20101109Vol I Oral Argument, Boise.pdf

ORIGINAL.BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF I DAHO POWER COMPANY FOR
APPROVAL OF A FIRM ENERGY SALES
AGREEMENT WITH YELLOWSTONE
POWER, INC. FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY.
CASE NO. IPC-E-10-22
ORAL ARGUMENT
BEFORE
COMMISSIONER JIM KEMPTON (Presiding)
COMMISSIONER MARSHA SMITH
COMMISSIONER MACK REDFORD
.PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:October 26, 2010
VOLUME I - Pages 1 - 50
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Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
(208) 890~5198 * [phone]
Email csbCiheritagewifi.com
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1 APPEARANCES
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3 For the Staff:Kristine Sasser, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
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6 For Idaho Power Company:Donovan Walker, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
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9 For Yellowstone Power, Inc.: McDEVITT & MILLER
by Dean J. Miller, Esq.10 Post Office Box 2564
Boise, Idaho 83701-2564
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APPEARANCES
.1 BOISE, IDAHO, TUESDAY, OCTOBER 26, 2010, 2:00 P. M.
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4 COMMISSIONER KEMPTON: Good afternoon, and
5 we i II go on the record as of this time. This is the
6 date, time and place, being the 26th of October, 2010.
7 The time is 2: 00 0' clock and the location is the Idaho
8 Public Utili ties Hearing Room. The purpose is to conduct
9 oral argument in the form of a hearing in the matter of
10 the application of Idaho Power Company for approval of a
11 firm energy sales agreement with Yellowstone Power, Inc.
12 for the sale and purchase of electric energy, and.13
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otherwise identified as Idaho Public Utilities Case
No. IPC-E-10-22.
1S The Commissioners present are Smith,
16 Kempton and Redford and Kempton will be the Chair for the
17 oral argument today. The proceedings in this case are
18 being conducted in accordance with Commission
19 j urisidiction under Title 61 Idaho Code and Commission IS
20 Rules of Procedures under Idaho Administrative Procedures
21 Act 31.01.01.
22 Just for sort of a tune-up as we go into
23 this, I'm going to run through the background a little
24 bi t that has led us to the oral argument. It started.25 back on August 13th, 2010, with the application being
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1 filed by Idaho Power and a 9/03/2010 Commission Notice of
2 the Application, Notice of Modified Procedure to form a
3 process and indicated comments were due not later than
4 10/1/2010 and that was Order No. 32065.
5 On the 1st of October, only the Idaho PUC
6 Staff submitted comments and at that same time on that
7 same date, Yellowstone filed a motion to permit filing of
8 reply comments and to establish a 10/18/2010 due date for
9 reply comments. On 10/5/2010, four days later, the
10 Commission Notice set a reply comment due date of
11 10/18/2010 in Order No. 32083. On 10/7/2010, Yellowstone
12 filed a motion requesting oral argument following the
13 filing of the reply comments.
14 On 10/15, the Commission issued Notice of
15 Oral Argument at the IPUC Hearing Room on 10/26/2010.
16 That was Order No. 32094. On 10/18, all four intervening
17 interested parties, Yellowstone Power, Idaho Power, Rocky
18 Mountain Power and Exergy, all filed comments, so that
19 brings us to where we are right now, and so the first
20 order of business I would like tò work with is the
21 appearances and starting with Yellowstone Power, if
22 counsel will identify themselves and any other person
23 that will be a witness.
24 MR. MILLER: Thank you, Mr. Chairman.
25 Dean J. Miller of the firm McDevitt & Miller on behalf of
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1 Yellowstone Power and with me is Mr. Richard Vinson, the
2 principal of Yellowstone Power who I will introduce in a
3 li ttle more detail in a few moments.
4 COMMISSIONER KEMPTON: Idaho Power.
5 MR. WALKER: Yes, Mr. Chairman, Donovan
6 Wal ker representing Idaho Power Company and with me today
7 is Randy Allphin. He is a senior energy contracts
8 administrator for the Company.
9 COMMISSIONER REDFORD: How do you spell
10 that last name?
11 MR. WALKER: A-l-l-p-h-i-n.
12 COMMISSIONER REDFORD:Thank you.
13 COMMISSIONER KEMPTON: I have a question.
14 Mr. Richardson, are you going to -- do you intend to make
15 appearances as far as testimony?
16 MR. RICHARDSON: Mr. Chairman, on behalf
1 7 of Exergy Development Group, we do not intend to make a
18 formal appearance or participate in oral argument.
19 COMMISSIONER KEMPTON: Thank you.
20 COMMISSIONER REDFORD: We can sure see
21 you back there with that tie.
22 MR. RICHARDSON: I was going to take it
23 off, but I forgot.
24 COMMISSIONER KEMPTON: And the Idaho
25 Public Utili ties Commission Deputy Attorney General
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1 Kristine Sasser.
2 MS. SASSER: Yes, Kristine Sasser
3 representing Commission Staff and I have with me Rick
4 Sterling, the Utilities Staff assigned to the case.
5 COMMISSIONER KEMPTON: Rocky Mountain
6 Power? No one here from Rocky Mountain Power? It
7 doesn't look like it.
8 MS. SASSER: Chairman Kempton, if I may,
9 Rocky Mountain Power had asked that we make a phone
10 bridge available for them to dial in, so if you hear a
11 beep, it may be the acknowledgment that they've called
12 in. That line has been established.
13 COMMISSIONER KEMPTON: Okay, is there
14 anyone on the line from Rocky Mountain Power? It looks
15 like the bridge is open to me, so I think we're all right
16 if they show up, or we may have one of the Staff come in
17 and try and reset that while we're in the process. The
18 presentation order, if there i s no obj ection, would be
19 Yellowstone Power, Mr. Miller, followed by Idaho Power,
20 followed by the Idaho PUC Staff, and the procedures, I
21 think as long as we i re doing this in a formal oral
22 argument setting that we will use the witness chair, so
23 whoever is taking the witness chair will have the oath
24 and Commissioner Smith will administer the oath. Yes?
25 No?
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1 COMMISSIONER SMITH: I think there will
2 only be lawyers talking.
3 COMMISSIONER KEMPTON: Is that the case?
4 MR. MILLER: Mr. Chairman, our intention
5 is to make an oral argument through counsel, although Mr.
6 Vinson is available to be called as a witness if the
7 Commission has any questions that they would like him to
8 address.
9 COMMISSIONER KEMPTON: All right, very
10 well. Well, then, let's start the process with you,
11 Mr. Miller.
12 MR. MILLER: Thank you, Mr. Chairman,
13 Members of the Commission, and thank you, Mr. Chairman,
14 for your summary of the procedural record to date which
15 saves me doing that, so in the absence of the necessity
16 of doing that, I i d like to sort of indicate the outline
17 of my intended remarks. First, I'd like to introduce in
18 a little more detail Mr. Vinson. As I've said, he's
19 available to call as a witness if desired by the
20 Commission. Second, I i d like to provide some from the
21 record background regarding the history of this case and
22 the merits of the generation proj ect. Next, I'd like to
23 discuss the significance of the fact that there does not
24 exist any written evidence of an agreement prior to March
25 16th. Then I i d like to briefly touch on the fact that a
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.1 complaint was not filed in connection with this case and
2 the significance or lack of significance of that, and,
3 finally, close with a procedural request.
