20230808Comments of the Commission Staff.pdf

MICHAEL DUVAL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074
[phone]
IDAHO BAR NO.11714
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR )CASE NO.IPC-E-23-08
PARTICIPATION IN THE WESTERN )
RESOURCE ADEQUACYPROGRAM )COMMENTS OF THE
)COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission,by and through its Attorneyof
record,Michael Duval,Deputy AttorneyGeneral,submits the followingcomments.
BACKGROUND
On March 14,2023,Idaho Power Company ("Company")filed an application
("Application")with the Idaho Public Utilities Commission ("Commission")for an order:"(1)
acknowledging the potential for long-term cost savings associated with participation in the
Western Resource Adequacy Program ("WRAP")and (2)allowing the Company to recover
WRAP-associated costs in a future rate proceeding."Application at 1.The Company filed the
Direct Testimony of Alison Williams and Nicole Blackwell in support of its Application.The
Company requested its Application be processed under Modified Procedure.
The WRAP is a regional program in the western United States,administered by the
Western Power Pool ("WPP").The Company states,"[a]t its simplest ...[the WRAP]is an
STAFF COMMENTS 1 AUGUST 8,2023
insurance program of sorts that makes reserved resources available to participants during short-
term periods of resource deficiency."Application at 2.
As the Company indicates,the WRAP is comprised of two programs ("Forward-
Showing"and "Operations")which run across the summer and the winter season.As the
Company indicates,the Forward-Showing program concerns aspects related to regional resource
planning whereas the Operations program "facilitates the identification of real-time capacity
needs and the sharing of energy and capacity between participants during the summer and winter
seasons."Id.at 3.
The Company participated in the non-binding Forward-Showing program but also plans
to participate in the Operations program this summer with the tentative goal of beginning
"binding participation in the summer of 2027."Id.at 4.
The Company "estimates that the annual cost of WRAP participation will be between
$537,420 and $744,555,along with a one-time charge of $152,856."Id.The Company asserts
that participation in WRAP will result in significant cost-savings.
STAFF ANALYSIS
Staff recommends that the Commission acknowledgethe likelihood of long-term cost
savings associated with participation in the WRAP.Staff also recommends that the Commission
allow the Company to recover WRAP-associated costs after it can show prudency and after
customers begin receiving benefits from the program.
Long-TermCost Savings
Staff believes that the Company's participation in the WRAP is likelyto yield long-term
cost savings for customers.The primary WRAP-related expense is the monthlyadministrative
charge the program administrator,WPP,will use to cover the program's operating and
administrative expenses.The Company states that the monthly charge will depend on the
WRAP participant count and the Company's monthly50th percentile ("P50")peak load.
Williams Direct at 13-14.Staff examined the WRAP tariff,the Company's assumptions,and its
calculations for the annual expenses.Staff believes the estimated range of values is reasonable.
Other WRAP-related expenses are possible,but there are penalties that the Company
would incur if it did not meet the program's obligations,or an exit fee if the Company opts to
STAFF COMMENTS 2 AUGUST 8,2023
withdraw from WRAP.The Company states the likelihood of incurringthese expenses is small,
and the customer's responsibility for them would depend on the circumstances.Response to
Production Request No.21.Staff believes this is a reasonable assertion and therefore considered
only the Administrative Charge in its analysis of cost-effectiveness.
The Company asserts that the primary WRAP-related benefit will be an avoided cost of
generation capacity,which it estimates to be $2.1 million per year.Application at 4.This value
was determined through three calculational steps.First,the Company used its Reliabilityand
Capacity Assessment Tool to estimate the perfect generation avoided (14 MW)due to the WRAP
resource.Second,the Company converted the perfect generation to the equivalent amount of
natural gas generation (15.6 MW).Third,the Company converted the amount of avoided natural
gas generationto a cost using the 2021 IRP surrogate resource cost and escalated it with two
years of inflation at 2.3 percent,for a final estimate of $2.1 million.Williams Direct at 16.
