20051005final order no 29886.pdf

Office of the Secretary
Service Date
October 5, 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF A FIRM ENERGY SALES
AGREEMENT FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
BETWEEN IDAHO POWER COMPANY
AND ARROW ROCK WIND, INC.
ORDER NO. 29886
CASE NO. IPC-O5-
On July 28, 2005 , Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting approval of a
Firm Energy Sales Agreement (Agreement) between Idaho Power and Arrow Rock Wind, Inc.
Arrow R ck) dated J ly 28, 2005. Under the Agreement Arrow Roc will sell and Idah
ower wI purc ase nc energy generateCfDy1h rrow ROCk W d UenerafiilgProJect
located near Billings, Montana, in an area more particularly described as located approximately
100 miles northwest of Billings, Montana in Wheatland County on the west side of Highway 191
in the NW 1/4 of Section 36, Township 10 N, Range 15 E. The nameplate rating of the wind
facility is 19.5 MW. Under normal and/or average conditions, the project will not exceed 10
aMW on a monthly basis.
As represented, Arrow Rock will be a qualified small power production facility (QF)
under the applicable provisions of the Public Utility Regulatory Policies Act of 1978 (PURP A).
Idaho Power contends that the Agreement comports with the terms and conditions of
Commission Order No. 29632 (Us. Geothermal et al. v. Idaho Power) and avoided cost Order
No. 29646. The Agreement is for a 20-year term and contains the published non-Ievelized
avoided cost rates set forth in Order No. 29646. Arrow Rock has selected December 1 , 2005 as
the scheduled Operation Date for this facility.
Arrow Rock has made arrangements with NorthWestern Energy to deliver the net
energy from its Montana facility to the Idaho Power electrical system. The transmission
arrangement with NorthWestern Energy means that the Company will receive firm energy from
the facility rather than the intermittent energy generally associated with a wind-generating
project. Energy deliveries from the Arrow Rock project are for nine months out of the year and
ORDER NO. 29886
exclude deliveries during the spring months of March, April and May when the value of energy
on the Company s system is the lowest.
Idaho Power acknowledges the Company s Petition in Case No. IPC-05-22 and
represents that Arrow Rock was in the final stages of negotiations with Idaho Power immediately
prior to the Petition filing and that prior to that date Arrow Rock had submitted an executed
Agreement to the Company. It is Idaho Power s contention that Arrow Rock is appropriate for
exempting from the temporary suspension requested by the Company in Case No. IPC-05-22.
Section 22 of the Agreement provides that the Agreement will not become effective
until the Commission has approved all the Agreement's terms and conditions and declared that
all payments that Idaho Power makes to Arrow Rock for purchases of energy will be allowed as
prudently incurred expenses for ratemaking purposes.
On August 19, 2004, the Commission issued Notices of Application and Modified
Procedure in Case No. IPC-05-24. The deadline for filing written comments or protests was
September 9, 2005. The Commission Staff was the only party to file comments. Staff
recommends that the Commission approve the Agreement.
Staff Comments
Staff sees nothing within the Arrow Rock Agreement that either violates PURP A or
that is not in compliance with prior Commission Orders. Staff believes that the Arrow Rock
project is unaffected by Commission Order No. 29839 concerning intermittent wind
published rate eligibility. Under that Order, wind projects that are firmed, as the Arrow Rock
project is, are not subject to the change in published rate eligibility and grandfathering criteria.
Staff identifies aspects of the Arrow Rock project that cause Staff concern. Noting
that Arrow Rock will comprise 13 wind turbines of a total 90 turbines that constitute a larger
project termed the Judith Gap Project, Staff expresses concern with the potential for
disaggregation of large projects into 10 aMW pieces. Staff identifies further the disparity
between Idaho Power s published avoided cost rates paid for 10 aMW of Arrow Rock output and
the lower NorthWestern Energy RFP price ($31.71/MWh) that will be paid for the remaining
135-150 MW of Judith Gap output. Staff also expresses concern regarding the ownership,
control, operation and maintenance of the Arrow Rock generation facility and notes that there are
no Commission rules addressing QF ownership or lease arrangements. Staff believes that these
identified issues can be addressed in the context of ongoing Case No. IPC-05-22.
ORDER NO. 29886
Arrow Rock Reply Comments
On September 23, 2005, Arrow Rock submitted Reply Comments. The purpose of
Arrow Rock's reply comments is to clarify the record and correct some factual errors in Staff's
comments related to the development, cost and structure of the Arrow Rock project.
Arrow Rock clarifies that it is not intending to sell any electrical energy to
NorthWestern Energy in March, April and May. The energy produced from the Arrow Rock
project during those months will be integrated and stored by NorthWestern for later delivery to
Idaho Power. The integration service contemplated with NorthWestern is intended to be an
energy-neutral service at market-based rates.
Arrow Rock notes also that it is not providing a 10 MW flat product to Idaho Power.
Pursuant to Agreement the base load firm energy deliveries to Idaho Power will be 7 MW in the
months of June, July and August and 9 MW in the months of September through February.
Commission Findings
The Commission has reviewed the filings of record in Case No. IPC-05-
including the underlying Agreement and filed comments. We find it reasonable that the
submitted Agreement be approved without further notice or procedure. IDAP A 31.01.01.204.
Idaho Power has submitted for Commission consideration and approval a Firm
Energy Sales Agreement with Arrow Rock Wind, Inc. dated July 28, 2005. The Agreement is
for a 20-year term and contains the published non-Ievelized avoided cost rates set forth in Order
No. 29646. The nameplate rating of the wind facility is 19.5 MW. Under normal and/or average
conditions, the project will not exceed 10 aMW on a monthly basis. We find that the energy
product delivered is a firm product exempt from the change in published rate eligibility in recent
Order No. 29839. We find also that the project is qualified to receive published avoided cost
rates approved by the Commission in Order No. 29646. We further find it reasonable to allow
payments made under the Agreement as prudently incurred expenses for ratemaking purposes.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power Company,
an electric utility, pursuant to the authority and power granted it under Title 61 of the Idaho Code
and the Public Utility Regulatory Policies Act of 1978 (PURP A).
The Commission has authority under PURP A and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
ORDER NO. 29886
utilities to enter into fixed term obligations for the purchase of energy from qualified facilities
and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described above, IT
HEREBY ORDERED and the Commission does hereby approve the July 28, 2005 Firm Energy
Sales Agreement between Idaho Power Company and Arrow Rock Wind, Inc.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this LjtJ...
day of October 2005.
SHA H. SMITH, COMMISSIONER
ATTEST:
Je D. Jewell
Co mission Secretary
bls/O:IPC-05-24 sw
ORDER NO. 29886