4 So with that in mind, let me introduce
5 once again Mr. Vinson. Mr. Vinson has a long history in
6 the sawmill and electric power industry as an independent
7 operator.For 27 years he operated the Vinson Timber
8 Products, a sawmill that he built and operated in Trout
9 Creek, Montana.In 1980, he financed and built a one
10 point million dollar chip processing facility near
11 Lewiston, Idaho, called Fiber Recovery which was later
12 sold to and became known now as Longview Fiber, and in.13
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2002, he built and then sold to Montana-Dakota Utilities
a 100 megawatt electric generation proj ect, so Mr. Vinson
15 does have a long history in the, successful history in
16 the, sawmill and electric power industry, and as I've
17 indicated, if you have questions for Mr. Vinson, we'll
18 certainly call him as a witness and have him sworn for
19 your questions.
20 Well, as the Commission knows, this case
21 grows out of a Commission Order change in avoided costs
22 on March 16th of this year and as the Commission recalls,
23 shortly after that, the New Energy Company filed a
24 complaint alleging entitlement to the vintage or.25 preexisting rate.In response to that complaint, Idaho
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1 Power developed a set of criteria for evaluating requests
2 for preexisting rates and those criteria are set out in
3 the Company i s application, they 're recited in the Staff
4 comments and also in our comments.
5 In short, those criteria touch on two
6 areas:first, as an interconnection and transmission
7 area; and the second is in the progress toward a firm
8 energy sales agreement area.
9 COMMISSIONER KEMPTON: Excuse me, Mr.
10 Miller, is there anybody on the line that just came on?
11 MR. LOVINGER: Yes, my name is Jeff
12 Lovinger.I i m an attorney for PacifiCorp.
13 COMMISSIONER KEMPTON: Okay, we were kind
14 of waiting for you. Thank you. Last name is what?
15 MR. LOVINGER: Lovinger.
16 COMMISSIONER KEMPTON: Okay, we currently
17 have Dean Miller, Mr. Miller, making a summary of the
18 Yellowstone Power application and you may participate
19 from your telephone connection if you have questions as
20 we go along.
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MR. LOVINGER: Thank you.
COMMISSIONER KEMPTON: Mr. Miller.
MR. MILLER: Thank you, Mr. Chairman, and
24 as the record indicates in this case, everyone agrees.25 that Yellowstone has met all of the criteria with respect
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1 to interconnection and transmission. The only real
2 question in the case is whether there was a materially
3 complete agreement prior to March 16th of this year. On
4 October 1st, as the Chairman has indicated, the Staff
5 filed comments pointing out that there is no written
6 agreement existing prior to March 16th and the absence of
7 some kind of a writing led Staff to the conclusion that
8 the second criteria had not been satisfied.
9 From the Staff comments, I infer that
10 Staff views itself as constrained by what it thinks to be
11 the existing criteria and it does not have the
12 flexibili ty wi thin its role to depart from the criteria.
13 The Staff comments, however, recogni ze that the
14 Commission does have that flexibility and in fact, the
15 Staff comments invite the Commission to exercise that
16 discretion in this case. The Staff comments say Staff
17 believes that this case presents a unique set of facts
18 that permit the Commission to look beyond the established
19 cri teria applied in other recent requests to grandfather
20 the rates of Order No. 30744 and consider other aspects,
21 such as strong public interest and the impact of allowing
22 a grandfathered rate, and in support of that statement,
23 the Staff points to a number of things.
24 The first is that the proj ect is an
25 economic boost to an economically depressed area. As we
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.1 indicated in our reply comments, Yellowstone estimates
2 that it will provide to Gem County in excess of $200,000
3 of additional tax revenue annually if the proj ect is
4 approved. Staff also points out the proj ect has an
5 extremely high capacity factor, allowing it to run at
6 almost continuous operation and, in Staff i swords, is a
7 valuable addition to Idaho Power's resource portfolio.
8 Staff also points out and it i S true that the proj ect is
9 sufficiently mature.
10 Substantial environmental remediation was
11 required of the former Boise Cascade mill site and that
12 has been completed. The DEQ has issued a permit to.13
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construct the facility and Yellowstone has invested in
excess of $ 6 million in equipment to build the facility,
15 and there is one truly unique factor that distinguishes
16 this case from all others and that, as the Commission
17 recalls, is the previous Renewable Energy agreement. You
18 recall from the record that a company which Mr. Vinson
19 was principal previously entered into a firm energy sales
20 agreement for a project at the same site. As a result of
21 factors beyond Renewable's control, that proj ect went
22 into default or the contract went into default and that
23 proj ect was not built.
24 I think the existence of that prior.25 contract is significant for three reasons, two of which
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1 are, first, approval of this contract will allow the
2 Company to recover for the benefit of its ratepayers
3 otherwise unrecoverable damages that were incurred by
4 Idaho Power by the default of the Renewable contract, and
5 the second thing it proves, I think, is that Mr. Vinson
6 is a man of his word. After the default of the Renewable
7 Energy contract, he orally promised to pay if the new
8 proj ect was successful the contract or default damages
9 that resulted from the Renewable Energy default and, in
10 fact, Mr. Vinson has now executed a contract to repay
11 those damages, so for a long period of time or for
12 several years, Mr. Vinson held out an oral promise to pay
13 and when the time was right executed a written document
14 evidencing that promise to pay, and I'll touch on the
15 third implication of the Renewable contract in a moment.
16 Let me turn now to the fact that there is
17 not a writing existing prior to March 16th that
18 demonstrates that an agreement was materially complete
19 prior to March 16th. As I was re-reading the Staff
20 comments last night , it seemed to me that the comments
21 conflate two arguments into one argument. The argument
22 could be that the criteria require a written document
23 prior to March 16th, but by their wording, the criteria
24 do not. All they require is an agreement was materially
25 complete prior to March 16th. As written, the criteria
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1 do not require a written writing, or the argument could
2 be that oral evidence is unreliable to prove the
3 existence of a preexisting agreement, but I think on this
4 point the evidence is overwhelming.
5 First, both parties agree there was a
6 materially complete agreement and a complete meeting of
7 the minds prior to March 16th. As the Commission
8 observed in the Grand View Solar case, Idaho Power has an
9 obligation to protect its ratepayers from avoided costs
10 that are too high. It seems very unlikely to me that
11 Idaho Power would abandon or overlook that obligation and
12 in effect misrepresent the existence of an agreement if
13 an agreement did not exist.
14 Secondly, attached to our reply comments
15 is the affidavit of Mr. Vinson that was provided to Staff
16 during the discovery, but, unfortunately, not attached to
17 the Staff comments. That affidavit establishes that
18 because of his experience with the Renewable Energy
19 proj ect, Mr. Vinson was familiar with the terms and
20 conditions of Idaho Power i s standard form of agreement
21 and that he and Mr. Allphin discussed and agreed upon the
22 updates or changes to the standard form agreement that
23 had occurred since the time of the Renewable contract, so
24 it seems completely plausible that Mr. Vinson understood
25 and accepted all of the terms of the standard agreement
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prior to March 16th, and the oral, the sworn oral,
2 testimony is consistent with observable facts.
