20151110Comments.pdf

DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8370
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-59t8
Attorney for the Commission Staff
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF PACIFICORP DBA
ROCKY MOUNTAIN POWER'S APPLICATION )
TO APPROVE CAPACITY DEFICIENCY FOR )
AVOIDED COST CALCULATIONS.)
)
)
)
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Daphne Huang, Deputy Attorney General, and in response to the Notice of
Application and Notice Modified Procedure issued October 20,2015, submits the following
comments.
BACKGROUND
On October 13, 2015, PacifiCorp dba Rocky Mountain Power filed an Application asking
the Commission to approve 2020 as its updated capacity deficiency period for use in its avoided
cost calculations under the Public Utility Regulatory Policies Act (PURPA). Under PURPA,
electric utilities must purchase electric energy from qualifying facilities (QFs) at rates approved by
the applicable state regulatory agency - in Idaho, this Commission. l6 U.S.C. $ 824a-3; Idaho
Power Co. v. Idaho PUC,l55 Idaho 780,789,316 P.3d 1278,1287 (2013). The purchase or
CASE NO. PAC.E.15-12
COMMENTS OF THE
COMMISSION STAFF
STAFF COMMENTS NOVEMBER 10, 2OI5
"avoided cost" rate shall not exceed the "'incremental cost' to the purchasing utility of power
which, but for the purchase of power from the QF, such utility would either generate itself or
purchase from another source." Order No. 32697 at7, citing Rosebud Enterprises v. Idaho PUC,
128 Idaho 624,917 P.2d 781 (1996); 18 C.F.R. 5 292.101(b)(6) (defining "avoided cost").
The Commission has established two methods of calculating avoided cost, depending on
the size of the QF project: (1) the surrogate avoided resource (SAR) methodology, and (2) the
Integrated Resource Plan (IRP) methodology. See Order No. 32697 at7-8. At issue in this case is
the SAR methodology, which the Commission uses to establish "published" avoided cost rates.
/d. Published rates are available for wind and solar QFs with a design capacity of up to 100
kilowatts (kW), and for QFs of all other resource types with a design capacity of up to 10 average
megawatts (aMW). /d
In calculating avoided cost, the Commission found it "reasonable, appropriate and in the
public interest to compensate QFs separately based on a calculation of not only the energy they
produce, but the capacity that they can provide to the purchasing utility." Id. at 16. As to the
capacity calculation, the Commission found it appropriate "to identify each utility's capacity
deficiency based on load and resource balances found in each utility's IRP." Id. The Commission
elaborated:
In calculating a QF's ability to contribute to a utility's need for capacity, we
find it reasonable for the utilities to only begin payments for capacity at such
time that the utility becomes capacity deficient. If a utility is capacity surplus,
then capacity is not being avoided by the purchase of QF power. By including
a capacity payment only when the utility becomes capacity deficient, the
utilities are paying rates that are a more accurate reflection of a true avoided
cost for the QF power.
Id. at2l.
The Commission directed that "when a utility submits its [IRP] to the Commission, a case
shall be initiated to determine the capacity deficiency to be utilized in the SAR Methodology." 1d
at 23. The Commission also stated "utilities must update fuel price forecasts and load forecasts
annually - between IRP filings. . . . We find it reasonable that all other variables and assumptions
utilized within the IRP Methodology remain fixed between IRP filings (every two years)." Id. at
22.
STAFF COMMENTS NOVEMBER 10, 2OI5
STAFF ANALYSIS
Rocky Mountain Power filed its 2015 IRP with the Commission on March 31,2015. (Case
No. PAC-E-15-04). The Company's 2015 IRP includes the results of its capacity balance
calculated for summer peak loads only. Rocky Mountain Power's capacity balance from its 2015
IRP is reproduced below for reference.
