20071031notice_of_application.pdf

Office of the Secretary
Service Date
October 31 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR AN CASE NO. IPC-O7-
ACCOUNTING ORDER AUTHORIZING
THE INCLUSION OF POWER SUPPLY NOTICE OF APPLICATION
EXPENSES ASSOCIATED WITH THE
PURCHASE OF ENERGY FROM RAFT NOTICE OF
RIVER ENERGY I LLC IN THE MODIFIED PROCEDURE
COMPANY'S POWER COST ADJUSTMENT
NOTICE OF
COMMENT/PROTEST DEADLINE
YOU ARE HEREBY NOTIFIED that on October 5 , 2007, Idaho Power Company
(Idaho Power; Company) filed an Application requesting an accounting order authorizing the
inclusion of all power supply expenses associated with the purchase of energy (13 MW) from
Raft River Energy I LLC in the Company s Power Cost Adjustment (PCA) mechanism. The
underlying Power Purchase Agreement (PP A) for 13 MW is pursuant to a Company Request for
Proposal (RFP) for geothermal resources and is the initial agreement with U.S. Geothermal, Inc.
of what will total 45.5 MW of geothermal energy. If the PPA is approved, the Company
proposes to rescind an existing Firm Energy Sales Agreement with U.S. Geothermal for 10 aMW
(IPC-05-, Order No. 29642) at the same site.
Background
Pursuant to an identified need for geothermal resources first identified in the
Company s 2004 Integrated Resource Plan (IRP) Idaho Power on June 2 2006 issued a Request
for Proposal (RFP) for 100 MW of geothermal resource. In February 2007, the Company chose
to negotiate power purchase contracts with U.S. Geothermal, Inc., a Boise company with
geothermal resources in Cassia County, Idaho.
In its bid, u.S. Geothermal, Inc. proposes to offer a total of 45.5 MW of geothermal
energy to Idaho Power and to have those facilities online between October 2007 and January
2011. The parties have negotiated and executed a Power Purchase Agreement (PP A) dated
September 24 2007 for approximately 13 MW of the 45.5 MW of geothermal power from Raft
River Energy I LLC, an affiliate of U.S. Geothermal, Inc., for its facility known as Raft River
Geothermal Power Plant Unit No., located approximately 15 miles southeast of Malta, Idaho.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
Agreements for the remaining 32.5 MW of power will be submitted to the Commission
separately from this filing.
Currently, a Commission-approved Firm Energy Sales Agreement (Agreement) is in
place between Raft River Energy I LLC and Idaho Power for a 10 aMW facility at this identical
location (Case No. IPC-05-, Order No. 29692). The approved project is a qualifying facility
(QF) under the applicable provisions of the Public Utility Regulatory Policies Act of 1978
(PURP A). If the Commission approves the PP A and authorizes inclusion of the power supply
expenses associated with the energy from the Raft River Geothermal Power Plant Unit No.1 in
the Company s PCA, Idaho Power proposes that the Company s December 29 2004 Agreement
with Raft River Energy I LLC be rescinded upon satisfaction by Raft River Energy I LLC of all
requirements to attain a first energy date as specified within the PP
Power Purchase Agreement Idaho Power/Raft River Energy I LLC
Raft River Energy I LLC initially guarantees an annual output of 108 186 000 kWh
and a 90% capacity factor beginning with the third contract year. The term of the PP A is 25
contract years from the operation date (February 1 2008). Idaho Power has an option to extend
the term of the PP A for an additional period mutually agreeable to both parties. Should Raft
River Energy I LLC choose to sell its facility, the PP A provides that Raft River first offer to sell
its facility to Idaho Power.
Under the existing PURP A Agreement for this site, the project is restricted to
providing 10 aMW of energy to Idaho Power. Energy over 10 aMW (Inadvertent Energy) may
be delivered to Idaho Power under the existing PURP A Agreement but no payment is required
for this Inadvertent Energy. The actual geothermal equipment and generation unit under this
PP A are identical to the equipment being constructed under the current PURP A Agreement.
part of the negotiations for this PP A, upon approval of this PP A by the Commission, Idaho
Power has agreed to retroactively pay for Inadvertent Energy delivered under the PURP A
Agreement. The price for the Inadvertent Energy will be the lesser of either 85% of the weighted
average of Mid-, non-firm on and off peak prices or the monthly PP A price for the applicable
months when the Inadvertent Energy was delivered to Idaho Power. If this PP A is not approved
by the Commission, the existing PURP A Agreement terms and conditions will remain in effect
which include no payments for Inadvertent Energy.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
The project is physically connected to the Raft River Rural Electric Cooperative
(RREC) electrical system and will wheel its energy across the RREC and Bonneville Power
Administration (BP A) transmission systems to deliver its energy to Idaho Power at the Minidoka
Substation. The PP A allows and Idaho Power contemplates in the future working with BP A to
reduce the BP A transmission costs for this project.
Prices under the PP A will be seasonally adjusted consistent with the seasonality
factors currently being used in Idaho Power s PURP A agreements, with the highest rates being
paid during the Company s peak energy usage months. The price for energy will start at an
annual base rate of $52.50/MWh, escalating annually at a rate of 2.1 % through 2020. For the
remaining term, the price for energy will escalate annually at a rate of 0.6% with the resulting
energy price in 2032 being $73.92/MWh. In addition to the energy price, a transmission cost of
approximately $1.75/MWh will be added to determine the total delivered price per MWh.
