HomeMy WebLinkAbout20231011Reply Comments.pdf
DONOVAN WALKER
Lead Counsel
dwalker@idahopower.com
October 10, 2023
VIA ELECTRONIC FILING
Jan Noriyuki, Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg 8,
Suite 201-A (83714)
PO Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-23-20
In the Matter of Idaho Power Company’s Application for a Certificate of
Public Convenience and Necessity to Acquire Resources to be Online in
Both 2024 and 2025 and for Approval of an Energy Storage Agreement with
Kuna Bess, LLC
Dear Ms. Noriyuki:
Attached for electronic filing please find Idaho Power Company’s Reply Comments
in the above matter.
Please feel free to contact me directly with any questions you might have about
this filing.
Very truly yours,
Donovan E. Walker
DEW:cd
Enclosures
RECEIVED
2023 OCTOBER 10, 2023 4:00PM
IDAHO PUBLIC
UTILITIES COMMISSION
IDAHO POWER COMPANY’S REPLY COMMENTS - 1
DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: (208) 388-5317
Facsimile: (208) 388-6936
dwalker@idahopower.com
Attorney for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY TO ACQUIRE
RESOURCES TO BE ONLINE IN BOTH
2024 AND 2025 AND FOR APPROVAL OF
AN ENERGY STORAGE AGREEMENT
WITH KUNDA BESS LLC
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CASE NO. IPC-E-23-20
IDAHO POWER COMPANY’S
REPLY COMMENTS
Idaho Power Company (“Idaho Power” or “Company”) respectfully submits these
Reply Comments in response to the Comments filed by the Idaho Public Utilities
Commission (“Commission”) Staff (“Staff”), on September 26, 2023. Idaho Power
appreciates Commission Staff’s support of an order: (1) granting the Company a
Certificate of Public Convenience and Necessity (“CPCN”) to acquire 24 megawatts
(“MW”) and 77 MW of dispatchable energy storage necessary to meet the identified
capacity deficiencies in 2024 and 2025, respectively; (2) approving the 20-year Energy
Storage Agreement (“ESA”) between Idaho Power and Kuna BESS LLC (“Kuna BESS”),
with modifications, and; (3) acknowledging the lease accounting necessary to facilitate
IDAHO POWER COMPANY’S REPLY COMMENTS - 2
the transaction and that the resulting expenses associated with the ESA are prudently
incurred for ratemaking purposes. In these Reply Comments, Idaho Power will respond
to concerns raised by Commission Staff regarding the competitive resource procurement
process used to evaluate various resources that competed to provide a capacity resource
to help meet Idaho Power’s peak capacity needs in 2024 and 2025 and the resulting least-
cost, least-risk capacity resources selected through that fair and competitive Request for
Proposal (“RFP”) process.
I. BACKGROUND
1. Idaho Power has been generally resource-sufficient since the addition of
the Langley Gulch natural-gas fired power plant almost a decade ago until recently. The
load and resource balance from the Second Amended 2019 Integrated Resource Plan
did not show a capacity deficiency occurring until the summer of 2028. However, several
converging factors outside of the Company’s control, including limited third-party
transmission capacity, load growth, and a decline in the peak serving effectiveness of
certain supply-side and demand-side resources caused Idaho Power to rapidly move to
a near-term capacity deficiency starting in 2023. These dynamic circumstances led the
Company to immediately file a request for a CPCN to acquire resources to be online in
20231, as well as a CPCN to acquire resources to be online in 20242, and Idaho Power
expects to acquire additional resources each year thereafter through (at least) 2027.3
2. Under Idaho law, Idaho Power has an obligation to provide adequate,
efficient, just, and reasonable service on a nondiscriminatory basis to all those that
request it within its service area. Idaho Power has experienced and expects sustained
1 Case No. IPC-E-22-13
2 Case No. IPC-E-23-05
3 See, OPUC Case No. UM 2255, In the Matter of Idaho Power Company, Application for Approval of 2026 All-
Source Request for Proposals to Meet 2026 Capacity Resource Need.
IDAHO POWER COMPANY’S REPLY COMMENTS - 3
load growth, thereby requiring the addition of new resources. To meet its obligation to
reliably serve customer load and fill the capacity deficiencies identified in 2024 and 2025,
the Company conducted a competitive solicitation through a Request for Proposals
(“RFP”) seeking to acquire energy and capacity to help meet Idaho Power’s previously
identified capacity needs of 85 MW to be online by June of 2024 and an incremental 115
MW in 2025 (“2022 RFP”). The procurement process resulted in the acquisition of least-
cost, least-risk resources necessary to fill the identified capacity deficiencies.
