20150423Lowe Direct.pdf

Williams Bradbrry
ATTORNEYS ATLAW
April23,2015
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise,lD 83702
Re: IPC-E-15-01
Dear Ms. Jewell:
Enclosed please find nine (9) copies of the Direct Testimony of John R. Lowe on
behalf of Renewable Energy Coalition, CD-ROM, and Certificate of Delivery for filing in the
above referenced docket.
Please call should you have any questions.
Sincerely,
R^Vut^
Ronald L. Williams
RLWijr
Enclosures
1015 !f. Hays Steet - Boise, ID 83702
Phone: [phone] - Fax: [phone] - www.williamsbradbury.com
BEFORE THE IDAHO PUBLIC UTILITY COMMISSION
].*'.,.
Fn!r lnD r'jirr: f :\ / J
IN THE MATTER OF
TDAHO POWER COMPANY'S PETITION
TO MODIFY THE TERMS AND
CONDITIONS OF PROSPECTIVE PURPA
ENERGY SALES AGREEMENTS,
IN THE MATTER OF AVISTA
CORPORATION'S PETITION TO MODIFY
TERMS AND CONDITIONS OF
PROSPECTIVE PURPA AGREEMENTS
ENERGY SALES AGREEMENTS,
IN THE MATTER OF THE PETITION OF
ROCKY MOUNTAIN POWER FOR
MODIFICATION OF THE TERMS AND
CONDITIONS OF PURPA PURCHASE
AGREEMENTS AND FOR
MODIFICATION OF ITS AVOIDED COST
METHODOLOGY.
l;l;i
CASE NO. AVU-E-I5-01
CASE NO. PAC-E-I5-03
RENEWABLE ENERGY COALITION
DIRECT TESTIMONY OF
JOHN R. LOWE
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INTRODUCTION
Please state your name and business address.
My name is John R. Lowe. I am the director of the Renewable Energy
Coalition (the "Coalition"). My business address is 12040 SW Tremont
Street, Portland, Oregon 97225.
Please describe your background and experience.
ln1975,I graduated from Oregon State with a B.S. I was employed by
PacifiCorp for thirty-one years, most of which was spent implementing the
Public Utility Regulatory Policies Act ("PURPA") regulations throughout the
utility's multi-state service territory. My responsibilities included all
contractual matters and supervision of others related to both power purchases
and interconnections. Since 2009,I have been directing and managing the
activities of the Coalition as well as providing consulting services to
individual members related to both power purchases and interconnections.
On behalf of you are you appearing in this proceeding?
I am testiffing on behalf of the Coalition.
Please describe the Coalition and its members.
The Coalition was established in2009, and is comprised of thiny members
who own and operate nearly forty non-intermittent small renewable energy
generation qualiffing facilities ("QFs") in Oregon, Idaho, Washington, Utah,
and Wyoming. Several types of entities are members of the Coalition,
including irrigation districts, water districts, corporations, and individuals.
Except two, all are small hydroelectric projects less than 7 megawatts. The
Coalition's ldaho members sell power to both Idaho Power Company and
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PacifiCorp pursuant to PURPA contracts, all of which are projects under the
published rate eligibility cap.
What are the Coalition's interests in this proceeding?
The Coalition has a number of key interests in this proceeding. First, our goal
is to ensure fair and reasonable contract terms and conditions, and avoided
cost rates for small projects under the published rate eligibility cap. Second,
the Coalition's members are primarily existing QFs, and our goal is to ensure
that any final order in this proceeding recognizes and accounts for the unique
circumstances and benefits of existing projects. Finally, the Coalition
recognizes that PURPA must work to benefit all interested parties, including
the utilities, ratepayers, and new and existing QFs of various sizes. The
Coalition's goal is that PURPA policies account for all these interests, and the
changes (if any) adopted by the Idaho Public Utilities Commission (the
'oCommission") are narrowly tailored to resolve specific problems. Any
policy changes should not unduly harm any one, especially parties not causing
the problems that led to the utilities' filings.
Please summarize your testimony.
