20121025Comments.pdf

KRIST1NE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
RE L.
In OCT 25 p;
IDAHu -
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S
REVIEW OF PURPA QF CONTRACT
PROVISIONS INCLUDING THE SURROGATE
AVOIDED RESOURCE (SAR) AND
INTEGRATED RESOURCE PLANNING (IRP)
METHODOLOGIES FOR CALCULATING
PUBLISHED AVOIDED COST RATES.
CASE NO. GNR-E-11-03
COMMENTS IN SUPPORT OF
PARTIAL SETTLEMENT
STIPULATION
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Partial Settlement Stipulation and Request for Comment issued in Order No. 32665 on October
16, 2012, in Case No. GNR-E-11-3, submits the following comments.
BACKGROUND
On August 15, 2012, the Commission issued a Notice scheduling a settlement conference
in this case for parties to discuss two issues: (1) light load curtailment as proposed by Idaho
Power Company in its Schedule No. 74 or an alternative process; and (2) power purchase
agreement (PPA) terms related to delay security or liquidated damages. Order No. 32617. The
participating parties met in settlement conferences on August 23, and September 7, 2012.
COMMENTS IN SUPPORT OF
PARTIAL SETTLEMENT STIPULATION 1 OCTOBER 25, 2012
Negotiations regarding curtailment were not fruitful. However, on October 2, 2012, a
"Partial Settlement Stipulation" was filed on behalf of 13 parties in the case that generally
addresses the issue of performance security, delay damages, and termination damages in PURPA
contracts. The signing parties agreed the Partial Settlement Stipulation represents a compromise
of the positions of the parties.
STAFF ANALYSIS
The signing parties agreed to settle the issues discussed below. The signing parties also
agreed that all new PPAs approved after the date of the Partial Settlement Stipulation shall
conform to the terms of the Stipulation.
Security Deposit
The parties agree that a security deposit or performance bond will be required for each
new PURPA agreement. The purpose of the security deposit is to provide security for
performance by the Qualifying Facility ("QF") under the PPA and provide an upfront source of
liquid funds that can be used to pay the following damages in the event they are incurred:
1)Delay damages during the 120-day cure period if the QF is not in commercial operation
by the scheduled commercial operation date set out in the PPA; and
2)Termination damages if the QF cannot cure a failure to achieve commercial operation
and a party seeks termination of the PPA.
The need for security deposits first became apparent when some QFs defaulted on their
PPAs and the utilities alleged that damages had been incurred. Instances arose wherein the QF
had few or no liquid assets, thus, they had no real ability to pay damages to the utilities. A
requirement that QFs post security helps ensure that the QF will perform and that funds will be
available to cover damages should they arise. As discussed below, if commercial operation is
achieved per the PPA, the deposit is to be returned to the QF.
Security deposits have been negotiated and included in nearly all PURPA agreements
signed since 2009, although the Commission has never formally adopted specific requirements for
them. Consistent inclusion of certain terms, conditions and deposit amounts in recent PURPA
COMMENTS IN SUPPORT OF
PARTIAL SETTLEMENT STIPULATION 2 OCTOBER 25, 2012
contracts, particularly by Idaho Power, has tended to make them fairly standard. Formal adoption
of standard terms, conditions and deposit amounts by the Commission, however, will help to
ensure consistency and eliminate disputes.
The terms of the Partial Settlement require that the security deposit be set at $45 per
kilowatt (kW) of nameplate capacity for each new PPA. This is the same amount that has been
included in contracts since January of 2010. Under the terms of the Settlement, the cash or other
liquid security deposit will be forwarded to the utility no later than thirty days after the
Commission issues its final Order approving the PPA.
Staff believes that a requirement for a security deposit is essential in order to adequately
protect the utility and its ratepayers from default by a QF. Staff also believes that $45 per kW is
not onerous to the QF, and is instead a reasonable deposit amount that would likely cover most, if
not all delay and/or termination damages.
