19910412Final_Order_No_23631.pdf

Offt:c of tte SecretaY
Scrvlce Date
APR 12 rg91
Btr'OBE IEE II}AHO PTIBLIC IITILITIES COMIUISSION
IN TEE MATIER OF TEEAPPIJCAIION
Or. IDAHO POWER COMPANT FOBAPPROVALOFAIYffi
TARITT TOR NON-TIITI,ITY
GENERA'IION-S CflEDUI,E 72
CASE NO. IPGF-90.20
oRDmNO. 23631
On December 17, 1990, Idaho Power Qernpan] (IPCo, Company) filed
an Application with the Idaho Public Utilities Cornrnigsion (Commission) for ap-
proval of an Interconnection Tariff for non-utiliQr generation (Tariff Schedule No.
72). The Company has submitted direct testimony and exhibits in support of its
Application.
Previously, the terms and confitions for interconnection of non-utility
generation to the Qq'nFanf's transrnission/distribution system have been indi-
vidually negotiated, although the terrns and conditions have proved to be substan-
tially similar. The Co-pany contends that now that it has gaioed experience in
this area, the development of a schedule directly addressing such interconnec-
tions will simplify the process and will ensure that all non-utility generators are
treated similarly under uniform and standard terrns and. conditions.
As proposed, the Schedule No. 72 Tariff applies to the construction,
upgrade, relocation, or removal of transmission and/or distribution lines and
equipment necessary to safely interconnect a seller's generation plant (and seller
furnished facilities) to the Company's system. The tariff addresses cost
(valuation), construction and transfer of interconnection facilities, together with
associated payment obligation for such facilities, and related operation and
maintenance obligations and expenses. The tariff also addresses vested interest
refunds.
The Cornrnission by Notice of Modified Procedure issued December 27,
1990 indicated its intent to process the Qernpan/'s Application by written
submission rather than by hearing. The deadline for filing written cornrnents or
protests with respect to the Cornrnission's proposed use of Modified Procedure in
Case No. IPC-E-90-20 was January 18, 1991.
Timely protest and eottt"tents in Case No. IPC-E-90-20 were received
from A. W. Brown and Independent Energy Producers of Idaho (IEPI). The
Cornmission in Order No. 23548 dated January 31, 1991 directed Idaho Power to
Iile a written response to the criticism and comments of A. W. Brown and the
recoynrnendations of IEPI regarding proposed Schedule 72. The Cornrnission in
its Order also reserved judgment on the appropriateness of processing the
Company's Application under Modified Procedure, i.e., by written subrnission
rather than by hearing. Reference IDAPA 3L.4.29.4.
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On March 1, 1991, Idaho Power Company filed its Reply Com'nents.
COMIIISSIION AIYALY$S AI{D FINDINGS
Idaho Power's proposed Schedule 72 accomplishes the following:
1. Establishes IPCo's control over the design of interconnection
facilities and identifies the Seller as the party responsible for all interconnection
costs in accordance with PURPA regulations.
2. Establishes IPCo as owDer of the connecUdisconnect equipment
(circuit breaker and relays).
3. Establishes a procedure by which the Seller may transfer ownership
of interconnection facilities to IPCo by the Seller agreeing to pay an O&M charge.
4. Provides for a partial refund of Sellers interconnection costs in the
event a third party is to share interconnection facilities.
AW. BBOWNPBOITES:T
On January 17, 1991, A. W. Brown (Brown), the developer of Sunshine
No. 2, a small power project located in Lemhi County, filed a timely protest in
Case No. IPC-E-90-20. By way of criticism and cornrnent Brown raises the
following concerns:
1. Brown contends that the costs IPCo seeks to recover do not fit the
FERC delinition of "intcrconnection costs".
IPCo responds by citing IPUC Order No. 15746, Case No. P-300-12, p.