3. The competitive RFP process resulted in a least-cost, least-risk selection of
two projects to meet the 2025 capacity deficiency: (1) a 150 MW energy storage project,
consisting of a 20-year ESA for a 150 MW battery storage facility and (2) 77 MW
comprised of an Idaho Power-owned Battery Energy Storage System (“BESS”). In
addition, the fluid load and resource balance identified an additional need for capacity in
2024, requiring the additional 24 MW of Idaho Power-owned battery storage. The ESA
is a slightly different kind of agreement than those the Company has previously presented
to the Commission. The ESA acts as a type of lease through which Kuna BESS will
develop, design, construct, own, and operate the battery storage system and, in
accordance with the terms of the agreement, Idaho Power will supply the charging energy
for the system and has the exclusive right to dispatch and use the charging and
discharging energy in exchange for a monthly payment. However, the terms of the ESA,
including pricing, security, and other terms of service, are generally consistent with
industry standard terms included in other Commission-approved procurements and
energy sales agreements of the Company.
IDAHO POWER COMPANY’S REPLY COMMENTS - 4
4. At the time the 2022 RFP4 proposals were being evaluated, the 2025
capacity deficiency had increased. To account for the increased 2025 capacity deficiency,
Idaho Power also selected the next most cost-effective resource to meet the 2025
capacity deficiency, the Idaho Power benchmark resource, a 77 MW battery storage
facility at the Happy Valley station. Further, during preparation of the 2023 IRP, as the
load and resource balance was refreshed, it was determined that a capacity shortfall still
existed in 2024. Idaho Power can address the 2024 capacity deficiency economically and
efficiently by adding 24 MW of battery storage at the Hemingway substation, the site for
which 80 MW of battery storage was installed to meet the 2023 capacity deficiency. The
Company has executed a Battery Energy Supply Agreement for the 24 MW battery
storage with Powin Energy Corporation (“Powin”), similar to previous agreements
executed with Powin. Idaho Power’s fair and competitive resource acquisition
procurement process resulted in the least-cost, least-risk procurement of 101 MW of
energy storage capable of being operational to meet both the 2024 and 2025 capacity
deficiencies.
II. IDAHO POWER’S REPLY
A. The Commission Should Adopt Staff’s Recommendation to Grant the
Company a CPCN, Declare the Expenses Associated with the ESA are
Prudent, and Acknowledge that Lease Accounting is Necessary to Facilitate
the ESA.
5. In order to comply with its continuing obligations to serve customers, the
Company must at times acquire additional resources to meet the identified capacity
deficits on its system when the need arises, and potentially outside of the formalized IRP
process. Given the short turn-around to construct a resource to meet deficits identified in
4 The 2022 RFP sought proposals for resources to be online by summer of 2024 and 2025. With Order No. 35900 in
Case No. IPC-E-23-05, the Company received approval of a Power Purchase Agreement with Franklin Solar LLC for
100 MW of solar generation as well as a CPCN for 72 MW of dispatchable energy storage to be online in 2024.
IDAHO POWER COMPANY’S REPLY COMMENTS - 5
2023, coupled with global supply-chain disruptions stemming from the COVID-19 health
crisis and other events, it was imperative that the Company move forward quickly on the
resource procurement process. Idaho Power performed a quantitative and qualitative
evaluation with an objective scoring methodology to reasonably evaluate the price and
non-price attributes of each project proposal submitted through the RFP process. The
request for a CPCN to acquire 101 MW of dispatchable energy storage is the result of
those efforts.
6. Idaho Power appreciates Staff’s thorough analysis of the Company’s
request in this case and their recommended “[a]pproval of the CPCN to acquire 24 MW
and 77 MW of BESS capacity to meet the 2024 and 2025 capacity deficiencies,
respectively.”5 Staff performed an extensive review in this proceeding of the capacity
deficiencies identified at different times during the RFP process, evidence of the fluidity
of those deficiencies during the near-term resource decision making phase, agreeing with
Idaho Power’s inputs and assumptions used in the Reliability & Capacity Assessment
Tool to determine the amount of the 2024 and 2025 deficits and believes the amounts are
reasonable.6 Further, Staff concluded that the “additional capacity deficiency in 2024 that
drove the need for the 24 MW BESS is justified”7 and “that the capacity deficiency in 2025
that drove the need for the 77 MW BESS and the 150 MW ESA is justified.”8
7. Kuna BESS will develop, design, construct, own, and operate the BESS
and, in accordance with the terms of the ESA, Idaho Power will supply the charging
energy for the system and has the exclusive right to dispatch and use the charging and
