20250801Staff Comments.pdf

ERIKA K. MELANSON
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 11560
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR ) CASE NO. IPC-E-25-10
APPROVAL OF A POWER PURCHASE )
AGREEMENT AND AN ENERGY STORAGE )
AGREEMENT WITH CRIMSON ORCHARD ) COMMENTS OF THE
SOLAR LLC ) COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission
("Commission"), by and through its Attorney of record, Erika K. Melanson, Deputy Attorney
General, submits the following comments.
BACKGROUND
On March 13, 2025, Idaho Power Company("Company") filed an application with the
Commission for an order: (1) approving the 20-year Power Purchase Agreement("PPA")
between Crimson Orchard Solar LLC ("Crimson Orchard") and the Company, supplying the 100
megawatts ("MW") output to the Company; (2) approving the 20-year Energy Storage
Agreement ("ESA")between Crimson Orchard and the Company for 100 MW of dispatchable
energy storage capacity; and(3) acknowledgment of the lease accounting necessary to facilitate
the transaction and that the resulting expenses associated with both the PPA and the ESA are
prudently incurred for ratemaking purposes.
STAFF COMMENTS 1 AUGUST 1, 2025

The Company states that under the PPA, Crimson Orchard will construct, own, operate,
and maintain a solar powered generation facility located in Elmore County, Idaho, with an
expected nameplate capacity of 100 MW, supplying the output to the Company for a period of
20 years from a commercial operation date of June 1, 2027. Application at 6-7. The Company
states that the 20-year ESA was executed for a battery energy storage system(`BESS") located
in Elmore County, Idaho supplying 100 MW of capacity at the point of interconnection on the
Company's system, with a commercial operation date ("COD") of June 1, 2027. Id. at 7.
The Company filed two sets of direct testimony with the Application. Id. at 2. The
Company states that the testimony presents the Company's need for new resources to meet an
identified capacity deficit in 2027 as informed by previous Integrated Resource Plans ("IRP").
Id. The Company states the annual capacity positions identified in the 2021 IRP were deficits of
approximately 101 MW in 2023, 186 MW in 2024, 311 MW in 2025, 560 MW in 2026, and 665
MW in 2027. Id.
The Company states the Crimson Orchard PPA and Crimson Orchard ESA were executed
on February 7, 2025, as cost-effective projects that can meet a June 1, 2027, operation date. Id.
at 6.
The Company requests the Commission to acknowledge the lease accounting, as outlined
under Generally Accepted Accounting Principles, to facilitate the ESA transaction and that the
expenses associated with the ESA are prudently incurred expenses for ratemaking treatment. Id.
at 8-9.
STAFF ANALYSIS
1. Initial Summary
Staff agrees that the Company's system faces a capacity deficit in 2027 and the Crimson
Orchard resources are a least-cost, least-risk("LC-LR")part of the solution. Therefore, Staff
recommends that the Commission approve the Company's requests, with minor modifications
described below.
2. The System Need
The Company submitted this case in March 2025, when its 2025 IRP was near
completion. Accordingly, the Company incorporated up-to-date load and resource assumptions
STAFF COMMENTS 2 AUGUST 1, 2025

to calculate the system reliability. Ellsworth Direct at 9. The Company's reliability assessment
"identified a capacity deficit of 123 MW in 2027." Id. at 8. The Company also asserted that the
proposed acquisitions "are necessary and required in order to continue to provide reliable and
adequate electric service to Idaho Power's customers starting in the summer of 2027 and into the
future." Application at 4.
Staff reviewed the load and resource assumptions and believes that they were reasonable.
Staff renewed the Company's reliability analysis using these assumptions and agrees with the
results—the system faces a 123 MW capacity deficit in 2027 unless additional resources are
procured.
3. The Least-Cost Least-Risk Solution
The Company asserts that the Crimson Orchard resources are LC-LR resources that are
necessary to meet the identified 2027 capacity deficiency. Hackett Direct at 32. The resources
are cost-effective finalists after a long and competitive acquisition process. The Request for
Proposal ("RFP")process was prescribed by the Oregon Public Utility Commission ("OPUC")
and Company Witness Hackett provided a detailed synopsis of each step as a large number of
energy resource proposals were winnowed to the final short list("FSL").
Staff identified concerns with this process in a related case (IPC-E-24-46)but refrains
from repeating the concerns in this case. The concerns are moot because the Crimson Orchard
resources are the only remaining FSL resources that can be constructed by the 2027 deadline.
The other FSL projects were approved in earlier cases or have been eliminated due to permit
denials and interconnection delays.
Staff agrees that all the projects that made it to the FSL were properly vetted by the
Company, with oversight by an independent evaluator, and review by the OPUC staff. Staff also
reviewed each step of the selection process, the cost assumptions for various bids, and the
portfolio net present value results. Staff believes that the projects that made it to the FSL are the
most cost-effective proposals from the 2026-2027 RFP, including the Crimson Orchard projects.
Staff notes, however, that this case continues the trend of putting the Commission in the
dilemma of approving a last-option project or risking a system capacity deficit. To provide
meaningful resource alternatives, Staff encourages the Company to reduce the time it takes to
STAFF COMMENTS 3 AUGUST 1, 2025

