20170403_5230.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF

FROM: DAPHNE HUANG
DEPUTY ATTORNEY GENERAL

DATE: MARCH 27, 2017

SUBJECT: IDAHO POWER’S APPLICATION TO APPROVE ITS ENERGY SALES
AGREEMENT WITH CAFCO IDAHO REFUSE MANAGEMENT LLC,
IDAHO, AS TO THE SISW LFGE PROJECT, CASE NO. IPC-E-17-04

On March 22, 2017, Idaho Power Company filed an Application asking the
Commission to approve its Energy Sales Agreement with CAFCO Idaho Refuse Management
LLC, Idaho (“CAFCO”). The Agreement falls under the Public Utility Regulatory Policies Act
of 1978 (PURPA), and is a contract for the sale of electric energy purchased by Idaho Power,
and generated by CAFCO’s Southern Idaho Regional Solid Waste District Landfill Gas to
Energy Project (“Facility”) near Burley, Idaho. Idaho Power asks that its Application be
processed by Modified Procedure.
BACKGROUND
Under PURPA, electric utilities must purchase electric energy from “qualifying
facilities” (QFs) at rates approved by this Commission. 16 U.S.C. § 824a-3; Idaho Power Co. v.
Idaho PUC, 155 Idaho 780, 789, 316 P.3d 1278, 1287 (2013). The purchase or “avoided cost”
rate shall not exceed the “‘incremental cost’ to the purchasing utility of power which, but for the
purchase of power from the QF, such utility would either generate itself or purchase from
another source.” Order No. 32697 at 7, citing Rosebud Enterprises v. Idaho PUC, 128 Idaho
624, 917 P.2d 781 (1996); 18 C.F.R. § 292.101(b)(6) (defining “avoided cost”).
The Commission has established two methods of calculating avoided cost, depending
on the size of the QF project: (1) the surrogate avoided resource (SAR) methodology, and (2)
the integrated resource plan (IRP) methodology. See Order No. 32697 at 7-8. The Commission
uses the SAR methodology – which applies to the Facility in this case – to establish “published”
avoided cost rates. Id. Published rates are available for wind and solar QFs with a design
DECISION MEMORANDUM 2
capacity of up to 100 kilowatts (kW), and for QFs of all other resource types with a design
capacity of up to 10 average megawatts (aMW). Id. In this case, the Facility is a QF under the
“all other resource type” category. Application at 3.
In calculating avoided cost, the Commission has found it “reasonable, appropriate and
in the public interest to compensate QFs separately based on a calculation of not only the energy
they produce, but the capacity that they can provide to the purchasing utility.” Order No. 32697
at 16. In calculating capacity, the Commission considers “each utility’s capacity deficiency
based on load and resource balances found in each utility’s [Integrated Resource Plan] IRP,” as
well as “a QF’s ability to contribute to a utility’s need for capacity.” Id. at 16, 21.
THE AGREEMENT
Idaho Power and CAFCO entered into their Agreement on March 13, 2017.
Application at 3. Under the Agreement’s terms, CAFCO elected to contract with Idaho Power
for a 20-year term using the non-levelized “other” published avoided cost rates, as established by
the Commission (Order No. 33538) for energy deliveries of less than 10 aMW. Id. Although the
nameplate rating of the Facility is 5 megawatts (MW), CAFCO agrees not to exceed 10 aMW on
a monthly basis. Id. at 4. If the Facility does exceed the monthly 10 aMW limit, CAFCO agrees
that “Idaho Power will accept the energy (Inadvertent Energy) that does not exceed the
Maximum Capacity Amount, but will not purchase or pay for this Inadvertent Energy.” Id.
CAFCO has agreed to October 1, 2018, as the Scheduled Operation date. Id. The
terms and provisions of the Agreement include that “applicable interconnection charges and
monthly operation and maintenance charges under Schedule 72 will be assessed to [CAFCO].”
Id. Also, PURPA QF generation “must be designated as a network resource (“DNR”) to serve
Idaho Power’s retail load on its system.” Id. To maintain DNR status, “there must be a power
purchase agreement associated with [the project’s] transmission service request that maintains
compliance with Idaho Power’s non-discriminatory administration of its Open Access
Transmission Tariff (OATT) and maintains compliance with [Federal Energy Regulatory
Commission] FERC requirements.” Id. at 4-5. The Agreement provides that it will not become
effective “until the Commission has approved all of [its] terms and conditions and declared that
all payments Idaho Power makes to CAFCO for purchases of energy will be allowed as
prudently incurred expenses for ratemaking purposes.” Id. at 5.

DECISION MEMORANDUM 3
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure with a 21-day
comment period, followed by a 7-day reply period for Idaho Power.
COMMISSION DECISION
Does the Commission wish to process this case under Modified Procedure with a 21-
day comment period followed by a 7-day reply period for Idaho Power?

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