20090113Affidavit of Counsel in Support of Brief.pdf

Bruce C. Jones, ISB #3177
Joy M. Bingham, ISB #7887
JONES & SWARTZ PLLC
1673 W. Shoreline Drive, Suite 200 (83702)
Post Office Box 7808
Boise, Idaho 83707-7808
Telephone: [phone]
Facsimile: [phone]
E-mail: bruce(fjonesandswarlaw.com
joy~jonesandswarzlaw.com
2089 It,'-!'iN /2
Pl1 S: o?
..
Attorneys for Idaho Power Company
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IDAHO POWER COMPANY,
Case No. IPC-E-08-20
Complainant,
vs.AFFIDAVIT OF COUNSEL IN
SUPPORT OF IDAHO POWER
COMPAN'S BRIEF IN OPPOSITION
TO RESPONDENT'S MOTION TO
DISMISS FOR LACK OF SUBJECT
MATTER JURISDICTION
GLENNS FERRY COGENERATION
PARTNERS, LTD., a Colorado Limited
Parnership,
Respondent.
STATE OF IDAHO )
: ss.
County of Ada )
I, Bruce C. Jones, being first duly sworn upon oath, depose and state as follows:
1. I am an attorney with the law firm of Jones & Swartz PLLC, and am authorized to
practice law before this and all courts of the State of Idaho.
2. I am counsel of record for Idaho Power Company in the above-entitled action.
AFFIDAVIT OF COUNSEL IN SUPPORT OF IDAHO POWER COMPANY'S BRIEF IN OPPOSITION TO
RESPONDENT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 1
3. Attached hereto as Exhibit A is a tre and correct copy of the Firm Energy Sales
Agreement between Idaho Power Company and Glenns Fery Cogeneration Parer, Ltd.
(Dec. 9, 1992).
4. Attached hereto as Exhibit B is a tre and correct copy of Idaho Public Utilties
Commission Order No. 24674, In the Matter of the Approval of a Firm Energy Sales Agreement
Between Idaho Power Company and Glenns Ferry Cogeneration Partners, Ltd. for the Magic
West Cogeneration Project (Jan. 22, 1993).
5. Attached hereto as Exhibit C is a tre and correct copy of the Letter from Steven
J. Helmers, Vice President, Glenns Ferr Cogeneration Parers, Ltd., to M. Mark Stokes
(June 10, 2008).
6. Attached hereto as Exhibit D is a true and correct copy of Idaho Public Utilities
Commission Order No. 21690, In the Matter of the Investigation on the Commission's Own
Motion of Reasonable Terms for Security in Agreements Between Idaho Power Company and
Cogenerators and Small Power Producers (Jan. 11, 1988).
7. Attached hereto as Exhibit E is a tre and correct copy of the First Amendment to
the Firm Energy Sales Agreement (April 12, 1994).
8. Attached hereto as Exhibit F is a tre and correct copy of the Idaho Public
Utilities Commission Order No. 25505, In the Matter of a Proposed Amendment to the Firm
Energy Sales Agreement Between Idaho Power Company and Glenns Ferry Cogeneration
Partners, Ltd. For the Magic West Cogeneration Project (May 18, 1994).
9. Attached hereto as Exhibit G isa tre and correct copy of the Second Amendment
to the Firm Energy Sales Agreement (Dec. 30, 1995).
10. Attached hereto as Exhibit H is a tre and correct copy of the Idaho Public
AFFIDAVIT OF COUNSEL IN SUPPORT OF IDAHO POWER COMPANY'S BRIEF IN OPPOSITION TO
RESPONDENT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 2
Utilties Commission Minute Entr, In the Matter of the Application of Rupert and Glenns Ferry
Cogeneration Partners for an Order Approving Amendments to Power Sales Agreements (Jan. 8,
1996).
11. Attached hereto as Exhibit I is a tre and correct copy of the Idaho Public Utilties
Commission Order No. 21800, In the Matter of the Investigation on the Commission's Own
Motion of Reasonable Terms for Security in Agreements Between Idaho Power Company and
Cogenerators and Small Power Producers (March 1988).
FURTHER YOUR AFFIANT SA YETH NAUGHT.
&I::
BRUCE C. JONES
SUBSCRIBED AND SWORN TO before me this 12th day of Januar, 2009.
~~ad~
. Notar Public for Idaho
My Commission Expires 1 f. 1.2
AFFIDAVIT OF COUNSEL IN SUPPORT OF IDAHO POWER COMPANY'S BRIEF IN OPPOSITION TO
RESPONDENT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURSDICTION - 3
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 12th day of Januar, 2009, served the foregoing
AFFIDAVIT OF COUNSEL IN SUPPORT OF IDAHO POWER COMPANY'S BRIEF IN
OPPOSITION TO RESPONDENT'S MOTION TO DISMISS FOR LACK OF SUBJECT
MATTER JURISDICTION upon all paries of record in this proceeding, by the method
indicated, addressed as follows:
Glenns Fer Cogeneration Parners, Ltd.
c/o Power Plant Management Serices, LLC
7001 Boulevard 26, Suite 310
North Richland Hils, TX 76180
Attn: Fred Barber/Scott Gross
National Corporate Research L T
921 S. Orchard Street, Suite G
Boise, ID 83706
I)U.S. Mail
( ) Fax: [phone]
( ) Overght Delivery
( ) Messenger Delivery
( ) Email: tbarber(fppmsllc.com
sgrossppms(fsuddenlink.net
rxU.S. Mail
( ) Fax:
( ) Overnight Delivery
( ) Messenger Delivery
( ) Email:~_i,~
BRUCE C. JONES
AFFIDAVIT OF COUNSEL IN SUPPORT OF IDAHO POWER COMPANY'S BRIEF IN OPPOSITION TO
RESPONDENT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 4
EXHIBIT A
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IDAHO POWER COMPANY
FIRM ENERGY SALES AGREEMENT
BETEEN
IDAHO POWER COMPANY
AND
GLENNS FERRY COGENERATION PARTNERS, LTD.
A COLORADO LIMITED PARTNERSHIP
L899
I
II
II
IV
V
Vi
VII
VII
IX
X
Xl
XII
XII
XlV
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XVi
XVII
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XiX
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FIRM ENERGY SALES AGREEMENT
BETEEN
IDAHO POWER COMPANY
AND
GLENNS FERRY COGENERATION PARTNERS, LTD.
A COLORADO LIMITED PARTNERSHIP
TABLE OF CONTENTS
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1
NO RELIANCE ON IDAHO POWER ............................... 3
WARRANTIES............................................. 4
CONDITIONS TO INTERCONNECTION ............................ 4
TERM, EARLY TERMINATION AND OPERATION DATE . . . . . . . . . . . . . . .. 10
SALE OF NET FIRM ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11
PURCHASE PRICE AND METHOD OF PAYMENT;
ADJUSTMENT OF PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . .. 13
FACILITY AND INTERCONNECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14
DISCONNECTION EQUIPMENT ................................ 14
METERING .............................................. 16
RECORDS. . . . .. . . .. . . . . ., . .. . . . . . . . . . . . .. . . . . . . . . . . . . .,. 17
PROTECTION ............................................ 17
OPERATIONS ............................................ 18
INDEMNIFICATION AND INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .. 19
LAND RIGHTS .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 22
FORCE MAJEURE ......................................... 24
LIABILITY; DEDICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24
SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25
WAIVER................................................ 25
CHOICE OF LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25
DISPUTES AND DEFAULT. ................................... 25
GOVERNMENTAL AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32
COMMISSION ORDER ...................................... 32
SUCCESSORS AND ASSIGNS .... . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32
MODIFICATION. . .. . . . . . .. . .. . . . . .. . . . . . . . . . . . . . . . . . . . . . .. 33TAXES. . . . . . . . . . . . . . . . . . . . .. . .. . ., . . . . . . . . . . . . . . ... . . .. 33
NOTICE ................................................ 33
ADDITIONAL TERMS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . .. 34
ENTIRE AGREEMENTM SIGNATURES. . . . . . . .. . . . . . . . . . . . . . . . . . .. 35APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 37
APPENDIX B ............................................. 43
APPENDIX C ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 47
APPENDIX D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 48
APPENDIX E ............................................. 50
APPENDIX F ............................................. 58
APPENDIX G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 59
APPENDIX H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 60
L900
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~ ~ No: 21765151
Project: Magic West
Less Than 10 MW
FIRM ENERGY SALES AGREEMENT
THIS AGREEMENT, entered into on this 9th day of December , 1992, is between
GLENNS FERRY COGENERATION PARTNERS, LTD., a Colorado limited partnership (hereinaftr referred
to as .Seller"), and IDAHO POWER COMPANY, an Idaho corporation (hereinafter referred to as "Idaho
Power"). Seller and Idaho Power are hereinafter sometimes referred to collectively as "Parties" or
individually as "Part."
WIT N E SSE T H:
WHEREAS, Seller plans to construct, own and operate a cogeneration facilty; and
WHEREAS, Seller wishes to sell, and Idaho Power is legally obligated to purchase firm
electric energy generated by Seller's cogeneration facilit.
NOW THEREFORE, In consideration ofthe mutual covenants and agreements hereinafter,
set fort and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE I: DEFINITIONS
As used in this Agreement and the appendices attached hereto, the following terms
shall have the following meanings:
1 .1 "Annual Net Rrm Energy" - The amount of Net Firm Energy Seller estimates it
will deliver to Idaho Power at the Point of Delivery during each Contract Year.
1.2 "Commission" - The Idaho Public Utilties Commission.
1.3 "Contract Year" - The period commencing each calendar year on the same
calendar date as the Operation Date and ending 364 days thereafter.
1.4 "Designated Dispath Facilty" - Idaho Power's Boise Bench System Dispatch
Center.
1.5 "Disconnection Equipment" - Any device or combination of devices by which
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Idaho Power can manually and/or automatically interrupt the flow of energy from the Seller to Idaho
Powet s system, including enclosures or other equipment as may be required to ensure that only Idaho
Power wil have access to the devices.
1.6 "Facilty" ~ That cogeneration facilty described in Appendix B of this
Agreement.
1.7 "First Energy Date" ~ The date when the Seller begins delivenng energy to Idaho
Power's system.
1.8 "Interconnection Facilties" - All facilties which are reasonably required by
Prudent Electrcal Practices and the National Electric Safety Code to interconnect and to allow the
delivery of energy from the Seller's electric generation plant to Idaho Power's system including, but
not limited to, Special Facilities, Disconnecton Equipment and Metering Equipment.
1.9 "Losses" - The loss of energy occurring as a result of the transformation and
transmission of energy between the Facilty and the Point of Delivery.
1.10 "Metering Equipment" - Equipment required to measure, record or telemeter
power flows between the Seller's elecric generation plant and Idaho Power's system.
1.11 "Net Firm Energy" - Electric energy produced by the Facilty, less Station Use
and less Losses, expressed in kilowatt hours ("Kwh"), which Seller commits to deliver to Idaho Power
at the Point of Delivery for the full term of the Agreement.
1.12 "Operation Date" - The day commencing at 0001 hours Mountain Time,
following the day on which the Facilty demonstrates that it has been completed and reached a degree
of reliabilty such that it is capable of delivering Net Firm Energy continuously into Idaho Power's
system.
1 .13 "Point of Delivery" ~ The location specified in Appendix B, where Idaho Power's
and Seller's electrical facilties are interconneced.
1.14 "Prudent 8ectrìcal Practices" - Those practices, methods and equipment that
are commonly and ordinarily used in electrical engineering and operations to operate electric equipment
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lawfully and with safety, dependabilty, effciency and economy.
1 .15 "Scheduled Operation Date" - The date specified in Appendix B when Seller
anticipates achieving the Operation Date.
1.16 "Schedule 72" - Idaho Power's Tariff No 101, Schedule 72 or its successor
schedule(s) as approved by the Commission.
1.17 "Season" - The three time peds identified in Article Vi.
1.18 "Seasonal Net Firm Energy" - The amount of Net Firm Energy Seller estimates
it wil deliver to Idaho Power at the Point of Delivery during each Season.
1.19 "Special Facilties" - Additions or alterations of transmission and/or distnbution
lines and transformers to safely interconnect the Seller's electric generation plant to the Idaho Power's
system.
1.20 "Station Use" - Eleetc energy which is used solely to operate the Facilty's
equipment which is auxilary or directly related to the production of electricity and which, but for the
generation of eleetricity, would not be consumed by Seller.
1.21 "Surplus Energy" - Electrc energy which is produced by the Facility and is
delivered and accepted prior to the Operation Date or which exceeds the amounts specified in
paragraph 6.1.
1.22 "Thermal Energy Metering Equipment" - Equipment required to measure and
record the volume and heat content of fuel delivered to and consumed by the Faclity and the amounts
of thermal energy produced by the Facilty and delivered to the thermal host.
ARTICLE II: NO RELIANCE ON IDAHO POWER
2.1 Seller Independent Investigation - Except for the Disconnection Equipment and
any other facilties exclusively within the control of Idaho Power, Seller warrants and represents to
Idaho Power that in entering into this Agreement and the undertking by Seller of the obligation set
forth herein, Seller has investigated and determined that it is capable of performing hereunder and has
not relied upon the advice, experience or expertise of Idaho Power in connection with the transactions
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contemplated by this Agreement.
2.2 Seller Independent Experts - Except for the Disconnection Equipment and aoy
other facilties within the exclusive control of Idaho Power, all professionals or expert including, but
not limited to, engineers, attorneys or accountants, that Seller may have consulted or relied on in
undertking the transactions contemplated by this Agreement, have been solely those of Seller.
ARTICLE II: WARRANTIES
3.1 No Warranty by Idaho Power - Any review, acceptance or failure to review
Seller's design, specifications, equipment or facilities shall not be an endorsement or a confirmation
by Idaho Power, and Idaho Power makes no warranties, expressed or implied, regarding any aspect
of Seller's design, specifications, equipment or facilities, including but not limited to safety, durabiltY,
reliabilty, strength, capacity, adequacy or economic feasibilty.
3.2 Qualifying Facilty Status - Seller warrants that prior to interconnection with
Idaho Power the Facilty wil be a "qualifying facility," as that term is used and defined in 18 CFR,
§292.207. After initial qualification, Seller wil take such steps as may be required to maintain the
Facilty's "qualifying facilty" status during the term of this Agreement and Seller's failure to maintain
qualifying facility status wil be a material breach of this Agreement.
ARTICLE iV: CONDITIONS TO INTERCONNECTION
4.1 Prior to the First Energy Date and as a condition of interconnecton with Idaho
Power, Seller shall provide the following:
4.1.1 Licenses and Permits - Submit proof to Idaho Power that all licenses,
permits or approvals necessary for Seller's operations have been obtained from applicable
federal, state or local authorities, including but not limited to, evidence of compliance with
Subpart B of 18 CFR §292.207.
4.1.2 Opinion of Counsel- Submit to Idaho Power an Opinion Letter signed by
an attorney admitted to practice and in good standing in the State of Idaho providing an
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opinion that Seller's licenses, permits and approvals as set forth in paragraph 4.1.1 above are
legally and validly issued, are held in the name of the Seller, provide the rights set fort therein,
and are enforceable in accordance with their terms. The Opinion wil be in a form acceptable
to Idaho Power and will acknowledge that the attorney rendering the opinion understands that
Idaho Power is relying on said opinion. Idao Power's acceptance of the form wil not be
unreasonably withheld. The Opinion Letter wil be governed by and shall be interpreted in
accordance with the legal opinion accord of the American Bar Association Section of Business
Law (1991).
4.1.3 Schedule 72 Payments - Make payment to Idaho Power for all costs of
Disconnection Equipment. Metering Equipment and Special Facilties as provided for in
Schedule 72 and Appendix B of this Agreement;
4.1.4 Written Acceptnce - Obtain written acceptance from Idaho Power as
provided in paragraph 8.3;
4.1.5 Insurance - Submit written proof to Idaho Power of all insurance
required in Article XiV;
4.1.6 Demonstration of Safe Operation - Demonstrate to Idaho Power's
reasonable satisfaction that Seller's Facilty has been completed, and is capable of operating
safely to commence deliveries of electric energy into Idaho Power's system;
4.1.7 Maintenance Escrow Account - Demonstrate to Idaho Power's
satisfacton that the Seller has established a maintenance escrow account in a form and with
an escrow manager which complies with Commission Order Nos 21690 and 21800. Said
maintenance escrow account shall be structured and funded as follows:
4.1 .7.1 The escrow instructons estblishing the maintenance escrow
account wil provide that the funds in the maintenance escrow account wil be pru-
dently invested and that all costs of implementing and operating the maintenance
escrow account shall be paid by the Seller. All interest earned on the funds of deposit
wil be retained in the maintenance escrow account. At the end of the term of this
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Agreement, any balance remaining in the maintenance escrow account shall be the
propert of the Seller;
4.1.7.2 Within sixt (60) days after the completion of each Contract
Year, the Seller wil:
a) provide both the escrow manager and Idaho Power with a report
prepared by an independent accounting firm showing the prior Contract Year's
actual maintenance expenses, identified by appropriate FERC maintenance
account number; and
bl provide an estimate of the Facilty's gross income from Net Firm
Energy Sales for the ensuing Contract Year, together with documentation
supporting that estimate; and
c) deposit cash in the maintenance escrow account in an amount equal
to five percent (5%) of the Facilty's estimated gross income from Net Firm
Energy sales for the ensuing Contract Year, less an amount equal to the
Facilty's actual maintenance, repair and replacement expense (maintenance
expenses) incurred during the prior Contract Year; and
d) provide Idaho Power with evidence of compliance with the
maintenance escrow account deposit requirements. This evidence of
compliance wil be provided in a manner and form acceptable to Idaho Power.
The maintenance escrow fund wil be subject to the lien rights described in
paragraph 4.1.8 below.
4.1 .7.3 If Seller determines that the maintenance expense for a
Contract Year wil exceed five percent (5%) of the Facility's estimated gross income
for that Contract Year, the Seller may request that the escrow manager release funds
from the maintenance escrow account in an amount suffcient to pay the anticipated
additional maintenance expenses. The request must include documentation supporting
the Seller's projection of excess maintenance expense, identified by appropna1e FERC
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maintenance account number, and such documentation shall be submitted to both the
escrow manager and Idaho Power. Following receipt of the request and
documentation, the escrow manager, shall, within five workng days, release the
requested funds to Seller.
4.1.8 Security Interests - Provide Idaho Power with acceptable security for
Sellet s default under this Agreement. Acceptable security wil conform to Commission Order
Nos 21690 and 21800, and may include, but wil not be limited to, security interests in real
propert, equipment, fixtures, contracts, permits, easements, rights-of-way, prepurchased fuel
supplies, fuel supply contracts, thermal energy sales contracts, and fuel supply transportation
contracts associated with the Facilty. Seller wil provide title insurance and other reasonable
security arrangements consistent with the Facilty's financing and ownership arrangements.
Idaho Power's security interests wil be superior and senior to all liens other than the first
mortgage lien, leasehold, financing statement, security agreement and other security interests
permitted in accordance with paragraph 4.1.8.1.
4.1 .8.1 If Seller desires to enter into a lease and/or incur a first
mortgage lien and other security interests that wil be superior to Idaho Power's
security interests in the Facilty, at least twenty-one (21) days prior to their execution
Seller wil provide Idaho Power with draft copies of the lease and/or deeds of trust,
mortgages and other security agreements that wil be used to secure such first lien.
Upon their execution, Seller wil provide Idaho Power with copies of the executed first
lien documents. In no event wil the amount of any lease and/or first mortgage lien
exceed $15,000,000.00 without Idaho Power's prior written consent which consent
shall not be unreasonably withheld or delayed. The executed first lien documents shall
not be assigned, amended, modified, or extended, and no replacement or refinancing
of any nature shall be undertaken, without Idaho Power's prior written consent which
consent shall not be unreasonably withheld or delayed. The amount of any refinanced
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or replaced first liens shall not exceed the unpaid principal balance of the lien they
replace.
4.1.8.2 Other than the first mortgage liens permitted herein or
temporary mechanics, statutory or similar liens incurred in the ordinary course of
business in an amount not to exceed in aggregate ten thousand dollars ($10,000.001,
Seller wil not permit any liens or encumbrances of any nature whatsoever to be
placed on the Facilty withOut Idaho Power's prior written consent, which consent wil
not be unreasonably withheld. If any unpermitted lien or encumbrance is placed on the
Facilty, Seller wil provide Idaho Power with a bond, insurance or other security
acceptable to Idaho Power in an amount sufficient to secure the full discharge of such
unpermitted lien or encumbrance.
4.1.8.3 If, aftr the initial first lien has been established, Seller desires
to assign this Agreement or assign, replace or refinance said first lien, Seller wil
reimburse Idaho Power for the reasonable out-of-pocket costs Idaho Power incurs for
document review and revision including any consents to assignment or subordination
agreements that Seller requests from Idaho Power. Idaho Power's out-of-pocket costs
wil include but not be limited to filing fees, title insurance premiums, and fees of legal
counseL.
4.1.9 Debt Serice Reserve Account - Demonstrate to Idaho Power's
satisfacton that Seller has established and funded a debt service reserve account in a form and
with a fund holder which complies with paragraph 21.4.2.
4.1 .10 Fuel Supply and Transportation Contracts - Seller will demonstrate to
Idaho Power's reasonable satisfaction that Seller has entered into fuel supply and fuel
transportation contracts which wil provide a firm supply of fuel and fuel transporttion in
amounts sufficient to allow the Facilty to generate the Annual Net Firm Energy amount each
Contract Year for the full term of this Agreement. The respective firm fuel supply and fuel
transporttion agreements wil include provisions that recognize that: (1) Idaho Power is an
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intended third part beneficiary of the fuel supply and fuel transportation agreements; and (21
that Seller and the fuel supplier and fuel transporter wil be jointly and severally liable to Idaho
Power under their respective agreements for payment to Idaho Power of damages arising out
of Seller's permanent curtilment as descñbed in paragraph 21.3 herein if such permanent
curtailment by Seller arises out of an uncured breach of the fuel and/or fuel transporttion
agreements by the fuel supplier or fuel transporter resulting in a curtailment or termination of
the fuel supply or fuel transporttion. The contract provisions to be included in the fuel supply
and transportation agreements to comply with the requirements of subparagraphs (1) and (2)
wil be substantially similar to Appendix F.
4.1.11 Thermal Host Contract - Seller wil demonstrate to Idaho Power's
reasonable satisfaction that Seller has entered into a firm contract for the sale of an amount
of thermal energy from the Facilit sufficient to ensure that the Facilty wil comply with
paragraph 3.2 (Qualifying Facilty Status) for the full term of this Agreement. The thermal
energy purchaser wil execute an agreement with Idaho Power and Seller providing, among
other things, that: (1) Idaho Power is an intended third part beneficiary of the thermal energy
sales agreement; and (2) that Seller and the thermal energy purchaser wil be jointly and
severally liable to Idaho Power for payment to Idaho Power of any damages arising out of
Seller's permanent curtailment as described in paragraph 21.3 herein, if such permanent
curtilment arises out of an uncured breach of the Thermal Energy Sales Agreement by the
thermal host which results in a loss of Seller's qualifying facilty status. The contract provision
to be executed by the thermal energy purchaser to comply. with the requirements of
subparagraphs (1) and (2) wil be substantially similar to Appendix G.
4.1 .12 Obtain written confirmation from Idaho Power that all conditions to
interconnection have been fulfiled. Such wñtten confirmation shall not be unreasonably
withheld by Idaho Power.
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ARTICLE V: TERM, EARLY TERMINATION, AND OPERATION DATE
5.1 Term. Except as otherwise provided, this Agreement shall become effective
on the date first above written, and shall continue in full force and effect for a period of Twenty (20)
Contract Years.
5.2 Early Termination. Either Part may terminate this Agreement at the end of the
fifteenth Contract Years by giving the other Part written notice of termination a minimum of one year
prior to the beginning of the fifteenth Contrct Years provided, hQwever, that neither part shall be
allowed to terminate until at least five (5) years after the date of expiration of the initial lease and/or
the initial permanent first lien financing for the Project.
5.2.1 Liquidated Administrative Cost . If either Party exercises its
option to terminate, in addition to any payments due under paragraph 5.2.3, the Part
initiating termination wil pay the other Part liquidated administrative costs which wil
be determined according to the following formula:
(kWh) x (RateIkWh) x (Percent) = liquidated administrative costs
Where:
"kWh" is the Annual Net Firm Energy amount shown in paragraph 6.3; and
"RateIkWh" is the sum of the base payment shown in paragraph 7.1.1 plus the
adjustable payment as set on the July 1 st immediately prior to the notification of
intention to terminate; and
"Percent" is a multiplier based on the following schedule:
4 Year's prior notice of termination: 1.5%
3 Year's prior notice of termination: 2.0%
2 Year's prior notice of termination: 2.5%
1 Year's prior notice of termination: 3.0%
5.2.2 Idaho Power. Early termination under this paragraph by Idaho Power is
not a default by the Seller and wil not constitute a permanent curtilment under
paragraph 21.3.
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5.2.3 ~ - Early termination under this paragraph by the Seller wil
constitute a permanent curtilment under paragraph 21 .3.
5.3 Operation Date - The Operation Date may occur only after Seller has achieved
the First Energy Date, and the necessary degree of completion and reliabilty has been demonstrted
to Idaho Power's reasonable satisfaction, and Idaho Power has confirmed such reasonable satisfaction
in writing. The procedure for establishing and confirming eligibilty for an Operation Date is set out in
Appendix H. Seller shall have the dut to obtain that confirmation and it wil not be unreasonably
withheld by Idaho Power. Prior to the Operation Date, Seller must provide the following:
(1 ) As-builtdrawings of the Seller-furnished interconnecton equipment, and
(2) Executed Certification of Design Engineer, Engineer's Certification of
Design & Constructon Adequacy, and Engineer's Certification of Operations and Maintenance Policy
as described in Commission Order No 21690. These certificates wil be in the form specified in
Appendix E, but may be modified to the extent necessary to recognize the different engineering
disciplines providing the certficates.
(3) Written verification by the Design Engineer that the Thermal Energy
Metering Equipment has been installed, tested and is operating satisfactorily.
ARTICLE Vi: SALE OF NET FIRM ENERGY
6.1 Deliver and Accptance of Net Firm Energy - Excet when prevented by events
of force majeure (Article XVI) or otherwise excused as provided herein, Idaho Power wil purchase up
to 10,000 kWh per hour of Net Firm Energy produced by the Facility and delivered by Seller to the
Point of Delivery. All energy produced and delivered by Seller in excess of 10,000 kWh per hour wil
be purchased as Surplus Energy.
