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Ore. regulatory staff says PacifiCorp's big wind bidding process is unfair

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Essential Energy Insights - February 2021

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Ore. regulatory staff says PacifiCorp's big wind bidding process is unfair

Staff of the Oregon Public Utility Commission questioned the fairness and transparency of PacifiCorp's bidding process for 1,270 MW of wind resources because all but two bidders were disqualified.

The commission authorized PacifiCorp to proceed with the request for proposals, or RFPs, on Aug. 29, 2017. By mid-October 2017, PacifiCorp had received bids from 16 parties offering 18 projects and 59 bid options, covering 13 different sites.

However, the staff concluded in a March 19 report to the PUC that shrinking a large pool of bidders down to two bidders due to previously unknown and undisclosed criteria "lacks fairness, transparency, [and] subverts the RFP as a competitive process. This calls into question if this portfolio is truly the best resource for ratepayers."

PacifiCorp has also asked Wyoming regulators to approve ratemaking treatment for the projects of NextEra Energy Inc. subsidiary NextEra Energy Resources LLC and Invenergy LLC.

The Oregon staff's conclusions call into question whether the PUC will accept the projects PacifiCorp presented. Acceptance, or "acknowledgement" in regulatory parlance, does not mean PacifiCorp cannot carry out its plans, but increases doubt whether the company will be able later to obtain approval from the commission to include the projects in Oregon's utility rates. Acknowledgement of an RFP is an assessment of reasonableness of the requested action, staff said.

PacifiCorp's 2017 RFP did not demonstrate that the final selection was reasonable or that the process was concluded in a fair and transparent fashion, the staff said, giving several reasons why.

Foremost, the Berkshire Hathaway Energy company made a major revision to its transmission study in January, which eliminated all but about four potential offers.

Originally, PacifiCorp proposed to select only projects from a transmission-constrained area capable of interconnecting to its Wyoming transmission system, coupled with a new, 140 mile, 500-kV transmission line between the Aeolis substation and the Jim Bridger power plant in Wyoming.

However, in late January, PacifiCorp released a revised transmission study that had the impact of eliminating 14 of the 18 projects from competition for the Wyoming wind projects.

PacifiCorp also disqualified most of the projects because of their positions in the transmission interconnection queue, the staff said. The time a request is received establishes a project's position and its priority within the queue. However, bidders were not informed that their queue positions were a qualification issue until four months after the opening of the solicitation, the staff said.

The result increases the risk of cost overruns and construction delays, the staff said. Further, 85% of the capacity PacifiCorp selected calls for the utility to become the owner of the finished projects, rather than entering into power purchase agreements with independent wind power producers. "This creates a lack of diversity of ownership and therefore a lack of diversification of risk for customers," the staff said.

PUC spokeswoman Kandi Young said the commission has is set on April 30 to discuss the comments of staff, PacifiCorp and other parties concerning the RFP results. "At that meeting, they could adopt the staff's recommendation, PacifiCorp's original request, adopt their own recommendation, or deliberate without final decision," Young said.

An administrative law judge will then prepare a draft order which the PUC will consider on May 22, deciding whether to acknowledge the project selections, which the commission refers to as an RFP "shortlist" even though PacifiCorp has already chosen the projects. A final order will be issued shortly afterward, she said.

PacifiCorp spokesman Ry Schark said PacifiCorp was preparing to file its comments late March 29.

"We disagree with staff's conclusions and believe that deferring these investments, and losing at least 20% of the value of the federal production tax credit, is not in the best interest of customers," Schark said. "These new wind projects will significantly expand the amount of clean energy serving PacifiCorp's customers, and will do so cost-effectively. With the results of the RFP, the overall benefits of these projects exceed what was included in our acknowledged Integrated Resource Plan." (Oregon PUC Docket UM 1845)