20120720Legal Brief.pdf

RECEIVED
Deborah E. Nelson, ISB #5711
GIVENS PURSLEY LLP
601 W. Bannock St.
Post Office Box 2720
Boise, Idaho 83701-2720
Telephone: [phone]
Facsimile: 208-388-1300
11067-6151296412
Attorneys for Idaho Wind Partners 1, LLC
2012 JUL 20 PM 3: 57
DAFO PUBLIC
UTftT!ES COMASSON
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-1 1-03
LEGAL BRIEF OF IDAHO WIND
PARTNERS 1, LLC
I. Introduction
Intervenor Idaho Wind Partners 1, LLC ("IWP"), on behalf of its wholly-owned
subsidiary project companies,' respectfully submits this legal briefing to the Idaho Public
Utilities Commission ("Commission") to address concerns with the proposed Schedule 74. If
approved, Schedule 74 would allow Idaho Power Company ("Idaho Power") to unilaterally
curtail its purchases from qualifying facilities ("QFs"), even those with existing fixed-rate
contracts, during light loading periods "if, due to operational circumstances purchases from the
1 Thousand Springs Wind Park, LLC; Tuana Gulch Wind Park, LLC; Oregon Trail Wind Park,
LLC; Payne's Ferry Wind Park, LLC; Camp Reed Wind Park, LLC; Yahoo Creek Wind Park, LLC;
Salmon Falls Wind Park, LLC; Pilgrim Stage Station Wind Park, LLC; Burley Butte Wind Park, LLC;
Milner Dam Wind Park, LLC; Golden Valley Wind Park, LLC (collectively, the "IWP Projects").
U
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Applicable QF would require the Company to dispatch higher cost, less efficient resources to
serve system load. ,2
Each of the IWP Projects owns wind generation facilities that have been self-certified as
QFs. Each of the IWP Projects also has a power sales agreement with Idaho Power for the sale
of all net energy at fixed avoided cost rates for a twenty-year fixed term ("IWP PPAs").3 The
IWP PPAs were executed in 2005 and 2009, and each PPA was approved by the Commission
and reflects the Commission orders in effect at that time.4
Neither the IWP PPAs nor the related Generator Interconnection Agreements ("GIAs")5
include provisions allowing Idaho Power to curtail the projects based on the circumstances in the
proposed Schedule 74•6 Rather, these agreements set forth very narrow circumstances for
curtailment based on reliability issues, emergency conditions, or specific transmission
constraints.7
2 Schedule 74, Exhibit No. 5 to Direct Testimony of Tessia Park (Jan. 31, 2012) ("Park Direct
Testimony").
Exhibits 2102-2112 submitted with the Direct Testimony of Richard Guy on behalf of Idaho
Wind Partners 1, LLC (May 21, 2012) ("Guy Direct Testimony").
Eight of the IWP Projects have PPAs approved by the Commission in 2005; three of the IWP
Projects have PPAs approved by the Commission in 2009. See Order Nos. 29813 (July 1, 2005)
(approving the May 5, 2005 Burley Butte Wind Park Project PPA); 30924 (Oct. 8, 2009) (approving the
July 9, 2009 Camp Reed Wind Park Project PPA); 29814 (July 1, 2005) (approving the May 5, 2005
Golden Valley Wind Park Project PPA); 29948 (Jan. 10, 2006) (approving the Oct. 14, 2005 Milner Dam
Wind Park Project PPA); 29772 (Apr. 25, 2005) (approving the Feb. 18, 2005 Oregon Trail Wind Park
Project PPA); 30926 (Oct. 8, 2009) (approving the July 9, 2009 Payne's Ferry Wind Park Project PPA),
29951 (Jan. 10, 2006) (approving the Oct. 14, 2005 Salmon Falls Wind Park Project PPA); 29770 (Apr.
25, 2005) (approving the Feb. 18, 2005 Thousand Springs Wing Park Project PPA); 29773 (Apr. 25,
2005) (approving the Feb. 18, 2005 Tuana Gulch Wind Park Project PPA); and 30925 (Oct. 8, 2009)
(approving the July 9, 2009 Yahoo Creek Wind Park Project PPA).
Exhibits 2113-2118 submitted with Guy Direct Testimony.
6 See Park Direct Testimony at 15 (explaining that Schedule 74 would allow curtailment that is not
contemplated by existing Schedule 72 and existing firm energy sales agreements with QFs).
IWP's agreement to be subject to curtailment through the use of Generator Output Limiting
Controls ("GOLCs") was expressly limited to defined circumstances, which did not include those
contemplated by Schedule 74. See Attachments 4 and 5 of the GIAs. The language in the GIAs setting
forth the limited use of GOLCs was the result of the Cassia Gulch settlement and order, in which the
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In this docket, Idaho Power and Commission Staff have taken the position that,
notwithstanding the explicit provisions of the PPAs, Schedule 74 is authorized by Section
292.304(f) ("Section 304(f)")8 of the Federal Energy Regulatory Commission's ("FERC")
regulations implementing the Public Utility Regulatory Policies Act of 1978, as amended
("PURPA").9 However, FERC's regulations and orders make clear that Section 304(f) does not
allow Idaho Power to unilaterally stop buying energy from QF holders of fixed-rate contracts.
