20121025Comments.pdf

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PUC 2012 OCT25 P1 3:
ATTORNEYS AT LAW
IflAL4f pi
Peter Richardson - -
Tel: [phone] Fax: [phone]
[e-mail]
P.O. Box 7218 Boise, ID 83707 - 515 N. 27th St. Boise, ID 83702
October 25, 2012
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
P 0 Box 83720
Boise ID 83720-0074
RE: Case No. GNR-E-11-03
Dear Ms. Jewell:
Enclosed please find an original and (7) copies of the COMMENTS OF
CLEARWATER PAPER CORPORATION, EXERGY DEVELOPMENT GROUP OF
IDAHO AND J.R. SIPLOT COMPANY ON PARTIAL SETTLEMENT
STIPULATION in the above case.
An extra copy is also enclosed to be stamped & returned to our office.
Sincerely,
V)" OjAb
Nina Curtis
Administrative Assistant
end.
Peter J. Richardson R
Gregory M. Adams or'- pi 3: O
Richardson & O'Leary, PLLC L • L
515 N. 27th Street
P.O. Box 7218 JTtL1flSG3''
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
[e-mail]
greg(richardsonandolearv.com
Attorneys for Clearwater Paper Corporation
Exergy Development Group of Idaho, LLC
J. R. Simplot Company
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S )
REVIEW OF PURPA QF CONTRACT ) CASE NO. GNR-E-1 1-03
PROVISIONS INCLUDING THE )
SURROGATE AVOIDED RESOURCE ) COMMENTS OF CLEARWATER
PLANNING (IRP) METHODOLOGIES FOR ) PAPER CORPORATION, EXERGY
CALCULATING PUBLISHED AVOIDED ) DEVELOPMENT GROUP OF IDAHO
COST RATES ) AND J. R. SIMPLOT COMPANY ON
) PARTIAL SETTLEMENT
STIPULATION
Pursuant to Order No. 32665 of the Idaho Public Utilities Commission (the
"Commission"), Clearwater Paper Corporation, Exergy Development Group of Idaho, LLC and
the J. R. Simplot Company ("Intervenors") hereby provides the following Comments on that
Partial Settlement Stipulation ("Stipulation") filed with the Commission on October 2, 2012.
The Intervenors did not sign the Stipulation because it simply codifies the status quo.
The only true settlement issue that was resolved was the unremarkable and obvious concession
that EXISTING projects will not be required to post a delay security deposit. The intervenors
stand by the testimony of their expert witness, Dr. Reading, a copy of which is attached and
incorporated herein by this reference.
DATED this 25th day of October, 2012.
P,ejO 44ja~~
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY PLLC
Page 2— Comments on Stipulation - GNR-E-1 1-03
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 25 th day of October, 2012, a true and correct copy of
the within and foregoing COMMENTS OF CLEAR WATER PAPER CORPORATION,
EXERGY DEVELOPMENT GROUP OF IDAHO AND J R SIMPLOT COMPANY ON
PARTIAL SETTLEMENT STIPULATION was served as shown to
Jean D Jewell, Secretary XL. Hand Delivery
Idaho Public Utilities Commission U S Mail, postage pre-paid
472 West Washington - Facsimile
Boise, Idaho 83702 X Electronic Mail
[e-mail]
Donald Howell X Hand Delivery
Kris Sasser U S Mail, postage pre-paid
Idaho Public Utilities Commission - Facsimile
472 West Washington X Electronic Mail
Boise, Idaho 83702
donald howell@puc idaho gov
[e-mail]
Donovan E Walker - Hand Delivery
Jason B Williams —U .S. Mail, postage pre-paid
Idaho Power Company - Facsimile
P0 Box 70 X Electronic Mail
Boise, ID 83707-0070
dwalker@idahopower com
iwilhams@idahonower corn
Michael G Andrea - Hand Delivery
Avista Corporation —U .S. Mail, postage pre-paid
P.0. Box 3727 - Facsimile
Spokane, WA 99220 X Electronic Mail
michael.andrea@avistacorT).com
Electronic Copies Only Hand Delivery
Ken Kaufmann —U .S. Mail, postage pre-paid
Lovinger Kaufrnann LLP - Facsimile
825 NE Multnomah Ste 925 X Electronic Mail
Portland, OR 97232
Kaufmann@lklaw corn
Daniel Solander Hand Delivery
PacifiCorp/dba Rocky Mountain Power _U.S. Mail, postage pre-paid
201 S Main St Ste 2300 - Facsimile
Salt Lake City, UT 84111 X Electronic Mail
[e-mail]
Dean J. Miller - Hand Delivery
McDevitt & Miller, LLP _U.S. Mail, postage pre-paid
420 W. Bannock St. Facsimile
Boise, ID 83702 X Electronic Mail
[e-mail]
Liz Woodruff - Hand Delivery
Ken Miller _U.S. Mail, postage pre-paid
Snake River Alliance - Facsimile
P0 Box 1731 X Electronic Mail
Boise, ID 83701
lwoodruffsnakeriveralliance.org
kmillersnakerivera1liance.org
John R Lowe - Hand Delivery
Consultant _U.S. Mail, postage pre-paid
Renewable Energy Coalition - Facsimile
12050 SW Tremont St X Electronic Mail
Portland, OR 97225
jravenesanmarcosyahoo.com
R. Greg Ferney - Hand Delivery
Mimura Law Offices PLLC _U.S. Mail, postage pre-paid
Interconnect Solar Development, LLC Facsimile -
2176 E Franklin Rd Ste 120 X Electronic Mail
Meridian, ID 83642
[e-mail]
Bill Piske, Manager Hand Delivery
Interconnect Solar Development, LLC _U.S. Mail, postage pre-paid
1303 E. Carter - Facsimile
Boise, II) 83706 X Electronic Mail
[e-mail]
Ronald L. Williams - Hand Delivery
Williams Bradbury, PC U.S. Mail, postage pre-paid
1015 W. Hays Street - Facsimile
Boise, ID 83702 X Electronic Mail
[e-mail]
Wade Thomas - Hand Delivery
General Counsel _U.S. Mail, postage pre-paid
Dynamis Energy, LLC - Facsimile
776 W. Riverside Dr., Ste 15 X Electronic Mail
Eagle, ID 83616
[e-mail]
Shelley M. Davis - Hand Delivery
Barker Rosbolt & Simpson LLP _U.S. Mail, postage pre-paid
1010 W. Jefferson St (83 702) - Facsimile
P0 Box 2139 X Electronic Mail
Boise, ID 83701
[e-mail]
Brian Olmstead - Hand Delivery
General Manager _U.S. Mail, postage pre-paid
Twin Falls Canal Company - Facsimile
P0 Box 326 X Electronic Mail
Twin Falls, ID 83303
[e-mail]
Robert A. Paul Hand Delivery
Grand View Solar II _U.S. Mail, postage pre-paid
15690 Vista Circle Facsimile -
Desert Hot Springs, CA 92241 X Electronic Mail
[e-mail]
James Carkulis - Hand Delivery
Exergy Development Group of Idaho, LLC _U.S. Mail, postage pre-paid
802 W. Bannock, Ste 1200 Facsimile -
Boise, ID 83702 X Electronic Mail
jcarkulisexergvdeveloDment.com
Arron F. Jepson - Hand Delivery