5 Staff Comments, pg. 4.
6 Staff Comments, pgs. 6 and 7.
7 Staff Comments, pg. 5.
8 Staff Comments, pg. 6.
IDAHO POWER COMPANY’S REPLY COMMENTS - 6
discharging energy in exchange for a monthly payment. Staff reviewed the terms and
provisions of the 20-year ESA between the Company and Kuna BESS as well as the
associated lease accounting treatment necessary to facilitate the transaction of the ESA
requested by Idaho Power, finding that lease accounting is the “appropriate way to
account for”9 the transaction and expenses associated with the ESA. Additionally, Staff
recommends “[d]eclaration that the expenses associated with the ESA, as proposed, are
prudently incurred for ratemaking purposes.”10 In their review of Section 19.3 of the ESA,
Staff suggests an emphasis to the significance of Commission approval and that the
section be “updated to reflect the need for Commission approval before any modification
becomes valid.”11 Idaho Power supports Staff’s proposed addition to Section 19.3 of the
ESA and concurrent with filing of the Company’s Reply Comments is submitting for
approval with the Commission the First Amendment to the Energy Storage Agreement
Between Kuna BESS, LLC and Idaho Power Company (”First Amendment”) that reflects
Staff’s proposed addition. The First Amendment is submitted herewith as Attachment 1.
Idaho Power respectfully requests Commission Approval of the First Amendment,
intended to meet Staff’s recommended condition of approval, along with approval of the
ESA.
B. Idaho Power Completed a Robust Competitive Resource Procurement
Process for Identifying the Least-Cost, Least-Risk Resource Acquisitions
8. The Company’s rapid change in the capacity deficiency was the result of
several converging factors, including limited third-party transmission capacity, load
growth, and a decline in the peak serving effectiveness of certain supply-side and
9 Staff Comments, pg. 14.
10 Staff Comments, pg. 15.
11 Staff Comments, pg. 13.
IDAHO POWER COMPANY’S REPLY COMMENTS - 7
demand-side resources. In order for Idaho Power to meet its obligation to reliably serve
customer load in a least-cost, least-risk manner, a competitive solicitation for the
acquisition of resources was conducted through an RFP. This competitive RFP process
allowed the Company to access the broader peak capacity and energy market to obtain
the best resources for Idaho Power’s customers, providing access to a spectrum of
potential resources and developers. Staff “believes the Company generally conducted a
fair and transparent resource selection process.”12 However, Staff believes there were
issues with the resource selection process, indicating “the bid pool could have been larger
and there could have been additional final shortlisted projects with lower costs.”13
9. The formal request for competitive proposals for the acquisition of electric
energy and capacity delivered from electric resources did require that the resources
employ certain qualifying technologies under varying ownership arrangements as those
were the products that would have the most realistic potential to be in-service to meet the
capacity deficiencies identified in 2024 and 2025. Staff believes the limited size of the bid
pool resulting from the restricted ownership and resource types prevented Idaho Power
from receiving potential additional bids. In support of their concerns, Staff indicates that
although an addendum to the RFP was issued on April 13, 2022, allowing for respondent
ownership of a standalone BESS, Solar + BESS or Wind + BESS, respondent ownership
projects were still not allowed. Idaho Power would like to clarify that although not
specifically identified in Addendum No. 8 to the RFP, the Company did allow for the PPA-
based storage component of the Solar + BESS and Wind + BESS resource types to be a
BESS structure. In fact, Project Nos. 5, 6, 9, 10, 11, 12, 22, 24, and 30 identified in
12 Staff Comments, pg. 7.
13 Id.
IDAHO POWER COMPANY’S REPLY COMMENTS - 8
Confidential Exhibit No. 5 included a Solar + BESS or Wind + Solar + BESS Battery
Storage Agreement (“BSA”) proposal to meet the identified 2025 capacity deficiency. In
addition, Project No. 7 identified in Confidential Exhibit No. 4 to the Direct Testimony of
Mr. Hackett in Case No. IPC-E-23-05, included a Solar + BESS BSA proposal to meet
the identified 2024 capacity deficiency.
10. Moreover, the Company’s assumption that certain resource types could not
be constructed in such a short timeline is supported by respondent proposals received
through the RFP process for capacity deficiencies identified in 2023, 2024 and 2025; the
number of viable projects grew as construction timelines expanded. As evidenced in Case
No. IPC-E-22-13 in which the Commission granted a CPCN for 2023 resources, only one
project was able to meet the commercial operation date of June 2023, for project
submittals necessary to meet the 2024 capacity deficiency, 17 projects were initially
identified as able to meet the commercial operation date of June 202414, and the number
of project proposals able to meet the commercial operation date of June 2025 grew to 36.
