HomeMy WebLinkAbout20130128Force Majeure Letter.pdfca rn co clean energy
Via: Email & U.S. Mail
Vice President; Power Supply
Idaho Power Company
P0 Box 70
Boise, Idaho 83707
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Cogeneration and Small Power Production
Idaho Power Company
P0 Box 70
Boise, Idaho 83707
RE: Firm Energy Sales Agreement between Idaho Power Company and AgPower Jerome. LLC
("Agreement")/ Project 31616115/Notice of Force Majeure
Dear Ms. Grow:
On behalf of AgPower Jerome, LLC and pursuant to Article XIV of the Agreement, we are hereby
notifying you that combined "events of Force Majeure" have occurred. It is a result of the extended
period of excessive below-freezing temperatures, exacerbated by Idaho Power's temporary
suspension of receipt of electricity on January 14, 2013 and again on January 23, 2013 (both of
which significantly increased the difficulty of maintaining internal digester temperatures). These
Force Majeure events have prevented us from receiving enough manure feed stock and hindered
digester operation, such that despite our lower energy delivery nomination and our best efforts, we
are unlikely to generate sufficient energy to reach 90% of the nominated Net Energy (as such term
is used in the Agreement) for the month of January. We request that, for the month of January,
Idaho Power agree that either (i) all energy produced will be treated as Net Energy (irrespective of
whether or, not we meet the 90% criteria) or (ii) the nominated Net Energy amount for January be
appropriately adjusted downwards to reflect the actual negative impact of our inability, to generate
enough electricity due to the Force Majeure.
Background
During the period from 1/1-1/23, 2013, Jerome, Idaho experienced historically cold temperatures.
During this period, there were no more than 3-4 days where the daily high temperature exceeded
32 F and, on such days, the high temperature never exceeded 39 F. During this entire period, the
daily low temperature was, for the most part, less than 10 F and in fact many mornings were below
0 F. January temperatures continuously this low, particularly the daily high, are significantly below
historical values (graph) and impossible to anticipate.
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Energy Production vs. Temperature
January 1-22,2013
— Daily Energy Produced (kWh/day) - Max Temp (F)
- Mean Temp (F) - Mm Temp (F)
- - - Avg. Max Temp (F) - - -Avg. Mean Temp (F)
- - -Avg. Min Temp (F)
90,000
80,000
Daily Energy Produced
70,000
50,000
. 40,000
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20 30,000
Lu 20,000
10
10,000
0
0 -10
1 2 3 4 5 6 7 8 9 10 1112 13 14 IS 16 17 18 19 20 2122 23 24 25 26 27 28 29 30 31
January
The excessive cold contributed to low energy production for a number of reasons:
• The manure actually froze in the barns, and the dairy, unable to deliver manure through
normal means, was forced to scrape and haul manure to the digester by truck. The dairy has
been unable to supply more than 50% of the"normal" amount of manure required to
achieve our power nomination.
• The inability to obtain adequate manure, and the frozen nature of what was received,
impaired our ability to maintain optimal internal temperatures in the facility's digester, and
was compounded by the actions of Idaho Power, as set forth below.
On January 14, 2013, Idaho Power suspended receipt of electricity. This exacerbated the
problem we were experiencing in connection with maintaining the proper temperature in
the digester, because the resulting shutdown of the gen-sets reduced production of heat
necessary for the digester. Our production dropped precipitously after that curtailment and
despite our extraordinary efforts had not recovered by January 22. However, on January 23,
2013, Idaho Power again failed to take electricity from the facility, causing us to shut down
the gen-sets for a second time and to suffer a second loss of gen-set produced heat at a
critical time for the digester. Although the first curtailment, together with the lower manure
supply resulting from the extreme cold, caused demonstrable production issues, the second
curtailment virtually assured that we would be unlikely to meet the 90% threshold.
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Commercially Reasonable Efforts
The definition of "Force Majeure" requires (1) that impact must be a result of a cause beyond our
control and (ii) that, despite our exercise of due diligence, we were unable to prevent or overcome
such impact. In the instant case, the extended period of excessively cold temperatures and Idaho
Power's repeated curtailments were clearly out of our control. But, equally clear, is that we took
every commercially reasonable step to make sure that we could produce enough electricity to
satisfy the "90% of Net Energy" test prescribed in the Agreement:
• We intentionally lowered our January (and February and March) energy nominations, in
anticipation of cold temperatures.
• We have operated and maintained the digester in accordance with good industry standards
to insure that it would be functioning within design parameters.
• We immediately rented a boiler to supplement lower gen-set heat production after we
determined that the internal digester temperatures would not recover from the effects of
the January 14 Idaho Power curtailment.
• We purchased significant amounts of non-manure feed stock from outside sources, to offset
the drop in manure supply, which increased energy production more than 50% over what
would have been produced otherwise.
• We diligently sought other local manure supplies, but we were unable to locate supplies
that were not frozen.
In short, we have expended significant effort and expense to minimize the duration and/or impact
of this Force Majeure.
Based on the foregoing, we feel that true "Force Majeure" events existed and our inability to fully
perform should be excused, as requested above, with respect to previously nominated Net Energy
amount for the Month of January.
If you have any questions, please feel free to contact me at (713) 807-7775.
Sincerely,
Andrew Jackura
Manager - AgPower Jerome, LLC
Sr. Vice President - Camco International Group, Inc.
cc: Jim Wiest
Ed Herman
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