20100108Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 1895
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2010 JAN -8 PM l: 13
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
PACIFICORP DBA ROCKY MOUNTAIN )
POWER FOR APPROVAL OF A POWER )
PURCHASE AGREEMENT BETWEEN ROCKY )
MOUNTAIN POWER AND BELL MOUNTAIN )HYDROLLC )
)
)
CASE NO. P AC-E-09-09
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff ofthe Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on
December 17, 2009 submits the following comments.
BACKGROUND
On December 4, 2009, PacifiCorp dba Rocky Mountain Power (PacifiCorp; Company)
fied an Application with the Idaho Public Utilties Commission (Commission) requesting
approval of a 20-year Power Purchase Agreement between PacifiCorp and Bell Mountain Hydro,
LLC (Bell Mountain) dated November 17,2009 (Agreement). Bell Mountain intends to
construct, own, operate and maintain a 290 kW hydroelectric generating facilty (Facility) at a
location approximately 40 miles north of Howe, Idaho, in Butte and Lemhi Counties. Bell
STAFF COMMENTS JANUARY 8, 2010
Mountain warrants that the Facilty wil be a qualified small power production facilty (QF)
under the applicable provisions of the Public Utilty Regulatory Policies Act of 1978 (PURP A).
Agreement ii 3.2.6. The estimated annual net generation is 1,102,530 kWh. Agreement, Exh. D.
The Facility has been operational since December 1,2009; however, the Scheduled Commercial
Operation Date of the Facility is December 15,2009.
Agreement ii 2.1 provides that the Agreement wil not become effective until the
Commission has approved all of the Agreement's terms and conditions and declares that all
payments PacifiCorp makes to Bell Mountain are just and reasonable and legitimate expenses, all
of which the Commission wil allow PacifiCorp to recover in rates in Idaho in the event other
jurisdictions deny recovery of their proportionate share of said expenses.
ST AFF ANALYSIS
With one notable exception, the terms and conditions in the Agreement are similar to
other recent PURP A contracts approved by the Commission and are in conformance with prior
Commission orders. PacifiCorp wil pay Bell Mountain non-Ievelized conforming energy or
non-conforming energy purchase prices for net output adjusted for the month and on-peakoff-
peak hours in accordance with Commission Order Nos. 30423 (monthly and daily price
multipliers), 30480 (SAR methodology - fuel cost component), and 30744 (Conforming Energy
Annual Rates).
The notable exception referred to above relates to the inclusion of an integration discount
in the rates to be paid to Bell Mountain by PacifiCorp, and to the corresponding requirement for
a mechanical availabilty guarantee (MAG). Requirements for an integration discount and a
MAG are normally reserved for wind generation projects, and are designed to account for the
costs associated with the intermittency of the generation. Bell Mountain's project in this case is a
hydro facility. The Company proposes use of the wind integration adjustment as a surogate for
hydro.
In accordance with Commission Order No. 29632, non-intermittent PURPA Qualifying
Facilties (QFs) (i.e., non-wind or non-solar) are stil subject to what has come to be referred to
as the "90/110 percent performance band rule." The 90/110 performance band rule was
developed to address the firmness issue associated with the intermittent nature of wind. Under
the performance band concept, the QF is required to make monthly production estimates.
STAFF COMMENTS 2 JANUARY 8, 2010
Energy produced below 90 percent or above 110 percent of the monthly forecasted production is
priced at a discount equal to 85 percent of the market or contract price, whichever is less. This
discounted pricing scheme serves both as an incentive for the QF to make the most reliable
estimates possible as well as a means of compensating the utilty when the QF delivers less
reliable or non-firm energy.
Nearly all hydropower facilties subject to the 90/110 performance band have been able
to meet it because of known, reliable and consistent water flows available to the project.
However, wind facilities, because of the intermittency of the resource, have diffculty meeting
thisrequirement. Consequently, in 2008, upon the completion of wind integration studies by all
three regulated utilties, the Commission approved a different set of requirements intended to
function as an equivalent substitute to the 90/110 performance band requirement. The result was
a combination of a wind integration discount to published avoided cost rates, an 85 percent
MAG, and a requirement that wind projects be responsible for contributing a proportionate share
of costs incured for wind forecasting services.
