20110826IPPC Comments and Intervention.pdf

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UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

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Cedar Creek Wind, LLC ) Docket No. EL11-59-000
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MOTION TO INTERVENE AND COMMENT OF THE NORTHWEST AND

INTERMOUNTAIN POWER PRODUCERS COALITION

Pursuant to Rules 212 and 214 of the Rules of Practice and Procedure of the
Federal Energy Regulatory Commission (“FERC” or the “Commission”), 18 C.F.R. §
385.212 and 385.214, and the Commission’s Notice of Petition for Enforcement dated
August 8, 2011, the Northwest and Intermountain Power Producers Coalition (“NIPPC”)
hereby moves to intervene and submits its comment in the above captioned matter. As
explained in more detail below, NIPPC respectfully urges the Commission to affirm the
directives of the Public Utility Regulatory Policies Act of 1978 (“PURPA”) that (1) a QF
is entitled to receive avoided cost rates in effect on the date on which a legally
enforceable obligation is incurred, and (2) state commissions are prohibited under
PURPA from holding that the date a legally enforceable obligation is created is simply
the date on which the utility signed the contract.

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I. COMMUNICATIONS
Please direct all correspondence and communications in this matter to:

Peter J. Richardson
Gregory M. Adams
Richardson & O’Leary, PLLC
515 N. 27th Street
PO Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
[e-mail] [e-mail] Northwest and Intermountain Power Producers Coalition c/o Robert D. Kahn, Executive Director
1117 Minor Avenue, Suite 300
Seattle, Washington 98101
Telephone: [phone]
Fax: [phone]
[e-mail]

II. MOTION TO INTERVENE

Intervention is appropriate where the movant has or represents an interest that may
be directly affected by the outcome of the proceeding. See 18 C.F.R. § 385.214(b)(2)(ii).
NIPPC is a trade association whose members and associate members include independent
power producers active in Idaho, the Pacific Northwest and Western energy markets.1
1 NIPPC’s members include Calpine Corporation; Capital Power Corporation; Constellation Energy Control & Dispatch; EDP Renewables North America LLC; enXco, an EDF Energies Nouvelles Company; EverPower Wind Holdings, Inc.; First Wind Holdings, Inc.; Invenergy Wind North America LLC; Ridgeline Energy, Veolia
Environment; Exergy Development Group of Idaho LLC; Shell Energy North America; TransAlta Energy Marketing, Inc.;TransCanada Corporation; and Veresen Inc.

The purpose of NIPPC is to represent the interests of its members in developing rules and
policies that help achieve a competitive electric power supply market in the Pacific
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Northwest. NIPPC’s members utilize PURPA as one means of securing power purchase
agreements for the sale of the output of their projects to electric utilities in Idaho and
other states. Without the opportunity to intervene herein, NIPPC would be without any
means of participation in this proceeding which may have a material impact on its
members’ ability to enter into PURPA contracts or other legally enforceable obligations.
Indeed, some of NIPPC’s member companies are developing projects that have been, or
will be, directly impacted by the Idaho Public Utilities Commission’s (“Idaho PUC’s”)
policies manifested in orders identical to those challenged by Cedar Creek. NIPPC
therefore requests that the Commission grant its motion to intervene pursuant to Rule 14
because the outcome of this proceeding will directly and materially affect its members.
III. BACKGROUND
On August 5, 2011, Cedar Creek Wind, LLC (“Cedar Creek”) petitioned
(“Petition”) the Federal Energy Regulatory Commission (“Commission” or “FERC”) to
initiate an enforcement action against the Idaho PUC. Cedar Creek asserts that the Idaho
PUC wrongfully rejected five Firm Energy Sales Agreements between it and PacifiCorp
d/b/a Rocky Mountain Power (“Rocky Mountain Power”), solely because Rocky
Mountain Power did not execute those Agreements prior to the December 14, 2010 date
after which Cedar Creek’s projects were no longer eligible to receive the Idaho published
avoided cost rates, and now must instead accept rates determined through the Integrated
Resource Planning (“IRP”) process.2
2 Petition at 1.

