20050830Answer to Windland's petition.pdf

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Dean J. Miller ISB #1968
McDEVITT & MILLER LLP
420 West Bannock Street
O. Box 2564-83701
Boise, ill 83702
Tel: [phone]
Fax: [phone]
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Attorneys for Magic Wind, LLC
Cassia Wind Park LLC and
Cassia Wind LLC
OR'G'NAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TIER OF THE PETITION OF
IDAHO POWER COMPANY FOR AN
ORDER TEMPORARILY SUSPENDING
IDAHO POWER'S PURPA OBLIGATION TO
ENTER INTO CONTRACTS TO PURCHASE
ENERGY GENERATED BY WIND-
POWERED SMALL POWER PRODUCTION
FACILITIES.
Case No. IPC-O5-
ANSWER OF MAGIC AND CASSIA
TO WINDLAND'S PETITION FOR
RECONSIDERATION AND
PETITION FOR STAY
COME NOW Magic Wind LLC, Cassia Wind Park LLC and Cassia Wind LLC
(collectively referred to as "Magic and Cassia ) and Answers the Petitions of Windland
Incorporated ("Windland") for Reconsideration and Stay as follows:
INTRODUCTION
In both the Petition for Reconsideration and the Petition for Stay Windland advances
three arguments to support its request that the Commission abandon the policy regarding
grandfathering" adopted in Order No. 29839 ("Suspension Order ) issued on August 4, 2005.
In the Suspension Order, the Commission adopted the following policy:
ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -
This Commission fmds it reasonable to establish the following criteria to
determine the eligibility of PURP A qualifying wind generating facilities for
contracts at the published avoided cost rates. F or purposes of determining
eligibility we find it reasonable to use the date of the Commission s Notice in this
case, i., July 1 , 2005. For those QF projects in the negotiation queue on that
date, the criteria that we will look at to determine project eligibility are: (1)
submittal of a signed power purchase agreement to the utility, or (2) submittal to
the utility of a completed Application for Interconnection Study and payment of
fee. In addition to rIDding of existence of one or both of the preceding threshold
criteria, the QF must also be able to demonstrate other indicia of substantial
progress and project maturity, e., (1) a wind study demonstrating a viable site
for the project, (2) a signed contract for wind turbines, (3) arranged financing for
the project, and/or (4) related progress on the facility permitting and licensing
path. Suspension Order, pp 9-10.
Windland argues:
With respect to wind generation, the current PURP A rates are above avoided cost.
The grandfathering policy protects projects that have no contractual or legal right to
protection.
The Suspension Order limits Idaho Power s ability complete an RFP process and to
possibly acquire cheaper resources.
As demonstrated below, each of these arguments is wrong, either as a matter of fact or
law and accordingly, both the Petition for Reconsideration and Petition for Stay should be
denied.
ARGUMENT
A. Until modified by a competent Order following hearing.. the current PURP A rates
are.. by defmition.. fair.. iust and reasonable.
The current avoided cost rates were established pursuant to law following appropriate
administrative process. See Order No. 29646 (December 1 2004), Order No. 29124 (September
2002). Windland did not participate in the proceedings to establish those rates. Windland'
ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -
belief, never previously asserted in a proper proceeding, that current rates are unreasonable, does
not make them so.
The Commission has determined there are enough facts to warrant investigation of
PUPRA rates, but it has not yet found them to be unjust or unreasonable. And, it may be that
upon full investigation the current rates, which are based heavily on 2004 natural gas prices, will
appear to be a bargain. (See e.
g.
Case No. INT -05-, Notice of Application, August 26, 2005
advising that Intermountain Gas believes its Weighted Cost of Gas has increased 27.2%).
Further, Windland suggests price comparisons that are misleading. By comparing the
current levelized PURPA rate of$61/mwh to Idaho Power s anticipated RFP price of$55mwh2
Windland fails to account for the discount that results from the "90/110" reduction contained in
standard form Idaho Power Purchase Power Agreements. Magic and Cassia s consultants have
estimated that the "90/110" discount will result in effective rate approximately 0% lower than
the published rate, leading to an effective PURP A rate very near the anticipated RFP price.