38, in which the Cornrnission states, "Section 292.906 of the federal rules make it
the duty of the qualiffing facility to reimburse the utility for interconnection
costs on a non-discriminatory basis with respect to other customers having
similar load characteristics." IPCo points out that the avoided cost rates paid to
qualifying facilities lQFs) allow for the recovery of interconnection costs by the
QF. And IPCo calls attention to the fact that each of its 63 QF contracts,
approved by the Comrnission, required the QF to pay interconnection costs.
The Cornrnission, based on its analysis of PURPA, Sections 201 and
210, FERC Rules and Regulations and associated cornments, finds that Brown
has misinterpreted the FERC definition of "interconnection costs." FERC defines
interconnection costs at 18 C.F.R. $ 292.101(7). The Cornmission addressed
interconnection costs aud QF responsibility for such costs in Order No. 15746,
Case No. P-300-L2. A QF is obligated to pay such costs pursuant to Cornrnission
Order and F"ERC Rule 18 C.F.R. $ 292.306(a). See also FERC cornrnents 45 Fed.
Peg. L2277, L2230.
2. Brown contends that IPCo realizes "signifrcant profits" by
overcharging QFs on interconnection construction and contends further that
IPCo has reason to inllate interconnection costs because IPCo's operation and
maintenance (O&M) charges are based on a percentage of interconnection costs.
ORDER NO. 23631 -2-
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IPCo responds by stating that QF's have the option of paying actual
interconnection costs or estimated construction costs. O&M charges, the
Company states, are based on the average cost of operation and maintenance of
equipment and facilities provided to QFs and not project-specific equipment costs.
Competitive third party pricing and construction is not precluded under
Schedule 72. The Cornrnission, based on Staff analysis firrther finds no evidence
to suggest that the Company is maLi.g a profit on QF interconnection
construction, or is failing to comply with the Uniform System of Accounts, or that
related O&M charges are anything other than reasonable.
IEPI COMMBTTSI
On January 18, 1991 timely eornrnents in Case No. IPC-E-90-20 were
filed by the Independent Energy Producers of Idaho (IEPI). IEPI while
expressing general agreement with the need for and the format of IPCo's
proposed Schedule 72, raises specific concerns and recorntnends the following
changes:
1. IEPI contends that the term for possible vested interest refund
should be for the length of the power sales agreement instead of five years. IEPI
further contends that Idaho Power and the QF wifl have a contractual
relationship for at least as long as the power sales agreement, third party
involvement will be infrequent, and making vested refunds will not be an
administrative burden for IPCo.
IPCo responds that keeping track of the varied interests for an
extended number of years, despite IEPI's contention, will be an administrative
burden. IPCo states that QF projects are often sold and partial interests are
routinely assigned. IPCo further states that in collecting from a third party to
refund to the QF, the third party then has a vested interest, and so on for fourth
and fifth parties.
The Qsmrnissisp finds IPCo's reasoning to be persuasive that the
vested interest term should run no longer than five years.
2. IEPI contends that in regard to the determination of the
maintenance charge or a vested interest refund, the actual construction costs
should be used and not the estimated cost.
IPCo states that most QFs want to use estimated costs because they
need a firm price cotnmitment to obtain frnancing. The Company, however,
advises QFs that they have a choice between actual costs and estimated costs.
fhg Qernrnission finds it reasonable that QFs retain the contract option
of actual or estimated costs for calculation of vested interest and O&M charges.
3. IEPI contends that at the expiration of the power sales agreement,
the QF may have an interest in the disposition of interconnection equipment, and
this should be recognized in Schedule 72. IEPI requests that the following
different situations be covered:
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a. The QF wants to continue selling power to IPCo. In this
case, Schedule 72 should state that IPCo will maintain
interconnection equipment at no additional capital cost so
long as such equipment is electrically sound.
b. The QF wants to sell power to a third party with IPCo as
the wheeling utility. In this case, Schedule 72 should state
that IPCo will maintain interconnection equipment without
additional cost to the QF for the length of the equipment's
useful life.
c. The QF wants to cease power production but the QF has a
need for the interconnection equipment and wants to take
ohvsical possession. Schedule 72 should accottttnodate such a
irossibility with the caveat that the utility is made whole for
any tax or other monetary consequences.
