20230712Comments of Commission Staff.pdf

MICHAEL DUVAL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074 .
[phone]
IDAHO BAR NO.11714
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 )CASE NO.IPC-E-23-19
APPROVAL OR REJECTION OF AN )ENERGY SALES AGREEMENT WITH )AMERICAN FALLS RESERVOIR DISTRICT )COMMENTS OF THE
NO.2 )COMMISSION STAFF
COMMISSION STAFF ("STAFF")OF the Idaho Public Utilities Commission
("Commission"),by and throughits Attorneyof record,Michael Duval,Deputy Attorney
General,submits the followingcomments.
BACKGROUND
On May 11,2023,Idaho Power Company ("Company")applied to the Idaho Public
Utilities Commission ("Commission")for approval or rejection of an energy sales agreement
("ESA")with American Falls Reservoir District No.2.("Seller")(collectivelythe "Parties")for
the energy generated by the Dietrich Drop Hydro Project ("Facility").The Facility is a
qualifying facility ("QF")under the Public Utility Regulatory Policies Act of 1978 ("PURPA").
The Facility is located in Lincoln County Idaho and has a 4,770 kilowatt ("kW")
nameplate capacity.The Facility has been delivering energy to the Company under a firm
energy sales agreement entered into on July 13,1987.The nameplate capacity listed in the
STAFF COMMENTS 1 JULY 12,2023
original 1987 contract was 4,500 kW.The First Amendment to the contract executed on August
5,1988,listed the nameplate capacity as 4,770 kW.The nameplate capacity has remained
unchanged since the First Amendment.
The new ESA has a 20-year term with non-levelized,seasonal hydro published avoided
cost rates as set in Order No.35422.The Seller would receive capacity payments for the entire
20-year term under the ESA.
The Seller informed the Company it would like the Commission to consider changing the
annual period for determining seasonal hydro so that each year's period would start on June 1,
and end on May 31 of the followingyear.
STAFF REVIEW
Staff s review focused on eligibilityfor and the amount of capacity payments,avoided
cost rates,Article XXIII (Modification),future modifications to the Agreement,and the
timeframe associated with the 55%requirement.Staff recommends that the Commission
approve the proposed ESA conditioned on includinga provision addressing potential
modifications to the ESA.In addition,if the Parties prefer using a new timeframe associated
with the 55%requirement,Staff does not oppose the Parties amending the ESA to reflect the
change.
Capacity Payments
The ESA allows immediate capacity payments,and Staff believes this treatment is
reasonable.In Order No.32697,the Commission stated that "[i]f 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/extension includes immediate payment of capacity."
The current avoided cost rates in the 1987 contract were established in Order No.20350 in
Case No.U-1006-248 and those rates do not contain capacity payments.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
that because the Facilityhas 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.
STAFF COMMENTS 2 JULY 12,2023
The nameplate capacity listed in the original 1987 contract was 4,500 kW.The First
Amendment to the contract executed on August 5,1988,listed the nameplate capacity as 4,770
kW.Because the nameplate capacity has remained unchanged since the First Amendment,Staff
believes the Facility should be granted immediate capacity payments for its entire generation
capacity amount over the full term of the ESA.
Avoided Cost Rates
Staff has verified that the avoided cost rates contained in the ESA are correct.
Article XXIII (Modification)
Staff reviewed Article XXIII (Modification)in the ESA that addresses potential
modifications to the Facility and believes the language aligns with Facility Modification
language recently approved by the Commission.Order Nos.35767 at I and 35750 at 4.
Future Modifications to Agreement
The Company did not include a provision that requires any future modification to the
Agreement to be in writing,signed by both Parties,and subsequently approvedby the
Commission.All recent PURPA agreements contain this language,which have been approved
by the Commission,such as the North Side Energy Company's ESA in Case No.IPC-E-23-02.
Order No.35750.Staff believes this language is critical to ensure that any future modifications
comply with Commission orders and have been reviewed and approvedby the Commission.
Timeframe associated with 55%Requirement
The proposed ESA contains seasonal hydro rates.To qualify for seasonal hydro rates,a
QF must produce at least 55%of its annual generation during the months of June through August
as measured over each calendar year.Order No.32802 at 5 and 6.The Seller would like the
Commission to consider changing the timeframe associated with this 55%requirement.
Sorenson Engineering,Inc.and IdaHydro'sComments at 3;Application at 7.After a review of
this issue,Staff does not oppose this modification;however,the Parties need to amend the ESA
to reflect the change and submit the amended ESA to the Commission for approval.