The alleged problems facing Idaho Power, PacifiCorp, and Avista are not
being caused by small QFs under the published rate eligibility cap, and any
policy changes that result from these proceedings should exempt smaller
projects. Second, I explain that there should be no change in policy for
existing projects under the rate eligibility cap. Existing projects are also not
causing any problems, and in fact are providing significant benefits to the
utilities. In addition, imposing a policy change like a shortened contract term
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on existing QFs could have significant and unnecessary harm on these
projects, the utilities, and ratepayers. Finally, the Coalition is not clear as to
what the recommendations of other parties will be in this proceeding, and I
intend to review these parties' testimony and potentially respond in the next
round of testimony. For example, other parties may agree that small projects
under the published rate should not have their contract terms shortened, which
would reduce the Coalition's need to participate in these proceedings.
THERE SHOULD BE NO POLICY CHANGES FOR SMALL AND
EXISTING PROJECTS UNDER THE RATE ELIGIBILITY CAP
Please describe what you mean by small projects under the published
rate eligibility cap.
The rate eligibility cap is the maximum size for a QF to be eligible to sell
power at a utility's published avoided cost rates. The current rate eligibility
cap is 100 kilowatts for wind and solar, and 10 average megawatts for all
other generation resources
Is the rate eligibility cap important?
Yes. It is much more difficult for QFs to negotiate contracts over the rate
eligibility cap than those below the cap. All states that I work in allow smaller
QFs to obtain published rates instead of negotiating rates or having their rates
determined by a utility computer model.
Why are small projects treated differently than larger projects?
There are a number of important reasons for treating smaller projects
differently, some which include developer sophistication, transaction costs,
economies of scale, and the inability to economically access alternative
markets. It is important to recognize the unique difficulties facing smaller
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projects, and allowing smaller projects to sell power at a published rate helps
mitigate some of these difficulties.
Negotiating contracts can be costly in terms of upfront transactional
costs. Small QFs do not typically have in house attomeys and experts with
the skills to assist in the evaluation and negotiation of contracts. Therefore,
they often need to hire outside experts. In addition, negotiating a QF contract
with a utility can take a great deal of time. All of these transactional costs can
impose significant economic burdens, and even make a smaller project
uneconomical.
Small projects also do not have the options available to larger projects.
For example, large scale resources developed by utilities or large independent
power producers benefit from being sized so that the dollar-per-kilowatt
investment required to build the plant is less than for a much smaller sized QF
of the same basic technology. Similarly, it is my understanding that the
typical short-term power sale trades in the Pacific Northwest electricity
market are for blocks of 25 MW power, and small QFs cannot effectively
participate in this market.
Please explain what you mean by existing QFs?
Existing QFs are those projects that are already operating and are generally
selling power to the interconnected utility. Some of these projects have been
operating since the mid 1980s.
Existing projects face some unique challenges. Existing projects must
enter into a replacement power purchase agreement ("PPA") when their
current PPA expires. This always means that their new PPA starts during a
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term that includes an initial period of utility resource sufficiency. Most
existing projects have been operating for years, and may require upgrading of
their equipment and facilities including interconnections. New
interconnection agreements are often required. There can be significant costs
involved in addressing these needs or requirements
Are existing QFs treated differently than new QFs?
Yes. For example, existing QFs are included in the utilities' resource plans.
These QFs have been and will continue to contribute to the utilities' capacity
needs, which justifies paying existing QFs a capacity payment that recognizes
their capacity value when they renew their contracts regardless of the utilities'
resource position. Therefore, there is precedent for recognizingthat existing
QFs should sometimes be treated differently from new QFs given that they
have been selling, and are expected to continue to sell, power to the utilities.
Would changing PURPA policy to include a two-year or other short
contract term harm these existing and small projects?
Yes. Currently, small QFs can enter into a twenty-year contract term.
Renegotiating PPAs can be time consuming and costly, especially for
small and existing QFs, and could be expected to be very burdensome if
required every five years or less. As I explained above, small existing
facilities nearly always do not have the option of selling their power to other
entities, and typically only have the choice of continuing to sell their power to
their interconnected utility or shutting down. Also, since existing QFs,
especially small hydro projects that are FERC licensed or exempted are not
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going mobile, there is no need to place a significant burden and the cost of
constantly entering into new short-term contracts.
