20080131final_order_no_30493.pdf

Office of the Secretary
Service Date
January 31 , 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
EXERGY DEVELOPMENT GROUP OF
IDAHO LLC,CASE NO. IPC-07-
PETITIONER,
vs.ORDER NO. 30493
IDAHO POWER COMPANY
RESPONDENT.
On July 22, 2007, Exergy Development Group of Idaho LLC (Exergy) filed a
formal complaint" against Idaho Power Company (Idaho Power; Company). Exergy owns and
brings its complaint on behalf of five wind-power generating projects located within Idaho, each
possessing an approved Firm Energy Sales Agreement with Idaho Power. The subject matter of
the complaint is Idaho Power s requirements for generation interconnection for qualifying
facilities (QFs) under the Public Utility Regulatory Policies Act of 1978 (PURPA). Four of the
five Exergy QF projects are part of the Twin Falls 138 kV interconnection queue. The Company
has determined that capacity and operational constraints on the Company s transmission system
in the Twin Falls area require upgrading to accept all the generation being offered. In total
nearly 200 MW of new generation is being offered. The sharing of transmission upgrading costs
was addressed by the Commission in Idaho Power/Cassia Case No. IPC-06-, Order No.
30414.
In multiple counts, Exergy contends that Idaho Power is failing to provide cost
estimates for interconnection pursuant to Schedule 72 (Interconnections to Non-utility
Generation), is charging unauthorized deposits as a precondition of providing cost estimates, is
threatening to remove Exergy s projects from the Company s transmission queue for failure to
pay the deposits, is failing to treat all interconnection customers in the same manner and is
operating under interconnection practices and policies that have not been approved by the
Commission. In this Order the Commission finds that Exergy has been provided the "initial cost
estimates" required by Schedule 72 and finds that Exergy must make the study deposits
requested by the Company to keep its projects in the transmission queue.
ORDER NO. 30493
Pursuant to the Commission-issued Summons, Idaho Power on August 21 , 2007
filed its answer to Exergy s complaint recommending that the relief requested by Exergy be
denied and that the complaint be dismissed with prejudice. On September 12 2007, Exergy filed
a Motion (and Brief) to Compel Retention in Idaho Power s Interconnection Queue and to
Prohibit Idaho Power from Assessing Illegal Interconnection Study Deposits. By way of explicit
clarification, Exergy states that it accepts full responsibility for paying Idaho Power all prudently
incurred interconnection costs. This case is not about cost responsibility, it contends, but rather
it is about the timing of those costs. Exergy maintains that Idaho Power s Schedule 72 governs
the process for interconnecting non-utility generators to the Company s system.
Schedule 72 provides in part
Unless specifically agreed otherwise in a written agreement between the
Seller and the Company, an initial cost estimate of Company-owned
interconnection Facilities will be provided to the seller. Payment of the
estimated cost will be required prior to the Company s ordering, installing,
modifying, upgrading, or performing in any other way work associated with
the Interconnection Facilities.
...
Exergy contends that Idaho Power puts the cart before the horse. The phrase "payment of the
estimated cost " Exergy states, necessarily assumes that there is an estimate ofthe costs. Exergy
contends "there is no provision in Schedule 72 for the pre-payment of interconnection costs, nor
is there any reference in Schedule 72 to the imposition of deposits in advance of the provision of
the 'actual cost estimate " If the Commission had contemplated the use of deposits, Exergy
contends, it would surely have provided for a mechanism for collecting, refunding, and
accounting for such deposits. No utility, Exergy contends, may charge anything other than what
it is permitted to charge in its tariffs. Citing Idaho Code 9 61-313. Citing QF Power Purchase
Agreements, Appendix B Paragraph B-, Exergy contends that the agreements approved by the
Commission contemplate reimbursement of Idaho Power costs, not prepayment.
Without first implementing a ratemaking procedure or opening a docket to amend
Schedule 72, Exergy contends that Idaho Power and its QF customers are limited to the four
comers of Schedule 72 and nothing more.
On September 26, 2007, Idaho Power filed an answer to Exergy s Motion. Idaho
Power in its Answer describes FERC's four-step interconnection application process
ORDER NO. 30493
(Application, Feasibility Study, System Impact Study, Facility Study). The Company states that
it applies the Federal Energy Regulatory Commission (FERC) rules for managing priority in the
interconnection queue and for processing all interconnection requests to assure compliance with
FERC's regulations , and to ensure comparable treatment between QF and non-QF generation
developers. 1 Idaho Power contends that Exergy was in fact provided initial cost estimates for its
projects as part of project-specific Generator Interconnection Feasibility Studies. Answer to
Motion, Exhibits 1-5. (See schedule below.) Having provided Exergy with an initial estimate of
cost responsibility, the Company contends it is authorized under Schedule 72 to request an
additional deposit for further interconnection studies: If Exergy wants to stay in the
interconnection queue and continue with the design and cost estimation process, it can pay the
additional deposit. Idaho Power states that the Company s request to Exergy is consistent with
the process the Company follows for all interconnection requests. Idaho Power notes that since
year 2000, the Company has received more than 200 requests for interconnection. In each
instance, the Company has requested and received deposits to offset engineering and design
expense and to ensure that customers have some measure of protection if a developer decides to
abandon its generation project in midstream.
