20130620Comments.pdf

DONALD L. HOWELL, T
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3366
KARL KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
Tel: [phone]
Fax: [phone]
Idaho Bar No. 5156
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorneys for the Commission Staff
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA ROCKY MOUNTAIN
POWER FOR APPROVAL OF A POWER
PURCHASE AGREEMENT BETWEEN
PACIFICORP AND ST. ANTHONY HYDRO,
LLC.
' When Rocky Mountain initially filed its
discussions with Commission Staff, Rocky
on May 17 ,2013.
STAFF COMMENTS
f$fj Jlij? tril 3: S4
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
On April 15,2013, PacifiCorp dba Rocky Mountain Power filed an Application for
approval of a Power Purchase Agreement (PPA) between itself and St. Anthony Hydro, LLC.
St. Anthony Hydro (a potential "qualifying facility" (QF) is an Idaho limited liability company
that has entered into an agreement to purchase Rocky Mountain's hydroelectric facility at St.
Anthony in Fremont County, Idaho. See CaseNo. PAC-E-13-06. The PPA1 is contingent on the
CASE NO. PAC-E.I3-07
COMMENTS OF THE
COMMISSION STAFF
Application, the PPA was marked confidential and proprietary. After
Mountain resubmitted the PPA as a non-confidential, public document
JLINE 20,2OI3
Commission's approval of the utility's application to sell its existing (but inoperable)
hydroelectric facility to St. Anthony Hydro. PPA at $ 2.1. Although the hydro facility is not
currently operational, St. Anthony Hydro expects to repair the facility and retum it to operation
with an estimated capacity rating of 700 kW.
Rocky Mountain and St. Anthony Hydro signed their PPA on December 20 and
December 13,2072, respectively. Application at 1. Under the terms of the Agreement, St.
Anthony Hydro has contracted to sell the output from its hydroelectric facility to Rocky
Mountain for a term of approxim ately 20 years beginning on or about November 3 0, 20 I 3 . The
PPA is structured as a 90-110% banded agreement. Rocky Mountain will pay non-levelized,
conforming energy or non-conforming energy prices "for capacity and energy adjusted for
seasonality and On-Peak/Off-Peak Hours in accordance with Commission Order No. [32337]."2
Id. at\4.
The parties have agreed that the commercial operation date for the facility is defined as
180 days after the effective date of the contract. The parties have further agreed that various
requirements will be placed upon the QF in order for Rocky Mountain to accept energy
deliveries from the facility. Id. at\ 7. Rocky Mountain will monitor compliance with these
initial requirements, and additional requirements through the full-term of the Agreement. The
PPA also provides that the renewable energy credits (RECs) will be split between the parties
with Rocky Mountain taking the first l0 years of RECs and the QF taking the last 10 years. PPA
at fl 4.5.
Section 2.1 of the PPA provides that the contract will not become effective until: (l) the
Commission has approved the PPA; and (2) the Commission has approved; (3) the parties have
closed on the sale of the hydro facility from PacifiCorp to St. Anthony; and (4) the Commission
has declared that all payments made by Rocky Mountain to the QF for the purchase of "energy
and capacity are just and reasonable, in the public interest, and that cost incurred by PacifiCorp
for purchasing capacity and energy from [the QF] are legitimate expenses, all of which the
Commission will allow PacifiCorp to recover in rates in Idaho in the event other jurisdictions
deny recovery of their proportional share of said expenses." Id. atl6.
' The Company's Application references Order No. 30480 but the proposed rates contained in the PPA are from
Order No. 32337.
STAFF COMMENTS JUNE 2O,2OI3
STAFF REVIEW
The Energy Delivery Schedule found in the PPA is based on historical monthly
generation of the facility. Specifically, each month's estimated generation is that month's
average generation from 1966 through 2001, excluding most months in which no generation
occurred. Assuming this historical annual generation, under the non-levelized rates in the PPA,
the annual energy payments by Rocky Mountain will be approximately $178,000 in2014
increasing to approximately $352,000 in 2033, or a cumulative total of $5.09 million over the 20-
year term of the PPA. The net present value of the energy payments over the life of the PPA will
be approximately $2.28 million.
The energy prices to be paid to St, Anthony Hydro are based on the avoided cost rates in
effect when St. Anthony Hydro signed the PPA on December 13, 2012. The PPA and the
Purchase Agreement upon which the PPA is contingent were negotiated prior to orders being
issued in the PURPA investigation analyzing SAR and IRP methodologies (Case No. GNR-E-
l l-03).
Although current rates would result in a slightly higher net present value over the life of
the PPA than the contract rates (approximately $2.38 million), the agreement to both sell the
hydroelectric facility and purchase the output after the sale, was made based on PURPA rates at
the time. Nevertheless the lower contract rates benefit ratepayers over the 2}-year term of the
contract. Likewise, the issues of REC ownership, delay security damages and liquidated
damages were negotiated before the Commission issued Order No. 32697. While Order Nos.