3 As we point out in our reply comments,
4 when a party is going to accept without negotiation a
5 standard terms and conditions contract, very little
6 additional information is required to complete the
7 contract and all of it is in the nature of technical
8 information not related to the question of whether there
9 was a meeting of the minds on central terms, so in my
10 mind on these facts, the existence of an agreement and a
11 meeting of the minds prior to March 16th seems
12 concl usi vely established by the record.
13 Let me just briefly touch on the fact that
14 in connection with this proj ect, Yellowstone Power did
15 not file a complaint against the utility.I know there's
16 been some worry or consideration of what that filing
17 requirement is and I'll just make three brief
18 observations and I believe Mr. Donovan -- Mr. Walker will
19 discuss this topic in more detail as I think the Company
20 is more familiar with the background and history.I'll
21 just make these three brief observations: First, I think
22 the filing of a complaint requirement is sort of an
23 artifact of an early stage of PURPA implementation that
24 tended to be quite adversarial and developers often
25 thought that litigation was the only avenue towards
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1 success.
2 In my experience as the industry has
3 matured, developers such as Mr. Vinson have come to the
4 conclusion that negotiation is the better path to success
5 than litigation and, in consequence, in the modern era
6 the filing of a complaint is viewed as a last resort, not
7 as a starting point of the process. Secondly, the
8 Commission has previously ruled that it is not bound to
9 follow the complaint requirement in every case. The
10 Commission will recall a case, Idaho Power 05-22, in
11 which the Commission adopted a temporary new regime for
12 implementation of PURPA projects and in that case, the
13 Commission adopted a set of grandfathering criteria that
14 did not include the filing of a complaint and did not
15 include the idea that there had to be a legally
16 enforceable obligation prior to the change in rates.
17 In that case, Staff took the unusual step
18 of petitioning for reconsideration, arguing that the
19 Commission must be required to follow the prior
20 grandfathering standards and the Commission rej ected the
21 Staff argument saying, "The Commission is not rigidly
22 bound by principles of stare decisis to follow prior
23 precedent so long as a record is developed and sufficient
24 findings supported by the evidence show that our action.25 is not arbitrary and capricious," and finally, I think
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.1 that in this case, the Commission doesn i t really have to
2 decide this question.
3 All of the older cases grew out of
4 circumstances where there was a dispute between the
5 utility and the developer as to whether the developer was
6 entitled to the old rates. In this case, there is no
7 dispute.It seems to me the Commission can say that
8 whatever the continued viability of the complaint
9 requirement is in disputed cases, it does not apply in
10 non-disputed cases. It would be illogical to say that in
11 a case where the parties are in agreement the developer
12 still has to file a complaint in order to find its way to.13 preexisting rates, so before turning to our procedural
14 request, let me just conclude with an observation that I
15 hope you won i t find presumptuous and that is the obvious
16 point that the Commission i s role is to regulate in the
17 public interest through reasoned decision making.
18 I believe that the Company's application,
19 its reply comments and our reply comments give you a
20 basis for a reasoned decision to arrive at the public
21 interest which in this case would be approval of the
22 Company's application, so let me now conclude with a
23 procedural request, and this focuses around the fact that
24 the financing for this project is intended to be through.25 tax exempt revenue bonds that were authorized under the
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.1 Federal Economic Recovery Act. In order to qualify for
2 tax exempt status, those bonds must be fully issued by
3 December 31st of this year.
4 Prior to the issuance of those bonds, a
5 great deal of work is required, one item of which is the
6 preparation of a public prospectus that outlines, as the
7 Commission knows, the terms of the offering.In order to
8 prepare an accurate prospectus, the company or
9 Yellowstone needs to be able to include a verifiable
10 projected income stream which in turn depends on approval
11 of the firm energy sales agreement, so in light of all
12 that work that has to be accomplished in a relatively.13 short period of time, we're asking that the Commission
14 deliberate on this matter at its earliest convenience and
15 notify us of your decision at your earliest convenience
16 so that that work necessary to the advantageous financing
17 of the proj ect can be accomplished, and to that end, we
18 would ask at the conclusion of this hearing the
19 Commission determine that the matter is now fully
20 submitted.
21 Well, Members of the Commission, thank you
22 very much for your patience and the opportunity to
23 present these thoughts. If there are questions, I'll be
24 happy to try and respond..25 COMMISSIONER KEMPTON: Mr. Donovan?
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1 MR. WALKER: Thank you, Mr. Chairman,
2 Commissioner Redford and Commissioner Smith. Before I
3 get started --
4 COMMISSIONER KEMPTON: Just a minute, let
5 me make a point that the invitation was extended by Mr.
6 Miller for questions, so I'm calling on you not to
7 present right at this moment, but if you have any
8 questions, we could go ahead and pursue that in the
9 immediate order so that we don i t lose context by going
10 through the whole thing and then coming back and trying
11 to do questions, so do you have any questions?
12 MR. WALKER: No questions.
13 COMMISSIONER KEMPTON: Ms. Sasser?
14 MS. SASSER: No, Mr. Chairman.
15 COMMISSIONER KEMPTON: Mr. Lovinger, is
16 that right, Mr. Lovinger, can you hear me?
17 MR. LOVINGER: Yes, I can hear you. I
18 don't have any questions. Thank you.
19 COMMISSIONER KEMPTON: All right,
20 Commission, Marsha?
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COMMISSIONER SMITH: No.
22 COMMISSIONER KEMPTON: Mack?
23 COMMISSIONER REDFORD: No questions.
24 COMMISSIONER KEMPTON: I have one question
25 and that has to do with the period of time prior to March
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1 16. As I understand in the various papers and comments,
2 you had started looking at the possibility of doing this
3 as a non~PURPA project and that there was -- and that the
4 PURPA aspect of it was put on hold prior to March 16th;
5 is that correct?
6 MR. MILLER: I think the better
7 characterization would be that the parties came to a
8 defaul t basic agreement for a PURPA proj ect and PURPA
9 contract and as always is the case, with that default
10 basic understanding in place, the parties did explore
11 other options which they found to be unattractive and
12 then, in effect, defaulted back to the existing agreement
13 for a standard form PURPA agreement.
14 COMMISSIONER KEMPTON: In any of those
15 discussions when you were looking at a PURPA contract
16 prior to March 16th, was there a discussion of the
17 methodology that the Commission uses in establishing
18 avoided cost rates and changing those same avoided cost
19 rates over periods of time?
20 MR. MILLER: I'm not sure precisely when
21 it occurred, but there was a discussion of the
22 possibility of negotiated non-published rates which
23 didn i t lead anywhere after a very short investigation, so
24 the basic understanding was always that it would be the
25 published avoided costs existing prior to March 16th and
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1 then there were sort of tangential efforts to explore
2 options, but in the end, the parties defaulted back to
3 the existing agreement for the published avoided costs.
4 COMMISSIONER KEMPTON: But during this
5 time you're not aware of the Northwest Power and
6 Conservation Council process that was ongoing with the
7 purposeful intent of changing rates?
8 MR. MILLER: As Mr. Vinson indicates in
9 his affidavit, prior to March 16th, he did not have
10 regulatory counsel that would have been aware of what was
11 going on at the Power Council and I guess I i d also
12 indicate that the Idaho use of the Power Council output
13 is a collateral or incidental result of that Northwest
14 Power effort, so prior to March 16th, Mr. Vinson did not
15 have any reason to believe that a change in avoided costs
16 was imminent, and he recites in his affidavit that if he
17 had had any reason to believe that he would have pushed
18 the process to obtain a written contract prior to that
19 date.
20 COMMISSIONER KEMPTON: Okay, and just to
21 clarify the question that I asked, I didn i t intend in
22 that question to suggest that the Council is the one that
23 is setting the avoided cost rate, they simply readjust
24 the fuel cost rates, et cetera that then fit in with the
25 formula for determining the avoided costs.
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1 MR. MILLER: Right.
2 COMMISSIONER KEMPTON: Okay, when you talk
3 about the oral agreements that seem to follow all the way
4 through this, was there never a draft that was
5 accomplished, it was just oral discussions?
6 MR. MILLER: That is correct. A small
7 point that sort of bears in this area that I didn i t touch
8 on is that like some people of his generation, Mr. Vinson
9 does not use e-mail, doesn i t know how to use e-mail, so
10 Mr. Vinson's style of business tends toward reliance on
11 oral discussions, not on written documents, and it's for
12 this reason that I emphasized his oral commitment to
13 repay the contract damages from Renewable Energy to
14 demonstrate that his oral commitments can be relied on.
15 COMMISSIONER KEMPTON: And is it your
16 point that the Commission would not find itself perhaps
17 far afield in making specific decisions on allowing
18 companies sort of making the same kind of a claim in
19 future years if we move to a situation where we move away
20 from the bright line established by the double criteria
21 that the Supreme Court and the Commission have advocated
22 in Staff iS writing indicating the two principal ways to
23 make a decision as to whether to accept the offer, the
24 proposal, to use a past rate in this case?
25 There is a bright line distinction in
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1 those two that is very clear. I mean, you either have it
2 or you don't have it and I i m sure that as we go through
3 this further there will be additional discussions about
4 the fact that the Commission did not -- they did not
5 comply with the second provision which was to have a
6 complaint, a meritorious complaint, that was served
7 against the Company and then that was the trigger that
8 would provide the Commission the authority to go ahead
9 and make a decision on that, so if you go to an oral kind
10 of situation, what is the Commission supposed to use for
11 verification that in fact those oral communications are
12 equally understood on both sides?
13 MR. MILLER: Well, if I might, let me make
14 a couple of observations. First, in the Empire Lumber
15 and A. W. Brown Supreme Court cases, the Supreme Court did
16 not hold that the criteria that were employed by the
17 Commission were legally required or mandated by some law.
18 The court only held that those were permissible criteria
19 and that the Commission properly applied them in those
20 cases, and I think the point you raise is an interesting
21 one.
22 On the one hand, a good thing is certainty
23 and predictability in regulatory decisions based on
24 established criteria. On the other hand, a good thing is
25 flexibili ty to exercise reasoned decision making to
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1 arri ve at a decision that i s in the public interest and
2 the problem with rigid unthinking adherence to bright
3 line criteria is you preclude yourself from taking into
4 account the peculiar facts of individual cases; for
5 example, you will not see another case where there was a
6 preexisting power purchase agreement with a promise to
7 repay damages resulting from the default in that
8 agreement.
9 If you handcuffed yourself into bright
10 line unwaivable criteria, you would gain the advantage of
11 clarity, but lose the advantage of flexibility and it's
12 for that reason that the Commission has recognized that
13 it is not like a cord bound to strictly apply prior
14 precedents, that based on the right circumstances, the
15 Commission can on a reasoned basis come to some different
16 conclusion, so it seems to me the Commission properly
17 may, as in this case, have criteria that serve to inform
18 its judgment and the key is to whether it exercises
19 reasoned judgment in coming to a conclusion as opposed to
20 just some conclusion, so I sympathize with the dilemma
21 you i re posing of the desirability of the bright line yes
22 or no tests, but recognize the other good in the
23 regulatory process that comes from reasoned, the exercise
24 of reasoned, discretion.
25 COMMISSIONER KEMPTON: Okay, I have no
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.1 addi tional questions, so Mr. Donovan.
2 MR. WALKER: Thank you, Mr. Chairman,
3 Mr. Redford and Commissioner Smith. Similar to
4 Mr. Miller having Mr. Vinson available for any questions,
5 Mr. Allphin who accompanies me today is also available to
6 go under oath and answer any questions should the
7 Commission desire that of him. He is the individual, the
8 Company representative, that dealt with Mr. Vinson and
9 had these oral communications and negotiations related to
10 the contract, and I'd just like to, without repeating
11 very much of the stuff that's already been discussed,
12 just touch on three main points and I think they dovetail.13 nicely to the last discussion about the criteria because
14 I think they all are related to what we're referring to
15 as criteria in this discussion.
16 First of all, what are the different
17 cri teria that we 1 re talking about and briefly, what's the
18 difference in meaning of those because we have some
19 different sets of criteria at play here, and secondly,
20 I i d like to make a few comments about the whole issue
21 regarding the lack of a writing prior to the March 16th
22 date, and finally, some brief comments regarding the lack
23 of a complaint, the requirement or the lack of a
24 requirement of having a complaint, in examination of.25 grandfathered issues, and I do think that in addition to
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22 COLLOQUY
.1 those brief comments that the equities that are wi thin
2 the Commission's discretion when considering what's in
3 the public interest as well as some consideration to the
4 equities in treating similarly situated projects in a
5 similar fashion also come into play, and I won't repeat a
6 lot of what Mr. Miller went over, but I think those are
7 very important distinguishing factors for Yellowstone's
8 case, and to get into it, I i d li ke to start off from the
9 Company obviously filed its application, but I speak from
10 oral argument more from the tone of our reply and to
11 start off with what Staff stated in its assessment of the
12 case and Staff stated, "The issue, in a nutshell, is.13 whether Idaho Power and Yellowstone were in substantial
14 agreement on the terms, conditions, and rates for a new
15 power sales agreement prior to the change in rates on
16 March 16."
17 Staff goes on to say, "There is nothing in
18 writing to indicate that there was a meeting of the minds
19 prior to March 16th and the Commission is left only with
20 the word of both parties that there were no outstanding
21 contract issues or disagreements on any terms or
22 condi tions prior to March 16th," and Staff goes on to
23 ultimately conclude that because there is no writing that
2 4 there was no substantial agreement or at least no.25 evidence of a substantial agreement to the terms and
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23 COLLOQUY
.1 condi tions and, thus, the proj ect failed Idaho Power 's
2 second criteria regarding a materially complete power
3 purchase agreement, that the terms were materially
4 complete.
5 Now, I think the proj ect, and not to speak
6 for them, but certainly the Company, we have no dispute
7 wi th the first two items and actually put forth those
8 items as Staff did that there is no writing prior to
9 March that evidences that agreement and the only evidence
10 that the Company is able to submit of that agreement is
11 the oral negotiations and the past course of dealings
12 that the Company and Mr. Vinson have had through the.13 years ultimately to evidence that fact, and what we don't
14 agree with is Staff's conclusion that they draw from
15 those same two facts in that that somehow fails the
16 cri teria and that's fatal to the company's or the
17 proj ect i s claim for a grandfathered rate.