Exergy has already paid Idaho Power the following fees and deposits.
additional deposit requested is to proceed further in the interconnection study process.
The
UpgradeApplicationJoint Study Additional Deposit Requested Cost
QF Proiect Fee Deposit EstimateGolden Valley $500 $10 588 $35 000 Facilities Study $333 000
Milner Dam $500 $10 588 $100 000 Facilities Study 987 000
Notch Butte $500 $10 588 $100 000 Facilities Study 114 000
Lava Beds $500 N/A $10 000 System Impact Study $270 000
Salmon Falls $500 824 $10 000 System Impact Study 300 000
1 In its Reply to Answer, Exergy contends that it is unreasonable to assume that FERC's interconnection rules areappropriate for wholesale adoption in Idaho for QF interconnections. Many states, it argues, have adopted their own
comprehensive set of interconnection rules for QF interconnections that recognize the fact that most QFsinterconnect at distribution or sub-transmission voltages.
ORDER NO. 30493
Idaho Power in its Answer to Motion states that the Company is not relying on
FERC's authority as justification for collecting deposits from Exergy and that it does not need to
rely on FERC's authority. The plain language in Schedule 72, it states, provides the Company
with all the authority it needs to collect deposits to protect customers. The benefit of applying
FERC's interconnection study process, the Company maintains, is the uniformity and
consistency that it provides. Using FERC's four-stage interconnection study process and the
FERC's rules for managing the QF interconnection queue , the Company contends, is completely
compatible and consistent with the terms of Schedule 72. Nothing in Schedule 72, Idaho Power
states, precludes the Company from taking payments for interconnection facilities in
installments. A prepayment to be applied to a final bill, the Company contends, is a "deposit
regardless of what it is called.
Idaho Power recommends that Exergy s Motion be denied and that Exergy be
required to post the required deposits and that the Company be authorized to remove Exergy
projects from the interconnection queue for failure to do so. The costs of interconnection for all
participants in the Twin Falls queue, Idaho Power states, are dependent on whether or not other
projects ahead of them in the queue proceed for development. (Reference Idaho Power/Cassia
Case No. IPC-06-, Order No. 30414.) By remaining in the queue without providing
deposits in the same manner that other queue participants have provided them, the Company
contends that the Exergy projects have created uncertainty and have imposed a financial
disadvantage on other participants in the queue.
Pursuant to agreement of the parties and the Commission, oral argument in this case
was held on January 18, 2008. The following parties appeared by and through their respective
counsel:
Exergy Development Group of Idaho LLC Peter J. Richardson
Idaho Power Company Barton L. Kline
Commission Staff Scott D. Woodbury
Exergy provided copies of Federal Energy Regulatory Commission (FERC)
documents pertaining to dual-use facilities and FERC and state jurisdiction over interconnection.
FERC acknowledges that the jurisdiction of state or federal authorities regarding interconnection
ORDER NO. 30493
requests can be dependent upon the type of small generator requesting interconnection and the
nature of the underlying wholesale transaction. FERC suggests that uniformity in practice can be
obtained by states adopting small-generator interconnect rules similar to FERC's (or the NARUC
model).
Schedule 72 reqUIres that non-utility generators requesting interconnection be
provided with an "initial cost estimate." Exergy argues that Schedule 72 preceded and cannot
have contemplated the FERC four-step process. Exergy wants an accurate upfront estimate it
can take to the bank. Something more, it contends, is required than a non-binding back-of-
envelope calculation. Use of the FERC four-step process, it contends, is putting the cart in front
of the horse - it argues that Commission approval of the process is required.
Idaho Power contends there is no conflict between state and federal jurisdiction.
Idaho Power contends that it has provided Exergy with the cost estimate required by Schedule 72
(see Idaho Power Answer Attachments Al-5). Idaho Power uses the FERC study process
(feasibility study; system impact study; facility study) as internal policy. Under this policy QFs
and all small generators requesting interconnection are allowed to prepay in incremental amounts
the cost of going forward. Apart from Exergy, all other QFs, the Company contends, comply
with the small-generator interconnection process; in fact, Idaho Power contends that they like the
certainty and ability to exit at various stages.
