20230313Comments of Commission Staff.pdf

RILEY NEWTON tonDEPUTYATTORNEYGENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074 '
[phone]
IDAHO BAR NO.11202
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )COMPANY'S APPLICATION FOR APPROVAL )CASE NO.IPC-E-23-02ORREJECTIONOFANENERGYSALES)AGREEMENT WITH NORTH SIDE ENERGY )COMPANY,INC.FOR THE SALE AND )COMMENTS OF THEPURCHASEOFELECTICENERGYFROM)COMMISSION STAFFTHEBYPASSHYDROPROJECT)
Staff of the Idaho Public Utilities Commission,by and through its attorney of record,
RileyNewton,Deputy Attorney General,submits the followingcomments.
BACKGROUND
On January 19,2023,Idaho Power Company ("Company")applied for approval or
rejection of a proposed energy sales agreement ("ESA")with North Side Energy Company,Inc.
("Seller"collectivelywith the Company,"Parties")for the energy generated by the Bypass
Hydro Project ("Facility").The Facility is a qualifying facility ("QF")under the Public Utility
Regulatory Policies Act of 1978 ("PURPA").
The Facility is located on the North Side Canal Company's main canal near Hazelton,
Idaho and has been delivering energy to the Company under a firm energy sales agreement
entered on November 12,1986,and expiring on May 31,2023.The proposed ESA,executed by
STAFF COMMENTS 1 MARCH 13,2023
the Parties on January 3,2023,contemplates a 20-year term with non-levelized,seasonal hydro
published avoided cost rates with full capacity payments to the Seller for the entire term.
STAFF REVIEW
Staff's review of the ESA focused on Section B-7 Designated Network Resource
("DNR"),Facility nameplate capacity,capacity payments,avoided cost rates,and Article XXIII
Modification.Staff recommends that the parties update the proposed ESA to reflect the
followingitems:
1.Updating the incomplete statement contained in Section B-7;
2.Correcting the Facility nameplate capacity and explaining the difference between
the Facility nameplate capacity (9999 kW)and the net nameplate capacity (9960
kW)in Appendix B;
3.Updating Article XXIII Modification to achieve two objectives:(1)the modified
Facility operates under a correct and accurate contract that describes the
characteristics and parameters of the modified Facility;and (2)the rates paid to
the QF and recovered from ratepayers,starting from the first operation date after
the Facility is modified,reflect the proper and authorized rate of the modified
Facility;and
4.Includingrecovery of Net Power Supply Expenses ("NPSE")in the Power Cost
Adjustment ("PCA")based on proper and authorized rates starting from the first
operation date of any facility after it has been modified.
Staff also recommends approval of the Errata filed on February 16,2023,which contains
a replacement page for Section E-2 of Appendix E.
Section B-7
Section B-7 of the proposed ESA contains an incomplete statement:"If this Agreement is
1)executed and approved by the Commission;2)a GIA has been executed by both parties;and
3)the Seller is in compliance with all requirements of that GIA."Staff recommends completing
this statement so it makes sense.
STAFF COMMENTS 2 MARCH 13,2023
Facility Nameplate Capacity
Appendix B states "Facility Nameplate Capacity:9960 kW."ESA at 41.However,the
actual Facility nameplate capacity is 9999 kW.Response to Staff's Production Request No.2
(a).The Company explained that 9960 kW represents the net generator nameplate capacity
amount that the Facility is able to deliver less station service,which is consistent with the
Schedule 72 Generator Interconnection Agreement and the 1986 contract'.Response to Staff's
Production Request 2(b).The Maximum Capacity Amount of the Facility is set at 9960 kW.
ESA at 42.Staff recommends that the Parties correct the value of the Facility nameplate
capacity and explain the difference between 9999 kW and 9960 kW in Appendix B.