Significantly shortening the contract term for small QFs would also
harm the utilities and ratepayers. It is my understanding that that small
hydroelectric QFs below the rate eligibility cap make up the majority of
individual PURPA projects. Idaho Power Petition at 17-18. According to
Idaho Power, small hydroelectric projects make up 68 of the total 133 that
utility's PURPA projects under contract. Id. at 18. Requiring the utilities to
renegotiate all of these small QF contracts every two years, for example,
would be costly for the utilities. These unnecessary costs would be passed on
to ratepayers.
Please describe the alleged problems facing the utilities.
The utilities have supported their request to reduce the contract term with
claims regarding the harm caused by new large wind and solar QFs. For
example, Idaho Power and PacifiCorp state that they have a large amount of
new wind and solar projects under contract, and a large number of additional
wind and solar QFs seeking new contracts. They allege significant customer
rate and reliability concems associated with this large amount of large wind
and solar QFs.
Do you agree with the utilities that they are facing significant problems
associated with new PURPA projects?
I have not independently verified the accuracy of the utilities expected new
QF contracts, rate impacts, or reliability concerns. In my experience, not all
of the QFs that request contracts, or that even enter into contracts, ever come
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on line. Utilities also typically over estimate the costs and harms associated
with QFs, and underestimate their benefits. That said, I believe that the
utilities have raised legitimate concerns that warrant careful review, and
justiff some changes in policy to account for the significant volume of large
scale intermittent QFs
How should the Commission address the alleged problems facing the
utilities?
I recommend that the Commission open a generic investigation into PURPA
issues to review whether other solutions might better protect the utilities and
ratepayers without unduly harming QFs. There is no need to make long-term
decisions without considering all the potential impacts and solutions.
The Commission should not revise PPA term limits without a thorough
review of the issues and potential solutions typically achieved by a broader
investigation. By this, I mean that any solution should be narrowly tailored to
the specific problems that can be proven, and should not cause unintended or
harmful consequences. Simply reducing the contract term may achieve the
utilities' goal of reducing the amount of QF development, but it may not be
the best solution to the problem of large amounts of new wind and solar QFs.
For example, the Commission could instead revise avoided cost rates for
certain QFs, better account for integration costs, limit the amount of unneeded
power that a utility must purchase, or change the utilities' computer models.
I understand that many parties want the scope of the proceeding to be
narow and only focus on the issue of contract length, but the Commission
should be aware that there are other, potentially more appropriate, solutions.
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Are small and existing projects contributing to the utilities' alleged
problems?
No. Assuming that all of the utilities alleged problems are true, these
problems are not being caused by existing and small QFs.
For example, Idaho Power explains that the hydroelectric projects
under the rate eligibility cap provide only 154 megawatts of the total current
1,302 megawatts of PURPA nameplate generation. Idaho Power Petition
at 18. While there is a large number of QFs under the published rate
eligibility cap, the total megawatt size of these existing projects is small and
not causing the alleged rate or reliability concems identified by the utilities.
In fact, these projects provide Idaho Power with significant benefits.
For example, many of these projects are seasonal, which means that they
provide Idaho Power with valuable capacity. Limiting the contract length to
these projects not only does not address the problems identified by Idaho
Power, but may harm both Idaho Power and its ratepayers. The
Commission's final order in this proceeding should be careful not to harm
those QFs that are not contributing to the problems faced by the utilities.
CONCLUSION
Do other parties support your position that projects under the rate
eligibility cap should be exempt from shortening the contract length?
Yes. It is my understanding that Idaho Power, the Snake River Alliance, Twin
Falls Canal Company, North Side Canal Company and American Falls
Reservoir District No. 2, and AgPower, all support or do not oppose keeping
the current contract term for projects under the current rate eligibility cap. We
think it would be inappropriate for the Commission to lower the contract term
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when Idaho Power has not requested such an action. Given that Idaho Power
did not request a lower contract term for projects under the rate eligibility cap,
it is likely that there are parties that would have participated in the case if they
knew there was a chance that their future contract terms could be shortened.
