20210428Comments.pdf

'' .l , r,'i-- ;l... - t v l-. l-)JOHN R. HAMMOND, JR.
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720.0074
(208) 334-03s7
IDAHO BAR NO. 5470
IN THE MATTER OF ROCKY
MOUNTAIN POWER'S APPLICATION
FOR APPROVAL OR REJECTION OF
THE POWER PURCHASE AGREEMENT
WITH COMMERCIAL ENERGY
MANAGEMENT,INC.
CASE NO. PAC.E.21-05
COMMENTS OF THE
COMMISSION STAFF
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Street Address for Express Mail:
1 I33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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The Staff of the Idaho Public Utilities Commission ("Staff') submits the following
comments.
BACKGROUND
On March 3,202I, Rocky Mountain Power, a division of PacifiCorp ("Company")
requested the Commission approve or reject a replacement Power Purchase Agreement ("PPA")
with Commercial Energy Management, Inc. ("Seller") for the purchase of energy and capacity.
The Seller owns and operates a 90O-kilowatt hydroelectric qualiffing facility ("Facility")
under the Public Utility Regulatory Policies Act of 1978 ("PURPA"). The Facility is on the
Portneuf River east of Lava Hot Springs in Bannock County, Idaho.
The Seller and the Company's first contract for the sale of energy from the Facility was
dated November 12, 1991. In June 2020, the parties extended that contract through March l,
2021. The replacement PPA contains published avoided cost rates for a non-seasonal hydro
STAFF COMMENTS APRIL 28,2021
qualifuing facility ("QF") with capacity payments for the entire term of the agreement, with no
sufficiency period.
STAFF ANALYSIS
Staff s review focused on the 90/110 rule; long-range, day-ahead, and real-time
forecasting; eligibility for capacity payments; avoided cost rates; and a lapsed contract period.
901r10 Rule
Staff confirmed the PPA contains the 90/110 Rule as required by Commission Order
29632. The 90/110 Rule requires a QF to provide utilities with a monthly estimate of the amount
of energy the QF expects to produce. If the QF delivers more than 110 percent of the estimated
amount, then the utility must buy the excess energy for the lesser of 85 percent of the market
price or the contract price. If the QF delivers less than 90 percent of the estimated amount, then
the utility must buy total energy delivered for the lesser of 85 percent of the market price or the
contract price. See Order No. 29632 at20.
1. Monthly Estimates
The Application states that the Facility's estimated annual net output over the term is
2,187 megawatt-hours ("MWh")lyear. However, page 3 of the PPA states Expected Net Output
is 2,300 MWh. Page 15 of the proposed PPA shows the monthly estimates, which results in an
estimated amount of 2,310 MWh/year. In Response to Staff s Production Request No. 3, the
Company explained that2,l87 MWh/year stated in the Company's Application was incorrect.
The2,3l0 MWh/year is derived from summing the figures in Section 4.9 on page l5 of the PPA
(Energy Delivery Schedule) and is the correct forecast of annual MWh as represented by the
Facility. The 2,300 MWh/year on page 3 was inadvertently rounded down to 2,300 MWh/year
from 2,310 MWh/year.
Staff believes that for the purpose of the 90/l l0 Rule, only the monthly estimates in
Section 4.9 are used, instead of any of the annual estimates. However, Staff is concerned about
the definition of the Expected Net Output stated on page 3 of the PPA:
2STAFF COMMENTS APRIL 28,2021
'oExpected Net Output" means 2300 MWh (depends on run-of-river flow) of Net
Output in the first Contract Year, as applicable, by an annual degradation factor of
1% (depends on run-of-river flow) per Contract Year, measured at the Point of
Delivery. Seller estimates that the Net Output will be delivered during each
Contract Year, measured at the Point of Delivery. Seller estimates that the Net
Output will be delivered during each Contract Year according to the Expected
Monthly Net Output provided in Exhibit A-1, as reduced each Contract Year, as
applicable, by the annual degradation factor.
Contrary to this definition, in response to Staff s Production Request No. 4, the
Company stated that the Expected Net Output definition is the initial forecast of
generation, meant to inform expectations of generation at the time of contracting, and this
forecast is not updated after contracting.
Staff believes that if the definition of Expected Net Output is necessary in the
PPA, it should be modified to reflect that the forecast is not updated after contracting and
should use the correct amount of 2,310 MWh/year.
2. Advanced Notice
The PPA uses a lO-day advanced notice to revise future monthly estimates. If 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:
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 Order Nos. 34263 and348l0, for example.
