20200810Comments.pdf

MATT HLINTER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720.0074
(208) 334-03 l 8
IDAHO BAR NO. 10655
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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 ROCKY MOUNTAIN
POWER'S APPLICATION FOR APPROVAL OF A
POWER PURCHASE AGREEMENT BETWEEN
PACTFICORP AND BIRCH HYDRO COMPANY
CASE NO. PAC.E-20.07
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Matt Hunter, Deputy Attomey General, submits the following comments.
BACKGROUND
The Facility has a nameplate capacity of 2.65 megawatts. The Power Purchase
Agreement (*PPA") contains published non-seasonal, non-levelized avoided cost rates for a
20-year term.
The Qualiffing Facility ("QF") has been delivering encrgy to Rocky Mountain Power
("Company") in accordance with a Public Utility Regulatory Policies Act of 1978 ("PURPA")
contract dated August 2l , 1984. By letter dated March 30, 2006, the Company and Birch Hydro
Company agreed the existing PURPA contract will expire at midnight on March 31,2022.
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STAFF COMMENTS AUGUST IO,2O2O
STAFF ANALYSIS
Early Filing
The current contract will not expire until March 31,2A22, and the Application for this
proposed, renewal contract was filed on June 3,2020, almost two years ahead of time. The
Company's Schedule No. 38 ("Qualiffing Facility Avoided Cost Procedures") requires that the
scheduled commercial operation date must not be greater than thirty (30) months after the
execution date of the power purchase agreement. The QF is scheduled to commercially operate
from April 1,2022, and the PPA was executed on May 19,2020. There are approximately 22.5
months between the two dates, which complies with Schedule No. 38.
90/110 Rule
Staff has reviewed the contract provisions related to the 90i I l0 rule and believes the
monthly estimates are incorrect and the firm market price needs to be converted to a non-firm
market price. Staff recommends that the parties update the monthly estimates and convert lirm
market price to non-firm market price using an 82.4%o discount.
1. Monlhly Estimotes
The Application states that the Seller has demonstrated to the Company's reasonable
satisfaction that "the likelihood the facility, under average design conditions, will generate at no
more than 2.5 aMW in any calendar month." IJowever, Exhibit A of the PPA shows that the
expected monthly net output ranges from 875 aMW to 1673 aMW. Staff believes the parties are
mistaken about the units used: the estimates should have used kWh, instead of MWh. Therefore,
Staff recommends that the parties update the Exhibit A to include correct monthly estimate
information.
2. Advanced Notice Timefratne
The PPA uses a l0-day advanced notice to revise future monthly estimates. (lf the
Company develops a web-based or other electronic noticing or scheduling system for the Seller
to provide estimates, the timeframe will be revised to a 5-day advanced notice.) Staff believes
any timeframe between a month in advance and 5 days in advance is reasonable.
The Commission allowed a month-ahead timeframe in Order No. 33103, which states:
2STAFF COMMENTS AUGUST 10,2O2O
The intent of a QF providing generation estimates has always been to
assist the utility in forecasting and operational planning so that the utility can
provide the most reliable service possible to its customers. We find that a
provision allowing for monthly generation estimate updates is consistent with that
purpose.
Later, the Commission also allowed a 5-day timeframe in several cases, recognizing that
monthly estimates provided closer to the time of delivery can improve the accuracy of input used
for short-term operational planning. See, e.g., Case Nos. IPC-E-19-01, IPC-E-19-03,
IPC-E-19-04, IPC-E-19-07, and IPC-E-19-12.
Staffbelieves any timeframe between a month and 5 days is reasonable from the utility's
planning perspective and thus recommends approval of the proposed l0-day advanced notice
(and 5-day if using a web-based or other electronic noticing or scheduling system).
3. Market price
Staff finds the Company's determination of firm market price is fair and reasonable, but
the price needs to be discounted to convert to non-firm market price for the purpose of 90/l10.
Firm Market Price Index is defined on Page No. 4 of the PPA as:
[T]he hourly value calculated based on the average prices reported by the
Intercontinental Exchange, Inc. (lCE) Day-Ahead PV On-Peak Index and the ICE
Day-Ahead PV Off-peak Index (each an ICE Index) for a given day, weighted by
the count of hours for each ICE Index on such day, multiplied by the hourly
CAISO day-ahead market locational marginal price for the "PACE.
DGAP_PACE-APND" location and divided by the average of the same CAISO
index over all hours in such day.
In this definition, PV refers to the Palo Verde Hub. The Company explained through Response
to Staff s Production Request No. 11 that the Idaho service territory is located within the
PacifiCorp East balancing authority area, which is more closely connected to Palo Verde than
Mid-Columbia. Therefore, the Company uses the Palo Verde Hub instead of the Mid-Columbia
Hub. The ICE On-Peak Index at the Palo Verde Hub, however, spans a wide range of conditions
that are not adequately represented by an average value, so the Company further adjusts the
numbers with the California Independent System Operator's (CAISO) day-ahead market index to
provide hourly granularity. The adjustment is based on the locational marginal price for
"PACE.DGAP_PACE-APND" location, which is the Default Generation Aggregate Price for the
PacifiCorp East balancing authority area. This price reflects an average of generation resources
JSTAFF COMMENTS AUGUST 1O,2O2O
in PacifiCorp East. Lastly, the hourly prices are averaged over a month to arrive at a monthly
value for the purpose of 90/110. Staff believes that this method reflects the Company's actual
operations and transactions and is a fair representation of firm market price values.