Blue Ribbon Energy, LLC ._U.S. Mail, postage pre-paid
10660 South 540 East Facsimile -
Sandy, UT 84070 X Electronic Mail
[e-mail]
M.J. Humphries - Hand Delivery
Blue Ribbon Energy, LLC .U.S. Mail, postage pre-paid
4515 S. Ammon Rd. - Facsimile
Ammon, ID 83406 X Electronic Mail
blueribbonenergy@'mail.com
Ted Diehl - Hand Delivery
General Manager _U.S. Mail, postage pre-paid
North Side Canal Company - Facsimile
921 N. Lincoln St. X Electronic Mail
Jerome, ID 83338
[e-mail]
Bill Brown Hand Delivery
Adams County Board of Commissioners _U.S. Mail, postage pre-paid
P0 Box 48 - Facsimile
Council, IT 83612 X Electronic Mail
[e-mail]
Ted S. Sorenson, PE - Hand Delivery
Birch Poer Company _U.S. Mail, postage pre-paid
5203 South 1 1th East Facsimile -
Idaho Falls, ID 83404 X Electronic Mail
4Xä)tsorenson.net
Glenn Ikemoto - Hand Delivery
Margaret Rueger _U.S. Mail, postage pre-paid
Idaho Windfarms, LLC Facsimile
6762 Blair Avenue X Electronic Mail
Piedmont, CA 94611
[e-mail]
[e-mail]
Megan Walseth Decker Hand Delivery
Senior Staf Counsel _U.S. Mail, postage pre-paid
Renewable Northwest Project Facsimile -
917 SW Oak Street Ste 303 X Electronic Mall
Portland, OR 97205
[e-mail]
Benjamin J. Otto - Hand Delivery
Idaho Conservation League _U.S. Mail, postage pre-paid
710 N. Sixth Street (83702) Facsimile
P0 Box 844 X Electronic Mail
Boise, ID 83701
bottoidahoconservation.org
Robert D. Kahn - Hand Delivery
Executive Director _U.S. Mail, postage pre-paid
Northwest & Intermountain Power Producers Facsimile -
Coalition X Electronic Mail
1117 Minor Ave., Ste 300
Seattle, WA 98101
rkahn.nippc.org
Don Sturtevant - Hand Delivery
Energy Director _U.S. Mail, postage pre-paid
J.R. Simplot Company Facsimile -
P0 Box 27 X Electronic Mail
Boise, ID 83707-0027
[e-mail]
Mary Lewallen Hand Delivery
Clearwater Paper Corporation _U.S. Mail, postage pre-paid
601 W. Riverside Ave., Suite 1100 Facsimile -
Spokane, WA 99201 X Electronic Mail
[e-mail]
Tauna Christensen - Hand Delivery
Energy Integrity Project _U.S. Mail, postage pre-paid
769 N. 1100 E. Facsimile
Shelley, ID 83274 X Electronic Mail
taunaenergvintegrityproj ect. org
Deborah E. Nelson - Hand Delivery
Kelsey J. Nunez U.S. Mail, postage pre-paid
Givens Pursley LLP Facsimile -
601 W. Bannock Street X Electronic Mail
Boise, ID 83702
dengivenspursley.corn
[e-mail]
J. Kahle Becker - Hand Delivery
Mountain Air Projects, LLC _U.S. Mail, postage pre-paid
1020 W. Main St., Suite 400 Facsimile -
Boise, ID 83702 X Electronic Mail
kahle@,kahlebeckerlaw.com
Michael J. Uda Hand Delivery
Uda Law Firm, PC _U.S. Mail, postage pre-paid
7 West 6th Ave., Suite 4E - Facsimile
Helena, MT 59601 X Electronic Mail
[e-mail]
Dr. Don Reading - Hand Delivery
6070 Hill Road U.S. Mail, postage pre-paid
Boise, ID 83703 - Facsimile
dreading(mindspring.com j Electronic Mail
Nina M. Curtis
ATTACHMENT I
to
COMMENTS OF
CLEARWATER PAPER
CORPORATION, EXERGY
DEVELOPMENT GROUP
OF IDAHO AND J.R.