Given that it is unclear what other parties' positions on this issue will
be, the Coalition is only submitting this limited testimony at this time. We
will review the testimony of other intervenors and may respond to their
arguments in rebuttal testimony.
Does this conclude your testimony?
Yes.
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CERTIFICATE OF DELIVERY
I HEREBY CERTIFY that on this 23rd day of April,20ls,I caused to be
served a true and correct copy of the Direct Testimony of John R. Lowe on behalf of
Renewable Energy Coalition upon the following individuals in the manner indicated
below:
Hand Deliverv: (9 copies plus CD-ROM)
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W . Washington Street
Boise, Idaho 83720
Electronic Deliver"y:
Donovan E. Walker
Idaho Power Company
E-Mail: [e-mail]
dockets@idahopower. com
Donald L. Howell, II
Daphne Huang
Deputy Attomeys General
Idaho Public Utilities Commission
E-Mail: [e-mail]
daphne.huang@puc. idaho. gov
Peter J. Richardson
Gregory M. Adams
Richardson Adams, PLLC
E-Mail: [e-mail]
gre g@richardsonadams. com
Attorneys for J.R. Simplot Company
and Clearwater Paper Corporation
Don Reading
E-Mail: [e-mail]
J.R. Simplot Company and
Clearwater Paper Corporation
Benjamin J. Otto
Idaho Conservation League
E-Mail: [e-mail]
Matt Vespa
Sierra Club
E-Mail: [e-mail]
Leif Elgethun, PE, LEED AP
Intermountain Enerry Partners, LLC
E-Mail: [e-mail]
Dean J. Miller
McDevitt & Miller LLP
E-Mail : j [e-mail]
Attorneys for Intermountain Enerry
Partners, LLC
Kelsey Jae Nunez
Snake River Alliance
E-Mail [e-mail]
Electronic Copies Onlv:
Ken Miller
Snake River Alliance
E-Mail: [e-mail]
Daniel E. Solander
Yvonne R. Hogle
PacifiCorp/dba Rocky Mountain Power
E-Mail: daniel.solander@pacifico{p.com
yvonne.ho gel@pacifi corp. com
Ted Weston
PacifiCorp/dba Rocky Mountain Power
E-Mail: [e-mail]
C. Tom Arkoosh
Arkoosh Law Offices
E-Mail: [e-mail]
Attorneys for Twin Falls Canal Company,
North Side Canal Company and American
Falls Reservoir District No. 2
Electronic Copies Onlv:
Erin Cecil
Arkoosh Law Offrces
E-Mail: [e-mail]
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
E-Mail: [e-mail]
Idaho Irrigation Pumpers
Association, fnc.
Anthony Yankel
E-Mail: [e-mail]
Idaho Irrigation Pumpers
Association, Inc.
John Lowe
Renewable Enerry Coalition
E-Mail : [e-mail]
Irion Sanger
Sanger Law, P.C.
E-Mail: [e-mail]
Co-Counsel for Renewable Enerry
Coalition
Michael G. Andrea
Avista Corporation
E-Mail : michael.andr ea@avistacorp. com
Clint Kalich
Avista Corporation
E-Mail: [e-mail]
Frederick J. Schmidt
Pamela S. Howland
E-Mail: [e-mail]
Attorneys for Micron Technolory, Inc.
Richard E. Malmgren
Micron Technoloryr lnc.
E-Mail: [e-mail]
Scott Dale Blickenstaff
The Amalgamated Sugar Company LLC
E-Mail: [e-mail]
Andrew Jackura
Camco Clean Energy
E-Mail : andrewj [e-mail]
AgPower DCD, LLC and
AgPower Jerome, LLC
Dean J. Miller
McDevitt & Miller, LLP
E-Mail : j [e-mail]
AgPower DCD, LLC and
AgPower Jerome, LLC
Ronald L. Williams