20070712Amendment.pdf

r:'r:cr
IDAHO~POWER~
An IDACORP Company
7\""1 liil ' P
: "'
~; l\J..,;;J r ,-'\.Il-
Barton L. Kline
Senior Attorney
, ,
i, ,
, (! " '
J' ,
j ; '
unLX; ;,.;:::;810:
July 11 , 2007
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise , Idaho 83720-0074
Re:Case No. IPC-06-
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 Hot Springs Windfarm LLC
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of Idaho Power
Company s Motion for Approval of Amendment of Firm Energy Sales Agreement for the
above-referenced matter.
I would appreciate it if you would return a stamped copy of this transmittal letter in
the enclosed self-addressed , stamped envelope.
r!iJJ~
Barton L. Kline
BLK:sh
Enclosures
O, Box 70 (83707)
1221 W Idaho St,
Boise, ID 83702
BARTON L. KLINE, ISB # 1526
MONICA B. MOEN , ISB # 5734
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise , Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
i; ;' i i :; L:
:':"_",
;i;.
Attorneys for Idaho Power Company
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
HOT SPRINGS WINDFARM LLC
Case No. IPC-06-
IDAHO POWER'S MOTION FOR
APPROVAL OF AMENDMENT OF
FIRM ENERGY SALES
AGREEMENT
COMES NOW , Idaho Power Company ("Idaho Power" or "the Company ) and
pursuant to RP 056, moves the Commission for an Order approving an amendment to
the December 20, 2006 Firm Energy Sales Agreement ("Agreement") between Idaho
Power and Hot Springs Wind Farm LLC ("Hot Springs ). This request is based on the
following:
BACKGROUND
In Order No. 30246 issued in this case on February 20 2007 ("the Order
the Commission approved the Agreement.
IDAHO POWER'S MOTION FOR APPROVAL OF AMENDMENT OF FIRM ENERGY SALES
AGREEMENT -
In the Order the Commission noted that Hot Springs selected December
, 2007 as the estimated scheduled operation date for the Hot Springs Wind Farm
Project ("Project"). As the Commission noted on page 3 of the Order, in Idaho Power
negotiations with Hot Springs, Hot Springs agreed that an online date of December
2007 was crucial to demonstrate , for "grandfathering" purposes, that the Project was a
viable project in August 2005. The Agreement contains liquidated damage provisions
that require the Project to pay Idaho Power liquidated damages if the Project comes
online after December 31 , 2007 ("Delay Damages ). The Delay Damages will accrue
for a period of up to ninety (90) days. (Agreement Sections 5.6).
On page 9 of the Order the Commission also noted that the Hot Springs
Wind Farm Project had not signed an interconnection agreement at the time of the
Commission s approval of the Agreement. During the negotiation of the Agreement , Hot
Springs indicated to Idaho Power that it believed that the costs of interconnection would
be manageable and that the time required for interconnection studies would not
adversely impact its ability to meet the December 31 2007 scheduled operation date.
Hot Springs has now completed initial discussions with Idaho Power
delivery business unit as required by the Agreement. As a result of those discussions, it
has become apparent that the Hot Springs Project will require network upgrades in
order to accommodate the Project'generation and that the time required for
completion of necessary studies and the construction of necessary interconnection
facilities and network upgrades will delay the project's online date beyond the
December 31 , 2007 scheduled operation date.Such a delay will trigger Delay
Damages.
IDAHO POWER'S MOTION FOR APPROVAL OF AMENDMENT OF FIRM ENERGY SALES
AGREEMENT - 2
Hot Springs is also concerned about its ability to absorb all of the network
upgrade costs. Hot Springs has indicated that the settlement that is proposed in Case
No. IPC-06-21 will allow it to proceed with its Project. However, until Case No. IPC-
06-21 is resolved, Hot Springs is reluctant to proceed.
The delay in interconnection of the Project has caused Hot Springs
investor and wind turbine supplier to reallocate the project's turbines to another project.
Hot Springs must now wait for the next available turbines, which are due before the end
of the year. One of the new turbine options requires a modification of the type and size
of wind turbines allowed under the Agreement. The amendment reflects this change in
turbine manufacturer and size. It also recognizes that the turbine market is volatile and
additional changes in turbine configuration may be required in the future.
In light of the foregoing, Hot Springs has requested that Idaho Power
agree to amend the Agreement to extend the scheduled operation date for a period of
time that Hot Springs believes is necessary to ensure that it will be able to meet the
revised scheduled operation date and give the Project the opportunity to avoid the
payment of Delay Damages.