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6.2 Seasonal Net Firm Energy Amounts- Based on expected site specific equipment
performance and average energy producton estimates based thereon, Seller estimates that it can
deliver Net Firm Energy in the following seasonal amounts:
Season 1
March
April
May
20,976,000 kWh's Total
Season 2
June
July
August
September
27,816,000 kWh's Total
Season 3
October
November
December
January
February
34,428,000 kWh's Total
6.3 Annual Net Firm Energy Amount - The Annual Net Firm Energy amount shall be
83,220,000 kWh and shall be the sum of the three Seasonal Net Firm Energy amounts Seller specified
above. After a reasonable period of operating experience but not later than the end of the fifth (5th)
Contract Year, the Parties wil review the actual Annual Net Firm Energy production of the Facilty.
If the Parties determine that there is a material difference between the actual Annual Net Firm Energy
producton of the Facilty and the Annual Net Firm Energy amount specified above, the Annual Net Firm
Energy amount and the resulting Appendix C lump sum repayment amount wil be amended to
recognize actual operating experience.
6.4 Subsequent Determination that Facilty Capacity Exceeds Ten Megawatts
Cogeneration and small power producton facilties with generating capacit larger than 10 megawatts
("MW") are not leally entitled to the rates terms and conditions contained in this Agreement. The
rates, terms and conditions contained in this Agreement are premised on Seller's representation that
the c~pacit of the Facility is not larger than 10 MW. If, at any time, Idaho Power determines that the
Facilty's capacity consistently exceeds 10 MW, Idaho Power wil notify Seller and the Commission.
If the Commission determines that the FaciltY's capacitY exceeds 10 MW, then this
Agreement may be modified by the Commission.
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ARTICLE VII: PURCHASE PRICE AND METHOD OF PAYMENT;
ADJUSTMENT OF PURCHASE PRICE
7 . 1 Net Firm Energy Purchase Price - The price to be paid to Seller for Net Firm Energy
wil be the sum of the following payments:
7.1 .1 Base Payment -
Season 1 35.63 Mils/kWh
Season 2 58.16 Mils/kWh
Season 3 48.47 MillslkWh
7.1.2 Adjustable Payment -In addition to the base payment specified in paragraph
7.1.1, Idaho Power shall pay to Seller an adjustable payment which shall be established by the
Commission and subject to change pursuant to Commission Order effective on July 1 of each
year during the term of this Agreement. While the Parties do not know what the adjustable
payment amount wil be as of the Operation Date under this Agreement, the Parties
acknowledge that the adjustable payments as of the date of the signing of this Agreement are
as follows:
Season 1 7.00 Mils/kWh
Season 2 11 .42 Mils/kWh
Season 3 9.52 Mils/kWh
7.2 Surplus Energy Purchase Price - Surplus Energy wil be purchased at the non-firm
rate computed in accordance with option B in Idaho Power's Tariff 101, Schedule 86 or with its
successor schedule(s) as approved by the Commission.
7.3 Continuing Jurisdiction of the Commission - This Agreement is a special contract
and as such, the rates, terms and conditions contained in this Agreement wil be constred in
accordance with ~ Power Company v. Idaho Public Utilities Comm'n and Afton Energy, Inc, 107
Idaho 781,693 P2d 427 (1984), ~ Power Company ~ Idaho Public Utilities Comm'n, 107 Idaho
1122, 695 P2d 1261 (idaho 1985), Af Energy, Inc, ~ Idaho Power Company, 111 Idaho 925, 729
P2d 400 (1986), Section 210 of the Public Utilties Regulatory Policies Act of 1978 and 18 CFR
§ 292.303-308.
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ARTICLE VII: FACILITY AND INTERCONNECTION
8.1 Design of Facilty - Seller shall design, construct, install, own, operate and maintain
the Facility and any Seller-owned interconnection facilities so as to allow safe, reliable delivery of
electric energy to Idaho Power's system for the full term of the Agreement.
8.2 Interconnection Facilties - Except as specifically provided for in this Agreement,
interconnection of the Facility wil be in accordance with Schedule 72. Seller wil pay all costs of
interconnecting the Facility with Idaho Power.
8.3 Idaho Power Review - To assure the Facilty and Seller-furnished Interconnecton
Facilities are of suitble size and are compatible with Idaho Power's system, Seller shall submit the
designs, plans, specifications and performance data for the Facility and Seller-furnished Interconnection
Facilities to Idaho Power for review. Idaho Power shall, in writing and in conformance wit
paragraph 4.1 .4, notify Seller of its acceptance and confirmation of system compatibility or conversely,
notify Seller, in writing, of any changes which, consistent with Prudent Electrical Practces. Idaho
Power determines are reasonable and necessary to assure the safe delivery of electric energy from the
Facilty to Idaho Power's system.
ARTICLE IX: DISCONNECTION EQUIPMENT
9.1 Disconnect Equipment - Idaho Power wil, at Seller's expense, provide, own,
operate, and maintain all Disconnecton Equipment. At Seller's request, Idaho Power wil provide Seller
with the general specifications and an itemization by category of the costs of such Disconnection
Equipment. Idaho Power will establish the settings of Disconnection Equipment to disconnect auto-
matically from the Facilty for the protection of Idaho Power's system and personnel consistent with
Prudent Electrical Practices. Upon Seller's request, Idaho Power wil notify Seller as to the original
setting and any adjustments thereof. Except as otherwise required by Prudent Electrical Practces, Dis-
connection Equipment wil be designed so that the closure of any breaker or other disconnectng device
which connect the FaciltY to Idaho Power's system shall be controlled by equipment which wil
perform the following:
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(1) Automatically monitor the status of the electical system on Idaho Power's side
of the disconnectng device as to voltage and frequency; and
(2) Prohibit closure or reconnection until voltage and frequency have been within
approved limits for a continuous period of not less than five (5) minutes; and
(3) Operate so that if Idaho Power's system is de-energized within sixt (60)
seconds after closure of the disconnecting device, the disconnecting device wil immediately open and
not close again until it has been manually reset and/or Idaho Power can safely reclose the
Disconnecting Equipment.
9.2 Securit of Disconnect Equipment - The Disconnection Equipment wil be located
in an enclosure secured by a lock or otherwise secured in a manner designed to ensure that only Idaho
Power's authorized personnel wil have access to the disconnecting devices.
9.3 Remote Disconnection - OtherDisconnectionEquipment,includingequipmentwhich
wil provide Idaho Power's operating personnel with the abilty to remotely control and monitor the
status of the breaker or other disconnecting device by radio or hard-wire circuit between the Facility
and the Designated Dispatch Facility may be specified by Idaho Power when, in Idaho Power's
reasonable judgment, such equipment is required by Prudent Electrical Practices. Seller recognizes that
such remote control equipment may not initially be required by Idaho Power, but at such time as
operating conditions on Idaho Power's system dictte, Idaho Power wil install this remote control
equipment at Seller's expense. If Seller disputes Idaho Power's determination that the installation of
such remote Disconnection Equipment is required, such dispute shall be submitted to the Commission
for resolution.
9.4 Interference with Disconnection Equipment - If Seller attempts to modify, adjust or
otherwise interfere with the Disconnection Equipment or its enclosure such action shall constitute an
event of default pursuant to Article XXi and a material breach of this Agreement.
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ARTICLE X: METERING
10.1 Metering and Telemetry ~ Idaho Power shall, for the account of Seller, provide,
install, and maintain required Metering Equipment to be located at a mutually agreed upon locaton to
record and measure power flows to Idaho Power in accordance with the standards set forth in
Appendix A of this Agreement. If required by Idaho Power, metering wil also include measurement
of kilovar~hours in a manner agreed to by both Parties. All Meter Equipment and installation costs shall
be borne by Seller, including costs incurred by Idaho Power for inspecting and testing such equipment
at reasonable intervals at Idaho Power's actual cost of providing this Metering Equipment and seryices.
The point of metering shall be at the location described in Appendix B of this Agreement. All meters
used to determine the billng hereunder shall be sealed and the seals shall be broken only by Idaho
Power when the meters are to be inspected, tested or adjusted.
10.2 Meter Inspection - Idaho Power shall inspect and test all meters upon their
installation and at least once every four (4) years thereafter. If requested by Seller, Idaho Power shall
make a special inspection or test of a meter and Seller shall pay the reasonable costs of such special
inspection. Both Parties shall be notified of the time when any inspection or test shall take place, and
each Part may have representatives present at the test or inspection. If a meter is found to be
inaccurate or defective, it shall be adjusted, repaired, or replaced, at Idaho Power's expense, in order
to provide accurate metering. If a meter fails to register, or if the measurement made by a meter
during a test varies by more than two percent (2%) from the measurement made by the standard meter
used in the test, adjustment (either upward or downward) to the payments Seller has received shall
be made to correct those payments affected by the inaccurate meter for the actual period during which
inaccurate measurements were made. If the actual period cannot be determined, correctons to the
payments will be based on the shorter of (1) a period equal to one-half the time from the date of the
last previous test of the meter to the date of the test which established the inaccuracy of the meter;
or (2) six (6) months.
10.3 Telemetry - Consistent with Appendix A of this Agreement, Idaho Power shall in-
stall, operate and maintain. at Seller's expense, metering, communications and telemetry Metering
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Equipment which will be capable of providing Idaho Power with continuous instantaneous telemetry
of Seller's net generation to Idaho Power's Designated Dispatch Facilty.
10.4 Thermal Eneray Metring Equipment - During the term of this Agreement, Seller wil
install, operate and maintain or cause to be installed, operated and maintained the Thermal Energy
Metering Equipment.
ARTICLE XI: RECORDS
11 .1 Maintenance and Retention of Records - Seller shall maintain at the Facility or such
other location mutually acceptable to the Parties, adequate electric metering and related power
production records, thermal energy metering records and fuel delivery and consumption records
suficient to permit corroboration, by Idaho Power, that the Facility continues to meet the operating
and efficiency standards required to maintain qualifing cogeneration facilty status in compliance with
18 CFR 292.205(a). Seller wil maintain these records in a form approved by Idaho Power and wil
retain them for a period of not less than three (3) years aftr the date the records are generated.
11.2 Inspection - Idaho Power, after reasonable notice to Seller, shall have the right,
during normal business hours, to inspect and audit any or all of the above referenced records.
ARTICLE XII: PROTECTION
12.1 Seiter shalt construct, operate and maintain the Facility and Seller-furnished
Interconnection Facilties in accordance with Appendix A, Prudent Electrical Ptactices, the National
Electrical Code, the National Electrical Safety Code and any other applicable local, state, and federal
codes. If, in the reasonable opinion of Idaho Power, Seller's operation of the Facilty or Interconnection
Facilties is unsafe or may otherwise adversely affect Idaho Power's equipment, personnel, or service
to its customers, Idaho Power may physically interrupt the flow of energy from the Facility or take such
other reasonable steps as Idaho Power deems appropriate under the circumstances. Except in the case
of an emergency, Idaho Power wil attempt to notify Seller of such interruption prior to its occurrence
as provided in paragraph 13.8. Seller shall provide and maintain adequate protective equipment suff-
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cient to prevent damage to the Facilty and Seller-furnished Interconnection Facilities. In some cases,
some of Seller's protective relays wil provide back-up protection for Idaho Power's facilties. In that
event, Idaho Power wil test such relays annually and Seller wil pay the actal cost of such annual
testing.
ARTICLE XII: OPERATIONS
13.1 Emergency Conditions - Seller agrees that in the event of and during a period of
a shortage of power on Idaho Power's system as declared by Idaho Power in its reasonable discretion,
Seller shall, at Idaho Power's request and within the limits of reasonable safety requirements as
determined by Seller, use its best eforts to provide the requested energy, and shall, if necessary, delay
any scheduled shutdown of the Facility.
13.2 Communications - Idaho Power and Seller shall maintain appropriate operating
communications through Idaho Power's Designated Dispatch Facilty, and Seller shall report to Idaho
Power at the times and in the manner set forth in Appendix A of this Agreement.
13.3 Energy Acceptance - Idaho Power shall be excused from accepting and paying for
Net Firm Energy delivered by Seller to the Point of Delivery under the following circumstances:
13.3.1 If it is prevented from doing so by an event of force majeure.
13.3.2 If Idaho Power determines that curtailment, interruption or reduction of Net
Firm Energy deliveries is necessary because of line constructon or maintenance requirements,
emergencies, operating conditions on its system, or as otherwise rsquired by Prudent Electrical
Practices. If, for reasons other than an event of force majeure, Idaho Power requires such a
curtailment, interruption or reduction of Net Firm Energy deliveries for a period that exceeds
twenty (20) consecutive days, beginning with the twenty-first day of such interruption,
curtailment or reduction, Seller wil be deemed to be de1ivering Net Firm Energy at a rate
determined by dividing the seasonal Net Firm Energy amount specified in paragraph 6.2 for the
season in which the interruption or curtailment occurs by the number of hours in that season.
Idaho Power wil notify Seller when the interruption, curtailment or reduction is terminated.
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13.4 Voltage Levels - Seller shall use it best efforts to minimize voltage fluctations and
to maintain voltage levels acceptable to Idaho Power. Idaho Power may, upon one hundred eighty
(180) days' notice to Seller, change its nominal operating voltage level by more than ten percent (10%)
at the Point of Delivery, in which case Seller shall modif, at Idaho Power's expense, Seller's
equipment as necessary to accommodate the modified nominal operating voltage level.
13.5 Generator Ramping - Idaho Power shall have the right to limit the rate that
generation is changed at startup, dunng normal operation or following reconnection to Idaho Powers
system. Generation ramping may be required to permit Idaho Power's voltage regulation equipment
time to respond to changes in power flow.
13.6 Scheduled Maintenance - On or before January 1 of each year, Seller shall submit
a proposed maintenance schedule for that year and Idaho Power and Seller shall mutually agree as to
the accePtabilit or unacceptabilty of the proposed date(s). The Partes' determination as to the
acceptabilty of Seller's timetable for scheduled maintenance wil take into consideration Prudent
Electrical Practices and neither Part shall unreasonably withhold it acceptance of the proposed date
for scheduled maintenance.
13.7 Maintenance Coordination - The Parties shall, to the extent practical, coordinate
their respective line and Facility maintenance schedules such that they occur simultaneously.
13.8 Contact Prior to Curtilment - Idaho Power wil contact Seller prior to exercising its
fights to curtail, interrupt or reduce deliveries from Seller. Seller understands that in the case of
emergency circumstances, no notice wil be given to Seller prior to interruption, curtailment, or
reduction.
ARTICLE XIV: INDEMNIFICATION AND INSURANCE
14.1 Indemnification - Each Part shall agree to hold harmless and to indemnify the other
Part, its officers, agents, and employees against all loss, damage, expense and liabilty to third
persons for injury to or death of person or injury to propert, proximatelv caused by the indemnifying
Part's construction, ownership, operation or maintenance of, or by failure of, any of such Part's
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i
works or facilties used in connection with this Agreement. The indemnifying Part shall, on the other
Part's request, defend any suit asserting a claim covered by this indemnity. The indemnifying Party
shall pay all costs that may be incurred by the other Part in enforcing this indemnity.
14.2 Insurance - During the term of this Agreement, Seller shall secure and continuously
carry the following insurance coverages:
14.2.1 Comprehensive General Liabilty Insurance for both bodily injury and
propert damage with limits equal to fifteen percent (15 % i of the total cost of the FaciltY, 2r
$1,000,000, whichever is greater, each occurrence, combined single limit. The deductible for
such insurance shall not exceed one-half of one percent (0.5%) of the total cost of the Facilty.
14.2.2 Propert Insurance for catastrophic perils with minimum limits not less than
sixt percent (60%) of the total cost of the Facilit. The Propert Insurance coverage wil be
written on a replacement cost basis and wil include:
(a) Standard fire policy.
(b) Extended coverage endorsement.
(c) Vandalism and malicious mischief endorsement.
(d) Earthquake and flood insurance.
(e) The deductble for the above property insurance coverage shall not exceed
one percent (1 %) of the total cost of the Facilty.
14.2.3 Boiler and machinery insurance with minimum limits not less than ninety
percent (90%) of the total cost of the equipment covered in (a) below:
la) All boiler and machinery coverage must be written on a "comprehensive
form" basis to provide coverage against the sudden and accidental breakdown of all boilers,
machinery and electrical equipment, turbines, generators, and switchgear.
(b) Coverage under this insurance must be written on a "Replacement Cost"
basis.
(c) The deductible for this insurance shall not exceed two percent (2%) of the
total cost of the equipment covered in (a) above.
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14.2.4 Business Interruption (Loss of Incomellnsurance with minimum daily limits
not less than seventy-five percent (75 %) of the Facilty's estimated gross daily electical revenue
and total policy limits not less than twenty percent (20%) of the Facilit's estimated gross
annual revenue from the sale of electrical energy:
(a) Coverage wil include Seller's loss of earnings when business operations are
curtailed or suspended because of a loss due to an insured peril. Coverage may be written on
an actual loss sustained basis.
(bl This insurance coverage must be endorsed to the Propert Insurance Policy
and the Boiler and Machinery Insurance Policy.
(cl The deductible for this insurance coverage shall not exceed ten (101 days
gross daily revenues from the sale of electrical energy.
Cd) Estimated gross daily revenue and estimated gross annual revenue shan be
computed on the basis of the kWh production estimates contained in paragraph 6.2.
14.2.5 All of the above insurance coverages shall be covered with insurance
companies with an A.M. Best rating of A- or better and shall include:
(al An endorsement naming Idaho Power as an additional insured and loss payee
as applicable;
(bl A provision stating that such policies shall not be canceled or their limits of
liabilty reduced without sixt (60) days' prior written notice to Idaho Power.
Icl In the case of the insurance coverages described in subparagraphs 14.2.1,
14.2.2 and 14.2.3 above, the total cost of the Facilit wil include any Seller-furnished
Disconnection Equipment and/or Interconnection Facilties. The total cost of the Facilty and
total cost of equipment wil be adjusted either upward or downward to reflect the current
replacement cost of the Facilty or equipment. This adjustment wil be based on either III an
appraisal made by, or for, the Seller's insurance company, or (21 the Handy-Whitman Index
"Cost Trends of Electric Utility Construction -- Plateau Region" other production plant-gas turbo
generators as published by Whitman, Requardt & Associates, 2315 Saint Paul St, Baltimore, MD
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21218. Such adjustment shall be made, at a minimum, every fifth Contract Year during the
term of this Agreement. A copy of these computations and/or appraisals will be submitted to
Idaho Power for Idaho Power's review and approvaL'
14.3 Seller to Provide Certificates of Insurance - As required in paragraph 4.1.5 herein
and annually thereafter, Seller shall furnish Idaho Power certificates of insurance, together with the
endorsements required therein, evidencing the coverages as set forth above.
14.4 Seller to Provide Copies of Policies of Insurance - Within one hundred twenty (120)
days after the Operation Date, and within ninety (90) dayS of the effective date of any modifications
to the policy, Seller wil furnish to Idaho Power a certified copy of the original of each insurance policy
and all endorsements for each of the insurance coverages described above. In the case of policy
renewals, Seller may provide a certificate from the insurance carner that there have been no changes
to the policy in lieu of providing the required certified copy of the policy.
14.5 Seller to Notify Idaho Power of Lapse of Coverage - If any of the insurance
coverages required by paragraph 14.2 shall lapse for any reason, Seller wil immediately notify Idaho
Power in writing. The notice will advise Idaho Power of the specific reason for the lapse and the steps
Seller is taking to reinstate the coverage.
ARTICLE XV: LAND RIGHTS
15.1 Seller to Provide Access - Seller hereby grants to Idaho Power for the term of this
Agreement all necessary rights-of-way and easements to install, operate, maintain, replace, and remove
Idaho Power's Metering Equipment, Disconnection Equipment and other Special Facilities necessary
or useful to this Agreement, including adequate and continuing access rights on propert of Seller.
Seller warrants that it has procured sufficient easements and rights-of-way from third parties so as to
provide Idaho Power with the access described above. All documents granting such easements or
rights-of-way shall be subject to Idaho Power's approval and in recordable form.
15.2 Use of Public Rights-of-Way - The Parties agree that it is necessary to avoid the
adverse environmental and operating impacts that would occur as a result of duplicate electric lines
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being constructed in close proximity. Therefore, subject to Idaho Power's compliance with paragraph
15.4, Seller agrees that should Seller seek and receive from any local, state or federal governmental
body the right to erect, construct and maintain Seller-fumished Interconnection Facilties upon, along
and over any and all public roads, streets and highways, then the use by Seller of such public right-of-
way shall be subordinate to any future use by Idaho Power of such public right-of-way for construction
and for maintenance of electric distribution and transmission facilities and Idaho Power may claim use
of such public right-of-way for such purposes at any time. Except as required by paragraph 15.4,
Idaho Power shall not be required to compensate Seller for exercising its rights under this paragraph
15.2.
15.3 Joint Use of Facilties - Subject to Idaho Power's compliance with paragraph 15.4,
Idaho Power may use and attach its distribution and/or transmission facilties to Seller's Interconnection
Facilties, may reconstruct Seller's Interconnection Facilties to accommodate Idaho Power's usage or
Idaho Power may construct its own distribution or transmission facilities along, over and above any
public right-of-way acquired from Seller pursuant to paragraph 15.2, attaching Seller's Interconnection
Facilties to such newly constructed facilties. Except as required by paragraph 15.4, Idaho Power shall
not be required to compensate Seller for exercising its rights under this paragraph 15.3.
15.4 Conditions of Use - It is the intention of the Parties that the Seller be left in
substantially the same condition, both financially and electcally, as Seller existed prior to Idaho
Power's exercising its rights under this Article XV. Therefore, the Partes agree that the exercise by
Idaho Power of any of the rights enumerated in paragraphs 15.2 and 15.3 shall: (1) comply with all
applicable laws, codes and Prudent Electrical Practices, (2) equitably share the costs of installng,
owning and operating jointly used facilties and rights-ot-way. It the Parties are unable to agree on the
method of apportioning these costs, the dispute wil be submitted to the Commission for resolution and
the decision of the Commission wil be binding on the Parties, and (3) shall provide Seller with an
interconnection to Idaho Power's system of equal capacity and durabilty as existed prior to Idaho
Power exercising its rights under this Article XV.
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ARTICLE XVI: FORCE MAJEURE
As used in this Agreement, "force majeure" or "an event of force majeure" means any
cause beyond the control of the Seller or of Idaho Power which, despite the exercise of due diligence,
such Part is unable to prevent or overcome. Force Majeure includes but is not limited to act of God,
fire, flood, storms, wars, hostilties, civil strife, strikes and other labor disturbances, earthquakes, fires,
lightning, epidemics, sabotage, restraint by court order or other delay or failure in the performance as
a result of any action or inaction on behalf of a public authority, which by the exercise of reasonable
foresight such part could not reasonably have been expected to avoid and by the exercise of due
dilgence, it shall be unable to overcome. If either Part is rendered wholly or in part unable to perform
its obligations under this Agreement because of an event of force majeure, both Parties shall be
excused from whatever performance is affected by the event of force majeure, provided that:
(1 ) The non-performing Part shall, as soon as is reasonably possible after the
occurrence of the event of force majeure, give the other Part written notice describing the particulars
of the occurrence.
(2) The suspension of performance shall be of no greater scope and of no longer
duration than is required by the event of force majeure.
(3) No obligations of either Part which arose before the occurrence causing the
suspension of performance and which could and should have been fully performed before such
occurrence shall be excused as a result of such occurrence.
(4) Seller's obligation to pay liquidated damages as provided in paragraph 21.3
wil not be excused by an event of force majeure.
ARTICLE XVii: LIABILITY; DEDICATION
Nothing in this Agreement shall be construed to create any duty to, any stndard of care
with reference to, or any, liabilty to any person not a Part to this Agreement. No undertking by one
Part to the other under any provision of this Agreement shall constitute the dedication of that Part's
system or any portion thereof to the other Part or to the public, nor affect the status of Idaho Power
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as an independent public utilty corporation, or Seller as an independent individual or entity.
ARTICLE XVIII: SEVERAL OBLIGATIONS
Except where specifically stated in this Agreement to be otherwise, the duties, obligations
and liabilties of the Parties are intended to be several and not joint or collective. Nothing contained
in this Agreement shall ever be construed to create an association, trust, partership, or joint venture
or impose a trst or partnership dut, obligation or liabiltv on or with regard to either Part. Each Part
shall be individually and severally liable for its own obligations under this Agreement.
ARTICLE XIX: WAIVER
Any waiver at any time by either Part of its rights with respect to a default under this
Agreement, or with respect to any other matters arising in connection with this Agreement, shall not
be deemed a waiver with respect to any subsequent default or other matter.
ARTICLE XX: CHOICE OF LAWS
This Agreement shall be construed and interpreted in accordance with the laws of the
State of Idaho.
ARTICLE XXI: DISPUTES AND DEFAULT
21.1 Disputes - All disputes related to or arising under this Agreement. including, but not
limited to, the interpretation of the terms and conditions of this Agreement, wil be submitted to the
Commission for resolution.
21.2 Default - If either Part fails to perform any of the terms or conditions of this
Agreement, (an "event of defauiei the nondefaulting Part shall cause notice in writing to be given
to the defaulting Party, specifying the manner in which such default occurred. If the defaulting Part
shall fail to cure such default within the sixt (60) days after service of such notice, then, and only
then, may the nondefaulting Part pursue its legal or equitable remedies.
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21.3 Seller Permanent Curtailment - If, at any time priot to the end of the term of the
Agreement, Seller permanently curtils in whole or in part its deliveries of the Annual Net Firm Energy
amount specified in paragraph 6.3, Sèller shall pay to Idaho Power, as reasonable liquidated damages
arising out of this permanent curtailment of Annual Net Firm Energy deliveries, the appropriate lump
sum repayment amount specified in Appendix C, multiplied by the difference in megawatt-hours
between the Annual Net Firm Energy amount specified in paragraph 6.3 and the reduced Annual Net
Firm Energy amount after the permanent curtailment. The lump sum repayment amount wil bear
interest from sixt (60) days after Idaho Power gives or receives notice of Seller's permanent reducon
of the Annual Net Firm Energy amount, until paid, at a rate equal to interest rates specified in Idaho
Code §28-22-104(2) or its successor Idaho Code provision in effect during each month of that period.
For purposes of this paragraph, Idaho Power's voluntary termination in accordance with paragraph
5.2.2 shall not be considered a permanent curtailment. The Parties further agree that this paragraph
does not constitute a waiver by Idaho Power of its right to pursue its remedies under paragraph 21 .6
or by either Part of their right to an award of pre and post judgement interest, costs and attorneys
fees as permitted by law in any litigation arising out of this Agreement.