If the QF achieves commercial operation in accordance with the scheduled commercial
operation date set out in the PPA, under the terms of the Partial Settlement, the utility must
promptly refund the security deposit to the QF. In addition, if there is a delay and a cure within
the cure period, the undisputed portion of the deposit will be returned to the QF. Staff believes
the security deposit is reasonable because it maintains the QFs financial commitment to perform,
but only for as long as necessary.
The parties agree that a security deposit shall not be required in situations where an
existing QF project already in commercial operation is simply signing a new PPA, so long as the
new PPA is between the same parties and there are no material changes or modifications to the
existing QF project.
Delay Damages
Whenever a QF fails to achieve commercial operation by the scheduled commercial
operation date contained in the PPA, utilities will sometimes incur delay damages. Determination
of the exact amount of those damages has frequently led to disputes in the past. The Partial
Settlement will help to alleviate disputes by specifying the manner in which delay damages will
be calculated.
Under the terms of the Partial Settlement, delay damages shall be calculated based upon
the difference between market rates at the time the QF fails to achieve its scheduled commercial
COMMENTS IN SUPPORT OF
PARTIAL SETTLEMENT STIPULATION 3 OCTOBER 25, 2012
operation date and the avoided cost rates contained in the PPA during the cure period. The cure
period is now specified as a standard 120 days from the scheduled operation date during which
the defaulting party is permitted to cure its default.
Delay damages, if any, during the cure period will be drawn from the security deposit held
by the utility. If the security deposit is insufficient to defray all of the delay damages, then the QF
will promptly pay the outstanding delay damages. If the QF achieves commercial operation
during the cure period, any undisputed or remaining security deposit beyond the amount of any
delay damages shall be refunded to the QF.
Staff believes it is reasonable to base calculation of delay damages on the difference
between market rates and the contract rates. This approach fairly assesses the amount of the
damages and holds the QF responsible for the full amount of actual damages without imposing a
penalty. The security deposit helps ensure that funds are available to pay the damages, yet does
not limit the amount of damages that may be claimed by the utility.
Termination Damages
Termination damages are damages that could be alleged to extend beyond the delay period
and the cure period. Under the terms of the Partial Settlement, if a default occurs and the contract
is terminated, the utility is required to communicate its notice of default and claim for any
termination damages to the QF within a reasonable period of time. The QF must then respond
within 15 days. The Partial Settlement does not specify exactly how termination damages shall
be calculated, however, in the event of a dispute regarding the calculation of termination
damages, either party may resort to a court of competent jurisdiction.
Because termination damages are exceedingly difficult to quantify in advance, and
because they depend on the circumstances of each individual case, Staff believes it is appropriate
to leave determination of the damages to negotiation between the parties or to a court if there is a
dispute. Allowing the courts, in lieu of the Commission, to decide termination damages provides
a neutral forum for both parties.
Payment for Damages
If the QF fails to achieve commercial operation within the cure period, then the utility may
collect delay damages, terminate the agreement, and calculate termination damages, if any. If the
COMMENTS IN SUPPORT OF
PARTIAL SETTLEMENT STIPULATION 4 OCTOBER 25, 2012
utility elects to terminate the agreement, the security deposit may be used to first pay the delay
damages, then to pay termination damages, if any, arising after the cure period for the remaining
term of the agreement. In the event that the security deposit is insufficient to pay the undisputed
damages, such undisputed damages will be paid promptly by the defaulting party. If the security
deposit exceeds the total amount claimed as delay damages or termination damages, the utility
shall promptly refund any portion of the deposit that is in excess of the claimed delay damages or
termination damages. Staff supports this approach and believes it is fair to both the QFs and the
utilities. Calculating delay damages based on actual damages eliminates an argument that the
previous liquidated damages (now security deposit or performance bond) were punitive and
unreasonable.