Staff examinedthe Company's assumptions and calculations for deriving this value and
believes they are reasonable.However,different assumptions would significantlyalter the
results.For example,if the Company assumed two WRAP events per year,the avoided costs
would be over 60%greater.Assuming zero events would yield no avoided costs.Another
example is the assumption of having 100 MW of available WRAP capacity on the highest-risk
day of the year in its models.Assuming 50 MW,or 150 MW,of available capacity would yield
different results.The Company asserts that it will assess the accuracy of its assumptions as it
becomes more familiar with the WRAP.
Importantly,the Company's theoretical calculation is not the final determination of
avoided cost.Staff believes that the theoretical calculation only becomes a real avoided cost
when the Company officially reduces its resource capacity requirement by an equal amount.
Overall,Staff agrees that once the Company reduces its generationcapacity requirement,
the annual financial cost avoidance is likely to be 3 to 4 times greater than the annual expense,
which would significantlybenefit customers.
Non-Financial Benefits
In addition to the likely cost savings,the Company and customers should benefit in at
least three ways through participation in the WRAP.
STAFF COMMENTS 3 AUGUST 8,2023
First,the fundamental purpose of the WRAP is to improve resource adequacy for all
participants.WPP designed the WRAP to be an insurance program for participants who
experience a short-term resource deficiency that would be used only after all other options were
exhausted.Staff agrees that the availability of this type of insurance is likelyto improve the
overall reliability of the Company's system.
Second,the Company believes that participation will provide valuable insight into
resource adequacy across the Western United States.As part of the Forward-Showing program
within the WRAP,all participants must submit forecasts of their expected loads and resources
for the upcoming summer or winter season.Staff agrees that consolidation and standardization
of this information will provide the participants with important insights into regional resource
adequacy.
Third,participation in the WRAP will expand the Company's options for buyingand
selling power.Althoughthe WRAP is not a market,it requires participants to sell and buy
power to one another if one of them has a short-term capacity shortfall.During a capacity
shortfall event,some participants will sell and buy through the WRAP and therefore have limited
availability in the bi-lateral market.During the highest risk days of each season,WRAP-
mandated energy sales could be the only source of surplus energy.Therefore,Staff agrees that
this is an important non-financial benefit.
Because of these non-financial benefits in combination with the likely financial benefits,
Staff recommends the Commission acknowledge the likelihood of long-term cost savings
associated with participation in the WRAP.
Recoveryof Expenses
Staff recommends the Commission allow the Company to recover WRAP-associated
costs after customers begin receiving a benefìt,and after the Company demonstrates prudency.
The Company reports paying a one-time charge of $152,856 in early 2022 and has began
paying the monthly administrative charge.The Company expects the monthlyadministrative
charge to continue for as long as it participates in the program.
Despite the Company incurring costs now,customers will not see a financial benefit until
the Company reduces its resource capacity requirement.However,the Company cannot make
this reduction until the WRAP becomes binding on the Company and a critical mass of the
STAFF COMMENTS 4 AUGUST 8,2023
participants.Currently,the Company anticipates the summer of 2027 will be the binding year,
but it continues to evaluatewhether an earlier binding date would be beneficial.Response to
Production Request No.8.Staff believes it would be premature to assume the customers will
receive the benefit in the future and declare the action prudent now.Instead,Staff recommends
that the Company file for recovery after it has become bound to the WRAP and can demonstrate
that the predicted avoided cost is real.Staff recommends that the Company include a report that
details the historical season-by-season costs,benefits,and lessons learned when they file for
recovery.
Other WRAP Concerns
Loss of Autonomy
Staff was concerned that the Company might lose planning and operational autonomy if
the WRAP required it to provide a particular type of resource for other participants.For
example,the WRAP has participants from states that have clean energy mandates.The
Company stated that the WRAP tariff allows it to use any of its resources,and it would therefore
not be subject to clean mandates.Staff verified the relevant language in the tariff.Given the
Company's assertions,Staff believes the Company's participation in the WRAP will not unduly
influence the Company's ability to conduct its own planning and operations.
