20100312final_order_no_31021.pdf

Office of the Secretary
Service Date
March 12 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
ACIFICORP DBA ROCKY MOUNTAIN
POWER FOR AN ORDER REVISING THE
WIND INTEGRATION RATE FOR WIND-
POWERED SMALL POWER GENERATION
QUALIFYING FACILITIES
) CASE NO. PAC-09-
) ORDER NO. 31021
On September 11 , 2009, PacifiCorp dba Rocky Mountain Power (PacifiCorp;
Company) filed a Petition with the Idaho Public Utilities Commission (Commission) for an
Order increasing the published avoided cost wind integration rate from $5.10 to $9.96 per MWh.
Published avoided cost rates are the purchase price paid to qualifying small power production
facilities (QFs) for purchases of QF capacity and energy. 1 The proposed change would be
applicable to purchases by PacifiCorp of electric power from wind-powered QFs except in those
circumstances where the QF developer agrees in the power purchase agreement to deliver QF
output to PacifiCorp on a firm hourly schedule. The Commission in this Order increases the
published avoided cost wind integration rate for PacifiCorp from $5.10 to $6.50 per MWh.
BACKGROUND
The Commission in Order No. 29839, Case No. IPC-05-, found that the supply
characteristics of wind generation and related integration costs could provide a basis for
adjustment of the published avoided cost rates, an adjustment that may be different for each
utility. In subsequent Order No. 30497 in Case No. PAC-07-, the Commission approved a
Settlement Stipulation which by its terms required PacifiCorp to file notice with the Commission
of any changes to its wind integration costs as reflected in subsequent changes to its Integrated
Resource Plan (IRP). Settlement Stipulation, Section III( a)( c)( d).
History of Wind Integration Charges
As related by Commission Staff in its comments filed in this case, the issue of wind
integration costs first arose in 2005 when Idaho Power Company filed a petition with the
Commission requesting a temporary suspension of Idaho Power s obligation under PURPA to
I Reference Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) and the
implementing regulations of the Federal Energy Regulatory Commission (FERC).
ORDER NO. 31021
enter into new contracts with QFs pending an investigation of the impacts of adding substantial
amounts of wind-powered generation projects to the utility s system. (IPC-05-22). Based on
the record developed in that case, the Commission found reason to believe that wind generation
presents operational integration costs to a utility different from other PURP A qualified resources.
Further, the Commission found that the unique supply characteristics of wind generation and the
related integration costs provide a basis for adjustment to the published avoided cost rates, a
calculated figure that may be different for each regulated utility. Reference Order No. 29839.
Further proceedings in that docket were ordered to determine the appropriate amount
of adjustment and the identification of what studies, if any, needed to be performed to provide
such a number. PacifiCorp and Avista were directed to participate in those proceedings. In
accordance with the Commission s directive, four workshops and one settlement meeting were
conducted over the next six months to try to develop consensus on some of the issues. The
parties were unsuccessful in reaching mutual agreement on interim settlement issues. No further
meetings were scheduled pending completion of wind integration studies by the three utilities.
In early 2007, nearly two years after the original docket was opened, PacifiCorp,
Idaho Power, and Avista completed their respective wind integration studies and filed petitions
recommending utility-specific wind integration adjustments to the published avoided cost rates.
In Case No. IPC-07-, Idaho Power proposed a wind integration adjustment of$10.72/MWh.
Later, in a Report Addendum filed with the Commission, Idaho Power presented an updated
wind integration cost of $7.92/MWh. Avista filed a similar Petition in Case No. A VU-07-
proposing a wind integration adjustment to published avoided cost rates of 12 percent; and for
QFs agreeing to deliver output on a firm hourly schedule, a percentage reduction of 6 percent.
PacifiCorp, in Case No. PAC-07-, proposed a wind integration adjustment of$5.04/MWh.
