20060106Vol I Oral Argument.pdf

OR\G\NAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION
OF CASSIA WIND TO DETERMINE
EXEMPTION STATUS
CASE NO. IPC-05-
ORAL ARGUMENT
BEFORE
COMMISSIONER PAUL KJELLANDER (Presiding)
COMMISSIONER DENNIS HANSEN
COMMISSIONER MARSHA SMITH
PLACE:Commission Hearing Room
472 West Washington
Boise, Idaho
DATE:January 4, 2006
VOLUME I - Pages 1 - 40
CSB REpORTING
Constance S. Bucy, CSRNo. 187
17688 Allendale Road * Wilder, Idaho 83676
[phone] * [phone]
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For the Staff:Scot t Woodbury, Esq.
Deputy Attorney General
472 West Washington
Bo is e , Idaho 83 72 0 - 0 074
For Idaho Power:Barton L. Kline, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
For the Cassia proj ects:McDEVITT & MILLER LLP
by Dean J. Miller, Esq.
420 West BannockBoise, Idaho 83702
CSB REPORTING
Wilder, Idaho APPEARANCES83676
Premarked
Admitted
PAGENUMBERDESCRIPTION
FOR THE CASSIA PROJECTS:
Letter from John Deere Credit
to Idaho Power Commission , dated
January 3 , 2006
CSB REPORTING
Wilder , Idaho 83676 EXHIBITS
BOISE , IDAHO , WEDNESDAY , JANUARY 4 2006 , 10:00 A. M.
COMMISSIONER KJELLANDER:Well , good
mornlng.This is the time and place for an oral argument
in the matter of the petition of Cassia Wind to determine
exemption status in Case No. IPC-E-05-35.
m Paul Kj ellander.I'll be the Chairman
of today I s proceedings.To my right is Commissioner
Dennis Hansen and to my left is Commissioner Marsha
Smith , and as we begin these proceedings, we'll start
with the appearances of the parties and let I s begin with
Cassia Wind.
MR. MILLER:Thank you , Mr. Chairman and
members of the Commission.Dean J. Miller of the firm
McDevitt & Miller on behalf of the Cassia projects.
COMMI S S IONER KJELLANDER:Good morning,
Mr. Miller.Let's move now to Idaho Power.
MR. KLINE:Thank you.Mr. Chairman , I'
Bart Kl ine .m an attorney with Idaho Power.
appearing on behal f of Idaho Power.
COMMISSIONER KJELLANDER:Thank you
Mr. Kl ine , and let's look now to Mr. Woodbury.
MR. WOODBURY:Thank you, Mr. Cha i rman .
Scott Woodbury, Deputy Attorney General , for Commission
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Staff.
COMMISSIONER KJELLANDER:Okay.All
right , well , is there anything that needs to come before
the Commission before we begin the proceedings this
morning?I f not , then we I 11 start with Cassia.
MR. MILLER:Thank you very much,
Mr. Chairman and members of the Commission.Le t
start, if I migh~ with two introductory comments.The
first is to reintroduce to you Cassia Wind and Mr. Jared
Grover who is seated to my right.You first met Cassia
Wind and Mr. Grover last June in the hearings that were
held last summer , and as you recall , Mr. Grover is an
Idaho resident , an owner of former agricultural lands in
the Bell Rapids area.Mr. Grover and the Cassia proj ects
are not , is not a commercial developer of proj ects
interested in some sort of short-term turnaround, but
rather the proj ects intend a long-term investment to
convert lands that are no longer economically viable for
agricul ture to another productive use.
In this sense, I think the Cassia proj ects
are truly what PURPA intends to encourage.They are not
a disaggregated part of a greater scheme.They are a
small scale alternative to natural gas and fossil fuel
generation.
Secondly, let me just say a word about
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vocabulary.As you noted, our petition is entitled or is
styled as a request to determine exemption status.
have not used the word "grandfathering," as that word
implies to me the receipt of some sort of a benefit
through an act of kindness like a pardon or a clemency,
and while no one would rej ect an act of regulatory
kindness, we view entitlement to an exemption status as
more in the nature of a legal right or an entitlement
based on rules that the Commission has prescribed.
Let me briefly now review the history that
brings us to today.The Commission will recall that on
June 17th of last year, Idaho Power Company filed a
petition to suspend its PURPA obligations with respect to
wind generation and this has now come to be referred to
as the 22 case.Following hearings in July, the
Commission on August 4th issued its Order reducing the
rate cap eligibility for published rates from 10 average
megawatts to 100 kilowatts rather than fully suspend the
Company's PURPA obligations , and in doing so , the
Commission recognized that there were proj ects under
development at different stages of maturity and it was
necessary to create a standard for determining which
proj ects were eligible for the older , higher cap and
which proj ects had to be content with the new , lower cap.
In that case , Cassia argued for , in
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effect , a bright line test, that is , either the filing of
an interconnection agreement or a signed purchase power
agreement.The Commission fashioned a somewhat different
standard accepting in part the Cassia recommendation but
adopted a two-part test.It accepted the interconnection
application or purchase power agreement as a first or
threshold criteria , but then required some additional
evidence to show that the proj ect was in some sense real
that it existed more than just on the paper associated
with an interconnection application or purchase power
agreement.