32697 and32802 in Case No. GNR-E-I1-03 have adopted standard PURPA contract terms that
differ from the terms in this agreement, the Staff determined that these terms are still reasonable
when assessing the merits of the combined sale of the project and associated PURPA purchase of
project generation.
REC ownership
The PPA stipulates that the parties split ownership of "Green Tags" (RECs) during the 20
year term of the contract. For the first 10 years, Rocky Mountain will have title to the "Green
Tags." Starting in the l lth year and extending through the rest of the term of the PPA, St.
Anthony Hydro will have title to the Green Tags.
This departs from the way in which Order No. 32697 decided the issue of REC
ownership for projects qualiffing for the SAR rates. Under Order No. 32697, published rate
STAFF COMMENTS JLrNE 20,2013
PURPA projects are assigned ownership of all RECs. However, because splitting the RECs
between St. Anthony Hydro and Rocky Mountain was negotiated as part of the St. Anthony
Hydro Project sale and does not disadvantage ratepayers, Staffhas no objection.
Delay security and liquidated damages
The PPA stipulates that St. Anthony Hydro will provide Delay Security to Rocky
Mountain in the amount of $45,1I I within 5 days of the effective date of the PPA. Actual delay
damages are calculated each day as the greater of (a) the difference between PPA rates and
market rates or (b) a fraction of the product of $45 times the Maximum Facility Delivery Rate.
These provisions differ from those specified in Order No. 32697 which would require Delay
Security in the amount of $31,500 within 30 days of Commission approval of the PPA.
Furthermore, the delay damages would be based on the difference between the PPA rates and the
market rates. However, as with the issue of REC ownership, the PPA provisions were freely
entered into by both parties as part ofthe Hydro Project sale, and do not disadvantage ratepayers.
Altemate methods of estimating energy delivery
As mentioned above, the Energy Delivery Schedule in the PPA is based on average
historical generation at the Facility. Unfortunately, the historical data used is missing almost
10% of its data points. Staff had concerns that the schedule included in the PPA may not
accurately reflect future generation. Therefore, Staff also considered two altemate Energy
Delivery Schedules. The first is also based on historical generation but instead of using monthly
averages, it is based on the median year in terms of output. Missing data in this "median" year
was estimated using regression techniques. The second is the schedule used by Rocky Mountain
in its analysis of the sale of the St. Anthony Facility in Case No. PAC-E-I3-06.
Enersv Deliverv Schedule
Energy Delivery
based on median
seneration vear
Energy Delivery per
the PPA
Energy Delivery
based on Rocky
Mountain estimates
Total energy
payments
$4.96 million $5.09 million $5.33 million
Net present value ot
payments
92.25 million S2.28 million $2.39 million
STAFF COMMENTS JLINE 20,2013
Total energy payments will likely fall in the range of $4.96 to $5.33 million with a corresponding
net present value in the range of $2.25 to $2.39 million. Based on this analysis, Staff believes
that historical generation provides a reasonable approximation of future energy delivery.
RECOMMENDATION
Staff recommends approval of the PPA as submitted. Staff believes that the PPA is
reasonable and does not disadvantage ratepayers. Staff further recommends that the costs
incurred by Rocky Mountain for purchasing capacity and energy from St. Anthony Hydro be
accepted as legitimate expenses subject to approved allocation and recovery from the Idaho
jurisdiction.
Respectfully submitted this ZOD day of June 2013.
Technical Staff: Cathleen McHugh
i:umisc:comments/pace l3.Tdhkkcm comments
Donald L. Hodell, il
Deputy Attorney General
STAFF COMMENTS JI-INE 20,2013
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2OTH DAY OF JUNE 2013,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC.E-13-07, BY E.MAILING AND MAILING A COPY THEREOF,
POSTAGE PREPAID, TO THE FOLLOWNG:
TED WESTON DANIEL E SOLANDER
ID REGULATOR.Y AFFAIRS MANAGER SENIOR COUNSEL
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 23OO
SALT LAKE CITY UT 841I I
E-MAIL: ted.weston@,pacificorp.com
E.MAIL ONLY:
datareq uest@f'acifi corp. com
DATA REQUEST RESPONSE CENTER BRUCE GRISWOLD
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 23OO
SALT LAKE CTTY UT 84I11
E-MAIL: [e-mail]
DIRECTOR, SHORT-TERM ORIGINATION
PACIFICORP
825 NE MULTNOMAH SUITE 18OO
PORTLAND OR 97232
E-MAIL: bruce. [e-mail]
CERTIFICATE OF SERVICE