SIMPLOT COMPANY
GNR-E-1 1-03 - Attachment to Comments
1 allowed between approved 1RP's with the exception of natural gas prices based on EIA's annual
2 updates or from another publicly available third party source on a predetermined date The
3 single model run approach advocated by Idaho Power should be rejected, and the models should
4 instead be rim twice - once with the QF at zero cost and once without the QF QF projects
5 should be eligible for capacity payments for the full term of their contract with no deficit period
6 allowed, and a 20 year contract term should remain the standard which is discussed further
7 below.
8
9 PART 2 OTHER QF ISSUES
10 1 LIQUIDATED DAMAGES AND DELAY SECURITY
11 Q AV1STA COMPANY WITNESS CLINT KALICH STATES QF CONTRACTS
12 SHOULD CONTAIN A PROVISION WITH "MEANINGFUL" DELAY DEFAULT
13 LIQUIDATED DAMAGES IN HIS DIRECT TESTIMONY DO YOU HAVE ANY
14 COMMENTS ON HIS DISCUSSION ON PAGES 31 THROUGH 33'
15 A Yes In addition to my comments, I have also included discovery responses by Avista
16 addressing this issue as Exhibit 503 to my testimony. "Meaningful" of course is another term
17 that is in the eyes of the beholder. Mr. Kalich recommends the Commission authorize utilities to
18 require QFs to post a security deposit equivalent to $45 per kilowatt of nameplate capacity, and
19 allow the utility to terminate the contract and keep the $45 per kilowatt deposit if the actual on
Reading DI
Clearwater, Simplot, Exergy
-36
ATTACHMENT 1 COMMENTS (GNR E 11 03)
1 line date is more than 180 days beyond that stated in the conlract.31 The rationale for the 180
2 day termination condition is the Company fears a developer may simply hold off bringing the
3 project on line if prices are falling and waiting for prices to hopefully increase. Mr. Kalich
4 supports the security provision because it creates a meaningful deterrent to delay in achieving the
5 proposed on line date. There are two major issues with what Avasta (or any other utility) is
6 proposing for liquidated damages for a QF.
7 Q. WHAT IS THE FIRST ISSUE?
8 A. The first issue is that no Idaho utility has provided the Commission with any analysis on
9 a utility's likely actual damages in the event that a PURPA project either did not come on line at
10 the stated contract date or fulled to come on line completely. Instead, the $45 per kilowatt delay
11 security amount appears to be an amount that the utilities have decided will provide adequate
12 deterrent to a breach. Avista simply conducted a survey of what other utilities have been We to
13 demand as a delay security in PPAs with independent power developers and states it has not
14 estimated the likely costs to Avista or any other utility should a QF defuult.2 This is out of line
15 with Commission orders, which I presume are based upon the Commission's understanding of
16 Idaho contact law.
17 With regard to a recent contract containing a delay liquidated damage security, the
18 Commission stated "the Commission is concerned that such provisions will have a potentially
19 deleterious effect upon future PURPA projects. Quite often, operators of qualified small power
Direct Testimony of Avista Witness Clint Kalich, GNR-E-11-03, pp. 32-33.
Avista Response to Clearwater Paper's Production Request Nos. 11, 13, and 14, contained in Exhibit 503.
Reading DI
Clearwater, Simplot, Exergy
-37
ATTACHMENT 1 - COMMENTS (GNR.E-11-03)
I production facilities do not have ready access to the necessary amount of security or capital
2 delineated in this Agreement The Commission declared -
3 Therefore, the Commission finds that such provisions calling for delay security
4 should not be punitive in nature Rather, the amount of delay security ultimately provided
5 in this case, as well as future energy sales agreements with other PURPA suppliers,
6 should constitute a fair and reasonable offset of a regulated utility's estimated increase in
7 power supply costs attributable to the PURPA supplier's failure to meet its contractually
8 scheduled operation date
9
10 In other words, a liquidated damages provision should not operate merely as a one-way penalty
11 to deter one party from breaching the agreement It should not be derived from a canvassing of
12 terms required by other utility purchasers because the traditional utility market is essentially a
13 monopsony market with only very limited number of purchasers in the region of any independent
14 power project Standard terms in such a monopsony market place should not be assumed to be
15 fair. Instead, the liquidated damage provision should be an actual estimate of the likely damages
16 the non-breaching party (here, the utility) would mcur. The intent should be to keep the utility
17 and its customer's whole in the event of a default Otherwise, the provision is simply a penalty
18 provision unilaterally imposed by the party with superior bargaining strength Avista has
19 admitted that it has made no effort to approximate its likely actual damages in the event of a QF
20 delay default.-"
21 Q HOW WOULD YOU ESTIMATE A UTILITY'S ACTUAL DAMAGES IN THE
IPUC Order No 30608, p 3 Case No IPC-E-08-09 (2008)
.ld.,p.4.