This is the case as a matter of law, regardless of any factual determinations of (1) whether
operational circumstances that trigger the applicability of Section 304(f) actually exist and (2)
whether the QF' s avoided cost rates already take into account such circumstances. Because it is
contrary to FERC's regulations, any Commission order allowing the proposed curtailment of
fixed-rate contracts is preempted by federal law.
If approved, Schedule 74 would have significant economic consequences for IWP and
similarly situated QFs and, further, would discourage investment in regulated and other
industries in Idaho by undermining the certainty of contracts. IWP requests the Commission to
decline to approve the proposed Schedule 74.
IL Because it is contrary to FERC's regulations, as a matter of law, the Commission
may not allow a utility to curtail fixed-rate QFs as contemplated by Schedule 74.
a. QFs may opt for fixed-rate contracts.
Under FERC's regulations promulgated pursuant to PURPA, electric utilities must
purchase all energy and capacity that is made available to them by a QF.'° QFs may choose to
Commissi4n explained: "Idaho Power will call for a Cassia Redispatch only when necessary to respond to
system emergencies or when identified transmission lines are out of service."
8 18 C.F.R. § 292.304(f) (2012).
lU.S.C. § 824a-3 (2012).
10 1 C.F.R. § 292.303(a) (2012). An electric utility may make an application with FERC to be
exempted from its obligation to purchase from QFs under certain circumstances, but Idaho Power has not
filed for or received such an exemption. Id. § § 292.309-292.3 10.
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sell that energy and/or capacity to the utility either (1) where the avoided costs are calculated at
the time of delivery or (2) where the avoided costs are calculated at the time the legally
enforceable obligation for the delivery of energy or capacity over a specified term is incurred.11
The IWP PPAs are the latter category—"fixed-rate contracts"—where the avoided cost rate was
calculated at the time the obligation was incurred and fixed for the term of the contract.
FERC's regulations recognize that, once parties have entered into fixed-rate contracts, the
actual avoided cost rates at the time of delivery may differ from the fixed rate (i.e. the avoided
cost rate that was estimated and fixed at the time of contracting). FERC regulations at 18 C.F.R.
§ 292.304(b)(5) ("Section 304(b)(5)") state:
In the case in which the rates for purchases are based upon
estimates of avoided costs over the specific term of the contract or
other legally enforceable obligation, the rates for such purchases
do not violate this subpart if the rates for such purchases differ
from avoided costs at the time of delivery.
Not only does FERC allow in Section 304(b)(5) that fixed rates may differ from actual
avoided cost rates, but FERC has also confirmed that this circumstance does not excuse the
parties' performance under the contract. In Order No. 69,12 in which FERC first established its
rules for mandatory purchases from QFs and other PURPA implementation issues, FERC
explains:
18 C.F.R. § 292.304(d) (2012). See also Cedar Creek Wind, LLC, Notice of Intent not to Act and
Declaratory Order, 137 FERC ¶ 61,006 (2011) (affirming a QF's right to choose to provide energy or
capacity pursuant to a legally enforeceable obligation for delivery over a specified term at rates based on
avoided costs calculated at the time the obligation is incurred). The Commission has also confirmed that
QFs "are entitled to fixed-term, fixed-rate agreements." Order No. 19769 (June 1985) (upholding Idaho
Order No. 19442 (Feb. 8, 1985)).
12 FERC Order No. 69, 45 Fed. Reg. 12214 (Feb. 19, 1980) (Small Power Production and
Cogeneration Facilities; Regulations Implementing Section 210 of the Public Utility Regulatory Policies
Act of 1978, Order No. 69, FERC Stats. & Regs. P 30,128, order on reh 'g, Order No. 69-A, FERC Stats.
& Regs. P 30,160 (1980), aff'd in part and vacated in part, American Electric Power Service Corporation
v. FERC, 675 F.2d 1226, 219 U.S. App. D.C. 1 (D.C. Cir. 1982), rev 'din part, American Paper Institute,
Inc. v. American Electric Power Service Corporation, 461 U.S. 402, 103 S. Ct. 1921 (1983) ("Order No.
69")).
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Paragraph (b)(5) addresses the situation in which a
qualifying facility has entered into a contract with an electric
utility, or whether the qualifying facility has agreed to obligate
itself to deliver at a future date energy and capacity to the electric
utility. The import of this section is to insure that a qualifying
facility which has obtained the certainty of an arrangement is not
deprived of the benefits of its commitment as a result of changed
circumstances. This provision can also work to preserve the
bargain entered into by an electric utility; should the actual avoided
costs be higher than those contracted for, the electric utility is
nevertheless entitled to retain the benefit of its contract for, or
otherwise legally enforceable, lower price for purchases from the
qualifying facility. This subparagraph will thus insure the certainty
of rates for purchases from a qualifying facility which enters into a
commitment to deliver energy or capacity to a utility. 13
In its decisions, FERC has reiterated that fixed rates continue to comply with statutory
and regulatory requirements - including the requirement to be just and reasonable - and remain
binding on the parties, even if circumstances have changed such that purchases from QFs will
result in costs greater than those the utility would incur if it did not make such purchases but
instead generated an equivalent amount of energy itself. 14 FERC has explained that allowing a
utility to revisit a fixed-rate contract in this circumstance: "(a) would disturb the settled and
legitimate expectations of the parties; (b) could lead to difficulty in financing generation projects
and impairment of wholesale competition; and (c) would be inconsistent with Congressional
intent underlying PURPA and the Energy Policy Act of 1992."15
These FERC regulations and orders describing the sanctity of fixed-rate contracts provide
an important context for understanding why, in Section 304(f), FERC likewise does not allow a