21.4 Security for Repayment Obligation - During the full term of this Agreement, seller
wil provide Idaho Power with adequate assurance that seller wil be able to repay the amounts owing
Idaho Power if Seller defaults under this Agreement. In accordance with Commission Order
Nos 21690, 21800 and Declaratory Order No. 23949 and subject to the provisions of paragraph 21.2
above, this assurance wil be provided as follows:
21.4.1 Insurance - Seller shall comply with the provisions of paragraph 14.2. If
SelieI' fails to comply, such failure wil be an event of default.
(a) In the case of the liabilty insurance coverage, (paragraph 14.2.1), a default
wil be a material breach and may 2! be cured by Seller supplying evidence that the
liabilty insurance coverage has been replaced or reinstated.
(b) For all other insurance coverages described in paragraph 14.2, the default
may be cured bv replacement or reinstatement of the insurance, or by Seller posting liquid
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security in accordance with paragraph 21.5 in an amount equal to one hundred percent
(100%) of the accumulated overpayment liabilty specified for that year in Appendix C.
21.4.2 Debt Service Reserve Account - (a) During the period of time in which the
Facility acts as security for a first mortgage lien which is senior to Idaho Power's security
interest in the Facility as described in paragraph 4.1.8 above, Seller shall maintain a debt
service reserve account containing cash in an amount equal to twenty percent (20%) of
the Facility's estimated gross revenue from Net Firm Energy sales for the first Contrct
Year rounded to the nearest $1,000. With Idaho Power's consent, this debt service
reserve account may be coordinated with any debt service reserve account required by
Seller's first mortgage lender to avoid duplication of accounts.
(b) Upon full satisfaction of the above-referenced first mortgage lien and when
Idaho Power's security interest becomes the senior security interest in the Facilty, the
escrow manager wil pay to Seller the amount in the debt service reserve account which
exceeds five percent (5%) of the Facilty's estimated gross revenue for the next Contract
Year rounded to the nearest $1,000.
(c) The amount to be retained in the debt service reserve account wil be
recalculated every five (5) Contract Years to reflect any increases or decreases in the
Adjustable Payment amount under paragraph 7.1.2 of the Agreement.
(d) During the period when the Facilty is security for a first mortgage lien that
is senior to Idaho Powet s lien, the escrow manager of the debt service reserve account
will be instructed to only release funds from the debt service reserve account to the
hOlder of the first mortgage lien. Funds from said account shall be released only when,
and only to the extent that Seller certifies to the escrow manager that after payment of
all operating costs, the Facilty's revenues are insufficient to make full debt service and/or
lease payments on the Facilty.
(e) During the period when Idaho Power's security interest is the senior security
interest in the Facilty, the escrow manager wil be instructed to only release funds from
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the debt service reserve account to pay operating costs for the Facility.
(f) For purposes of the debt service reserve account, operating costs are limited
to those costs necessary for the operation of the Facilty such as taxes, insurance
expenses, lease payments and other ordinary and necessary operating expenses.
Operating costs shall not include any disbursements other than lease payments which
would constitute a profit or return on investment.
(g) After any release of funds by the escrow manager, Seller shall be obligated
to restore the debt service reserve account to the amounts provided for in paragraphs
21.4.2Ia) and (b), whichever is applicable, prior to Seller disbursing funds which would
constitute a profit or return on investment. Until the debt service reserve debt accOunt
is fully restored, Seller wil, within sixty (60) days of the completion of each Contrct
Year, provide the escrow manager and Idaho Power with a report prepared by Seller's
independent outside accountants showing that Seller has not breached its obligations
under this paragraph 21.4.2(g).
(h) Any breach of paragraph 21.4.2(9) by Seller wil be an event of default and
wil require posting liquid security in accordance with paragraph 21.5 in an amount equal
to one hundred percent (100%) of the accumulated overpayment amount specified for
that year in Appendix C.
21.4.3 In lieu of establishing and funding the above-described debt service reserve
account, with Idaho Power's prior written consent Seller may substitute irrevocable
standby letter(s) of credit, book entr certificate(s) of deposit or other security
instrument(s) acceptable to Idaho Power. During the period when the Facilty is security
for a first mortgage lien that is senior to Idaho Power's lien, Idaho Power and the first
mortgage lender wil be joint beneficiaries of the security instrument(s). When Idaho
Power's security interest is the senior security interest in the Facility, Idaho Power wil
be the sole beneficiary of the security instrument(s).
21.4.4 Engineer's Certification - Every three (3) years for the first twelve (12)
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years after the Operation Date, and every two (2) years thereafter during the full term of
this Agreement, Seller wil supply Idaho Power with an Engineet s Certification of Ongoing
Operations and Maintenance from a Registered Professional Engineer licensed in th State
of Idaho, which ongoing 0 & M Certficate shall be in the form specified in Appendix E.
Seller's failure to supply the required certificate wil be an event of default. Such a
default may be cured by Seler providing the required certificate or by posting liquid
security in accordance with paragraph 21.5 in an amount equal to twenty percent (20%)
of the accumulated overpayment liability specified for that year in Appendix C.
21.4.5 Maintenance Escrow - During the full term of this Agreement, Seller shall
maintain and fund the maintenance escrow account described in paragraph 4.1.7 and
Commission Order No 21690. If at any time Seller fails to maintain or fully fund that
maintenance escrow account, such a failure wil be an event of default. Such default
may be cured by reinstating the required escrow account or by Seller posting liquid
security in accordance with paragraph 21.5 in an amount equal to twenty percent (20%)
of the accumulated overpayment liabilty specified for that year in Appendix C.
21.4.6 Security Interests - During the full term of this Agreement, Seller shall
maintain compliance with all of the requirements of Idaho Power's security interests
described in paragraph 4.1.8 of this Agreement and Commission Order No 21690.
Seller's failure to comply with those requirements, wil be an event of default and in
addition to any other remedies available under this Agreement, Commission Order
No 21690, and the security interests, Seller wil be required by Idaho Power to post liquid
security in accordance with paragraph 21.5 in an amount equal to thirt-five percent
(35%) of the accumulated overpayment liability specified for that year in Appendix C.
Seller recognizes that in accordance with Commission Order No 21690, an event of
default under either or both of paragraphs 21.4.3 or 21.4.4 constitutes an event of
default under paragraph 21.4.5 and in that event the obligation to post liquid security
under paragraphs 21.4.3 through 21.4.5 is cumulative.
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21 .4.7 Licenses and Permits - During the full term of this Agreement, Seller shall
maintain compliance with all permits and licenses described in paragraph 4.1 .1 of the
Agreement. In addition, Seller wil supply Idaho Power with copies of any new or
additional permits or licenses Seller is required to obtain during the term of this
Agreement. At least every fifth Contract Year, Seller wil update the documentation
described in Paragraph 4.1 .1. If at any time Seller fails to maintain compliance with the
permits and licenses described in paragraph 4.1 .1 or to provide the documentation
required by this paragraph, such failure wil be a default.
(al In the case of non-compliance with the required governmental permits, an
event of default wil be a material breach and may Q! be cured by Seller submittng to
Idaho Power evidence of compliance from the permittng agency.
21.4.8 "K" Factor and Estppel Certificates -In reliance upon Seller's compliance
with paragraphs 4.1 .10 and 4.1.11, upon execution of this Agreement by Idaho Power,
and approval of this Agreement by the Commission, application of the "K" factor as
described in Commission Order No. 21690 is suspended. Every three (3) years during the
term of this Agreement, commencing with the third anniversary of the Operation Date,
Seller shall deliver to Idaho Power estoppel certificates from Seller and Sener's fuel
supplier, fuel transporter and thermal energy purchaser certifying that the contract
described in paragraphs 4.1 .10 and 4.1 .11 are unmodified and in full force and efect and
that there are no uncured defaults by either party.
If Seller fails to provide the required estoppel certificates and the Parties are
unable to agree on alternative security, the Partes agree to submit to the jurisdiction of
the Commission for a determination of whether the "K" factor and the obligation to post
liquid security, as described in this Agreement and Commission Order No. 21690, should
be applied to the Facility.
21.5 Liquid Security - If, pursuant to this Agreement or Commission Order No 21690,
Seller becomes obligated to post liquid security, such obligation may be satisfied by Seller's (1)
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depositing cash in an escrow to be held and managed by a bank or savings & loan association located
and in good standing in the State of Idaho; or (2) providing an irrevocable standby letter of credit
acceptable to Idaho Power. The escrow holder and the escrow instructions for the cash deposit wil
be acceptable to both Idaho Power and Seller. Payment of all taxes on the amounts deposited in the
escrow wil be the obligation of the Seller. The liquid security escrow account wil be maintained
separately from the maintenance reserve account described in paragraph 4.1 .7. Failure to maintain
and provide the liquid security required by this Agreement and Commission Order Nos 21690
and 21800 shall be an event of default.
21.6 Equitable Remedies - If as described in paragraph 21.3, Seller permanently curtils
all or part of its deliveries of Net Firm Energy to Idaho Power and (1) within three (3) years after said
curtilment Seller or its successors or assigns sells or delivers or atempts to sell or deliver said
curtailed capacity or energy to any entity other than Idaho Power without Idaho Power's prior written
consent, such sale or delivery or attempted sale or delivery shall be a breach of this Agreement; or (2)
if, within three (3) years after such permanent curtilment Seller or its successors or assigns attempts
to require Idaho Power to purchase said permanently curtiled Net Rrm Energy at a rate that exceeds
the rates contained in this Agreement, such attempt wil be a breach of this Agreement. The remedy
at law for the above descnbed breaches shall be inadequate and Idaho Power shall be entitled to
injunctive relief and specific performance of this Agreement. The provisions of this paragraph 21.6
shall survive any termination of this Agreement (other than an optional termination under paragraph
5.2) for the periods provided for in this paragraph.
21.7 Refund of Lump Sum Repayment - If Seller has made a lump sum repayment as
required by paragraph 21 .3 and;
(1) Within three (3) years of said payment Seller becomes capable of resuming
production of the curtailed Net Firm Energy and offers to resume sales to
Idaho Power at the rates, terms and conditions contained in this Agreement
for the number of Contract Years that were remaining under this Agreement
at the time of the permanent curtailment; then
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(2) Idaho Power wil resume its purchases from the FacilitY and wil refund a
portion of the lump sum repayment amount as follows:
(a) If sales resume within one year of the payment of the lump sum repayment
amount, Idaho Power wil refund 90% of the lump sum repayment amount;
(b) If sales resume within two years of the payment of the lump sum repayment
amount, Idaho Power wil refund 85% of the lump sum repayment amount;
(c) If sales resume within three years of the payment of the lump sum
repayment amount, Idaho Power wil refund 85% of the lump sum
repayment amount.
ARTICLE XXII: GOVERNMENTAL AUTHORIZATION
This Agreement is subject to the jurisdiction of those governmental agencies having
control over either Part or this Agreement.
ARTICLE XXII: COMMISSION ORDER
This Agreement shall become finally effective upon the Commission's approval of all terms
and provisions hereof without change or condition and declaration that all payments to be made to
Seller hereunder shall be allowed as prudently incurred expenses for ratemaking purposes.
ARTICLE XXIV: SUCCESSORS AND ASSIGNS
This Agreement and all of the terms and provisions hereof shall be binding upon and inure
to the benefit of the respective successors and assigns of the Parties hereto, except that no transfer
of Sellets rights or obligations under this Agreement by merger or otherwise nor any assignment
hereof by Seller shall become effective without the written consent of Idaho Power being first
obtained. Such consent shall not be unreasonably withheld. This artcle shall not prevent a financing
entitY with recorded or secured rights from exercising all rights and remedies available to it under law
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or contract. Idaho Power shall have the right to be notified by the financing entity that it is exercising
such rights or remedies.
ARTICLE XXV: MODIFICATION
No modification to this Agreement shall be valid unless it is in writing and signed by both
Partes and subseQuently approved by the Commission.
ARTICLE XXVI: TAXES
Each Part shall pay, before delinQuency, all taxes and other governmental charges which,
if failed to be paid when due, could result in a lien upon the facilty or Interconnecton Facilities.
ARTICLE XXVII: NOTICES
All written notices under this Agreement shall be directed as follows, and shall be
considered delivered when deposited in the U S Mail, first-class postage prepaid, as follows:
To Seller: Glenns Ferry Cogeneration Parters, Ltd.
Attn: Alan K Forbes
12150 E Briarwood, Suite 145
Englewood, Colorado 80112
To Idaho Power Vice President, Power Supply
Idaho Power Company
POBox 70
Boise, Idaho 83707
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ARTICLE XXVII: ADDITIONAL TERMS AND CONDITIONS
This Agreement includes the following appendices, which are attached hereto and
included by reference:
Appendix A
Appendix B
Standards for Interconnecton and Metering
Special Facilities, Point of Delivery,
Metering, and Operation Date
Lump Sum Refund Payme(lt
Operating Instructions
Enginee's Certifications
Appendix C
Appendix D
Appendix E
Appendix F
Appendix G
Appendix H Determination of Eligibility for Operation Date
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ARTICLE XXiX. i:NTIRE AGREEMENT
This Agreement constitutes the entire Agreement of the Parties concerning the subject
matter hereof and supersedes all prior or contemporaneous oral or written agreements between the
Parties concerning the subject matter hereof.
IN WITNESS WHEREOF, The Parties hereto have caused this Agreement to be executed
in their respctive names on the dates set forth below:
IDAHO POWER COMPANY, an Idaho corporation
By
Date: ßC ~ LWz-
"Seller"
GLENNS FE ~ COGENERJt
G eral Partner
k:, ei
By
Date:
1.H F Wright -:w 5.J M Collngwood l2.B L Kline ~'f~6.L R Gunnoe
3.R W Stahman 7.J W Marshall
4.W AMott ãe
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STATE OF IDAHO )
) ss
)County of Ada
On thisê day of ..e..4 ,1992, before me, the undersigned,
a Notary Public, personally appeare Jan B Packwood, personally known, who being duly sworn, did
say that he is the Vice President, Power Supply of the corporation that executed the within instrument,
and acknowledged to me that such corporation executed the same as the free act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal,
the day and year in this certificate first above written.
(NOTARIAL SEAL)_/,. . ~-/
..._. .,./ ".",
. My Com~¡ssion Expires:
'rtr ¿;'ý ,æu
STATE OF COLORADO
County of Äf a.0..bct
)
) ss
)
On this Cl tt day of D.QQD) i:: , 1992, before me, the undersigned,
a Notary Public, personally appeared Alan K Forbes, personally known, who being duly sworn, did say
that he is the General Partner of Glenns Ferry Cogeneration Partners, Ltd. that executed the within
instrument, and acknowledged to me that he executed the same as the free act and deed.
IN WITNESS WHEREOF, i have hereunto set my hand and affixed my official seal, the day and year
in thiscertificate first above written.
,'. .-.
(1'-J.OTARI~l SEAL)
.., ..v. ,_,
My Corñ~ission Expires:(S- /;)i j) - OLp
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APPENDIX A
STANDARDS FOR INTERCONNECTION AND METERING
A-l GENERAL PROVISIONS
A-1 .1 It is the policy of Idaho Power to permit Seller to operate its Facilty in parallel with Idaho
Power's electric system, whenever this can be done without adverse effect to Idaho Powe(' s
equipment, personnel or other customers.
A-l.2 These guidelines contain the minimum metering, interconnection, protection, operation, and
communications requirements for the safe and effective parallel operation of Seller's Facility with Idaho
Power's system. Although these guidelines are established to provide a uniform approach for
evaluating Seller's generation projects, each interconnecton must be examined by Idaho Power indivi-
dually. Idaho Power and the Seller wil be guided by this document, which is a part of the Firm Energy
Sales Agreement, in planning an interconnection between Idaho Power's system and the Seller.
A-l.3 Idaho Power may provide limited technical assistance for Seller, but wil not perform any
engineering, construction or repair work on power production equipment.
A-2 GENERAL DESIGN CONSIDERATIONS
A-2.1 All Seller generators larger than twenty (20) kVA shall be three-phase generators conneced
to three-phase circuits. Generators twenty (20) kVA and smaller may be either three-phase or single-
phase, as approved by Idaho Power.
Due to physical limitations within Idaho Power's transmission and distribution systems,
induction machine sizes wil be limited to confine voltage flicker within acceptable limits. Each
generation site is unique and Idaho Power wil determine the appropriateness of any proposed machine
tYpe for the site and interconnection.
A-2.2 Except in certain instances to be determined by Idaho Power, Seller's generator(s) shall be
isolated from Idaho Power's system by a transformer. Transformer type and connection wil be
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specified by Idaho Power. The Seller may be required to limit the fault current contribution to Idaho
Power's system by generator and/or transformer impedence, neutral grounding, transformer
connections or other means.
A.2.3 Idaho Power wil not assume any responsibilty for protection of the Seller's generator or of any
other portion of the SeUer's electrical equipment. The Seller is fully responsible for protecting its
equipment from faults or disturbances on Idaho Power's system. For example, most transmission and
distribution line circuit breakers on Idaho Power's system wil reclose automatically after they have
attempted to clear a fault. The reclose time delays and system impedances are available from Idaho
Power and should be considered very carefully by the Seller to determine if damage to the Seller's
facilty is possible. Dead line and synchronism check systems can be installed, at Seller's expense,
that wil minimize the possibiltY of a line reclosing into a generator while it is still connected to the
system. In some cases, Idaho Power wil require these dead line and synchronism check systems.
A-i.4 Seller is hereby notified that certain conditions on Idaho Power's system may cause negative
sequence currents to flow in the Seller's generator. It is the sale responsibilty of the Seller to protect
its equipment from excessive negative sequence currents, reverse power flow, and single phasing.
A-3 METERING AND TELEMETRY REQUIREMENTS
A-3.1 Unless otherwise agreed by the Parties, metering wil be provided for recording net output of
the Facilty and wil be separate from any metering of Seller's load. Metering required wil be
determined by Idaho Power on a case-by-case basis, but wil generally follow the guidelines below:
A-3.1.1 Capacity ~ 750 kW - Two kWh/demand meters; one measuring power flow into
Seller's facilties and one measuring power flow into Idaho Power's system;
A-3.1.2 Capacity 2f 750 kW to 4999 kW - A bi-directional, electronic meter installation with
load profiling and communication port capability wil be installed, and connected to the project
voice communications circuit supplied by the developer with a first priorit given to Idaho
Power's use of said communication circuit. An electro-mechanical kWh backup meter wil also
be installed: Additionally, if a project is interconnected with Idaho Power's transmission
system, all necessary telemetr and communication equipment and a dedicated voice quality
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unconditioned data line may be installed to provide continuous instantaneous telemetering of
net generation to Idaho Power's Designated Dispatch Facilty;
A-3.1.3 Caoacit of 5000 kW and Above - A bi-directional, electronic meter installation with
load profiling and communication port capability will be installed and connected to a voice
communications circuit supplied by the developer with a first pn~rity given to Idaho Powers
use of said communication circuit. An electo-mechanical kWh backup meter wil also be
installed. In addition, all necessary telemetry and communication equipment and a dedicated
voice quality unconditioned data line wil be installed to provide continuous instantaneous
telemetering of net generation to Idaho Power's Designated Dispatch Facilty.
A-4 FACILITY PROTECTION
A-4.1 The Seller has full responsibilty for the maintenance of its generating equipment and the
equipment protecting the Facilty. If, in the opinion of Idaho Power, the Seller has failed to provide
proper maintenance of the Facilty or its protection equipment and this failure could adversely impact
Idaho Power or other Idaho Power customers, Idaho Power can require the Seller to cease parallel
operation.
A-5 SYNCHRONOUS GENERATORS
A-5.1 All synchronous machines five (5) MVA or larger shall be equipped with a speed governor
operated with a speed droop characteristic of five percent (5 %).
A-5.2 A check interlock for synchronizing of the Seller's genertor(s) is required.
A-5.3 Synchronous generators shall be capable of operating continuously at maximum power output
within five percent (5%) of rated voltage and anywhere within a power factor range of from ninety
percent (90%) lagging to ninety-five percent (95%1 leading.
Synchronous generators shall be equipped with an excitation system and a voltage regulator
which are capable of automatically controllng voltage at the generator terminals or a point farther into
the system through the use of compensation.
The excitation system shall be equipped with over and under excitation limiters or equivalent
systems which wil permit the voltage regulator to utilze the full reactive capabilty of the machine.
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In some cases, because of specific system requirements in the area of the interconnection, this general
rule may be modified by Idaho Power to include:
11 power factr or reactve control of the voltage regulator;
21 use of a programmable controller to vary the reactive output of the machine based
upon a preset time schedule or other control criteria; or
3) Idaho Power may provide a remote signal which wil be used to adjust the voltage or
power factor regulator setting.
Facilities used to control reactive output including both local and remote equipment will be at
the Seller's expense as specified in 8-11 of Appendix B.
Idaho Power may also require the use of a power system stabilizer (PSS) on machines with high
speed excitation systems.
Idaho Power wil provide the required operating criteria (voltage, power factor, schedules, etc.)
and/or settngs. Idaho Power may change these criteria from time to time as system requirements
change. If after notification of operational deficiencies the Facilty is not operated as specified, or if
the Seller does not make necessary corrections within a reasonable time, a default wil be declared
pursuant to Article XXi.
A-5.4 Due to the abilty of large synchronous generators to influence Idaho Power's system,
protective and control relaying, in addition to the usual voltage frequency and fault relaying, may be
required by Idaho Power. If required, this wil consist of generator relaying for phase-to-phase and
three-phase fault detection. Idaho Power wil specify the relay type and determine settings. This
relaying wil be tested annually by Idaho Power and the actual cost of this testing wil be paid by the
Seller.
A.a INDUCTION GENERATORS
A-6.1 Overvoltage can become a serious problem when an induction generator and a porton of the
transmission or distribution facilties are isolated from the system. Overvoltage relaying shall be
provided that wil open the generator breaker in the event that the voltage reaches predetermined limits
consistent with the overvoltage capability of the generator and the system. Undervoltage protection
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may also be required. On larger units, underfrequency and overfrequency relaying may both be
required.
A~6.2 Inducton generators require reactive support to operate. The supplemental reactive required
is that amount required to correct th Facilty to unity power factor. The reactive may be supplied by
either Idaho Power's system or from capacitive correction at the Facilty or both. Idaho Power will
charge the Seller (as specified in Appendix B) for reactive that is provided from Idaho Power's system.
At some Facilities, because of system considerations, it may not be practical to provide all of
the reactive compensation at the Facilty. In these instances, Idaho Power shall specify the power
factor and compensation necessary at the Facilty.
The Seller wil have the option to furnish the reactve compensation that is required at the
Facilty. If the Seller furnishes the reactive compensation, the Facilty must be operated within five
percent (5%) of the specified power factor. The Seller must also design the Facilty to avoid possible
overvoltage that can occur under certain conditions when capacitors are applied to the generator
terminals.
A-7 Qt IQ AC CONVERTERS
A-7.1 Direct current generators may be operated in parallel with Idaho Power's system through a
synchronous inverter. The inverter installation wil be designed such that an Idaho Power system
interruption wil result in the immediate removal of the inverter power flow to Idaho Power. Harmonics
and/or spurious frequencies generated by the Sellets generator-inverter combinations must be limited
to avoid causing any reduction in quality of electric service to Idaho Power's customers.
A-8 SWITCHING REQUIREMENTS
A~8. 1 Idaho Power reserves the right to open and secure by lock any disconnecting device without
prior notice to Seller for any of the following reasons:
A-8.1 .1 System emergency;
A-8.1.2 Inspection of the Seller's Facilty protectve equipment reveals a condition which
might adversely impact Idaho Power or Idaho Power's customers;
A-8.1.3 Seller's generating equipment interferes with Idaho Power's customers, or system.
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A-8.2 Seller shall maintain a written record of all operating (opening and closing) by Seller of the
Seller's interconnection with Idaho Power. Each operation wil be recorded by the date, hour and
minute and wil include the generator kWh reading at the time of the operation. This record will be
maintained on a monthly basis and the original wil be mailed to Idaho Power on the first business day
of the following month. Idaho Power wil provide the forms necessary for filng this monthly switching
repor.
A-9 GENERATION SCHEDULING AN REPORTING
A-9.1 For installations under 750 kVA, the Seller shall read its generator kWh/demand meter within
the 24-hour period following 12:00 noon on the last day of each month. That kWh meter reading is
to be recorded on the Monthly Power Production Switching Report.
A-9.2 Fo installations 750 kVA and above, see Appendix D.
A-9.3 The written record of the end-of-month meter reading on the Monthly Power Production
Switching Report, subject to subsequent review and correction by Idaho Power. wil be the basis of
payment for energy purchased by Idaho Power from the Seller. An adjustment in the kWhs delivered
wil be made to compensate for the losses in 8-6.
A-9.4 At the end of each month, the Monthly Power Production Switching Report wil be mailed to:
Operations and Joint Facilities Accounting
Idaho Power Company
POBox 70
Boise, Idaho 83707
A-9.5 Payment to the Seller wil be made no later than thirt (30) days following receipt of the
Monthly Power Production and Switching Report.
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i
APPENDIX 8
SPECIAL FACILITIES, POINT OF DELIVERY, METERING,
AND OPERATION DATE
PROJECT NO 21765151
MAGIC WEST COGENERATION PROJECT
ß.l DESCRIPTION OF FACILITY
The Seller's electrical Facilty is described as natural gas fired turbine generator packages with
total nameplate rating of less than 10 MW net at 4,1 60 volts, three phase, 60 Hz.
ß.2 LOCATION OF FACILITY
The Facilit is located in the SE Quarter of Section 29, Township 5 South, Range 10 East, Boise
Meridian, Elmore County, at the Magic Valley potato processing facility in Glenns Ferry, Idaho.
ß.3 SCHEDULED OPERATION DATE
Seller has selected January 1, 1 995, as the Scheduled Operation Date and December 1, 1994,
as the First Energy Date. In making these selections, Seller recognizes that to allow for
adequate testing of the Facilty's degree of completion and reliabilty, it must achieve its First
Energy Date at least thirt (30) days prior to the Operation Date. Idaho Power, based on the
information supplied by Seller, wil schedule its construction so that all Special Facilties,
Disconnection Equipment and Metering Equipment wil be completed in time so as not to delay
Seller's achieving the First Energy Date. However, if Seller fails to pay the costs specified in
B-l1 below at the time specified therein, or materially changes the specifications or design of
the Facilty or Seller-furnished Interconnection Facilities from what was previously provided to
Idaho Power, Idaho Power may be required to reschedule its constructon of these facilities
which could adversely impact Seller s abilty to achieve its scheduled First Energy Date.
B- FAILURE TO ACHIEVE OPERATION DATE
If Seller has not achieved the Operation Date within eleven (11) months of the Scheduled
Operation Date, such failure shall be deemed to be an event of default pursuant to Article XXi.
