20050809Petition for stay of Order No 29839.pdf

William J. Batt
John R. Hammond, Jr.
BAIT & FISHER, LLP
U S Bank Plaza, 5th Floor
101 South Capitol Boulevard
o. Box 1308
Boise, Idaho 83701
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Attorneys for Windland Incorporated
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
IDAHO POWER COMPANY FOR AN ORDER
TEMPORARIL Y SUSPENDING IDAHO
POWER'S PURP A OBLIGATION TO ENTER
INTO CONTRACTS TO PURCHASE ENERGY
GENERATED BY WIND- POWERED SMALL
POWER PRODUCTION FACILITIES
Case No. IPC-O5-
WIND LAND
INCORPORATED'S PETITION
FOR STAY OF COMMISSION
ORDER NO. 29839
Introduction
Windland Incorporated ("Windland") hereby requests, pursuant to the Idaho Public
Utilities Commission s ("Commission ) Rule of Procedure 324, that the Commission stay, in
part, its decision in Order No. 29839 (the "Suspension Order IDAP A 31.01.01.324.
Specifically, Windland respectfully requests the Commission stay its decision to allow for
grandfathering," which in this case means that if certain criteria are met, wind-powered
qualifying facilities ("QF") will be able to require Idaho Power to purchase the power they
generate through contracts at the avoided cost rate established by Order No. 29646. Windland
files this Petition for Stay in conjunction with its Petition for Reconsideration and supporting
Briefbased on the reasons contained below.
Windland requests that the Commission stay its findings concerning "grandfathering" in
the Suspension Order on the following grounds:
The Order requires Idaho Power to enter into contracts at rates exceeding avoided
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO.' 29839 '
R \ G \ N A
cost and such requirement is contrary to the public interest and the law.
The Order sets criteria for "grandfathering" certain proposed QF projects that do
not have established contractual rights to old, clearly outdated avoided cost rates
contrary to the public interest and the law.
The Commission s implementation of "grandfathering" will detrimentally impact
and potentially eliminate Idaho Power s acquisition of wind resource generating
options that are more cost effective.
1. The Order obligates Idaho Power to enter into contracts at rates which
exceed avoided cost are not in the public interest and contrary to the law.
Evidence in the record demonstrates that the current avoided cost rate is too high for
wind powered QFs. Section 210 of the PURP A requires that the rates paid to QFs should not
exceed the incremental cost to the electric utility of alternative electric energy . 1 In its
testimony and pleadings, Idaho Power asserted that through its Request for Proposal ("RFP") it
would be able to acquire power from larger scale wind-generating power plants at $55 per MWh.
This alone shows that the incremental cost of wind-generated alternative electric energy in the
Idaho Power service territory is well below the avoided costs of nearly $61 per MWh established
in Order No. 29646.2 Idaho Power s witness, John R. Gall, testified that the current avoided cost
rate "deserves to be reexamined" because the Company thought it "would acquire wind
resources closer to $43.00" in its RFP. Testimony of John R. Gale Tr. at p. 71 , 1. 25, p. 72, ll.
11-20. Additionally, the Company believed that "integration issues" made applying the current
avoided cost rate to wind QFs questionable. Id. Staffwitness Rick Sterling also agreed that
there were sufficient reasons to question whether the current avoided cost rates as applied to
1 Public Utilities Regulatory Policy Act of 1978, 210(b)(2).
2 Indeed, Windland's bid for selling the output of the Cotterre1 wind farm is lower than both the avoided cost rate of
$61 per MWh for PURP A projects and the Idaho Power claimed $55 per MWh price, fact which further
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839, P. 2
wind QFs were too high. See Testimony of Rick Sterling, Tr. at pp. 110, 111 & 117. Using this
evidence, the Commission correctly found that avoided cost rates are set too high for wind QFs
stating:
Based on the record established in this case the Commission finds reason to
believe that wind generation presents operational integration costs to a utility
different form other PURP A qualified resources. We find that the unique supply
characteristics of wind generation and the related integration costs provide a basis
for adiustment to the published avoided cost rates, a calculated figure that may be
different for each regulated utility.