13 Id. at 45 Fed. Reg. 12214, 12224 (emphasis added).
14 New York State Electric & Gas Corporation ("NYSEG"), 71 FERC ¶ 61027, *14.45 (1995),
rehearing denied 72 FERC ¶ 61067, 61341 (1995) (rejecting utility's argument that changed
circumstances mandates recalculation of rates in existing contracts based on avoided costs as of the time
of the new circumstances); West Penn Power Company ("West Penn"), 71 FERC ¶ 61153, 61495 (1995)
(noting similarities to NYSEG and again rejecting utility's argument that changed circumstances mandates
recalculation of rates in existing contracts based on avoided costs as of the time of the new
circumstances).
15 NYSEG, 72 FERC ¶ 61067, 61341 (Order denying reconsideration).
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utility to cease QF purchases under a fixed-rate contract, even if in certain periods operational
circumstances cause a negative avoided cost rate.
b. Section 304(1) does not relieve a utility of its obligation to purchase energy
pursuant to fixed-rate contracts.
Section 304(f) provides that an electric utility "will not be required to purchase electric
energy or capacity during any period during which, due to operational circumstances, purchases
from qualifying facilities will result in costs greater than those which the utility would incur if it
did not make such purchases, but instead generated an equivalent amount of energy itself.""
FERC's implementing order further provides that, of the two rate categories described above,
Section 304(f) only applies to the first category—where the avoided costs are calculated at the
time of delivery—and does not "override contractual or other legally enforceable obligations
incurred by the electric utility to purchase from a qualifying facility. "7
In Order No. 69, FERC explained the limited purpose of Section 304(f) - to alleviate a
potential burden on certain QFs with "time-of-delivery" pricing, not to provide utilities the
option to favor their own resources. If a utility operating only base load units during light
loading periods is forced to cut back output to accommodate purchases from QFs, then the base
load units might not be able to increase output rapidly when the system demand later increased.
As a result, the utility would be required to use less efficient, higher cost units with faster startup
to meet the demand. FERC explained that this situation, when applied to a QF contract whose
avoided cost rate is determined at the time of delivery, could actually force the QF to have to pay
the utility to take its power. To avoid this "anomalous result", FERC proposed a curtailment
option by which a utility could notify the QF not to deliver during those periods.
16 18 C.F.R. § 292.304(f) (2012).
Order No. 69,45 Fed. Reg. 12214, 12228.
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FERC explained in Order No. 69 the justification for the curtailment provision, i.e., that a
utility's net costs would be higher during these periods than if it did not purchase from a QF,
does not apply and therefore curtailment under Section 304(f) is not authorized, if purchases are
made pursuant to a fixed-rate contract:
The Commission does not intend that this paragraph
override contractual or other legally enforceable obligations
incurred by the electric utility to purchase from a qualifying
facility. In such arrangements, the established rate is based on the
recognition that the value of the purchase will vary with the
changes in the utility's operating costs. These variations ordinarily
are taken into account, and the resulting rate represents the average
value of the purchase over the duration of the obligation. The
occurrence of such periods may similarly be taken into account in
determining rates for purchases.'8
FERC ' s recent decision involving Entergy Services, Inc. ("Entergy"), further confirms
that Section 304(f) does not apply to fixed-rate contracts. 19 Among other issues raised in a
compliance filing, Entergy sought to curtail unscheduled QF energy "on the same basis as other
non-firm, secondary transmission service, when necessary to relieve congestion. ,20 In its
December 2011 Order, FERC denied Entergy's curtailment proposal, finding that Section 304(f)
did not relieve Entergy of its statutory obligation to purchase unscheduled QF energy.2' FERC
explained:
56. Many avoided cost rates are calculated on an average or
composite basis, and already reflect the variations in the value of
the purchase in the lower overall rate. In such circumstances, the
utility is already compensated, through the lower rate it generally
pays for unscheduled QF energy, for any periods during which it
purchases unscheduled QF energy even though that energy's value
is lower than the true avoided cost. On the other hand, for avoided
cost rates that are determined in real-time, such avoided costs
18 Order No. 69, 45 Fed. Reg. 12214, 12228 (emphasis added).
Entergy Services, Inc., Order on Compliance Filing, 137 FERC ¶ 61,199, ¶j 52-58 (Dec. 15,
2011) ("Entergy Order").