As a result of the settlement discussions, 13 of the 25 parties that participated in the
settlement conference signed the Partial Settlement Stipulation. The table below shows those
parties who signed the Partial Settlement Stipulation, and those parties who chose not to sign the
Stipulation but who participated in one of more of the settlement conferences. Two intervenors in
the case, Interconnect Solar Development, LLC and the Energy Integrity Project, declined to
participate in either of the settlement conferences; thus, they also did not sign the Partial
Settlement Stipulation.
Parties in Support of the Stipulation
PacifiCorp dba Rocky Mountain Power
Commission Staff
Snake River Alliance
Idaho Conservation League
Idaho Wind Partners I, LLC
North Side Canal Co.
Twin Falls Canal Co.
Big Wood Canal Co.
American Falls Reservoir Dist. No. 2
Renewable Energy Coalition
Dynamis Energy, LLC
Ridgeline Energy, LLC
Birch Power Company (Ted Sorenson)
Parties Not Signing the Stipulation
Idaho Power Company
Avista Corporation
Renewable Northwest Project
Exergy Development Group of Idaho, LLC
Clearwater Paper Corporation
Blue Ribbon Energy, LLC
Mountain Air Projects, LLC
Adams County Board of Commissioners
Grand View Solar II
Idaho Windfarms
J.R. Simplot Co.
Northwest and Intermountain Power Producers
Coalition
The signing parties agreed that existing PPAs that have been approved by the Commission
shall not be affected by the Partial Settlement Stipulation.
COMMENTS IN SUPPORT OF
PARTIAL SETTLEMENT STIPULATION 5 OCTOBER 25, 2012
STAFF RECOMMENDATION
Staff believes that the proposed Partial Settlement Stipulation resolving disputed issues in
this case and agreed to by many of the parties participating in the settlement process is in the
public interest, is just and reasonable and should be approved by the Commission without
condition or modification.
1 Dated at Boise, Idaho, this 26 day of October 2012.
Kri inc A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i :umisc:eomments/gnre II 3ksrps stipulation comments.doc
COMMENTS IN SUPPORT OF
PARTIAL SETTLEMENT STIPULATION 6 OCTOBER 25, 2012
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 25TH DAY OF OCTOBER 2012,
SERVED THE FOREGOING COMMENTS IN SUPPORT OF PARTIAL SETTLEMENT
STIPULATION, IN CASE NO. GNR-E- 11-03, BY E-MAILING A COPY THEREOF TO
THE FOLLOWING:
DONOVAN E WALKER
JASON B WILLIAMS
IDAHO POWER COMPANY
P0 BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
jwilliamsidahopower.com
MICHAEL G ANDREA
AVISTA CORPORATION
1411 EMISSION AVE
SPOKANE WA 99202
E-mail: [e-mail]
ROBERT D KAHN
NW & INTERMOUNTAIN POWER
PRODUCERS COALITION
1117 MINOR AVE STE 300
SEATTLE WA 98101
E-mail: rkahnnippc.org
ROBERT A PAUL
GRAND VIEW SOLAR II
15690 VISTA CIRCLE