PacifiCorp s Settlement Stipulation
In the wind integration cases for all three utilities, separate Settlement Stipulations
were developed and submitted to the Commission for approval. The Settlement Stipulation
approved for PacifiCorp in Order No. 30497 provided the following with regard to establishment
of a wind integration charge:
Settlement Stipulation ~ 3
(a) (PacifiCorp s) published avoided-cost rates for Wind QFs will be adjusted
to recognize an assumed cost of integrating the energy generated by Wind
ORDER NO. 31021
QFs as a part of the Company s generating resource portfolio. The
integration charge will be equivalent to the calculated cost of wind
integration on a per MWh provided in the Company s most recent
Commission-acknowledged Integrated Resource Plan (IRP) . . the
estimated cost of wind integration in the 2007 IRP . . . is $5.10/MWh.
(PacifiCorp) shall hereafter file notice with the Commission of any
changes to its wind integration charge as reflected in subsequent changes
to its IRP. The integration charge will remain fixed throughout the term of
the contract and will be applied as a decrement to the applicable published
rate.
The term "applicable published rate" means the applicable avoided-cost
rate approved by the IPUC and updated periodically for purchases of
power from QFs producing less than 10 aMW, for the relevant contract
year and time period of energy generation.
(c) (PacifiCorp) will review its expected cost of wind integration in light of
the best available scientific data and actual operating experience. Expected
wind integration cost information will be included in the Company
integrated resource planning (IRP) process in the same way that costs for
other generating resources are included in the IRP.
(d) (PacifiCorp) currently provides public input meetings for its IRP
assumptions. Idaho wind developers will be notified as part of the public
meeting process and can contribute their input at those meetings to discuss
PacifiCorp s wind integration study and new data related to wind
integration costs prior to the publishing of the Company s next (2009)
IRP.
In accordance with the terms of the Settlement Stipulation, PacifiCorp has updated its
study of wind integration costs as part of the development of its 2009 IRP. PacifiCorp submits
as Exhibit A to its Petition an excerpt from the Company s 2009 IRP Appendix F - "Wind
Integration Costs and Capacity Planning Contributions" in which PacifiCorp provides a
description of the methodology used and the results derived from PacifiCorp s analysis of the
wind integration cost issue. The Company s 2009 IRP wind integration cost analysis identifies
its wind integration cost to be in the range of $9.96 to $11.85 per MWh depending on what
assumption is used regarding the future cost of CO2 compliance.
PacifiCorp submits as Exhibit A to its Petition in this case, an excerpt from
PacifiCorp s 2009 IRP Appendix F - "Wind Integration Costs and Capacity Planning
Contributions" in which the Company provides a description of the methodology used and the
ORDER NO. 31021
results derived from PacifiCorp s analysis of the wind integration cost issue. The Company
concludes:
The wind integration cost results. . . range from $9.96/MWh to $11.85/MWh
for PacifiCorp s system in 2009 dollars, depending on the CO2 tax level
scenario. The inter-hour wind results were developed by weighting the
PACWest inter-hour wind costs by 30% (the PACWest MW share of the
system total) and the P ACEast wind costs by 70%, then adding the system
wind reserves.
The Company s 2009 IRP wind integration cost analysis identifies its wind integration cost to be
$9.96 per MWh. The Company filed its 2009 IRP with the Commission on May 29, 2009 in
Case No. PAC-09-06. A Notice of the Company s IRP filing was issued on June 24, 2009; the
deadline for filing written comments was July 31 2009. Commission Staff was the only party to
file comments. On September 15, 2009, the Commission issued an acceptance and
acknowledgement of the Company s 2009 IRP filing.
On September 23, 2009, the Commission issued a Notice of Petition and Modified
Procedure in Case No. PAC-09-07. The deadline for filing written comments was October 30
2009. Comments were filed by Commission Staff and the Renewable Northwest Project (RNP).
Public comments filed urge caution and one contends that the increase requested by PacifiCorp
may affect the viability of renewable wind project development in Idaho. On November 20
2009, PacifiCorp filed reply comments.