Order No. 29839 at p. 8 (emphasis added). This being the case, it is clear that the current
avoided cost rate is unjust and unreasonable as applied to wind powered QFs. Thus, to
allow for any wind-powered QF grandfathering is simply not in the public interest and
contrary to the law. See Idaho Code ~ 61-502.
Nevertheless, the Suspension Order requires Idaho Power to enter into new
contracts with wind-powered QFs at a rate that clearly exceeds avoided cost. The
consequence of this decision is that ratepayers will be required to pay for the costs of
such contracts even though the Commission has now found that the avoided cost rate for
wind projects needs adjustment. Order No. 29839 at p. 8. In addition, these costs are
significantly more expensive than those resources which could be acquired through Idaho
Power s Wind RFP as the briefing and testimony demonstrates. Idaho Power Company
Opening Briefat p. 5; Direct Testimony of Michael Heckler Tr. at p. 290, ll. 11-15. If
the Commission does not reverse its decision regarding grandfathering, the consequence
is that Idaho Power ratepayers would pay at least $3 300 000.00 dollars more for a
PURP A 10.5 MW nameplate capacity project as opposed to the same amount of energy
demonstrates that using the current avoided cost rate for wind powered QFs is unjust and unreasonable. Heckler Tr.
at pp. 290, ll. 11-292 1. 25, 293 ll. 1-
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839, P. 3
being procured through the average RFP bid.3 Multiply this by the potential of 80 to 100
MW more wind-powered QF projects being grandfathered into twenty (20)-year contracts
at a rate that the Commission has found needs adjustment and the impacts on rates are
unjust and unreasonable.4 Based on the foregoing, Windland believes that the prudent
and legally justified course of action is for the Commission to stay the grandfathering
portion of Order No. 29839 pending resolution of the Company s Petition for
Reconsideration.
2. A Stay should be granted because the Commission has ordered
grandfathering of QFs contrary to law
In the Suspension Order the Commission stated:
(TJhis Commission finds 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. For purposes of determining
eligibility we find it reasonable to use the date of the Commission s Notice in this
case, i., July 1 , 200S. 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 a finding 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., (l) a wind study demonstrating a viable site
for the project, (2) a signed contract for wind turbines, (3) arranged financing for
3 This figure is generated by taking the known $61 per MWh avoided cost rate and the RFP bid price of $55 per
MWh, per Idaho Power s Petition and assuming a plant with a 10.5 MW nameplate capacity, with a 30% capacity
factor that operates for 8760 hours per year under a 20 year contract.
See In the matter of the application of MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP for
approval of capacity charges contained in a power purchase agreement with Consumers Power Company et ai
PUR 4th 350 at pp. 124-126 (Michigan PSC1989) (Michigan PSC found that Commission s underestimation of the
amount of cogeneration capacity that would be offered to meet utility need combined with potential approval of a
rate in all "grandfathered" contracts with rates above its finding of avoided cost, when the utility only needs 1 160
MW of additional capacity, would result in ratepayers being overcharged by millions of dollars per year. The
Commission found that avoidance of such a large overcharge justified a refusal on the part of the Commission to
adhere to the "grandfathering" Furthermore, the Michigan Commission reasoned that a selection based on fITst-
come, first-served priority is not in the public interest because priority based on timing leaves to luck and chance the
selection of projects and makes no sense when the characteristics of the projects are important. In conclusion the
Commission found that it was not legally required to apply the concept of grandfathering. Furthermore, it found that
while many project developers and investors have relied -- some more reasonably than others -- on its past decisions
their potentially detrimental reliance had to be balanced against the possibility of significantly overcharging
ratepayers.
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839, P. 4
the project, and/or (4) related progress on the facility permitting and licensing
path.
Suspension Order, pp. 9-10. In so doing, the Commission requires Idaho Power to enter
into contracts with which it has no legal obligation under contract law. Idaho law provides
otherwise. Thus, the Supreme Court has stated:
In A.W. Brown Co., this Court ruled that IPUC has authority, under state and
federal law, to require that before a developer can lock in a certain rate, there
must be either a signed contract to sell at that rate or a meritorious complaint
alleging that the project is mature and that the developer has attempted and failed
to negotiate a contract with the utility; that is, there would be a contract but for the
conduct of the utility.
