20240614Final_Order_No_36223.pdf

Office of the Secretary
Service Date
June 14,2024
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER ) CASE NO. IPC-E-24-09
COMPANY'S APPLICATION FOR )
APPROVAL OR REJECTION OF AN )
ENERGY SALES AGREEMENT WITH BP ) ORDER NO. 36223
HYDRO ASSOCIATES FOR THE SALE AND )
PURCHASE OF ELECTRIC ENERGY FROM )
THE ROCK CREEK II HYDRO PROJECT )
On February 29, 2024, Idaho Power Company("Company"), applied for approval of
an Energy Sales Agreement("ESA") with BP Hydro Associates ("Seller") for energy generated
by the Rock Creek II Hydro Project("Facility").
On March 25, 2024, the Commission issued a Notice of Application and Notice of
Modified Procedure. Order No. 36119. Commission Staff("Staff') submitted the only comments.
Having reviewed the record, the Commission issues this Order approving the
Company's Application as follows.
THE APPLICATION
The Company seeks approval of a proposed 20-year ESA for the energy generated at
the Facility to replace the existing ESA formed in 1987, which expired on April 2, 2024 ("1987
ESA"). Under the proposed ESA, the Company will purchase electrical energy from the Facility
at non-levelized, published avoided cost rates for non-seasonal hydro resources as currently
established by the Commission in Case No. GNR-E-23-02 with full capacity payments for the
entire term.
The Facility's Scheduled First Energy Date and Scheduled Operation Date under the
proposed ESA is April 3, 2024. The proposed ESA also requires projected energy delivery
estimates five days before the beginning of the following month to comply with the 90/110
firmness requirements consistent with past Commission orders. However, the proposed ESA will
become effective only upon the Commission's approval and determination that all payments the
Company makes to Seller for energy purchases will be allowed as prudently incurred expenses for
ratemaking purposes.
ORDER NO. 36223 1

STAFF COMMENTS
Staff reviewed the Application and proposed ESA, focusing on capacity payment, the
amount of such payments, avoided cost rates, Article XXIII (Modification), and the lapsed-
contract period. Based on this review, Staff recommended that the Commission approve the
proposed ESA and that all payments for energy made under it be allowed as prudently incurred
expenses for ratemaking. Staff further recommended that, if the Facility is modified, the
Commission allow only net power supply expense reflecting the proper authorized rate for all
energy delivered from the modified facility's first operation date be included in the Company's
Power Cost Adjustment. Regarding Facility generation delivered during the lapsed-contract
period, Staff recommended the Company pay the Seller the Surplus Energy Price as defined in
Section 7.2 of the proposed ESA.
1. Capacity Payments
The proposed ESA allows immediate capacity payments, which Staff believed was
reasonable. In support of this belief, Staff noted that the Facility has operated throughout the
Company's capacity deficiency periods since the 1980s. Because the Facility contributed to
satisfying the Company's capacity needs, Staff believed the Facility should be granted immediate
capacity payments for its entire generation capacity amount for the full term of the proposed ESA.
Additionally,the First Amendment to the 1987 ESA overstated the nameplate capacity
for the Facility. The proposed ESA corrects this error, decreasing the stated nameplate capacity
from 2,100 kW to 1,900 kW. As no overpayment will ensue, Staff did not believe the correction
in nameplate capacity would negatively impact consumers.
2. Avoided Cost Rates
Staff verified the accuracy of the avoided cost rates contained in the proposed ESA.
3. Article XXIII (Modification)
After reviewing Article XXIII(Modification) of the proposed ESA, Staff believed that
the language in the proposed ESA addressing potential modifications to the Facility complies with
Order No. 35705. However, following a future modification, Staff recommended that the
Company's Power Cost Adjustment include only the net power supply expense reflecting the
proper authorized rate for all energy delivered from the first operation date of the modified Facility,
regardless of the actual price paid for the generation. Staff indicated that this would be consistent
with Order No. 35705.
ORDER NO. 36223 2

