20261016Staff Comments.pdf

RECEIVED
October 16, 2026
ERIKA K. MELANSON IDAHO PUBLIC
DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83702
[phone]
IDAHO BAR NO. 11560
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-26-20
APPROVAL OF A POWER PURCHASE )
AGREEMENT AND AN ENERGY STORAGE )
SYSTEM TOLLING AGREEMENT WITH ) COMMENTS OF THE
BLUEBIRD SOLAR PROJECT 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 June 19, 2026, Idaho Power Company ("Company") applied to the Commission
requesting (1) approval of the 20-year Power Purchase Agreement ("PPA") between Bluebird
Solar Project LLC ("Bluebird") and the Company, supplying 200 megawatts ("MW") of output
from the solar powered generation facility to the Company, (2) approval of the 20-year Energy
Storage System Tolling Agreement ("ESSTA")between Bluebird and the Company for 100 MW
of dispatchable energy storage capacity (together, the "Bluebird Project"), and (3)
acknowledgement of the lease accounting necessary to facilitate the transaction and that the
resulting expenses associated with both the PPA and the ESSTA are prudently incurred for
ratemaking purposes ("Application"). The Company requested an order by December 4, 2026.
STAFF COMMENTS 1 OCTOBER 16, 2026

STAFF ANALYSIS
Staff reviewed the Company's Application and supporting documentation and
recommends that the Commission approve the PPA and the ESSTA. Staff also recommends that
the Commission acknowledge the lease accounting and acknowledge that the contracted expenses
will be prudently incurred once the proposed systems are in service. Staff s analysis is described
below.
A Need Exists for Additional Resources
Staff agrees that the Company's system faces a capacity deficit in 2028 and therefore
additional resources are necessary to ensure system reliability.
The Company states that "[t]he Company updated the system reliability assessment to
reflect the most up-to-date information available and found that the 2028 deficit had increased
from the previously identified 155 MW to an expected deficit of 204 MW." Ellsworth Direct at
8. Staff reviewed the load and resource assumptions that the Company used to make this
determination and believes they are justified and reasonable. Therefore, Staff believes that
additional cost-effective resources are necessary by 2028 to ensure system reliability.
The Bluebird Proiect Is a Least-Cost and Least-Risk Resource
Staff believes that the Bluebird Project is a least-cost, least-risk resource, and therefore the
Commission should approve the associated agreements and acknowledge that the costs incurred
are prudent.
The 2028 RFP Selection Process Was Fair and Reasonable
Staff believes that the 2028 All-Source Request for Proposal ("RFP")process was fair and
reasonable based on a careful review of Company Witness Hackett's testimony and Exhibit 3, the
closing report from the Independent Evaluator("IE").
Staff agrees that the Company's RFP "allowed bids for all commercially viable resource
types that could meet the specified commercial operation date." Hackett Direct at 12. Staff also
agrees that the bifurcation of the bidders into two groups was reasonable: Group One consisting
of bids with a commercial operation date ("COD") on or before April 2028, and Group Two
consisting of bids with a COD beyond April 2028. Staff believes that sufficient bidders applied to
STAFF COMMENTS 2 OCTOBER 16, 2026

each group to ensure adequate competition in each group. The Bluebird Project was included with
the Group Two responses, and was one of 83 proposals from 18 different bidders in that group.
Id. at 13. From this group of proposals, the Company eliminated non-conforming proposals and
created the initial shortlist which "included 53 projects from 15 bidders." Id. at 17. The initial
shortlist was reduced further by only considering bids with a COD between May 1,2028, and June
1, 2029 ("2029 Bids"). Id. at 18.
Staff believes the Company's evaluation of the 2029 Bids was fair and reasonable for two
reasons. First, the IE affirmed the reasonableness in its closing report, stating "LEI attests to the
reasonableness of IPC's approach in identifying bids for the final AS RFP shortlist. The process
was conducted with the utmost fairness and impartiality, upholding the integrity of the selection
process." Exhibit No. 3 at 12. Second, Staff independently examined the Company's calculations
for each bidder's levelized cost of capacity ("LCOC"), because those values are a major
determinant of which resources are identified as least-cost and included on the preliminary final
short list("FSL"). See Response to Production Request No. 13 —Confidential Attachment. Staff
believes that the LCOC values were fairly and reasonably determined, and therefore, Staff believes
that the preliminary 2029 Bids final short list ("2029 FSL") was reasonably determined.
The Bluebird Project Is a Least-Cost Resource
Staff believes that the Bluebird Project is a least-cost resource based on its top-tier outcome
in the 2029 FSL and its price-competitiveness with another recent Staff-recommended resource.
After the preliminary 2029 FSL was established, the Company performed stochastic
analyses to determine which combination of projects was the least-cost across a wide variety of
future conditions. The projects were then ranked according to their contributions to the optimal
portfolios. Confidential Exhibit No. 2 lists the ranked FSL projects, and the Bluebird Project is
one of the highest. Staff independently verified the stochastic net present value calculations that
underpin the FSL rankings and agrees with the results. See Response to Production Request No.
14.
Additionally, Staff believes the prices identified in the two Bluebird agreements are very
similar to the prices in another recent least-cost project: Crimson Orchard (Case No. IPC-E-25-
10). Both Crimson Orchard and Bluebird consist of a photovoltaic PPA and an ESSTA, so the
STAFF COMMENTS 3 OCTOBER 16, 2026