AVIStá Response to Clearwater Paper's Production Request No. 13, contained in Exhibit 503.
Reading DI
Clearwater, Simplot, Exergy
-38
ATTACHMENT 1 COMMENTS (GNR E 11 03)
1 EVENT OF A QF'S DELAY DEFAULT?
2 A. One easy way to estimate a purchasing utility's actual damages in the event of a QF delay
3 default is to require the QF to pay the difference between the rate the utility would pay in the QF
4 contract and the actual cost for replacement power during the period the QF's delay default
5 forces the utility to secure replacement power. The replacement price would include the cost at
6 the relevant market hub plus the necessary transmission and administrative costs to secure that
7 replacement power. The period during which the utility would need to secure replacement
8 power should not last for the entire term of the power purchase agreement, which could be up to
9 twenty years, because the utility could obviously make alterative arrangements to meet its load
10 needs prior to the expiration of the 20-year contract term. The period during which the
11 breaching QF should be liable should be limited to a reasonable amount of time for the utility to
12 make alternative long-term arrangements to secure that amount of power. I understand that
13 Idaho QF power purchase agreements have in the past contained provisions tied to the
14 replacement price of electricity and capacity. The market price for replacement power in the
15 event of a QF default is quite low at the present time, and $45 per kilowatt is an excessive
16 amount for a QF to automatically forfeit in the event of a delay. For example, at $45 per
17 kilowatt, a 10 MW QF must provide $450,000 to the utility at the time the contract is approved.
18 Under Mr. Kalich's proposal, the utility would receive $450,000 for a 180y delay in a QF's
19 achievement of its committed on line date. This appears far in excess of the utility's actual cost
20 for replacement power at the present time.
Reading DI
Clearwater, Simplot, Exergy
-39
ATTACHMENT 1 - COMMENTS (GNR-E-11-03)
I It is only in the last few years that the utilities began unilaterally imposing the $45 per
2 kilowatt delay security liquidated damages provision for QF contracts Although I am aware of
3 complaint cases where QF8 have alleged that a $45 per kilowatt delay damage provision is
4 unfair, I am not aware of any QFs having fully litigating such a complaint at the Commission
5 The Commission should not consider the absence of a fully litigated challenge to be
6 representative of a belief that these clauses are a fair estimation of the utility's actual damages, as
7 required by the Commission order cited above. Even for a QF with the financial resources to
8 litigate the legality of the clause, a delay caused by filing a complaint at the Commission could
9 compromise the viability of the entire project because the timing of tax credits, financing and
10 equipment supplies are critical in development of a generation project
11 Mr. Kalich even recommends requiring the $45 per kilowatt security amount be provided
12 by the QF simply to exercise the QF's right to create a legally enforceable obligation, i.e. a
13 binding contract that would lock in the fixed avoided cost rates Many QFs cannot secure
14 financing and access to such large amounts of money until after the PPA is signed and approved
15 by the Commission Thus, Mr. Kalich's proposal would create a timing problem for many QFs,
16 and would obviously be a substantial hurdle for all but the most well-funded QFs
17 For all of these reasons, if such a requirement is to be authorized by the Commission, it
18 should not be based on a flawed method of calculating the utility's actual damages, so as to
19 unnecessarily deter otherwise viable QF projects. The Commission should take the opportunity
SeeiPlJCCaseNos.IPCE-lO29 and -30 PAC-E-10-05.