20 Id. atlJ3O.
21 Id. at ¶IJ 52-54, 58.
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adjust to reflect the low (zero or negative) value of the
unscheduled QF energy, allowing the QF to make its own
curtailment decisions. In neither case is the utility authorized to
curtail the QF purchase unilaterally."
Thus, FERC's orders establish that a utility may not rely on Section 304(f) to avoid its
obligations to purchase from a fixed-rate QF, even if in certain periods operational circumstances
cause a negative avoided cost rate.
C. FERC exempts from Section 304(f) all fixed-rate contracts, not just those
that explicitly calculated low loading expenses in the avoided cost rate.
Based on the rebuttal testimony of Commission Staff Rick Sterling and recent filings
submitted to FERC, Commission staff appears to take the position that if the parties to a fixed-
rate contract did not explicitly calculate low loading expenses in the fixed avoided cost rate -
then Section 304(f) allows curtailment. 23 This position has no support in FERC's regulations or
orders. Parties to fixed-rate contracts are not required to have anticipated, much less agreed to,
every circumstance that might affect actual avoided cost rates through the duration of a contract
before they get the benefit of their bargain. To the contrary, FERC's regulations and orders
provide that operational circumstances that cause actual avoided cost rates to differ from those
fixed at the time of contracting do not justify overriding the terms of fixed-rate contracts.24
Sterling bases his argument on the following quote from the Entergy Order (with
emphasis added by Sterling):
"Many avoided cost rates are calculated on an average or
composite basis, and already reflect the variations in the value of
the purchase in the lower overall rate. In such circumstances, the
22 Id. at 56.
23 Rebuttal Testimony of Rick Sterling, pp. 4-6 (June 29, 2012) ("Sterling Rebuttal Testimony").
24 Order No. 69, 45 Fed. Reg. 12214, 12224 ("The import of this section [304(b)(5)] is to insure that
a qualifying facility which has obtained the certainty of an arrangement is not deprived of the benefits of
its commitment as a result of changed circumstances." (emphasis added)); id. at 12228 ("The Commission
does not intend that this [section 304(f)] override contractual or other legally enforceable obligations
incurred by the electric utility to purchase from a qualifying facility."); NYSEG at * 14-15; West Penn at 61495.
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utility is already compensated, through the lower rate it generally
pays for unscheduled QF energy, for any periods during which it
purchases unscheduled QF energy even though that energy's value
is lower than the true avoided cost."25
This quote is taken out of context. The very next sentence in Paragraph 56 of the Entergy Order
states: "On the other hand, for avoided cost rates that are determined in real-time, such avoided
costs adjust to reflect the low (zero or negative) value of the unscheduled QF energy, allowing
the QF to make its own curtailment decisions."26 The quote excerpt beginning with "Many"
does not describe a subset of fixed-rate contracts, but rather one of the rate categories identified
in FERC's regulations 27--namely, the fixed-rate category. The sentence beginning with "On the
other hand" describes another category—namely, avoided costs determined in real time (i.e.,
time of delivery where rates can be zero or negative). The Entergy Order does not distinguish
among different types of fixed-rate contracts or the pricing methodologies they may reflect, and
it does not state that curtailment applies to some fixed-rate contracts and not others. In fact,
FERC concludes in this same paragraph 56 that in neither of these two categories is the utility
authorized to curtail the QF purchase unilaterally. 28
Further, Sterling's argument that the avoided cost rate methodology and other pricing
terms in the IWP PPAs did not specifically calculate low loading scenarios and thus the PPAs are
subject to curtailment fails to acknowledge that this methodology and these pricing terms were
(1) based on the approved orders of the Commission and (2) specifically approved by the
Commission as establishing a valid avoided cost rate for these PPAs. In adopting the SAR
methodology, the Commission accepted that this was an adequate tool for estimating avoided
25 Sterling Rebuttal Testimony at 4 (quoting Entergy, with emphasis added by Sterling).
26 Entergy at ¶ 56 (emphasis added).
27 18 C.F.R. § 292.304(d) (2012).
28 EntergyatJ56.
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cost rates. 29 And the Commission-approved pricing adjustments and firming provisions further
tailor the published rates to account for variations in avoided costs. 30 The Commission cannot
use Section 304(f) as a trump card for subsequently alleged inadequacies in the approved
avoided cost rate methodology and pricing adjustments to change approved PPA terms.
Of course, the parties and Commission may choose to explicitly calculate low loading
impacts in setting the avoided cost rate, along with any other variables that affect the estimated
operating costs. 31 Or, they may choose to incorporate a comprehensive but un-enumerated
approach to address the variability in costs of operating an evolving generation mix. Or, they
may choose to allow economic, or light loading, curtailment outside of the avoided rate
calculation (i.e., in the terms and conditions of the contract), just as they agreed in the IWP PPAs
to allow curtailment for reliability and emergency purposes. But once a state commission
approves a PPA, the contract rates and terms are not subject to future change absent the express
language of the PPA or the mutual agreement of the parties. 32
29 Order No. 29124 at 13 ("It is the Commission's belief that in issuing this Order we are
establishing a platform for avoided cost pricing that is reasonable and will appropriately reflect the
avoided cost of each utility into the future." (emphasis added))
30 See Order No. 30415 at 1 (Sept. 7, 2007) (approving seasonalization factors because "[s]easonal
avoided cost rates recognize that energy delivered by QFs has different values based on when it is
delivered"); Order No. 18190 at 11-12 (July 21, 1983) (establishing heavy versus light load hour
adjustments "to more precisely value the energy being delivered"); Order No. 30488 at 12 (Feb. 20,
2008) (approving the wind integration charge and finding the use of such adjustment to the published
avoided-cost rate for wind QFs "results in net rates that represent the full avoided cost of wind generation;
rates that are fair, just and reasonable." Id. (emphasis added)); Order No. 29632 at 20 (Nov. 22, 2004)
(establishing the 90%/i 10% band) ("excess energy is not accepted by the Company without consequence.
