20051229Reply Memorandum.pdf

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IDAHO POWER COMPANY
PO. BOX 70
BOISE, IDAHO 83707
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An IDACORP Company
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BARTON L. KLINE
Senior Attorney
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December 29, 2005
Jean D. Jewell , Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise, Idaho 83720-0074
Re:Case No. IPC-05-
Idaho Power Company s Reply Memorandum
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of the
Company s Reply Memorandum in the above-entitled case.
I would appreciate it if you would return a stamped copy of this transmittal
letter for our files in the enclosed self-addressed stamped envelope.
Very truly yours
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Barton L. Kline
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Enclosures
Telephone [phone] Fax [phone], E-mail BKline~;dahopower.com
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BARTON L. KLINE , ISB # 1526
MONICA B. MOEN, ISB # 5734
Idaho Power Company
1221 West Idaho Street
P. O. Box 70
Boise, Idaho 83707
Telephone: [phone]FAX: [phone]
E-mail: BKline(g) idahopower.com
MMoen (g) idahopower.com
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Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
CASSIA WIND TO DETERMINE
EXEMPTION STATUS.IDAHO POWER COMPANY
REPLY MEMORANDUM
CASE NO. IPC-05-
This Reply Memorandum is in response to the Motion and Memorandum
in Support filed by Cassia Gulch Wind Park LLC and Cassia Wind Farm LLC
(collectively "Cassia Wind") seeking a Commission Order determining that Cassia Wind
is exempt from the rate eligibility cap contained in Order No. 29839.
Standard To Be Applied
In its Memorandum in Support, Cassia Wind describes the standard it
believes the Commission should apply to the facts to make a determination as to
whether or not Cassia Wind should be exempted from the 100 kW cap on eligibility for
entitlement to the published rates. Such an exemption is often referred to as
grandfathering" in various pleadings and Commission Orders addressing this subject.
IDAHO POWER COMPANY REPLY MEMORANDUM, Page
First, Cassia Wind quotes the section of Order No. 29839 in which the
Commission described the primary and secondary indicia of substantial progress it will
consider for determining which projects will be grandfathered to the previous 10 aMW
cap.
Second, Cassia Wind acknowledges that Order No. 29839 was the
subject of petitions of reconsideration filed by Windland, Commission Staff and Idaho
Power.
With two exceptions, Idaho Power believes Cassia Wind has accurately
described the standard to be applied. However, those two exceptions are significant.
The first exception Idaho Power takes to Cassia Wind's description of the standard to
be applied arises out of the language of Order No. 29872 , which was the Order denying
reconsideration. In Order No. 29872 , the Commission provided additional guidance as
to the degree of substantial progress and project maturity that it was looking for in OF
projects in order to qualify for grandfathering. In Order No. 29872 , the Commission
stated:
The degree of substantial progress and project maturity that we
look for in projects that have not submitted a signed power
purchase agreement to the utility by our grandfathering cut-off
date is a demonstration that the OF project can be brought on
line in a timely manner and within a reasonable period following
contract execution and approval.
(Order No. 29872, pp. 10-11).
Cassia Wind's Motion and Memorandum do not mention this language from Order No.
29872.
As will be discussed in greater detail later in this Memorandum , Idaho
Power believes this section of Order No. 29872 is an important clarification of the
IDAHO POWER COMPANY REPLY MEMORANDUM , Page 2
standard the Commission should apply to the facts in making a decision on whether an
individual OF should be grandfathered.
The second area where Idaho Power takes exception to Cassia Wind'
analysis is the inference that it proposes that the Commission draw from Staff's
comments in the Schwendiman case. In its Memorandum in Support, Cassia Wind
states that the 100 kW exemption standard was subject to interpretation in PacifiCorp
application for approval of the Schwendiman Agreement. In fact, the Commission did
not need to address "grandfathering" criteria to decide Schwendiman in light of the
parties' failure to include the 90%/110% band in the proposed contract.
Cassia Wind states that in the comments Commission Staff filed in the
Schwendiman case, Staff "asserted that the exemption standard was satisfied if
evidence showed the existence of one of the primary criteria and at least one of the
secondary criteria." (Cassia Memo, p. 2.) Cassia Wind seems to be inferring that it is
Staff's position that if a OF can demonstrate it has completed one of the primary criteria
and one of the secondary criteria, it is entitled to grandfather status. Based on the
Staff's comments , Idaho Power believes that drawing this inference would be incorrect.
In the final analysis, Cassia Wind acknowledges that the Commission did
not need to discuss the primary and secondary criteria to decide the Schwendiman
case, and as a result, it is impossible to tell from the Schwendiman case Order what, if
anything, the Commission might think of Staff's discussion or its comments on this
specific point.
If the Commission thinks the Schwendiman case should have any
application to this case , Idaho Power suggests that rather than speculate on what the
IDAHO POWER COMPANY REPLY MEMORANDUM , Page 3
Commission Staff meant in its comments in the Schwendiman case, the Commission
ask the Staff to explain or clarify, if necessary, what their position is on the application of
the secondary criteria to the entitlement to grandfathering.
Cassia Wind Meets One of the Primary Criteria
With respect to the primary criteria described in Order No. 29839 and
clarified in Order No. 29872, Idaho Power agrees that Cassia Wind meets one of the
primary criteria because it made a request to Idaho Power s Delivery Business Unit for
an interconnection prior to August 4, 2005.