For all the above described reasons, Idaho Power and Hot Springs desire
to amend the Agreement to (1) revise the wind turbine manufacturer and specifications;
(2) revise the scheduled operation date; and (3) provide liquid security in the amount of
estimated Delay Damages.
Enclosed for the Commission approval is Attachment 1 , the First
Amendment to the Hot Springs Wind Farm Firm Energy Sales Agreement.
IDAHO POWER'S MOTION FOR APPROVAL OF AMENDMENT OF FIRM ENERGY SALES
AGREEMENT - 3
10.Idaho Power is willing to enter into the First Amendment for two reasons.
First, in exchange for this Amendment, Hot Springs is willing to provide Idaho Power
with liquid security in an amount sufficient to cover the liquidated Delay Damages. This
provision is not currently included in this or other OF contracts and Idaho Power
believes that the inclusion of this provision provides value for the Company and its
customers. Second , Idaho Power is aware of other wind projects in the same area
facing similar delays due to unanticipated (by the developer) interconnection delays. If
the Commission concurs , Idaho Power will propose a similar resolution for those
projects.
11.For the Commission s information , Idaho Power has implemented new
procedures to avoid this situation occurring in the future. FERC's Standard of Conduct
rules make it impossible for the Company s power supply business unit to independently
confirm the reasonableness of the OF developer s selection of a particular date for
scheduled operation. As a result, it will now be the policy of the power supply business
unit not to sign Firm Energy Sales Agreements until the OF project developer can
demonstrate that it has completed its interconnection application to the extent that the
scheduled operation date is unlikely to be modified due to delays in the interconnection
study and transmission construction process. This is the only way that the Company
can be reasonably certain that the scheduled operation dates selected by the OF
developer is realistic. Idaho Power recognizes that OF developers prefer to obtain a
Firm Energy Sales Agreement at the earliest possible date so they can use the
agreement to obtain project financing. In the past, speedy interconnection was simply
assumed by all parties. The situation addressed in Case No. IPC-06-21 (Cassia
IDAHO POWER'S MOTION FOR APPROVAL OF AMENDMENT OF FIRM ENERGY SALES
AGREEMENT - 4
case) has shown that the cost and timing of the interconnection process is now
material factor that must be considered in the development schedule of OF projects.
NOW, THEREFORE, based on the foregoing, Idaho Power requests that the
Commission issue its Order: (1) approving the First Amendment to the Firm Energy
Sales Agreement (Attachment 1) without change or condition; and (2) confirming that
the costs associated with the Agreement as amended will be approved as prudent
expenditures for ratemaking purposes as originally provided in Order No. 30246.
Respectfully submitted this (1-day of July 2007.
CJJt:~BARTO L. KLINE
Attorney for Idaho Power Company
IDAHO POWER'S MOTION FOR APPROVAL OF AMENDMENT OF FIRM ENERGY SALES
AGREEMENT - 5
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 11th day of July 2007, I served a true and
correct copy of the within and foregoing upon the following named parties by the
method indicated below, and addressed to the following:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
Post Office Box 83720
Boise, Idaho 83720-0074
) U.S. Mail , Postage Prepaid
(X) Hand Delivered
) Overnight Mail
) Facsimile
(X) Email Scott.woodburv~puc.idaho.qov
Dean J. Miller
Attorney for Bennett Creek
McDevitt & Miller LLP
420 W. Bannock
Boise, ID 83701
(X) U.S. Mail , Postage Prepaid
) Hand Delivered
) Overnight Mail
) Facsimile
(X) Email: ioe~mcdevitt-miller.com
""""--
IDAHO POWER'S MOTION FOR APPROVAL OF AMENDMENT OF FIRM ENERGY SALES
AGREEMENT - 6
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-O6-
IDAHO POWER COMPANY
Attachment No.
Idaho Power Facility No. 21615105
Project: Hot Springs Wind Fann
FIRST AMENDMENT TO
ENERGY SALES AGREEMENT
This First Amendment is to that certain Firm Energy Sales Agreement ("Agreement"
entered into on December 20, 2006, between Hot Springs Windfarm, LLC ("Seller ) and Idaho
Power Company ("Idaho Power ) for the Hot Springs Windfarm electric generation project
Facility
WITNESSETH:
WHEREAS, the Agreement was approved by the Idaho Public Utilities Commission
Commission ) on February 2007 in Order No. 30246; and
WHEREAS, the parties desire to amend the Agreement to (1) allow for the substitution of a
different wind turbine manufacturer and specifications and (2) revise the Scheduled Operation Date
and (3) provide liquid security in the amount of estimated Delay Liquidated Damages.