Commission Staff
Rather than increasing the wind integration charge from $5.10 per MWh to $9.96 per
MWh as proposed by the Company, Staff recommends that the wind integration charge be
changed to $6.50 per MWh to comport with the Commission-approved cap for Idaho Power and
Avista. Staff is not suggesting that PacifiCorp s proposed wind integration cost is inaccurate.
Staff notes in its comments that the $9.96 is in the same general range as identified in Idaho
Power s and Avista s wind integration studies. Moreover, more recent studies completed by
Portland General Electric and BP A, Staff states, also computed wind integration costs in a range
closer to those in PacifiCorp s recent study.
Staff believes that PacifiCorp s most recent wind integration study is probably more
accurate than its initial study. Furthermore, Staff believes that actual wind integration costs are
likely greater than the $5.10 currently in place for PacifiCorp. At the same time, however, Staff
ORDER NO. 31021
acknowledges that there is still much uncertainty about the results of various wind integration
studies, that wind integration costs are likely different for each utility, and that the results of
various wind integration studies are not necessarily comparable. In addition, Staff is aware that
there are regional efforts underway that may eventually decrease wind integration costs, but
conversely, that wind integration costs may increase as greater amounts of wind are added to
utilities' systems.
Staff notes that throughout the development of its 2009 IRP, PacifiCorp conducted
public input meetings just as it has done for past IRPs. However, Appendix F, the Company
wind integration cost study, was not discussed in any of the public input meetings because it was
not completed until just before the IRP was finalized and submitted to the Commission for
approval. Nonetheless, on August 31 , 2009, three months after the IRP was filed with the
Commission, PacifiCorp conducted a public meeting to describe its wind integration study and to
accept comments from interested parties. All of the interested parties in Case No. P AC-07-
the Company s initial wind integration docket, were invited to participate. Staff participated in
the meeting by telephone, but notes that few of the parties in Case No. PAC-07-
participated.
Several participants in the August 31, 2009 meeting, Staff notes, expressed concerns
with some of the assumptions and analysis methods used by PacifiCorp in computing its wind
integration costs.PacifiCorp, however, remained convinced that its assumptions were
reasonable and its analysis accurate.The Company agreed, however, to reexamine its
assumptions and analysis in future studies as more information becomes available and better
analysis techniques are developed.
Idaho Power s and Avista Settlement Stipulations
Although the Settlement Stipulations of Idaho Power and A vista in their respective
wind integration cases were very similar to PacifiCorp , Staff notes they differed on one key
aspect. Unlike PacifiCorp s Stipulation that includes a fixed wind integration charge of
$5.lO/MWh, Idaho Power s and Avista s Settlement Stipulations contain wind integration
charges that are stated as a percentage of the published avoided cost rates. The percentage
ranges from 7 percent to 9 percent and is based on three "tiers" representing levels of wind
generation development on each utility s system. Most importantly, however, is the fact that
Idaho Power s and Avista s wind integration charges are subject to a cap of $6.50/MWh. Based
ORDER NO. 31021
on the avoided cost rates currently in place, the wind integration charges for Idaho Power and
Avista range from about $4.30/MWh to the maximum cap of $6.50 depending on details of the
specific contract.
Renewable Northwest Project
The Renewable Northwest Project (RNP) recommends denial of the Company
Petition, opposes Modified Procedure and recommends a hearing prior to any change in the
Company s wind integration rate.
The analytical techniques used in PacifiCorp s study, RNP states, represent a radical
departure from earlier Company studies, those of other northwest utilities, and studies across the
S. and internationally. Flaws in the methodology, it contends, are relatively basic and the
stated results should not be accepted as a serious approximation of the Company s wind
integration costs. The most fundamental shortcoming in the Company s methodology, RNP
contends, is that the variability and uncertainty introduced by wind is considered separately from
the variability and uncertainty already on the power system due to load. The reason this is
important, RNP states, is that the forecast errors in short-term (less than one hour) variability of
wind and load are not normally correlated with one another. Every wind integration study of
which RNP is aware, it states, has netted wind against load in deriving the reserve requirement
including PacifiCorp s previous analyses dating back to 2003, as well as the analyses of Idaho
Power and A vista.