If unplanned for and not easily integrated the energy may as suggested by the Company have to be sold in
the surplus market or other more valuable resources of the Company backed down.").
31 "The occurrence of such periods iy similarly be taken into account in determining rates for
purchases." Order No. 69, 45 Fed. Reg. 12214, 12228 (emphasis added).
32 See Freehold Cogeneration Associates v. Board of Regulatory Commissioners of the State of New
Jersey, 44 F.3d 1178 (3d Cir. 1995) (holding "that once the [state commission] approved the power
purchase agreement between Freehold and JCP&L on the ground that the rates were consistent with
avoided cost, any action or order by the [state commission] to reconsider its approval or to deny passage
of those rates to JCP&L's consumers under purported state authority was preempted by federal law.");
Independent Energy Producers Assoc. v. California Public Util. Comm., 36 F.3d 848 858-59 (9th Cir.
1994) ("the fact that the prices for fuel, and therefore the Utilities' avoided costs, are lower than
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The IWP PPAs do not contain any provision that allows Idaho Power to curtail the
projects as contemplated by Schedule 7433 Further, the IWP PPAs state, "No modification to
this Agreement shall be valid unless it is in writing and signed by both Parties and subsequently
approved by the Commission."34 IWP has not agreed to modify the IWP PPAs to allow such
curtailment or to incorporate the terms of Schedule 74 if approved. If the Commission could
allow a utility to use extra-contractual means to curtail purchases, then it would disturb the
settled and legitimate expectations of the parties and lead to difficulty in financing generation
projects and impairment of wholesale competition, contrary to FERC's stated policies. 35
d. A Commission decision to allow Idaho Power to unilaterally curtail fixed-
rate QFs is contrary to FERC regulations and thus is preempted by PURPA.
Section 210(0(1) of PURPA provides that "each State regulatory authority shall
implement" the rules adopted by FERC "for each electric utility for which it has ratemaking
authority."36 Such state implementation must be "pursuant to and consistent with [FERC's]
regulations under PURPA."37 If a state regulatory action fails to implement or violates PURPA,
estimated, does not give the state and the Utilities the right unilaterally to modify the terms of the
standard offer contract"); NYSEG at *14.45 (rejecting utility's argument that changed circumstances
mandates recalculation of rates in existing contracts based on avoided costs as of the time of the new
circumstances); West Penn at 61495 (as in NYSEG, rejecting utility's argument that changed
circumstances mandates recalculation of rates in existing contracts based on avoided costs as of the time
of the new circumstances); Rosebud Enterprises v. Idaho PUC, 128 Idaho 609, 622-23 (1996) (allowing
alteration of avoided cost rates prior to the execution of the purchase contract and noting that the rates are
not locked in until the QF has obtained a legally enforceable obligation); Grand View Solar PV Solar
Two, LLC v. Idaho Power Company, Order No. 32580 at 14 (June 21, 2012) ("Once a PPA has been
executed and approved by the Commission - once the contract terms are set - they are generally not
subject to future change absent the express language of the PPA, or the agreement of the parties.").
See Park Direct Testimony at 15 (explaining that Schedule 74 would allow curtailment that is not
contemplated by existing Schedule 72 and existing firm energy sales agreements with QFs).
Section 26.1 in the 2005 IWP PPAs; Section 23.1 in the 2009 IWP PPAs.
NYSEG, 72 FERC ¶ 61067, 61341 (Order denying reconsideration).
36 16 U.S.C. § 824a-3(f)(1). See also Order No. 69, 45 Fed. Reg. 12214, 12216 ("[E]ach State
regulatory authority or nonregulated utility must implement [FERC's] rules."); Power Resource Group
Inc. v. PUCT, 422 F.3d 231, 236 ("§824a-3(f) requires state regulatory agencies like the [Texas] PUC to
implement the FERC regulations").
Connecticut Light & Power Co., 70 FERC ¶ 61,012 at 61,023 (1995) ("CL&P").
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such action is preempted by federal law. 38 Because it is contrary to FERC's regulations, as
described in the preceding sections, any Commission order allowing the proposed curtailment of
fixed-rate contracts is preempted by federal law.