In the language of the Order, the
Commission said that the QF must be able to demonstrate
other indicia of substantial progress and proj ect
maturity, and by way of example , it then listed four
indicia of maturity; that being the existence of a wind
study, a contract for turbines, arranged financing and/or
progress on permitting and licensing path.Thereafter
the Staff , Idaho Power Company and Windland all filed
petitions for reconsideration challenging the exemption
cri teria that the Commission had adopted, each arguing in
different ways that the exemption standard adopted was
too 1 iberal
The Commission will also recall that the
Commission rej ected all of these arguments and
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specifically rej ected the idea that a proj ect must have
progressed to a point that it had a legally enforceable
entitlement to a purchase power agreement, and the
Commission explained its rationale for a liberal standard
this way:The criteria we established for published rate
eligibility was fashioned in such a manner as to
recognize and not discount the considerable time , effort
and energy extended by some QFs in developing their
proj ects , the process for some that included not only
required negotiations with the utility, but also with
financing entities, turbine suppliers and efforts to
prove proj ect viability, so the Commission laid out its
rationale for a liberal exemption standard in Order
No. 29872 and it I S our belief that that same spirit
should guide the Commission in determining whether
specific proj ects are exempt from the new cap.
It's important , also, to note what the
Commission did not require.It did not require the
existence of legally enforceable obligations.It did not
require legally enforceable commitments that made proj ect
completion a legal certainty.It did not require proof
beyond all reasonable doubt that the proj ect could be
brought to successful conclusion.
Subsequently, the interpretation of the
exemption standard has come up in one subsequent case,
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that is , the PacifiCorp Case 05-09, the Schwendiman case,
and in comments in that case, the Staff took an approach
which we could refer to as a one and one approach; that
is, in order to be entitled to the exemption, the proj ect
had to satisfy one of the primary criteria and one of the
secondary criteria.The Commission in that case never
reached the question of whether that was an appropriate
way to interpret the exemption criteria as the case was
decided on other grounds, but the Staff I s one on one or
one and one approach does have some merit.It simplifies
the analysis.It I S consistent with what I take was the
Commission I S original intent of wanting some evidence to
show that the proj ect exists not just on paper, so I
think that roughly is the background that brings us to
today I S proceedings.
Let me now summarize, hopefully
accurately, if I can , what I take Idaho Power I s position
in this case to be as set forth in its memo of December
29th.Idaho Power admits , as it must, that Cassia, the
Cassia projects meet one of the primary criteria , that
is, the submission of interconnection study applications
and payment of the required fees, and it does not dispute
the testimony of Cassia that it would have met the other
criteria but for the actions of Idaho Power Company, and
Idaho Power admits that Cassia has wind studies , has
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permitting and licensing progress and land rights.
The Company says in its memorandum, in all
these areas, Cassia Wind I s progress appears to be equal
to or slightly ahead of other QF developers , and so it I S
clear that under a one and one test by the Company I
admission , Cassia is entitled to an exemption.Idaho
Power , however , concludes that the remaining criteria
turbines and financing, are entitled, it says, to
significant weight and are critical to determining the
exemption status.This, I believe , is wrong for a number
of reasons.
First , in neither Order 29839 or 29851 did
the Commission indicate that some factors were more
important than others , that some were entitled to more
weight than others.In effect, Idaho Power seeks to
elevate the turbine and financing issue to the status of
primary criteria and , in my opinion, seeks to accomplish
what the Commission rej ected in the reconsideration phase
of the 22 case , that is, the creation of more strict
eligibility threshold criteria , so the Company's effort
to reshuffle the eligibility criteria by making some more
important than others is not supported by the Commission
Orders that we I re dealing with so far , so, so far , we
have discussed two different approaches to evaluating or
to applying the threshold or the eligibility criteria.
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There I s the one and one approach and there
is Idaho Power's incorrect effort to reshuffle or the
cri teria to make some more important than others.
think there is a third approach that the Commission could
take and that's what you might call a totality of the
circumstances , that is, an assessment of the overall
facts and circumstances to arrive at a judgment about
project maturity.I think this approach would have the
advantage of consistency with the Commission's stated
interest in fair treatment of proj ects that relied on
prior rules and made investments and efforts in reliance
on prior rules , and if you examine the record from that
perspective , I think it's clear that Cassia is entitled
to an exemption.
We have provided an affidavit, a number of
affidavits , which I'm sure you've reviewed and which I
won't review in further detail, largely because it I
unnecessary in light of the Company I s admission that
Cassia satisfies the secondary criteria of wind studies
and land rights and adequate progress toward financing.
We have supplied, also , this morning, I provided to
Mr. Kline a new Exhibit 0 which is a letter from John
Deere Credit Company clarifying its commitment to
financing and provision of the turbines, and from Exhibit
0 and from the confidential exhibits which are attached
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to the second affidavit of Jared Grover, it is apparent
that John Deere Credit Company, obviously a substantial
firm with significant wherewithal , has turbines reserved
for the proj ects , has financing reserved for the proj ects
and awaits only a confirmation from the Commission that
the proj ects are exempt in order to complete the last of
its approval and due diligence process.
I 1 m not intimately familiar with the
normal procedures for approvals in a large corporation
like John Deere Credit Corporation , but it does not seem
unreasonable to think that, as it I S explained here, a
proj ect moves to a certain point wi thin the corporate
approval stage and then must await certain things to
happen before final approvals can be obtained and that
appears to be the case here.All that remains is for the
Commission to indicate that the proj ects are exempt and
the final approval process can occur at John Deere Credit
Company.
As I've indicated, I don't think it'
necessary to discuss the other elements of the
eligibility criteria since they are largely admitted, and
on the total i ty of all the circumstances, it seems clear
that the Cassia proj ects are mature, that there is every
reason to believe that they will be completed once the
Commission has issued its Order determining the exemption
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status , so by way of a simple conclusion , it's clear that
the Commission intended to adopt a fair exemption
standard , it I s clear in my mind that Cassia meets that
standard , and Cassia respectfully requests that the
Commission enter its Order determining that it is exempt
from the eligibility or from the rate cap eligibility
rule in the 22 case , so thank you very much for your
consideration.That concludes our presentation.
