20201221Comments.pdf

C. Tom Arkoosh,ISB No.2253
Amber Dresslar, ISB No. 10536
ARKOOSH LAW OFFICES
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P.O. Box 2900
Boise,ID 83701
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Attorneys for IdaHydro and Renewable Energy Coalition
BEFORE THE IDAHO PUBLIC UTILITIES COM1VtrSSION
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IN THE MATTER OF ROCKY
MOUNTAIN POWER FOR APPROVAL OF
A CAPACITY DEFICIENCY PERIOD TO
BE USED FOR AVOIDED COST
CALCULATIONS
Case No. PAC-E-20-13
IDAHYDRO AND RENEWABLE
ENERGY COALITION'S
CoMMENTS, PROTEST, ANI)
REQUEST FOR IIEARING
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COMES NOW the Idaho Hydroelectric Power Producers Trust, an Idaho Trust, d/b/a
IdaHydro ("IdaHydro") and the Renewable Energy Coalition (*REC") by and through its counsel
of record, C. Tom Arkoosh and Amber Dresslar of Arkoosh Law Offices, and pursuant to
IDAPA 31.01.01.203, hereby submits the following comments, protest and request for hearing:
I. SUMMARY
"The IRP process determines when the utility will experience a need for new capacity."l
In the PacifiCorp ("Rocky Mountain") Integrated Resource Plan ("IRP"), Rocky
Mountain predicts its capacity deficiency date to be the surnmer of 2028 after early coal plant
I In the Matter of the Commission's Review of PURPA QF Contracl Provisions Including rhe Surrogate Avoided
Resource (SAR) and Integrated Resource Planning (IRP) Methodologies for Calculating Avoided Cb$ Rotes, CaseNo. GNR-E-I l-03, Order No. 32697, p.23.
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
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retirements . Application, P.3.
Responding to Qualiffing Facility ("QF") concerns that the Commission did not either
oversee or "approve" the IRP process, and that a utility "could manipulate variables within the
IRP planning process that would negatively impact the pricing of capacity paid to a QF," the
Commission found in Order No. 36297, Case No. GNR-E-I1-03,
...it reasonable and fair to subject each utility's determination of capacity
deficiency to further scrutiny. Therefore, when a utility submits its lntegrated
Resource Plan to the Commission, a case shall be initiated to determine the
capacity deficiency to be utilized in the SAR methodology. The capacity
deficiency determined through the IRP planning process will be the starting point,
and will b" pr.ru.rd to be correct subjict to the outcome of the proceeding.2
ln the instant case, the Application seeks to advance the capacity deficiency date for
Rocky Mountain as determined in the IRP from the summer of 2028 into the summer of 2029 by
assuming that PacifiCorp is not planning to retire certain coal plants. Thus, and ironically, this
separate application process is being used to "manipulate variables within the IRP planning
process in a way that would negatively impact the pricing of capacity paid to I QF," even though
the Commission's intention in establishing a separate capacity determination proceeding for QF
avoided cost pricing was to avoid this very type of manipulation.
I FACTUALBACKGROUND
On October 18,2019, Rocky Mountain filed its 2019IR.P with the Commission. That IRP
shows the company will be capacity deficient in the summet of 2028.
In its Application, Rocky Mountain cites the following gratuitous language from Staff
comments in the IRP process.
The load and existing resource balance identifies resource deficiencies in the
2 Order No. 32697, p.23.
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
REQUEST FOR HEARING -Page2
Company's system acting as a starting point for developing and evaluating future
resource portfolios. A decision to close a plant early must be evaluated against
other alternatives that maintain system reliability and should be made as part of
the portfolio development and evaluation phase of the IRP. Regardless of whether
the closure decision is driven by economics or by environmental compliance,
once should choose the least cost alternative that maintains system reliability,
which likely requires additional replacement resource(s). The early retirement and
the replacement resources should be considered as a combined resource decision
and should only be included together so an accurate deficit date can be
determined.3
Evidently, Rocky Mountain interpreted the ambiguous phrase "combined resource
decision" to mean that the capacity deficiency date should be calculated as though the coal-fired
resources would not be retired. Therefore, based upon this understanding, Rocky Mountain
departed from its actual plans that it has included in its tRP and put the coal-fired resources back
in its resource stack and concluded that the capacity deficiency date would be advanced to the
summer of 2029.
On November 16, 2020,Ida[vdro timely filed its Petition to Intervene. On November
19,2020, Renewable Energy Coalition timely filed its Petition to Intervene. Both petitions were
granted by Order No. 34856 on December 3,2020.
III. ISSUE
Whether a utility may advance its IRP capacity deficiency date for QF avoided cost
pricing purposes into the future by assuming the placement into its resource stack of either assets
that it knows will be deleted from its portfolio or other non-existent assets.
IV. ARGUMENT
In Case No. GNR-E-I l-03, in 2012, Rocky Mountain Power, the Staff and the
3 In the Matter of RoclE Mountain Power's 2019 Electric Integrated Resource Plan, Case No. PAC-E-19-16, OrderNo.34780.
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
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Commission agreed that the IRP would be the source of a capacity deficiency date for QF
avoided cost pricing purposes.