III. The IWP Projects would be significantly harmed by Schedule 74.
The IWP Projects relied on the fixed energy prices in the IWP PPAs to forecast a revenue
stream and to secure debt and equity financing. The revenue projections included no allowances
for curtailment for the circumstances in Schedule 74 since Idaho Power has no such right under
the IWP PPAs. The financing and investment in these projects—approximately $450 million to
date—is jeopardized by the proposed curtailment.
Curtailment has a direct impact on the IWP Projects' revenues, without compensating for
fixed costs or increased costs as a result of the curtailment, as described in the Direct Testimony
of Richard Guy. The IWP Projects are only paid for the hours when energy is produced.
Curtailment may also hinder the IWP Projects' ability to comply with the "firming" requirements
of the IWP PPAs (the 90%/i 10% performance band and 85% Mechanical Availability
Guarantee), thus subjecting the IWP Projects to lower pricing and/or penalties. Curtailment also
has a direct impact on the IWP Projects' sale of renewable energy credits, which are only created
when energy is produced. Lower revenues could affect the IWP Projects' ability to comply with
38 See, e.g., CL&P at 61,023 (finding that a Connecticut state law establishing a methodology to
determine avoided cost rates to be preempted because it violated PURPA and the Commission's
implementing regulations); Midwest Power Systems, Inc., 78 FERC ¶ 61,067 at 61,246-48 (1997) (finding
that orders of the Iowa Utilities Board implementing a state statute on avoided costs were preempted
because they violated PURPA and the Commission's PURPA regulations); Cedar Creek Wind, LLC, 137
FERC ¶ 61,006 (2011), and Rainbow Ranch Wind, LLC and Rainbow West Wind, LLC, 139 FERC ¶
61,077 (2012) (finding that the Commission had violated PURPA by issuing orders denying QFs a legally
enforceable obligation); JD Wind], LLC, 129 FERC ¶ 61,148 at 61,632-33 (2009) (finding that the Texas
Public Utility Commission's determination that "legally enforceable obligations are only available to
sellers of 'firm power,' as defined by Texas law, [was] inconsistent with PURPA and [FERC's]
regulations implementing PURPA"); SoCal Edison, 70 FERC at 61,676-78 (finding that the California
Public Utilities Commission's avoided cost methodology violated PURPA and the Commission's PURPA
regulations). See also Grand View Solar PVSolar Two, LLC v. Idaho Power Company, Order No. 32580 (June 21, 2012) (because the Commission found that the provision at issue "would not subject the PPA to
changing conditions", the Commission decided that it was "not preempted by PURPA.")
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existing credit terms with their lenders, the effect of which could lead to various penalties and,
ultimately, default of the debt financing.
IV. Conclusion
As a matter of law, Section 304(f) does not authorize a utility to unilaterally curtail QF
purchases under fixed-rate contracts. The proposed Schedule 74 is contrary to PURPA and
FERC regulations, and therefore the Commission is preempted by federal law from approving
Schedule 74.
The terms in the IWP PPAs reflect the parties' and the Commission's determination at
the time of contracting of the anticipated avoided costs for the entire twenty-year term of the
contracts. If Idaho Power believes that the SAR methodology, seasonal and loading adjustments,
wind integration charges, and firming provisions accepted by the parties and the Commission
and incorporated into the IWP PPAs did not accurately predict avoided cost rates during certain
operational circumstances, then it is appropriate for Idaho Power to seek to change those
methodologies and terms in new contracts. 39 However, FERC's regulations and orders under
PURPA prohibit Idaho Power and the Commission from unilaterally modifying the PPAs to
allow curtailment in such circumstances.
Schedule 74 would amount to a unilateral modification of the IWP PPAs and would
undercut the balance of rights and obligations negotiated by Idaho Power and the IWP Projects
and established by the Commission. Further, the approval by the Commission of the proposed
Schedule 74 would send a chilling message to the financial community that one cannot rely on
See Independent Power Producers Assoc., 36 F.3d at 848-49 ("although the avoided cost rates
calculated in the Utilities' contracts are in fact higher than the Utilities' current short term avoided cost
rates, the proper remedy for such a situation is to ensure that future standard offer contracts contain more
flexible pricing mechanisms"). Indeed, the Commission historically has applied these types of changes
prospectively.
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executed contracts in Idaho. This would affect more than just the wind industry as it would
discourage all future investments in Idaho in regulated industries and in general.
IWP respectfully requests that the Commission decline to adopt the proposed
Schedule 74.
DATED this 20th day of July 2012.
GIVENS PURSLEY LLP
By LcTZJd*
Deborah E. Nelson
Attorneys for Idaho Wind Partners 1, LLC
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CERTIFICATE OF SERVICE
I hereby certify that on the 2 O day ofcJ&/J 2012 the foregoing
was served upon the following individuals by the means indicate7t:
Original plus 9 copies:
Jean Jewell
Secretary
Idaho Public Utilities Commission
472 W. Washington
P.O. Box 83720
Boise, ID 83720-0074
j ean.j [e-mail]
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U.S. Mail, postage prepaid
Express Mail
Hand Delivery
Facsimile
E-Mail
Service copies:
Donovan E. Walker
Jason B. Williams
Idaho Power Company
P0 Box 70
Boise, ID 83707-0070
E-mail: [e-mail]
[e-mail]