STAFF COMMENTS 3 JULY 12,2023
The reason why the Seller prefers using an annual timeframe from June 1 through May
31,instead of a timeframe from January 1 through December 31,is that it is easier for the Seller
to meet the 55%requirement.According to the estimated monthly generation included in
Paragraph 6.2.1,the Facility generates from April through October,seven months out of the
year,as seen in Table No.1,below.To stay above the 55%requirement under a calendar year
evaluation period,the Seller may need to curtail some of its generation in September and
October,which may be difficult to accomplish given the limited amount of generation it can
curtail.By using the Seller's preferred annual timeframe,the months of April and May can be
used,besides September and October,to provide additional flexibility for meeting the 55%
requirement.
Table No.1:Estimated Generation Amounts
Months Monthly Generation (kWh)
January 0
February 0
March 0
April 8,400
May 1,671,600
June 2,608,200
July 3,586,800
August 3,364,200
September 2,200,800
October 281,400
November 0
December 0
Staff does not oppose the new timeframe for several reasons.First,Staff reviewed the
justification for using a calendar year when it was first ordered by the Commission and was not
able to determine a reason why the Commission chose a calendar year versus any other one-year
timeframe.However,Staff believes that a calendar year was chosen primarily because year-end
accounting would provide a convenient time to evaluate compliance.The Commission found
that "it is just and reasonable for the utility to audit and verify the generation of a seasonal hydro
project each year at year-end."Order No.32802 at 6.
Second,the impact on resource and operational planning is minimal.The Company's
resource and operational planning relies on a QF's historical performance which uses five years
STAFF COMMENTS 4 JULY 12,2023
of historical data.(If five-years of historical data is not available,recent available generation
data and the initial estimates of generationprovided by the QF will be used.)Response to Staff
Production Request No.2(a).When the Seller switches to the new timeframe,Staff anticipates
that the Seller may update its estimated monthlygeneration amounts to reflect how it will
operate to meet the 55%seasonal requirement.However,given that generation amounts depend
heavilyon water availability with a lack of water five months out of year,Staff believes the
impacts on resource and operational planning will be minimal.
Third,the reason for the higher seasonal rates compared to non-seasonal rates with the
55%requirement is to recognize the Company's peak consumption months and reward QFs able
to deliver power during peak summer months when the utility would otherwise have to utilize an
alternative resource to meet customer demand.Id.at 5.Any curtailment that occurs outside of
those months only alleviates the Company from being compelled to purchase QF power that may
not be needed.Id.
Fourth,there is no significant administrative burden to track contracts with different
timeframes.The Company's contract tracking system can analyze whether a project has met the
55%requirement under different timeframes.Response to Staff Production Request No.2(b).
Fifth,the Company's accounting systems can accommodate different timeframes.If a
rate change is triggered by not meeting the 55%requirement,the Seller will be paid non-seasonal
hydro rates for the remaining term of the ESA,which the accounting system can accommodate,
regardless of whether the evaluation period is a calendar year or a June through May timeframe.
Based on the reasons above,Staff does not oppose the new timeframe.If the Parties
prefer using a different annual evaluation period,Staff recommends that the Parties amend the
ESA to reflect the change.
STAFF RECOMMENDATIONS
Staff recommends that the Commission approve the proposed ESA and declare that all
payments for purchases of energy under the ESA be allowed as prudentlyincurred expenses for
ratemaking purposes,conditioned on includinga provision addressing potential future
modifications to the ESA.In addition,if the Parties prefer using a new timeframe associated
with the 55%requirement,Staff recommends that the Parties amend the ESA to reflect the
change.
STAFF COMMENTS 5 JULY 12,2023
Respectfully submitted this i day of July2023.
Michael Duval
Deputy AttorneyGeneral
Technical Staff:Yao Yin
Shubrah Paul
i:umisc/comments/ipce23.19mdyyspcomments
STAFF COMMENTS 6 JULY 12,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 12TH DAY OF JULY 2023,SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF,IN CASE NO.IPC-
E-23-19,BY E-MAILING A COPY THEREOF,TO THE FOLLOWING:
DONOVAN E WALKER ENERGY CONTRACTS
MEGAN GOICOECHEA ALLEN IDAHO POWER COMPANY
IDAHO POWER COMPANY PO BOX 70
PO BOX 70 BOISE ID 83707-0070
BOISE ID 83707-0070 E-MAIL:[e-mail]
E-MAIL:[e-mail]
[e-mail]
[e-mail]
MIRIAH R ELLIOTT IDAHYDRO
DIETRICH DROP HYDRO PROJECT C TOM ARKOOSH
711 E TURTLE POINT DR ARKOOSH LAW OFFICES
IVINS UT 84738 PO BOX 2900
E-MAIL:[e-mail] BOISE ID 83701
E-MAIL:[e-mail]
erin.cecil arkoosh.com
SECRETARY
CERTIFICATE OF SERVICE