Capacity Payments
The ESA allows immediate capacity payments and Staff believes this treatment is
reasonable.In Order No.32697,the Commission stated that "if a QF project is being paid for
capacity at the end of the contract term and the parties are seeking renewal/extension of the
contract,the renewal/extensionwould include immediate payment of capacity."The current
avoided cost rates in the 1986 contract were established in Order No.20350 in Case No.U-1006-
248 and those rates do not contain capacity payments.2
However,since 2000,the Company has added significant amounts of capacity to meet
capacity needs,includingthe Danskin (2001 and 2008),Bennett Mountain (2005),and Langley
Gulch (2012)gas plants.Staff believes because the Facility has operated since the mid-1980s
and throughout the Company's capacity deficiency periods,the Facility has contributed to
meeting the Company's need for capacity and should be granted immediate capacity payments.
Order Nos.34875,34961,and 35067.
The 1986 contract listed the capacity at 9960 kW,and the Maximum Capacity Amount of
this ESA is also 9960 kW.Staff believes the Facility should be granted immediate capacity
payments for its contribution of capacity to the Company's system over the full term of the ESA.
'The 1986 contract listed a nameplate rating of 3320 kW for each of three generators for a total of9960 kW.The1986contractat35.
2 Order No.20350 stated "[t]he current avoided cost payments for Idaho Power,as well as the payments set in the -200 case,are 100%energy based.In other words,payments are made solely for energy deliveries,and there is noseparatelycalculatedcapacitypayment."Order No.20350 at 19.
STAFF COMMENTS 3 MARCH 13,2023
Avoided Cost Rates
The avoided cost rates contained in the proposed ESA are correct except for the rates of
Year 2023 in Section E-2 of Appendix E (Base Energy Light Load Purchase Price),which are
not fully shown due to a formatting issue.ESA at 53.The Company filed an Errata to the
Application on February 16,2023,providing a replacement page for Section E-2 of Appendix E.
The new rates for Year 2023 provided in the Errata are correct.
Article XXIII Modification
There is a possibility for a PURPA project owner to modify its facility during the term of
a contract.Provisions within "Article XXIII Modification"of the proposed ESA describe the
process for potential Facility modifications.If a facility is modified,Staff believes two critical
objectives need to be achieved.First,the modified facility needs to operate under a correct and
accurate contract that describes the characteristics and parameters of the modified facility.
Second,the rates paid to the QF and later recovered from ratepayers,starting from the first
operation date after a facility is modified,must reflect the proper and authorized rate of the
modified facility.
Staff recommends two courses of action.First,Staff recommends that the Company
modify "Article XXIII Modification"of the proposed ESA to ensure both objectives will occur.
Second,Staff recommends that the Commission direct the Company to include recovery of
NPSE in the Company's annual PCA filing based on the new rates,starting on the first operation
date of the modified Facility to protect ratepayers.Staff believes that,moving forward,this
recommendation should apply to all QFs under contract with the Company when modifications
occur.
Currently,there have been two processes for implementing facility modifications.The
Commission recently approved the Amended Power Purchase Agreement ("PPA")of Amy
Family Holdings in Case No.PAC-E-22-08,which adopted the followingsequence of events if
the Facility was modified:
1.Seller notifies the Company when Seller has an intention of modifying the
Facility;
2.Parties seek Commission approval of the intended modification to the Facility;
3.Commission approval is granted;
STAFF COMMENTS 4 MARCH 13,2023
4.The modification to the Facility occurs;and
5.If the actual modification deviates from the approved modification,an
amendment needs to be filed with the Commission for approval to reflect the
actual modification occurred.
Amended Power Purchase Agreement of Amy Family Holdings at 20.