PacifiCorp s implicit assumption that the reserve requirement is independent of the
load, RNP contends, would only hold if the load variability and uncertainty are small fractions of
the wind variability and uncertainty. The Company, RNP contends, offers no information
suggesting this is the case, and offers no basis at all for failing to net load and wind to determine
reserve requirements.
PacifiCorp Reply
The Company in its filed reply addresses only the comments of Staff.The
Company s wind integration costs, it states, are reasonably within the range of the ones
calculated by other entities and are based on analysis that is technically sound. PacifiCorp owns
or is acquiring the output from 1 300 MW of wind resources currently online. The Company,
while it continues to develop and refine its wind integration costs, should not, it contends, be
prohibited from recovering prudently incurred costs to integrate wind on a day-ahead and hour-
ORDER NO. 31021
ahead basis. The proposed $9.96/MWh, it contends, is much more reflective of the Company
overall system integration (than the $6.50 cap proposed by Staffj and is appropriate considering
a much higher wind penetration rate than Avista or Idaho Power.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case No. P AC-
09-07 including the comments filed by Commission Staff and Renewable Northwest Project
and the reply comments ofPacifiCorp. We have reviewed the Company s 2008 IRP Appendix F
- Wind Integration Cost Update. We have also reviewed our prior Order Nos. 29839 (Case No.
IPC-05-22) and 30422 & 30497 (Case No. PAC-07-07) including the related Settlement
Stipulation filed in that case. RNP contends that PacifiCorp s methodology is flawed and that a
hearing is required. For reasons set forth below, we disagree. We continue to find it reasonable
to process this case pursuant to Modified Procedure. IDAPA 31.01.01.204.
Our acceptance of the Stipulation in Case No. P AC-07-07 was conditioned on the
continued close monitoring of integration costs by PacifiCorp. In Order No. 30497, we stated
PacifiCorp agrees to continue to review its wind integration study and update
its study to include the results of available scientific data and actual operating
experience. The Company is continuing to explore methodologies to confirm
and quantify wind variability with respect to the need for operating reserves.
In particular, sub-hourly data is being captured to test the impact of deviations
within the hour. The Company proposes including a wind integration review
in the Company s biennial Integrated Resource Plan. This Commission has
continuing oversight and we expect PacifiCorp to provide wind integration
analysis and results to the Commission separate from its biennial IRP filing.
We expect the Company in conjunction with its IRP planning process to
address wind integration as a discrete part of its plan and to extend
participation to Commission Staff and the parties of record in Case No. P AC-
07 -07. Regional wind integration efforts, improvements in wind
forecasting, regulatory changes and actual "hands-on" experience will all have
an impact on the cost of integrating wind energy. The Commission
interested in the day-to-day mechanics of how wind is integrated into the
Company system; the day-to-day impact on scheduling; and the
ramifications of the Area Control Error (ACE) Diversity Interchange sharing
on integration costs. We expect annual review by the Company and proposed
adjustments (up or down) when warranted. We expect the additional data
provided will be very important to our continued support of a wind integration
adjustment. As with variables in the underlying avoided-cost methodology,
parties can petition the Commission at any time to open a docket to review
and update wind integration costs if those costs are believed to be outdated or
inaccurate.
ORDER NO. 31021
Order No. 30497, pp. 12, 13.
In our Order No. 30497 , we acknowledged that regional wind integration efforts have
an impact on the cost of integrating wind energy. The Commission is aware of, monitors and
awaits the results of the regional studies of the Western Electricity Coordinating Council'
Variable Generation Subcommittee and the Wind Integration Study Team of Northern Tier
Transmission Group (NTTG) and Columbia Grid, both of which efforts are exploring how best
to broadly integrate increasing amounts of wind generation into the transmission grid.
Additionally, we note that a Joint Initiative among NTTG, Columbia Grid, and West Connect is
implementing operational transmission enhancements among voluntary western utility
participants that will provide more flexibility for integrating intermittent and other resources.