project prices are directly comparable. Staff believes the prices are substantially similar, which
therefore supports the conclusion that Bluebird is also a least-cost project.
Staff also considered the potential price impact due to changing import tariffs. Both
agreements include provisions to accommodate new tariffs or increases or decreases to existing
tariffs. Because these provisions would presumably exist in any competitor agreements, the cost
impact would be similar, and so Staff believes the comparative effects would be a wash. Even
more compelling, Company Witness Hackett stated that "[t]he results indicate that, even with
pricing under maximum tariff implications, a portfolio inclusive of the Bluebird Project remains
the second most cost-effective project with a 2028 commercial operation date, behind only the
Bennett Gas Expansion Project." Hackett Direct at 35. Staff therefore believes that the import
tariff provisions do not jeopardize the Bluebird Project's least-cost determination.
The Bluebird Project Is a Least Risk Resource
Staff believes the Bluebird Project is a least-risk resource due to the anticipated reduction
of the overall capacity deficit and the developer's mitigation of typical development risks.
Staff agrees with Company Witness Ellsworth who stated, "the addition of the Bluebird
Project would reduce the 2028 capacity deficit of 204 MW to a capacity deficit of 177 MW."
Ellsworth Direct at 12. Furthermore, "the ELCC of the Bluebird Project increases to 45 MW in
2029 and 70 MW in 2030." Id. Therefore, Staff believes that this proposed resource would aid in
the reduction of reliability risk by meaningfully reducing the system capacity deficit.
Regarding project execution risk, Staff believes the risk is low. Like any capital project,
this project runs the risk of delay for many different reasons. However, the nature of the
agreements puts much of the risk on the service provider rather than the Company. For example,
under the agreements, the service provider is responsible for obtaining all the necessary permits
for both projects. Response to Production Request No. 17. Furthermore, the combined projects
have already received the Conditional Use Permit from Ada County. Id. The service provider is
still awaiting additional permits but does not anticipate any outstanding permits delaying the COD.
Id.
Additionally,the service provider is responsible for procuring the materials needed for the
construction of the project, including modules, invertors, tracker, transformer and batteries.
STAFF COMMENTS 4 OCTOBER 16, 2026

Response to Production Request No. 18. The service provider has advised the Company that all
materials are anticipated to be delivered on time.
Other Considerations
In the section below, Staff addresses the adequacy of the agreement terms,the appropriate
accounting treatment for the ESSTA, and the causal connection of this project to new large load.
The Agreement Terms
Staff believes the agreement terms are reasonable and discusses the most important ones
below. Also, Staff discusses an ambiguity concerning a purchase option and recommends that the
Commission issue clarifying direction.
Both the PPA and the ESSTA include liquidated damage clauses that compensate the
Company if the service provider does not meet conditions of the contract. The PPA and ESSTA
each include delay damages if the guaranteed COD is not met. Hackett Direct at 26, 31; PPA at
25-26; ESSTA at 26-27. Staff reviewed the COD guarantees and believes they provide reasonable
protection for ratepayers against the risk of schedule delays.
The contracts also include performance guarantees and provisions for operation and control
of the project. Section 7.12 of the PPA outlines a shortfall payment to be paid by the Service
Provider if the quantity of net output guaranteed for the contract year is not met. Hackett Direct
at 27; PPA at 43. Likewise, Section 2.3 and 5.2 of the ESSTA outline that liquidated damages be
paid by the Service Provider if the guaranteed round-trip efficiency or guaranteed availability of
the battery energy storage facility are not met. Hackett Direct at 32;ESSTA at 16-19,32. Because
the service provider will be responsible for upholding these guarantees, the Company will not be
responsible for any additional battery augmentation costs or other maintenance expenses as these
are already embedded in the fixed contract pricing. Response to Production Request Nos. 4 and
5.
In addition to the performance guarantees, both contracts contain provisions for project
controls and operations such as outages,scheduling,and forecasting which are described in Section
7 of the PPA and Article 5 of the ESSTA. Hackett Direct at 27, 33, PPA at 34-44; ESSTA at 31-
36. Staff believes the Company has implemented sufficient solutions to maintain the capacity of
STAFF COMMENTS 5 OCTOBER 16, 2026