121 Idaho at 816, 828, P.2d at 845. Rosebud Enterprises, Inc. v. Idaho Public Utilities
Commission and Idaho Power Company, 131 Idaho 1 , 9, 951 P.2d 521 (1997) (emphasis added);
see also Rosebud Enterprises v. Idaho Public Utilities Commission 128 Idaho 609, 620, 917
P.2d 766, 777 (1996) (PacifiCorp case - the Court held that "Rosebud is not entitled to a lock-
of an avoided cost rate until it has entered into a legally enforceable and IPUC approved
obligation for the delivery of energy and capacity.) Other than the wind QF projects that the
Commission has previously approved and the Arrow Rock project, Idaho Power Company has
not entered/signed any further contracts with wind-powered QFs. Although the Company does
have obligations under federal law to purchase power from QFs, in this case where the
Commission has found the avoided cost rate need adjustment and Idaho Power has not legally
bound itself to purchase power by signing a contract . The Commission s Order is in error
because it would bind Idaho Power to purchase power despite the fact that it has not signed a
contract binding itself. This is at odds with the authority in Rosebud above. Accordingly, the
Commission should stay its findings concerning grandfathering in Order No. 29839 until
Windland's Petition for Reconsideration is resolved.
WIND LAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839, P. 5
3. The Commission s Order detrimentally impacts Idaho Power s ability
to acquire least cost resources and is not in the public interest and is contrary to the law.
The testimony in the record unequivocally demonstrates that the grandfathering of wind
powered QFs into twenty (20)-year contracts at the avoided cost rate of $60.99 per MWh will
undoubtedly impact Idaho Power s 2004 Wind RFP. Idaho Power, through Company witness
John R. Gale, has made clear that consistent with its Integrated Resource Plan, it is only seeking
to purchase 200 MW of wind power generation in 2005:
The thought of the initial 200 is that we could acquire 200 megawatts of wind
nameplate capacity, and work through those first 200 integration issues and the
Company could absorb that or if we hadn t anticipated correctly, we were able to
put 200 into the system comfortably, we thought comfortably. To go beyond that
then we thought that cost of integration became much more important, so the first
200 was kind of a try-out period, an experience-gaining period.
Gale Cross Tr. at p. 56, 11. 17-25. Although Windland believes the evidence shows 200
MW is not a "magic number Id. at Tr. 87 11., it is clear from the record that Idaho
Power will not or at least has serious reservation about acquiring more than 200 MW of
power from wind-generating projects in 2005. Mr. Gale in his testimony stated that:
In light of the large number of MW s of QF wind resources already acquired
approved and proposed, and the high bid prices received in the 2005 RFP it is
almost certain that Idaho Power will reduce the amount of wind generation it will
obtain through the 2005 RFP.At the same time, it is likely that the 2008 RFP will
need to be either reduced or eliminated altogether.
Gale Tr. at p. 39 11. 13-20; see also Idaho Power s counsel, Bart Kline s comments, Tr. at p. 15
11. 1-7. Currently, Idaho Power has nearly 80 to 100 MW of wind-power QF generation under
contract. If 80 to 100 more MW are grandfathered in, it is very likely that there will be no RFP
or one that is severely restricted as indicated by Mr. Gale s testimony and Mr. Kline s comments.
As such, the benefits Idaho Power and ratepayers could obtain through an RFP by acquiring
power from large scale wind projects at a cost-effective, reasonable market price will be
5 In addition, Windland believes the Commission s finding that the filing of an interconnection application and the
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839 , P. 6
significantly scaled back or eliminated all together. This is completely nonsensical and at odds
with the Commission s finding in Order No. 29839 that the avoided cost rate needs adjustment
the Commission s rate setting responsibilities under Idaho Code ~ 61-502 and principles of least
cost resource planning. Accordingly, the Commission should grant a stay of the
grandfathering" of Order No. 29839 until Windland's Petition for Reconsideration is resolved.