The Bell Mountain facilty is a small hydro project that uses water for both irrigation and
power production. Water flow is year-round and the irrigation season runs from April to
October. The source of the water is two small mountain streams that apparently have poor
historical stream flow records. Bell Mountain has the abilty to store approximately i 0 acre-feet
of water in an upstream pond, which is equivalent to about seven hours of generation at the
Facilty capacity rating. Nevertheless, the project's owner is not confident that he has the abilty
to predict stream flows accurately enough to satisfy the 90/110 requirements normally imposed
on other PURP A hydro facilties. As a result, the project owner sought agreement on contract
requirements, similar to requirements for wind projects, that could be considered an equivalent
substitute to 90/110 requirements.
The paries, recognizing the intermittent nature of the resource, have agreed as a
surogate to the 90/110 requirement to include a 90 percent MAG and adopt the Company's
curent $5.10IMWh wind integration cost adjustment. Agreement ii 5.1. Note that the 90
percent MAG requirement in the Agreement is higher than the 85 percent MAG requirement
for wind projects. Note also that the current $5.1 OIMWh wind integration cost adjustment is
included in the Agreement, rather than some other wind integration adjustment amount as
could be approved in a stil pending case to adjust PacifiCorp's wind integration charge
STAFF COMMENTS 3 JANUARY 8, 2010
(PAC-E-09-07). The submitted Agreement, as reflected in the Application, is the result of
negotiation and compromise between the parties.
Staff recognizes that substitution of an integration discount and a MAG represents a
deviation from existing Commission orders. However, Staff believes that deviation from prior
orders is justifiable in this case because of the very small size of the project (290 kW), and
because the proposed rates and contract terms represent an acceptable alternative to the 90/110
requirement. Staff concedes that compliance with the 90/110 percent performance band may be
exceptionally difficult to meet for a small hydro project with limited stream flow records. In
addition, meeting the 90/110 performance requirements may be burdensome and costly for a
very small project due to its forecasting and reporting requirements. Notwithstanding these
difficulties, Staff believes that the 90/110 performance band requirements must continue to be
enforced for other projects, unless very small projects, similar to this one, are wiling to accept a
discount to published rates and meet a MAG.
Staff also recognizes that the discount to avoided cost rates proposed in this case is equal
to PacifiCorp's current approved wind integration discount. The Company's wind integration
discount was developed based on the effects of integrating intermittent wind generation, not
based on the effects of intermittent hydro generation. While some of the costs integration for
intermittent wind integration may be similar to intermittent hydro generation, no study has been
done to analyze hydro specifically. Clearly, the behavior of a wind facility differs from a hydro
facilty, but the costs of conducting such a study could not be justified for the extremely few
potential small hydro projects to which it might apply. In any case, Staff believes that the
integration costs for a small hydro facility would likely be no greater than for a wind project, and
that applying the wind integration discount to a small hydro project is conservative and
reasonable.
RECOMMENDATIONS
Staff recommends approval of the Agreement as submitted. Staff further recommends
that the costs incurred by PacifiCorp for purchasing capacity and energy from Bell Mountain be
accepted as legitimate expenses. Staff recommends PacifiCorp be allowed to recover in rates in
Idaho the appropriate allocated costs under the Revised Protocol.
STAFF COMMENTS 4 JANUARY 8, 2010
Because of the unusual circumstances and the very small size of the proposed project,
Staff recommends that, should the Commission approve the Agreement, none of the terms and
conditions of the Agreement be considered precedential for any future projects.
Respectfully submitted this Ó~ day of January 2010.
Technical Staff: Rick Sterling
i :umisc: commentspace09 .9swrps comments
STAFF COMMENTS 5 JANUARY 8, 2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH OF JANUARY 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-09-09, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
BRUCE GRISWOLD DIRECTOR
SHORT-TERM ORIGINATION
PACIFICORP
825 NE MUL TNOMAH
STE 1800
PORTLAND OR 97232
E-MAIL: bruce.griswold(fpacificorp.com
TED WESTON
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: ted.weston(fpacificorp.com
daniel. solander(fpacificorp. com
DATA REQUEST RESPONSE CENTER
PACIFICORP
825 NE MULTNOMAH STE 2000
PORTLAND OR 97232
E-MAIL: datarequest(fpacificorp.com
lof~ ¡~-
SECRETARY
CERTIFICATE OF SERVICE