Idaho Power contends that the energy prices within this PP A compare favorably
against the prices contained within the PURP A Agreement for this same location. Because the
PP A has a 25-year term while the PURP A Agreement has only a 20-year term, a direct
comparison of prices under this PP A to PURP A published avoided costs, the Company states, is
not available. However, the current non-Ievelized PURP A published avoided cost for calendar
year 2007 is $52.69 and if the 20th contract year non-Ievelized PURP A published avoided cost is
escalated at the same rate as previous years, an approximate PURP A price for calendar year 2032
would be $93.14. In addition to this cost savings, Idaho Power states the PP A includes other
provisions that are superior to a PURP A agreement including but not limited to the receipt of
renewable energy credits, forecasting and security provisions, and performance assurances.
No payment is required by Idaho Power for energy deliveries over maximum
contract amounts. The price paid for all energy delivered includes the value of renewable
attributes (green tags or RECs) associated with 3 MW of geothermal generation for the first 10
years of the Agreement. For the remaining 15 years of the PP A, Idaho Power will receive 51 %
of the green tags associated with 13 MW of geothermal generation.
The PPA requires that Raft River Energy I LLC deliver detailed hourly, daily and
weekly forecasting of net energy deliveries to Idaho Power Company. If the project fails to
provide timely, reliable and useful forecasts to Idaho Power as detailed and required by this PPA
the PP A contains provisions similar to the 90%1110% delivery provisions contained in the
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
Company s current PURP A agreements that will become effective and replace the annual
performance requirements within this PP
The PPA further requires the project to post a $750 000 security deposit by the end of
the third contract year which will be available for Idaho Power to draw upon in the event
damages are assessed against the project. The $750 000 security deposit is required to be
maintained for the full term of the Agreement which includes replenishment if any withdrawals
occur during the term of the PP A.
Cost Recovery
Idaho Power requests full cost recovery of expenses under the PP A through its PCA
mechanism. Idaho Power notes that under the Company s current PCA mechanism, the
Company recovers only 90% of changes from base level net power supply costs through the
PCA for non-PURP A projects with the remaining 10% acting as an incentive for efficiency. The
Commission found at that time that it was "appropriate to exclude any future non-CSPP
(cogeneration, small power production J firm purchases from the PCA unless the Company has
first obtained Commission approval to include them." Order No. 24806 at 23. Unlike typical
wholesale power supply transactions done in day-ahead or real-time markets, Idaho Power states
that it has gone through an extensive RFP process to identify the geothermal PP A that will
provide the best value to its customers. Full recovery of power supply expenses associated with
10 MW of the 13 MW encompassed in this PP A, the Company notes, are already subject to the
Commission-approved PURP A Agreement currently in place between Raft River Energy I LLC
and Idaho Power at the same facility. Under the new PP A, Idaho Power will continue to
purchase the same electrons but at a lower cost to customers.
YOU ARE FURTHER NOTIFIED that the Commission has reviewed and
considered the Company s Application in Case No. IPC-07-17.The Commission has
preliminarily determined that the public interest regarding the Company s Application may not
require a hearing to consider the issues presented and that the issues raised by the Application
may be processed under Modified Procedure , by written submission rather than by hearing.
Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204.
YOU ARE FURTHER NOTIFIED that the Commission may not hold a hearing in
this proceeding unless it receives written protests or comments opposing the use of Modified
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
Procedure and stating why Modified Procedure should not be used.
31.01.01.203.
Reference IDAP A
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or
protests with respect to the Application and the Commission s use of Modified Procedure in
Case No. IPC-07-17 is Friday, December 21, 2007. Persons desiring a hearing must
specifically request a hearing in their written protests or comments.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the deadline, the Commission may consider the matter on its merits and enter its
Order without a formal hearing. If comments or protests are filed within the deadline, the
Commission will consider them and in its discretion may set the matter for hearing or may
decide the matter and issue its Order based on the written positions before it. Reference IDAP
31.01.01.204.
YOU ARE FURTHER NOTIFIED that written comments concerning Case No. IPC-
07-17 should be mailed to the Commission and the Company at the addresses reflected below.
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
Lisa D. Nordstrom
Barton L. Kline
Idaho Power Company
1221 W. Idaho Street (83702)
PO Box 70
Boise, ID 83707-0070
E- mail: lnordstrom~idahopower. com
bkline~idahopower.com472 W. Washington Street
Boise, ID 83702-5983
All comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.idaho.gov. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to Idaho Power at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that the Application in Case No. IPC-07-
may be viewed at www.puc.idaho.gov by clicking on "File Room" and "Electric Cases " or can
be viewed during regular business hours at the Idaho Public Utilities Commission, 472 W.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
Washington Street, Boise, Idaho and at the general business office of Idaho Power Company,
1221 West Idaho Street, Boise, Idaho.
DATED at Boise, Idaho this 31 day of October 2007.
Co ission Secretary
bls!N:1PC-07-17 sw
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE