified Facilities tariffs for
compensation. If size limits are modified for net generation are wholly divorced from the
customer's load, I see a risk of Qualified Facility developers using the net generation
tariffs to circumvent the safe guards put in place through the Qualified Facility tariff. I
therefore recommend that any change in size limits be paired with additional safeguards
to circumvent developers from avoiding the Qualified Facility framework.
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 4
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AVOIDED GEI\IERATION CAPACITY
THE ICL PROYIDES AN ALTERNATIVE CALCT]LATION FOR AVOIDEI)
CAPACITY COSTS. WHAT CONCERNS DO YOU HAVE WITH THE ICL'S
METHODOLOGY?
I have the following concerns:
The ICL's use of the peak capacity allocation factor ("PCAF") overestimates capacity
contribution of solar.
The ICL's use of a battery to price capacity misrepresents the avoided cost of capacity.
The ICL's method inappropriately grosses up the cost of capacity bV the planning reserve
margin.
HOW DOES THE PCAF OVERESTIMATE CAPACITY CONTRIBUTION?
The PCAF overestimates capacity contribution because it does not scientifically identiff
hours where IPC is expected to be in capacity deficit. IIPA recenfly participated in an
extensive analysis and revision of IPC's demand response programs. ln that process, the
effective load carrying capacity was used as the measure of avoided capacity. As
recipients of demand response payments, IIPA has an interest in maximizing the value of
the demand response payments, but IIPA accepted the use of the ELCC because it is an
accurate and appropriate measure of capacity contribution. I have participated in avoided
cost proceedings, integrated resource planning proceedings, and cost allocation
proceedings across the Pacific Northwest and the ELCC is a well vetted and widely
accepted measure of capacity contribution.
The peak capacity allocation factor, however, is neither widely used nor a
mathematically sound measure of capacity contribution. I have never seen the peak
capacrty allocation factor adopted by a Commission for either avoided cost calculations,
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IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 5
capacity planning, or cost of service modeling. This lack of adoption is for good reason.
The PCAF is not a mathematically sound measure of capacity contribution.
During IPC's demand response proceeding, IPC provided convincing evidence
that IPC's capacity shortfall occurs during evening hours when demand is declining. IPC
modified the dispatch hours of the irrigation load control programs to allow for
curtailment in the late evening to specifically account for this shift in their capacity need.
This shifting of curtailment windows into late evening places hardship on irrigators
because late evening curtailment disrupts their irigation schedule more than early
evening curtailment. However, the Irrigators accepted this shift of curtailment in order to
provide a more valuable product to IPC.
The PCAF does not account for the fact that IPC's capacity shortfall does not fall
on peak hours, but rather occurs on shoulder hours when non-dispatchable solar resources
do not produce.
The measure of capacity contribution should be consistent across IPC's various
resource planning and procurement processes, including qualified facility rates, demand
response rates, and net exporting customer rates. More importantly, these measures
should be consistent with treatment in the IRP process. The same avoided capacity
measure should be used to pay avoided costs as used to make planning decisions. That
measure is the ELCC.
If the PCAF were used to measure capacity contribution, it would result in a
subsidy of non-generating customers to net-exporting customers.
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 6
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WHY DOES TIIE USE OF BATTERY COSTS OVERVALUE CAPACITY
COSTS?
There are two reasons for this. First, net generating customers retain the Renewable
Energy Certificates of their self-generation. A renewable energy certificate carries all
environmental attributes of the renewable generator. ICL implies that IPC's use of
batteries in its IRP is related to its carbon goals. If this is correct, and the selection of
batteries is due to carbon goals, then pricing capacity using a battery would be the
equivalent of offering net generators a payment for renewable capacity, or renewable
enabling capacity. This is inconsistent with the customer's retention of RECs.
If the net generator was required to surrender the RECs associated with their
facilities to IPC, it may be appropriate to consider some form of renewable avoided
capacity cost. However, even in this scenario, additional adjushents are needed to
isolate the capacity cost of batteries from the other services that bafferies provide.
In addition to capacity, batteries provide substantial arbitrage benefits as well as
load shaping and other services. If batteries are used to value capacity, the cost of the
battery should be apportioned between all the services that a battery provides and not
fully atributed to capacity.
WHY IS IT INAPPROPRIATE TO GROSS TIIE VALUE OF CAPACITY UP BY
THE RESERVE MARGIN?
ln resource planning, a planning reserve is added to forecasted load by multiplying
forecasted load with a planning reserve margin. Generating resources are then procured
to meet the load plus reserves. Net generation is a resource. To the extent that IPC uses
net generation in their planning process, I expect it to be incorporated in their resource
stack, not as an offset to native load. If net generation is incorporated in IPC's resource
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IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 7
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stack there is a one-to-one correspondence between each MW of capacity contribution
from net generation and capacity contribution from IRP resources.
TRANSMISSION AND DISTRIBUTION DEFERRAL
DOES THE REGRESSION ANALYSIS CONDUCTED IN THE CROSSBORDER
STI'DY DEMONSTRATE AVOIDED TRANSMISSION AI\[D DISTRIBUTION
COSTS?