COMMISSIONER KJELLANDER:Thank you,
Mr. Miller.Are there any questions from members of the
Commission?Mr. Miller , just one question.I n your
presentation, you mentioned that John Deere also had the
access and a commitment for the turbines, where is that
documented in this case?I s there someplace I should be
looking?
MR. MILLER:I f you would look , of course
at Exhibit 0 which has been distributed and then in the
second affidavit of Jared Grover , there is a confidential
Exhibit J and a confidential Exhibit I , which taken
together with Exhibit 0 document the John Deere Credit
documentation that it has turbines reserved for the
proj ects and that it awaits only an approval from , a
confirmation from the Commission that the Cassia proj ects
meet the requirements of maturity, after which John Deere
Credit will be able to complete the rest of its due
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diligence and approval process.
COMMISSIONER KJELLANDER:Mr. Miller, in
looking at the new Exhibit 0, it also states in the final
paragraph that this letter is to seek final confirmation
no later than January 6th.It's January 4th, what are
they intimating in that letter?Are these turbines going
to be put someplace else if there's no decision coming up
by the 6th?
MR. MILLER:I believe that is the case.
It I S my understanding based on Exhibit 0 that without the
commitment -- well , it's my understanding that John Deere
Credit is considering the financing of a number of
proj ects, that the time line for their consideration is
such that if these proj ects are not going - - cannot be
approved their investments will go somewhere else.
COMMISSIONER KJELLANDER:Thank you,
Mr. Miller.Are there any other questions?
Commissioner Hansen.
COMMISSIONER HANSEN:Mr. Miller , I guess
the question I I d have is do you think you can actually
draw a line and identify the substantial progress or
proj ect maturity that should exist to qualify for
grandfathering?And I guess kind of to extend beyond
tha t, won I t there always be a gray area?Won I t there be
always some that just with a variance here or a variance
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there could qualify?
MR. MILLER:Commissioner , I think your
point is well taken.It was for that reason that we
initially advocated for a bright line test; that is , if
you had a purchase power agreement signed or if you had
an interconnection application submitted , that in itself
was evidence of sincerity and proj ect maturity.No one
would go to the effort of paying the fees for an
interconnection study if they were not serious about the
proj ect.The addition of the secondary criteria does
lead the Commission then into the area that you discuss
which is having to make somewhat subj ecti ve judgments
about what is maturity, what isn't maturity.
We've attempted to apply those secondary
cri teria to show that , on the whole, it's reasonable to
conclude there is a good probability that these proj ects
can and will be completed if there is Commission
approval.I can understand the reason for wanting to
have some additional evidence of maturity over and above
the paper that's associated with an interconnection
application just to provide some assurance that the
proj ect is real , that it exists not just on a piece of
paper , so I guess my view is that if the threshold
cri teria have been met , which they have , and if there is
some additional evidence , the proj ect should be allowed
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to proceed and we should find out if it is complete.
don't know if that I s completely responsive.
COMMISSIONER HANSEN:That's fine.
COMMISSIONER KJELLANDER:I think it
prompted one more question going back to the financing
letter in Exhibit 0 from John Deere Credit.The question
that comes to mind , it sounds as if there I s some kind of
competition of sorts in relationship to the financing.
We've been given in part sort of a deadline of January
6th in relationship to John Deere I s desire to get an
answer in this respect.How quickly have they told you
that you would get an answer if we were to give a
favorable Order out to Cassia Wind in this case before
January 6th?What would the turnaround be in terms of
you knowing whether or not you had financing?
MR. MILLER:Let me confer with Mr. Grover
to see if he knows anything.
(Pause in proceedings.
MR. MILLER:Mr. Grover indicates that in
conversations with John Deere , they have indicated that
their process would be completed by the end of January,
so it would be known by the end of January whether final
approval has been made.I would not
- -
I do not think
that Exhibit 0 is intended by John Deere as some sort of
an ultimatum or effort to improperly influence or
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pressure the Commission.I think it's merely a statement
of fact that given their business cycle, decisions need
to be made for the upcoming construction season, and if
their assets are going to be deployed one way, subsequent
decisions about contracting and all the process of
constructing the proj ects are made during this time
period.
I f they re to be deployed some other way,
then construction decisions and contractors and all of
the efforts that go into the construction will be done in
some other area, so I I m quite sure that this letter is
not intended to improperly influence the Commission.
It I S merely a statement of the business realities of when
decisions have to be made.
COMMISSIONER KJELLANDER:I guess one
follow-up, then.If John Deere is the source for the
turbines here and let's say, for example, that an Order
is issued in Cassia Wind's favor and then in 30 days you
find out that they're going to go to another proj ect
what's the other avenue for access to turbines?Is there
one today?I s there a backup plan?Is there any
progress made there or is it starting over at that point
in terms of finding a turbine if John Deere is not in the
picture?
MR. MILLER:If I could just have one
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moment.
(Pause in proceedings.
MR. MILLER:We did not place in the
record other evidence of turbine availability, primarily
because we thought that the availability commitment from
John Deere Credit was adequate.I can say, although this
is not in the record, that Mr. Grover has investigated
the availability of turbines from other suppliers and we
can , if desired, place in the record a record from or a
letter from Suzlon Wind Energy which is a - - which
provides another pricing quote for turbines in delivery
of 2006 , or actually early in 2007 , so Mr. Grover has
been investigating other probabilities.The fact of the
matter is that John Deere Credit is the primary and
preferred financing and turbine supplier at this
moment.