Rocky Mountain's position in that case was that the IRP method was an appropriate
method to assess the value of a QF project's capacity:
Rocky Mountain Power maintains that the IRP Methodology, "as established in
IPC- E-95-09, is an appropriate method to assess the value of a QF project in
terms of its capability to deliver its resource when the Company is in need of such
a resource, und it ieflective of the value of the QF to the Company and its
customers." Tr. at 188. Rocky Mountain Power argues that, with a 100 kW
eligibility cap in place for wind and solar resources, the previously adopted SAR
urJ mp mettrodotogies continue to provide an accurate means of calculating
avoided cost prices for QFs.
OrderNo.32697, p. 18.
Staff agreed:
Staff notes that, as it is presently applied, each utility's IRP model accounts for
whether the utility is in need of capacity. "In the methods used by each utility,
none assign capacity value to QFs in years when the utility is in a surplus
condition." Id. at 1091.
Id., p.19.
The Commission tailored its findings accordingly:
Therefore, we find that the IRP models used by each individual utility produce
reasonable avoided cost rates consistent with PURPA and FERC regulations.
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
iates that are a more accurate reflection*of
3
true avoided cost for the QF power.
However, we acknowledge that some determinations made within the IRP process
have an impact on calculations under the SAR and IRP methodologies.
Specifically, ih. IRP process determines when the utility will experience a need
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST' AND
REQUEST FOR HEARING - Page 4
for new capacity.
Id., pp.20-22.
Responding to QF concems that it was possible to o'manipulate variables within the IRP
planning process in a way that would negatively impact the pricing of capacity paid to a QF," the
Commission separated the ultimate finding of a capacity deficiency date for QF avoided cost
pricing purposes from the IRP into a separate proceeding.
In an effort to address the concerns of QF developers who maintain that a utility
could manipulate variables within the IRP planning process in a way that would
negatively impact the pricing of capacity paid to a QF, we find it reasonable and
fair to subject each utility's determination of capacity deficiency to further
scrutiny. Therefore, when a utility submits its Integrated Resource Plan to the
Commission, a case shall be initiated to determine the capacity deficiency to be
utilized in the SAR Methodology. The capacity deficiency determined through the
IRP planning process will be the starting point, and will be presumed to be correct
subject to the outcome of the proceeding.
Id., p.23.
ln the Application in this case, Rocky Mountain, responding to Staff comments in its
previous IRP case that the determination of capacrty value should be a "least cost alternative"
and therefore the capacity determination should be a "combined resource decision" has
reinserted its coal-fired assets it is planning to retire from its portfolio for purposes of
determining the capacity deficiency date for QF avoided cost pricing purposes.
IdaHydro and REC understand that Rocky Mountain is proposing to use a baseline
assumption for setting avoided costs that uses its IRP assumptions with only the exception of not
recognizing its plans for early retirement of thermal resources. Application at p. 5-6. Rocky
Mountain's [RP has a capacity deficiency based on its load and resource balance that includes
new contracts, updated loads, planned resources and retirements, and its planned planning
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
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reserve margin. Id. This results ina2028 capacity deficit. Id. at4. However, for its avoided
cost capacity deficiency, Rocky Mountain then uses all of its IRP planning assumptions, with the
single exception that it removes the early retirement of thermal resources. Id. at 4-5.
There is no reason to single out only PacifiCorp's planned coal retirements out of all of
PacifiCorp's planning assumptions. IdaHydro and REC recognize that any specific planning
assumption may or may not occur; however, there is no reason to assume that PacifiCorp's actual
plans for coal retirements is any less accurate than its assumptions regarding other loads and
resources. PacifiCorp's avoided cost rates should be based on its plans assumed in the IRP,
unless it can be demonstrated that those plans are unreasonable. PacifiCorp has not provided any
information that its thermal plant retirement assumptions are unreasonable, and avoided costs
should reflect its actual plans.
Pursuant to the dictates of PURPA's must-buy obligation and PURPA'S command that
QF capacity allows a utility to avoid having to construct new generation or purchase outside
power to serve its customers during peak load hours, employment of fictional resources to
advance the capacity deficiency date is not allowed. The law of PURPA and the policy of the
Commission dictate that not only must utilities purchase QF energy, but if the capacity offered
by a QF would displace capacity that a utility would otherwise necessarily buy or construct to
meet peak-hour demand, the QF must also be paid for that capacity.
A QF that provides generation during peak hours when the utility is most in need
of powerto serve its customers should be compensated based on the QF's ability
to deliver during peak hours. This structure comports with the purpose and intent
of PURPA that a utility pay a QF the costs it avoids by not having to build or
procure alternative energy. l8 C.F.R. 292.304(b)(2). Payments for both energy
and capacity must be part of this consideration. Although the current SAR model
merges energy and capacity payments into a single avoided cost rate, this
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
REQUEST FOR HEARING - Page 6
Commission has previously approved separate energy and capacity payments as
consistent with the intent and objectives of PURPA. PURPA requires that the
utility purchase the energy produced by a QF. Paying for a resource's ability to
provide the utility with capacity that the utility needs to reliably serve its
customers encourages development of resources that truly allow the utility to
avoid the costs of building new generation.