These products include Area Control Error Diversity Interchange (ADI) , Dynamic System
Scheduling (DSS), and Intra-Hour Transaction Accelerator Platform (I-TAP). PacifiCorp is
actively involved in all of these efforts. PacifiCorp states that it continues to refine and expand
its wind integration cost analysis. The Commission believes that these regional efforts may
clarify wind integration operational and cost issues and should be taken into consideration and
reflected in the Company s wind integration studies.
This Commission continues to find that the cost of wind integration for utilities is real
and greater than zero. With the passage of time and increased understanding, studies continue to
become more sophisticated. We believe a generic workshop may be helpful in the future when
information is better, and greater consensus exists. RNP contends that a fatal flaw in the
Company s study is its failure to integrate the variability and uncertainty associated with load
and wind in deriving the reserve requirement. We see the RNP concern not as a fatal flaw but
instead, simply anecdotal evidence that there is no consensus methodology for calculation of
wind integration costs. Modeling and assumptions will vary by utility. Although we are
presented only with the Company s summary findings in its 2008 IRP Appendix F, we find no
reason to discount the study in its entirety. PacifiCorp, we note, has launched efforts to develop
a new wind integration study in concert with its next IRP. We encourage RNP to participate in
that process. We expect the Company to be able to articulate why proposed changes to its
methodology are rejected.
ORDER NO. 31021
In this case, PacifiCorp seeks to raise the wind integration adjustment from $5.10 to
$9.96 per MWh, the low end of its study spectrum. PacifiCorp notes that the summary results of
its wind integration cost study were submitted as part of the Company s 2008 Integrated
Resource Plan. The wind integration study is challenged by Renewable Northwest Project. RNP
requests a hearing. This case is not an administratively economic forum (cost, time and effort)
for analyzing the Company s wind integration methodology. We find a more appropriate forum
is the Company s IRP process, a forum that is open to all stakeholders.
The Commission finds that the Company s inclusion of its Appendix F wind
integration cost update as part of the 2008 IRP provides no tacit approval of same by this
Commission. As PacifiCorp is aware, we only acknowledge IRP filings. We do not approve
them or any part thereof. Without further development of a record, we cannot find that the
magnitude of increase proposed by the Company is reasonable. Further, for reasons expressed
above, we question whether developing further record in this docket will be a meaningful
exercIse.
We acknowledge that the Company has added wind resources, both actual and
planned, since we established its existing wind integration rate and that its integration costs have
likely increased.While we continue to believe that fundamental economic differences in
avoided costs and wind integration costs exist for different utilities, we also believe a uniform
balancing between companies is now necessary to avoid counterproductive incentives favoring
one utility over another. We find Staffs compromise proposal in this case to be both reasonable
and defensible. We accordingly find it reasonable to increase the published avoided cost
integration rate for PacifiCorp from $5.10 to $6.50 per MWh, the maximum wind integration
rate presently authorized for Idaho Power and Avista. We encourage PacifiCorp to continue to
refine its wind integration cost analysis. We expect it to consider in its analysis and studies the
results of regional efforts and studies.
CONCLUSIONS OF LAW
The Commission has jurisdiction over PacifiCorp dba Rocky Mountain Power, an
electric utility, and the issues presented in Case No. P AC-09-07 pursuant to the authority and
power granted it under Title 61 of the Idaho Code and the Public Utility Regulatory Policies Act
of 1978 (PURP A).
ORDER NO. 31021
The Commission has authority under PURP A and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed term obligations for the purchase of energy from qualified facilities
(QFs) and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission hereby authorizes an increase in the published
avoided cost wind integration rate for PacifiCorp dba Rocky Mountain Power from $5.10 to
$6.50 per MWh.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this I;L -tt..
day of March 2010.
~/.~
JIM D. EMPTON: P
J&uJL
1\RSHA H. SMITH, COMMISSIONER
ATTEST:~ill~
D. Jewell
C mmission Secretary
bls/O:P AC-09-07 _sw2
ORDER NO. 31021