No, there are numerous issues with the ICL's regression approach to avoided cost. ICL's
analysis fails account for how distributed generation is expected to impact an existing,
built out transmission and distribution system. The data underlying the ICL analysis has
several critical flaws. First, the cost metric of transmission additions come from FERC
Form l, and thus do not reflect transmission capacity addition, but overall transmission
plant additions. This is an important distinction because a large share of plant additions is
attributable to retirement and replacement of aging ffiastructure. Because retired
infrastructure has a cost basis from 50 or more years ago the replacement plant is
expected to have a larger total capital expense than the retired plant. The coefficient in
this regression is thus over-estimated because it is absorbing the natural inflation-driven
growth in transmission plant.
Second, the independent variable "Peak Load" is distinctly different from "net
export energy". This is important because Crossborder fails to demonstrate that net
energy capacity reductions have the same incremental impact on tansmission expense as
load growth. To understand why these two distinct measures would have a different
impact on transmission and distribution plant on must consider the underlying mechanics
of how each affects plant additions. Peak load growth is typically due to buildout. Over
the last 20 years, use per customer has been declining. This is because of efficiency gains
in equipment and other energy saving measures. Load growth is primarily due to new
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 8
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constnlction of residential buildings and corresponding growth in commercial and
industrial customer accounts. This buildout drives distibution and transmission spending
because it requires extending lines to new areas.
Net export energy does not reduce the need to build out ffansmission and
distribution, it simply offsets the load on existing distribution. As the constaint on
existing infrastructure decreases there is no way for the IPC to recoup the existing
investnent. Thus the only avoided cost is through avoiding upgrades to existing
distribution and fansmission buildout. Upgrades to existing transmission and distribution
buildout is caused by infill, which is a much smaller share of plant inveshent and is
appropriately modeled ming the bottom-up approach proposed by IPC.
WHAT ASPECTS OF TIIE CROSSBORDER TRANSMISSION ANI)
DISTRIBTIITON ANALYSIS DO YOU FIND RELEVAI\IT?
The Crossborder study correctly notes that distributed generation is unlikely to be
uniformly spread across all IPC's feeders. For example, IIPA is aware that many of the
larger net generation customers are on rural feeders due to the low land cost involved in
large solar installations. It is possible that a well-placed and sufficiently large, distributed
generation system could have a material impact on avoiding additional distribution or
transmission, but this would require multiple coincidental factors. Because this tlpe of
avoided cost is fact specific, it is not appropriate to build these avoided costs into a
generic rate. However, IPC could consider incorporating custom avoided distribution cost
studies into its assessment of large-scale projects to account for this. The Commission
could also consider authorizing Idaho Power to proactively notiff large customers that
are situated in such locations of the potential for additional avoided cost benefits.
IIIAHO IRRIGATION PUMPERS ASSOCIATION' INC.'S COMMENTS - Page 9
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AVOIDED LII\TE LOSSES
IS THE CROSSBORDER STUDY CORRECT THAT LINE LOSSES HAVE
INCREASED SINCE THE LAST LINE LOSS STUDY?
No, the Crossborder study provides no supporting evidence and utilizes flawed logic.
While loads have grown since the last study, so have distribution and transmission
capacity; line losses are a function of both load and capacity. Under the Crossborder
logic, line losses double every ten years. The Crossborder study assumes that line losses
double from 5.8 percent in2012 to 11.6 percent lrn2022. This leads to the absurd result
that line losses will be 23 .4 percent in 2032 and nearly I 00 percent by 2052 . IIPA' s initial
comments contain additional discussion on line losses and the appropriateness of
applying line losses to various cost calculations.
WHAT IS YOUR RESPONSE TO THE CROSSBORDER'S RECOMMENDED
LINE LOSS ESTIMATE?
The Crossborder study notes that a2O2l IRP case with extensive battery additions shows
an integration cost of $0.64 per MWh, which is lower than the 2020 ntegration study of
$2.93 per MWh used in the VODER study. The Crossborder study attibutes the decrease
in integration costs to the modeled investnent in batteries. As I noted earlier in my
testimony, batteries provide multiple functions beyond capacity, one of those functions is
integration. I also note earlier in these comments that the cost of a battery installation
should be apportioned between all the functions that the battery performs. It is
inappropriate to use the $0.64 per MWh figure proposed in the Crossborder study
because that measure relies on the free provision of battery services by the utility to the
net exporter.
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IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 10
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ENVIRONMENTAL ATTRIBUTE S
DOES TI{E CROSSBORDER STUDY ACURRATLY REPRESENT TIIE VALUE
OF IIEDGING?
No, the Crossborder study indicates that the value of reducing fuel price risk is $23 per
MWh. Note that hedging eliminates both up-side and down-side risk and does not impact
the expected fuel cost. Thus, a$23.40 per MWh payment to reduce fuel price risk
constitutes a pure price adder to expected energy costs. It is absurd to claim that IPC
customers are willing to double their energy costs in order to achieve less fuel price risk.
DO YOU RECOMMEND THAT IPC OR OTIIER UTILITIES IN GENERAL
HEDGE TUEL PRICE RISK?