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8-S POINT OF DELIVERY
The Point of Delivery of energy from the Seller to Idaho Power wil be the 138,000 volt bushings
of the Seller's transformer. The 11,000 kVA transformer wil be owned and maintained by the
Seller. The transformer connection wil be 138 kV grounded Wye/4.16 kV Delta.
8-6 LOSSES
Until modified by mutual agreement, losses shall be set at 2.00% of the metered energy
delivered. When Seller has supplied Idaho Power with the data needed to properly analyze the
Losses associated with the Facility, Idaho Power and Seller wil review that data and re-set the
loss factor for the Facilty. If the Parties are unable to agree, they will submit the dispute to the
Commission for resolution. Any adjustment wil be retroactive to the First Energy Date.
B-7 METERING AND TELEMETRY
The Metering Equipment, wil be on the 4,160 volt side of the Seller's step up transformer.
Idaho Power provided metering equipment wil consist of: current and potential transformers,
a meter enclosure, an electonic bi~directional meter for measuring net generation, an isolation
relay, transducer, communication equipment, and all meter wiring. Seller provided metering
equipment wil consist of all conduit and junction boxes from the metering transformers to the
meter enclosure and all high side conductor and connectors. Seller wil arrange for and make
available at Seller's cost, a telephone circuit dedicated to Idaho Power's use terminating in an
RJ-11 receptacle to be used for load profiling and another telephone circuit dedicated to Idaho
Power's communication equipment for continuous telemetering of the project's kilowatt output
to Idaho Power's Designated Dispatch Facility. The meter wil register kilowatt-hours and
kilowatt of demand. Idaho Power provided meter and communication equipment will be owned
and maintained by Idaho Power with total cost of purchase, installation, operation and
maintenance, including administrative cost to be reimbursed to Idaho Power by the Seller.
8-8 SPECIAL FACILITIES
The constructon of approximately 3/4 mile of three phase 138,000 volt single pole transmission
line with switching provisions and the reconstruction of approximately 1/4 mile of 12.5 kV
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distribution circuit wil be supplied and maintained by Idaho Power. The total cost of these
facilties wil be reimbursed to Idaho Power by the Seller.
B-9 REACTIVE POWER
The Seller shall operate the synchronous generators within plus or minus 5% of unity power
factor, or as listed in Appendix A.
B-l0 DISCONNECTION EQUIPMENT
Disconnection Equipment is required to insure that the Seller's Facility wil be disconnected from
Idaho Powets system in the event of a disturbance on either Idaho Power's system or the
Seller's Facilty. This equipment is for the protecton of Idaho Power's equipment only and wil
be located at the Point of Delivery. Idaho Power wil supply a three phase 138,000 volt gang
operated disconnect switch, a 138,000 volt potential transformer, a 138,000 volt circuit
switcher and a relay cabinet containing relays, assocated wiring, logic, and batteries. Seller wil
install all Idaho Power supplied equipment, and all wiring and conduit necessary for the operation
of the interconnection equipment. Idaho Power wil supply details for the interconnection panel
and wil connect and test the equipment prior to operation of the facilitY. Seller wil provide
drawings of their interconnection wiring for engineering approval before installation. The total
cost of the interconnection equipment, connecion and testing wil be reimbursed to Idaho Power
by the Seller.
B-11 COSTS
The total cost of the 138,000 kV transmission line Special Facilties is $160,000. The total cost
of the distribution line Special Facilties is $3,444. The total cost of the Metering Equipment is
$8,236. The total cost of the communication equipment is $8,500. In addition, there wil be
a monthly charge for the communication circuit lease cost associated with the telemetry
equipment. The communications circuit lease is $280.00 per month as of the date of this
Agreement. Seller recognizes that the monthly communications circuit charge may be adjusted
by Idaho Power as the cost to Idaho Power is adjusted by the owner of the communications
circuit. The total cost of the Disconnecting Equipment is $93,468. The total cost to be paid
-45-
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by the Seller is $273,648. This represents the amount that wil be charged by Idaho Power if
the Seller makes the payment on or before January 18, 1993. If the Seller does not make this
payment by the specified date, the costs wil be subject to update. Idaho Power wil not
schedule construction or order Special Facilities which are not ordinarily maintained in Idaho
Power's inventory until payment has been made. In addition to the installation and construction
charges above, during the term of the agreement Seller wil pay Idaho Power the operation and
maintenance charge specified in Schedule 72 INTERCONNECTIONS TO NON~UTILITY
GENERATION or its successor schedules(s). This monthly operation and maintenance charge
wil be calculated based on $160,000.00 of 138 kV rated Interconnecion Facilties plus an
additional $110,204.00 of Interconnection Facilties rated below 138 kV. The total cost shown
above is an estimate calculated on the basis of average costs. When the acual total cost is
determined, Idaho Power wil adjust the total cost amount to reflect the actual total cost
incurred by Idaho Power. Beginning with the month of this adjustment, the operation and
maintenance charges wil also be adjusted. When the actual total cost is known, within sixt
(60) days Idaho Power wil refund any overpayment or Seller wil remit any underpayment.
8-12 SALVAGE
No later than sixt (601 days after the termination or expiration of this Agreement, Idaho Power
wil prepare and forward to Seller an estimate of the remaining value of those Idaho Power
furnished Interconnection Facilties described in this Appendix, less the cost of removal and
transfer to Idaho Power's nearest warehouse, if th~ Interconnection Facilities will be removed.
If Seller elects not to retain ownership of the Interconnecton Facilties but instead wishes that
Idaho Power purchase such facilties from Seller at the net salvage value, Idaho Power may then
be invoiced by Seller for the net salvage value estimated by Idaho Power for the interconnecton
facilities and shall pay said amount to Seller within thirt (30) days after receipt of said invoice.
Seller shall have the right to offset the invoice amount against any present or future payments
due Idaho Power.
-46-
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APPENDIXC
LUMP SUM REFUND PAYMENT FOR PERMANENT CURTAILMENT
OF PORTION OR ALL OF ANNUAL NET ENERGY AMOUNT
UNDER 20-YEAR CONTRACT
Contract Year of Dollars
Curtailment Per Annual
Commencement Megawatt Hour
1 31
2 44
3 57
4 69
5 81
6 92
7 102
8 111
9 118
10 124
11 128
12 130
13 128
14 124
15 116
16 104
17 87
18 65
19 36
20 18
-47-
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APPENDIX D
OPERATING INSTRUCTIONS FOR PLATS OVER 750 KW
1. Prior to initial start-up at least one day in advançe the Project sha!!:
A. Provide Idaho Power's System Scheduling at the Boise Bench System Dispatching Center
with an estimate of the hourly generation that is expected to be produced during the first
scheduled test day. The phone number for System Scheduling is listed below.
B. Notify the Division Substation Supervisor of project start up plans. The phone number
is listed below.
C. The kWh meter should be read and entered on the Monthly Power Production and
Switching Report (Form No: Cogen CAD-A-l).
2. Before 10:00 a.m. on each normal work day, after the initial start-up, the Projec wil report to
the system scheduling ofce the previous day's actual generation based upon midnight to
midnight meter readings and the estimate of generation planned for the following day or days.
The phone number to report the actual generation and scheduling estimate is listed below. Note
that the System Scheduling number is answered only between the hours of 8 a.m. to 5 p.m.
Mountain Time, on weekdays and that generation estimates must be provided for weekend days
and holidays.
3. Each time the generator breaker is closed or opened (including testing and normal operation),
Idaho Power's system dispatchers must be notified by phone as soon as possible. Prompt
reporting is very important. The Designated Dispatch Facilty is manned 24 hours a day, 7 days
a week, and the phone number is listed below.
4. In addition to promptly notifying the system dispatchers, the record of each breaker opening and
closing must be entered on the Monthly Power Production and Switching Report mentioned in
1-C above.
5. For questions or problem concerning:
Power Scheduling:[phone]
System Dispatching:[phone]
Metering:Meter Engineer - Boise
[phone]
or
Division Metering Supervisor
Payette
Boise
Twin Falls
Pocatello
[phone]
[phone]
[phone]
[phone]
-48-
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r-~
Substations:Division Substtion Supervisor
Payette
Boise
Twin Falls
Pocatello
[phone]
[phone]
[phone]
[phone]
.m: Operations and Joint Facilties Accounting . Boise
[phone]
Contract: Customer Generation. Boise
[phone]
6. Toll free numbers for Operating Reporting:
System Scheduling
System Dispatching
1-800-356-4328
1 -800-348-4328
-49-
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i..~.,~
APPENDIX E
CERTIFICATION OF DESIGN ENGINEER
The undersigned , on behalf of himself and
, hereinafter collectively referred to as "Design Engineer",
hereby states and certfies to Idaho Power as follows:
1 . That Design Engineer is a Ucensed Professional Engineer in good standing in the
State of Idaho.
2. That Design Engineer has reviewed the Firm Energy Sales Agreement, hereinafter
"Agreement", between Idaho Power as Buyer, and
as Seller, dated
3. That the cogeneration or small power production project which is the subject of the
Agreement and this Certification is identified as IPCo Facility No and is further
designated as Federal Energy Regulatory Commission Cogeneration Project No and is
hereinafter referred to as the "Project".
4. That the Project, which is commonly known as the
Project, is located in Section _' Township_,
Range _' Boise Meridian, County, Idaho.
5. That Design Engineer recognizes that the Agreement provides for the Project to
furnish electrical energy to Idaho Power for a I year period.
6. That Design Engineer has substantial experience in the design, construction and
operation of electric power plants of the same type as this Project.
7. That Design Engineer has reviewed the engineering design and construction of the
Project, including the civil work, electrical work, generating equipment, Seller furnished interconnection
equipment and other Project facilties and equipment.
8. That the Project has been constructed in accordance with said plans and
specifications, all applicable codes and consistent with Prudent Electical Practces as that term is
described in the Agreement.
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9. That the design and construction of the Project is such that with reasonable and
prudent operation and maintenance practices by Seller, the Project is capable of performing in
accordance with the terms of the Agreement and with Prudent Electrcal Practices for a
(_l year period.
10. That Design Engineer has supplied the Seller with at least one copy of said Plans
and Specifications bearing his Stamp and the words "CERTIFIED FOR IDAHO P.U.C SECURITY
ACCEPTANCE" on each sheet thereof.
11. That Design Engineer recognizes that Idaho Power, in accordance with
paragraph 5.2(2) of the Agreement, in interconnecting the Project with its system, is relying on
Engineer's representations and opinions contained in this Certfication.
12. That Design Engineer certifies that the above statements are complete, true and
accurate to the best of his knowledge and therefore sets his hand and seal below.
By
(P.E. Stamp)
Date
STATE OF IDAHO
County of
)
) ss
)
On this _ day of ,19_, before me, the undersigned, a Notary
Public, personally appeared , personally known, who being duly sworn, did
say that he is the individual who executed the within instrument, and acknowledged to me that he
executed the same as a free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day
and year in this certificate first above written.
(NOTARIAL SEAL)Notary Public for Idaho
Residing at:
-51-
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..../--.
APPENDIX E
ENGINEER'S CERTIFICATION OF DESIGN &
CONSTRUCTION ADEQUACY
The undersigned , on behalf of himself and
, hereinafter collecvely referred to as "Engineer", hereby
states and certifies to Idaho Power as follows:
1 . That Engineer is a licensed Professional Engineer in good standing in the State of
Idaho.
2. That Engineer has reviewed the Firm Energy Sales Agreement, hereinafter
"Agreement", between Idaho Power as Buyer, and
as Seller, dated
3. That the cogeneration or small power production project which is the subject of the
Agreement and this Certification is identified as IPCo Facilty No and is furter
designated as Federal Energy Regulatory Commission Cogeneration Project No and is
hereinafter referred to as the "Project".
4. That the Project, which is commonly known as the
Project, is located in Section _' Township_,
Range _' Boise Meridian,County, Idaho.
5. That Engineer recognizes that the Agreement provides for the Project to furnish
electrical energy to Idaho Power for a I year period.
6. That Engineer has substantial experience in the design, construction and operation
of electric power plants of the same type as this Project.
7. That Engineer has no economic relationship to the Design Engineer of this Project
and has made the analysis of the plans and specifications independently.
8. That Engineer has reviewed the engineering design and construction of the Project,
including the civil work, electrical work, generating equipment, Seller furnished interconnection equip-
ment and other Project facilties and equipment.
-52-
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9. That the Projec has been constructed in accordance with said plans and
specifications, all applicable codes and consistent with Prudent Electical Practices as that term is
described in the Agreement.
10. That the design and construction of the Project is such that with reasonable and
prudent operation and maintenance practices by Seller, the Project is capable of performing in
accordance with the terms of the Agreeent and with Prudent Electrical Practices for a
(_) year period.
11. That Engine recognizes that Idaho Power, in accordance with paragraph 5.3 of
the Agreement, in interconnecting the Project with its system, is relying on Engineer's representations
and opinions contained in this Certification.
12. That Engineer certifies that the above statements are complete, true and accurate
to the best of his knowledge and therefore sets his hand and seal below.
By
(P.E. Stamp)
Date
STATE OF IDAHO
County of
)
) ss
)
On this _ day of ,19_1 before me, the undersigned, a Notary
Public, personally appeared 1 personally known, who being duly sworn, did
say that he is the individual who executed the within instrument, and acknowledged to me that he
executed the same as a free act and deed.
IN WITNESS WHEREOF, i have hereunto set my hand and affixed my official seal, the day
and year in this certificate first above written.
(NOTARIAL SEAL)Notary Public for Idaho
Residing at:
-53-
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~".r,
APPENDIX E
ENGINEER'S CERTIFICATION OF
OPERATIONS &. MAINTENANCE POLICY
The undersigned , on behalf of himself and
, hereinafter collectvely referred to as "Engineer", hereby
states and certifies to Idaho Power as follows:
1 . That Engineer is a licensed Professional Engineer in good standing in the State of
Idaho.
2. That Engineer has reviewed the Firm Energy Sales Agreement, hereinafter
"Agreement", between Idaho Power as Buyer, and
as Seller, dated
3. That the cogeneration or small power production project which is the subject of the
Agreement and this Certification is identified as IPCo Facilty No and is further
designated as Federal Energy Regulatory Commission Cogeneration Project No and is
hereinafter referred to as the "Project".
4. That the Project. which is commonly known as the
Project, is located in Section _' Township_,
Range _' Boise Merdian,County, Idaho.
5. That Engineer recognizes that the Agreement provides for the Project to furnish
electrical energy to Idaho Power for a ) year period.
6. That Engineer has substantial experience in the design, construction and operation
of electic power plants of the same type as this Project.
7. That Engineer has no economic relationship to the Design Engineer of this Project.
8. That Engineer has reviewed and/or supervised the review of the Policy for Operation
and Maintenance (O&M Policy) for this Project and it is his professional opinion that, provided said
Project has been designed and built to appropriate standards, adherence to said O&.M Policy wil result
-54-
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,~.~'"
in the Project's producing at or near the design electcal output, efficiency, and plant factor for a
(_I year period.
9. That Engineer recognizes that Idaho Power, in accordance wi paragraph 5.3 of
the Agreement, is relying on Engineets representations and opinions contained in this Certification.
10. That Engineer certifies that the above statements are complete, true and accurate
to the best of his knowledge and therefore sets his hand and seal below.
By
(P.E. Stamp)
Date
STATE OF IDAHO
County of
)
) ss
)
On this _ day of ,19_, before me, the undersigned, a Notary
Public, personally appeared , personally known, who being duly sworn, did
say that he is the individual who executed the within instrument, and acknowledged to me that he
executed the same as a free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day
and year in this cerificate first above written.
Notary Public for Idaho
Residing at:
(NOTARIAL SEAL)
-55-
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1..--~,
APPENDIX E
ENGINEER'S CERTIFICATION OF ONGOING
OPERATIONS AND MAINTENANCE
The undersigned , on behalf of himself and
, hereinafter collectively referred to as "Engineer", hereby
states and certifies to Idaho Power as follows:
1 . That Engineer is a Licensed Profesional Engineer in good standing in the State of
Idaho.
2. That Engineer has reviewed the Firm Energy Sales Agreement, hereinafter
"Agreement", between Idaho Power as Buyer, and
as Seller, dated
3. That the cogeneration or small power production project which is the subjec of the
Agreement and this Certification is identified as IPCo Facilty No and is further
designated as Federal Energy Regulatory Commission Cogeneration Project No and is
hereinafter referred to as the "Project".
4. That the Project, which is commonly known as the
Project, is located in Secton _' Township_,
Range _' Boise Meridian,County, Idaho.
5. That Engineer recognizes that the Agreement provides for the Project to furnish
electical energy to Idaho Power for a I year period.
6. That Engineer has substantial experience in the design, constructon and operation
of electric power plants of the same type as this Project.
7. That Engineer has no economic relationship to the Design Engineer of this Project.
8. That Engineer has made a physical inspecton of said Project, its operations and
maintenance records since the last previous certified inspection, and the Project's Policy for Operation
and Maintenance (O&M Policy) bearing the words "CERTIFIED FOR IDAHO P.U.C. SECURITY
APPROVAL" and the Stamp of the Certfying Engineer. It is Engineets professional opinion, based on
-56-
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/-.,
I ,r.
the Project's appearance, that its ongoing operation and maintenance has been substantially in
accordance with said O&M Policy; that it is in reasonably good operating condition; and that if
adherence to said O&M Policy continues, the Project wil continue producing at or near its design
electrical output, efficiency, and plant factor for (_)years.
9. That Engineer recognizes that Idaho Power, in accordance with paragraph 21.4.3
of the Agreement, is relying on Engineer's representations and opinions contained in this Certification.
10. That Engineer certifies that the above statement are complete, true and accurate
to the best of his knowledge and therefore sets his hand and seal below.
By
(P.E. Stamp)
Date
STATE OF IDAHO
County of
)
) ss
)
On this _ day of , 19_, before me, the undersigned, a Notary
Public, personally appeared , personally known, who being duly sworn, did
say that he is the individual who executed the within instrument, and acknowledged to me that he
executed the same as a free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and afixed my offcial seal, the day
and yeai' in this certficate first above written.
(NOTARIAL SEAL)Notary Public for Idaho
Residing at:
-57-
L957
/',~
APPENDIX F
Fuel Supplier - Fuel Transporter ("FS") recognizes that Glenns Ferry Cogeneration Parters, Ltd.
("GFCP") has elected to sell the electrical output of the Magic West Cogeneration Facilty to Idaho
Power at levelized rates under a twenty (20) year Firm Energy Sales Agreement. FS understands and
agrees that Idaho Power wil be a "Lender" as that term is defined and used in the Fuel Supply and Fuel
Transporttion Agreements. FS understands that under the Firm Energy Sales Agreement if GFCP
permanently curtails its sales of firm electcal energy to Idaho Power prior to the conclusion of the
twenty (20) year term of the Firm Energy Sales Agreement, GFCP's election to be paid levelized rates
wil trigger a substantial overpayment liabilty payment to Idaho Power. FS furter recognizes that
Idaho Power's willngness to purchase firm energy from the Magic West Cogeneration Facility at
levelized rates was based, in part, on FS's commitment to supply and deliver fuel in an amount
suficient to allow the Magic West Cogeneration Facility to generate the annual Net Energy amount in
the Firm Energy Sales Agreement each year during the full twenty (20) year term of the Firm Energy
Sales Agreement. FS recognizes that if it terminates or permanently curtails its sales/deliveries of fuel
to GFCP, such termination - curtailment could cause a permanent curtailment, as described in
paragraph 21.3 of the Firm Energy Sales Agreement. FS and GFCP agree that Idaho Power is an
intended third-part beneficiary of the Fuel Supply and Fuel Transportation Agreements. GFCP and FS
further agree that they wil be jointly and severally liable to Idaho Power for any damages Idaho Power
may incur as a result of an uncured breach by FS of the conditions and covenants of the Fuel
Supply/Fuel Transportation Agreements, and such uncured breach results in any permanent curtailment
byGFCP.
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APPEND1XG
Magic West, Inc. ("MW"I recognizes that Glenns Ferry Cogeneration Parters, Ltd. ("GFCP"I has
elected to sell the electrical output of the Magic West Cogeneration Facility to Idaho Power at levelized
rates under a twenty (20) year Firm Energy Sales Agreemeot. MW understands and agrees that Idaho
Power will be a "Lender" as that term is defined and used in the Thermal Energy Service Agreement.
MW understands that under the Arm Energy Sales Agreement if GFCP permanently curtils its sales
of firm electric energy to Idaho Power prior to the conclusion of the twenty (20) year term of the Arm
Energy Sales Agreement, GFCP's election to be paid levelized rates wil trigger a substantial
overpayment liability payment to Idaho Power. MWfurther recognizes that Idaho Power's wilingness
to purchase firm energy from the Magic West Cogeneration Facilty at levelized rates was based, in
part, on MW's commitment to purchase suficient thermal energy under the Thermal Energy Service
Agreement to assure the Magic West Cogeneration Facilty wil be a Qualifying Facility under PURPA
, for the full twenty (20) year term of the Firm Energy Sales Agreement. MW recognizes that if it
terminates or permanently curtails its purchases of thermal energy from GFCP, the Magic West
Cogeneration Facilty may lose its qualifying facilty status. Such loss of qualifying facilty status wil
be a default under the Firm Energy Sales Agreeent and would cause a permanent curtailment, as
described in paragraph 21.3 of the Firm Energy Sales Agreement. MW and GFCP agree that Idaho
Power is an intended third-party beneficiary of the Thermal Energy Service Agreement. GFCP and MW
further agree that they wil be jointly and severally liable to Idaho Power for any damages Idaho Power
may incur as a result of the loss of the Magic West Cogeneration Facilty qualifying facility status, if
such loss of qualifying facility status is a result of an uncured breach by MW of the conditions and
covenants in the Thermal Energy Service Agreement, and such breach results in the failure by MW to
purchase the amounts of thermal energy required to maintain qualifying facilty status.
-59-
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APPENDIX H
DETERMINATION OF ELIGIBILITY FOR OPERATION DATE
1 . Prior to initial startup and during the determination of eligibilty for an Operation Date, the
Facilty wil observe all the applicable requirements of APPENDIX C - OPERATING
INSTRUCTIONS FOR PLANTS OVER 750 kW.
2. The test period ("Test Period") for determination of eligibilty for an Operation Date shall be thirt
(30) consecutive days.
3. Concurrently with the start of its Test Period, the Facilty wil notify Idaho Power, in writing, of
the date and time the test is considered to have started.
4. For each 24 hour period during the Test Period, the Facilit wil record, at a minimum, the net
generation, in kWh, delivered (n scheduled) to Idaho Power.
5. The Facilty will record all outages occurrng during the Test Period. For each outage, the record
wil include, at a minimum, the starting time, the ending time, the total time the unit was
disconnected from Idaho Power's system, and the cause(s) of the outage whether internal or
external to the Facilty.
6. If the Test Period spans the end of any month, the Facilty wil report to Idaho Power the
previous month's total net generation delivered per the requirements of Paragraph A-9 -
GENERATION SCHEDULING AND REPORTING. The total kWh delivered during the month wil
be correctly designated as having occurred either prior to the date stipulated in 3. above or after
the start of the Test Period.
7. Prior to the determination of an Operation Date, all kWhs delivered are Surplus Energy and wil
be paid for at the Surplus Energy Purchase Price.
8. At the end of the Test Period, the Facilty will submit to Idaho Power, in writing, the following;
a. the complete daily record per 4.; and
b. the total net kilowatt hours delivered to Idaho Power (the sum of 4.); and
c. the complete outage record per 5., including total hours of outage; and
-60-
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I~~"',
d. a calculation showing the Service Factor (SF) which is defined as
SF = (SHrrPH) x 100%
where
TPH is defined as the Test Period Hours which equals
24 hours x 30 consecutive days = 720 hours
and,
SH is defined as Service Hours which equals
TPH - total outage hours (from 8c)
e. a calculation showing the Net Capacity Factor (NCF) which equals
ANG/PRSNFEA x 100%
where
ANG is defined as actal net generation delivered
during the Test Period (from 8b)
and,
PRSNFEA is defined as the Pro-Rated Seasonal Net Firm
Energy Amount (from paragraph 6.2 of the Agreement)
f. A letter certifying to the above and requesting Idaho Powet s concurrence that the
Facilty has, indeed, demonstrated the necessary degree of completion and
reliabilty and is thus eligible for an Operation Date.
9. The Facilty shall be deemed eligible for an Operation Date if during the Test Period both the
Serice Factor and the Net Capacity Factr are equal to or greater than 90%. If both Factors
are shown to exceed the minimum requirement, then the eligible Operation Date for the Facilty,
per paragraph 1 .12, shall be deemed to have occurred at 0001 hours Mountain Time on the day
following the day defined in 3. above as the day the test began.
10. If, at the end of the Test Period, either the Service Factor or the Net Capacity Factor (or both)
are found to be below 90%, the Test Period wil be extended on a day to day basis until such
time as at the conclusion of a period of 30 consecutive days, both the Serice Factor and the
Net Capacity factor m! simultaneously above 90%. The date when the Facilty becomes eligible
for an Operation date, in this case, shall be deemed to have occurred at 0001 hours Mountain
Time on the day following the day 30 days previous to the conclusion of the extnded Tes
Period.
-61-
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~~.~( .
11. Once the Facilty has accomplished all the requirements of paragraph 5.2, including either 9. or
10. above, Idaho Power wil, as part of the routine month-end payment process, and in addition
to any payment due for the then current month, remit to the Seller the diference beteen the
appropriate seasonal rate of paragraph 7.1 and the Surplus Energy Purchase Price previously
paid for Test Period energy. If the projects Operation Date has been determined per 10., this
adjustment will apply to only the 30 consecutive days prior to the conclusion of the Test Period.
No interest wil be paid on any adjustment amounts.
-62-
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EXHIBITB
, .
. Qa.l' UCUl
...:~r-.JAN 22',993~,
BEFORE TH IDAHO PUBLIC UT COMMSION
INTB MATlOFTHAPOVAL OF )A FI ENY SAL AGRE )BETEE IDAHO POWE COMPAN AN )GL FE COGENTION )PARRS, LTD. FOB TH MAGIC )WE COENTION PRO. )
)
CAS NO. lPE-92-2
ORDER NO. 2474
On December 23, 1992, Idaho Power Company (Idaho Power; Company)
and Glenns Ferr Cogenration Parers, Ltd. (Glenns Ferr) fied an
Application with the Idaho Public Utilities Commssion (Commsson) requesting
approval of a Fir Energy Sales Ageement (Agreement) between Idaho Power
and Glenns Ferr.
Glenns Ferr is the developer of the Magic West Cogeneration Project
(Magic West), a proposed less than ten megawatt natual gas fired turbine
generation facity located in the SE Qu of Sen 29, Townhip 5 South,
Rage 10 East, Bois Merdian, Elmor County, at the Magic West Potato
Processig Facity in Glenns Fer, Idaho. The estimte annual net fi
energy production is 83,220,000 kWh. As represente, the projec wil be a
. PURA "qualg facity" (QF) pror to interconnecton. The Agreement, dated
December 9, 1992, provides for levelied rate over a 20-year contract term.