18 The Company's position is that the
19 examination of grandfathering criteriaj ust doesn't work
20 that way, so if we look at and talk about the criteria
21 for a moment from the Company's application, I think the
22 Company may have unintentionally caused some confusion
23 when we talk about criteria and really, if one goes back
24 and looks at the application and the rest of the.25 pleadings, you i II see a discussion about two different
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24 COLLOQUY
3
sets of criteria that are reported,and the first one,
and I apologize on behalf of myself and the Company if we
caused any confusion with that and hopefully,I can try
now and through our reply comments to clarify that,but
.1
2
4
5 really, the first set of criteria that are referenced is
6 where we talk about two prongs and, very briefly, the
7 first one is that you have a signed contract containing
8 the grandfathered rates that's in place prior to the time
9 the Commission changes the rates. That's the first
10 criteria.
11 Secondly would be a meritorious complaint
12 filed alleging that the proj ect is entitled to a.13 grandfathered rate contract that i s also filed prior to
14 the time that the Commission changes the rates. Now, I
15 refer to that in the reply comments of the Company as
16 kind of the Supreme Court validated criteria and how
17 should I phrase this, those are what we know for sure
18 would qualify a company or a project to come in under a
19 claim of grandfathering if they had a contract in place
20 or a complaint that they were entitled to a contract
21 prior to the time the rates change.
22 Now, where the problem comes in and where
23 we get additional criteria I think beyond what's
24 referenced in those two as the Supreme Court criteria is.25 that very seldom do we have grandfathering claims for
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25 COLLOQUY
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1 examination at the Commission where you i ve had a contract
2 or a complaint that's happened prior to the time or event
3 which precipitated a change in the rates. Typically, the
4 more difficult questions that come over here for
5 resolution happen after the rates changed and we i ve had
6 some kind of proj ects that were in the pipeline over that
7 change in rates that either for whatever reason didn i t
8 know, didn't have notice, were not aware of the process
9 or whatever reason there is didn i t have an opportunity or
10 didn i t get something filed before the change, so
11 typically, when we're examining these at the Commission,
12 we i re talking about different criteria than those rigid
13 cri teria set up and validated through appeals to the
14 Idaho Supreme Court, and that is not to say that those
15 are not valid and applicable and fine criteria to apply
16 and wi thin the Commission's discretion, but it also
17 doesn't mean those are the only exclusive criteria that
18 you either meet or you don't and then you're out of luck
19 because it just is not the facts.
20 If we look simply at this rate change from
21 March and look at the cases that the Company has
22 submitted, none of those, not a single one of those, had
23 the opportunity or actually filed a complaint or a
24 contract prior to the rate and we didn i t consider those
25 to be dead on arrival and just completely out of luck
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26 COLLOQUY
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1 because of that fact. The Company went on to what I'll
2 call here is the second set of criteria that's described
3 in the Company's application that also has two main
4 factors and the Company looked at these very carefully as
5 it does whenever an opportunity comes up that there may
6 be grandfathering claims for prior rates and looked at
7 some of the instances that the Commission has dealt with
8 this question in the past and I think one case that
9 Mr. Miller referred to was IPC-E-05-22.
10 I think that the Commission may recall in
11 that case was where the Commission lowered the threshold
12 requirement of qualifying for the published avoided cost
13 rate from 10 megawatts down to 100 kilowatts and dealt
14 wi th a barrage of grandfathered claims in relation to
15 that and the Commission had quite a discussion in
16 Order I i d like to state for the record it was Order
17 29872 in that same case, an Order on reconsideration
18 about an evidencing of times and justifications when the
19 Commission may examine grandfathering claims outside of
20 those two rigid Supreme Court validated criteria and
21 really come up with its own reasoned, rational, legal
22 cri teria that are well wi thin the Commission's discretion
23 and authority and also take into consideration the
24 particular facts and circumstances of individual claims
25 for grandfathering.
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27 COLLOQUY
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1 I think grandfathering claims by their
2 very nature are a very case-by-case independent, factual
3 analysis of just what exactly the situation was in
4 relation to that proj ect and the progress that they were
5 making with the Company in reaching a final agreement, a
6 contract for submittal to the Commission for approval on
7 a PURPA qualifying facility agreement and that's really
8 what the second set of criteria was crafted to capture.
9 I don't think the particular criteria themselves are as
10 important as the idea that you i re trying to capture when
11 setting up those criteria in that you i re getting at the
12 main point of the degree of the substantial progress and
13 the proj ect maturity and the actual negotiations, how far
14 along in the process was this proj ect and is it equitable
15 and fair and in the public interest to allow them because
16 they did reach a certain point in development to obtain
17 this previous rate.
18 Order 29872 talks about some of those
19 factors, some of those equitable factors, that the
20 proj ect once you reach a certain point in development and
21 progress in order to sign an agreement, you need some
22 kind of certainty to rely on things and other things that
23 make it equitable and in the public interest, so I think
24 the Company iS position is strongly that the lack of a
25 formal complaint and even the lack of a writing
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28 COLLOQUY
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1 evidencing this agreement is not a fatal flaw to any
2 particular claim of grandfathering.It's not an
3 automatic in the door either. It really has to come down
4 to a factual case-by-case analysis of what kind of degree
5 of completion there was to the qualifying facility 's
6 progress towards a final agreement, and I know I i ve went
7 on a little longer than I even intended, but to kind of
8 conclude things up here, I think a couple of points.
9 I think Staff was correct when they boiled
10 it down to their nutshell of an issue of was there
11 substantial completion, substantial agreement as to the
12 terms and conditions of a final firm energy sales
13 agreement and does the mere lack of a writing to evidence
14 that mean that it carries any less weight than some of
15 these other similarly situated grandfathered proj ects
16 that have been submitted, and I submit to you that the
17 level of commitment and agreement that the Company had
18 with Yellowstone and their project even though it is oral
19 is a much higher, in the Company's mind a much more solid
20 and higher, commitment than we've had in many other
21 grandfathered instances where maybe there was a writing,
22 maybe a signed, a one-party signed, draft that's lobbed
23 over the fence prior to a certain date to try to secure
24 this writing as marking a point in time, when really
25 there may have been little discussion or agreement about
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29 COLLOQUY
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1 what's contained in that writing that's lobbed over the
2 fence, but yet, there's a writing that you i re able to
3 mark a point in time and somehow even though there i s
4 maybe less of discussion and agreement than, say, the
5 Company may have had with Mr. Vinson and Yellowstone
6 somehow that marks a place in time and allows that claim
7 for grandfathering to go on when a more solid agreement
8 just because it's oral and lacks that written
9 placeholder, you know, is it really equitable to deny
10 that claim for grandfathering just on the mere lack of a
11 wri ting. The Company doesn't think so as evidenced by
12 its willingness to sign the contract and submit it to the
13 Commission.
14 One other point and Mr. Miller made this
15 so I won't dwell on it, but one other quite
16 distinguishing factor is the fact that the Company
17 examined this and based on its other criteria with the
18 interconnection and transmission progress, as well as the
19 oral agreements to the terms and conditions on the power
20 purchase agreement and was in agreement with the
21 Company's request that it execute a contract containing
22 the grandfathered rate.