Finally, Windland must address the issue of reliance as a reason for allowing
grandfathering." If reliance justifies "grandfathering" then the Commission should also
consider that Windland along with other RFP bidders have spent substantial resources to develop
their projects. In addition, Windland submitted its bid into the RFP process prior to many of
those who are now seeking to be grandfathered into an unreasonable rate. Despite this issue
Windland still asserts that no grandfathering should occur and that the more appropriate remedy
for those who seek grandfather status is to seek reliance damages through alternative processes
rather than to allow the remedy to be that ratepayers should absorb unjust and unreasonable costs
from these contracts. See In the matter of the application of MIDLAND COGENERATION
VENTURE LIMITED PARTNERSHIP for approval of capacity charges contained in a power
purchase agreement with Consumers Power Company et ai 99 PUR 4th 350 at pp. 124-126
(Michigan PSC 1989).
Conclusion
For the foregoing reasons, Windland respectfully requests that the Commission, pursuant
to Rule of Procedure 324, stay its decision in Order No. 29839 regarding "grandfathering" until
such time as Windland's Petition for Reconsideration is resolved and/or until the time the
Commission issues an order regarding the law governing grandfathering and the parties
payment of a fee is also not sufficient grounds upon which to allow grandfathering.
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839, P. 7
relationships concerning wind powered QF contracts. After such reconsideration, Windland
respectfully requests that the Commission amend Order No. 29839 to prohibit the
grandfathering" of any wind QF projects into the avoided cost rate established by Order No.
29646.
RESPECTFULLY S UBMITIED this of August, 2005.
ohn . Hammond, Jr.
W. iam J. Batt
A TT & FISHER, LLP
101 South Capital Blvd., Suite 500
O. Box 1308
Boise ID 83701
[phone]
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839, P. 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 5th day of August, 2005 , I served the foregoing upon
all parties of record in this proceeding as indicated below.
Barton L. Kline
Monica B. Moen
IDAHO POWER COMPANY
O. Box 70
Boise, ID 83707-0070
bkl ine~idahopower.com
mmoen~idahopower. com
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Peter J. Richardson
RICHARDSON & O'LEARY PLLC
515 N. 2ih Street
Boise, ID 83702
peter~ri chrdsonando I eary. com
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Richard L. Storro
Director, Power Supply
A VISTA CORPORATION
1411 E. Mission Ave
O. Box 3727, MSC- 7
Spokane, WA 99220-3727
di ck. storro~avistacorp. COIn
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R. Blair Strong
PAINE, HAMBLEN, COFFIN
BROOKE & MILLER LLP
717 West Sprague Avenue, Suite 1200
Spokane, W A 99201-3505
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Scott Woodbury
Deputy Attorney General
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WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839 , P. 9
IDAHO PUBLIC UTILITIES COMMISSION
424 W. Washington Street
O. Box 83720
Boise, ID 83720-0074
scott. woodbury~puc.idaho. gov
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Michael Heckler
Director of Marketing and Development
WIND LAND INCORPORATED
7669 West Riverside Drive, Suite 102
Boise, ID 83714
Telephone: [phone]
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mheckler~windland. com
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Dean J. Miller
McDEVITT & MILLER LLP
420 W. Bannock
Boise, ID 83702
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Jared Grover
CASSIA WIND LLC
CASSIA GULCH WIND PARK LLC
3635 Kingswood Drive
Boise, ID 83701
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Armand Ecker
MAGIC WIND LLC
716- BEast 4900 North
Buhl, ID 83316
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Glenn Ikemoto
Principal
ENERGY VISION LLC
672 Blain Avenue
Piedmont, CA 94611
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Bob Lively
P ACIFICORP
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WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839 , P. 10
One Utah Center, 23rd Floor
201 S. Main Street
Salt Lake City, UT 84140
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P ACIFICORP
825 NE Multnomah, Suite 1800
Portland, OR 97232
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Director, Energy Natural Resources
J .R. SIMPLOT COMPANY
999 Main Street
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Boise, ID 83707-0027
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Assistant General Counsel
J .R. SIMPLOT COMPANY
999 Main Street
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William M. Eddie
ADVOCATES FOR THE WEST
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Boise, ID 83701
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Portland, OR 97205
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WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839 , P. 11
WINDLAND INCORPORATED'S PETITION FOR STAY OF COMMISSION ORDER NO. 29839, P. 12