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IV. COMMENT
NIPPC agrees with Cedar Creek that the Idaho PUC has violated PURPA and the
Commission’s established precedent to the effect that QFs are entitled to receive avoided
cost rates calculated at the time a legally enforceable obligation is incurred, and not
solely on the date on which a contract is fully executed by both parties. The Idaho PUC’s
“bright line rule”3
A. The Idaho PUC has recently issued several orders weakening the Commission’s PURPA regulations.
vests all power to decide when a legally enforceable obligation is
created in the hands of the utility, thereby abdicating the Idaho PUC’s responsibility to
implement FERC’s PURPA rules. In essence, the Idaho PUC has repealed the must-buy
provision of PURPA. Should a utility choose not to sign a contract, under the Idaho
“bright line rule,” there will be no legally enforceable obligation and hence no must-buy
requirement.

The Idaho PUC has established a pattern of skirting PURPA and allowing the
utilities under its jurisdiction great latitude when it comes to shirking their responsibility
to purchase the output from QFs under legally enforceable obligations.
This pattern is evidenced by the fact that, concurrently with the issuance of the
Cedar Creek June 8 Order, the Idaho PUC issued a similar order rejecting identically
situated QFs in five other Idaho Power Company dockets. Like with Cedar Creek, and
3 The new “bright line rule” is that “a Firm Energy Sales Agreement/Power Purchase Agreement must be
executed, i.e. signed by both parties to the agreement, prior to the effective date of the change in eligibility criteria.” Idaho PUC Order No. 32260, Case No. PAC-E-11-01 at 9 (June 8, 2011) (the “Cedar Creek June 8 Order”). Idaho PUC Cases and Orders cited herein are available online at http://www.puc.idaho.gov/electric/electric.HTM.

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also on June 8, the Idaho PUC issued an order4 rejecting contracts between Idaho Power
Company and (1) Alpha Wind, LLC; (2) Bravo Wind, LLC; (3) Charlie Wind, LLC; (4)
Delta Wind LLC, and (5) Echo Wind, LLC (the “ABCDE Projects”). The ABCDE QF
projects had executed contracts that were tendered to them by Idaho Power prior to the
December 14 cutoff date on which the Idaho published avoided cost rates would no
longer be available to wind projects sized greater than 100 kilowatts (“kw”).5 (The
ABCDE projects are all proposed to be larger than 100kw.)6 The ABCDE contracts were
all executed prior to December 14, 2010.7 Idaho Power executed the contracts, like
Rocky Mountain Energy, after the December 14, 2010 cutoff date.8 Applying the
heretofore unknown “bright line rule” that, in order to establish a legally enforceable
obligation, a contract must be fully executed prior to the date the eligibility for published
rates changes, the Idaho PUC rejected all five contracts.9
4 Idaho PUC Order No. 32254, Case Nos. IPC-E-10-51 -52 -53 -54 -55 (June 8, 2011).
Cedar Creek’s Petition cites the
5 Id. 6 The Idaho PUC has historically published avoided cost rates for all QF projects, regardless of technology, that are up to ten average monthly megawatts in size. Wind projects have been able to, due their relatively low capacity factors, qualify for those published rates with projects up to thirty nameplate megawatts. Further, the Idaho
PUC has adopted the FERC “one mile rule” for determining common ownership of a project for purposes of determining eligibility for the Idaho PUC’s published rates. The utilities’ therefore initiated a generic docket before the Idaho PUC to address what they perceived as a problem due to the ability of wind developers to successfully
develop multiple projects more than one mile apart under the Idaho PUC’s rules. See Idaho PUC Docket No. GNR -E-10-04. These rates available to wind QFs, however, were reduced by a wind integration charge that resulted form the last moratorium on published rates for Idaho wind QFs over 100 kw. See Idaho PUC Order No. Order No.
30488, at 8-9, Idaho PUC Case No. IPC-E-07-03 (2008). The same exact published rates at issue in the Cedar Creek contract and those discussed in this filing are still available to non-wind and non-solar QFs as of the date of this filing. Idaho PUC Order No. 31025, GNR-E-10-01 (2010). 7 Idaho PUC Order No. 32254.
8 Id. 9 Id.