No, I have never advocated for fuel price hedging and have actively argued against long
term fuel price hedging. This does not bring value to customers.
SHOULD AVOIDED CARBON EI\,IISSIONS BE CONSIDERED IN AI\t EXPORT
RATE CALCIJLATION?
No, environmental attributes should be considered when pricing net export rates. This
includes avoided carbon emissions and all other environmental considerations listed in
the Crossborder study. All environmental attributes of the net exporter should be retained
by the net exporter. As such, no environmental attributes should be incorporated into the
net export rate. This would constitute a double counting of these atEibutes.
DOES THIS CONCLUDE YOTIR RESPONSE TESTIMONY?
Yes.
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IDAHO IRRIGATION PUMPERS ASSOCIATION' INC.'S COMMENTS - Page 11
CERTIFICATE OF SERYICE
I HEREBY CERTIFIY that on this 12tr day of October,2022,I served a true, correct and
complete copy of the Comments of Idaho Irrigation Pumpers Association, lnc. to each of the
following, via U.S. Mail or private courier, ernail or hand delivery, as indicated below:
Jan Noriyuki, Secretary
Idaho Public Utilities Commission
P.O. Box 83720
11331 W. ChindenBlvd.
Building 8, Suite 201-A
Boise,ID 83714
i an.norivuki@puc. idaho. eov
Lisa D. Nordstrom
Megan Goicoechea Allen
Idaho Power Company
1221 West ldaho Sfreet(83702)
P.O. Box 70
Boise,Idaho 83707
lnordstrom(@ idahopower.com
mgoicoecheaallen(@idahopower.com
dockets@idahopower. com
Timothy Tatum
Connie Aschenbrenner
Grant Anderson
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise,Idaho 83707
ttatum@ idahopower. com
caschenbrenner@ idahopower. com
ganderson@idahopower. com
Riley Newton, Deputy Attorney General
Chris Burdin
Idaho Public Utilities Commission
I l33l W. Chinden Blvd., Bldg No. 8,
Suite 201-4 (83714)
PO Box 83720
Boise, D 83720-0074
riley. newton(a)puc. idaho. sov
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IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Prge 12
Michael Heckler
Courtney White
Clean Energy Opportunities for Idaho Inc.
3TTSPlantation River Dr., Suite 102
Boise,ID 83703
mike(rD cl eanenergyopportunities. com
courtney(Ecleanenergyopportunities. com
Kelsey Jae
Law for Conscious Leadership
920 N. Clover Dr.
Boise,ID 83703
kelsev@kelseyiae.com
Tom Arkoosh
Amber Dresslar
Arkoosh Law Offices
913 W. River St., Suite 450
P.O. Box 2900
Boise,ID 8370
tom. arkoosh(Earkoosh. com
amber. dresslar@ arkoosh. com
erin.cecil@ arkoosh. com
Lance Kaufrnan, Ph.D.
4801 W. Yale Ave.
Denver, CO 80219
I ance(g)bardwellconsultin s. com
Marie Kellner
Idaho Conservation League
710 N. 6th Street
Boise, ID 83702
mkellner(d idahoconservation. ore
Peter J. Richardson
Richardson, Adams, PLLC
515 N. 27th Street
PO Box 7218
Boise,lD 83702
p eterf@ ric hardsonad ams. c om
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IDAHO IRRIGATION PUMPERS ASSOCIATION,INC.'S COMMENTS - Page 13
Dr. Don Reading
6070 Hill Road
Boise,ID 83703
dreadine(A mindsprin s. com
Mary Grant, Deputy City Attorney
Boise City Attorney's Oflice
150 N. Capitol Blvd.
PO Box 500
Boise,ID 83701-0500
mrerant(rD citvofboi se. ore
boisecityattornev(dcitvofboise. ore
Wil Gehl
Energy Program Manager
Boise City Dept. of Public Works
150 N. Capitol Blvd.
PO Box 500
Boise, ID 83701-0500
w gehl (E citvo fboi se. ors
Richard E. Kluckhohn,pro se
Wesley A. Kluckhohn,pro se
2564W. Parkstone Dr.
Meridian,ID 83646
kluckhohn@email.com
wkluckhohn(Emac.com
Jim Swier
Micron Technology,Inc
8000 South Federal Way
Boise,ID 83707
jswier(Emicron.com
Austin Rueschhoff
Thorvald A. Nelson
Austin W. Jensen
Holland & Hart, LLP
555 lTth Street Suite 3200
Denver, CO 80202
d arue s chho ff(D ho I I andhart. com
tnelson@hollandhart. com
awj ensen@hollandhart.com
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IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page t4
Joshua Hill
Idaho Solar Owners Network
1625 S. Latah
Boise, ID 83705
solarownersnetwork@ smail. com
tottens@amsidaho.com
Ryan Bushland
ABC Power CompanyrLLc
184 W. Chrisfield Dr.
Meridian,ID 83646
ryan.bushland@ abcpower. co
sunshine@abcpower.co
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ERIC L. OLSEN
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S COMMENTS - Page 15