20070808final_order_no_30399.pdf

Office of the Secretary
Service Date
August 8, 2007
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 BENNETT CREEK WIND FARM LLC
ORDER NO. 30399
CASE NO. IPC-06-
On July 11 , 2007, Idaho Power Company (Idaho Power; Company) submitted for
Commission approval an amendment (First Amendment) to the December 20, 2006, Firm Energy
Sales Agreement (Agreement) between Idaho Power and Bennett Creek Windfarm LLC (Bennett
Creek). The original Agreement was approved on February 20 2007, in Order No. 30245 (Order).
Idaho Power and Bennett Creek 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. The Commission in this Order approves the
First Amendment to the Idaho Power Bennett Creek Agreement.
BACKGROUND
In the original Agreement, Bennett Creek selected December 31 , 2007 as the estimated
scheduled operation date for the Bennett Creek Windfarm Project (Project). The Agreement
contains provisions that require the Project to pay Idaho Power liquidated damages if the Project
comes online after December 31 , 2007 (Delay Liquidated Damages). The Delay Liquidated
Damages will accrue for a period of up to ninety days. (Agreement Sections 5.6).
In the Order approving the original Agreement, the Commission noted that the Bennett
Creek Windfarm Project had not signed an interconnection agreement at the time of the
Commission s approval of the Agreement. During the negotiation of the Agreement, Bennett
Creek 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.
Bennett Creek has now completed initial discussions with Idaho Power s delivery
business unit as required by the Agreement. As a result of those discussions, it has become
apparent that the Bennett Creek Project will require network upgrades in order to accommodate
the Project's generation and that the time required for completion of necessary studies and the
ORDER NO. 30399
construction of necessary interconnection facilities and network upgrades will delay the Project'
online date beyond the December 31 , 2007 scheduled operation date. Such a delay will trigger
Delay Liquidated Damages.
Bennett Creek is also now concerned about its ability to absorb all of the network
upgrade costs. Bennett Creek has indicated that the type of settlement that is proposed in Case
No. IPC-06-21 (Cassia Case) will allow it to proceed with its Project. However, until Case No.
IPC-06-21 is resolved; Bennett Creek is reluctant to proceed.
FIRST AMENDMENT
1. Wind Turbine Manufacturer and Specifications
The delay in interconnection of the Project has caused Bennett Creek's investor and
wind turbine supplier to reallocate the project's turbines to another project. Bennett Creek 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 First 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.
2. Scheduled Operation Date
In light of the foregoing, Bennett Creek has requested that Idaho Power agree to amend
the Agreement to extend the scheduled operation date for a period of approximately one year.
Bennett Creek believes this time 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
Liquidated Damages.
3. Liquid Security
Idaho Power states that it is willing to enter into the First Amendment for two reasons.
First, in exchange for this Amendment, Bennett Creek is willing to provide Idaho Power with
liquid security in an amount sufficient to cover the Delay Liquidated Damages. This provision is
not currently included in this or other QF1 contracts and Idaho Power believes that the inclusion
this provision provides value for the Company and its customers. Second, Idaho Power is aware
of two other wind projects in the same area facing similar delays due to unanticipated (by the
1 A qualifying small power production facility (QF) under 9 292.203(a) of the Public Utility Regulatory Policies Act
of 1978 (PURPA), as amended.ORDER NO. 30399
developer) interconnection delays (Bennett Creek; Alkali Wind). If the Commission concurs
Idaho Power indicates that it will propose a similar resolution for those proj ects.
The Bennett Creek and Hot Springs contracts are the first with separate firm energy
sales agreements and interconnection agreements. When power sales agreements are approved
first, without signed transmission interconnection agreements, proj ects can be delayed and
necessitate later amendments to firm energy sales agreements. The Federal Energy Regulatory
Commission s (FERC's) Standard of Conduct rules make it impossible, the Company states, for
Idaho Power s power supply business unit to independently confirm the reasonableness of the QF
developer s selection of a particular date for scheduled operation. To address this problem in the
future, Idaho Power states that it has implemented new contract procedures. As a result, Idaho
Power states that it will now be the policy of the power supply business unit not to sign firm
energy sales agreements until the QF 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, Idaho Power states, that the Company can be reasonably certain that the scheduled
operation dates selected by the QF developer are realistic.
Comments Of Idaho Winds LLC
Idaho Winds LLC is the developer of Alkali Wind Farm (IPC-06-36; Order No.