Scheduled operation date is Janua 1, 1995.
Magic West is the fist propose natual gas fid quaed
cogeneration facity to offer energy to Ida Power. Of sigicance, the
Commssion" in its revew of the submittd Ageement, notes the followig
nonstanda and/or unque featurs:
Su olth T P8d
Application of the "K fact, pe pror Comsion Orders, is intended
to compensate for the incras rik of loss of motive force attrbutable to
non-hydr generati resce and hydr generati reures with less than
opti water rihts. Reer Order Nos. 21690 and 21800, Case
No. U.I006.292. The Commsion may consder reasonable evdence of
ORDER NO. 24674 - i-
PS472
/"./".
secue motive power as an acceptable means of eliminating the application of the
uK" factor. Order No.
23949. Case No. IPC..E.91.13; Order No. 24007. Case
No. IPC.E.91.22.
In ths case the pares propose "suspendig.' application of the '"K.'
factr conditioned upon the commtment of Glenns Fer to provide the followig
specic and periodic assurances of the fimness of motive force for the term of the
Ageement:
a. Agreement' 4.1.0 requies that as a condition tointerconnection, Glenn Ferr must "demonstrate toIdaho Power's reasnable satifaction that Glenns Ferhas ented into fuel supply and fuel tranportationcontracts which wi provide a fim supply of fuel and
mel transportation in an amount sufcient to allow the
facity to generate the anual net firm energy amount
each contract year for the fu term of the Agrment."
b. Ageement , 21.4.8 addresses the suspenson of the i"K'.
factr and provides a procedure for ongoing monitorig
of the status of the contracts between Glenns Fer, its
mel supplier and fuel traiport. If thi monitorig
frocess reveal that any of
the varous contracts, i.e., themotive fore" for the projec, are in default, , 21.4.8prodes that th ~enson of the "K" fact can be
revoked with Commssion conCUence and Glenns Ferr
woud be obligate to post liquid secty consistent with
the Commion's Orders in Case No. U-1006-292.
c. Agrment" 4.1.11 and 21.4.8 provide that as acondition of interconnecon, Glenn Fer wi alo
prde assuances simiar to (a) . and (b) above for theperormce of the ther host, Magic West, Inc. forthe fu term of the Agment.
d. Agent " 4.1.0 and 4.1.11 als provide that GlennFer wi inude contract prvions in its contracts.
with a fuel ~pplier and fuel trairte and the.
ther host, Magic West, Inc., that wi put theseentities on notice that Idaho Power is an inteded thid
pary benefciar of the respecve ageements and that
Idao Power can enfrce those agrm.ts ü necsar.Glenn Fer ha alo agr to place Magic West, Inc.,
th fuel supplier and fuel transportr on notice that ifsuch fuel supplier and fuel trrt and Magic Wes,Inc., have uncu breaches of thei resectveagreements with Glenn Fer that in the case such
uncued breach causs a pernt cuaient by
ORDER NO. 24674 - 2-
PS473
r'.1..'1
Glenn Ferr as defied in the Agreement or in the
event such uncured breach by Magic West results in theloss of the facility's qualifyg facilty status, then Idaho
Power can proeed directly agait Magic West, Inc.and/or the fuel supplier and fuel tranportr as
approprate to recover its damges.
Subt detti tht facty capa uc te mewatt
Ageement 1 6.4 provides a proedure for revig the contract rates
with the concuence of the Commsion if Idaho Power subseently determies
that the capacity of the Magic West facilty actualy exceds ten megawatts.
Suilus en
Ageement , 6.1 provides that all energy produced and delivered by
Glenns Ferr in excess of 10,000 kWh per hou wi be purased as surplus
energy (Schedule 86).
:Mte and Re
Therm Energy Meteri Equipment, Ageement' 10.4 and Mainte-
nance and Retention of Rerds, Ageement 111.1 prode that Glenn Ferr wi
insta, opeate and mata therm energy meteri equipment and maitai
necssar records regarg ther energy delveres and naturl gas
puhases. Ths meteg and record keping requient wi alow Idaho
Power to veri that the effciencies of the proec comply with PURA and
presere the prec's QF status over the tù term of the Ageement. Failur to
matai QF status for the fu term of the Ageeent is an event of default
under th Agment and if UDcued cod lead to a contract termation.
Dite
Ageeent 1 21.1 reds as follows: "Al diutes reate to or arsing
under th Agment, includi, but not lite to, the interetation of the
te and condions of th Agrnt, wil be submitte to the Comm~on for
reslution."
ORDER NO. 24674 - 3..
PS474
.--,¡"-,,i
The Commsion remids the paries that jursdiction may not be
conferred on the Commssion by contractual stipulation. The authority and
jursdiction of the Commsion is restricted to that expressly and by necessar
implication conferred upon it by enabling statutes. The nature and extent of the
Commssion jursdiction to reslve actual disputes wil be determed by the
Commssion on an individual case-by.case basis notwithstandig paragraph 21.1
of the Agreement.
The Commssion fids that the Agreement signed and submitted by the
pares conta avoided cost rates in conformity with applicable Commssion
Orders. Reference Order No. 24383, Case No. IPC-E-92-15. It is the fuher
opinon of the Commsion that the precautions taen by Idaho Power to justif
. supenion of the "K" factr for the Magic West proect satify the intent and
requirements of the Commsion's prior Orders regardig reasonable evidence of
a sece motive power. The term of the Ageement, except as qualled above,
are reasonable and we approve them. We also approve payments made under
this Ageement as prudently inCued exenss for ratemaking puroses.
CONCLUSNS OF LAW
I
The Idaho Public Utities Commsion has jusdction over Idaho
Power Company, an electc utilty, pursuant to the authority and power granted
it under Title 61 of the Idao Code and the Pulic Utity Regutory Policies Act
of 1978 (PUR A).
II
Thè Idao Public Utitìes Commsion has authority under the Public
Utilty Regutory Policies Ac of 1978 and the implementin regutions of the
Federal Energy Reguto Commsion (FERC) to set avoded cots, to order
elecc utities to ente into fid te obliations for the purhase of energy
from qualed cogeeration facities, and to imlement FERC rues.
o BD E B
In consideratìon of the forgoing and as so quaed, IT is HEREBY
ORDERE that the Fi Ener Sales Agment between Idaho Power
Company and Glenn Fer Cogeneration Parer, Ltd. subiDtte in this
preeg be and the same is hereby approed.
ORDER NO. 24674 -4 -
PS475
r'-'"~'..
THS is A FINAL ORDER Aiy person interested in thi Order (or
in issues fialy decded by this Order) may petition for reconsideration withi
twenty-one (21) days of the servce date of thi Order. Withi seven (7) days
afr any person has petitioned for reconsideration, any other person may
crss-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilties Commssion at Boise,
Idao, ths ..Â/1d- day of Januar 1993.~iJ~)
MAHA H. SMI, PRESIDENT
\JWf~fiSSIONE
~~g~L~dO~H~Sõ ;COMMS ÏONER
¡;T:~Q...LD.~~
A J. WALTERS,COMMSSION SECRTARY
SW:vld/'o-1985
ORDER NO. 24674 - 5-
PS476
EXHIBITC
--
.._. --~ =.
TM
Black Hlllsldaho lIana,ømlJot, Inc.
June 10, 2008
Mr. M. Mark Stokes
Manager, Power Supply Planning
Idaho Power Company
P. a.Box 70
Boise, Idaho 83707
Re: Firm Energy Sales Agrement (as amended, the "FESA") between Idaho Power
Company ("Idaho Power") and Glenns Ferry Cogeneration Parners, Ltd. (the
"Parnership") - Magic West Project
Dear Mark:
We have received and reviewed your letter dated May 23, 2008 (the "May Lettet'), in
which Idaho Power identies a purport material breach of the FEA, Idao Power's
intention to begin the process of termnating the FESA, and its assessment of liquidated
damages payable under the FEA. Given that the May Letter does not identify itself as a
formal notice of default or termination under and in accordance with the terms of the
FESA, we do not consider it as such. Further, although we understand that Idaho Power
believes that the Facilty (as defined in the FESA) has lost its "qualifying facilty" status
(as that term is used and defined in 18 C.F.R. 292.207) due to the termination of the
operations of Idaho Fresh-Pak, the Facilty's steam host, Idaho Power should consider the
following information in light of the conclusions outlined in the May Letter:
1. It is premature for Idaho Power to conclude that the Facilty is no
longer a qualifying facilty. Compliance with the criteria of the Federal
Energy Regulatory Commission (the "PERC") for status as a qualifying
facilty is measured over the course of the calendar year. Idaho Power's
conclusion that the Facilty has not satisfied FERC's criteria presently,
therefore, is speculative. If the Parnership concludes that the Facilty may
be unable to satisfy PERC's criteria for qualifying facilty status under the
circumstances. the Parership wil undertake efforts to preserve such
status, including petitioning the PERC for a temporary waiver of the
applicable standards for qualfying facilty status. and a reaffirmation of
the Facilty's status as a qualifying facilty. We wil apprise Idaho Power
of any such petition.
350 Indiana Street, Suite 400, Golden, Colorado 80401
General: 303-568-3260 Facsimile: 303-568-3261
PS1
Idaho Power Company
June 10, 2008
Page 2
2. Even if a breach had occUled under Section 3.2 of the FESA,
wouldn't the Parershp get the benefit of a notice of the default and the
cure period specified in Section 21.2 of the FESA? Section 21.2 requis
that a notice in wrtig be given to the defaultig par, and is quite clear
on the limitations of the pursuit of remedes by a non-defaultig part,
stating, "If the defaultig Par shall fail to cure such default with the
sixty (60) days after semce of (the default) notice, or if the defaultig
Par reasonably demonstrtes to the other Part that the default can be
cured with a commercially reasonable tie but not with such sixty
(60) day period, and if the defaultig Par does not commence such cur
within the sixty (60) day period and continue to dilgently purue such
cure, then, the nondefaultig Part may pursue its legal or equitable
remedies. "
3. Idaho Power assert in the May Letter that liquidate daiages of
$ 11,234,700 are payable, without (i) citig on what basis the damages are
payable, (ü) prviding a calculation of such amount or (ii) referencing the
applicable provision of the FESA purant to which such amounts ar
payable. Given the lack of substatiation of the liquidated damages clai,
we wil not have a plan' for payment of the specified dages, as requested
in the May Letter, as we believe those amounts are not due. If you would
like to discuss ths issue fuer, we are open to a meeting where your
points could be reviewed.
We understand that our reading of the provisions of the FESA may differ with Idaho
Power's, and would be wiling, under Section 21.1 of the FESA, to take any reltig
difference of opinon to the Idaho Public Utiities Commssion ("PUC") for resolution.
If, as you state in the last paragrph of the May letter, it is Idaho Power's intention to
unateraly fie a notice of materal breach and termation of the FESA with the PUC,
the Partership wil vigorously challenge any such action. We contiue to believe tht an
amicable resolution is in the best interest of all paries, and we would lie to purue
fuer discussions with Idao Power to work though these issues, as well as to reach an
arangement whereby the Parership can contiue to provide power to Idaho Power
under term that ar acceptable to both pares. The tolling proposal that you reference in
the May Lettr was intended to be a startg point for discussions between the partes,
and we hope that Idaho Power will be open to working with the Parership to formulate
terms for a tollig or other argement tht wil be workable for Idaho Power and the
Parership.
If, at any point in the future, a default actuly has occurd under the FESA on which
Idaho Power intends to take action and notify the Parership, we would remi you of
your obligations to the lenders to the Facilty to provide all wrtten notices under the
FESA diectly to their Collatera AgeIit, both under Arcle XX of the FESA (as
amended pursuant to the Second Amendment to the Fin Energy Sales Agreement, dated
PS2
Idaho Power Company
June 10,2008
Pag 3
December 30,1995), and under Sectin 1.0 1 (c) of the Consent an Agrent, dated as
of December 15, 1995, between Idaho Power an Toronto Domion (Texa), Inc., as
Collatera Agent, predecsor in interest to Calyon, New York Branch, the cuent
Collatera Agent.
We look forward to fuher dicussions with you.
Respectflly,
Glenn Ferr Cogeneration Parers Ltd.
By: Glenns Ferr Magement, Inc.,
its Geerl ParerBY'~N~~'
Title: Vice President
cc: Fre Barber, Power Plant Management Servce, LLC
Scott Gross, Power Plat Magement Services, LLC
Barbara Nevin, Blak Hills Generation, Inc.
Mak Lux, Black Hils Energy, Inc.
Tom Ohlcher, Black Hills Cooration
Ted Vanderel, Calyon - Crit Agrcole cm
An She, Calyon - Crédit Agncole em
PS3
EXHIBITD
Of 'f ti se
Serv Date
JAN 1 '11988
BEFORE THE IDAHO PUBLIC UTITIES COMMION
IN THE MATTR OF TH INSTIGATION )
ON THE COMMSION'S OWN MOTION OF )
RENABLE TERM FOR SECURIY IN )
AGREEMTS BETWEN IDAHO POWER )
COMPANY AN COGENRATORS AND )SMALPOWER PRODUCERS. )
)
CASE NO. U-1006-292
ORDER NO. 21690
i.
II.
TABLE OF CONTENTS
Appearances at the Hearing .
Suppliers of Written Comment .
PAGE
1
2
Organization of this Order .2
Summary . . . . . . . . . .2
Discussion of Questions & Options 4
A.General Issue ...........4
B.Quantification of Overpayment Amount .5
C.Risks of Economic Walk-Away .....8
D.Security ..................12E.Risk Mitigation in Lieu of Security ...20F.Weighting and the Base Requi rement .....20
G.Basic Insurance ............22
H.Engineering Certification .........24i.Maintenance Escrow .....26J.Lien Rights ..........29
K.The "K"Factor ...............31L.Water Rights ................32
Details of the Methodology.. . 33
A.
B.
C.
The Decision Tree . . . . . .
The Security Requirement Amounts
The Overpayment Liability . . . .
. . . . . 33
. . . . . . 34
. . . . . . . 35
Findings of Fact .. . . 36
Order .. . .. . 38
Appendices (For Guidance Only)
A. From Order No. 21446 Appendix A .
B. Sample Engineering Certificates
Appearances at the Hearing:
On March 20, 1987, the Idaho Public Utilties Commission (Commission)
initiated Case No. U-I006-292, an investigation into the security provisions of
cogeneration and small power production (CSPP) contracts with Idaho Power Company
(IPCo).
Public hearing was held in this matter beginning Tuesday, June 16, 1987 and
continuing through June 19, 1987 in the Commission Hearing Room, Boise, Idaho. The
following parties appeared by and through their respective counel:
Commission Staff:Scott D. Woour
Deputy Attorney General
Barton L. Kline
Evan, Keane, Koontz, Boyd &
Ripley
Ronald L. Wiliams
Idaho Power Company:
The Washington Water Power
Company:
R. Blair Strong
Payne, Hamblin, Coffin, Brooke
& Miler
N. Randy Smith
Merrll & Merrll
Michael G. Jenkins
Utah Power & Light Company:
Bonneville Pacific Corpration
& Interwest Financial, Inc.:Gar L. Montgomery
Marcus, Merrck & Montgomery
David P. Hirschi
Cook Electric, Inc. and
Afton Energy, Inc.:
Owen H. Orndorff
Charles F. Peterson
Ordorff & Peterson
Sithe Energies U.S.A., Inc.:
Potlatch Corporation:
Roy L. Eiguen
Steven R. Ormiston
Lindsay, Hart, Neil & Weigler
Ralph M. Davisson
ORDER NO. 21690 1
Supliers of Wrien Comments:
On September 10, 1987, the Commission issued Order No. 21446 and its
Appendix A propoal for securng the cumulative overpayment liabilty that occurs with
levelized rates in CSPP power purchase contracts. The Commission solicited written
comments and specific suggestions from the paties with respect to implementation of the
proposed methodology and regarding the Appendix A referenced standards for adequacy
and appropriateness. Parties providing written comments to Order No. 21446 were:
Idaho Power Company (ICo)
Washington Water Power Company (WP)
Pacific Power &: Light Company (PP&:L)
Utah Power and Light Company (UP&:L)
Sithe Energies USA, Inc. (Sithe)
Cook Electric, Inc. (Cook)
Resource Development Associates (RDA)
Bonnevile Pacific Corpration (Bnneville)
RTD Hydro Projects (RTD)
Stein-McMuray Insurance
Organization of ths Or:
This Order is structured as set out in the Table of Contents. Although framed
as an Idaho Power Company case, the implications of this Order have generic consequence
for all Idaho regulated electric utilties. We therefore discuss the various items in generic
terms, although we use IPCo data in all of our examples.
To establish this Order as a "stand-alone" document, we repeat verbatim here
(in single spacing) each item discussed in Order No. 21446. Following each repeated item
we discuss the pertinent specific comments provided by the parties and our findings.
Summar
After reviewing the fiings of record, testimony and submitted comments, the
Commission concludes that significant overpayment by ratepayers to cogenerators
ORDER NO. 21690 2
and small power producers (CSPPs) occurs in the early years of a level-pay power
purchase contract. In the event of a default, we find that some CSPPs may be unable to
refund this overpayment unless they maintain some form of liquid securty to provide the
funds. Liquid security is to be made available to the ratepayer in an amount equal to the
computed overpayment liabilty, adjusted for risk reduction. The Commission finds that
the amount of the required securty is determined by the following factors: (a) the length
of the power sales contract, (b) the amount of the level rate paid to the CSPP, (c) the
type of Qualifying Facilty (QF), (d) the amount and tye of insurance carred on the QF,
(e) the quality of design and construction of the QF, (f) the funds available for QF
maintenance, and (g) the availabilty of a lien on the QF to the energy purchasing utilty.
The details of determining the amount of liquid security required of each QF
are exlained in the body of this Order. The steps to be followed in computing the amount
of required security are:
(1) Using the contract length, the avoided cost rate, and the applicable
discount rate, compute the annual total overpayment liabilty (Section I.B. and II.C.);
(2) Using the decision tree, determine the base liabilty ratios (Sections I.G.,
H., I., & J., subsection 3; and Sections II.A. & B.); and
(3) Using the "K" factor equation, determine the final liabilty ratio.
The effects of having adequate inurance, engineering certification,
maintenance escrow, and lien rights all reduce the base liabilty ratio. Application of the
"K" factor (required except for hydro projects with protected water rights) adds to the
liabilty ratio.
ORDER NO. 21690 3
I. Discussion of Question and Qpon
A. General Issue
1. Order No. 21446
As established in the Notice of Issue Identifcation (Order No. 21889) the principal issue
addressed at hearing was one of securty, assessing the need for and devising a means to
protect ratepayers from the perceived exposure and risk of non-recovery of overpayment
resulting from the front-end loading that occurs with levelized rates in power purchase
contracts.
The avoided cost rates paid to cogenerators and small power producers (CSPPs) for energy
and capacity are substantially a melded rate levelized over the term of the contract. The
Commission in its implementation of the Public Utilty Regulatory Policies Act of 1978
(PURPA) and the related rules and regulations of the Federal Energy RegulatoryCommission (FERC) has utilzed levelized rates as an incentive to the development of the
cogeneration and small power production industr. Levelization provides the project
developer with a price for supplied power at the front-end of the contract in excess of the
power's actual energy value, thus enabling the project to better service its debt and meet
start-up costs. In later years the cumulative overpayment is recouped because the
payments at levelized rates are projected to be less than the value of the power. At the
end of the contract, the cumulative sum of overpayments and underpayments
theoretically will be zero.
The need for securty for the amount of overpayment attendant to the front-end loading
is commensurate with the perceived risk of economic walk away by the project owner and
the consequential or ensuing loss to the utilty's ratepayers. We believe that some form
of securty andor risk mitigation is necessary to achieve an optimum level of ratepayer
indifference.
For the record, the Commission notes that in prior Orders 16025 and 16048 we exressed a
policy against enforcing overpayment liabilty clauses. Those Orders were entered in theearly, high inflation years of PURPA implementation when the risk to ratepayers was not
definable and at a time when PURPA implementation was the primary goal. The passage
of time has more clearly limned the ratepayer risks associated with CSPP development
and we can now engage in a more sophisticated balancing of policy goals.
2. Parties' Comments
Most parties accepted the commission's defining of the issues without
comment. Resource Development Associates however, spent considerable effort
comparing the riskiness of utilty plants and CSPP plants. In part, it states
"... the ratepayer is not protected nor is the utilty at risk for its
economic consequences with generation projects such as WPPS and
Kettle Falls. In the long ru the utilties have been able to pass on
to the ratepayer the brut of this overpayment for higher cost
resources at little or no risk to the utilty or economic consequence
to the utilty. It is this double standard that I believe is the single
major underlying oversight in this case. II
ORDER NO. 21690 4
3. Commission's Position
We recognize that utilty-owned resources are not without risk. We do not
agree with Resource Development Associates' characterization of that risk nor with its
characterization of this Commission's treatment of such risk. We emphasize that this
case does not concern the record of the comparative risks of utilty and CSPP resources.
This case instead concerns itself with the establishing of a means for securing the
overpayment liabilty inherent in the early years of a CSPP power purchase levelized rate
contract.
The comparison between utilty generation resource costs and CSPP rates is the
proper subject of "avoided cost" determination, which is presently being revisited in the
U-1500-170 case.
B. Ouantification of Oveient Amout
1. Order No. 21446
"We find that appropriate quantification of the overpayment amount for purse of risk
assessment and present value calculation involves factoring in the impact of the
time-value of money (contra methodology employed by The Washington Water Power
Company (WP)). This is accomplished by assigning a discount rate to the balance of the
cumulative overpayment. Idaho Power in its "Appendix D lump sum refund payment
schedule" has assigned a discount rate of 12.74%, its weighted cost of capitaL. Following
is a graphic representation for analysis comparing levelized and non-1evelized rates, and
the cumulative over/underpayments with and without a discount rate of 12.74% for a 35
year contract. An added assumption factored into the calculations is an annual inflation
rate of 3%.
ORDER NO. 21690 5
The disparity between Staff and IPCo calculations of accumulated overpayment amounts,
as evidenced in their respective testimony and exhibits, has been subsequently and
substantially reconciled. We are satisfied that the 47.05 mil value of avoided costs
includes delevelization of the 7 mil adjustable (variable) portion. We find that IPCo's
calculations are based on a reasonable interpetation of the modeling approved in the -248
case and are conceptually appropriate for determining the amount of cumulative
overpayment liabilty.
As indicated above, the discount rate represents the time value of money. An analysis of
inflation adjusted retur on various investment instruments shows that long-term
expectations are highly variable and extremely risk related. The average expected return
on long-term, safe investments over the last 30 years was 0.3% over inflation. The
average expected return on very risky short-term investments was 13.5% above inflation.
(Reference: Stocks. Bonds. Bils and Inflation: 1986 Year Book, Ibbotson Associates.)
On the basis of the foregoing, we believe that IPCo's use of 12.74% as a discount rate
assumes a very high level of risk. The use of 12.74% also contributes significantly to the
magnitude of overpayment liabilty. We find that a varance in the risk factors associated
with any given project or class of projects may justify a proportionate reduction in the
cumulative overpayment amounts and level of required securty.
Utah Power & Light Company's (UP&L) computation of overpayment liabilty results in a
sum nearly three times larger than that of IPCO. The reason for the discrepancy lies in
the differing methodologies for computing avoided cost rates for periods less than 35
years.
In IPCO Order No. 20350 the minimum length of an agreement qualifying for maxmum
levelized avoided costs was determined to be 35 years. A series of arbitrary discounts
from the 35-year payment - 85% for 30 years, 75% for 25 year and 65% for 20 years --
was adopted to encourage long-term agreements. (Order No. 20350 at p. 20.) Idaho
Power uses the arbitrary percentages in ratesetting for contracts less than 35 years. In
determining overpayment liabilty in a 35 year contract the Company computes the
amount of overpayment for each year less than 35 years by the discounted present valuemethod, rather than employing the arbitrar discount percentages. We find that the
underlying procedure used to construct IPCo's "Appendix D" accurately reflects our intent
and we approve the use of such methodology for computation of overpayment liabilty.
UP&L Order No. 20637 contains similar languge to that of IPCO regarding the utilzation
of an arbitrary discount in ratesetting for contracts less than 35 years. UP&L, however,
also uses the arbitrary percentages in computing the amount of overpayment liabilty, as
if the contract were written for the shorter contact period, with adjustments for the time
value of money. We reject this methodology for computation of overpayment liabilty as
being inappropriate."
ORDER NO. 21690 6
2. Parties' Comments
Cook Electric Inc. and Resource Development Associates provided comments
that indicate they do not fully understand IPCo's Appendix D methodology. WW suggests
that they may have some difficulty implementing the precise IPCo methodology because
of inadequate data in prior Commission orders and suggests an alternate method which
provides nearly identical results.
UP&L suggests using the CSPP's discount rate in lieu of the utilty's, provided
the former is higher.
3. Commission's Position
For clarification. under IPCo's Appendix D methodology the computed
overpayment liabilty is the cumulative difference between the actual contract rate and
what that rate would have been had it been computed by the same method for a shorter
contract period. The cumulative difference includes applying the discount rate to
increase the balance anually. All computations start with the actual avoided cost rate
being paid to the Qualifying Facilty (QF).
The discount rate to be used is the Commission-determined "Ratepayer"
discount rate. For any project contracting under avoided cost rates determined before
Order No. 21630 (U-1500-l70) the ratepayer discount rate is identical to the utilty's
discount rate as used in determining the levelized avoided cost. For QFs contracting
after Order No. 21630 (U-1500-L70), the ratepayer discount rate wil be specifically
identified in the Commission order setting the avoided cost.
Using the QF's discount rate is unacceptable. Neither the Commisson nor the
utilties ought to be privy to CSPP's cost of capitaL. Furthermore, the damages that we
herein attempt to avoid and recover relate to costs to the ratepayer, not costs to CSPPs.
ORDER NO. 21690 7
We find that applying the computations to actual annual generation rather than
contract energy, as proposed by WWP, is acceptable.
In fact, not doing so raises the potential inconsistence of applying a liquidated
damages rate to a contract energy far different from any actual energy produced. We
therefore find that utilties using a liquidated damages schedule such as IPCo's Appendix
D, shall apply the rate to some reasonable estimate of the actual annual generation of the
plant. The method of determining the applicable estimate shan be clearly stated in the
power purchase contract.
c. Risks of Econmic Walk-Away
1. Orr No. 21446
"Although the amount of cumulative overpyment can be readily ascertained, the
perceived risk that a given CSPP wil not perform for the full term of the contract and
wil 'walk-away' is not easily susceptible to quantification. Given an absence of actuarial
experience by which to gauge the associated risk, we are unble to make an accurate
assessment as to how many CSPPs wil fail, what type of project is most likely to fail, and
when that failure is likely to occur. It can be assumed to be a high probabilty, however,
that a project owner receiving levelized payments will seriously consider 'walk-away' if
his projected or realized revenue stream is insufficient to meet his variable operating
costs.