IPCo responds by pointing out that if the QF wished to continue to be a
Seller, whether to IPCo or to a third party, the interconnection and safety
equipment would have to remain in place and IPCo would continue maintenance
to assure safe delivery of power from QF into IPCo's system. In regard to giving
interconnection equipment to the Seller at contract expiration, IPCo believes it
may be more appropriate to consider paying salvage value or delivering the
equipment to the QF but only for very short-term contracts (5 years or less). The
Company prefers this sort of thing be a part of contract negotiations.
The Cornrnission finds IPCo's response to be reasonable. The concerns
raised by IEPI are more appropriately addressed by contract. As always, the
Cornrnission encourages the parties to be precise in contract language.
rpAHo BoTrrER's BEquEsT REGARDING SALYAGE
IPCo states that the Cornmission requires IPCo to include a "Salvage
Value" provision in QF contracts (Exhibit 2) as part of the implementation of
Order No. 15746, Case No. P-300-t2. The contracts call for pay'ment of net
salvage value to the QF at contract termination or expiration if interconnection
equipment is to be removed. IPCo contends that this provision represents
preferential treatment and further contends "Salvage Value" is a non-issue for 20
to 35 year contracts. IPCo, in its Reply Comments, asks fhs Sernrnission to
discontinue its requirement to have a "Salvage Value" provision in which case
IPCo will still address the salvage issue on a case specific basis for QF contracts
of 5 years or less.
fhs Qernynission will not grant IPCo relief on a utility-specifrc basis
from the requirements of a generic order applicable to all its major electrics.
The Cornrnission, after considering the filings of record in Case No.
IPC-E-90-20, frnds it reasonable to process the Company's Application under
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Modifred Procedure. Regarding interconnection procedure for non-utility
generation, the Cornrnission finds it in the best interest of all QFs that they be
treated similarly under uniform and standard terms and conditions. The
Cornrnission finds that IPCo's proposed Schedule 72 serves this purpose.
CONCT.USIONS OFI"AW
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The Idaho Public Utilities Qsrnynigsion has jurisdiction over Idaho
Power Company, an electric utility, pursuant to the authority and power granted
it nnder Title 61 of the Idaho Code.
',The Idaho Public Utilities Cornrnission has authority under the Public
Utility Regulatory Policies Act (PURFA) of 1978 and implementing regulations of
the Federal Energy Regulatory Cornrnission (FERC) to set avoided costs, to order
electric utilities to enter into fixed term obligations to purchase enerfy from
small power producers and to implement FERC rules. PURPA Sections 210,
210A, 210F, 16 U.S.C.A. $$ 824-A-3, 824-A-3(a)(f); Afton Energy Inc. u. Idaho
Power Company, LO7 Idaho 781, 693 P.zd,427 (1984).
OBDER
In consideration of the foregoing and as more partic'ularly described
above, IT IS HEREBY ORDERED that the proposed Tariff Schedule No. 72
Interconnection Tariff for Non-utility Generation submitted in Case No.
IPC-E-90-20 (attached) be approved for effective date April 15, 1991.
THIS IS A FINAL ORDER. Any person interested in this Order (or in
issues finally decided by this Order) or in interlocrrtory Orders previously issued
in this Case No. IPC-E-90-20 may petition for reconsideration within twenty-one
(21) days of the service date of this Order with regard to any matter decided in
this Order or in interlocutory Orders previously issued in this Case No.
IPC-E-90-20. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See
Idaho Code $ 61-626.
ORDER NO. 2363L -5-
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DONE by Order of the Idaho Public Utilities Commission at Boise,
Idaho, this //ru day of April 1991.
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