30253), a PURP A qualified facility with an Idaho Power power supply contract. The Alkali
project faces similar obstacles to meeting its online date due to unanticipated interconnection
delays. Idaho Winds is currently engaged in discussion with the Idaho Power delivery business
unit and, like Hot Springs and Bennett Creek, it has become apparent that Alkali will require
network upgrades in order to accommodate the project's generation and the time required for
completion of necessary studies and the construction of necessary interconnection facilities and
network upgrades will delay this project's online date beyond the December 31 , 2007 Scheduled
Operation Date, triggering Delay Liquidated Damages.
Idaho Winds believes that the Delay Liquidated Damages provision of Alkali Project'
contract is adequate to protect Idaho Power and its customers and objects to Idaho Power
proposal to require Delay Security from Idaho Winds, or upon any other developer in a similar
situation.
ORDER NO. 30399
Analysis of the Commission Staff
Staff apprises the Commission that it has no objection to amending the Idaho
PowerlBennett Creek Agreement to revise the wind turbine manufacturer and specifications. The
particular turbine manufacturer and specifications are not critical, and do not change the energy
product Idaho Power will be purchasing under the Agreement.
As a condition of the one-year contract extension, the contract parties propose
extending the scheduled operating date by approximately one year. Because both Idaho Power
and Bennett Creek are in agreement, Staff does not oppose the proposed changes. Unlike most of
the other wind contracts wherein the projects have yet to come online, this Agreement contains
liquidated damages provisions in the event of delays in achieving the expected online date.
Staff believes strongly that approval of the First Amendment should not carry with it
either explicit or implicit approval of any terms of interconnection.The Interconnection
Agreement, which is yet to be signed, and the Firm Energy Sales Agreement, Staff states, are
clearly two separate agreements. The Bennett Creek project is not included in the "Twin Falls
cluster" and will not be included in a settlement stipulation in the Cassia Case IPC-06-21;
therefore, whether any terms of the proposed settlement in the pending IPC- E-06-21 case relating
to QF interconnection can be applied to this Project is yet to be determined. Staff expects that a
separate interconnection agreement for this Project will be submitted for Commission approval at
a later date.
Bennett Creek agrees to provide liquid security in the amount of estimated Delay
Damages. Staff has no objection to this consensual change in security by the contract parties.
Idaho Power states that if the Commission concurs, Idaho Power would propose a similar
resolution for other wind projects in the same vicinity that are facing similar transmission
interconnection delays. Although Staff does not have any particular objections to proposals for
similar resolutions for other projects, Staff does not believe that Commission approval of the
Bennett Creek First Amendment should be interpreted by the Company as blanket approval for
any other wind contracts.
Staff recommends that the Commission issue an 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. 30245. Staff
recommends that the Commission decline to comment on the Company s proposal to use the
ORDER NO. 30399
Liquid Security" amendment to the online delay damages provision agreed to by the contract
parties in this case as a template for other instances of QF failure to achieve scheduled operation
dates.
Commission Findings
The Commission has reviewed the filings of record in Case No. IPC-06-35 including
the underlying Agreement between Idaho Power and Bennett Creek which we approved on
February 20, 2007, in Order No. 30245 (Order). Idaho Power and Bennett Creek desire in this
case 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. The Commission finds that the proposed amendment terms have been agreed to
by the parties and we find the proposed changes comprising the First Amendment to the Firm
Energy Sales Agreement between Idaho Power and Bennett Creek Windfarm LLC to be
reasonable.
The Commission notes that Idaho Power proposes to use the "Liquid Security
amendment to the online Delay Liquidated Damages provision agreed to by the contract parties in
this case as a template for other instances of QF failure to achieve scheduled operation dates.
Idaho Winds LLC opposes the Company s template proposal.Staff contends that it is not
necessary for the Commission to address the Company s template proposal in this case docket and
advises the Commission that it has contacted both Idaho Power and Idaho Winds LLC with its
recommended treatment of the Company s template proposal. Neither party, it states, objects to
Staff s recommendation. The Commission finds that the First Amendment proposed in this case
can be approved without consideration of the Company s template proposal. We accordingly find
it reasonable to not address the substance of the Company s template proposal in this docket. We
find that the respective positions of both Idaho Power and Idaho Winds LLC regarding same can
be raised later and are preserved and not waived.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power Company,
an electric utility, and the issues raised in Case No. IPC-06-35 pursuant to the authority and
power granted it under Title 61 of the Idaho Code and the Public Utility Regulatory Policies Act
of 1978 (PURPA).
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
ORDER NO. 30399
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 and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby approve the First Amendment to the
December 20, 2006 Firm Energy Sales Agreement between Idaho Power Company and Bennett
Creek Windfarm LLc. Reference Order No. 30245.
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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of August 2007.
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~ ewe
Commission Secretary
bls/O:IPC-06-35 _
ORDER NO. 30399