20110307_3269.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

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

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: FEBRUARY 28, 2011

SUBJECT: IDAHO POWER’S APPLICATION FOR A DETERMINATION REGARDING A
POWER PURCHASE AGREEMENT WITH WESTERN DESERT ENERGY,
CASE NO. IPC-E-11-01

On February 2, 2011, Idaho Power Company filed an Application requesting acceptance or
rejection of a 20-year Firm Energy Sales Agreement (Agreement) between Idaho Power and Western
Desert Energy, LLC. The project (Facility) is located near Oreana, Idaho. The project will be a
“qualifying facility” (QF) under the applicable provisions of the federal PURPA.
THE AGREEMENT
On January 28, 2011, Idaho Power and Western Desert entered into an Agreement wherein
Western Desert proposes to design, construct, install, own, operate, and maintain a 5 MW (maximum
capacity) wind generating Facility. Under the terms of the Agreement, the Facility agrees to sell
electric energy to Idaho Power for a 20-year term using the current non-levelized published avoided
cost rates as currently established by the Commission in Order No. 31025 for energy deliveries of less
than 10 aMW. Application at 4. Under normal and/or average conditions, the Facility will not exceed
10 aMW on a monthly basis. Idaho Power warrants that the Agreement comports with the terms and
conditions of the various Commission Orders applicable to PURPA agreements for wind resources.
Order Nos. 30415, 30488, 30738 and 31025.
The Facility has selected September 1, 2012, as its Scheduled First Energy Date and
December 1, 2012, as its Scheduled Operation Date. Applications at 5. Idaho Power asserts that
various requirements have been placed upon the Facility in order for Idaho Power to accept the
Facility’s energy deliveries. Idaho Power states that it will monitor the Facility’s compliance with
initial and ongoing requirements through the term of the Agreement. Idaho Power asserts that the
Facility has been advised that delays in the interconnection or transmission process do not constitute
DECISION MEMORANDUM 2
excusable delays and if the Facility fails to achieve its Scheduled Operation Date delay damages will
be assessed. Id. at 6. The parties have agreed to liquidated damage and security provisions of $45 per
kW of nameplate capacity. Agreement, ¶¶ 5.3.2, 5.8.1.
By its own terms, the Agreement will not become effective until the Commission has
approved all of the terms and conditions and declares that all payments made by Idaho Power to the
Facility for purchases of energy will be allowed as prudently incurred expenses for ratemaking
purposes. Agreement ¶ 21.1.
Idaho Power’s Application specifically notes the Joint Petition it filed with the Commission
on November 5, 2010, requesting an immediate reduction in the published avoided cost rate eligibility
cap from 10 aMW to 100 kW. Application at 2. Idaho Power states that it is aware of and in
compliance with its ongoing obligation under federal law, FERC regulations, and Idaho Public Utilities
Commission Orders to enter into power purchase agreements with PURPA QFs. Id. at 3. However,
Idaho Power asserts that the Commission has specifically directed the utility “to assist the Commission
in its gatekeeper role of assuring that utility customers are not being asked to pay more than the
Company’s avoided cost for [its] QF contracts.” Id. Idaho Power further states that “the continuing
and unchecked requirement for the Company to acquire additional intermittent and other QF
generation regardless of its need for additional energy or capacity on its system not only circumvents
the Integrated Resource Planning process and creates system reliability and operational issues, but it
also increases the price its customers must pay for their energy needs.” Id. at 4.
Idaho Power requests that its Application be processed by Modified Procedure pursuant to
Commission Rules of Procedure 201-204. IDAPA 31.01.01.201-.204.
STAFF RECOMMENDATION
Staff recommends that the Application be processed by Modified Procedure with a
comment deadline of April 7, 2011.
COMMISSION DECISION
Does the Commission agree with the recommendation that the Power Purchase Agreement
be processed under Modified Procedure with a comment deadline of April 7, 2011?

Kristine A. Sasser
Deputy Attorney General