Moreover, the use of a PURPA rate of$61/mwh is misleading. Wind generation projects
universally opt for payment under IPCo s non-Ievelized rate schedule. Under that schedule the
first year rate for a 2005 contract is $50.34/mwh. See Order No. 29646, Appendix B. When
reduced by the "90/110" discount the current effective PURP A rate is closer to $45/mwh.
Accordingly, Windland's calculation of supposed overpayments by IPCo (Petition for Stay, pg 3)
IS erroneous.
As a matter of regulatory policy the Commission may adopt a exemption policy
independent of contract law.
1 $61 /mwh is actually the rate for 2006 contracts. To reflect today s conditions Windland should have used the 2005
rate of$59.62. See Order No. 29646, Appendix B.2 It is not clear whether the $55/mwh rate includes or does not include transmission and ancillary services.
ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -
Windland incorrectly asserts that only projects with signed contacts are eligible for
exemption and that the grandfathering policy to that effect adopted by the Commission in A. W.
Brown is required by law. In A. W. Brown the Commission adopted a policy that to be entitled to
existing rates a project must show there is a signed contract to sell at that rate or a meritorious
complaint alleging that the project was mature and that the developer had attempted, and failed
to negotiate a contract with the utility. See Order No. 24192. On appeal, the Supreme Court
upheld the Commission s authority to adopt such a policy as against a claim the Commission
was preempted by federal law from adopting such a limitation. See A. W. Brown v. Idaho Power
112 Idaho 812, 816, 828 P.2d 841 (1992).
A critical distinction, however, is that the Court in A. W. Brown held only that the
limitation established by the Commission was within its authority; the Court did not hold the
limitation was legally required or that it was the only limitation that could be adopted. The
precise question before the Supreme Court was:
We fust consider whether the Commission had authority to establish the
requirement that, before a CSPP can lock-in a certain rate, there must be a signed
contract to sell at that rate or a meritorious complaint alleging that the project was
mature and that the developer had attempted, and failed, to negotiate a contract
with the utility." 112 Idaho at 816.
Put differently, as a matter of policy, the Commission can adopt any grandfathering
policy which, based on evidence, is reasonable in the circumstance. The policy adopted in A. W.
Brown is not mandated by law.
The subsequent case of Rosebud Enterprises Inc.v. Idaho Public Utilities Commission
and Idaho Power Company, 131 Idaho 1 951 P.2d 521 (1997) does not change this analysis.
Rosebud affmned the holding in A. W. Brown and confirmed the Commission was not pre-
empted by federal law from adopting a policy requiring the existence of a legally enforceable
ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -
obligation as a condition to grandfathering. 131 Idaho at 6. Rosebud did not hold that such a
policy was required by law or that the Commission could not adopt some other standard.
While it is not precisely the policy advocated by Magic and Cassia, the exemption
standard adopted by the Commission in Order No. 29839 is reasonable in today s circumstances.
In the A. W Brown context the only issue was which projects were entitled to older, higher, rates.
Here, more sweeping changes to the entire regulatory structure for wind generation are proposed.
It is not unreasonable to exempt a larger category of potential projects, who have relied on the
continuance of the existing structure, than would be exempted under the A. W. Brown rule. It
cannot be said that the exemption policy in Order No. 29839 is "unreasonable, unlawful
erroneous or not in conformity with the law.IPUCRP 331.
Idaho Power, itself, recognizes that the A. W. Brown policy is not required by law. In this
case, Idaho Power proposed an exemption for those projects "in the final stages of contract
negotiation." (Gale, Direct, Tr., pg. 47). This, obviously, is a broader exemption than that
approved in A. W Brown and Rosebud. Idaho Power acknowledges that neither the existence of
a signed contract or some other form of legally enforceable obligation is a legally necessary
predicate for exemption from the Suspension Order.
Windland's suggestion to permit no exemptions to the Suspension Order is
extreme.