The risks of project failure attendnt to persnal injur or property damage, or equipment
failure due to improper maintenance or management are of a nature that can be readily
insured against. So too can a project developer insure against catastrophic loss or failure
of operating equipment due to natural or man-caused calamity. The prudent businessmen
insures against these risks as a matter of course.
What we have described above and characterized as economic 'walk-away' is a form of
business loss triggered by economic adversity. It has been suggested that the cost of
obtaining securty from financial or insurance industries against this risk is prohibitively
expensive because the exposure to a CSPP walk-away is perceived to be high. Arguably
the cost, if it is indeed expensive, is rather a factor of there being no track record for
assessing the incidence of loss. We note however, that segments of the insurance industry
are stepping forward with what appear at first blush to be reasonable proposals addressing
the overpayment liabilty. (E.g. Stein-McMuray.)
Protecting the ratepayer from this risk, assessing the risk and determining the appropriate
level of security involves a balancing of equities and benefits. This Commission has
previously recognzed that few if any QFs are absolutely risk free. (U-l006-199, Order
ORDER NO. 21690 8
No. 17478.) We have long supported the development of cogeneration and small power
production as a viable alternative generation resource. We recognize that a diverse
generation base enables a utilty to achieve greater reliabilty and provides a societal
benefit of marked importance. We are not prepaed to abandon our policy of facilitating
the development of QF power through levelized rates by implementing requirements that
have the effect of eliminating the benefits of levelization. This is not to say however
that the perceived risk attendant to overpayment liabilty need not be addressed. We
believe the risk can be mitigated.
Assessment of risk for cogeneration and small power production facilities operating under
the umbrella of PURPA and FERC rues and regulations is complicated by the limited
review permitted into a project's financial structure and organization. Thus constrained,
this Commission cánnot engage in project specifc investment tye business analysis.
One means of assessing or differentiating risk entails a classification of projects by size
and generation technology (fuel source). Generically hydro projects are assumed to be the
lowest risk technlogy. Thermal projects are perceived riskier because the fuels or
renewable resources used have greater market demand and are by nature volatile in bothprice and supply. A graduated increase in risk is associated with thermal projects
utilzing solid fossil fueL. The high end of the risk spectrum under analysis is occupied by
thermal projects dependent on gas and oil for firing. Small power projects using wood
waste or biomass as a fuel source are viewed as medium to high risk projects. Unproven
technologies such as geothermal would generally be classified as high risk. We find the
generic differences between hydro and thermal projects to be a reasonable basis for
distinctions in treatment.
We do not choose to dictate how a qualifying facilty (QF) must be operated. But
acknowledging that levelized rates and front-end loading create a risk of overpayment,
we find it reasonable to reduce the percentage of overpayment that need be actually
secured if the QF wil take identified steps to mitigate and reduce the risk of loss.
Risk reducing factors that are entitled to a concomitant reduction in the percentage of
overpayment liabilty that must be secured are as follows:
1. adequate basic business insurance
2. appropriate engineering certification
3. appropriate maintenance escrow
4. acceptable lien rights
5. adequate water rights (hydro electric facilty)
The factors are further defined in Appendix A, attached hereto together with ilustrative
graphs and the Commission's proposed procedure for implementation. You are noticed
that the standards of adequacy and appropriateness referenced therein are as yet
undefined and are solicited in party comments to this proposaL. The percentage values
cited in the Appendix A modeling are to a degree arbitrary as in fact are the risk reducing
items themselves. Nevertheless, we believe that the proposal is conceptually a viable and
equitable means of determining or projecting the total dollar amount of overpayment
liabilty requiring securty for a given project.
ORDER NO. 21690 9
As set out in the Appendix A propoal. it is envisioned that the total percentage of
liabilty that must be posted or secured may be reduced by the percent value assigned to
each rik reducing item down to a propsed floor of 20% of total. There is also a belief
within the Commission that qualifying hydro facilties satisfying the five factors cited
above should be permitted to escape the base floor requirement of 20%. The lack of
unanimity is based on differing perceptions. It is the perception of some that there wil
always remain a residual risk that cannot be eliminated. thus justifying a 20% floor. This
position is further supported by the realization that qualifying facilties regardless oftechnology have no statutory obligation to provide servce. There exists a belief cutting
the other way that qualifying hydro facilties satisfying all mitigation factors may through
diversity be expcted to be less risky and achieve a better performance history than
utilty base load facilties for which there may always be some attendant risk of failure.
An additional reason cited for elimination of the 20% floor for hydro is the degree of risk
already assumed by adopting the utilty's weighted marginal cost of capital as the
discount factor for avoided cost calculations. The Commission invites comment as to
whether a base floor of 20% or some other percentage should be required of all projects.
As evidenced from analysis of Appendix A. the Commission's proposal has been so
structured as to provide an incentive for QFs to enter into power purchase contracts for
period shorter than 35 years. This departs from our prior policy. When PURPA was
implemented. non-utilty generation was exected to defer construction of coal-fired
plants with life exectancies of up to 35 years. We now regulate no utilty with such a
base load plant on its planning horizon. We therefore must reassess the policy favoring 35
year power purchase contracts. The 35 year contract term is no longer a magic number.This adjustment favoring shorter contracts is also an attempt to compensate in part for
the perceived and inherent risk of inaccuracy in long-term projections. It
2. Parties' Comments
On the question of providing a base level of liquid security the parties were
predictably divided. The utilties recommended a base level for liquid securty of no less
than 20% of the computed liabilty. with UP&L initially suprting 100% regardless of
project typ.
The CSPPs take the position that as a result of proper risk mitigation. the level
of securty should be substantially reduced to the point where no liquid security is
required of a fully mitigated hydro QF. Sithe and Bonneville provided several citations
from the record showing that nearly every party sponsored witnesses who believe that the
probabilty of default by a well built. well managed hydro facilty with protected water
rights is nearly nil.
ORDER NO. 21690 10
¡PCo requested that the Commission not prejudge issues to be discussed in the
U-1500-L70 generic avoided cost case, especially as to contract length and levelized rates.
3. Commission Position
The preponderance of evidence in the record clearly supports the poition for a
zero security base for fully risk-mitigated projects. We remind the parties that the
subject here is securty, not liabilty. Every QF is liable for repayment of the full level of
discounted overpayment in the event of default. The liquid securty requirement provides
a source of funding for all or part of that liabilty. We are satisfied that the risk
mitigation measures identifed in Order No. 21446, as herein modified, are adequate to
assure ratepayer indifference.
Furthermore, every scenaro suggested to demonstrate the possibilty of a CSPP
contract default includes infation rates vastly exceeding those used to establish the
avoided cost. Since energy costs would increase in proportion to that high inflation rate,
we can expect ratepayers to have received substantial benefits from all QFs prior to (and
after) default by anyone of them. Furthermore, the Commission expects this Order to
result in a quality of design, construction, and management of QFs yielding resource
reliabilty equivalent to that provided by utilties.
We do not intend to prejudge here issues that are more properly considered in
Case No. U-1500-170. However, the issues of contract length and avoided cost
levelization are clearly related to overpayment risks and are properly subjects of
U-IOO6-292. We remain firmly committed to the general principle of leveUzed avoided
cost rates, although we are open to potential variations on the present method of full
levelization. Also, we are convinced that the risks associated with setting firm prices
increase expnentially with contract length. We therefore intend to discourage firm price
contracts exceeding 20 years in length.
ORDER NO. 21690 11
D. Secu
1. Order NQ. 21446
"As stated by Russell A. Pack, Manager Qf ResQurce CQntracts fQr UP&L, 'the CQntractual
QbligatiQIÌ (tQ repay) is nQthing but an empty prQmise if the CSPPs have nQ funds or assets
with which tQ make the repayment'. Mr. Pack's concer is nQt withQut merit; hQwever,
we find that mitigatiQn Qf risk is an alterntive tQ full funding Qf the Qverpayment
liabilty QbligatiQn.
The requirement Qf funding the Qverpayment liabilty tQ the tune Qf a liquidated damages
schedule was challenged by Dr. Slaughter (Cook Electric). It is his PQsitiQn that damages
(including cQnsequential damages) upon breach Qf contract (including breach Qccasioned by
eCQnQmic walk away) are capable Qf ascertainment and shQuld therefQre nQt cQntractually
be reduced tQ liquidated damages. The fallacy behind this reasQning is that part Qf the
prQblem we are dealing with is the creatiQn Qf a fund (a liquid securty) Qut of which tQ
pay Qr satisfy judgment damages. If a target amQunt is nQt identified at the frQnt-end
and an amQunt set aside or a fQrm of securty is nQt prQvided, the ratepayer is made tQ
assume a greater risk Qr expure that the awarded damages wil nQt be satisfied. The
PQtential magnitude Qf risk tQ ratepayers based Qn a reasQnable fQrecast Qf increasing
power CQsts, demand, inflation and disCQunt rate justifies the parties stipulating tQ a
liquidated damages provisiQn.
As previQusly indicated, we believe that SQme fQrm Qf securty and/Qr risk mitigation is
necessary tQ achieve and Qptimum level Qf ratepayer indifference.
SECURITY OPTIONS
The total universe Qr menu Qf QptiQns for securing the Qverpayment liabilty, while
conceptually large becomes mQre limited with analysis. The fQllQwing security optiQns
were evaluated by the parties:
IPCo
o Elimination of levelized rates
o Risk Premium Discounted Rate
o Deep Pocket Corp. Guarantee of
Performance
o Security Fund (ORF) Hydro Less
than 5 MW
Trust Account
Captive Insurance
WW
o Elimination of Levelized Rates
o Risk Assessment Based on
Generation Technology
and Location
Second Mortgage Lien
Financial Guarantees for
LOO~ of Overpaymnt
Liability Obligation
(Actual $ vs. time value
of money)
UP&L
o Elimination of Levelized Rates
o Full Cash Security (IOO~) or guarantee
o Risk Management/Risk Compensation
(Discounting of levelized rate to
arrive at risk premium)
Second mortgage lien requirement
Pooling hydro ( 5 MW
.s
o Elimination of Levelized Rates
o Insurance
o Performance Bonds
o Escrow
o Guarantee Lines of Credit
o Project Pooling
o Risk Sharing
o Lien Rights
o Corp. Guarantee of performance
ORDER NO. 21690 12
Bonneville Pacific Corporation
o No requirement of additional security
o Recommends raising avoided cost rates
to reflect the new level of risk
associated with levelized payments
Cook Electric
o Risk sharing by ratepayers
o Risk pool
o Letters of Credit
o Second Mortgage Liens
o Escrow
Potlatch
o Corp. Guarantee of performance
What follows is an analysis of the major security options commented on by the parties.We appreciate the variety of options presented. They all contributed to our
understanding, assessment, reassessment an development of policy and procedure.
ELIMATION OF LEVELIZED RATES
The favored solution of the utilties to the overpayment liabilty problem is to eliminate
levelized rates. Eliminating front-end loading subtantially reduces the magnitude of risk
in the event of default. A disadvantage of delevelized rates however is that they do not
provide a cushion of stabilty for ratepayers. Once beyond the surlus period they are
inclined to spiral ever upward. Capacity and energy payments in a firm contract would
vary over the contract term. A risk of overpayment would stil be present owing to the
vagaries of forecasting, but the dollar amount of potential loss would be significantly
reduced.
We view the consequence of full or partial delevelizing of rates to CSPP qualifying
facilties as reducing or eliminating the development of those QF projects heavily reliant
on financing. Although the experience of other States would indicate that some
development of cogeneration and small power production is posible without levelizedrates, we are not prepared to eliminate this incentive. Front-end loading faciltates
service of debt, encourages CSPP development, and meets the intent of Congress that
wealth is not a pre-condition to participation.
Delevelization of rates is not the panacea it is touted to be. While the economics under
either levelized or delevelized rates are similar, the perceived gap between projected
contract rate and actual value of power may be more pronounced with delevelization.
Delevelized rates could engender substantial rate shock at the end of the estimated
surplus period.
RISK PREMIUM DISCOUNTED RATE
The underlying rationale of the risk premium discounted rate is that without security the
front-end loading or overpayment amount in levelized rates is tantamount to an unsecured
loan from ratepayers to CSPPs. Arguably, as the unecured nature of the loan would
justify charging a higher interest rate, so does it justify the use of a higher discount rate
to compute the levelized rate. IPCO suggests that the existing -248 (-265) avoided cost
rates are appropriate only for facilties with zero risk. It recommends reducing the
amount of payment in proportion to the level of risk associated with a given project.
Idaho Power imputes its weighted marginal cost of capital, 12.74%, to CSPP projects in
ORDER NO. 21690 13
its present value calculations, a discount rate viewed by the Commission as already
assuming a very high level of risk. Under this approach it is proposed that a statistical
risk model be developed assessing the unique risks of each individual project or class of
projects to determine the appropriate discount rate. The type of analysis envisioned is
seemingly precluded. It was suggested that this alternative would have the advantage of
simplicity and no administrative costs. We question the appropriateness of setting rates
on any basis other than utilty avoided cost. We conclude that the more reasoned
approach is to use level of risk as reducing the percentage of overpayment amounts
requiring security, rather than adjusting or varyng the rates.
RISK MANAGEMENT/RISK COMPENSATION
A variation on IPCO's rik premium discounted rate methodology is the risk
management/risk compensation alternative of UP&L. Whereas IPCO would reduce the
rate paid to CSPPs, UP&L would pay the fuU rate and require a percentage refund or risk
premium to ratepayers. As propoed the risk premium would be a discounting of the
levelized rate below forecasted avoided costs to reflect the ratepayers bearing the risk of
potential project failure or economic walk-away. The premium would be paid directly to
ratepayers through a non-recourse adjustment in avoided cost rates. As with IPCO's
proposal the risk premium floor would be the utilties' weighted marginal cost of capital
(UP&L Order No. 20637 - 11.35%.)
As an integral part of its proposal UP&L suggests that CSPPs be required to take certain
steps to minimize the risk of project failure. A comprehensive general liabilty policy of
adequate coverage and limits for property. boiler & machinery and business interrption
insurance would be mandatory to mitigate uninsured or underinsured loss. To ameliorate
the discount or risk premium. CSPPs would be required to post a certain level of equity
(typically a CSPP wil provide only 30% equity) so that the developer has less exosure to
debt service constraints. a material amount of his own money at risk. and consequently a
greater incentive to perform.
OVERPAYMENT RESERVE FUND
The principal security measure discussed at hearing was IPCO's proposed Overpayment
Reserve Fund (ORF). This method of securty envisions a poling of hydro projects
limited in size to 5 megawatts or less. Participation would be limited to hydro because
such projects constitute a homogenous grouping of similar risk. Project size would be
limited to 5 megawatts because including larger projects would increase the required
contribution of aU pool participants (or of the larger facility) and would significantly
increase the risk potential of bankrupting the fund.
As proposed. the initial contribution would be a reasonable estimate based on modeling
assumptions. percentage of participation. assessment of actuarial risk. and fqrecasting of
loss probabilty. The required contribution would be adjusted over time or "experience
rated". It was estimated that the percentage of revenue stream necessary for funding the
ORF against the risk of "economic walk-away" would be 2-4% (estimated initial contrib.
of 4%). Periodic review would allow for appropriate contribution adjustments to reflect
the cumulative experience.
ORDER NO. 21690 14
IPCO foresees the ORF concept as structured along the lines of either (1) a trst account
or (2) captive insurance. The functioning of a trust account is generally familar. A
captive insurance program is captive in the sense that it is independently structued and
only covers losses for which the contributions are made. It is assumed that the insurance
premium would be deductible by the CSPP. However, if there is no loss history, it was
cautioned that the premiums received may be taxble revenue to the captive insurance
company. Tax and legal opinions would be required.
Participation in the ORF or in any project pol or homogenous grouping necessarilyinvolves satisfying eligibilty criteria. What are permissible criteria? Wh should
establish the criteria? Who should determine whether eligibilty standards are satisfied?
What right of appeal exists, if any? It was suggested that a precise or reasonable
calculation of contribution requires a substantial amount of knowledge about the cost
structure, operating characteristics, financial strength, and functional size, tye and
ownership of the qualifying facilty. It would also seem to be a function of level of
participation and amount or percentage of cumulative overpayment liabilty that must be
secured. It is questionable whether the type of inquiry envisioned as necessary is
permissible. It is unquestioned that neither this Commission nor the utilty may engage ininquiry into a CSPP's financial structure or organization. We must necessarily divorce
ourselves from any role in administration or review of program eligibilty criteria.
CORPORATE GUARANTEE OF PERFORMANCE
The corprate gurantee of performance is viable only to the extent that inquiry is
permitted into its financial structure and organization. PURPA and FERC rules and
regulations as previously indicated ostensibly preclude such an inquiry. Assuming,
however, for purse of argument that inquiry is permitted, IPCO suggests that qualifying
corporations must exhibit a consistent record of profitabilty, maintain a book equity of at
least $100.000,000, a debt ratio of less than 60%, pre-tax interest coverage tests of at
least 3.0x, a ratio of total bok equity to total net investment in CSPP assets of at least
500%, and an investment grade commercial paper rating from the nationally recognzed
rating agencies. The qualifying factors suggested are to a degree arbitrary but are
somewhat indicative of the "deep pokets" that are perceived to be necessar to
adequately insure the ratepayer against the risk of overpayment liabilty. Developing
precise quantifiable crteria is a difficult process. A corpration that is a stand-alone QF
is perceived to be much riskier than a well-diversified corpration with significant
financial strength, substantial liquid resources, and varied revenue streams and assets. If
a CSPP plant represents a major portion of the QF owners' committed assets and cash
flow, a corporate guantee of performance or guaranteed line of credit is probably
unacceptable or unattainable. To assess the risk involved in any corprate guarantee one
need only read the newspapers. Today's healthy company can quickly become tomorrow's
business failure. Acceptance of a corprate guarantee would require monitoring the
financial soundness of the gurantor over the term of the contract.
An additional perceived impediment to the viabilty of a corporate guarantee is the
Commission's inabilty to prevent transfer of project interest to a third party, a party
that may have neither the deep-pokets, the commitment nor the inclination to ensure
the continued viabilty and continuance of the project.
ORDER NO. 21690 15
CASH ESCROW
Short of delevelized rates a fully funded escrow provides the ratepayer with the most
complete protection against overpayment. Unfortunately it nullfies the benefits of
levelization. When used in combination with other security measures however. it may be
quite useful in providing the full or requisite coverage. As in any escrow or trut
arrangement the element of control becomes a factor when attempting to peñect one's
security interest. It has been suggested tht the degree of control necessar to assure
perfection is actual possession. (Reference Article 9 securty interest (§28-9-30S I.C.))
LIEN RIGHTS
The lien rights available to secure ratepayer interests in CSPP projects are usually
subordinate to the first lien of the project financier. The value of a second lien poition
in all the QF property and facilties is the measure or degree of control over the project
that it imparts with respect to its continued financing, operations and maintenance.
Although it provides no liquid fund for satisfaction of overpayment obligation, we
nevertheless recognize it as a valuable tool in safeguarding the interests of the
ratepayer. To be acceptable a lien should be subordinate only to the first lien of the
project financier and the FERC license, as evidenced by an appropriate policy of title
insurance.
RISK SHARING
As expressed at hearing, any entity should have the oppotunity to bear the risk and
receive compensation for doing so. In the context of the rik of overpayment liabilty it
was suggested that either a non-regulated subidiary of the utilty or the ratepayers
themselves might share the risk with the CSPPs.
Arguably the ratepayers have been sharing the risk, albeit somewhat unowingly, since
the inception and implementation of levelized rates. There has always been a perceived
risk. There wil always be a residual risk. We are committed to achieving a reasonablelevel of ratepayer indifference. We do not see any further sharing of risk by the
ratepayer as being a viable option.
It was suggested that a non-regulated utility subsidiary could operate as a potential risk
sharer, taking either an ownership position in selective CSPP plants or brokering for a
percentage of the CSPP revenue stream. The taint of impropriety and potential for less
than arms' length transactions between the utilty and its subsidiar would seem to
miltate against the feasibilty of this option. It also appears that development of such a
marketing mechanism would require a paradigm shift of thought on the part of the
utilties who are prone to view the CSPP industry as a competitive foe rather than an ally
in electric power generation.
INSURANCE
The feasibilty of insurance as securty against overpayment liabilty is dependent on the
wilingness of the industry to insure against economic abandonment for a 3S-year periodwith limited rights of cancellation (nonpayment of premium). It was the expressed
ORDER NO. 21690 16
concern of some that insurnce companies rarely make an unconditional commitment to
cover all amounts of risk; that a residual risk, the risk above policy limits, remains with
the policyholder.
The proposal of Stein-McMuray Insurance Servces of Boise, Idaho indicates that the risk
of economic walk-away is insurable. Insurng 100% of projected overpayment liabilty,
the projected premium as a percentage of revenue streamflow would start at 2% for the
first ten years, escalate to 5% for the next six years and gradually decline again to 2%with premium pay-off occurng in year 25 of a 35-year contract. The premium as a
percentage of 35-year revenue would equate to 2.2%; as a percentage of 25-year revenue,
2.99%.
2. Paries' Comments
a. Elimination of Levelized Rates
Resource Development Associates generally agrees with the Commission's
position that this option be rejected. The other parties withheld comment on this subject.
b. Risk Premium Discounted Rate
Resource Development Associates generally agrees with the Commission's
position that this option be rejected. The other parties withheld comment on this subject.
c. Risk Management/Risk Compensation
Resource Development Associates generally agrees with the Commission's
position that this option be rejected. The other parties withheld comment on this subject.
d. Overayment Reserve Fund
Resource Development Associates generally agrees with the Commission's
position that this option be rejected. The other parties withheld comment on this subject.
e. Corporate Guarantee of Performance
Resource Development Associates generally agrees with the Commission's
position that this option be rejected. ¡PCo and WWP both urged the Commission to
reconsider permitting Corprate Guarantees as a security option. The remaining parties
withheld comment on this issue.
ORDER NO. 21690 17
f. Cash Escrow
Resource Development Associates concurs that a fully funded cash securty
escrow nullfies the benefits of levelization. The other parties withheld comment on this
issue.
g. Lien Righs
All of the commenting parties addressed this issue as it relates to risk
mitigation. A detailed discussion of the comments follows in Section I.J. of this Order.
h. Risk Sharing
Resource Development Associates perceives risk sharing as beneficial to the
ratepayers. The other parties withheld comment on this issue.
i. Insurance
Resource Development Associates believes that QF insurance premiums should
be added to the "Avoided Cost" rates. RDA suggests no mechanics for accomplishing this,
nor does it explain how the premiums constitute costs of the utilty that can be avoided
through the purchase of CSPP energy.
Sithe, Bonnevile, Cook and Stein-McMurray Insurance point out that the
insurance contemplated in Order No. 21446 is unlikely to be available uness the insurance
company has access to a customer base comprising a large number of small hydroelectric
facilties requiring 100% securty liabilty coverage. Such a base is unlikely to be
available under the plan proposed by Order No. 21446.
3. Commission's Position
a. Elimination of Levelized Rates
The Commission rejects implementation of this option for general application.
Individually negotiated non-level rates wil be considered on a case by case basis.
ORDER NO. 21690 18
b. Risk Premium Discounted Rate
The Commission rejects implementation of this option for the reasons stated in
Order No. 21446.
c. Risk Management/Risk Compesation
The Commission rejects implementation of this option for the reasons stated in
Order No. 21446.
d. Ovemavment Reserve Fund
The Commission rejects implementation of this option for the reasons stated in
Order No. 21446.
e. Comorate Guarantee of Performance
We carefully reconsidered this option in light of the parties' comments, but our
conclusions were the same as descrbed in Order No. 21446. We therefore continue to
reject implementation of this option.
f. Cash Escrow
We continue to consider a cash escrow to be the best method of satisfying the
liquid securty requirement of a QF. A cash escrow or equivalent shall be maintained in
the amount of the overpayment liquid securty requirement. The escrow is to be managed
by an institution licensed to execute financial transactions in the State of Idaho (e.g. an
Idaho Bank or S&L).
g. Lien Rights
See Section I. J. below.
h. Risk Sharing
We believe that the risk mitigation propoal contained in Order No. 21446, as
modified herein, reduces the level of risk shared by the ratepayers adequately to
substantially represent ratepayer indifference between QF generation and utilty
generation.
ORDER NO. 21690 19
i. Insunce
We are disappointed that the insurance industry appears unwiling to provide
insurance for the portion of risk unmitigated under Order No. 21446. Nonetheless. we see
no reason to burden all projects equally in order to permit the most risky to obtain
insurance at the same rates as the least risky. We continue to offer risk mitigation as the
most reasonable solution.
E. Risk Mitigation in Lieu of Secuty
1. Order No. 21446
The details of this proposal are set out in Appendix A. attached.
2. Parties' Comments
Because of the extensiveness of the comments. they are separated into six
separate sections, with discussions of the parties' comments and the Commission's
position included in each section. The six sections are:
F. Weighting and the Base Requirement
G. Basic Insurance
H. Engineering Certification
I. Maintenance Escrow
J. Lien Rights
K. The "K" Factor
F. Weighti and the Bae Reqement
1. Order No. 21446
The weighting of the 5 risk mitigating factors suggested were:
a.b.c.d.
Insurance
Engineering Certification
Maintenance Escrow
Lien Rights
Non-Hydro or InadequateWater Rights
- 20%
- 15%
- 20%
- 25%e.
+ Add back K = ((1+d)n)%Where: d = discount rate
n = contract length
ORDER NO. 21690 20
The suggested weighting resulted in a base securty requirement of 20% of the
computed overpayment liabilty for a fully mitigated hydroelectric project.
2. Parties' Comments
The utilties recommend the following weightings and base requirement:
IPCo WW PP&L UP&L
Insurance -10%+80 0 -10%Engineering Certification -15%+25 0 -10%
Maintenance Escrow -20%+20 -25%-10%
Lien Rights -10%+25 -25%-10%
Thermal or inadequateWater Rights + K +35 0 + K
Adequate Water Rights -25%Hydro Proj ect -20%
utility O&M Rights == .:
Base Requirement 35%20%0 40%
WWP recommends an additive method with an unlimited number of potential
adders to a base of 20% of the computed liabilty.