If the QF delivers more than I l0 percent of the estimated amount, energy delivered in
excess of I l0 percent is priced at the lesser of 85 percent of the market price or the contract
price. [f the QF delivers less than 90 percent of the estimated amount, total energy delivered is
priced at the lesser of 85 percent of the market price or the contract price. Order No. 29632.
Hou'ever, the market price ref-erred to in Order No. 29632 is a non-firm market price, not a firm
market price. Originally, in Order No.29632, market price was defined as o'the monthly
weighted average of the daily on-peak and off-peak Dow Jones Mid-Columbia Index (Dow
Jones Mid-C Index) prices for non-firm energy." However, the Dow Jones Mid-C Index was
discontinued in 2013, and Case No. IPC-E-13-25 was initiated to find a replacement market
index for non-firm energy. Because firm energy is more valuable than non-firm energy, the
Commission authorized that 82.4o/o of the monthly arithmetic average of each day's
Intercontinental Exchange ("ICE") daily firm Mid-C Peak Avg and Mid-C Off-Peak Avg index
prices can be used as a replacement market index for non-firm energy. Order No. 33053. Since
then, the 82.4% discount has been used in Idaho Power's and Avista's PURPA contracts nhen
non-firm market prices are not available. Staff believes that 82.4% is a fair and reasonable
generic discount to be applied to convert firm market price to non-firm market price.
In addition, the Company stated through Response to Staff s Production Request No. 12
that the term "lndex Price" in Exhibit K was an error; it should have been a reference to the
"Firm Market Price Index". The term "Mid-C-85" should have been changed to "PV-85" to
reflect the use of the Palo Verde Hub. Therefore, Staff recommends amending Exhibit K to
correct the mistakes and incorporate the use of the 82.4% discount throughout the PPA.
Capacity Payment
A QF only receives compensation for capacity when the utility is capacity deficient,
unless it is a renewal/extension project that was paid for capacity at the end of the original
contract (see Order No. 32697), or has contributed to meeting the utility's capacity needs during
the original contract term (see e.g., Case Nos. IPC-E-19-04,IPC-E-19-30, and IPC-E-19-35).
Staff is uncertain if the design of the rates reflect ed a capctciy, deficit or an energ/ de/icit;
thus Staff is uncertain if the QF is paid for capacity at the end of the original contract term.
4STAFF COMMENTS AUGUST IO,2O2O
However, during the original contract term, the Company has added significant resources to meet
its capacity deficiencies. For example, Lake Side 2 was brought online in2014 to meet the
Company's capacity deficiency identified in its tntegrated Resource PIan (IRP). See Page 9 of
Volume I of PacifiCorp's 201I IRP, Case No. PAC-E-l l-10. Therefore, Staff is confident that
the project has contributed to meeting the Company's need for capacity during the term of the
original l99l contract and should receive full capacity payments in the proposed PPA.
Avoided Cost Rates
Staff reviewed the non-seasonal hydro avoided cost rates contained in the PPA and
believes the rates are colrect. The PPA was executed on May 19,2020, and the parties used the
rates approved in Order No. 34350, which became effective on June 1,2019.
STAFF RECOMMENDATION
Staff recommends the parties file an amended PPA that includes the following updates:
l. Update Exhibit A to include correct monthly estimate information.
2. Incorporate the 82.4% discount for purposes of converting firm market prices to non-
firm market prices throughout the PPA.
3. Correct mistakes and errors in Exhibit K as described above.
Staffrecommends approval of an amended PPA with these updates and also recommends
that, if the updates described above are made by the Company, the Commission declare that the
avoided cost prices set forth in the Agreement are just and reasonable, in the public interest, and
that the Company's incurrence of such costs are legitimate expenses.
Respectfully submitted this lO* day of August 2020.
DkP
Matt Hunter
Deputy Attorney General
Technical Staff: Yao Yin
Rachelle Farnsworth
i : umisc/commentVpace20. Tmhyyrf comments
5STAFF COMMENTS AUGUST IO,2O2O
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 1OTH DAY OF AUGUST 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMTSSTON STAFF, IN CASE
NO. PAC.E.}O.O7, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
TED WESTON
ROCKY MOUNTAIN POWER
I4O7 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84I16
E-MAIL: ted.weston@pacifi corp.com
idahodockets@paci fi coro. com
ADAM LOWNEY
McDOWELL RACKNER GIBSON
4I9 SW I ITH AVE SUTTE 4OO
PORTLAND OR 97205
E-MAIL: [e-mail]
JACOB A McDERMOTT
ROCKY MOUNTAIN POWER
I4O7 WESTNORTH TEMPLE STE 320
SALT LAKE CITY UT 84I 16
E-MAIL: [e-mail]
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datarequest@Fasi fi corp. com
SECRETAR
CERTIFICATE OF SERVICE