In contrast to the process approved in Case No.PAC-E-22-08,but consistent with the
current modification provision of the proposed ESA,the Company plans to seek approval of an
amendment to an ESA only after the modification to the Facility actuallyoccurs and depending
on the nature of the modification.Response to Staff's Production Request No.1(a).In addition,
the Company believes:
The modification language Idaho Power proposed in Case No.IPC-E-22-283 provides Idaho Power the option to revise the ESA,or terminate,uponnotificationofafacilitymodification.The nature of the proposed facilitymodificationwoulddictatewhatkindofESAchange(or termination)might
be appropriate.Idaho Power would consider the nature of the modificationandwhetherthemodificationproperlyshouldtriggerachangetorates,adifferentrevisiontotheESA,or termination of the ESA.Any actualchangestoorterminationoftheESAwouldbeimplementedthroughsubsequentcontractualdocuments-not through the existing language of theESA.Depending on the circumstances,any subsequent ESA amendment
or termination could be made effective as of the date of the facilitymodificationandwouldbesubmittedtotheCommissionforapproval.ByaddressingthepossibilityoffacilitymodificationsandrequiringtheSellertoprovideinformationtoIdahoPower,the proposed modification languageprovidesflexibilityandaprocessbywhichtoensurethattheESAaccuratelyreflectstheas-built facility and contains the appropriaterates andothertermsandconditions.
Response to Staff's Production Request No.1(c).
Althoughthe method approved in the Amy Family Holdings PPA and the Company's
current method each have pros and cons,Staff believes under either method,a modified facility
could operate under the original avoided cost rates,resulting in potentiallyinaccurate payments
to the QF unless the Commission authorizes retroactive rates.The Commission has expressed its
preference for not authorizing retroactive rates.
3 The Commission has not issued a final order in Case No.IPC-E-22-28 as of March 7,2023,when these commentsarebeingfinalized.
STAFF COMMENTS 5 MARCH 13,2023
[A]pproving PPAs between QFs and utilities with retroactive rates is not
our preference or practice historically.We encourage QFs and utilities to
take reasonable measures and timely submit proposed PPAs to allowadequatetimeforStaffandinterestedpartiestoconducttheirduediligenceandforustodeliberateandissueanorderbeforetheproposedeffective
date.
Order No.35383.
For this reason,Staff recommends that the Company modify "Article XXIII
Modification"within the proposed ESA to meet both of Staff's objectives.
In addition,to ensure ratepayers are not affected by a mismatch in rates due to a facility
modification,Staff recommends that the Commission direct the Company to include recovery of
NPSE in the PCA filingbased on the proper and authorized rates starting from the first operation
date of any facility that has been modified,regardless of what is paid to the QF.By making this
apply to all QFs if and when modifications occur moving forward,ratepayers will be protected
from inaccurate avoided cost rates.
STAFF RECOMMENDATIONS
Staff recommends that the parties update the ESA to reflect the followingitems:
1.Updating the incomplete statement contained in Section B-7;
2.Correcting the facility nameplate capacity and explaining the difference between
the facility nameplate capacity (9999 kW)and the net nameplate capacity (9960
kW)in Appendix B;
3.Updating Article XXIII Modification to effectivelyachieve the two objectives
mentioned above;and
4.Includingrecovery of NPSE in the PCA based on proper and authorized rates
starting from the first operation date of any facility after it has been modified.
Staff also recommends approval of the Errata filed on February 16,2023,which contains
a replacement page for Section E-2 of Appendix E.
STAFF COMMENTS 6 MARCH 13,2023
Respectfully submitted this day of March 2023.
Riley Ñewton
Deputy Attorney General
Technical Staff:Yao Yin
I:umisc/comments/ipce23.2rnyy comments
STAFF COMMENTS 7 MARCH 13,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 13th DAY OF MARCH 2023,SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF,INCASENO.IPC-E-23-02,BY E-MAILING A COPY THEREOF,TO THE FOLLOWING:
DONOVAN E WALKER ENERGYCONTRACTSMEGANGOICOECHEAALLENIDAHOPOWERCOMPANYIDAHOPOWERCOMPANYPOBOX70POBOX70BOISEID83707-0070BOISEID83707-0070 E-MAIL:[e-mail]-MAIL:[e-mail]
[e-mail]
[e-mail]
ALAN W HANSTEN
GENERAL MANAGER
NORTHSIDEENERGY CO
921 N LINCOLN AVE
JEROME ID 83338
E-MAIL:awh northsidecanal.com
SECRET RY
CERTIFICATEOF SERVICE