4. Lapsed-Contract Period
Staff noted that the proposed ESA will not be approved before the 1987 ESA expires,
producing a lapsed-contract period from April 3, 2024, through the service date of the
Commission's Final Order in this case. Anticipating this,the Parties agreed that the Company will
pay the Surplus Energy Price(as defined in Section 7.2 of the proposed ESA)l for energy delivered
during such a lapse period. Staff noted this arrangement is consistent with another agreement
between the parties that the Commission approved in Case No.IPC-E-21-08.See Order No. 35067.
Therefore, Staff believed it is reasonable for the Company to pay the Seller the Surplus Energy
Price as defined in Section 7.2 of the proposed ESA for any generation delivered from the Facility
during the lapsed-contract period.
COMMISSION DISCUSSION AND FINDINGS
The Commission has jurisdiction over the Company's Application and the issues in
this case under Title 61 of the Idaho Code including, Idaho Code §§ 61-501, 502, and -503. The
Commission is empowered to investigate rates, charges,rules,regulations,practices, and contracts
of public utilities and to determine whether they are just, reasonable,preferential, discriminatory,
or in violation of any provision of law, and to fix the same by order. Idaho Code §§ 61-502, 61-
503. Based on our review of the record, including the Application, proposed ESA, and Staff s
comments, we find it reasonable to grant the Company's Application.
The expiration of the 1987 ESA necessitates the formation of a new ESA. Since the
Facility has contributed to meeting the Company's capacity needs for decades, the provision of
immediate capacity payments under the proposed ESA is reasonable.
Additionally, an accurate description of the nameplate capacity of the Facility will aid
in future interpretation and application of the proposed ESA by reducing the risk of future
confusion or error. Accordingly, we find it reasonable to revise the nameplate capacity of the
Facility as proposed in the ESA.
Furthermore, in prior cases, we have approved ESAs with updated provisions relating
to facility modifications in some of the Company's other ESAs, if revision is necessary. The
proposed ESA here complies with Order No. 35705, in which we identified certain concerns with
an article in another ESA that similarly addressed facility modifications. If the Facility is modified,
1 Section 7.2 of ESA defines the Surplus Energy Price as the lesser of 85 percent of the market price or the contract
price.
ORDER NO. 36223 3

the Company's shall include only the net power supply expense reflecting the authorized rate for
all energy delivered from the first operation date of the modified Facility in the Power Cost
Adjustment, regardless of the actual amount paid for the generation. Accordingly, based on our
review, we find it fair,just, and reasonable to approve the proposed ESA for energy generated by
the Facility and that all payments for purchases of energy under the proposed ESA be allowed as
prudently incurred expenses for ratemaking purposes.
We next address the Company and Seller's agreement regarding the purchase of energy
delivered between the April 2, 2024, expiration of the 1987 ESA and the effective date of the
proposed ESA. The Company and Seller anticipated this and agreed that the Company will pay
the Surplus Energy Price (as defined in Section 7.2 of the proposed ESA) for energy delivered
during such a lapse period. We find that this is a reasonable method of addressing the lapse period
and approve the Company and Seller's agreement to do so.
ORDER
IT IS HEREBY ORDERED that an Energy Sales Agreement between the Company
and Seller for energy generated by the Facility is approved.
IT IS FURTHER ORDERED that if the Facility is modified, the Company's shall
include in its Power Cost Adjustment only the net power supply expense reflecting the authorized
rate for all energy delivered from the first operation date of the modified Facility,regardless of the
actual amount paid for the generation.
IT IS FURTHER ORDRED that the Company shall pay the Seller the Surplus Energy
Price for energy delivered during the lapse period.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order about any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
ORDER NO. 36223 4

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 14th day
of June 2024.
ERIC ANDERSON, PRESIDENT
J R. HAMMOND JR., COMMISSIONER
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EDWARD LODGE, CO T SSIONER
ATTEST:
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Commission Secretary
IALegal\ELECTRIC\IPC-E-24-09_BP Hydro\orders\IPCE2409_final_at.docx
ORDER NO. 36223 5