¡PCo discusses the riskiness of CSPP generation as reflected by a comparison of
QFs' actual generation to their contractual commitments and concludes that QFs are
more risky than utilty generating plants. UP&L also discusses its perception that QFs are
very risky. WWP discusses the varng levels of riskiness relative to the QF owner's
stabilty and the tye of project.
The other parties withheld recommendations of specific weightings, but all
except Stein-McMuray Insurance recommended a base of zero for fully mitigated
hydroelectric projects.
3. Commission's Position
The Commission recognizes that utilities consider goo insurance coverage,
excellent design/construction, and prudent operations/maintenance practices to be a
necessary part of any generation resource. Nonetheless, QFs deficient in one or more of
these areas have been and are "on line" in Idaho. Our goal is to promote measures that
ORDER NO. 21690 21
wil increase the likelihoo that the ratepayer wil receive the energy contracted for.
Thereforet we give substantial weight to these risk mitigation measures for reducing
security requirements.
We also recognize that there are other potential actions that may reduce risk
and that the "additive" method proposed by WWP permits flexbilty in its application.
Flexibilty howevert is likely to breed dispute leading to a reopening of the secuity issue.
Thereforet we continue to prefer the "subtractive" methodology proposed in Order No.
21446.
As stated previouslYt we find that a zero security requirement base for fully
mitigated hydroelectric projects is reasonable. AccordinglYt we have adjusted and
selected the following "subtractive" weighting system for risk mitigation measures:
Insurance
Engineering Certification
Maintenance Escrow
Lien Rights
Non-Hydro or InadequateWater Rights
-25%
-20%
-20%
-35%
+ K=( (i.i8)n-1J%
Base Requirement 0%
As beforet we ascribe no weight to any mitigation factor unless the basic
insurance package is in placet and we ascribe no weight to Lien Rights unless Insurance,
Engineering Certification, and Maintenance Escrow requirements have been met.
G. Basic Inurnce
1. Order No. 21446
"Adequate basic business insurance" refers to 5 types of insurance that ought to
be carred by a prudent businessman. They are:
1. Liabilty insurance,
2. Catastrophic (floo, firet etc.) insurance,
3. Boiler and Machinery insurancet
4. Temporary Los of Income insurance, and
5. For hydr plants, Low Water insurance.
ORDER NO. 21690 22
2. Parties' Comments
The parties generally concured with the selection of insurance types. IPCo
pointed out the varyg levels of protection available for low water insurance. As part of
its initial testimony in this case, Sithe submitted a copy of the insurance policy for its Elk
Creek project.
3. Commission's Position
Based on the above identified comments and original testimony, and in light of
the developments during Cook Electric Inc.'s negotiations with IPCo for the Magic Dam
Project, we have established a reasnable schedule of insurance limits to provide
minimum adequate protection for ratepayers. Of course, individual projects may have
unusual features, and conditions change with time, so deviations from the established
limits wil be considered on a case-by-case basis.
The specific or minimal levels of coverage required to qualify a QF for the 25%
reduction in liquid security requirement shall be at least:~
Liabilty
Catastrophic
Perils
Boilerl
Machinery
Loss of Income
(BusinessInterrption)
Low Water
Limit Max. Deductible
The greater of i 5% of plant
cost or $1 milion/incident
60% of plant cost
0.5% of plant cost
1.0% of plant cost
90% of equipment cost 2.0% of equipment
cost
75% of estimated daily
income up to 20% of annual
income
10 days of income
25% of anual income 10% of annual income
No more than 10 years from the initial generation date, and thereafter at
intervals no greater than 5 years, the coverages for Liabilty, Catastrophic, and
BoilerlMachinery insurance shall be adjusted by increasing or decreasing the underlying
ORDER NO. 21690 23
"plant cost" to reflect changes in the appropriate regional heavy construction deflator as
published by the U.S. Department of Commerce.
The power sales agreement shall require the QF to submit evidence of adequate
coverage at least annually. Should the coverage lapse, the QF shall immediately notify
the utilty, and the liquid security requirement level shall revert to 100% of the computed
liabilty. Failure either to maintain adequate basic business insurance or to fully fund the
required liquid securty fund shall constitute a breach of contract.
H. Engineeri Certification
1. Order No. 21446
"Appropriate engineering certifcation" refers to certfication by a Professional
Engineer (registered in the State of Idaho) as to the adequacy of the QF's design,
construction, and Operations and Maintenance (O&M) procedures policy."
2. Parties' Comments
The parties generally agreed that engineering certification of design,
construction, and O&M procedures provides a significant reduction in the risk associated
with QFs. IPCo and WWP recommend that O&M certification be required periodically
over the life of the power sales contract.
Sithe suggests that the project design engineer be permitted to certify the
project's design. It also suggests that engineers registered in jurisdictions other than
Idaho be permitted to certify QFs.
3. Commission's Position
a. Idaho Registration
We find the requirement for Idaho registration to be reasonable. Idaho has a
reciprocity agreement with nearly every other jursdiction in the U.S.. We believe that no
qualified professional wil be uneasonably excluded from participation in Idaho's CSPP
market by this requirement.
ORDER NO. 21690 24
b. Design Certification
i. QFs requiring a major FERC license must receive design
approval by FERC. Evidence of FERC approval shall
adeqately fulfil the requirement for design certification.
ii. To qualify for nsk mitigation, a QF unable to show design
approval by FERC must have its facilty design certifed by an
independent Idaho Registered Prfessional Engineer beanng no
association or nexus to the QF's designer. The "second
opinion" pnnciple is widely used in many areas of insurance
and risk management and we find it appropriate here.
c. Construction Certification
To qualify for risk mitigation, an independent Registered Professional Engineer
having no association or nexus to the primary constrction inspction professional must
certify the quality of facilty constrction. We again endorse the "second opinion"
pnnciple.
d. O&M Certification
We concur with ¡PCo and WW that continuing O&M certifications are
necessary to qualify for risk mitigation. Initially a Registered Professional Engineer must
certify that the QF has written Policies and Procedures for O&M and that they are
adequate to assure the plant's viabilty for the life of the power purchase agreement
under normal operating conditions. Thereafter, at intervals not greater than 3 years, the
QF shall be reqired to provide an Engineers Certification of the continued adequacy of
O&M procedures.
e. Standards of Certification
Appendix B comprises suggested Certifcation Forms. The suggested forms
include a statement of the engineer's qualifications, a statement of his review of the QF,
ORDER NO. 21690 2S
and a certification that the design, construction, or O&M are consistent with the life of
the power purchase agreement. Engineer certifcations shall be at least equivalent in all
terms to those included in Appendix B of this Order. A copy of each required certifcate
shall be submitted to the interconnecting utilty prior to commercial generation by the QF.
f. Awlicabilty
In order to receive a 20% reduction in liquid securty requirement for this risk
mitigation item, all the terms and conditions set out in Sections G and Hof this Order
must be met. Failure to maintain said terms and conditions at any time durng the life of
the power purchase agreement shall result in the 20% reduction being revoked. Failure to
establish and maintain the resulting new level of liquid overpayment security shall
constitute breach of contract.
I. Maintene Escw
1. Order No. 21446
"Maintenance escrow refers to a contractual arrangement with the Utilty or a
competent Idaho financial institution to maintain an account of liquid funds available only
for investment in repairs to the QF's physical plant."
2. Parties Comments
The parties generally agree that a maintenance escrow provides substantial
reduction in the risk associated with QFs.
IPCo submits the following outline of suggested terms and conditions:
"1. Prior to the date of commercial operation of the project, an amount equal
to an agreed upon percentage of annual project revenues is placed in a escrow account.
(In this example, we wil use 5 percent). The escrow account is managed by a third partyescrow holder, usually a financial institution, which is set up to handle periodic receipts
and disbursements of money. The funds in the escrow account are invested to earn
interest for the benefit of the escrow account.
2. As a condition of the CSPP contract, the CSPP developer agrees to provide
the utilty and the escrow holder with a formal plan for periodic maintenance of the
facilty. From time to time, as maintenance or repair work is performed, the CSPP
requests the escrow holder to disburse funds from the account to cover that maintenance
or repair work. As a part of the request, the CSPP supplies the escrow holder and the
ORDER NO. 21690 26
utilty with documentation regarding the work and the amounts that will be needed to
perform the work. Within five days of the request. the request is either approved or
denied. Denials are suject to arbitration.
3. The 5 percent amount is maintained throughout the term of the project.
Additional funding requirements are satisfied either by periodic lump-sum payments by
the CSPP or by regular deductions from utilty energy payments which are deposited
directly into the escrow account. If the escrow account earns a higher than excted rate
of interest or if there is no uncheduled maintenance and as a result the balance in the
escrow account exceeds 5 percent. any overages are immediately paid to the CSPP. In
addition. at the end of the contract. the balance in the account is paid to the CSPP."
UP&L states that a maintenance escrow" ... has little impact on reducing the
risks of economic walkaway." They recommend
If... that the funds come from an initial deposit by the CSPP of at least 5 years of
estimated maintenance expense and that the fund continue to grow by the utilty
withholding a percentage of each month's energy payment and depoiting that into the
maintenance escrow. If
Sithe and Bonnevile question whether the Maintenance Escrow required by the
power purchase agreement is to be separate and in addition to maintenance escrows
required by financial institutions.
3. Commission's Position
a. Terms and Conditions
i. An acceptable Maintenance Escrow shall be managed by an
institution licensed to execute financial transactions in the
State of Idaho. (E.g. an Idaho Bank or S&L.)
ii. Prior to March 1 of each year following the initial generation
date the QF shall submit to the Escrow Manager and the
utilty the following:
(1) An audted statement of the prior calendar year's O&M
expenses.
(2) An estimate of the present year's gross income.
ORDER NO. 21690 21
(3) Evidence that the resultant of 5% of the estimated gross
income minus the past year's O&M expense has been
submitted to the Escrow Manager for investment in the
escrow fund.
iii. If at any time it appears that the O&M expense for the
calendar year wil exceed 5% of the QF's projected gross
income, the QF may request the Escrow Manager to release
the overage to the QF from the escrow fund. The request
must include documentation of the estimated overage. The
QF shall also submit a copy of the request and associated
documentation to the utilty.
iv. Upon receipt of the request and documentation, the Escrow
Manager shall, within 5 working days, release the required
fun to the QF.
v. At the end of the life of the power purchase agreement, any
balance remaining in the maintenance escrow shall be
returned to QF.
vi. The Escrow Manager's fee, if any. shall be paid by the QF.
vii. The spcific languge of the power purchase agreement and
the escrow agreements shall be negotiated to reflect the
general intent of the above terms and conditions
b. Maintenance Escrow
The QF shall maintain only one maintenance escrow. Provided, however, that
the terms, conditions. and cumulative level of funding of said escrow shall be at least as
stringent as those specified above.
ORDER NO. 21690 28
c. Applicabilty
In order to receive a 20% reduction in liquid security requirement for this risk
mitigation item, all the terms and conditions set out in Sections G. and I. of this Order
must be met. Failure to maintain said terms and conditions at any time during the life of
the power purchase sales agreement shall result in the 20% reduction being revoked.
Failure to establish and maintain the resulting new level of liquid overpayment securty
shall constitute breach of contract.
J. Lien Rights
1. Order No. 21446
Order No. 21446 requires only that the utilty have "adequate lien rights" for
the QF to have reduced security requirements.
2. Parties Comments
IPCo recommends that utilties' lien rights be made subordinate mi to the
first lien holder, that the utilty be permitted to assess a fee for establishing the lien, and
that additional liquid security be required. It points out that foreclosure under the lien
may not provide full recovery for the ratepayers.
WWP cites considerable experience with liens on QFs and recommends that all
liens include at least:
1. Title insurance policy.
2. Contractually stipulated first mortgage amount.
3. The filng of fixture financing statements.
4. Assignble contract rights, water rights, permits, licenses, leases,
etc., relating to the operation of the QF.
WWP also includes a copy of its present contract langge pertaining to liens on QFs.
UP&L recommends that the QF "... bear the expense "of the "... tremendous
administrative burden ..." placed on the utilty by the lien.
ORDER NO. 21690 29
Sithe and Bonnevile recommend that the utilty lien be subordinate to liens
created by refinancing of the project as well as to the initial long term financing. Sithe
recommends a "standard form" lien.
3. Commission's Position
a. Terms and Condition
We find that the considerations recommended by WWP, quoted above, are terms
that must be addressed by any lien, deed of trut. or mortgage in order to qualify a QF for
the 35% reduction of liquid securty requirement under this risk mitigation item. In
addition,' fuel consuming thermal projects should be required to provide an assignable fuel
contract setting fuel prices for the life of the QF's power sales agreement with the utilty.
Experimental technologies (wind, geothermal, solar, etc.) will be subject to the
"lien rights" securty reduction only at the utilty's discretion.
b. Standard Forms
We decline the invitation to invoke "standard form" liens. We believe that
these instruments should be drafted by the parties to reflect specific conditions.
c. Subordination
We concur with ¡PCo that utilties' lien rights should be subordinate only to the
initial long term financier's lien.
d. Administrative Expenses
We find that the cost of administering reasonably wrtten liens wil not
substantially burden the utilties and that QFs shall not be required to pay a fee to the
utilties.
e. APJlicabilty
The value to the utilty and the ratepayer of a lien is directly related to the
quality of the underlying QF. Hence, the 35% reduction in liquid securty requirement for
ORDER NO. 21690 3~
this risk mitigation item shall remain in effect only so long as the QF fulfils all
requirements of Sections G., H., I. and J. above.
Failure to maintain these terms and conditions at any time during the life of
the power sales agreement shall result in the 35% reduction being revoked. Failure to
establish and maintain the appropriate new level of liquid overpayment secuity shall
constitute breach of contract.
K. The ''1" Factor
1. Order No. 21446
"5.)(K); Is the QF hydroelectrc, and if so, are it's water rights secured by
agrcultural rights for at least twice the required flow?
K = (1+d)n Where:
d = discount rate
n = contract length"
2. Parties' Comments
The parties generally agree that some recognition ought to be given to the
differences in quality of motive force (i.e., energy source), but many appear confused by
the "K" factor.
3. Commission's Position
The "K" factor was developed as an additive item to reflect our belief that the
risk of a QF losing its economic supply of motive force increases expnentially with time.
The utilties discount rate was selected as the anual rate of risk increase because it is a
reasonable reflection of the market's perception of financial risk over time. After
receipt and analysis of the parties comments, we find that energy costs are substantially
less predictable than financial costs. To reflect this we have substituted IS% in lieu of
the utilty's discount rate. Also, to adhere more closely to the mathematics of economic
theory, we subtract "one" from the raised value. The resulting equation for the additive
"K" factor is:
K = ((l.lS)n-ii%
ORDER NO. 21690 31
Thus to compute K, raise 1.18 to the "contract length in years" power, then
subtract "one" from the result. This number is the percentage increase to be added to the
otherwise required overpayment securty if the QF is non-hydroelectric or if the
hydroelectric QF's water rights are not protected by downstream consumptive users'
water rights. The "K" factor is applicable regardless of other risk mitigation factors.
Examples:
For 7 year contracts:
K= (1.18) 7 -1 = 3.19 -1 =~
For 20 year contracts:
20K= (1.18) -1 = 27.39 - 1 = 26.39%
L. Water Rights
1. Order No. 21446
Adequate water rights are defined as rights owned by downstream consumptive
users equal to twice the requirement of the QF.
2. Parties Comments
¡PCo suprts the requirement for non-condemnable senior water rights
downstream of the QF, but believes that only rights to flows equal to the maximum
project usage are necessar.
WWP points out the need for seniority to the downstream requirement, and
cautions that the downstream rights must not be supplied by inflows below the QF.
PP&L recommends broadening the concept to include long-term fuel contracts
for thermal projects.
Sithe suggests that the QF's water right provides adequate protection without
additional downstream water rights. Sithe, Cook and Bonneville state that no value is
given to water rights by Order No. 21446.
ORDER NO. 21690 32
RTD Hydr Projects states: "There is no potential for future subordination of
hydropower water rights to consumptive agrculture uses upstream from (its) diversions.
The extremely steep and rocky mountainous terrain upstream from (its) project sites
preclude agriculture development. The possibilty of industrial development is very
remote and the use of the water in this area for mining purses is very restricted by
clean water regulations."
3. Commission's Position
The requirement for non-condemnable senior water rights owned by
downstream users is reasonable regardless of upstream terrain. To be acceptable the
rights must not be supplied by inflows below the QF. Since some water rights may be
abandoned, hydroelectric QFs must be able to show non-condemnable senior downstream
rights equal to twice their maxmum rated flow to avoid adding the "Kit factor to the
securi ty requirement.
Long-term fuel contracts are a consideration in determining lien rights, so need
not be considered here.
n. Details of the Methlogy
A. The Deciion Tree
The following decision tree (page 33A) leads the user to proper determination of
the securty requirement for any given QF depending on the answers to 5 Questions, as
listed on the diagram.
ORDER NO. 21690 33
o ADEQUATE BUSINESS INSURANCE?
o ENGINEERS' CERTIFICATES 7
o MAINTENANCE ESCROW?
o UTILITY LIEN?
o HYDRO QF WITH DOWNSTREAM WATER RIGHTS?IF "NO", ADO K% TO THE BASE LIABILITY.
K,.. = (I.ia" - 1)"1.
It' coTIlACT LENGTH (YEARS I
YES 55,..
NO 51%
NO 35"1.
0"1
BASE
LIABILITY
ORDER NO. 21690 33A
B. The Secmty ReQuiment Amounts
1. The Table
The following table (page 34A) provides a matrx of the Securty Requirement
Ratios available to QFs depending on the various levels of mitigation. Column (1)
identifies the length of the QF's power sales agreement in years. The headings of the
other columns identify the level of mitigation which QFs may take. To qualify for the
ratios listed in Column (4), the QF may supply either engineering certification or a
maintenance escrow in addition to adequate basic business insurance. The ratios in
Column (5) require all three measures; basic business insurance, engineering certifications
and a maintenance escrow. Column (6) ratios require the QF to grant acceptable lien
rights to the utilty in addition to the other three mitigation measures.
The row labeled zero under Column (1) represents the securty ratios which
must be maintained by hydroelectric QFs possessing adequate downstream water rights,
regardless of contract length.
To use the table:
.. Select the column representing the mitigation measures in effect for the
QF.
..Select the row representing the length of the power sales contract for the
QF.
The percentage listed at the intersection of the selected column and row
represents the ratio to the total computed securty requirement that the
CSPP must maintain in the form of liquid security in order to avoid
breach of contract.
2. The Graph
Page 34B is a graphical representation of the data presented in the chart on
page 34A.
..
ORDER NO. 21690 34
*************************************************************************************** ** SECURITY REQUIREMENT RATIO ** -------------------------- ** *
* (NOTE. For hydroelectric projects with "Adequiate Wiater Rights", use the *
* ratio for' "0" year contract, regardless of actual contract length.) **.....m=.===.=====.==.===.==============a=====.===..~==========..======..==a======...*
..( 1)*(2)(3)(4)( 5)(6)*
**
**RATIO FOR RATIO FOR RATIO FOR *
**RATIO FOR ADEQUATE ADEQUATE ADEQUATE *
*RATIO FOR *ADEQUATE INSURANCE;INSURANCE;INSURANCE;*
*CONTRACT *RATIO FOR INSURANCE;ENGR.CERT.ENGR.CERT.ENGR.CERT. ;*
*LENGTH *INADEQUATE NO OTHER OR AND MAINT.ESCROW;*
*(YEARS)*INSURANCE MllIGATION MAINT.ESCROW MAINT.ESCROW 8c LIEN RIGHTS *
*---------*-------------------------------------------------------------*
*0 *100%75%55%35%0%*
***
*1 *100%'751.55%35%0%*
*2 *100%75%55%35%0%..
*3 *100%7b%56%3bï.1%*
*4 *100%76%561.3óX 1%..
*5 ..100%7b%SÓï.361.1%*
*ó *100%77%5n 37Y 21...
*7 *100%771.57%37%2%*
*8 *100%78%581.38Y.3%*
*9 *100Y.78Y.58Y.38Y.3%*
*10 *100%'791.59%39%4%*
*11 *100%80%bOY.40%Sï.*
*12 *10Ci%81 i.61Y.41%61.*
..13 *100%83%63%431.Sï.*
*14 ..1001.841.64%44%91.*
*15 *1001.8óï.661.461.11%'.
*16 *1001.881.681.481.131.*
*17 *100%91 %71 %51%ló1-..
*18 *1001.94%741.54%191-*
*19 *1001.971-771.571-221.*
*20 *1001-100%81 %61 %26%*
***
,,.21 *100%1001.861.661.31 %*
*22 *1 00%1001.921.72%37%*
*23 'Il 100ï.100%99%79%441.*
*24 *1001.100%100%871.521-*
..25 *100%1001.100%9"7%621.*
*26 *lQ07-1001.100%100%73%'.
'.27 *10Q%100%1Q07-100%86%*
*28 *100%1 ()Oï.1007-100%1001.*
*29 ..100%1001.1001.1001.100%*
*30 *1001.1001.1001.1001.100%*
*31 ..1001-1001.1001-1001.100%*
'Il :32 '.1001.100%1001.1001.100%*
*33 '*1001.1001.1001.1001.1001.*
*34 *1001.1001.1001-1001.1()0%*
*35 *100ï.100%1007-100ï.100%******************************** ~******************************************************
ORDER NO. 21690 34A
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C. The Qvyment Liabilty
i. The Chart
The chart on page 35A is a matri representing the overpayment liabilty rates
in any given year for QFs having a power sales agreement length of 10. 15. 20. 25. 30 or
35 years. The data shown are for avoided cost rates determined using the assumptions of
Case No. U-1006-247, but without arbitrary reduction for contracts less than 35 years.
The method of determining the overpayment liabilty rates is as described in Section
LB.3., above.
The chart is included for ilustrative pures only. Actual data will depend on
the rates in effect at the time of making the contract and should be clearly stated therein.
2. The Graph
Page 35B is a graphical representation of the data shown on page 35A.
ORDER NO. 21690 35
*************************************************************************************** ** IPCO OVERPAVMENT LIABILITV LEVEL ** (m/kWh) ** (100% of computed 1 i abi 1 ity) ** **=.======.........=.====.===========.====.=..=.====.....============....=..=.=........* * ** CONTRACT LENGTH ( YEARS): * 10 15 20 25 30 35 ** * **---------------------------*--------------------------------------------------------** * *
* LEVEL RATE (m/kWh): * 25.69 34.04 38.56 41.35 43.17 44.37 ** * **---------------------------*--------------------------------------------------------** END OF OPERATION * ** YEAR NO.: i) * 0.00 0.00 0.00 0.00 0.00 0.00 ** 1 * 7.60 16.46 21.26 24.22 26.15 27.43 ** 2 * 15.71 34.57 44.77 51.07 55.17 57.90 ** 3 * 24.39 54.52 70.82 80.88 87.43 91.79 ** 4 * 33.69 76.53 99.70 114.01 123.32 129.51 ** 5 * 43.69 100.85 131.77 150.86 163.29 171.34 ** 6 * 54.44 127.76 167.41 191.90 207.84 218.43 ** 7,. 66.05 157.57 207.07 237.64 257.54 270.76 ** 8 * 78.60 190.65 251.24 288.67 313.03 329.21 ** 9.42.66177.85250.96296.11 325.51 345.04 ** 10 * 0.00 161. 28 248.51 302.37 337.44 36(1.73 ** 11.. 140.4C) 243.53 307.22 348.68 376.23 ** 12 * 114.58 235.64 310.41 359.08 391.42 ** 13 .. 83.12 224.40 311.65 368.45 406.19 ** 14 * 45.22 209.30 310.63 376.60 420.42 *... 15 * 0.00 189.78 306.97 383.27 433.96 ** 16 * 165.18 300.27 388.22 446.64 ** 17 . 134.78 290.05 391.13 458.27 ** 18 * 97.76 275.77 391.65 468.64 ** 19 * 53. 19 256. 83 389. 41 477. 48 ** 20 .. 0.00 232.55 383.95 484.52 **.. ** 21 * 202.15 374.76 489.43 ** 22 * 164.75 361.28 491.84 ** 23'" 119.37 342.87 491. 34 ** 24 . 64.87 318.77 487.44 ** 25 * 0.00 288.17 479.61 *.. 26. 250. 12 467. 23 ** 27 .. 203.57 449.61 ** 28 . 147. 30 425. 97 ** 29 .. 79. 96 395. 41 ...* 30 . 0.00 356.93 ** 31 * 309.37 ** :32 * 25 i . 46 .li* 33 * 181.73 ** ;)4 .. 98. 53 '.* 35 * 0.00 *
******************************** .*****************************************************
ORDER NO. 21690 35A
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ORDER NO. 21690 35B
FIINGS OF FACT
We find:
1) That levelized rates are an incentive to the development of the
cogeneration and small power production industry.
2) That CSPPs receiving levelized avoided cost payments wil be overpaid if
they substantially reduce generation or if they discontinue generation (i.e. default) prior
to the end of their contract term;
3) That the overpayment rate is different in each year of operation;
4) That the burden of said overpayment falls on the ratepayers unless they
are reimbursed by the defaulting CSPP;
5) That any reimbursement from a CSPP to the ratepayers for said
overpayment ought to include annual interest for the period between the time of
overpayment and the time of the reimburement;
6) That the method described herein for estimating the cumulative value of
said overpayment is a just and reasonable method of determining liquidated damages;
7) That CSPPs may be unable to provide said reimburement unless they are
required to establish and maintain some form of liquid securty;
8) That a cash escrow manged by an Idaho Bank or Savings and Loan
Association (or equivalent guaranteed lines of credit or insurance) wt1 satisfy the liquid
security requirement;
9) That the risk of default by a CSPP for any QF is directly related to the
quality of design, construction, maintenace and management of said QF;
10) That it is just and reasonable to require CSPPs to maintain a form of
liquid securty equal to 100% of the estimated cumulative overpayment (estimate)
throughout the life of each QF's power purchase agreement;
ORDER NO. 21690 36
11) That it is just and reasonable to reduce the amount of the required liquid
security (required amount) by 25% of the estimate for each QF protected by adequate
basic business insurance as describe herein;
12) That it is just and reasonable to reduce the required amount by an
additional 20% of the estimate for each QF meeting the requirements of subparagraph 11,
above. and also providing full engineering certification as described herein;
13) That it is just and reasonable to reduce the required amount by an
additional 20% of the estimate for each QF meeting the requirements of subparagraph 11.
above, and also maintaining a maintenance escrow as descrbed herein;
14) That it is just and reasonable to reduce the required amount by an
additional 35% of the estimate for each QF meeting the requirements of subparagraphs
11, 12 and 13. above. and also providing the energy purchasing utilty with adequate lien
rights as described herein;
15) That it is just and reasonable to increase the required amount by an
amount "K%" of the estimate, as described herein. for any QF that does not receive its
motive force from fallng water protected by adequate downstream water rights as
described herein; provided that the required value shall not exceed 100% of the estimate;
and
16) That it is just and reasonable for each party subject to the requirements
of this Order to assume and bear its own administrative costs.