23 Now, we spent a lot of time talking about
24 how you don i t have to have a complaint, but I think the
25 complaint in this process still serves a very valid
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30 COLLOQUY
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24.25
1 purpose for those times when maybe the Company does not
2 agree with the proj ect 's request and would refuse to sign
3 a contract and submit it such as we did here, then
4 obviously, one of the last avenues available to get that
5 issue in front of the Commission would be for the proj ect
6 to then file a complaint and bring those issues in a
7 similar manner, so I think that's a very important
8 distinguishing factor for any grandfathering cases that
9 may be following this or any perceived precedential
10 value.I think by its very nature this is a very
11 case-by-case factual specific evaluation.
12 1'm available for questions if anybody has
13 any, as is Mr. Allphin.
14 COMMISSIONER KEMPTON: Thank you, Mr.
15 Walker. Are there any questions? Ms. Sasser first.
16 MS. SASSER: No, Mr. Chairman, thank
17 you.
18 COMMISSIONER KEMPTON: Commissioner Smith?
19 COMMISSIONER SMITH: Mr. Walker, was the
20 Company's review or analysis of this contract's
21 qualification for grandfathering any less rigorous than
22 wi th other proj ects that have come up after the March
23 16th rate change or other previous PURPA rate changes?
MR. WALKER: No, and in fact, I would not
say it was less rigorous. I would say because of the
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31 COLLOQUY
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1 lack of a writing and the oral agreements and many of the
2 things we have talked about now, it was perhaps more
3 rigorous, but really, you know, the Company -- part bf
4 the reason the Company comes up with the criteria is to
5 try to treat similarly
6 COMMISSIONER SMITH: That answer is
7 sufficient. Thank you.
8 COMMISSIONER KEMPTON: Any other
9 questions?
10 COMMISSIONER SMITH: No.
11 COMMISSIONER KEMPTON: Mr. Miller, did you
12 have a question?
13 MR. MILLER: Thank you for the invitation.
14 I think Mr. Walker made a very compelling presentation
15 and I couldn i t add to it by asking him any questions.
16 COMMISSIONER KEMPTON: Commissioner
17 Redford.
18 COMMISSIONER REDFORD: Mr. Donovan, it
19 seems to me that the operative words are in the
20 application which repeated other words that the proj ect
21 was sufficiently mature and far enough along in
22 contracting process that but for the conduct of the
23 utili ty, the developer would have been able to sign a
24 contract. It seems to me like everything but a signature
25 was in place for the agreement; is that what you're
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32 COLLOQUY
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1 saying?
2 MR. WALKER: Yes, what the Company is
3 saying is there was no material disagreements as to any
4 of the terms and conditions, that there are -- once you
5 reach that point, as Mr. Miller said, you know, there's a
6 lot of technical factual information and some amount of
7 administrative process at the Company to enter that and
8 run it through the approval process and get it signed.
9 COMMISSIONER REDFORD:But materially,
10 there was everything in place except these administerial
11 issues and the signatures?
12 MR. WALKER: That's correct.
13 COMMISSIONER REDFORD: So what you're
14 saying is that this is a non-exclusive method by which a
15 developer can get the avoided cost rates and not
16 exclusive? You're saying it's a non-exclusive method by
17 which a party can get the avoided cost rates?
18 MR. WALKER: I guess I don't understand
19 what you mean by non-exclusive.
20 COMMISSIONER REDFORD: Well, some people
21 are saying that this is the exclusive way by which you
22 get the rates, the avoided cost rates, and you're saying
23 it i S not the exclusive way, there are other ways you can
24 get it and this happens to be one of the other ways.
25 MR. WALKER: I would agree with that. I
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33 COLLOQUY
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1 don i t think that that's the one and only way by fitting
2 rigid that one requirement.
3 COMMISSIONER REDFORD: I don't have any
4 further questions.
5 COMMISSIONER KEMPTON: Mr. Walker,
6 probably central to a lot of the discussion we're having
7 right now has to do with the phrase materially complete.
8 As a matter of fact, Idaho Power, reading from page 4 of
9 Idaho Power's reply comments, Idaho Power developed two
10 criteria by which it evaluated whether it would entertain
11 signing a FESA with a proj ect that contained
12 grandfathered rates, and then it goes on and says that
13 the terms or the contract negotiations had to be
14 materially complete. To me, this is a definition created
15 by Idaho Power that the PUC, to my knowledge, never had a
16 chance to examine and perhaps identify a separate docket
17 to work through and find out what we would mean if we
18 were going to accept a term materially complete in the
19 place of the second criteria that the Staff identified;
20 in other words, if we were trying to be accommodating in
21 our effort, we would have to understand what materially
22 complete means.
23 At one point I wrote down how this -- where was
24 this term used in terms of any of the other submissions
25 of -- let me change that -- other submissions of
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34 COLLOQUY
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.
1 grandfathering petitions that were drafts, and this one
2 is not which is a principal distinction that we i re making
3 in this oral argument, so in trying to define that, I now
4 go to page 8 in your reply comments and you say in the
5 middle of the page on page 8, "Once all material terms
6 and conditions of a FESA are agreed upon by the parties,
7 the Company considers the FESA to be materially
8 complete. "
9 This constitutes the definition to me of
10 materially complete, but then you go on and say in the
11 next sentence, "Even though materially complete there can
12 be a number of details and processes to get the
13 materially complete agreement finally approved and
14 executed," which means there can be, in my mind, correct
15 me if I i m wrong, points at which disagreements would
16 resul t in changes to the basic oral agreement that
17 precipi tated the original determination of what had gone
18 on was materially complete; in other words, materially
19 complete wasn i t materially complete, because as you moved
20 on, although you accepted it for the basis of asking the
21 Commission to approve it, you then later wi thin the
22 Company go into additional discussions before you
23 actually sign the agreement and those mayor may not be
24 specifically what we had agreed to as we saw it.
25 I guess I'm more concerned about the fact
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35 COLLOQUY
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10
1 that perhaps here is a gem in the making of materially
2 complete that the Commission could use as a part of the
3 criteria, to expand the two criteria that Staff
4 identified.I f we could just have some example of it
5 being used at any time prior so we knew what we where
6 talking about or even being used in this case as a part
7 of the documents that were submitted prior to the time
8 that everyone submitted reply comments to Staff, I'm just
9 saying that this seems to suddenly emerge as a term that,
qui te frankly, I'm not familiar with.I won't speak to
11 the other Commissioners, but I don i t know where I've seen
12 it in anything else that Idaho Power has given to us..13
14
MR. WALKER: Well, it is the same criteria
that was reported in the applications on the previous
15 five submittals of grandfathered rates that the Company
16 turned in surrounding the March 16th date and were
17 subsequently approved by the Commission and I do
18 acknowledge your statement that, you know, these two
19 factors are factors that Idaho Power came up with and
20 they are reported here because those are the factors that
21 the Company used on its own to determine whether to agree
22 to submit, agree to sign a contract and submit, it for
23 the Commission i s approval.
