20120221_3613.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF

FROM: DON HOWELL
DEPUTY ATTORNEY GENERAL

DATE: FEBRUARY 17, 2012

SUBJECT: PROPOSED SETTLEMENT REGARDING HOKU’S PETITION TO
REFORM ITS SPECIAL CONTRACT WITH IDAHO POWER, CASE NO.
IPC-E-12-02

On January 9, 2012, Hoku filed a Petition requesting that its “Amended and Restated
Agreement for Electric Service” (the “amended special contract”) with Idaho Power be reformed.
Hoku is a special contract customer of Idaho Power and is constructing a polysilicon manufacturing
facility in Pocatello.
In an Order issued in the related Hoku complaint case objecting to termination of service
(Case No. IPC-E-11-28), the Commission ordered Idaho Power and Hoku
to immediately enter into negotiations regarding Hoku’s Petition to Reform the
amended special contract. . . . If settlement negotiations are not fruitful, the
Commission will issue further instructions regarding the processing of the
Petition.

Order No. 32437 at 11. Following issuance of this Order, Hoku, Idaho Power and Commission
Staff (the “Parties”) met on more than five occasions in settlement negotiations. On February 17,
2012, the Parties filed a proposed Settlement Stipulation, Joint Motion to Approve the Settlement
Stipulation, and supporting testimony.
THE PROPOSED SETTLEMENT
The Parties agreed to resolve all of their disputed issues in Hoku’s Petition. As set out in
the Settlement Stipulation, the Parties agreed to reduce the monthly minimum payments for the first
block of energy (the take-or-pay provision) to $800,000 for a period not to exceed 18 months from
January 1, 2012, through June 30, 2013. Hoku will continue to pay the applicable DSM Rider
DECISION MEMORANDUM 2
surcharge as applied to the demand and energy charges. Stipulation § 6.1. The cumulative total of
the reduced minimum payments will be added to the end of the special contract that is extended
until December 1, 2014. Stipulation § 6.4. Other elements of the proposed Settlement Stipulation
include:
1. Up-front Payment. In consideration for amending the contract, Hoku shall pay to
Idaho Power $3.8 million as an “up-front payment.” Idaho Power will immediately collect $2
million for the up-front payment from the existing $4 million deposit held by Idaho Power. The
remaining balance will be collected by assessing Hoku a monthly payment of $100,000 for 18
months. Stipulation § 6.3.
2. Balancing Mechanism. Effective January 1, 2012, Idaho Power will establish a
“balancing mechanism” capped at $16.5 million and will accrue interest at 6%. The purpose of the
balancing account is to track the difference between: (1) the deferred first block minimum energy
charges under the amended special contract; and (2) the “modified” minimum monthly billed
energy charges (excluding demand) under the proposed Settlement Stipulation. Beginning with the
invoice for service in December 2013, Idaho Power will then charge and recover from Hoku 1/12 of
the balance in the balancing mechanism. In other words, Idaho Power will charge and recover
amounts that were deferred during the 18-month deferral period over a 12-month period, in addition
to all other energy and demand charges. All payments collected from the balancing mechanism will
be allocated to ratepayers in the Company’s PCA mechanism. Stipulation § 6.2.
3. Usage. If Hoku plans to begin commercial operation during the 18-month deferral
period, it must provide a 6-month advance notice before its monthly consumption may exceed 20
MW. Id. § 6.5. Once Hoku uses more than 20 MW of energy in any given month, then Hoku shall
be obligated to pay the minimum billed energy charge according to the current amended special
contract for the remainder of the deferral period. Stipulation § 6.6.
The Parties recommend that the Commission issue a Notice of Proposed Settlement and
request comments within 14 days of the Commission’s Notice. Stipulation at 10. Each party also
filed testimony supporting the approval of the proposed Settlement Stipulation. The Parties assert
that the Settlement Stipulation is in the public interest and that all of its terms and conditions are
fair, just and reasonable.
COMMISSION DECISION
Does the Commission wish issue a Notice of Proposed Settlement in this case?
DECISION MEMORANDUM 3
Does the Commission wish to set a 14-day comment period?

bls/M:IPC-E-12-02_dh