Idaho Power Company
Michael G. Andrea
Avista Corporation
1411 E. Mission Ave.
Spokane, WA 99202
E-mail: [e-mail]
Avista Corporation
Daniel Solander
PacifiCorp / dba Rocky Mountain Power
201 S. Main St., Suite 2300
Salt Lake City, UT 84111
E-mail: [e-mail]
Pacflcorp, dba Rocky Mountain Power
Donald L. Howell, II
Kristine A. Sasser
Deputy Attorneys General
Idaho Public Utilities Commission
472 W. Washington (83702)
P0 Box 83720
Boise, ID 83720-0074
E-mail: don.howe(dpuc.idaho.gov
kris.sasser(puc.idaho.gov
U U.S. Mail, postage prepaid
El
Express Mail
I Hand Delivery
I Facsimile
Ir E-Mail
I U.S. Mail, postage prepaid
I Express Mail
I Hand Delivery
I Facsimile
E-Mail
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Peter J. Richardson LI U.S. Mail, postage prepaid
Gregory M. Adams LI Express Mail
Richardson & O'Leary, PLLC LI Hand Delivery
P0 Box 7218 LI Facsimile
Boise, ID 83702 Z E-Mail
E-mail: [e-mail]
[e-mail]
The Northwest and Intermountain Power
Producers Coalition, JR. Simplot Company,
Grand View Solar II, Exergy Development
Group of Idaho, LLC, The Board of County
Commissioners ofAdams County, Idaho, and
Clearwater Paper Corporation
Robert D. Kahn LI U.S. Mail, postage prepaid
Executive Director LI Express Mail
Northwest and Intermountain Power LI Hand Delivery
Producers Coalition LI Facsimile
1117 Minor Ave., Suite 300 Z E-Mail
Seattle, WA 98101
E-mail: rkahn(nippc.org
The Northwest and Intermountain Power
Producers Coalition
Don Sturtevant LI U.S. Mail, postage prepaid
Energy Director LI Express Mail
J.R. Simplot Company LI Hand Delivery
P0 Box 27 LI Facsimile
Boise, ID 83707-0027 Z E-Mail
E-mail: don.sturtevant@simplot,corn
JR. Simplot Company
Robert A. Paul LI U.S. Mail, postage prepaid
Grand View Solar II LI Express Mail
15690 Vista Circle LI Hand Delivery
Desert Hot Springs, CA 92241 LI Facsimile
E-mail: robertapau 1 08gmail.com Z E-Mail
Grand View Solar II
James Carkulis
Managing Member
Exergy Development Group of Idaho, LLC
802 W. Bannock St., Suite 1200
Boise, ID 83702
E-mail: icarkulis(exergydeve1opment.com
Exergy Development Group of Idaho, LLC
U. * U U
U.S. Mail, postage prepaid
Express Mail
Hand Delivery
Facsimile
E-Mail
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Dr. Don Reading 1111 U.S. Mail, postage prepaid
6070 Hill Road J Express Mail
Boise, ID 83703 Hand Delivery
E-mail: dreading(mindspring.corn Facsimile
Exergy Development Group of Idaho, LLC M E-Mail
Ronald Williams El U.S. Mail, postage prepaid
Williams Bradbury, P.C. Express Mail
1015 W. Hays St. Hand Delivery
Boise, ID 83702 El Facsimile
E-mail: [e-mail] M E-Mail
Renewable Energy Coalition
John R. Lowe El U.S. Mail, postage prepaid
12050 SW Tremont St. El Express Mail
Portland, OR 97225 ElI Hand Delivery
E-mail: [e-mail] El Facsimile
Renewable Energy Coalition E-Mail
R. Greg Ferney El U.S. Mail, postage prepaid
Mimura Law Offices, PLLC El Express Mail
2176 E. Franklin Rd., Suite 120 El Hand Delivery
Meridian, ID 83642 El Facsimile
E-mail: greg(mimuralaw.corn E-Mail
Interconnect Solar Development, LLC
Bill Piske, Manager Ej U.S. Mail, postage prepaid
Interconnect Solar Development, LLC El Express Mail
1303 E. Carter El Hand Delivery
Boise, ID 83706 El Facsimile
E-mail: [e-mail] Z E-Mail
Interconnect Solar Development, LLC
Ronald L. Williams U.S. Mail, postage prepaid
Williams Bradbury, P.C. LII Express Mail
1015 W. Hays Street El Hand Delivery
Boise, ID 83702 El Facsimile
E-mail: ron(williamsbradbury.com Z E-Mail
Dynamis Energy, LLC
Wade Thomas El U.S. Mail, postage prepaid
General Counsel El Express Mail
Dynamis Energy, LLC El Hand Delivery
776 W. Riverside Dr., Suite 15 El Facsimile
Eagle, ID 83616 Z E-Mail
E-mail: wthomasdynamisenergy.com
Dynamis Energy, LLC
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U.S. Mail, postage prepaid
Express Mail
Hand Delivery
Facsimile
E-Mail
U.S. Mail, postage prepaid
Express Mail
Hand Delivery
Facsimile
E-Mail
U.S. Mail, postage prepaid
Express Mail
Hand Delivery
Facsimile
E-Mail
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C. Thomas Arkoosh
Capitol Law Group, PLLC
205 N. 10th St., 4th Floor
P0 Box 2598
Boise, ID 83701
E-mail: tarkoosh(Zcapitollawgroup.com
North Side Canal Company
Twin Falls Canal Company
Brian Olmstead
General Manager
Twin Falls Canal Company
PO Box 326
Twin Falls, ID 83303
E-mail: [e-mail]