24 It i S not to say necessarily that those are.25 pronouncements that have come from the Commission, but I
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36 COLLOQUY
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1 think they were created by the Company for its own
2 evaluation to be its tool when determining whether to
3 agree to sign or not to sign a contract and tell the
4 proj ect that they need to file a complaint if they wish
5 this to be considered. I do think, like I said before,
6 that I don i t think it's necessary to get real caught up
7 or bogged down with the exact definition of a term. It's
8 really the principle that's embodied by the criteria that
9 you i re trying to determine how far along in the process a
10 proj ect is at the point in time when a rate changed and
11 whether it's equitable and in the public interest that
12 because of the place that they were in the process that
13 they be entitled to rely on and have that previously
14 effecti ve rate.
15 COMMISSIONER KEMPTON: Except the one
16 distinction with Yellowstone is that in all the other
17 cases that are cited in your reply comments, the caveat,
18 the but for, but for the fact that the Company was busy
19 basically with other things and didn't have a chance to
20 finally process the document, it would have been done
21 prior to the March 16th date, this doesn't have that same
22 kind of a but for business of the Company. It really has
23 a but for the fact that everything was materially
24 complete even though it was almost all done on the basis
25 of an oral agreement.
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37 COLLOQUY
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1 Were there any minutes taken of any of the
2 oral discussions? Were there any notes taken that can be
3 verified of the conclusions that came about in oral
4 discussions? Most people would do that if they're having
5 some kind of contract discussions on the phone. There 's
6 some record that would show what the oral discussion was
7 about, what the conclusions may have been and where the
8 problems may exist, and the way it's explained here, none
9 of that can be provided to the Commission so that we can
10 make a determination, notwithstanding we can make a
11 decision, that will hold merit as we go through the other
12 cases that are bound to come to us.I mean, this is the
13 camel i S nose under the tent routine that legislators hate
14 and most lawyers love is the lack of a definition of a
15 term that affects other businesses making decisions and
16 so I'm just asking.
17 MR. WALKER: Well, I would respectfully
18 disagree.I don't think it i s the nose under the camel's
19 tent.I think by the very nature of grandfathered claims
20 that each one has to be looked at individually and you
21 have to look at the specific facts and the Commission
22 when brought with these questions will have to determine
23 whether those specific facts are sufficiently in the
24 public interest to justify a previous rate being applied
25 to that.
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38 COLLOQUY
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1 COMMISSIONER KEMPTON: Mr. Walker, but
2 what I said was that there wasn't anything in evidence to
3 validate the oral decisions that had been made as you
4 moved along and it seems to me that a good part of your
5 diligence is that you at least document the oral
6 decisions that are made.
7 Commissioner Smith.
8 COMMISSIONER SMITH: Mr. Chairman, your
9 questions have caused me to wonder whether knowing that
10 we have most of the principals in the room available to
11 testify that if you have any question about whether there
12 was a meeting of the minds they're here available to be
13 called and sworn and that could maybe be the evidence
14 you i re looking for that doesn i t exist in writing. It's
15 probably in the heads of these two people.
16 COMMISSIONER KEMPTON: So my guess is, Mr.
17 Walker that you would agree with Commissioner Smith on
18 this point?
19 MR. WALKER: I would and not to speak for
20 Mr. Miller, but I believe that i s why we both tendered the
21 relevant witnesses that had these discussions so that
22 should the Commission wish, their sworn testimony could
23 be entered as evidence.
24 COMMISSIONER KEMPTON: And I just want to
25 make certain that there would be no instances where the
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39 COLLOQUY
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1 meeting of the minds -- I i m sorry, so let me rephrase
2 that, then, and put it context. I would certainly not
3 use the word collusion, but I would use the term taking
4 advantage of a situation that exists that is permissible
5 simply because there are no sideboards put up there in
6 the language identified for us to make decisions by; in
7 other words, what guidelines do we have relative to the
8 oral argument other than something that comes out in a
9 hearing where the individuals are sworn in? I mean, is
10 that the process we would have to go through on every
11 single one of these in order to get an oral kind of
12 agreement developed?
13 MR. WALKER: Well, I don i t think you
14 necessarily have to do that on everyone, but certainly,
15 in situations where we find ourselves today where we have
16 a critical fact is the point in time of when we had an
17 oral agreement that we're not able to produce any writing
18 to support, I think that's what we're left with and I do
19 think sworn oral testimony is just as good as written
20 evidence and as I stated previously, actually,
21 substanti vely can be much stronger than the one-party
22 signed draft that i s thrown over the fence, and I think as
23 far as any collusion or anything like that, I think many
24 of the people, Mr. Richardson or Mr. Miller or Staff,
25 could attest that the Company certainly does not hesitate
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40 COLLOQUY
.1 to refuse to sign a PURPA contract when it believes the
2 equi ties of the public interest or the law does not
3 require such to happen. I certainly would be surprised
4 of anyone accusing the Company of being overly ambitious
5 to sign contracts or to collude or conspire to get more
6 PURPA contracts.
7 COMMISSIONER KEMPTON: Are there other
8 questions?
9 MR. MILLER: If I might just add, if
10 desired, we can certainly make -- we're more than happy
11 to call Mr. Vinson. I would point out that you already
12 have before you his sworn affidavit, a statement under.13
14
oath, and to add to Mr. Walker i s point about the
reliability of oral evidence, it seems to me that if
15 there was a dispute between the parties, then the
16 reliabili ty of oral evidence might come into question if
17 one party said there was an agreement and another party
18 said no, there wasn't an agreement. Here there's no
19 disagreement and there is no obj ecti ve reason to
20 disbelieve either Mr. Vinson or Idaho Power Company and
21 all of the circumstantial evidence tends in the opposite
22 direction.
23 As Mr. Walker just indicated, the Company
24 takes seriously its obligation to ensure that its.25 customers are not paying avoided cost rates that are too
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41 COLLOQUY
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1 high.It seems inconceivable to me that the Company
2 would neglect that obligation on the basis of some
3 collusive plan to get a contract approved. As we have
4 indicated in our reply comments, once a developer has
5 accepted the standard form of agreement, there is very
6 li ttle else that needs to be included to complete a
7 wri ting and it's all very technical.I won't go through
8 it, but it i S on page 4 of our reply comments, and the
9 other circumstantial fact that tends toward acceptance of
10 the oral evidence is Mr. Vinson's track record of honesty
11 and square dealing with the Company in his oral promise
12 to repay the prior damages from the prior contract, so
13 the oral evidence is undisputed. The circumstantial
14 evidence underneath the oral evidence all points toward
15 accepting the oral evidence. There is no circumstance or
16 inference that points toward rejecting the oral evidence.
17 COMMISSIONER KEMPTON:Please understand
18 that when I asked the question I was putting sideboards
19 on the range that the oral argument presents.
20 MR. MILLER: Certainly.
21 COMMISSIONER KEMPTON: I have no further
22 questions.
23 COMMISSIONER REDFORD:I just have one
24 comment. We have the parties here, their clients are
25 here, it seems to me that the attorneys have made the
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1 representations of their clients and we are duty bound to
2 accept those representations. The representation is that
3 there was nothing else materially to be done to have this
4 contract in place and I think to have required Mr. Vinson
5 and Yellowstone to have filed a complaint at this time
6 would have been a meaningless argument or a meaningless
7 gesture which really wouldh' t have meant anything,
8 because as I read this, I guess the word we're hung up on
9 is executed and materiality.
