20071015final_order_no_30453.pdf

Office of the Secretary
Service Date
October 15 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR CASE NO. IPC-06-
APPROVAL OF A FIRM ENERGY SALES
AGREEMENT FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
BETWEEN IDAHO POWER COMPANY
AND HOT SPRINGS WINDFARM LLC
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR CASE NO. IPC-06-
APPROVAL OF A FIRM ENERGY SALES
AGREEMENT FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
BETWEEN IDAHO POWER COMPANY ORDER NO. 30453
AND BENNETT CREEK WINDFARM LLC
On September 12, 2007, Idaho Power Company (Idaho Power; Company) filed
Motions with the Idaho Public Utilities Commission (Commission) in Case Nos. IPC-06-
and IPC-06-35 requesting approval of Generation Interconnection Agreements (GIA) dated
September 13, 2007 between the Company and Hot Springs Windfarm LLC (Hot Springs) and
Bennett Creek Windfarm LLC (Bennett Creek). Interconnection service will be provided at 138
kV for the integration of 24 induction generator wind turbines for Bennett Creek/Hot Springs
Windfarms. The interconnect location is (Township 4S, Range 8E, Section 23) Elmore County,
Idaho. The total project output is 39.6 MW. Total transmission network upgrades (special
facilities) cost is estimated to be $2 155 000. The milestone date for construction completion is
March 15, 2008. The Commission in this Order approves the Hot Springs/Bennett Creek
Generation Interconnection Agreements.
Firm Energy Sales Agreements (and First Amendments) were earlier approved by the
Commission between Idaho Power and Hot Springs in Case No. IPC-06-34 (Order Nos. 30246
and 30398) and Bennett Creek in Case No. IPC-06-35 (Order Nos. 30245 and 30399).
The Generation Interconnection Agreements are the first outside of the Twin Falls
queue involving PURP A generating facilities subject to Idaho Power Schedule 72 which involve
substantial upgrades to Idaho Power s transmission system. The allocation of costs from the
transmission upgrades for the two projects was not addressed in Commission Order No. 30414 in
ORDER NO. 30453
Case No. IPC-06-21 (the Cassia Gulch Wind Park and Cassia Wind Farm (collectively Cassia)
case).
In the Cassia case, the Commission approved a settlement which implemented a cost-
sharing arrangement (Cassia Formula) under which Idaho Power will contribute 25% ofthe cost
of the needed transmission upgrades, Cassia will make a non-refundable 25% contribution in aid
of construction (CIAC) to support the transmission upgrades and Cassia will make an advance in
aid of construction (AIAC) for the remaining balance ofthe cost ofthe upgrades. The AIAC will
be refunded to the Cassia projects over time if they fully perform their Firm Energy Sales
Agreements with Idaho Power.
In Order No. 30414, the Commission concluded that use of the Cassia Formula was
appropriate for the Cassia Wind Farms as well as the other PURP A generation projects in the
Twin Falls 138 kV transmission queue. However, the Commission did not authorize the
Company to automatically apply the Cassia Formula in other locations on its system where
transmission upgrades would be required. Instead, the Commission indicated that the application
of any terms or conditions approved as a part of the settlement in the Cassia case to other QF
interconnection requests "will depend on the specific characteristics of that situation." Order No.
30414, p. 11.
In the GIAs between Idaho Power and Bennett Creek and Hot Springs, the parties
have agreed to apply the Cassia Formula to share the costs ofthe transmission upgrades.
In concluding that it is appropriate to use the Cassia Formula for sharing costs of
transmission upgrades, Idaho Power applied the Commission findings and conclusions in Order
No. 30414 as follows:
1. But for the construction of the Hot Springs and Bennett Creek
Windfarms, Idaho Power would not have constructed the transmission
upgrades described in the Generator Interconnection Agreements to
provide adequate service to its native load customers. Therefore, a
contribution by the developers of a portion of the transmission upgrade
cost is appropriate.
2. Idaho Power believes that in Order No. 30414 the Commission directed
the Company to assess the benefits of individual transmission upgrades
taking into consideration "the systemwide benefits that accrue to all
customers on an integrated transmission grid." Order No. 30414, p. 10.