There is admittedly tension between the RFP process for wind acquisition and the
PURP A process for wind acquisition. Each method has its merits, which need not be discussed
here. Windland, motivated obviously by its self-interest, however, suggests an extreme position
which completely favors the RFP process over the PURP A process-it would permit no
exemptions from the Suspension Order. It is often the case that the Commission must balance
ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
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competing interests, each of which is good in its own right. It is rarely the case that, as suggested
by Windland, an absolute preference of one over the other is the best choice.
Here, the Commission exemption policy from the Suspension Order, while not precisely
the policy advocated by Magic and Cassia, is a reasoned balancing of interests: It prospectively
guards against perceived excesses of the PURP A process, but provides appropriate relief to those
who relied on the PURPA process regulatory framework to being projects close to maturity.
CONCLUSION
Based on the reasons and authorities cited herein, both Windland' s Petition for
Reconsideration and Petition for Stay should be denied.
DATED this .day of August, 2005.
Respectfully submitted
McDEVITT & MILLER LLP
ean J. Iller
McDevitt & Miller LLP
420 W. Bannock
Boise, ID 83702
Phone: [phone]Fax: [phone]
Counsel for Magic Wind LLC,
Cassia Wind Park LLC and
Cassia Wind LLC
ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -
CERTIFICATE OF SERVICE
I hereby certify that on the50lliaay of August, 2005, I caused to be served, via the methodes)
indicated below, true and correct copies of the foregoing document, upon:
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, ID 83720-0074
j iewell(illpuc.state.id. us
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Scott Woodbury
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, ID 83720-0074
swoodbu(illpuc. state.
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Barton L. Kline
Monica B. Moen
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise, ID 83707
BKline(illidahopower. com
MMoen(illidahopower. com
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Linda Nordstrom
PacifiCorp
825 NE Multnomah, Suite 1800
Portland, OR 97232
Fax: [phone]
lisa.nordstrom~pacifi corp. com
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Bob Lively
Pacificorp
One Utah Center, 23rd Floor
201 S. Main Street
Salt Lake City, UT 84140
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bob .li vely(illpacificorp. com
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ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -
William J. Batt
John R. Hammond, Jr.
Batt & Fisher, LLP
U S Bank Plaza, 5th Floor
101 South Capital Boulevard
O. Box 1308
Boise, ID 83701
Fax: [phone]
irh~battfisher .com
wi b~ battfisher. com
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Michael Heckler
Director of Marketing & Development
Windland Incorporated
7669 West Riverside Drive, Suite 102
Boise, ID 83714
Fax: [phone]
mheckler~windland. com
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Peter J. Richardson
James T. Carkulis
Richardson & 0' Leary PLLC
99 East State Street
O. Box 1849
Eagle, ID 83616
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peter~richardsonandoleary .com
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Glenn Ikemoto
Principal
Energy Vision, LLC
672 Blair Avenue
Piedmont, CA 94611
Fax: [phone]
glenni~pacbel1.net
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ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -
Richard L. Storro
Director, Power Supply
and David Meyer
1411 E. Mission Ave.
O. Box 3727, MSC- 7
Spokane, W A 99220-3727
Fax: [phone]
dick. storro~avistacorp. com
davi d. meyer~avistacorp. com
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R. Blair Strong
Paine, Hamblen, Coffin, Brooke &
Miller LLP
717 West Sprague Ave., Suite 1200
Spokane, W A 99201-3505
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r. blair .strong~painehamblen.com
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J. R. Simp lot Company
Attn: David Hawk
Director, Energy Natural Resources
999 Main Street
Box27
Boise, Idaho 83702
[phone]
Fax: [phone]
dhawk~simplot.com
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R. Scott Pasley
Assistant General Counsel
J. R. Simp lot Company
999 Main Street
P. O. Box 27
Boise, Idaho 83702
[phone]
[phone] telefax
gJasley~simplot.com
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ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
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William M. Eddie
Advocates for the West
O. Box 1612
Boise, ID 83701
billeddie~rmc i. net
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ANSWER OF MAGIC AND CASSIA TO WINDLAND'S PETITION FOR RECONSIDERATION AND
PETITION FOR STAY -