In addition to the 1O-day advanced notice, the PPA requires that beginning the end of the
ninth full calendar month after the Effective Date, and at the end of every third month thereafter,
Seller shall supplement the Energy Delivery Schedule with three additional months of forward
estimates, such that the Energy Delivery Schedule will provide at least three months of
scheduled energy estimates at all times. See Section 4.9.2. of the PPA. Staff believes the
JSTAFF COMMENTS APRIL 28,2021
statement should be changed to "at least sixl-months of scheduled energy estimates at all times"
to resolve the inconsistency. For example, at the end of the ninth full month after the Effective
Date, the Seller may provide three additional months of estimates for January, February, and
March of the following year. This effectively provides six months of estimates, including
October, November, and December of the first year and January, February, and March of the
second year. Staff recommends this inconsistency be corrected in the PPA.
3. Morket Prices
The Company uses the Palo Verde Hub to establish market prices for the purpose of the
90/110 Rule. Staff believes the Company's determination of market prices is fair and
reasonable.
Da and Real-Time F
The Seller agrees to provide an annual update to the 12X24 generation profile in Section
6.7 .1. Although the Commission does not require 12X24 generation profiles for contracts that
use published rates, Staff does not oppose this provision agreed upon by the parties.
The Seller also agrees to pay for the day-ahead and real-time forecasting services in
Section 5.7.2. Although the Commission does not require day-ahead and real-time forecasting
services, Staffdoes not oppose to this provision agreed upon by the parties.
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).
The Seller was paid for capacity at the end of the original contract, and during the
original contract term, the Company has added significant resources to meet its capacity
I Order No. 29632 states that QFs shall initially provide ldaho Power with one year of monthly generation estimates
and beginning at the end of month nine and every three months thereafter provide the Company with an additional
three months of forward estimates. QF opportunities for estimate revisions begin at the end of month three and every
three months thereafter for the forward period beginning the fourth month out through the end of the estimate period.
For planning purposes, following the first year the Company on a rolling basis will always have six months of QF
production estimates.
4STAFF COMMENTS APRIL 28,2021
deficiencies. Therefore, Staff is confident that the project has contributed to meeting the
Company's need for capacity during the term of the original 1991 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
verified that the rates are correct.
Lapsed Contract Period
The original contract expired on March 1,2021, and the initial delivery date in the PPA is
on the same date. However, the proposed effective date of the PPA would be after any
Commission approval of the PPA. See Section 2.1 of the PPA. Therefore, there is a lapsed
contract period between March 1,2021and the effective date.
In a recent case AVU-E-19-16, the Commission approved both energy and capacity
payments during a lapsed contract period for Stimson Lumber, which never stopped operating.
Staff verified with the Company that the Facility in this case has continued to be operational;
thus, Staff recommends energy and capacity payments during the lapsed contract period using
published rates in the PPA.
STAFF RECOMMENDATION
Staff recommends the parties file an amended PPA that includes the following updates:
1. The definition of Expected Net Output should be modified to reflect that the forecast
is not updated after contracting and should use the correct amount of 2,310
MWh/year.
2. The inconsistency of "three months" in Section 4.9.2. of the PPA should be corrected
to oosix months".
Staff recommends 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. Staff also recommends
5STAFF COMMENTS APRIL 28,2021
both energy payment and capacity payment for the lapsed aonfract period betureen March l,
}Ail aurdthe effective date of the FPA, using the published rates in the PPA.
**,of April2O2l.Respectfully submitted this
Technical Staff: Yao Yin
Rachelle Famsworth
i:umise/oommomt*/paoe2l.5jhryrf oomments
Jr.
Attomey Goneral
6STAIIF COMMENTS APRIL 28,2CI21
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 28TH DAY OF APRIL 2021,
SERVED THE FOREGOING COMMENTS OF TIrE COMMISSION STAFX" IN
CASE NO. PAC.E.2I.O', BY E.MAILING A COPY THEREOF, TO THE
FOLLOWING:
TED WESTON
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84116
E-MAIL : [e-mail]
idahodockets @pacifi corp. com
DATA REQUEST RESPONSE CENTER
E-MAIL OIILY:
datarequest@paci fi corp. com
EMILY WEGENER
ROCKY MOUNTAIN POWER
I4O7 WN TEMPLE STE 320
SALT LAKE CITY UT 84I 16
E-MAIL: emily.wegener@,pacificorp.com
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SECRETART
CERTIFICATE OF SERVICE