One way to approach that assessment is to compare the level of benefits
ORDER NO. 30453
that the upgrades will provide to the system with the level of benefits
provided in the Cassia case. The Company acknowledges that it is nearly
impossible to precisely quantify the relative system benefits conferred by
two distinct and geographically separate transmission upgrades.
However, transmission engineers can exercise their judgment and their
knowledge of transmission systems they have designed and operate.
Based on their informed judgment, Idaho Power s transmission engineers
are of the opinion that the transmission upgrades identified in the GIAs
will provide different benefits than the transmission system benefits the
Cassia upgrades will provide. Where the Cassia upgrade will install a
new transformer to interconnect the 230 and 138 kV transmission
systems in the western portion of the Magic Valley, the improvements
contemplated herein will upgrade (replace the line conductor) and update
(replace poles, insulators and hardware not capable of supporting the
larger conductor) on older transmission line. Some facilities on the line
interconnecting the Bennett Creek and Hot Springs projects may have
been providing service since 1921. The use of the Cassia Formula is
reasonable in this circumstance.
3. The Company is also of the opinion that the application of the Cassia
Formula in this case will maintain the balance between "the benefits
accruing to the customers of the grid with the cost responsibility of the
QF necessitating the timing and the construction of the upgrade." Order
No. 30414, p. 11.
4. Hot Springs and Bennett Creek, like the QF projects in the Twin Falls
queue, will displace or defer the need for other or similar generation
projects in the Company s Integrated Resource Plan (IRP) that would
likely require related transmission investment by the Company. Order
No. 30414, p. 11.
5. Idaho Power believes that application of the Cassia Formula in this
instance will allow it to successfully defend a comparability claim
brought by Federal Energy Regulatory Commission (FERC)
jurisdictional customer claiming that Idaho Power and the Commission
had given unlawful, preferential treatment to QF resources.
On September 18, 2007, the Commission issued a Notice of Motion for Approval of
Generation Interconnection Agreements and Modified Procedure in Case Nos. IPC-06-34 and
IPC-06-35. The deadline for filing written comments was October 4 2007. The Commission
Staff was the only party to file comments. Staff recommends approval of the Hot
Springs/Bennett Creek Generation Interconnection Agreement. Staff agrees with all of the
ORDER NO. 30453
reasons cited by Idaho Power as justification for applying the Cassia Formula to the Hot Springs
and Bennett Creek projects. Although not cited by Idaho Power, Staff believes that another
reason for supporting use of the Cassia Formula in this instance is because it creates an incentive
for QFs to consider economic efficiencies in the siting of their generating facilities and reduces
the potential for the shifting of costs from QFs to the Company and its customers that might
occur if no transmission upgrade costs were assessed against the QF.
The primary difference between the Hot Springs/Bennett Creek GIA and the Cassia
case, Staff notes, is that the Hot Springs/Bennett Creek GIA has no provisions for redispatch.
the Cassia case, the parties were able to negotiate an arrangement wherein Cassia and other
projects using the same transmission facilities could potentially have their generation reduced
when transmission capacity was limited. In exchange for the redispatchability by Idaho Power
Cassia and the other projects in the Twin Falls queue are responsible for a much lower
transmission upgrade cost than would otherwise be required. In this case, however, by agreeing
to bear its share of the costs to fully upgrade the capacity of the transmission line, Hot
Springs/Bennett Creek will always be able to deliver their output. Thus, there will be no need
for redispatch.
Noting that the underlying Power Sales Agreements for Hot Springs and Bennett
Creek include the 90/110% performance requirement that provide for discounted payments in the
event the project's predicted monthly performance falls outside of the performance band , Staff
states that it does not object to the requirement for only 50% Mechanical Availability Guarantee
as a condition for Hot Springs and Bennett Creek to receive repayment for advance in aid of
construction (AlAC) network upgrades. However, Staff believes that in possible future instances
where a higher Mechanical Availability Guarantee is required as a condition for receiving firm
energy rates in a Power Sales Agreement, the same higher Mechanical Availability Guarantee
should be required in order for the projects to receive repayment AIAC network upgrades.