Line
1
2
3
4
Rocky Mountain PowerTable 1
2015 IRP - System Capacity Loads and Resources without Resource Additions
CalendarYear 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2023
5
6
7
8
9
10
11
t2
13
Total Resources
Obligation
Reserws
Obligation + Reserrrcs
System Position 2015
Arailable Front Ollice Transactions
Res ource S ufliciency / (Defi ciency)
10,568 10,043 10,143 10,21'7 10,1M 10,124 10,486
10,104 9,930 10,089 t0,225 10,333 10,452 10,569
1,333 1,310 1,33t 1,349 1,363 1,378 t,393
1.437 11.240 '.n.420 11,573 11,696 n,830 11,963
10,446 10,458 10,425 10,310
10,674 10,788 10,832 10,897
1,407 1,422 1,428 1,436
12.081 t2.2r0 12.259 12.333
(869) (r,197) (1,277)0.J57) (r,552) (1.706) (1,477) (r,6Js) (r,752) (r,8J4) (2,02J)
1,670 r,670 t,670 1,670 1,670 1,6'70 t,670 1,670 r,670 1,670 1,670
801 412 313 tt7 (36) t92 (82) (r 6s ) (Js.l)
The 2015 IRP shows that the Company first becomes capacity deficient by 36 MW in 2020
(line l3 in Rocky Mountain Power Table I above). The Company notes that available system
capacity is increased in the summer of 2021 with the expiration of a legacy exchange contract, and
the system falls short again in2023.
Pursuant to Order No. 32697, Rocky Mountain has updated its capacity balance based on
the following:
1) changes to the Company's load forecast;
2) addition of 564 MW of nameplate capacity ftom23 additional QF contracts signed with
QFs since preparation of the 2015 IRP; and
3) termination of two QF contracts that were included in the 2015 IRP, thus eliminatingS2
MW of nameplate capacity and roughly l2 MW of system capacity contribution.
After accounting for these factors, Rocky Mountain states that it now first becomes
capacity deficient by 167 MW in the summer of 2025 (line l6 in Rocky Mountain Power Table2
as Modified by Staff, shown below). The Company therefore requests that2025 be approved as
the first capacity deficiency year for calculating published avoided cost rates.
STAFF COMMENTS NOVEMBER 10, 2015
Li ne
t
2
3
4
Rocky Mountain Power Table 2 as Modified by Staff
Updated System Capacity Loads and Resources
CalendarYear 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
5
6
7
8
9
10
11
72
13
14
15
16
(25)(sl)(s6)
ll,412 11,189 11,364 I1,557 11,'.122 |,845 11,983 12,094 12,220 12,263 12,340
0 0 213 216 214 213 212 210 209 208 206
(l) ( 12) lt2) (12) (12) (12) (12) (12) ( 12) (t2) (12)
10,567 10,031 10,343 10,420 10,346 t0,325 10,685 10,644 10,655 10,620 10,504
(n.14) (1,159) (r,02r) (1,137) (1,376) 0,s20) fi,29tt) 0,45r) {1,56s) (r,6.1J) (I,ttJ7)
ArailaHe Front OIIice Transactions 1,670 1,670 1,670 1,6'70 1,670 1,670 1,670 1,670 1,670 1,670 1,670
(Deficiency) 825 5l t 219 104 27 (167)
In determining its first capacity deficiency, Rocky Mountain proposes to include 1670 MW
of available Front Office Transactions (line 15 in the table above). As described in the Company's
2015 IRP, Front Office Transactions (FOTs) are proxy resources, assumed to be firm, that
represent procurement activity made on an ongoing forward basis to help the Company cover short
positions. FOTs can be made years, quarters or months in advance, however, most transactions
made to balance the Company's system are made on a balance of month, day ahead, hour ahead,
or intra-hour basis. Rocky Mountain states that it develops its FOT limits based upon its active
participation in wholesale markets, its view of physical delivery constraints, market liquidity and
market depth, and with consideration of regional resource supply. (PacifiCorp 2015 IRP atI28-
tze).
Staff believes it is more reasonable to use the Updated System Position to represent the
Company's capacity balance in the SAR model (line 13 in the table above), which does not
include the available FOTs. Staff believes that FOTs generally do not represent committed market
purchases, except perhaps in the very near term. Uncommitted resources, regardless of whether
they are FOTs (i.e., market purchases), Company-owned generation plants, or long-term power
purchase agreements, should not be counted in determining a utility's capacity deficit position for
purposes of SAR avoided cost calculations. Absent a showing otherwise, Staff assumes that none
of the Front Office Transactions shown above represent committed market purchases.
