20060531_1572.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:MAY 24, 2006
DATE:SCOTT WOODBURY
SUBJECT:CASE NO. IPC-05-34 (Idaho Power)
MAGIC WIND - MOTION FOR DECLARATORY ORDER
BACKGROUND
On August 4, 2005 , the Commission in Case No. IPC-05-, Order No. 29839,
reduced the eligibility cap for avoided cost published rates for non-firm wind projects from 10
aMW to 100 kW, required individual negotiation for larger wind QFs, and established criteria for
assessing QF contract entitlement. By Commission Order No. 29872 the date for grandfathering
eligibility was changed from July 1 2004 , the Notice of Petition date, to August 4 2005 , the date
oflnterlocutory Order No. 29839.
On October 20 2005 , Magic Wind LLC (Magic Wind) filed a Motion to Determine
Exemption Status with the Commission. The matter sought a Commission determination that
Magic Wind was exempt from the rate eligibility cap established in Order No. 29839. The
Motion was accompanied by the supporting affidavit of Armand Eckert.
On November 4 , 2005 , Idaho Power Company (Idaho Power; Company) filed a
response to Magic Wind's Motion contending that the Company was without sufficient
information to verify the truth or falsity of the factual allegations contained in the affidavit of
Armand Eckert and was therefore denying same and requesting that the Motion be denied.
Following Idaho Power response, what ensued was an informal stay of
proceedings.
DECISION MEMORANDUM
PETITION FOR DECLARATORY ORDER
On April 26 , 2006, Magic Wind filed a Motion for a Declaratory Order declaring that
Magic Wind is entitled to receive from Idaho Power a Purchase Power Agreement that
establishes prices for surplus energy using the "modified PacifiCorp method." Reference Order.
No. 30000, Case No. PAC-05-6 (Schwendiman); Reference IDAPA 31.01.01.101 - Petition
for Declaratory Order.
In Case Nos. IPC-04-8 and 04-, Order No. 29632, the Commission established a
90/110 performance band" requirement, a provision that defines the minimum degree of
predictability required for published rate eligibility. Under PURP A contracts submitted by Idaho
Power and approved by the Commission, the price to be paid for energy purchases outside of the
performance band is equal to 85% of the Mid-C market index price for each month. In Order
No. 30000, Case No. P AC-05-9 (Schwendiman) the Commission approved an alternate
mechanism (PacifiCorp method) for pricing energy deliveries that are outside the "90/110
performance band." The Schwendiman Agreement includes a computed set of fixed rates (Non-
Conforming Energy Purchase Prices) as a substitute for market-based rates.
Under a proposed Agreement submitted by Magic Wind to Idaho Power on AprilS
2006, Magic Wind submitted an Idaho Power template contract that was modified to include a
PacifiCorp-Schwendiman type fixed price mechanism for energy deliveries outside the 90/110
performance band, albeit proposing a different calculation of variable O&M expense (modified
PacifiCorp method).
Idaho Power by letter response dated April 25, 2006 states its belief that the draft
contract presented by Magic Wind on AprilS, 2006 fails to acknowledge the role that market
prices play in determining the cost Idaho Power is likely to incur should the Magic Wind project
fail to perform in accordance with the terms of the Agreement. The change that Magic Wind
proposes, Idaho Power contends, eliminates consideration of market prices and the determination
of costs Idaho Power will incur if Magic Wind does not provide the monthly amount of energy it
agreed to provide. Idaho Power notes that the Schwendiman Order No. 30000 stated the
Agreement did not set precedent. Idaho Power contends that the Company has fully satisfied its
mandatory purchase obligation under PURP A by offering to purchase the generation from Magic
Wind's proposed wind farm by entering into a firm Energy Sales Agreement in the form
previously signed and tendered by Magic Wind on June 14, 2005. Reference October 20, 2005
DECISION MEMORANDUM
Affidavit of Armand Eckert, p. 2. It is Idaho Power s belief that elimination of market prices
from consideration will shift costs and risks to customers that should be appropriately borne by
Magic Wind and that such shift is inconsistent with PURP A. As a result, Idaho Power proposes
to utilize the template contract it has signed with numerous QFs similar to Magic Wind.
CO MMISSI 0 N D ECISI
Magic Wind on April 26, 2006, filed a Motion for Declaratory Order with the
Commission. Reference Commission Rule of Procedure 101. Magic Wind contends that it is
entitled to receive from Idaho Power the alternate mechanism for pricing energy for deliveries
that are outside the 90/110 performance band approved by the Commission in Order No. 30000
Case No. P AC-05-9 (Schwendiman). Idaho Power contends that the requested contract
changes are inconsistent with the requirements of PURP A and that the Company should not be
ordered to enter into a contract containing such provisions.
Because Magic Wind has requested the Commission issue a Declaratory Order
Idaho Power contends that such an Order would be bin~ing on all the electric utilities subject to
the Commission s jurisdiction. The Company contends that PacifiCorp and Avista and other
interested parties should be provided an opportunity to participate.
Staff by way of further procedure in this case recommends that the matter
processed pursuant to Modified Procedure, i., by written submission rather than by hearing.
Reference Commission Rules of Procedure, IDAP A 31.01.01.201-204. Staff recommends that
individual copies of the Notice be served on A vista and PacifiCorp. Staff further recommends
that the scheduling notice include a reply deadline for Magic Wind and Idaho Power. Does the
Commission agree with Staff s recommended procedure?
Scott D. Woodbury
bls!M:IPC-OS-34 sw
DECISION MEMORANDUM