The bid pool identified those resources that could be constructed in the short timeframe
and did not hinder Idaho Power’s ability to identify the least-cost, least-risk resource for
meeting either the 2024 or the 2025 capacity deficiency.
11. It is worth noting that some of the concerns Staff raised regarding the RFP
solicitation and resulting selection of the least-cost, least-risk resources are actively being
addressed. The Company has begun the competitive procurement process under the
Oregon RFP guidelines, issuing an RFP for 2026 resources on June 8, 2023. Because of
the probable longer construction time frame, the solicitation broadened potential eligible
14 In the Matter of Idaho Power Company’s Application for a Certificate of Public Convenience and Necessity to
Acquire Resources to be Online By 2024 and for Approval of a Power Purchased Agreement with Franklin Solar,
LLC.
IDAHO POWER COMPANY’S REPLY COMMENTS - 9
products which should alleviate Staff’s apprehensions associated with a limited bid pool.
In addition, Staff noted that although they believe “the scoring process was likely
conducted in a fair and impartial manner,”15 Idaho Power should include as part of the bid
solicitation materials the weighting factors for the evaluation metrics and criteria.
Understanding the importance of inclusion of the weighting factors for respondents of
RFPs, the Company has included a description of the non-price factor weighting as a
component of the RFP for 2026 resources, as well as the inclusion as Exhibit D to the
RFP of the Non-Price Scoring Matrix, the non-price evaluation rubric that illustrates the
weightings where applicable. As Idaho Power gains experience with the development and
issuance of RFPs, future RFPs are refined, becoming more robust and ensuring a
continued competitive resource acquisition process.
C. The Overbuild Associated with the BESS will be Used, Useful, and Provide
Benefits to Customers When Placed in Service.
12. Battery cells within a BESS degrade over time and more rapidly in the first
year of use. For example, a BESS installation providing 100 megawatt-hours (“MWhs”)
will supply 100 MWhs to the system on day one; however, assuming the below
degradation curve, that same BESS installation will only supply 93 MWhs to the system
after one year. The degradation rate varies and is a function of time and throughput, or
megawatt-hours.
Beginning of
Year MWhs
Degradation
MWhs
End of Year
MWhs
1 100 6.9 93.1
2 93.1 2.3 90.8
3 90.8 1.8 89.0
4 89.0 1.5 87.5
5 87.5 1.4 86.1
15 Staff Comments, pg. 7.
IDAHO POWER COMPANY’S REPLY COMMENTS - 10
To mitigate the degradation, additional battery segments are added. The Company
has included within the project costs of both the 77 MW and 24 MW BESS the overbuild
costs associated with day one batteries. By including additional battery segments at the
beginning of life, Idaho Power can ensure reliable operation at full nameplate capacity
(77 MW and 24 MW) for a minimum of 4 hours through the first five years of operation
before necessitating a decision to augment the BESS if the then-current capacity is below
the nameplate capacity after year five. If the BESS system is not cycled daily, the
longevity and assurance of performing above the nameplate capacity beyond five years
is likely and thus deferral of future augmentation investments can occur. The overbuild is
necessary as it provides for the most efficient plant balancing and cell utilization,
extending the guaranteed performance of the entire system and ensuring the Company
has the capacity necessary to meet customer demand. Absent overbuild, immediately
upon the BESS being placed in service, Idaho Power would be placed in a resource deficit
relative to the required capacity resources of 24 MW in 2024 and 77 MW in 2025,
respectively.
13. In their Comments, Staff indicated concerns about the overbuild amounts
“due to uncertainties related to cost-effectiveness and when they will become used and
useful.”16 However, Idaho Power’s basis for comparison of BESS proposals was
consistent among all projects during evaluation through the RFP process. As noted in
Confidential Exhibit No. 5 to the Direct Testimony of Mr. Hackett, some projects included
overbuild in their proposals while some did not. To ensure a consistent basis for
comparison, Idaho Power adjusted all proposal prices to exclude overbuild costs.