DESERT HOT SPRINGS CA 92241
E-mail: robertpau108gmail.com
ELECTRONIC SERVICE ONLY:
DR. DON READING
E-mail: dreadingmindspring.com
MARV LEWALLEN
CLEAR WATER PAPER CORP
601 W RIVERSIDE AVE STE 1100
SPOKANE WA 99201
E-mail: [e-mail]
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
201 S MAIN STSTE2300
SALT LAKE CITY UT 84111
E-mail: [e-mail]
PETER J RICHARDSON
GREGORY M ADAMS
RICHARDSON & O'LEARY
515 N 27TH STREET
BOISE ID 83702
E-mail: [e-mail]
[e-mail]
DON STURTEVANT
ENERGY DIRECTOR
J R SIMPLOT COMPANY
P0 BOX 27
BOISE ID 83707-0027
E-mail: [e-mail]
JAMES CARKULIS
EXERGY DEVELOPMENT GROUP OF
IDAHO LLC
802 W BANNOCK ST STE 1200
BOISE ID 83702
E-mail: [e-mail]
BILL BROWN CHAIR
BOARD OF COMMISSIONERS
OF ADAMS COUNTY ID
P0 BOX 48
COUNCIL ID 83612
E-mail: [e-mail]
TED S SORENSON P E
BIRCH POWER COMPANY
5203 SOUTH I I TH EAST
IDAHO FALLS ID 83404
E-mail: [e-mail]
CERTIFICATE OF SERVICE
R GREG FERNEY BILL PISKE MGR
MIMURA LAW OFFICES PLLC INTERCONNECT SOLAR DEVELOPMENT LLC
2176 E FRANKLIN RD STE 120 1303 E CARTER
MERIDIAN ID 83642 BOISE ID 83706
E-mail: gregmimuralaw.com E-mail: [e-mail]
RONALD L WILLIAMS WADE THOMAS
WILLIAMS BRADBURY DYNAMIS ENERGY LLC
1015 W HAYS ST 776 E RIVERSIDE DR STE 15
BOISE ID 83702 EAGLE ID 83616
E-mail: [e-mail] E-mail: [e-mail]
JOHN R LOWE LIZ WOODRUFF
RENEWABLE ENERGY COALITION KEN MILLER
12050 SW TREMONT ST SNAKE RIVER ALLIANCE
PORTLAND OR 97225 BOX 1731
E-mail: jravensanmarcosyahoo.com BOISE ID 83701
E-mail: lwoodruffsnakeriveralliance.org
[e-mail]
C THOMAS ARKOOSH ELECTRONIC SERVICE ONLY:
CAPITOL LAW GROUP PLLC
205 N 10TH ST 4TH FL BRIAN OLMSTEAD
P0 BOX 2598 GENERAL MANAGER
BOISE ID 83701 E-mail: [e-mail]
E-mail: tarkooshcapito1lawgroup.com
TED DIEHL
GENERAL MANAGER
E-mail: [e-mail]
DON SCHOENBECK
RCS
E-mail: [e-mail]
LORI THOMAS
CAPITOL LAW GROUP PLLC
E-mail: [e-mail]
M J HUMPHRIES ARRON F JEPSON
BLUE RIBBON ENERGY LLC BLUE RIBBON ENERGY LLC
3470 RICH LANE 10660 SOUTH 540 EAST
AMMON ID 83406 SANDY UT 84070
E-mail: [e-mail] E-mail: [e-mail]
DEAN J MILLER MEGAN WALSETH DECKER
CHAS McDEVITT SR STAFF COUNSEL
McDEVITT & MILLER LLP RENEWABLE NW PROJECT
P0 BOX 2564 421 SW 6TH AVE STE 1125
BOISE ID 83701 PORTLAND OR 97204
E-mail: [e-mail] E-mail: [e-mail]
[e-mail]
CERTIFICATE OF SERVICE
GLENN IKEMOTO
MARGARET RUEGER
IDAHO WINDFARMS LLC
672 BLAIR AVE
PIEDMONT CA 94611
E-mail: glennienvisionwind.com
margaret(2envisionwind.com
TAUNA CHRISTENSEN
ENERGY INTEGRITY PROJECT
769N 1100E
SHELLEY ID 83274
E-mail: tauna(ienergyinterityproject.org
BENJAMIN J OTTO
IDAHO CONSERVATION LEAGUE
P0 BOX 844
BOISE ID 83702
DEBORAH E NELSON
KELSEY J NUNEZ
GIVENS PURSLEY
601 W BANNOCK ST (83702)
P0 BOX 2720
BOISE ID 83701-2720
E-mail: dengivenspursley.com
kin(givenspursley.coni
.v
SECRETARY
CERTIFICATE OF SERVICE