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relevant legal authority to the effect that the Idaho PUC illegally rejected its contracts.
For the same reasons, the Idaho PUC also illegally rejected the ABCDE contracts.
This pattern of the Idaho PUC skirting its PURPA obligations is further evidenced
in dicta in an Idaho PUC order10 on reconsideration of yet another June 8, 2010 order11
In addition, however, the Rainbow projects also made the argument that the
Commission’s rejection of their contracts was an impermissible governmental
interference with contractual rights. In rejecting that argument, the Idaho PUC further
evidenced a pattern of skirting its PURPA responsibilities by actually asserting that it has
ongoing ratemaking authority over PURPA contracts:

rejecting two more QF contracts with the Rainbow Ranch Wind, LLC and the Rainbow
West Wind, LLC. The Rainbow Ranch and Rainbow West contracts were mutually
executed by Idaho Power and the developers on December 14, 2010, the very day the
Idaho PUC’s new eligibility rules were deemed effective. The Rainbow developer
petitioned for reconsideration of the Idaho PUC’s June 8 Rainbow Order making many of
the same arguments made by Cedar Creek and the ABCDE projects.
First, we note that a firm energy sales agreement/power purchase agreement
differs from a standard offer and acceptance contract. Unlike standard offer
and acceptance contracts, PURPA agreements are subject to review and
approval by this Commission pursuant to Idaho statutes. Idaho Code §§ 61-502 and 61-503.[12
10 Idaho PUC Order No. 32300, Case Nos. IPC-E-10-59 -60 (July 27, 2011).
] “The Commission, as part of its statutory duties,
determines reasonable rates and investigates and reviews contracts.” A.W.
Brown Company v. Idaho Power Company, 121 Idaho 812, 816, 828 P.2d
11 Idaho PUC Order No. 32256, Case Nos. IPC-E-10-59, -60 (June 8, 2010) (the “June 8 Rainbow Order”).
12 These two Idaho Code sections provide the Idaho PUC with the authority to set and revise rates and terms of service for the regulated utilities under its jurisdiction.

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841, 845 (1992). Thus, QF power purchase agreements are different from
typical or standard contracts. “Interference with private contracts by the
state regulation of rates is a valid exercise of the police power, and such
regulation is not a violation of the constitutional prohibition against
impairment of contractual obligations.” Agricultural Products Corp. v Utah
Power & Light Co. 98 Idaho 23, 29, 557 P.2d 617, 623 (1976). Moreover,
“[p]rivate contracts with utilities are regarded as entered into subject to
reserved authority of the state to modify the contract in the public interest.”
Id. (emphasis added).13

The Idaho PUC’s rejection of the Rainbow contracts was based, in addition to the
surprise “bright line rule,” also on its belief that it has ongoing utility-type oversight and
regulatory control over PURPA contracts and their contents. This is obviously in direct
contradiction to decades of precedent implementing section 210(e) of PURPA, which
prohibits utility-type regulation of long-term QF contracts.14
The Commission should grant Cedar Creek’s Petition for an enforcement action
against the Idaho PUC if for no other reason than because the Idaho PUC appears to have
lost sight of the fact that it is implementing, and is constrained by, federal law and this
Commission’s implementing regulations of that federal law.

13 Idaho PUC Order No. 32300. 14 See American Paper Institute, Inc. v. American Elec. Power Service Corp., 461 U.S. 402, 414 (1983)
(“Congress did not intend to impose traditional ratemaking concepts on sales by qualifying facilities to utilities.”); Freehold Cogeneration Associates, L.P. v. Board of Regulatory Com’rs of State of N.J., 44 F.3d 1178, 1194 (3rd Cir. 1995) (holding “once the [state utility commission] approved the power purchase agreement between Freehold
and JCP & L on the ground that the rates were consistent with avoided cost, any action or order by the [commission] to reconsider its approval or to deny the passage of those rates to JCP & L's consumers under purported state authority was preempted by federal law”); Independent Energy Producers Ass’n, Inc. v. California Public Utilities
Com’n, 36 F.3d 848, 858 (9th Cir. 1994) (holding that “the fact that the prices for fuel, and therefore the Utilities’
avoided costs, are lower than estimated [at the time of execution of the PPA], does not give the state and the Utilities the right unilaterally to modify the terms of the standard offer contract”); New York State Electric & Gas Corp., 71
FERC ¶ 61,027, at pp. 24-26 (1995) (stating, “If we were to . . . allow the reopening of QF contracts that had not been challenged at the time of their execution, financeability of such projects would be severely hampered. Such a result is not . . . consistent with Congress’s directive that we encourage the development of QFs.”).
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B. The Idaho PUC ignored the QF’s right to obligate itself to a long term contract by its own actions.
The Commission very recently reaffirmed the QF’s right to choose the date on
which it will obligate itself and therefore have its avoided cost rates calculated.15 “The
Commission’s regulations, from the beginning, have given QFs the option of choosing to
have rates calculated at the time the obligation is incurred.”16 The purpose of this rule is
obvious. “[I]n order to be able to evaluate the financial feasibility of a cogeneration or
small power production facility, an investor needs to be able to estimate, with reasonable
certainty, the expected return on a potential investment before construction of a
facility.”17 “Section 292.304(d) and the requirement that a QF can sell and a utility must
purchase pursuant to a legally enforceable obligation were specifically adopted to prevent
utilities from circumventing the requirement of PURPA that utilities purchase energy and
capacity from QFs.”18 “[I]f the electric utility refuses to sign a contract, the QF may seek
state regulatory authority assistance to enforce the PURPA-imposed obligation on the
electric utility to purchase from the QF, and a non-contractual, but still legally
enforceable, obligation will be created pursuant to the state’s implementation of
PURPA.”19
15 See JD Wind 1, LLC, “Notice of Intent Not to Act and Declaratory Order,” 129 FERC ¶ 61,148, ¶¶25-26,
29 (2009); JD Wind 1, LLC, “Order Denying ‘Requests for Rehearing, Reconsideration, or Clarification,’” 130
FERC ¶ 61,127, ¶¶ 23-24 (2010).

16 JD Wind 1, LLC, 130 FERC ¶ 61,127 at ¶ 23.
17 Id. (quoting Order No. 69).
18 JD Wind 1, LLC, 129 FERC ¶ 61,148, at ¶25. 19 Id.
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In this case, unfortunately, the state commission has refused to implement the
federal regulations by holding that a QF must secure the utility’s signature to create a
legally enforceable obligation. As Cedar Creek has correctly pointed out, the Idaho
PUC’s “bright line rule” is contrary to not only the obvious meaning and intent of 18
C.F.R. § 292.304(d), but also decades of the Idaho PUC’s own PURPA precedent.20 The
long and storied history of litigation before the Idaho PUC to determine a QF’s right to
“grandfathered” avoided cost rates demonstrates the obvious – that Idaho utilities are
loath to enter into power purchase agreements with independent power producers and
will stall negotiations by any means possible until the rates available to the QF render the
project un-financeable.21
To allow the Idaho PUC’s new “bright line rule” to stand and require QFs to
obtain a utility’s signature to lock in an avoided cost rate would be to grant the state
commissions the authority to completely ignore the requirements of this Commission’s
QFs had no reason to expect any different treatment with
regard to the most recent avoided cost rate change by the Idaho PUC from those in the
past.
20 See Cedar Creek Petition for Enforcement of the Public Utility Regulatory Policies Act of 1978, at p. 7 & notes 13, 14. See also Earth Power Resources, Inc. v. Washington Water Power Company, Idaho PUC Case No.
WWP-E-96-6, Order No. 27231 (1997) (holding that a QF was entitled to grandfathered published rates because it satisfied the Idaho PUC’s test “that ‘but for’ the actions of [the utility, the QF] was otherwise entitled to a power purchase contract”); Blind Canyon Aquaranch v. Idaho Power Company, Idaho PUC Case No. IPC-E-94-1, Order
No. 25802 (1994) (same); H. Koyle v. Idaho Power Co., Idaho PUC Case No. U-1006-206, Order No. 17796, at pp. 4-5 (1982) (holding “the fact that on July 29, 1982, Idaho Power filed for revised avoided cost rates to be paid cogenerators and small power producers does not provide any justification for refusing to purchase power at rates
that are now approved and on file”).
21 One of the primary reasons Congress passed the mandatory purchase provisions of Section 210 of PURPA
was that Congress felt that “traditional electricity utilities were reluctant to purchase power from, and sell power to, the nontraditional facilities” and that this reluctance “impeded the development of nontraditional generating facilities.” FERC v. Mississippi, 465 U.S. 742, 750, 102 S.Ct. 2126, 2132-2133 (1982).

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PURPA regulations. If left intact, the Idaho PUC’s new “bright line rule” means that no
matter how extreme the bad faith tactics of the utility, the QF cannot create a legally
enforceable obligation and thereby lock in the avoided cost rates calculated on the date of
the QF’s choosing by the QF’s own actions.22 The QF is entirely reliant on the utility’s
cooperation, and the utility, by definition can thereby “circumvent” the requirement of
PURPA that utilities purchase energy and capacity from QFs.”23
Under these circumstances, the Commission should not defer to the state
commission’s determination of when a legally enforceable obligation is incurred under
state law, as the Idaho PUC will surely urge the Commission to do. The Commission has
held that a state commission is not free to ignore the requirements of PURPA, and the
right of the QF to choose to have rates calculated at the time that obligation is incurred.

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Simply put, there is an outer boundary to a state commission’s determination of when a
legally enforceable obligation is incurred, and the Idaho PUC has surely stepped far
outside of that boundary.

22 In one case of which NIPPC is aware, a QF developer has alleged that an Idaho utility abused its role as transmission provider and PURPA negotiator by using a non-existent transmission constraint at the QF’s proposed point of delivery to delay PURPA contract negotiations until a time when the published avoided cost rates were no
longer available. See Idaho PUC Case No. PAC-E-10-08, available online at http://www.puc.idaho.gov/internet/cases/elec/PAC/PACE1008/COMPLAINANT/20110222XRG%20ANSWER%20TO%20PAC%20MOTIONS,%20AND%20ITS%20OWN%20MOTION.PDF. It is not clear how the Idaho PUC’s
new rule requiring a utility-signed contract would apply to such circumstances. 23 JD Wind 1, LLC, 129 FERC ¶ 61,148, at ¶25.
24 JD Wind 1, LLC, 129 FERC ¶ 61,148, ¶¶25-26, 29 (2009); JD Wind 1, LLC, 130 FERC ¶ 61,127, ¶¶ 23-24 (2010). Cf. West Penn Power Co., 71 FERC ¶ 61,153 (1995).

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C. In Idaho, PURPA is the Only Game in Town.
The electric utilities and regulatory landscape in Idaho are little changed from
what they were when PURPA was enacted in 1978. In the early 1980’s, the Idaho PUC
was a leader in the country in implementation of PURPA and it aggressively and proudly
produced a progressive, fair and transparent implementation regimen. It is only the
remnants of those efforts that sustain what is left of the renewable/independent power
industry in Idaho. Idaho does not have retail access opportunities for customers of its
investor-owned utilities. In addition, it is still illegal in Idaho for any entity other than the
regulated investor-owned utilities or the dozen or so small publically-owned non-
regulated utilities to sell electricity at retail to existing customers (or even new customers
that are in close proximity to an existing utility’s facilities) in the state.25
Further restricting the opportunities for renewable and independent power
producers from access to markets is the fact that Idaho does not participate in any
regional transmission organization. There is no independent transmission operator, and
all three investor-owned utilities remain traditional vertically integrated monopolies that
literally control the gates to outside markets. Finally, the Idaho PUC has no competitive
The market for
renewable and independent power producers is a monopsony -- with only a single or very
few buyers.
25 Idaho Code § 61-332.

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procurement rules26
V. CONCLUSION
for acquisition of new generating resources, and the state has no
renewable portfolio standard, guide or even goal. PURPA is the only avenue in the State
of Idaho for renewable and/or independent power producers to have any chance of
success. That the regulatory environment in Idaho is virtually identical to that at the time
of the passage of PURPA’s mandatory purchase provisions only underscores the need for
the Commission to protect the federal rights created to overcome the well-documented
reluctance of investor owned utilities to purchase from independent power producers.
For the reasons stated above and for the reasons stated in Cedar Creek’s Petition,
the Northwest and Intermountain Power Producers Association respectfully requests the
Commission institute an enforcement action against the Idaho PUC to address the Idaho
PUC’s PURPA violations both as discussed herein and as discussed in Cedar Creek’s
pleading, or otherwise declare the Idaho PUC’s “bright line rule” is in clear violation of
the Commission’s regulations.

Respectfully Submitted,
/s/ Peter Richardson
Peter Richardson, [e-mail] Gregory M. Adams, [e-mail]
Richardson & O’Leary PLLC
515 N. 27th Street
Boise, Idaho 83702
Phone: [phone]
Fax [phone]
26 NIPPC petitioned the Idaho PUC in December of 2008 to initiate a proceeding to establish competitive procurement guidelines for Idaho utilities’ acquisition of generation resources. That proceeding has languished with
no substantive action on the part of the Idaho PUC for over two years. See Idaho PUC Case No. IPC-E-10-03.
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CERTIFICATE OF SERVICE

I hereby certify that I have this day served the foregoing document upon each person
designated on the official service list compiled by the Secretary in this proceeding.

Dated at Boise, ID this August 26, 201.

Signed: /s/
Peter J. Richardson