COMMISSIONER KJELLANDER:Thank you,
Mr. Miller.
Let's move now to Mr. Kline.
MR. KLINE:Thank you , Mr. Cha i rman .
managed to pick up a little cold back in Nebraska , so 11
also kind of dried out , so hopefully you III bear with me.
Counsel for Cassia, Mr. Miller , did a good job of laying
out, I think, the facts that are presented in this case
and describing the standards that the Commission has put
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together this case.With respect
- -
think want
to make one comment the one plus one test that counsel
discussed context the Schwendiman case.When
read the Staff's comments in that case, I didn I t come to
the same conclusion that their intention was that it
would just be one primary and one secondary criteria
would get you over the finish line, but the fact of the
matter is the Commission Staff is here today and I III let
them comment on that and not try and do any more with
that.
I think having been through an awful lot
of these grandfathering cases, and I call them
grandfathering probably just because that was the
nomenclature that we developed many years ago when we
were in the same kind of a situation as this one where we
had a change, in that case it was a change, in rates as
well and we took a couple of cases to the Idaho Supreme
Court , actually, on the question of grandfathering and
that was the nomenclature that was used both at this
Commission and at the Idaho Supreme Court, so if I lapse
into that, it's not intended as a slur on Mr. Miller I
description of exemption rather than grandfathering, but
what tends to happen in this situation is that you are as
a Commission, it makes it difficult for you to try and
assess the individual facts that should be applied in
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each particular case and then apply them against a
standard , and I think the standard that you have set in
this case , while we talk about primary criteria and
secondary criteria , I'd like to refer you to your Order
No. 29872 and that was the Order on reconsideration in
which you clarified, I believe , what you viewed as the
test that a QF needed to meet in order to receive
exemption or grandfathering, and on page 1011 of your
Order , the degree of substantial progress and proj ect
maturi ty that we look for in proj ects that have not
submitted a signed power purchase agreement to the
utility by our grandfathering cutoff date is a
demonstration that the QF proj ect can be brought on line
in a timely manner and within a reasonable period
following contract execution and approval , so when I read
that Order , I thought that's the test that you were
laying out as to what you were going to look at.
Now, of course, that's a pretty subjective
test and I'm not sure there I s anything you can do about
that in these types of cases.It's by its nature going
to be subj ecti ve, but what you then have to do and I
think the tough job for the Commission at that point in
time is to take the obj ecti ve facts and the obj ecti ve
criteria that you have laid out in your Orders and apply
them to that more subj ecti ve test.
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We agree that as far as the obj ecti ve
criteria is concerned, Idaho Power agrees that Cassia has
met the primary, one of the primary, criteria.The
secondary criteria , the QF self-certification, the site
control , the wind study, the permitting, those are all
tests that certainly have a bearing on whether a small
wind proj ect will move forward, but the fact of the
matter is with these small projects, most of those aren
serious hurdles to moving forward.The QF
self-certification , that's just simply filing something
wi th the FERC.
Most of these proj ects are located in
rural areas , so there isn I t a lot of land use issues that
you have to deal with.To some extent the wind studies
again , they I re in rural areas where the location of wind
is pretty well known, so the reason that Idaho Power has
focused a lot of our attention, as we discussed in our
memorandum to you on the 29th, is the area of turbine
availability.Now , in thi That's the primary one.
particular case , turbine availability and financing are
linked.Often they are separate processes where the
developer gets the turbines from one person and gets
financing from another, but here they I re linked and it
makes it a little more complicated , but in this
particular case, these are the two contingencies that we
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see as being the more difficult ones for a QF if they I
going to meet the Commission I s test of demonstrating that
the project can be brought on line in a timely manner and
the turbine availability has been a problem.
I think there's no question that because
of the tax credits, because of other policy issues around
the country, the availability of turbines has become a
very difficult thing and if youl re not in the queue and
if you don't have the turbines available to you, your
proj ect isn't going to go ahead in a timely fashion, so
that's why we have focused that as being what we think
the primary barrier or hurdle for a QF developer to move
forward in a timely fashion.
Now , in this case, excuse me, what we I re
looking for and I think what the Commission ought to be
looking for is a commitment on the part of the turbine
manufacturer or , in this case, the turbine supplier which
is John Deere and it doesn't have to be a binding legal
commitment , necessarily, but it has to be a reasonable
commi tment and I I m referring to the John Deere Credit
letter dated November 30th , and I think , Joe , you
indicated that was Exhibit Is that different than
Exhibit A?Anyway, either way, if you look at the third
paragraph of confidential Exhibit J, and this is the
November 3 Oth letter from John Deere Credit addressed to
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me, it says that JDC is considering ~ commitment for the
investment and to supply turbines , so as I read through
the entire letter and as I read through Exhibit 0 which
we received this morning, there still really isn I t any
commi tment on the part of John Deere Credi t to provide
the turbines or the financing.
Now , what they're saying is if the Idaho
Commission will issue its Order authorizing
grandfathering and requiring Idaho Power to move forward
wi th a contract, then they will consider, they will go
back and finish up their due diligence and they'll make a
final determination as to whether or not they will supply
the turbines and they will supply the financing, and it
just seems to Idaho Power that this is kind of a backward
way of looking at what we I re trying to do in this
proceeding.
Typically, what we would expect to receive
is the turbine supplier makes a commitment subject to the
utility receiving or signing the contract.Here the
turbine manufacturer or the turbine supplier makes no
commitment.All they say is they 'll consider it and
that's the reason that we have indicated that we don'
think that they have satisfied the criteria that this
Commission has established for an obj ecti ve criteria that
would provide evidence that the QF proj ect can be brought
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on line in a timely manner.
Mr. Miller referred to a reservation that
he believed that John Deere Credit had made with respect
to financing and to turbines.I don't see any evidence
of a reservation there.I see a situation where John
Deere Credit is saying if the Commission will issue its
Order providing grandfathering, then we'll look at it and
see whether we want to make the investment or not and
we'll also look and see whether we'll supply the turbines
or not, because , again , in this case they re linked.
In the final analysis, I think the answer
that you have to come up with, the decision you have to
make is , is John Deere Credit making a commitment of
sufficient specificity that it would satisfy the test
that you have laid out and that is that they have
committed turbines and financing to a degree that we can
be assured that the QF proj ect can be brought on line in
a timely manner and I think that's what we're all
struggling with and that's the decision you 'll have to
make.
Thank you.
COMMISSIONER KJELLANDER:Thank you,
Mr. Kline.Are there any questions?
Mr. Woodbury.
MR. WOODBURY:Thank you , Mr. Cha i rman .
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appreciate the opportunity, but as Mr. Kline indicated, I
believe Mr. Miller adequately represented the facts.
What's before the Commission is a little different than
normal.As Mr. Miller indicated , the Commission has
previously stated in its Orders and on appeal that
contract eligibility is to be distinguished from contract
entitlement.In this particular case , the Commission in
the 22 case determined that there I s perhaps a different
standard that should apply, perhaps rej ecting the legally
enforceable entitlement or the other standards that the
Commission had previously adopted , so I do believe that
there s a greater degree of flexibility that the Company
has, that the Commission has in determining the
eligibility.
I think that the Commission's language on
reconsideration as to what it was looking for by way of
demonstration is somewhat controlling or is controlling,
but as far as what they were looking for in a proj ect and
when you would expect to have it brought on line, the
Commission was looking at a number of proj ects that were
in the queue in negotiation with Idaho Power and wanting
to be fair to those proj ects.
We did establish an August 8th deadline
for grandfathering eligibility and I think you look at
what had been accomplished as far as the milestones that
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were established and identified by the Commission by that
particular date, so I don't think I have anything further
to add.With respect to Staff's comments in the
Schwendiman case, Staff I s comments shouldn I t be taken out
of context , but as Mr. Miller has requested in this case
look at the totality, the facts developed here and the
Schwendiman case had its own set of facts and Staff I s
comments were filed prior to the Commission I s Order on
reconsideration.
COMMISSIONER KJELLANDER:Thank you,
Mr. Woodbury.
Are there any questions from members of
the Commission?Commissioner Smith.
COMMISSIONER SMITH:Thanks, I do.
Actually, I guess both Mr. Kline and Mr. Miller could
take a shot at this one.It occurs to me that the
Commission could issue an Order that looks very much like
Exhibit 0, but contingent on a firm commitment by John
Deere within a time certain the availability of financing
and turbines , then this proj ect is exempt from the cap,
so that's one idea I'd like your response to.
The other issue that keeps cropping up in
the number of letters that we've received regarding this
case is that if the Commission fails to support small
proj ects like this that Idaho Power and the State of
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Wilder, Idaho COLLOQUY83676
Idaho will fail to achieve the amount of wind generation
that is foreseen in the integrated resource plan or is
thought to be desirable for public policy purposes, so
m curious as to reaction on that issue, and I guess
finally, if there s any way to be specific , more
specific, I would like Cassia to please let us know that
if the Commission decides in its favor when the project
would be operational , so those are my issues and you'
free to take a stab.
(Pause in proceedings.
COMMISSIONER SMITH:I just thought of
another question for Mr. Kline.You should have started
talking, and I guess it's mainly for Mr. Kline.If the
Commission is more, I guess , open and lenient in its view
of the criteria and approves the Cassia proj ect, what
does that mean in terms of what else is in the queue?
MR. KLINE:Do you want me to start and
then you can respond?I guess that's the fair way to do
it.
MR. MILLER:All right.
MR. KLINE:I III start first with the
comment that Commissioner Smith made with respect to the
Commission issuing an Order that looked like Exhibit
and I think that I s exactly right , Commissioner Smith
that if the
- -
and I can tell you right now we've got
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COLLOQUY83676
another QF developer that we haven't finalized the
contract yet , but in fact what has happened there is the
turbine manufacturer has said contingent upon receipt of
the Order , we are committing that we have turbines
available and we are committing that they will be
available to this proj ect, and the same thing would be
true here; if John Deere would commit that upon receipt
of the Order, they will in fact make turbines available
and provide the financing, I don I t think we have a
dispute.
I think where we I ve hung up here is that
they're looking at it backwards from the way we I re
looking at it.They're looking at it as you guys commit
and then we I 11 let you know whether we I re going to do the
deal or not.That's been our problem from the beginning
and obviously, John Deere is a very big player in this
business.They're certainly a quality financier and
don I t have any doubt whatsoever that they'll do a good
job of looking at it, but the problem is we think we need
some kind of reasonable commitment as a condition of
grandfathering, and that somewhat goes to the third
question that you raised, Commissioner Smith.
We think it I S very important that there be
that commitment from the turbine manufacturer , from the
financier , but primarily the turbine manufacturer.
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Wilder , Idaho COLLOQUY83676
Without that commitment, then what you have is a
si tuation where the developer really then can say okay,
now that I I ve got my contract and I I ve got my
grandfathering Order, I I 11 go out and see if I can find a
turbine.I'll search the secondary markets , maybe I I 11
come up with something, but without that commitment ahead
of time, it really is going to, I think , make it much
more difficult for us to draw any kind of line as to
which small proj ect should be grandfathered and which
shouldn I t be.
COMMISSIONER KJELLANDER:Mr. Kl ine , as
follow-up, let's take, for example , the word that was
mentioned by Commissioner Smith "contingent.Let I S say
that we put out an Order that looks somewhat like Exhibit
0 that , In essence, says Cassia Wind , you have 30 days to
show us that firm commitment from the financing and also
the access to the turbine and then if you can I t within
that time frame, then no grandfathering or, the other
word used, the exemption status, that goes away, the case
is done, unless whatever filings may come after that, but
as far as an Order would be concerned that that would be
the contingency to, in essence , to put a finite stamp on
that specific case and then let it move forward as it
would proceed.Does that seem to accommodate your
client I S concerns?
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COLLOQUY83676
MR. KLINE:I think it
- -
I haven't talked
to my client about it, but I suspect my client would say
if there is a commitment on the part of the supplier
wi thin a period of time , and if the Commission wants to
set that period of time, I would certainly set it at a
tighter time frame than 30 days , because you might, what
you might then have in another case is the developer
saying fine, I have 30 days to go find somebody now and
don I t think that's what we have in mind, this is a
different case and I think you've got a specific
financier and supplier here , but I suspect that my client
could go along with that.
COMMISSIONER KJELLANDER:Thank you,
Mr. Kl ine .
MR. KLINE:ve got one more, the IRP.
You had an IRP question that I think I can address.
We I re not going to have any problem getting sufficient
wind resources.Our IRP currently calls for
approximately 350 megawatts of wind resource, I believe,
by 2007?I can I t remember for sure , but that I s the
target number that's in the currently acknowledged IRP.
Wi th the number of QF wind proj ects and currently the RFP
that we have in place that is in its final stages, it'
probably going to require that we actually reduce the
size of the RFP to bring the total amount of wind
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Wilder , Idaho COLLOQUY83676
resource within that 350-megawatt target that we had
identified in the IRP , so where you get the wind
resource, whether it comes from the PURPA resource or
whether it comes from the RFP , we're not going to have
any trouble getting enough wind resources for the State
of Idaho.
I think the bigger problem is going to be
the QF resources kind of crowding out the RFP resources
which we believe , preliminary indications are at least,
that the RFP resources are going to be somewhat less
expensive, so I don't think that's a problem,
Commissioner Smith.
MR. MILLER:If the Commission pleases,
might make my effort at responding to these questions.
Also , in response to Commissioner Hansen I s earlier
question about how do we interpret prior Orders and what
do they mean , I recalled as I was sitting here the story
about the poet Robert Browning who was once asked what
was the meaning of one of his very early poems and he
replied well , when I wrote that poem, only God and I knew
what it meant and now only God knows , so interpretation
of prior documents is a challenge in a number of
contexts.
Wi th due respect to Mr. Kl ine and the
Company, it does seem to me that Idaho Power is
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Wilder , Idaho COLLOQUY83676
attempting to impose its own views on the sequencing of
the contracting process and how it should work and who
should make the first commitment.It I S not unreasonable,
I think, for a company like John Deere to say we'
prepared to proceed to final review and approval once we
know that the proj ect is exempt and that there will be a
purchase power agreement.
The Company wants to have it the other
way, but to me , it's not unreasonable for a company like
John Deere to request it in this sequence, so for that
reason , I believe that Commissioner Smith's suggestion of
an Order contingent upon John Deere I s final approval is
sensible, because everyone seems to be in agreement that
the project meets all the other criteria and but for the
question of who makes the first commitment should not be
the thing that makes this succeed or fail, so an Order
contingent upon John Deere Credit I s final approval solves
that problem of who commits first and within a reasonable
period of time we will know with certainty whether the
proj ect will proceed or not.
I would just point out a couple of things
in the John Deere correspondence.In Exhibi t , John
Deere states that we have attempted in good faith to
illustrate our desire to invest in the Cassia Wind
proj ect and Cassia Wind Farm , collectively Cassia Wind,
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Wilder , Idaho COLLOQUY83676
so we have a good faith statement of intent to proceed to
final contract completion.It's not a speculative or
fanciful interest.It's a good faith illustration of our
desire to invest, and all that remains is the sequencing
of who makes commitments when , which again brings me back
to the point that I think Commissioner Smith I s approach
is sensible.
Commissioner Smith also inquired what we
could expect with respect to an on-line date or an
in-service date.Exhibit I indicates John Deere Credit
and Cassia Wind anticipate that both the proj ects will be
commissioned no later than December 6th
- -
I mean
December 2006.That letter was issued on November 30th
so I'm assuming that that is still a reasonably good
estimation of on-line dates.
m not really in a position to comment,
Commissioner Smith , on your second question with respect
to the broader public policy implications of this case
and have had no part in any letters and have not seen any
letters the Commission may have received, so I'
approaching and I I m suggesting that the Commission
approach this in the context of its prior Orders , the
policy underlying a liberal exemption policy expressed in
the prior Orders and don I t think that this case needs to
be resolved in a larger public policy is wind good , is
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Wilder , Idaho COLLOQUY83676
wind bad context , so in sum , we would accept and
appreciate a Commission Order determining that Cassia
Wind is exempt from the eligibility requirement subj ect
to and contingent upon a commitment, a contractual
commitment , from John Deere Credit within 30 days.
I believe I've said as much as I can
say.
COMMISSIONER KJELLANDER:Thank you,
Mr. Miller.Do we have any questions from members of the
Commission at this point?I think what I'd like to do is
take a short break.It sounds like the parties aren'
that far off.In the course of the discussion that I
believe I heard in the last 10 minutes, the remaining
question really is the contingency date.There may be
some discussion that you might be able to have amongst
yoursel ves as to whether it be 30 days or 21 days or some
other date, and so what I'd like to do at this point is
to take a break, allow the parties to talk amongst
themsel ves for a few minutes during that break and when
we come back see if there can't be some kind of meeting
of the minds in relationship to that and perhaps maybe a
proposal presented to the Commission at that point, so at
this point , then , I'd like to go off the record.
(Recess. )
COMMISSIONER KJELLANDER:And we'll go
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Wilder , Idaho COLLOQUY83676
back on the record.When we left for break , we had asked
if the parties might be able to come to some conclusion
with regard to a possible date or deadline in
relationship to a contingency plan , if that's what the
Commission ultimately chose to approve, and so I guess
this point , the Commission is willing to hear what
progress, if any, was made by the parties.
MR. KLINE:Okay, I'll be glad to.
think we both kind of agree in principle, but have some
things we'd also like to express to the Commission with
respect to how this might be implemented and some
concerns as to the way it I s characteri zed.Again,
speaking for Idaho Power , we think that what was
proposed, Mr. Miller characterized it right at the end,
that the Commission would issue an Order with a
contingency in it that the proj ect would be entitled to
an exemption if John Deere would make a final commitment
within a finite period of time and 30 days was discussed.
We think that may be a reasonable solution
for this one specific fact situation , for Cassia , a
limited time period and we talked about 30 days and
think Cassia believes that they can get John Deere to
move within that time period, and secondly, that it I s
limi ted to John Deere and this goes to a concern that
Idaho Power has.We talked a little bit about it in
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Wilder , Idaho
COLLOQUY83676
response to a question from Commissioner Smith.Our
concern is precedent.What we don I t want to have this
Order turn into is a belief by the QF , by the other QFs
that if they can get an Order for grandfathering, then
they've got a 30-day period of time , kind of a hunting
license to go out and see if they can find someone who
will commit to provide the turbines or provide the
financing.
The other concern that, again , Idaho Power
has is that we not lose sight of the fact that this
Commission established August 4th , 2005 as a date by
which grandfathered , you I re either grandfathered - - you
had either reached a certain level of development or you
hadn We've kind of lost sight of that a little bit.
Now , again , in this particular fact situation, what we I ve
got is demonstration from John Deere that memorializes
the fact that prior to August 5th, there was a process
ongoing, that they were doing due diligence , they were
working on the financing.Those are the kinds of things
that make Idaho Power more comfortable with the fact that
okay, the August 4th date hasn't been forgotten , but we
think , again , if the Commission chooses to go this path
we would hope that that's an integral part of the Order
eventually, but again , as long as it's these facts, this
situation , we I re okay with it.
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Wilder , Idaho COLLOQUY83676
COMMISSIONER KJELLANDER:Mr. Miller.
MR. MILLER:Thank you , Mr. Cha i rman .
concur that on the specific facts of this case the
proposed resolution is reasonable.Mr. Grover is on the
phone just now with John Deere attempting to confirm that
a 30-day finalization of their approval process is doable
from their point of view , and so hopefully, he'll be back
in just a moment and we can provide a final confirmation
on that, so as a resolution of this case and these
specific facts , we concur.Of course , my client in this
case is Cassia, nobody else.
I guess I would express from a little
broader perspective a point that is similar to
Mr. Kline', although it maybe goes in a different
direction and that is the point about precedential
effect.We would hope that this Order would not be
written in such a way as to make it appear that the
standards for exemption have somehow now become more
stringent than existing Orders seem to indicate that they
are.
We have indicated our view that these
projects should be evaluated on a totality of the
circumstances basis , that one criteria should not be more
important than the other necessarily and that each case
should be evaluated on its own facts, so we hope that the
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Wilder , Idaho
COLLOQUY83676
Order would be written in such a way as to not appear to
revise or make more strict what we understand the
standards for exemption to be now, but as I've indicated
our primary goal is to obtain a decent result for Cassia
and I believe that the proposed resolution is a decent
resul t for Cassia.
Hopefully, in just a moment Mr. Grover can
come back in and confirm that the 30-day final approval
process is - - he has confirmed that if the Commission has
a 30-day contingency, it appears things are feasible and
can be accomplished and we won't have to have any further
worry about that.
COMMISSIONER KJELLANDER:Thank you , Mr.
Miller.I think we have a question from Commissioner
Hansen.
COMMISSIONER HANSEN:Yes , Mr. Kline , I
believe I heard you say that where Cassia Wind had
started the financing process before the Commission Order
that that gave you some comfort , as this being maybe
unique in this case and yet, you were worried about this
setting a precedence for others to go and find 30 days to
find financing.Wouldn't this, though , where they had
applied before , really, I guess I'm a little confused in
wouldn't this really limit other companies from jumping
on the bandwagon now because the Order is already out?
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Wilder , Idaho COLLOQUY83676
It doesn't open Pandora's box and say hey, you ve got 30
days because this you said was unique before the Order
ever went out , so really, doesn I t that alleviate that
concern?
MR. KLINE:Well, I certainly hope that it
does.I think the emphasis is on the fact that this
specific set of facts that you re looking at would lead
to a specific Order.The problem , of course - - and
have a lot of information as far as the term sheet and
some other stuff that demonstrates to us that John Deere
and Cassia did a lot of due diligence and a lot of work
prior to August 4th , so again , in this specific instance,
the fact that , for example, a lot of the correspondence
confirming that didn I t come until well after the August
date isn't troubling.The commitment, it I S a continuing
process and so that , I guess, gives us comfort.Am I
being responsive?