acquire resources once a need is identified, extend the lead time by planning further into the
future, and/or reducing or delaying load growth.
Staff also notes that these Crimson Orchard projects are not sufficient to resolve the full
capacity deficit. Company Witness Ellsworth states that"The Company continues negotiations
with developers and energy suppliers for additional 2027 resources necessary to meet the
remaining capacity deficiency." Ellsworth Direct at 12. Staff encourages the Company to
disclose its plan to meet the deficiency as soon as possible.
4. Project Risks
Staff identified several risks associated with this project, as outlined below.
Cost and Schedule Risk.
Staff believes that the Company and ratepayers are shielded from construction cost
overruns because the risk resides with the developer. Both the PPA and ESA establish fixed
prices for the life of each contract, as defined in confidential Exhibit Nos. 4 and 5.
The Company still faces schedule risk if the developer misses the COD. This is a
potentially significant issue, given the rapidly growing load and the threat of capacity
deficiencies. However, the PPA and ESA contain typical COD guarantees that incentivize the
developer to meet the COD target. Staff believes that these guarantees are reasonable protection
against the risk of schedule delay and therefore considers the risk to be acceptable.
Investment Tax Credits and Tariff Risk.
The PPA and ESA were negotiated when the Investment Tax Credit("ITC") was
established law and presumably the value of the credit was built into the negotiated price for
each agreement. However, the new presidential administration's opposition to the credit injected
uncertainty about the issue. The recent passage of the One Big Beautiful Bill Act ("OBBBA")
resolved much of the uncertainty. The OBBBA does not change the ITC conditions for BESS
resources, and it established a new ITC phaseout schedule for the solar resource that still
STAFF COMMENTS 4 AUGUST 1, 2025

accommodates this project'. Furthermore, Staff believes that the developer bears the risk of
collecting the ITC.
Staff also considered the ongoing cost uncertainty due to fluctuating import tariffs.
Unless the project materials have already been purchased, or are sourced in the United States,the
project cost could increase significantly. However, Staff believes this cost risk also resides with
the developer, not the Company,because of the fixed-price structure of the agreements.
5. Recommended Approvals
Given the factors discussed above, Staff recommends that the Commission approve the
PPA and the ESA between Crimson Orchard Solar LLC and the Company, with the exceptions
described in the next section. Staff also recommends that the payments associated with these
agreements be deemed prudent.
6. Agreement Contract Terms
Staff believes the PPA and ESA are reasonable and contain typical contract terms.
However, Staff recommends two changes described below.
Option to Purchase
Article VIII of the PPA and Article II 2.7 and 2.8 of the ESA contain the Right of First
Offer and Purchase Option for both facilities. PPA at 45 and ESA at 24. The language in these
sections provides a specific minimum price for the purchase of each of these facilities. Article
III of the PPA and Article III of the ESA contain the statement". . . declaration that all payments
to be made to [Crimson Orchard] hereunder shall be allowed as prudently incurred expenses for
ratemaking purposes . . ....PPA at 27 and ESA at 26. Staff does not believe it is reasonable for
the minimum price requirement nor the prudency of the purchase of power production and a
power storage facility to be determined 10, 15, or 20 years in advance of purchase. Staff
recommends the Commission issue an order denying Article VIII of the PPA and Article II 2.7
and 2.8 of the ESA from being included as prudently incurred expenses for ratemaking purposes
'https://www.mwe.com/insights/the-one-big-beautiful-bill-act-navigating-clean-energy-tax-credits-in-a-new-era/
STAFF COMMENTS 5 AUGUST 1, 2025