10 I think everyone has made the
11 representation that the proj ect was sufficiently mature
12 and materially far enough along in the contracting
13 process that the developer would have been able to sign a
14 contract with the utility containing the superseded rates
15 and given the method by which the parties find themselves
16 in and their sophistication of how they handle the
17 signing of contracts, the old saying my word is my bond
18 is pretty apropos here. It seems to me like we're kind
19 of arguing about something that's not very practical.
20 That's all I have. Thank you.
21 COMMISSIONER KEMPTON: Well, that brings
22 up just one more question, then. I i m still concerned
23 about the language on page 8, Mr. Walker, in the center
24 of the page and that is the distinction between when
25 something would be submitted to the Commission for a
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1 decision based on it being materially complete and
2 whether after a Commission decision we would still be
3 going through the second step with the Company or may do
4 that where you state that even though materially
5 complete, there can be a number of details and processes
6 to get the materially complete agreement finally approved
7 and executed wi thin the Company. Are we going to see a
8 request from the Company after the executive -- however
9 far up you i re going to take these for final decisions
10 approved and executed or are we going to see it at a time
11 that it i S materially complete and it hasn i t necessarily
12 been signed off on by the Company?
13 MR. WALKER: In this case as with all of
14 the other submissions by the Company around this March
15 16th date, these were final executed contracts that the
16 Company submitted for Commission i s approval, so the
17 timing that you're referencing on eight would be they
18 didn i t come to the Commission until after all the review
19 and administrative process as well as the materially
20 complete terms and conditions, after all of that was done
21 and we had a finally-executed document.
22 It could be the case, although it i S not
23 the case here, where you have a complaint situation where
24 the Company has refused to sign the contract where it has
25 not gone through the rest of that administrative final
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1 execution and signing, but that i s certainly not the case
2 here, nor was it with any of the other grandfathered
3 claims.
4 COMMISSIONER KEMPTON: Okay, thank you.
5 Ms. Sasser.
6 MS. SASSER: Thank you, Chairman Kempton,
7 Commissioner Smith, Commissioner Redford. Staff stands
8 by the comments as they were filed on October 1st and as
9 noted by Mr. Miller, I want to reiterate, Staff doesn't
10 dispute the posi ti ve attributes of the Yellowstone Power
11 proj ect . We simply cannot recommend approval of a power
12 purchase agreement without more indicia of the progress
13 wi th the Company that Mr. Walker was referring to, and I
14 think it has to be noted that in regards to oral evidence
15 in this case, 100 percent of the costs of these projects
16 are passed on to customers which at the very least must
17 give us pause in blindly accepting oral evidence and
18 passing through those rates to customers and that i s all I
19 have.
COMMISSIONER KEMPTON: Questions?
21 Commissioner Smith.
22 COMMISSIONER SMITH: So do you want to
23 call these witnesses so the Staff can have more indicia?
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MS. SASSER: I have no desire to call
wi tnesses to the stand. Thank you.
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1 COMMISSIONER KEMPTON: Commissioner Smith.
2 COMMISSIONER SMITH: Did you ask to depose
3 the Company or proj ect witnesses to gather more indicia?
4 MS. SASSER: We did not. We conducted
5 discovery on the case in order to try to establish
6 something other than oral evidence.
7 COMMISSIONER SMITH: But you didn't go for
8 depositions?
9 MS. SASSER: No, that is correct.
10 COMMISSIONER SMITH: Thank you.
11 COMMISSIONER KEMPTON: Commissioner
12 Redford.
13 COMMISSIONER REDFORD: The only thing I
14 have to say and it may be in general dealing with
15 contracts, I i m always concerned about when someone says
16 is the contract materially completed. Until the
17 signature and all the exhibits and everything else is put
18 onto an agreement, the contract may be materially
19 effective, but it i S not complete because it doesn't have
20 all the indicia. That could be attaching the exhibits,
21 signature lines, dates, anything else that needs to go
22 into it.
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23 I seem to get the impression that what
24 Idaho Power and Yellowstone is saying is that
notwi thstanding all the administrative or ministrati ve
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1 issues of a contract that the contract was materially
2 complete and could be operated in the form that it had
3 been agreed upon, that is, even though it wasn't reduced
4 to writing, but if you were to go through all the issues
5 of the contract and all the details of the contract, the
6 contract was sufficiently, albeit not having been signed
7 off on, was operable.
8 It seems to me that the question of
9 materiality and operability, maybe we need to take a
10 quick look at that. I certainly don i t subscribe to
11 having the witnesses come here and testify that yes,
12 every period and every dot and I and so on was agreed to,
13 but the contract was materially complete and the only
14 thing left to be done was to be executed, and I think in
15 that case, I don i t find that some of the verbiage that
16 we i re dealing with as being totally exclusive as to the
17 method by which we can decide the avoided cost rate and
18 grandfather these costs.
19 I know we i ve gone through all of these
20 different cases, but none of them are exactly the same as
21 they are today and in this case, because we have parties
22 that disagree as to the material facts of the contract
23 and so that's by way of comment and if anybody has any
24 comment as to my comment, why, please, Mr. Chairman, they
25 may question me, I guess.
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1 COMMISSIONER KEMPTON: Thank you,
2 Commissioner Redford. Mr. Miller, I think if you want to
3 wind this up, it's fair, just and reasonable if you go
4 ahead if you have any responses or comments to the
5 proceedings today.
6 MR. MILLER: Thank you, Mr. Chairman,
7 Members of the Commission. I think there's been a very
8 thorough discussion here and one of the reasons for
9 asking for oral argument was to permit the opportunity
10 for a full discussion. We very much appreciate your
11 questions and the obvious thought about this case. I
12 hope that we've managed to make a cogent presentation and
13 I come back to the same conclusion I had when I concluded
14 my initial remarks was that between the Company's
15 application and the reply comments and our oral argument
16 today, I think that we have given you a basis for a
17 reasoned decision, to arrive at a public interest
18 decision which is the approval of the contract, so with
19 that, I'm exhausted or I've exhausted my abilities.
20 COMMISSIONER KEMPTON: All right, I assume
21 that there i s no other business to bring before the
22 Commission on this matter.
23 MR. MILLER: The only thing I guess we
24 would ask is that the Commission now consider the matter
25 fully submitted.
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1 COMMISSIONER KEMPTON: That i s where I was
2 going next and so the Commission does consider this
3 matter fully submitted. If there i s no objection, all
4 previously filed documents in the case together with
5 filed testimony and today' s hearing will be incorporated
6 into the record by reference and there being no
7 obj ection, so ordered, and this oral hearing is
8 adj ourned.
9 (The Oral Argument adj ourned at 3: 30 p. m. )
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1 AUTHENTICATION
2
3
4 This is to certify that the foregoing oral
5 argument held in the matter of the application of Idaho
6 Power Company for approval of a firm energy sales
7 agreement with Yellowstone Power, Inc. for the sale and
8 purchase of electric energy, commencing at 2: 00 p.m., on
9 Tuesday, October 26, 2010, at the Commission Hearing
10 Room, 472 West Washington, Boise, Idaho, is a true and
11 correct transcript of said oral argument and the original
12 thereof for the file of the Commission.
13
14
15 (J óJ~eJ â b~._........._----.,... -
CONSTANCE S. BUCYCertified Shorthand Reporter #187 -~ .
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