16 Staff Comments, pg. 12.
IDAHO POWER COMPANY’S REPLY COMMENTS - 11
Because adding battery cells is linear from a cost perspective, the least cost project at a
0 overbuild is going to be the least cost project with a 5 year overbuild due to the linear
nature of adding battery cells. Therefore, the overbuild was appropriately captured when
comparing bids submitted as part of the 2022 RFP and the selection of the 77 MW and
24 MW BESS projects resulted in the least-cost resources.
14. Staff suggests the Company has not provided certainty about when the
overbuilt capacity will become used and useful due to lack of experience owning and
operating a BESS and indicates “the manufacturer warranties may also be used for the
first several years to mitigate excessive degradation.”17 It is important to note that
manufacturer warranties would only cover the failure of a battery cell, not degradation of
the BESS and therefore cannot be relied upon to ensure reliable operation of the BESS
at full nameplate capacity. Further, Staff did not recognize Idaho Power’s first-hand,
recent experience owning and operating an 80 MW BESS at the Company’s Hemingway
substation, placed in service in 2023.18 The 80 MW BESS includes overbuild, to ensure
reliable operation at full nameplate capacity, that became used and useful immediately
upon being placed in service. The additional battery cells result in more time that the
BESS can discharge at its nameplate capacity, allowing for 4.5 hours of discharging for
example as opposed to only 4 hours of discharging that would occur absent the overbuild.
The overbuild associated with the 77 MW and 24 MW BESS will be used, useful, and
provide benefits to customers as soon as they are placed in service.
17 Staff Comments, pg. 11.
18 See Case No. IPC-E-22-13, In the Matter of Idaho Power Company’s Application for a Certificate of Public
Convenience and Necessity to Acquire Resources to be Online By 2023 to Secure Adequate and Reliable Service to
its Customers for which the Commission issued a CPCN, Certificate No. 538.
IDAHO POWER COMPANY’S REPLY COMMENTS - 12
15. Due to their general concerns about the selection process of the 2024 and
2025 resources, Staff recommends the Commission establish a soft cap, “a threshold up
to which Staff believes that the cost of the project has a high level of certainty that it is
justified based on the evidence presented and what is known at this time.”19 Staff
calculated the soft caps “to only include the cost and amount of capacity of the two
projects without the overbuild amounts . . .”20 The Company does not believe a soft cap
is necessary. Idaho Power’s evaluation of the proposals received as part of the 2022 RFP
considered the costs associated with overbuilds and the resulting selection of the 77 MW
and 24 MW BESS were the least-cost resources, of which the entire BESS will be used
and useful when placed in service. If, however, the Commission finds it necessary to
implement a soft cap, then the soft cap should apply only to those costs associated with
the nameplate capacity of the 24 MW and 77 MW BESS, or approximately
and , respectively. If the overbuild is to be evaluated separately in a future
rate proceeding as Staff is suggesting, then it is appropriate that those costs are not
subject to the soft cap in this proceeding.
III. CONCLUSION
16. Idaho Power appreciates the opportunity to respond to Staff’s comments
filed in this case and for Staff’s review of the history of the identification of the capacity
deficiencies and understanding of the urgency for acquisition of the summer 2024 and
2025 resources. The Company respectfully requests the Commission (1) accept Staff’s
recommendation to grant a CPCN to acquire 101 MW of dispatchable energy storage
necessary to meet the identified capacity deficiencies in 2024 and 2025, (2) approve the
19Staff Comments, pg. 12.
20 Id.
IDAHO POWER COMPANY’S REPLY COMMENTS - 13
20-year ESA between Idaho Power and Kuna BESS, as well as the First Amendment
thereto which reflects Staff’s proposed change, (3) acknowledge the lease accounting
necessary to facilitate the transaction and that the resulting expenses associated with the
ESA are prudently incurred for ratemaking purposes, and (4) reject Staff’s proposed
establishment of a soft cap to be applied to project costs, or in the alternative, clarify the
soft cap applies only to those costs associated with the nameplate capacity of the 24 MW
and 77 MW BESS.
DATED at Boise, Idaho, this 10th day of October, 2023.
________________________________
DONOVAN E. WALKER
Attorney for Idaho Power Company
IDAHO POWER COMPANY’S REPLY COMMENTS - 14
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 10th day of October 2023 I served a true and
correct copy of IDAHO POWER COMPANY’S REPLY COMMENTS upon the following
named parties by the method indicated below, and addressed to the following:
Staff
Chris Burdin
Deputy Attorney General
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg No. 8,
Suite 201-A (83714)
PO Box 83720
Boise, ID 83720-0074
Hand Delivered
U.S. Mail
Overnight Mail
FAX
X EMAIL: chris.burdin@puc.idaho.gov
_____ FTP Site
__________________________________
Christy Davenport
Legal Administrative Assistant
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-23-20
IDAHO POWER COMPANY
ATTACHMENT 1