20061103Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:NOVEMBER 2, 2006
SUBJECT:CASE NO. IPC-06-26 (Idaho Power)
FIRM ENERGY SALES AGREEMENT - MAGIC WIND PARK LLC
. On October 27, 2006, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting approval of a
20-year Firm Energy Sales Agreement between Idaho Power and Magic Wind Park LLC (Magic
Wind) dated October 11 , 2006 (Agreement).
Background
On August 4 , 2005, the Idaho Public Utilities Commission (Commission) in Case
No. IPC-05-, Order No. 29839, reduced the eligibility cap for avoided cost published rates
for non-firm wind projects from 10 aMW to 100 kW, required individual negotiation for larger
wind qualifying facilities (QFs), and established criteria for assessing QF contract entitlement.
Reference Public Utility Regulatory Policies Act of 1978 (PURP A). By Commission Order No.
29872 the date for grandfathering eligibility was changed from July 1 , 2004, the Notice of
Petition date, to August 4 2005 , the date oflnterlocutory Order No. 29839.
On October 20, 2005 , Magic Wind in Case No. IPC-05-34 filed a Motion to
Determine Exemption Status seeking a Commission determination that Magic Wind was exempt
from the rate eligibility cap established in Commission Order No. 29839. On August 15 , 2006
the Commission in Order No. 30109 determined that Magic Wind was entitled to an exemption.
The Commission further declared that Magic Wind was not entitled to receive from Idaho Power
a PURP A QF Purchase Power Agreement that established fixed prices for surplus energy outside
DECISION MEMORANDUM
the 90/110 performance band using the "Modified PacifiCorp Method.Reference Order No.
30000, Case No. PAC-05-
Agreement
The Magic Wind facility will be located in Sections 1 , 2 and 11 , Township 9 S
Range 13 E, Boise Meridian, Twin Falls County, Idaho. Magic Wind warrants that the facility
will be a qualified small power production facility (QF) under the applicable provisions of the
Public Utility Regulatory Policies Act of 1978 (PURP A). The facility will consist of eight
clipper wind turbines with individual nameplate ratings of 2.5 MW for each unit. The nameplate
capacity of the facility will be 20 MW. The Agreement contains the non-levelized, published
avoided cost rates set forth in Order No. 29391. Under normal and/or average operating
conditions, Magic Wind will not generate more than 10 aMW on a monthly basis. Energy
delivered in excess of this monthly amount is Inadvertent Energy. Idaho Power will accept
Inadvertent Energy that does not exceed the Maximum Capacity Amount (20 MW) but will not
purchase or pay for Inadvertent Energy. Agreement ~ 7.
As reflected in the Application, following issuance of Commission exemption Order
No. 30109, Magic Wind inquired ofldaho Power as to whether it would be possible to utilize the
methodology for computing shortfall energy payments the Commission approved in the Firm
Energy Sales Agreement between Idaho Power and Fossil Gulch Wind Park LLC (Case No. IPC-
04-, Order No. 29630) rather than the methodology for determining shortfall energy
payments established by Commission Order No. 29632 in Case No. IPC-04-, the U.
Geothermal case. Under the Fossil Gulch Method if the QF delivers less than 90% of the
scheduled "net energy" amount (for reasons other than forced outage or force majeure events)
the shortfall energy is priced at 85% of the market price, less the contract rate, the difference
capped at 150% of contract rate. In the u.s. Geothermal case the Commission expressed a
concern that under certain conditions use of the Fossil Gulch methodology could have adverse
results for QFs. (Order No. 29632, p. 20.) Magic Wind has voluntarily selected the Fossil Gulch
method. Agreement ~~ 7.5. Use of the Fossil Gulch methodology is a negotiated term of the
Agreement and is mutually acceptable to Idaho Power and Magic Wind.
As reflected in the Application and Appendix B to the Agreement, Magic Wind is
one of the generating resources that may be affected by the outcome of the Cassia Wind
complaint, Case No. IPC-06-, a dispute regarding cost responsibility for funding upgrades to
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Idaho Power s transmission system. Magic Wind has selected July 31 , 2007 as the Scheduled
First Energy Date and December 31 , 2007 as the Scheduled Operation Date for the facility.
These dates are subject to revision.
Section 24 of the Agreement provides that the Agreement will not become effective
until the Commission has approved all of the Agreement's terms and conditions and declared
that all payments Idaho Power makes to Magic Wind for purchases of energy will be allowed as
prudently incurred expenses for ratemaking purposes.
COMMISSION DECISION
Staff recommends that the Application in Case No. IPC-06-26 be processed
pursuant to Modified Procedure, i., by written submission rather than by hearing. Reference
IDAP A 31.01.01.201-204. Does the Commission agree that Modified Procedure is appropriate?
Scott Woodbury
bls/M:IPC-O6-26 sw
DECISION MEMORANDUM