The utilities, Commission Staff, and several intervenors support the use of a
separate capacity payment to appropriately value the power being produced and
delivered by a QF. We find that implementation of a separate resource-specific
capacity factor is an appropriate way to value when a QF is able to generate and
deliver energy to a utility. The value of all renewable resources is not equal. If a
QF is primarily allowing a utility to avoid energy generation during non-peak
hours, but not providing capacity during peak hours, then the utility is not
avoiding the cost of building new plant. Generation will ultimately have to be
built to provide the capacity necessary to reliably serye customers during peak
load hours. Consequently, we find it reasonable to assign a value to a QF
resource's ability to provide such capacity. A QF resource with a high capacity
factor is not only providing the utility with energy, but also capacity that will
allow the utility to avoid having to construct new generation to serve its
customers during peak load hours.
{. :1. *
Moreover, "equal footing" is not a legal standard required by PURPA nor applied
by this Commission. The legal standard for an appropriate determination of
avoided cost rates is clearly defined by PURPA. Rates for purchases from a QF
shall "(i) be just and reasonable to the electric consumer of the electric utility and
in the public interest; and (ii) not discriminate against quali$ing cogeneration and
small power production facilities." l8 C.F.R. g 292.304(a)(l). 'Nothing in this
subpart requires any electric utility to pay more than the avoided costs for
purchases." Id. at $ 29*0a@)(2). Avoided costs are those costs which a public
utility would otherwise incur for electric power, whether that power was
purchased from another source or generated by the utility itself. I S C.F.R. $
292.101(b)(6). PURPA allows QFs to obtain a rate equivalent to the utility's
avoided cost, a rate that holds utility customers harmless - not a rate that puts QFs
on "equal footing" with the utility. PURPA requires public utilities to purchase
generation from QFs without regard for whether the utility needs the energy. If a
QF resource provides energy but not capacity, then the utility is not avoiding a
portion of costs that will be required to build generation that provides capacity.
For this reason, we find 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.
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
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We find that utilizing a QF's nameplate capacity in the SAR calculation is a
reasonable approach that provides payment to QFs for capacity based on a
project's ability to incrementally contribute to a utility's capacity defrciency. We
further find it appropriate to identify each utility's capacity deficiency bssed on
lood and resource balancesfound in each utility's IRP.
Id., pp. I 5-16 [Emphasis added].
As a theoretical and a practical matter, the notion proposed in Staff comments and
adopted in this Applicotion to make a "combined resource decision" as though theoretical but
nonexistent resources will be added to the resource stack is wrong.
It is theoretically and legally wrong, as set forth above, because it is the QF capacity that
must be purchased if it will provide capacity during peak demand hours, displacing construction
or purchase of other capacity by the utility. While the Staff s idea of searching for a "least cost
altemative that maintains system reliability" is admirable, Order No. 32697 makes very clear
that valuation of QF capacity as adopted by that order and in the manner set forth in the tRP is
the exact and proper valuation ofthat capacity.
As a practical matter, for a QF entering a legally enforceable obligation ("LEO") with
Rocky Mountain today that is prepared to deliver capacity subsequent to the summer of 2028,
that QF will be denied compensation for providing capacity from the summer of 2028 until the
summer of 2029,even thoueh that QF does indeed provide that capacity and displaces any need
for Rocky Mountain to otherwise build or buy capacity elsewhere in the market. Thus, although
a QF signing a LEO today will be in the resource stack to provide capacity between the summer
of 2028 and summer of 2029,that capacity can illegally be displaced in the queue by nonexistent
resources anticipating that they may come online in the future.
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
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V. REQUEST FOR IIEARING
The proposal set forth in the Application proposes a sea change to the current practice of
setting the capacity deficiency date for QF avoided cost pricing from the findings of the IRp
without more than one paragraph of comments from Staff filed in the Rocky Mountain IRp case.
It is respectfully submitted that if the Commission is disposed to entertain the request to displace
PURPA avoided cost pricing with Staffs proposal of a "least cost alternative,, derived from a
"combined resource decision," that the Commission review the matter on a fully
developed record after complete discovery.
DATED this 2lst day of December2020.
ARKOOSH LAW OFFICES
C. Tom Arkoosh
Attomey for IdaHydro and
Renewable Energy Coalition
IDAHYDRO AND RENEWABLE ENERGY COALITION'S COMMENTS, PROTEST, AND
REQUEST FOR HEARING - Page 9
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on the 2lst day of December 2020,I served a true and correct
copy of the foregoing document(s) upon the following person(s), in the manner indicated:
Jan Noriyuki
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise,lD 83702
Matt Hunter
Deputy Attorney General
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. No. 8
Suite 201-4 (83714)
P.O. Box 83720
Boise, lD 83720-0074
Ted Weston
Emily Wegener
PacifiCorp/ dba Rocky Mountain Power
1407 West North Temple, Suite 320
salt Lake city, uT 84116
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Data Request Response Center
PacifiCorp
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C. Tom Arkoosh
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