Commission Findings
The Commission has reviewed the filings of record in Case Nos. IPC-06-34 (Hot
Springs) and IPC-06-35 (Bennett Creek) including the Company s Motion to approve the
related Generation Interconnection Agreements (GIA) for the two wind projects and the
comments and recommendations of Commission Staff. We have also reviewed the related Firm
Energy Sales Agreements for the two QF projects and our Orders approving same. Finally, the
ORDER NO. 30453
Commission has reviewed its related Cassia Order No. 30414 in Case No. IPC-06-21 wherein
we approved a methodology and formula for sharing transmission upgrade costs related to QF
requests for interconnection in the Twin Falls queue.
This Commission, we find, has exclusive authority and jurisdiction over the
interconnection and allocation of interconnection costs for QFs when an electric utility is
required to interconnect under 18 C.R. ~ 292.303 ofFERC's PURPA regulations (i., when
the QF's entire output is sold to a regulated utility). 18 c.F.R. ~ 292.306. We have such
jurisdiction and authority in these cases because Hot Springs and Bennett Creek are QFs with
Commission-approved Firm Energy Sales Agreements requiring them to sell their entire output
to Idaho Power. See Standardization of Generator Interconnection Agreements and Procedures
FERC Stats. & Regs. ~ 31 146 (2003) ("Order No. 2003"); and Standardization of Small
Generator Interconnection Agreements and Procedures FERC Stats. & Regs. ~ 31 180 (2005)
Order No. 2006" page 135 , ~ 516). Under FERC rules, interconnection costs, including all
reasonable costs of connection, switching, metering, transmission, distribution, safety provisions
and administrative costs caused solely by such QF interconnection, may be assessed by this
Commission against a QF. 18 C.R. ~~ 292.306(a), (b); 292.101.7.
The Commission finds it reasonable to apply the Cassia Formula for allocation of
transmission upgrade costs to the Bennett Creek and Hot Springs interconnect. We find the
Generation Interconnection Agreement to be consistent with our Order No. 30414. While in the
Cassia case we rejected use of the Cassia Formula as a template for other geographic areas, we
stated that we would consider use of similar terms dependent upon the specific characteristics of
an interconnect request. The Commission finds the assignment of costs in this case balances the
benefits accruing to customers of the grid with the cost responsibility of the QFs necessitating
the timing and construction of the upgrade. As in Cassia, we find that the cost sharing approach
reflected in the GIA (i.e., 25% non-refundable QF contribution in aid of construction (CIAC))
creates an incentive for QFs to consider economic efficiencies in the siting of their generating
facilities and reduces the potential for the shifting of costs from QFs to the Company and its
customers that might occur if no transmission upgrade costs were assessed against the QF.
also find persuasive, as in Cassia, a recognition that the Bennett Creek and Hot Springs projects
displace or defer the need for other or similar generation projects in the Company s Integrated
Resource Plan (IRP), resource acquisitions that would likely require related transmission
ORDER NO. 30453
investment by the Company. We find the identified reasons advanced by Company and Staff in
support of the Generation Interconnection Agreement to be persuasive and we fmd it reasonable
to approve the Bennett Creek/Hot Springs Generation Interconnection Agreements.
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 ofthe 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
utilities to enter into fixed-term obligations for the purchase of energy from qualified facilities
(QFs) and to implement FERC rules.
ORDER
In consideration of the foregoing, IT IS HEREBY ORDERED and the Commission
does hereby approve the September 13 , 2007 Generation Interconnection Agreements (GIA)
between Idaho Power Company and Hot Springs Windfarm LLC and Bennett Creek Windfarm
LLC.
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 ~ 61-626.
ORDER NO. 30453
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /::1..
day of October 2007.
MARSHA H. SMITH, COMMISSIONER
MACK A. REDFORD, COMMISSIONER
ATTEST:
Commission Secretary
O:1PC-06-34 1PC-06-35 sw
ORDER NO. 30453