Resource Availability
Staff was concerned about the likelihood of resource availability from WRAP
participants if the Company has a capacity shortfall event.The Company did not formally assess
the likelihood of resource availabilityduring its capacity critical hours,but it believes the WRAP
has a sufficient distribution of both winter-peaking and summer-peakingutilities as participants
to ensure resource availability.The Company did provide data showing the historical peak
demand of the two groups.Response to Production Request No.10.Staff agrees that the
Company's assumption is reasonable based on these historic patterns,but notes that summer
peak demand is climbing sharply in the Pacific Northwest,which threatens to erode that region's
traditional summer capacity surplus.Staff presumes the Company will monitor the WRAP
summer Forward-Showing program data carefullyto better assess surplus capacity.
STAFF COMMENTS 5 AUGUST 8,2023
Demand Response as a WRAP Resource
The Company maintains several demand response ("DR")programs across all classes
with a combined nameplate capacity of 312 MW.!Inclusion of these resources in the WRAP
represents a significant contribution to the Company's Forward-Showing capacity.
During the WRAP Forward-Showing program,participating utilities can include their DR
resources in one of two ways,as a load modifier or,as a capacity resource.Load modifiers
model the DR programs as a reduction to the P50 peak load forecast.The P50 load forecast is a
fundamental input for the WRAP tariffs and WPP uses it to calculate many values such as
administration charges and sharing requirements.Alternatively,utilities can choose to include
their DR programs as capacity resources available for deployment into the WRAP and it would
treat them in the same way as other qualifying resources.The Company stated that it intends to
include its DR programs as load modifiers.Response to Production Request No.19.Staff
agrees with this approach because it retains the dispatch of DR programs for the needs of the
Company's system and avoids several complications that may arise if included as a capacity
resource,such as deploying DR for other utilities.
As the Forward-Showing program transitions to the Operations program,the WRAP
automatically transfers the resources,includingthe DR-related load reduction,but with an
important caveat.In its Response to Production Request No.24,the Company noted that the
Operations program considers the load reduction to be available all hours of each day.This
assumption does not accurately reflect the dispatch parameters of the Company's DR programs,
and therefore it overstates the amount of load reduction.Staff is concerned that this could create
a situation where WPP tasks the Company to participate in a sharing event based on capacity that
is not actuallyavailable.The Company can disregard this potential issue during the non-binding
phase,but it might incur delivery failure charges once it is bound.When queried,the Company
stated that WPP is aware of this issue and has communicated an intent to review it.Response to
Production Request No.24,footnote 2.Staff looks forward to a solution for this concern.
I As of the Company's 2022 DSM Annual Report
STAFF COMMENTS 6 AUGUST 8,2023
Binding Implementation of the WRAP
In its response to Production Request No.18,the Company agreed to alert the
Commission prior to committing to a WRAP binding period.Staff supports the Company's
proposal.
Public Comments
As of August 7,2023,no public comments have been received.
STAFF RECOMMENDATION
Staff recommends that the Commission:
1.Acknowledge the likelihood of long-term cost savings associated with
participation in the WRAP;
2.Direct the Company to seek recovery of WRAP-associated costs in a later filing
after customers begin receiving the benefit;and
3.Direct the Company to include a report with its recovery filing that details the
historical season-by-season costs,benefits,and lessons learned.
Respectfullysubmitted this day of August 2023.
Michael Duval
Deputy AttorneyGeneral
Technical Staff:Matt Suess
Laura Conilogue
Leena Gilman
Jason Talford
Kimberly Loskot
STAFF COMMENTS 7 AUGUST 8,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8th DAY OF AUGUST 2023,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF TO
IDAHO POWER COMPANY,IN CASE NO.IPC-E-23-08,BY E-MAILING A COPY
THEREOF,TO THE FOLLOWING:
LISA D NORDSTROM ALISON WILLIAMS
MEGAN GOICOECHEA ALLEN IDAHO POWER COMPANY
IDAHO POWER COMPANY PO BOX 70
PO BOX 70 BOISE ID 83707-0070
BOISE ID 83707-0070 E-MAIL:[e-mail]
E-MAIL:[e-mail]
[e-mail]
[e-mail]
SECRETARY
CERTIFICATE OF SERVICE