Updated Load Forecast knpct
U$ated Obligation a Reserves
Signed PPAs not included in IRP
Terminated PPAs included in IRP
Uflated Resources
USated System Position 2015
532 150
STAFF COMMENTS NOVEMBER 10, 2015
Moreover, Staff believes it could be inconsistent with PURPA to allow uncommitted
market purchases to affect avoided cost rates. Under PURPA, utilities have an obligation to
purchase any energy and capacity made available from Qualifying Facilities (QFs). l8 C.F.R.
$292.303(a). This "must purchase" obligation, Staff believes, does not permit utilities to reject
offers to sell by QFs in lieu of utility purchases from the market. Stated differently, utilities
should not be allowed to rely on uncommitted, non-specific market purchases as an excuse for not
needing capacity from QFs. In addition, PURPA requires utilities to uphold the indifference
standard as reflected in the definition of avoided costs. Avoided cost is defined as the
"'incremental cost' to the purchasing utility of power which, but for the purchase of power from
the QF, such utility would either generate itself or purchase from another source." l8 C.F.R. $
292.101(b)(6). Relying on uncommitted market purchases (FOTs) to satisfy capacity deficiencies,
when the QF could provide capacity as an alternative, would disadvantage the QF by producing
lower avoided cost rates.
Finally, including FOTs in determining the utility's first capacity deficit would be
inconsistent with the Company's practices in the past. The current SAR model, which includes
inputs based on the Company's 2013 IRP, adopts the system position, exclusive of FOTs, to
represent the capacity balance.
In verbal conversations with the Company, Rocky Mountain indicated that it included
FOTs in this filing to establish its first deficit year, in part, because it believed the inclusion would
be consistent with Idaho Power's practices in the past. While inclusion of FOTs (uncommitted
market purchases) may, in fact, be consistent with Idaho Power's past practices, Staff stands by its
position in this case that they should not be included in the first deficit determination. Staff
believes it may be necessary to more closely examine Idaho Power's first capacity determination
in its next filing.
If Staff s proposal to exclude Front Office Transactions is accepted, then Rocky Mountain
Power is still currently deficit in 2015, just as it has been since its system position was determined
in 2013 (see table below). Consequently, the Company's avoided cost rates under the SAR
methodology do not change.
Capacity Balance in 2013 and 2015
Calendar Year
System Position 2013
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(r.228) (r,469) (1,688) (r,rJ88) (2,r00) (2,214) (2,08r) (2,J08) (2,308) (2,308) (2,308
System Position 2015 (8.14) (1,r59) (1.021) (1,r37) (t,376) (r,520) (1,298) (1,451)(1,s65) (1,643) (1,837
STAFF COMMENTS NOVEMBER 10, 2015
RECOMMENDATIONS
Staff recommends that the Commission reject Rocky Mountain Power's request to adopt
2025 as the Company's first capacity deficit for use in the SAR model. Instead, Staff recommends
the Commission adopt summer 2015 as the first capacity deficit, reflecting the Company's
Updated System Position exclusive of available Front Offrce Transactions.
Respectfully submitted this I oL day of November 2015.
Technical Staff: Rick Sterling
Yao Yin
i:umisc:comments/pacel5. l2djhrpsyy comments
6
Attomey General
STAFF COMMENTS NOVEMBER IO, 2015
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS l0th DAY OF NOVEMBER 2015,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E.15-12, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
BRIAN DICKMAN
PACIFICORP
825 NE MULTNOMAH STE 2OOO
PORTLAND OR 97232
E-MAIL: brian.dickman@pacifi com.com
DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
datareq uest@pacifi com. com
TED WESTON
WONNE HOGLE
ROCKY MOTINTAIN POWER
2OI S MAIN ST STE 23OO
SALT LAKE CITY UT 8411I
E-MAIL: [e-mail]
wonne.ho gel @pacifi corp.com
CERTIFICATE OF SERVICE