Twin Falls Canal Company
Ted Diehl
General Manager
North Side Canal Company
921 N. Lincoln St.
Jerome, ID 83338
E-mail: [e-mail]
North Side Canal Company
Don Schoenbeck
RCS
900 Washington Street, Suite 780
Vancouver, WA 98660
E-mail: [e-mail]
Lori Thomas
Capitol Law Group, PLLC
P. Box 2598
Boise, ID 83701-2598
E-mail: [e-mail]
Bill Brown, Chair
Board of Commissioners
of Adams County, ID
P0 Box 48
Council, ID 83612
E-mail: [e-mail]
The Board of County Commissioners of
Adams County, Idaho
U
U.S. Mail, postage prepaid
I Express Mail
U Hand Delivery
I Facsimile
E-Mail
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U.S. Mail, postage prepaid
Express Mail
Hand Delivery
Facsimile
E-Mail
U.S. Mail, postage prepaid
I Express Mail
I Hand Delivery
I
Facsimile
E-Mail
EVE
Ted S. Sorenson, P.E. E U.S. Mail, postage prepaid
Birch Power Company Express Mail
5203 South 11th East E11 Hand Delivery
Idaho Falls, ID 83404 Lii Facsimile
E-mail: [e-mail] Z E-Mail
Birch Power Company
Glenn Ikemoto U.S. Mail, postage prepaid
Margaret Rueger Express Mail
Idaho Windfarms, LLC LII Hand Delivery
672 Blair Avenue Facsimile
Piedmont, CA 94611 Z E-Mail
E-mail: glenni(envisionwind.com
niargaret(envisionwind.com
Idaho Windfarms, LLC
Dean J. Miller U.S. Mail, postage prepaid
Chas F. McDevitt Express Mail
McDevitt & Miller, LLP E Hand Delivery
420 W. Bannock St. (83702) Lii Facsimile
P0 Box 2564 Z E-Mail
Boise, ID 83701
E-mail: j [e-mail]
Idaho Windfarms, LLC and Ridgeline
Energy, LLC
M.J. Humphries U.S. Mail, postage prepaid
Blue Ribbon Energy LLC E Express Mail
4515 S. Ammon Road LII Hand Delivery
Ammon, ID 83406 LI Facsimile
E-mail: blueribbonenergy(gmai1.corn Z E-Mail
Blue Ribbon Energy LLC
Arron F. Jepson fl U.S. Mail, postage prepaid
Blue Ribbon Energy LLC F-1 Express Mail
10660 South 540 East Hand Delivery
Sandy, UT 84070 LI Facsimile
E-mail: [e-mail] Z E-Mail
Blue Ribbon Energy LLC
Dean J. Miller U.S. Mail, postage prepaid
McDevitt & Miller, LLP Express Mail
420 W. Bannock St. (83702) LI Hand Delivery
P0 Box 2564 LII Facsimile
Boise, ID 83701 Z E-Mail
E-mail: [e-mail]
Renewable Northwest Project
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Megan Walseth Decker Eli U.S. Mail, postage prepaid
Senior Staff Counsel ElI Express Mail
Renewable Northwest Project LII Hand Delivery
421 SW 6th Avenue, Suite 1125 liii Facsimile
Portland, OR 97204 Z E-Mail
E-mail: megan(mp.org
Renewable Northwest Project
Benjamin J. Otto II U.S. Mail, postage prepaid
Idaho Conservation League LII Express Mail
710 N. Sixth Street (83702) Li Hand Delivery
P0 Box 844 Li Facsimile
Boise, ID 83701 Z E-Mail
E-mail: [e-mail]
Idaho Conservation League
Liz Woodruff Li U.S. Mail, postage prepaid
Ken Miller Li Express Mail
Snake River Alliance Li Hand Delivery
P0 Box 1731 Facsimile
Boise, ID 83701 E-Mail
Email: [e-mail]
[e-mail]
Snake River Alliance
Man' Lewallen Li U.S. Mail, postage prepaid
Clearwater Paper Corporation Li Express Mail
601 W. Riverside Ave., Suite 1100 11J Hand Delivery
Spokane, WA 99201 LII Facsimile
E-mail: marv.1ewaI1enccIearwaterpaper.com Z E-Mail
Clearwater Paper Corporation
Tauna Christensen Li
Energy Integrity Project Li 769N1100E Li
Shelley, ID 83274 Li
E-mail: tauna(energyintegrityproj ect.org
Energy Integrity Project
U.S. Mail, postage prepaid
Express Mail
Hand Delivery
Facsimile
E-Mail
Deborah E. Nelson
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