20080627Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
POBOX 83720
BOISE, IDAHO 83720-0074
[phone]
ISB NO. 6864
\: i 9
Street Address for Express Mail:
472 WWASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR APPROVAL )
OF A FIRM ENERGY SALES AGREEMENT )WITH DF-AP #1 LLC. )
)
)
)
CASE NO. IPC-E-08-9
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff ofthe Idaho Public Utilities Commission, by and through its
Attorney of record, Neil Price, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 30570 on June 6, 2008,
submits the following comments.
BACKGROUND
On April 28, 2008, Idaho Power Company (Idaho Power; Company) fied an Application
with the Idaho Public Utilities Commission (Commission) seeking approval of a 20-year Firm
Energy Sales Agreement (Agreement) between Idaho Power and DF-AP #1 LLC (DF-AP) for
the Big Sky West Dairy Digester Generation Facility (Big Sky). The paries entered into the
Agreement on April 21, 2008.
The Big Sky facility wil be located approximately 7 miles southwest of Gooding, Idaho.
DF-AP warants the facility wil be a qualified small power production facility (QF) under the
STAFF COMMENTS 1 JU 27, 2008
applicable provisions of the Public Utility Regulatory Policies Act of 1978 (PUR A). The
facility wil consist of two reciprocating internal combustion engines with individual nameplate
ratings of71O kW for each unit, for a total facility nameplate generator rating of 1.5 MW.
The Agreement contains the non-Ievelized, published avoided cost rates set forth in the
Errata to Order No. 30480, adjusted in accordance with Order No. 30415 for heavy and light
load hour deliveries. Under normal and/or average operating conditions, the Big Sky facility will
not generate more than 10 aMW on a monthly basis. Energy delivered in excess of this monthly
amount is Inadvertent Energy. Idaho Power wil accept Inadvertent Energy that does not exceed
the Maximum Capacity Amount (1.5 MW) but wil not purchase or pay for Inadvertent Energy.
Agreement ir 7.5. DF-AP has selected November 21,2008 as the Scheduled First Energy Date
and February 14, 2009 as the Scheduled Operation Date.
ANALYSIS
There are two provisions in the Agreement that distinguish it from other recent PUR A
agreements. Each of the unique provisions are discussed below.
1. Security for Online Delay Damages
This Agreement contains delay damage provisions that require the project to pay Idaho
Power liquidated damages if the project comes on-line after February 14, 2009, the project's
Scheduled Operation Date. The delay damages wil accrue for a period of up to 90 days, after
which Idaho Power may terminate the Agreement. Idaho Power has included a similar contract
provision in contracts signed after mid-2007.
At least six recent QF projects have failed to meet their contractual on-line dates;
therefore, Staff believes it is reasonable for Idaho Power to continue to insert damage provisions
into PUR A contracts to provide a mechanism for the Company to be made whole if it incurs
higher costs to acquire replacement power. The delay, and in some cases complete failure, of
PUR A proj ects to come online as expected has had severe consequences on Idaho Power's
power supply costs, paricularly recently due to the extremely high market prices that have had to
be paid for replacement power.
This Agreement introduces a new set of provisions that requires DF-AP to post liquid
security that can be drawn upon to pay for liquidated damages should they be incured (delay
security). The amount of delay security wil be equal to the estimated difference between the
STAFF COMMENTS 2 JU 27, 2008
contract rates and market energy costs, multiplied by the project's expected monthly energy
generation. Under the terms of the Agreement, a minimum of$10,000 and a maximum of
$200,000 shall be required as delay securty.
Staff believes it is reasonable to require delay security to provide assurance that fuds
wil be available in the event liquidated damages are assessed. Without delay securty, liquidated
damages could not be collected from projects with no assets, which is not uncommon for projects
developed and owned by limited liability companies.
2. Heavy and Light Load Hour Rates
On September 7, 2007, the Commission, in Order No. 30415, approved adjustments to
the published avoided cost rates to reflect Idaho Power's daily load shape and to recognize the
difference in value between energy delivered by QFs durng heavy load hours and energy
delivered during light load hours. Although not likely significant for this project because it will
likely generate on a relatively flat schedule, the inclusion of heavy and light load hour rates is
noteworthy simply because this Agreement is the first to include them. Future Idaho Power
contracts wil also include them.
RECOMMENDATION
Staff recommends that the Commission approve all of the Agreement's terms and
conditions and declare that all payments Idaho Power makes to DF-AP for purchases of firm
energy wil be allowed as prudently incurred expenses for ratemaking puroses.
Respectfully submitted this 1l
¿;7 day of June 2008.
~d.~Neil Price ~ ;¡ / 895
~ Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:comments/ipce08.9nprps
STAFF COMMENTS 3 JUN 27, 2008
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 27TH DAY OF JUE 2008,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-08-09, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOV AN E WALKER
BARTON L KLINE
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(fidahopower.com
bklineØ)idahopower.com
RANDY C ALLPHIN
SR PLANNING ADMINISTRATOR
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: ra1lphinØ)idahopower.com
SEC~AR~-
CERTIFICATE OF SERVICE