COMMISSIONER HANSEN:So then you really
don I t think if this was allowed it's going to set a
precedent or open the gates for others to come and have
30 days to go out and secure financing and come before
the Commission , which I thought you had said earlier?
MR. KLINE:That is our concern , and I
think if the Commission's Order is written in a way that
makes it very clear that this remedy works under this
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Wilder , Idaho COLLOQUY83676
specific fact situation , then I think we're okay.
COMMISSIONER HANSEN:That's all I have.
COMMISSIONER KJELLANDER:Commissioner
Smith.
COMMISSIONER SMITH:Not a question, just
a comment in response to the discussion that Commissioner
Hansen and Mr. Kline just had and the comment that Mr.
Miller made about the criteria, and in my view , it is
important that there is evidence that the financing was
being firmed up prior to the date of the Commission I
Order and the cutoff date and I think that that'
important for us to acknowledge and important for the
other potential developers to know , and I don t see that
as the standards being more stringent.
When you look at the totality of the
circumstances, it is the circumstances that existed prior
to August 5th, where were you then , because after that
date , you knew that if you hadn't achieved a certain
level , you were playing under a different set of
circumstances , so I don't see that as a change in the
Commission I , how we are going to view the evidence , but
I do see it as a sign that we're going to stick to the
date and where you were is where you were before August
5th.Thank you.
COMMISSIONER KJELLANDER:Thank you.Mr.
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Wilder , Idaho COLLOQUY83676
Woodbury, I didn I t mean to overlook you , is there
anything that you need to add at this point?
MR . WOODBURY:No.
COMMISSIONER KJELLANDER:Okay, thank you.
Is there anything else that needs to come before the
Commission at this particular point?I think it would be
the Commission's desire to take a quick break with the
intent to come back in a few moments and rule from the
Bench , so we'll go off the record.
(Recess. )
COMMISSIONER KJELLANDER:Okay, weill go
back on the record.It I s the Commission's intent to rule
from the Bench at this point and whether we call it
grandfathering or an exemption , the Commission today
determines that Cassia Wind will receive the
grandfathering or exemption with the contingency that
they are able to secure the financing commitment in
relationship to not just the money but also the turbines
with John Deere and limited to John Deere only no later
than 30 days.
Now , we haven I t talked whether that's 30
days of the issuance of the Order or 30 days from this
point.I would suggest that since we I re ruling from the
Bench today that it be from this point, and without
obj ection, that will be the start point, and it would be
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Wilder, Idaho COLLOQUY83676
our intent , then , that Cassia Wind bring back that
documentation and file it with the Commission at that
point, and the official Order will likely be coming out
within a couple of days, but I hope that that will be
sufficient enough for you to move forward and proceed
with your discussions with John Deere , so is there
anything else that needs to come before the Commission
at this point?
MR. MILLER:Other than to express our
gratitude for your consideration and very much appreciate
it.
COMMISSIONER KJELLANDER:Well , thanks to
all parties engaged.We appreciate it and we are
adjourned.
(All exhibits previously marked for
identification were admitted into evidence.
(The oral argument adj ourned at
11:40 a.
CSB REPORTING
Wilder , Idaho COLLOQUY83676
T I C T I O
This is to certify that the foregoing oral
argument held in the matter of the petition of Cassia
Wind to determine exemption status , commencing at
10:00 a.m., on Wednesday, January 4 , 2006, at the
Commission Hearing Room , 472 West Washington , Boise,
Idaho , is a true and correct transcript of said oral
argument and the original thereof for the file of the
Commission.
CONSTANCE S. BUCY
Certified Shorthand Report
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CSB REPORTING
Wilder , Idaho
AUTHENTICATION83676
IS JOHN DEERE
CR EDIT
6400 NW 86TH STREET, JOHNSTON, IOWA 50131
DIRECT PHONE: [phone]
January 3, 2006
Idaho Power Commission
Boise, Idaho
RE:Cassia Gulch Wind Park, LLC
Cassia Wind Farm, LLC
As outlined in a previous letter to Idaho Power Company, dated November 30 , 2005
John Deere Credit ("JDC"), an affiliate of Deere & Company, has attempted in good faith
to illustrate our desire to invest in Cassia Gulch Wind Park, LLC and Cassia Wind Farm
LLC (collectively, "Cassia Wind"), along with a local landowner and wind energy
developer, Mr. Jared Grover. For a number of months now, JDC has reserved a portion
of its allotment of Suzlon S-88 - 2.1 MW nameplate turbines from Suzlon Wind Energy
Corporation, specifically for the Cassia Wind projects. Unfortunately, I have been unableto seek approval for the financial investment in this project from JDC'senior
management team due to the inability to receive firm confirmation that once these
turbines are delivered and operational, the resulting energy will, in fact, have a buyer of
that energy. Without such a commitment, it is difficult for Deere to make a $40 million
investment within the State of Idaho for this wind project.
This letter is to seek final confirmation no later than January 6 , 2006, that the Cassia
Wind projects meet the requirements of maturity, as required by Idaho Public Utilities
Commission Order NO. 29839. Without such a confirmation, JDC will have no choice
but to re-allocate the 14 turbines to another project outside of the State of Idaho.
Sincerely,
JOHN DEERE CREDIT
David M. Brija-Towery
Business Development Manager - Wind Energy
Cc:Mr. Jared Grover, Cassia Wind Projects
Mr. Dean J. Miller, McDevitt & Miller EXHIBIT NO...Q..
Exhibit 0
Pa~e 1 of 1