NOW THEREFORE, Idaho Power and Seller agree to amend the Agreement as follows:
In the existing Appendix B of the Agreement:
Description of Facility
The sentence that reads "Seller may substitute at any time prior to the Operation
Date, a different manufacturer and/or model wind turbine provided that the aggregate
nameplate rating of the Facility does not exceed 20 MW.is deleted in its entirety
and the following inserted in its place:
Page 1 of 6
... .....
Seller may substitute at any time prior to the Operation Date, a
different manufacturer and/or model wind turbine provided that the
aggregate nameplate rating of the Facility does not exceed 21
4 Maximum Capacity Amount
The stated Maximum Capacity of 20 MW is revised to be 21
In the existing Appendix B of the Agreement:
Scheduled First Enen!v and Operation Date
The sentence reading "Seller has selected December 31 , 2007 as an estimated
Scheduled Operation Date." is deleted and the following inserted in its place:
Scheduled Operation Date shall be no later than 365 days after the date of
the later of (1) Idaho Public Utilities Commission ("IPUC") final
unappealable order approving this amendment or (2) the IPUC final
unappealable order resolving the current IPUC case IPC-06-21 (Complaint
of Cassia Gulch Wind Park LLC and Cassia Wind Farm LLC)
The following paragraph is added to Article 5 of the Agreement.
Within thirty (30) days after the Scheduled Operation Date as
specified in Appendix B, item B-3 has been established; Seller shall post liquid
security ("Delay Security in a form as described in Appendix D equal to or
exceeding the amount calculated in paragraph 5. 7.
Idaho Power shall calculate the amount of Delay Security by
multiplying a good faith forecast of each applicable monthly Mid-
Page 2 of 6
Columbia Market Energy Cost for each month of the potential 90 day
(3 month) delay period, times the applicable month's Initial Year
Monthly Net Energy Amounts as specified in paragraph of the
Agreement. If the sum of the month's individual values results in a
total of less than $100,000 the Delay Security will be $100 000, if this
calculation results in a total of greater than $500 000 the Delay
Security will be $500 000.
Idaho Power shall release all security posted hereunder on the earlier
of (1) within 30 days after any and all Delay Liquidated Damages f2r.
the Delay Period, as calculated within the Agreement, are paid in full
to Idaho Power Company or (2) 45 days after the Operation Date has
been achieved.
The following Appendix D is added to the Agreement.
Page 3 of 6
Appendix D
Forms of Liquid Security
The Seller shall provide Idaho Power with commercially reasonable security instruments
such as Cash Escrow Security, Guarantee or Letter of Credit as those terms are defined
below or other forms of liquid financial security that would provide readily available cash
to Idaho Power to satisfY the Delay Security requirement within this Agreement.
For the purpose of this Appendix D, the term "Credit Requirements " shall mean acceptable
financial creditworthiness of the entity providing the security instrument in relation to the
term of the obligation in the reasonable judgment of Idaho Power, provided that any
guarantee and/or letter of credit issued by John Deere Capital Corporation or John Deere
Renewables, LLC or any other entity with a short-term or long-term investment grade credit
rating by Standard Poor s Corporation or Moody s Investor Services, Inc. shall be
deemed to have acceptable financial creditworthiness.
1. Cash Escrow Security Seller shall deposit funds in an escrow account established by
Idaho Power in a banking institution acceptable to both Parties equal to the Delay
Security. Such sum shall earn interest at the rate applicable to money market deposits at
such banking institution from time to time.
2. Guarantee or Letter of Credit Security Seller shall post and maintain in an amount
equal to the Delay Security: (a) a guaranty from a party that satisfies the Credit
Page 4 of 6
Requirements, in aform acceptable to Idaho Power in its discretion, or (b) a Letter of
Credit in a form acceptable to Idaho Power, in favor of Idaho Power. The Letter of
Credit will be issued by a financial institution acceptable to both parties.
Page 5 of 6
IN WITNESS WHEREOF , The Parties hereto have caused this Agreement to be executed in
their respective names on the dates set forth below:
Idaho Power Company Hot Springs Windfarm LLC.
es C. Miller, Sr. Vice President, Power Supply Glenn Ikemoto, Authorized Manager
Dated ~u..~ '2 ~C:Jc"7
Idaho Power
Dated
Seller
Page 6 of 6
IN WITNESS WHEREOF, The Parties hereto have caused this Agreement to be executed in
their respective names on the dates set forth below:
Idaho Power Company Hot Springs Windfarm L.L.C.
James C. Miller, Sf. Vice President, Power Supply Glenn Ikemoto, Authorized Manager
Dated Dated 7-()z.-ZCJo7
Idaho Power Seller
Page 6 of 6