at this time and the Company shall be required to prove prudence for recovery if it decides to
pursue ownership.
Bilateral Modifications
Section 23 of the PPA contains the statement "No modification hereof shall be effective
unless it is in writing and executed by both Parties." PPA at 62. Likewise, Article XIX 19.3 of
the ESA contains the statement"No amendment, modification or change to this Agreement shall
be enforceable unless set forth in writing and executed by both Parties." ESA at 26. Staff
believes that these provisions neglect the significance of Commission approval and recommends
that the language be updated within both the PPA and the ESA to reflect the need for
Commission approval before it becomes effective. For example, the language can be updated as
follows: No amendment, modification or change hereof shall be effective unless it is in writing
and executed by both Parties and subsequently approved by the Commission. (Emphasis added.)
7. Accounting Treatment of the ESA
The Company requested that the Commission acknowledge that lease accounting is
necessary to facilitate the transaction of the ESA. The Company stated that it will record the
ESA as lease liability and a right-of-use asset upon energization. The right-of-use asset will then
be amortized over a 20-year period with corresponding accounting entries to accumulated
amortization. Application at 8. Interest expense on the lease will be calculated using the
incremental borrowing rate. Id. The incremental borrowing rate is not currently known and will
be known at the point of commencement. Response to Production Request No. 11. The
difference between the total payment each month and the interest payment each month will
determine the principal payment, which reduces the overall lease liability. Application at 9.
Staff agrees with the Company's accounting proposals regarding the lease and agrees that
the method described is consistent with Generally Accepted Accounting Principles.
Crimson Orchard will develop, design, construct, own, and operate the BESS and supply 100
MW of capacity to the Company's system. However, the Company will have complete control
to dispatch the capacity of the BESS. Application at 8. The Company stated that the lease meets
the criteria of being classified as a capital lease. Id. For a lease to qualify as a capital lease, a
STAFF COMMENTS 6 AUGUST 1, 2025

lease must meet at least one of the following criteria listed in Accounting Standards Codification
842-10-25-2:
1. Transfer of title/ownership to the lessee after the lease term.
2. A purchase option the lessee is reasonably certain to exercise.
3. The lease term represents the major part of the asset's useful life (75%percent or
more of the useful life of the asset).
4. The present value of the lease payments over the lease term equals or exceeds
substantially all the fair value of the asset(90 percent or more of the fair value of).
5. The asset is so specialized in nature that it provides no alternate use to the lessor after
the lease term.
The contract meets one of the five criteria, Criteria No. 3, to qualify as a capital lease as
listed above. The lease term of the BESS is 20 years, and the useful life is estimated to be 20
years. Response to Production Response No. 10(c). This results in the lease term being 100% of
the asset's useful life, which exceeds the 75%threshold. Therefore, Staff recommends the
Commission acknowledge that lease accounting is the appropriate method to account for
Crimson Solar BESS as a capital lease and approve the Company's proposed accounting
treatment.
STAFF RECOMMENDATION
Staff recommends the Commission:
1. Approve the PPA.
2. Approve the ESA.
3. Approve future payments—at the current fixed rate - as prudent once each system is
in service. The Purchase Options should be excluded from this determination. If the
Company exercises them, prudence and recovery should be pursued if and when the
Company pursues ownership.
4. Direct the Company to amend the agreement terms to require Commission approval
for substantive contract modifications.
5. Acknowledge the use of lease accounting for the ESA.
STAFF COMMENTS 7 AUGUST 1, 2025

Respectfully submitted this 1 st day of August 2025.
ahntj �i/l/�- -----
Erika K. Melanson
Deputy Attorney General
I:\Utility\UMISC\COMMENTS\IPC-E-25-10 Comments.docx
STAFF COMMENTS 8 AUGUST 1, 2025

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 1st DAY OF AUGUST 2025, SERVED THE
FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO. IPC-E-25-10,
BY E-MAILING A COPY THEREOF TO THE FOLLOWING:
DONOVAN E. WALKER TIM TATUM
LEAD COUNSEL VP, REGULATORY AFFAIRS
IDAHO POWER COMPANY IDAHO POWER COMPANY
PO BOX 70 PO BOX 70
BOISE ID 83707 BOISE ID 83707
E-MAIL: dwalker(a idahopower.com E-MAIL: ttatumkidahopower.com
dockets&idahopower.com
Idaho Irrigation Pumpers Assn, Inc. Idaho Irrigation Pumpers Ass'n, Inc.
Eric L. Olsen Lance Kaufman, Ph.D.
Echo Hawk& Olsen, PLLC 2623 NW Bluebell Place
P.O. Box 6119 Corvallis, OR 97330
505 Pershing Ave., Ste. 100 E-MAIL: lance&ae isg insi hg t.com
Pocatello, ID 83205
E-MAIL: elo(d),echohawk.com
Micron
Austin Rueschhoff
Thorvald A. Nelson
Austin W. Jensen
Kristine A.K. Roach
Holland& Hart, LLP
555 17t' Street, Suite 3200
Denver, CO 80202
E-MAIL:
darues chhoff khollandhart.com
tnelson(i-�hollandhart.com
awj ensen(d)lhollandhart.com
karoach&hollandhart.com
aclee(d),hollandhart.com
PATRICIA JORDAII, SECRETARY
CERTIFICATE OF SERVICE