the projects over their useful life and shield ratepayers against potential maintenance and
operations issues.
The ambiguous contract terms are found in Article VIII of the PPA and Article II 2.7 and
2.8 of the ESSTA, which each describe a Purchase Option and Right of First Offer for the
respective facilities. PPA at 4; ESSTA at 20. The language in these sections provides a specific
price floor to purchase each facility,but it does not set the actual sale price. The sales price would
have to be negotiated at that time. The ambiguity is triggered by Article III of the PPA and Article
III of the ESSTA, which each contain the statement "... that all payments to be made to [the
Service Provider] hereunder shall be allowed as prudently incurred expenses for ratemaking
purposes ... ."PPA at 20; ESSTA at 22.
Staff believes that the Right of First Offer in both the PPA and ESSTA agreements are
reasonable as they mitigate the Company's exposure to change-of-control events involving the
service provider. However, Staff does not believe it is reasonable for the Commission's prudence
determination to include the possible purchase of the resource 10, 15, or 20 years later. The
Company clarified in its response to Production Request No. 20 that it would file a separate
application for Commission approval if it were to exercise the purchase option in the future.
Accordingly, Staff recommends the Commission direct the Company to seek a separate prudence
determination if and when it purchases either resource.
Accounting Treatment
The Company requested that the Commission acknowledge that lease accounting is
necessary to facilitate the transaction of the ESSTA. The Company stated that it will record the
fixed costs associated with the ESSTA as a lease liability and a right-of-use asset upon
energization. Application at 9. The right-of-use asset will be amortized on a straight-line basis
over a 20-year period with corresponding accounting entries to accumulated amortization. Id.
Interest expense on the lease liability will be calculated using the incremental borrowing rate. Id.
The incremental borrowing rate is not currently known and will be determined at lease
commencement. Id. The difference between the total monthly payment and the monthly interest
payment will determine the principal payment, which reduces the lease liability. Id.
Staff agrees with the Company's accounting proposals regarding the lease and agrees that
the method described is consistent with Generally Accepted Accounting Principles. Bluebird Solar
STAFF COMMENTS 6 OCTOBER 16, 2026

will develop, design, construct, own, and operate the BESS and supply 100 MW of capacity to the
Company's system. Id. at 8. The Company will have exclusive right to dispatch and use the
charging and discharging energy in exchange for a monthly payment. Id. The Company asserts
that the lease meets the criteria for classification as a capital lease under Generally Accepted
Accounting Principles. Response to Production Request No. 10.
For a lease to qualify as a capital lease, a lease must meet at least one of the following
criteria listed in the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") 842-10-25-2:
1. The title/ownership transfers to the lessee after the lease term.
2. The lessee is reasonably certain to exercise a purchase option.
3. The lease term represents the major part of the asset's useful life (75% 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 the
asset).1
The ESSTA meets Criterion No. 3 for classification as a capital lease. The ESSTA lease
term is 20 years. Application at 9. The Company currently estimates that the economic life of the
BESS at lease commencement will closely align with the 20-year useful life of similar Idaho
Power-owned BESS. See Order No. 35643 at 12. Since the lease term represents substantially all
of the estimated economic life of the BESS, Staff believes the agreement meets the finance lease
classification criteria under ASC 842-10-25-2. Therefore, Staff recommends that the Commission
acknowledge that the ESSTA qualifies for finance lease accounting under FASB ASC 842 and
approve the Company's proposed accounting treatment.
Cost Causation By a New Large Load
Staff believes this project is being caused in part by a new large load, as defined by Idaho
Code § 61-335. As established earlier in this document, this project is needed because of a 2028
system capacity deficit. Staff believes that the capacity deficit is primarily being caused by
extraordinary load growth from additional firm load ("AFL") customers identified in the 2025
Integrated Resource Plan ("IRP"). 2025 IRP, Appendix C at 6. Furthermore, Staff believes that
'FASB ASC 842:h!Ws:Hasc.fasb.org/842/tableOfContent(last visited Oct. 9,2026).
STAFF COMMENTS 7 OCTOBER 16, 2026

one of the AFL customers is Micron Idaho Semiconductor Manufacturing, LLC ("Micron"), and
that Micron's load meets the criteria of a new large load as established by Idaho Code § 61-335.
Case No. IPC-E-24-44.
Therefore, as prescribed by Idaho Code § 61-335, the costs of this project need to be
carefully considered and assigned in accordance with the law. The method for doing this is being
resolved in Case No. IPC-E-26-07. Staff merely notes for the record that this project is one that
must be part of that determination.
STAFF RECOMMENDATION
Staff recommends that the Commission:
1. Approve the PPA and ESSTA;
2. Acknowledge that once each resource is placed in service,the agreement expenses will
be prudently incurred, with the exception of the resource purchase options.
3. Direct the Company to seek a separate prudence determination if and when it purchases
either resource;
4. Acknowledge the lease accounting for the ESSTA; and
Respectfully submitted this 16th day of October 2026.
Erika K. Melanson
Deputy Attorney General
Technical Staff. Matt Suess, Kimberly Loskot, Rebecca Cottrell, Ray McArthur, Carl Smith
I:\Utility\UMISC\COMMENTS\IPC-E-26-20 Comments.doex
STAFF COMMENTS 8 OCTOBER 16, 2026

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 161h DAY OF OCTOBER 2026,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-26-20, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
DONOVAN E. WALKER, Lead Counsel
TIMOTHY TATUM, V.P., Regulatory Affairs
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707
E-MAIL:
dwalker(cidahopower.com
ttatumgidahopower.com
dockets(&,idahopower.com
PATRICIA JORDA9, SECRETARY
CERTIFICATE OF SERVICE