Also argued by Exergy is the Company s policy of allowing small generators
requesting interconnection to post letters of credit or other instruments of guarantee in lieu of
actual cash deposits. The credit issue, Exergy contends, is cut from whole cloth and should not
be left to the utility s discretion. Idaho Power admits that under PURPA, FERC rules and
Commission Orders, the Company has no right to evaluate the credit status and finances of QFs
without information being volunteered. 18 C.R. 9292.602(c).
Commission Findings
The Commission has reviewed the filings of record in Case No. IPC-07-13 and has
considered the oral argument ofthe parties. We have also reviewed the Company s Schedule 72
Interconnections to Non-Utility Generation tariff. Based on our review and consideration of
same, we find the matter to be fully submitted.
In its written filings, Exergy contends "this case is not about cost responsibility, but
rather about the timing of those costs.Exergy contends that Idaho Power is charging
ORDER NO. 30493
unauthorized deposits as a precondition of providing cost estimates. A strict reading of Schedule
72 requires a prepayment of the full "initial cost estimate" as a condition of going forward in the
interconnection process. The policy underlying this provision is that the Company and its
customers should not be responsible for project costs in the event of a developer walk-away.
The Commission finds the "estimated cost of all required upgrades" amounts included in the
generator interconnection feasibility studies provided Exergy to be the "initial cost estimate
required by the Company s Schedule 72 tariff. Under the terms of Schedule 72
, "
payment of the
estimated cost will be required prior to the Company s ordering, installing, modifying,
upgrading, or performing in any other way work associated with the interconnection facilities.
We find the estimate provided by the Company to be more than the "back-of-the-
envelope" characterization of Exergy. The estimate is informed by the QF project specifics and
the Company s experience and knowledge of its integrated electrical system. All that is required
indeed all that can be expected, is that it be a fair and reasonable good-faith estimate. It is
further expected and not unreasonable, we find, for the Company to segment the interconnection
study process into increasingly greater depths of study (Feasibility Study, System Impact Study,
and Facility Study) and in the instance of the Twin Falls transmission queue to require
prepayment of a project's share in additional studies as a condition of remaining in the
transmission queue.
We do not find the Company s use of FERC's small-generator interconnection rules
as an internal administrative template for QF interconnection requests to be inconsistent with
Schedule 72. The process itself is available to all QF and non-QF small-generator applicants on
the Company s web page. There is no representation that the Company has been acting
unreasonably or unfairly. We find the incremental study approach of the Company to be of both
economic benefit to small generators requesting interconnection in assessing continued project
viability and a meaningful method of encouraging the development of local renewable energy
resources.
Exergy contends that use of the FERC rules as a template by the Company to achieve
uniformity in practice requires Commission approval. We disagree. To achieve greater
transparency between the Company s tariffs and implementation policy, however, we find it
reasonable to require the Company to propose additional language to its Schedule 72 tariff. The
additional language should describe in general the three-step study process that the Company
ORDER NO. 30493
follows including (1) opportunities to pay for additional required studies on incremental
amounts, (2) opportunities to exit the interconnection process, and (3) opportunities to qualify for
and provide alternative financial guarantees in lieu of full prepayment of the initial cost estimate.
The Company s web site information, we find, should also be routinely monitored by the
Company to assure that a consistent message is being conveyed.
CONCLUSIONS OF LA W
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 of the Idaho
Code, the Public Utility Regulatory Policies Act of 1978 (PURPA) and the Commission s Rules
of Procedure, IDAPA 31.01.01.000 et seq.
The Commission has authority under PURP A and 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, and to
implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above, IT IS HEREBY ORDERED and the Commission does hereby find the estimates of
transmission upgrade costs provided to Exergy for its five wind-powered generating projects to
be the "initial cost estimates" required under Idaho Power tariff Schedule 72. Consistent with
Idaho Power incremental study approach, as a condition of going forward in the
interconnection process and for its projects to remain in the transmission queue, Exergy is
required to make the study deposits for each of its projects as requested by Idaho Power.
IT IS FURTHER ORDERED and Idaho Power is directed to provide supplemental
language to the Company s tariff Schedule 72 to provide greater transparency in its
interconnection process.
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 9 61-626.
ORDER NO. 30493
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 3/
day of January 2008.
MACK A. REDFO
lf~~~
MARSHA H. SMITH;, COMMISSIONER
~L~
EMPToN MISSIONER
ATTEST:
~~~
D. Jewe
Commission Secretary
bls/O:IPC-07-13 sw
ORDER NO. 30493