Reading DI
Clearwater, Simplot, Exergy
-40
ATTACHMENT 1 COMMENTS (GNR E 11 03)
I in this case to require the utilities to tie the delay default provision to a utility's actual damages.,
2 Q. WHAT IS THE SECOND ISSUE YOU WOULD LIKE TO MENTION WITH
3 DELAY SECURITY AND LIQUIDATED DAMAGES PROVISIONS?
4 A. Mr. Kalich notes in his testimony that the Company wants to "ensure a level playing
5 field" between the QF and the utility. 37 A true level playing field would be where the utility-
6 owned plants must be held to the same standard and issue rate payer refunds when their own
7 plants experience failures or delays. A good example is Avista's Reardan wind project that was
8 in the utility's Preferred Resource Strategy in its 2009 IRP. It was slated to come on line in 2010
9 or 2011, but now is not scheduled until 2014 or beyond. This is not to say that Avista
10 necessarily acted irrationally to replace this project with the Palouse wind RFP. I simply intend
11 to point out that utilities regularly incur expenditures for generation plants that either never come
12 on line or are delayed. If there are real costs to a utility and its customers that warrant a delay
13 default provision in a QF PPA, then there should likewise be compensation to the utility's
14 customers for a similar delay occurring at a utility-owned generation project. Avista's proposal
15 provides for unfair treatment to QFs and deprives the utilities' customers of a comparable market
16 check to the utilities' proposals to build their own generation resources.
17 Q. IS THERE ANYTHING ELSE THAT WOULD LEVEL THE PLAYING FIELD?
18 A. Yes, Mr. Kalich proposes only a provision that would address a default by the QF. But
19 there is the possibility that the QF could be harmed by a utility under certain circumstances, and
Direct Testimony of Avista Witness Clint Kalich, GNR-E-1 1-03, p. 33.
Reading DI
Clearwater, Simplot, Exergy
-41
ATTACHMENT 1 - COMMENTS (GNR-E-11-03)
I therefore QF contracts should provide for compensation to the QF in the event of a utility
2 default. For example, a delay in achieving an on line date could occur solely because the utility
3 failed to complete interconnection construction as scheduled. The QF could be damaged by such
4 a delay because it could delay the project's schedule and the time by which the project would
5 start generating revenue. Such a delay by the utility in completing interconnection should not
6 result, in the QF being in default on its power purchase agreement. Another potential cause of
7 damage to a QF is if the utility experiences a disruption on its system that requires curtailment of
8 the QF for a lengthy period of time. The QF should be compensated for the lost revenue and

• 9 other damages it might incur by the unscheduled outage. Further, as I will discuss below, Idaho

• 10 Power's proposed Schedule 74 curtailment provision would allow Idaho Power to curtail QFs
11 under certain circumstances. But Idaho Power's provision provides no express remedy to QFs if
12 Idaho Power implements the curtailment at an inappropriate time or in a manner that harms the

• 13 QF.
14 If Idaho QF PPAs will include damage provisions, they should address the possible
• 15 damages to the QFs also, not just the potential damages to the utilities.
• 16 II. AVISTA'S PROPOSAL THAT QFs MUST ACHIEVE ON LINE STATUS
17 WITHIN 2 YEARS TO OBTAIN FIXED RATES.
18 Q. DO YOU HAVE ANY COMMENTS ON AVISTA COMPANY WITNESS
19 KALICH'S RECOMMENDATION THAT QF CONTRACTS NOT BE SIGNED
20 EARLIER THAN FIVE YEARS BEFORE COMMERCIAL OPERATION AND THAT.
• Reading DI
• Clearwater, Simplot, Exergy
-42
ATTACHMENT 1 - COMMENTS (GNR-E-1 1-03)