The Evidence Cassia Wind Has Supplied Does Not
Demonstrate That It Has Sufficiently Met The
Secondary Criteria To Entitle It To An Exemption
In order to determine if OF developers met the primary and secondary
criteria in the Commission s Order No. 29839 regarding grandfathering, Idaho Power
identified 14 wind-generating project developers that had contacted Idaho Power
regarding a potential wind OF project. By letter dated August 8, 2005, the Company
requested that each of the identified OF developers provide Idaho Power information
regarding their project that the Company could use to determine whether or not the
particular wind OF would meet the primary and secondary criteria for grandfathering
established by the Commission. Cassia Wind provided responses to each of the items
in the Company s August 8th letter and provided supplemental responses following
discussions with Idaho Power.
Idaho Power has compared Cassia Wind's responses to the standard set
by the Commission in Order No. 29872 for projects that had not submitted signed
contracts by the grandfathering cut-off date (August 4, 2005), i.e.
, "
the degree of
IDAHO POWER COMPANY REPLY MEMORANDUM , Page 4
substantial progress and project maturity that demonstrates that the project can be
brought on line in a timely manner and within a reasonable period of time following
contract execution and approvaL" Idaho Power has also compared Cassia Wind'
progress to the progress of other OFs for which grandfathering has been sought. In
undertaking its review, Idaho Power believes it has acted in a manner consistent with
the Commission s intent expressed in Order No. 29839 by considering all of the criteria
identified in Order No. 29839. This analysis yields the following:
Cassia Wind , like all of the other OF projects, has performed wind studies
has commenced preliminary permitting and licensing activities, and has made efforts to
secure the sites upon which they intend to place the turbines. In all of these areas
Cassia Wind's progress appears to be equal to or slightly ahead of the other OF
developers that provided responses to Idaho Power. The two areas in which Cassia
Wind lags behind the other wind developers which Idaho Power has agreed are entitled
to be grandfathered is in the progress that Cassia Wind has made in securing financing
and wind turbines.
As Idaho Power has stated in the four Applications for approval of
contracts for the wind projects which Idaho Power believes are entitled to
grandfathering, one criterion that Idaho Power identified as being entitled to substantial
weight is a signed contract for wind turbines. Based on discussions with OF wind
developers and other publicly-available information , Idaho Power has determined that
the supply of wind turbines is extremely tight and if a binding commitment for wind
turbines has not been procured , it may be many months before turbines are available.
Therefore , a demonstration by a OF that prior to the August 4, 2005 cut-off date it had
IDAHO POWER COMPANY REPLY MEMORANDUM , Page 5
taken reasonable steps to bind a turbine manufacturer or other financially-responsible
supplier to deliver the needed wind turbines to the OF in a timely manner is critical for
qualification for grandfathering.
In Idaho Power s judgment , Cassia Wind does not possess a commitment
for either financing or wind turbines sufficient to entitle it to be grandfathered. In support
of its contention that it has a commitment for financing and wind turbines, Cassia Wind
has provided a copy of correspondence from John Deere Credit ("JDC") in which JDC
indicates that it is considering a commitment for the investment in Cassia Wind'
project. (Cassia Wind Exhibit A). In Exhibit A, JDC also indicates it is considering
whether it should allocate 14 Suzlon S-88 Arctic 2.1 MW nameplate turbines to the
Cassia Wind project. However, it is very clear in the John Deere letter that JDC
requires that the Commission first confirm that the project is grandfathered and then
JDC's management team will conclude its due diligence and make a final determination
as to whether or not to commit funding and wind turbines to Cassia Wind's project.
In Exhibit K, Cassia wind also provides correspondence concerning other
turbines that could be available. This correspondence seems to conflict with the JDC
letter and certainly doesn t indicate a binding commitment by the supplier.
In Idaho Power s opinion , Cassia Wind has the procedure backward. It is
up to Cassia Wind to demonstrate that it has taken reasonable steps to procure
financing. It is up to Cassia Wind to demonstrate it has a commitment from the wind
turbine manufacturer or supplier. If those commitments are in place and if the other
secondary criteria indicate that the project is substantially mature and can come online
in a timely manner, the project should be grandfathered. It is not incumbent on the
IDAHO POWER COMPANY REPLY MEMORANDUM, Page 6
Company and the Commission to commit to grandfathering and then have the financier-
turbine supplier make a final determination whether or not it will commit to finance the
project and supply the turbines.
Conclusion
In the final analysis , in Order No. 29872, the Commission described a
somewhat subjective test to which Idaho Power has tried to apply the objective facts in
this case. Idaho Power does not believe the objective facts in this case warrant
grandfathering.
DATED at Boise, Idaho, this day of December, 2005.
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BARTON L. KLINE
MONICA B. MOEN
Attorneys for Idaho Power Company
IDAHO POWER COMPANY REPLY MEMORANDUM , Page 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this day of December, 2005, I served a
true and correct copy of the within and foregoing IDAHO POWER COMPANY'S REPLY
MEMORANDUM upon the following named parties by the method indicated below, and
addressed to the following:
Dean J. Miller
McDevitt & Miller LLP
420 W. Bannock Street
Boise, Idaho 83702
Hand Delivered
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FAX
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, Idaho 83720-0074
Hand Delivered
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Overnight Mail
FAX
BARTON L. KLINE
CERTIFICATE OF SERVICE