ORDER NO. 21690 31
CONCLUSIONS OF LAW
I
The Idaho Public Utilties Commission has jursdiction over Idaho Power
Company. The Washington Water Power Company. Utah Power & Light Company and
Pacific Power & Light Company pursuant to the authority and power granted it under
Title 61 of the Idaho Code. and the Rules of Practice and Procedure of the Idaho Public
Utilties Commission. IDAPA 3L.A.
n
The Idaho Public Utilties Commission has authority under the Public Utilty
Regulatory Policies Act of 1978 (PURPA) and implementing regulations of the Federal
Energy Regulatory Commission (FERC) to set avoided costs, to order electric utilties to
enter into fixed term obligations to purchase energy from qualifying cogeneration and
small power production facilties, and to implement FERC rules. PURPA §§2l0, 210A.
210F, 16 U.S.C.A. §§824-a-3, 824-a-3(a), (f); Afton Energy, Inc. v. Idaho Power Company,
107 Idaho 781.693 P.2d 427.
ORDER.
In consideration of the foregoing, IT IS HEREBY ORDERED that cogenerators
and small power producers contracting for levelized rates with Commission-regulated
utilties after the date of this Order must provide a Commission-approved form of liquid
security and/or risk mitigation in the amount of computed overpayment liabilty to ensure
an optimum level of ratepayer indifference to the front-end loading that occurs with
levelized rates in power purchase contracts.
IT is FURTHER ORDERED that the reasoning and methodology of the
Commission as set forth above in Sections i and IT for securing the cumulative
ORDER NO. 21690 38
overpayment liabilty that occurs with levelized rates in CSPP power purchase contracts
be adopted and implemented.
THIS is A FINAL ORDER. Any person interested in this Order (or in issues
finally decided by this Order) or in interlocutory Orders previously issued in this Case No.
U-lOO6-292 may petition for reconsideration within twenty-one (21) days of the service
date of this Order with regard to any matter decided in this Order or in interlocutory
Orders previously issued in this Case No. U-IOO6-292. Within seven (7) days after any
person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idah Cod §61-626.
DONE by Order of the Idaho Public Utilties Commission at Boise, Idaho,
this //,¿L day of January, 1988.
~u~R.ON, COMMSSIONER
ATTEST:~~~ERS, SECRETARY
sw/692L
ORDER NO. 21690 39
SEPARATE CONCURRING OPINION
In Order No. 21446 the Commission acknowledged that unanimity did not exist
among the Commission members on at least one issue presented by this case. And, my
separate opinion in Case No. U-1006-294, Order No. 21522, further reflected, or at least
hinted at, lack of unanimity. In deference to the majority vote of my colleagues, I have
concured in this Order. However, I write separately for the purse clarifying the
difference of opinion which existed among the Commissioner.
The Commission, in its deliberations leading to this Order, has struggled with a
number of difficult issues. For the most part, this Order, which is the product of
extensive discussion and debate, achieves a reasonable accommodation of conflcting
interests.
The most difficult policy decision involved in this case was whether any
combination of secinty or risk mitigation should be allowed to completely eliminate a
requirement of liquid security. I argued that there should be some residual liquid security
requirement for two reasons. First CSPP projects are fundamentally different from
utilty-owned projects in that they operate free of regulatory oversight. Ratepayers are
protected, at least in theory, from risks arising from the construction of generating
facilties by regulated utilties. As a Commission, we do not have corresponding authority
with respect to CSPP projects. This distinction, in my opinion, should be reflected in the
security mechanism. All CSPP projects, whether they be hydro or cogenerating, should
have some residual liquid security requirement.
Second, by permitting hydro projects to escape from the residual security
requirement we may encourage the development of hydr projects at the expense of
thermal projects. Although this is not the intent of the Order, it may be a consequence.
DATED at Boise, Idaho, this day of January, 1988.
r\nJi IDL
~,PRE~DENT
ORDER NO. 21690
ORDER NO.21690
APPENDIX A
(From Order No. 21446)
Reduction of CSPP risk can best be accomplished by basing
the level of liquid security requirement on the answers to
"yes-or-no" questions about 5 key areas of a project. The first
4 questions pertain to the developer's contractualarrangements. The fifth question pertains to outside influencesover the QF. The 5 questions are:
1. )(20%l~
2. )( i 5 % 1 ~
3. )¡ 20% 1 ;
4. )(25%);
5. )I K ) ;
Does the QF have adequate basic business insurance?
Has the QF received appropriate independent
engineering certification?
Does the Owner assure an appropriate Maintenance
escrow?
Does the utility have acceptable lien rights over the
QF?
Is the QF hydroelectric, and if so, are it's water
rights secured by agricultural rights for at least
twice the required flow?
"Adequa teinsurance
They are:
basicthat business
ough t to
insurance"be carried refers to 5 types of
by a prudent busi nessman.
1. Liability insurance,
2. Catastrophic (flood, fire, etc.) insurance,
3. Boiler and Machinery insurance,
4. Temporary Loss of Income insurance, and
5. For hydro plants, Low Water insurance.
"Appropriate
certification by a
state of Idaho)
construction, andpolicy.
engineering certification" refers to
Professional Engineer (registered in theas to the adequacy of the QF' s des ig n,
Operations and Maintenance(O&M) procedures
"Maintenance escrow. refers to a contractual arrangementwith the Utility or a competent Idaho financial institutiOn tomaintain an account of liquid funds available only for
investment in repairs to the QF's physical plant.
Standards of adequacy and appropriateness for the three
items penUltimately identified are defined elsewhere.
The level of security required of a QF can be determinedby sequentially asking one or more questions (depending on the
answer(s) to the previous question(sll in the 5 key areas.
Bee au set hew r itt end esc rip t ion 0 f the que s t ion i ng pro c e s sis
somewhat complex, a pictorial decision tree is attached. The
description, in conjunction with the tree, explains the process.
Order No. 21446
Appendix A
Page 1 of 7
Answers to the key questions will lead to a percentagenumber. This number represents the level of liquid securtityrequired of the QF relative to the total .levelization
overpayment liability. as computed by the method describedelswhere. The questions are 'asked as follows.
Question No.1. is a crucial determinant of a QF's
riskiness. If a QF is not protected against basic risks by
adequate insurance, it must be viewed as very risky regardlessof any other measures an Owner may take. Therefore, if the
answer to question No.1 is .No., the QF is required to maintain100% of the computed overpayment security. If the answer is
.Yes., the security level requirement is reduced by 20% andquestion No.2 is appropriate.
If the answer to question No. 2 is .Yes., the securityrequirement is reduced by another 15%. Furthermore, regardless
of the answer to question NO.2, question No. 3 is alsoappropriate and if the answer there is .Yes., the securityrequirement is reduced by an additional 20%. If both 2 & 3 are
.Yes., question No. 4 is also appropriate. A .Yes. answer to
question No.4 reduces the requirement another 25%.
Regardless of the answers to questions No.Question No. 5 is appropriate so long as the
.Yes.. If the answer to No. 5 is .Yes., then
security stays as per questions Nos. 1 thru 4.
answer to 5 is .No., the level of security
inc reased by:
2, 3, and
answer to 1the levelHowever, ifrequirement
4,
was
of
theis
K
n
(1 +d)Where:d = discount rate
n = contract length
The resul tsof the following if of this series of decisions will result in one
5 is .Yes..
IF THES E ARE YES TH EN TH I S LEVEL
NONE
1 Only
1 & 2
1 & 3
1, 2, & 3
1, 2, 3, &4
ioa %
8 0%
65 i
6 a %
45 %
20 %
If the answer to 5 is nNO., the appropriate level tabulatedabove will increase according to the contract length, but not in
excess of 100%.
Order No. 21446
Appendix A
Page 2 of 7
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Appendix A
(031ncw.¡oo .:10 %) ¡3,~' Page 4 of 7
IPCD OYERPAYRET lIABILITY LEVEL li/kMh; 1001)=:......_______===.=..._==......--================
CONTRACT LEO (YEARSI'10 15 20 2S 30 35---------------------------..---------------------------------------------------
LEVE RATE (lIkll)'25.69 34.04 38.56 41.35 43.17 44.37
-------------------...-----1---------------------------------_____________________
OPERATION YEAR:1987 t 7.60 16.46 21.26 24.22 26.15 27.43
1988 t 15.71 34.57 44.77 51.07 55.17 57.90
1989 t 24.39 54.52 70.82 80,88 87.43 91.19
1990 t 33,69 76.53 99.70 114.01 123.32 12.51
1991 t 43.69 100.85 131.17 150.86 163.29 17.54
1992 t 54.44 127.76 167.4 191.90 207.84 218.43
1993 t 66.05 157.57 207.G 237.64 257.54 270.16
1994 t 78.60 190.65 251.24 288.67 313.03 329.21
1995 t 42.66 17.85 250.96 296.11 325.51 345.04
1996 t 0.00 161.28 248.51 302.31 337.44 360.13
1991 t 140.40 243.53 307.22 348.68 376.23
1998 t 114.58 235.64 310.41 359.08 391.42
1999 t 83.12 224.40 31.65 368.45 406.19
2000 l 45.22 209.30 310.63 376.60 420.42
2001 t 0.00 189.78 306.97 383.27 433.96
2002 t 165.18 300.27 388.22 446.64
2003 l 13.78 290.05 391.13 458.27
2004 t 97.76 275.77 391.65 468.64
2005 l 53.19 256,83 389.41 477,48
2006 t 0.00 232.55 383.95 484.52
2007 l 202.15 374.76 489.43
2008 l 164.15 361.28 491.84
2009 l 11.37 342.87 491.34
2010 l 64.87 318.17 487.44
2011 l 0.00 288.17 479.61
2012 l 250.12 467.23
2013 l 203.57 449.61
2014 l 14.30 425.97
2015 l 79.9&395.41
2016 l 0.00 356.93
2017 t 309.37
2018 l 2St. '"
2019 t 181.73
2020 l 98.53
2021 l 0.00
Order No. 21446
Appendix A
Page 5 of 7
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Appendix A
Paqe 6 of 7
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Appendix A
Page 7 of 7
~EAF. NO.:1 4
4 5 I;7 B '1 10
a:JYEAR:1987 198 1989 190 1991 1992 1993 194 1m lT9ó----lEVEL RATE:47.05 4i.(¡5 47.05 47.05 47.&5 '¡7.0~47.05 47.05 47,05 l7.0SACTUAL NON.lEYEli 21.2 ¡r.6y 22.07 22.55 l~. iJ :3,H 23.94 14.49 i:. ó4 ¡:i.cilOvER/UNDER PAYNENT:25.85 25.36 24.98 24.50 14.03 :3.56 23.11 ~, =p 124.5'1j ~~~. :H:,...""~.CU"ULATIVE aVER/UNDER PAY"ENTi 27.45 57.S7 91. 77 12.41 171. 4S 218.34 21.', iCI ~29l 14 ~.;4.1ii ...... ... '1:,:=C~~tATlvE PAY"ENT WID INTEREST:25.SS 51. :1 76.19 inO.69 !2.72 148.2E 171. 39 i 1!.;~1~9. 7é 142.75
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.11VEAK:1~97 ma 1~i;i;20(ìÎ/~ijcji 20.n 2003 2Gu4 20(,5 .:ta'I.IQLEvEL RATE:47.05 47.15 4i.05 47.(15 47.ù5 4j 11)5 47.05 4i.05 4i.ij5 l7.v5"CTUAL ~¡¡N-LEVEL:is. !J n.E7 ;(1.09 82.;8 84.3 ai.16 89.66 i;i.27 94.'14 n.71aVERIUNDER PAY~ENT:(2S. bSi ~ .'0'. S.:¡i::;.\!'¡)(35.ij)i3.£i8)!41Ì.11 142.63i m.ll)i47.S91 í~i).ii£i)C~UL"rIVE OVER/UNDER PAV~ENTI 376.15 j91.35 4ij6.n 42G.36 433.9n 446.59 458.22 468.59 47i.44 484.47CU"ULATiYE PAV~:Ni ï/G l~rEREii:1:4.u7 -': 'I;5v.21 14.S6 .22.8 .62.91 -105.54 .156.76 -1::e.65 -249.31
::.~._-
VEAR Nil.:ZL ii 23 24 25 :b ,7 28 29 30
YEAi:2i)~7 1*9 2ù09 :?~IO ZOlI ir'!2 29li 2014 2015 2'" .. .CI---i.EiJ!. RATE:47,0'47.,j5 47.G~41,,5 47.05 47.v5 47.(\5 47.05 47.~5 47.65ACrUAL NDlH£VEL:Iùn.S5 11)3.5 106. ~3 109.67 11:.91 116.25 11.69 12.21 126.94 133.74aVER/UNDER FAVll!li:;.,. -i'a ¡Si.451 m.48)(62.62)(6'.36)'íÓI3.201 i7,641 m.ll)í79.99!In.b9)
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C~~JL.TiVE OYER/UNDER ~AY"EHT:4ao..39 491.&0 491.29 ~61.~O 47~.5b 467. ;:4~~.S7 12:.92 195.l5 3Só.a6C~~ULATIyE ?ArftENT _/9 ~~TEft£sr: .)02.81 .m.2ó .418.14 .46.36 .547.22 4616.42 -689.06 .;t~.29 -84~. 17 .;Z3.66
YEAR NO.:~1 !~J3 34 35YEAR:2017 1~19 20U 2020 2Q1._--------LEVE RATE:47.es 4i.,j5 47.05 47..,5 41.nS
ACTUAL N~-lti¡Ei.:1:4.6;,~. Tl/142,9 !4?Z2 ISi.~1. .,....
Q\lER/lI~ER PAYIlNT:!S1.m i:i;1.c:i (9S.BS)(100.17 1104.ói)tU"UL~T:YE aVER/JNOEP. P'rnEHT:31)9.21 ....l ~,lS.61 98.39 10.16).:." ~...D
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APPENDIX B
Sample Engineering Certificates
ORDER NO.21690
ENGINEER · S CERTIFICATION
OF
DESIGN ADEQUACY
FOR A
PURPA QUALIFYING FACILITY (QF)
1.I,am a Professional Engineer
Name of Engineer
registered to practice in the State of Idaho. I have
substantial experience in the design, construction, and
operation of electric power plants of the same type as
(plant) ,
Title of QF
sited at
Description of Project Site
in County, State of
2. I have reviewed and/or supervised the review of the Plans and
Specifications for said power plant and its associated
equipment and appurtenances, and it is my professional opinion
that if the plant is built in accordance with said Plans and
Specifications and operated/maintained to conuercially typical
standards for this type of plant, said plant will operate at ornear design efficiency and plant factor for years(length of the proposed Power Sales Contract) , barring
unforseeable Force Majeure.
3. I have no economic relationship to the Designer of said plantand have made my analysis of the Plans and Specificationsindependently.
4. I have supplied the owner of the plant with at least one copy
of said Plans and Specifications bearing my Stamp and the words
"CERTIFIED FOR IDAHO P.U.C. SECURITY ACCEPTANCE" on each sheetthereof.
5. I hereby CERTIFY that the above statements are complete, true,
and accurate to the best of my knowledge and I therefore set my
hand and seal below.
Signed and Sealed
Date:
Signature
ENGINEER · S CERTIFICATION
OF
CONSTRUCTION ADEQUACY
FOR A
PURPA QUALIFYING FACILITY (QF)
1.I,am a Professional Engineer
Name of Engineer
registered to practice in the State of Idaho. I have
substantial experience in the design, construction, and
operation of electric power plants of the same type as
(plant) ,
Title of QF
sited at
Description of Project Site
County, State ofin
2. I have made and/or supervised periodic inspections of the
construction in progress and of the completed plant, and it is
my professional opinion that the plant was built substantially
in accordance with Plans and Specifications bearing the words
"CERTIFIED FOR IDAHO P.U.C. SECURITY ACCEPTANCE" and the Stamp
of the Certifying Engineer of the Design, and that the plant
was built to commercially accepted standards for a plant of
this type.
3. I have no economic relationship to the Designer of said plantand have made my analysis of the Plans and Specificationsindependently.
4. I hereby CERTIFY that the above statements are complete, true,
and accurate to the best of my knowledge and I therefore set my
hand and seal below.
Signed and Sealed
Date:
Signature
ENGINEER · S CERTIFICATION
OF
OPERATIONS AND MAINTENANCE POLICY
FOR A
PURPA QUALIFYING FACILITY (QF)
1.I,am a Professional Engineer
Name of Engineer
registered to practice in the State of Idaho. I have
substantial experience in the design, construction, and
operation of electric power plants of the same type as
(plant) ,
Title of QF
sited at
Description of Project Site
County, State ofin
2. I have reviewed and/or supervised the review of the Policy for
Operation and Maintenance (O&M Policy) for the plant and it is
my professional opinion that, provided said plant has been
designed and built to appropriate standards, adherance to said
O&M Policy will result in the plant. s producing at or near the
design electrical output, efficiency, and plant factor for
years (length of the proposed Power Sales Contract),
barring unforseeable Force Majeure.
3. I have no economic relationship to the Designer of said plantand have made my analysis of the Plans and Specificationsindependently.
4. I have supplied the owner of the plant with at least one copy
of said O&M Policy bearing my Stamp and the words "CERTIFIED
FOR IDAHO P. U. C. SECURITY ACCEPTANCE" on each sheet thereof.
5. I hereby CERTIFY that the above statements are complete, true,
and accurate to the best of my knowledge and I therefore set my
hand and seal below.
Signed and Sealed
Date:
Signature
ENGINEER · S CERTIFICATION
OF
ONGOING OPERATIONS AND MAINTENANCE
OF A
PURPA QUALIFYING FACILITY (QF)
1.I,am a Professional Engineer
Name of Engineer
registered to practice in the State of Idaho. I have
substantial experience in the design, construction, and
operation of electric power plants of the same type as
(plant) ,
Title of QF
sited at Description of Proj ect Site
in County, State of
2. I have made a physical inspection of said plant, its operations
and maintenance records since the last previous certified
inspection, and the plant. s O&M policy bearing the words
"CERTIFIED FOR IDAHO P.U.C. SECURITY APPROVAL" and the Stamp of
the Certifying Engineer. It is my professional opinion, based
on the plant. s appearance, that its ongoing O&M has been
substantially in accordance with said O&M Policy; that it is in
reasonably good operating condition; and that if adherance to
said O&M Policy continues, the plant will continue producing at
or near its design electrical output, efficiency, and plant
factor for years (time remaining to the end of the
plants Power Sales Contract).
3. I have no economic relationship to the Designer of said plantand have made my analysis of the Plans and Specificationsindependently.
4. I hereby CERTIFY that the above statements are complete, true,
and accurate to the best of my knowledge and I therefore set my
hand and seal below.
Signed and Sealed
Date:
Signature
EXHIBITE
APF"RVED PER CCiSSlOO
ORDER NO. 25505.-: I'
Facility No. 21765151
Project: Magic West",) . ') .'v':") ¡ .' v/, .," '.../ /~¿¿/y¿/ ..~J/c: , _!... ~. ,-_"
MY J. WALTE
c.ISSIGJ SECARY
FIRST AMENDMENT TO THE
FIRM ENERGY SALES AGREEMENT
t: ..' ATHIS FIRST AMENDMENT entered into on the ~ day of ~ 1994, to
the FIRM ENERGY SALES AGREEMENT (the" Agreement") dated as of DeceR: r~92, between
GLENNS FERRY COGENERATION PARTNERS, LTD ("Seller"), and IDAHO POWER COMPANY, ("Idaho
Power"), hereinafter sometimes referred to collectively as "Parties., or individually as "Part", for
Seller's cogeneration project ("Facilty").
WIT N E SSE T H:
WHEREAS, the Agreement was approved by the Idaho Public Utilities Commission
("Commission") on January 22, 1993 per Order No. 24674; and
WHEREAS, the Seler desires to delay the Scheduled Operation Date of this Facilty by
one year; and
WHEREAS, the Parties desire to embody various other miscellaneous change's which
have taken place since the Agreement was first signed.
NOW THEREFORE, the Parties have agreed to amend the Agreement as follows:
1. ARTICl Vl/: PURCHASE PRICE AND METOD OF PAYMENT; ADJUSTMENT OF PURCHASE
PRICE
In Paragraph 7.1.1 Base Payment"
"35.63 MilslkWh" is changed to "37.22" MilslkWh"
"58.16 MillslkWh" is changed to "60.71" MiUsIkWh"
"48.47 MilslkWh" is changed to "50.64" MilslkWh"
2.8-3 SCHEDULED OPERATION DATE
"January 1, 1995" is changed to "January 1, 1996" (Scheduled Operation Date)
"December " 1994" is changed to December 1, 1995" (First Energy Date)
3. 8-11 COSTS is amended to read as follows:
The cost of the 138 kV transmission line Special Facilties is $155,500. The cost of
- 1 -
PS275
the distribution line Special Facilities is $3,444. The cost of right.of.way acquisition
is $4,500. The cost of the Metering Equipment is $8,236. The cost of the
communication equipment is $8,500. In addition, there wil be a monthly charge for
the communication circuit lease cost associated with the telemetry equipment. The
communications circuit lease is $280.00 per month as of the date of this Agreement.
Seller recognizes that the monthly communications circuit charge may be adjusted by
Idaho Power as the cost to Idaho Power is adjusted by the owner of the
communications circuit. The cost of the Disconnecting Equipment is $103,00. The
total cost to be paid by the Seller is $283,180. The $283,180 represents the amount
that wil be charged by Idaho Power if the Seller makes the payment on or before
Februry 1, 1995. If the Seller does not make this payment by the specified date, the
cost wil be subject to update. Idaho Power wil not schedule constuction or order
Special Facilties which are not ordinarily maintained in Idaho Power's inventory until
payment has ben made. In addition to the instllaton and construction charges above,
during the term of the agreement Seller wil pay Idaho Power the operation and
maintenance charge specifed in Schedule 72 INTERCONNECTIONS TO NON.UTILITY
GENERTION or it successor schedules(s). This monthly operation and maintenance
charge wil be calculated based on $160.000.00 of 138 kV rated Interconnection
Falites plus an additional $119,736.00 of Interconnecton Facilties rated below 138
kV. The total cost shown above is an estimate calculated on the basis of average
co. When the acal total cost is determined, Idaho Power wil adjust the total cost
amount to reflect the actal total cost incurred by Idaho Power. Beginning with the
mo of this adjusten the operation and maintenance charges wil also be adjusted.
When the acal tol cost is known, witin sixt (60) days Idaho Power will refund any
overpayment or Seller wil remit any underpayment.
4. Except as modifed by this First Amendment, all other parts of the Agreement shall remain in
full force and effect.
.2.
PS276
IN WITNESS WHEREOF, the Panies hereto have executed this Amendment as of the
day and year herein written.
IDAHO POWER COMPANY
Byg,Pa!£~
Vi(:8 Presi,nt, Power SupplyDate W94
By ~ .~
Date
- 3-
PS277
STATE OF IDAHO )
) ssCounty of Áda )
On thiS~day of , 19U before me, the undersigned, a
Notary Public, personally appeared Jan Packwood, personally known, who being duly sworn, did
say that he is the Vice President, Power Supply of the corporation that executed the within
instrument, and acknowledged to me that such corporation executed the same as a free act and
deed.
IN WITNESS WHEREOF, I have hereunto set my harid and affxed my offcial seal, the
day and year in this certificate first above written.
(NOTARIAL SEAL)~~
Residing at'~44 0)
STATE OF CdOrC.d(ì
County of Ai C-fY1ß:
)
) ss
I
On this -:day of Apr L) , 19 fu, before me, the undersigned, a
Notary Public, personally appeared A\c.(' h ç:, ~~, personally known, who being duly
sworn, did say that he is the individual who executed the within instrment, and acknowledged to
me that he executed the same as a free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affxed my offcial seal, the
day and year in this certificate first above wntten.
(NOTARIAL SEAi)
~--"-'''~nc.;:GlQrC4Ô
Residing at: pc (\( 0 C C ,0
- 4-
PS278
EXHIBITF
r.....;
" ..'-"--ser Dål ,..... ,
MAY 18 1994BEFRE TH IDAHO PUBUC UTS COMMSION
IN TH MATl OF A PRPOSED AMND- )
:MNT TO TH FI ENERGY SALS
AGRET BETWEE IDAHO POWER
COMPAN AN GLENS FERRY COGEN-
ERTION PAR, LTD. FOR TH
MAGIC WEST COGENETION PRCT
) CASE NO. JP-E-94-7
)
) ORDER NO. 25505
)
~ 9/7b5KJ
APCATION
On Apri 15, 1994, Idaho Power Company (Idaho Power; Company) and Glenns
Ferr Cogeneration Parners, Ltd. (Glenns Ferr) fied an Application with' the Idaho
Public Utities Commission (Commission) requesting approval of an Amendment to a
Firm Energy Sales Ageement (Ageement) between Idaho Power and Glenns Ferr. The
underlyig Ageement dated Dember 9, 1992 was approved by the Commission in
Orer No. 24674 on Januar 22,1993.
Glenns Ferr is the developer of the Magc West Cogeneration project (Magc
West), a proposed less, than 10 MW natural gas fired turine generation facity located
in the southeast quarr of Setion 29, Townhip 5 South, Rage 10 East, Boise
Meridian, Elmore County, at the Magc West potato procssin facility in Glenn Fer,
Idaho. The estiate anual net fi energy prouctin is 83,220,OOOl kWh. As
represented. the projec will be a PURPA "qual facility (QF) prior to
intercnnecton. The underlyig Agment provides for levelized rates over a 20-year
contract term and a scheduled operation date of Januar 1, 1995.
Idaho Power ha also ente into a Fir Energ Sales Agement with
Rupert Cogeneration Parners, Ltd. (Rupert) to purchase energy to be generated by a
less than 10 MW cogeneration project which will be locte adjacent to the Magc Valley
Foods potato processin facty in Rupert, Idaho (Magc Valey Prject). The Magic
Valey Agement was approved by the Commssion in Ordr No. 25050 on July 23,
1993. The scheduled operation date for the Magc Valey Prjec is Januar 1, 1996.
The Application relates that Mr. Alen Forbes is the general parer of both
Rupert and Glenns Ferr and as the President of Independent Energ Parers, Inc., is
ORDER NO. 25505 .1-
PS440
"".- ..,
developing both the Magic West and Magic Valley Projects. In order to capture certain
economies of scale and to coordinate the construction and financing of the Magic West
and Magic Valley Projects, Mr. Forbes requested that Idaho Power consent to an
amendment to the Glenns Ferr Firm Energy Sales Agement to change the scheduled
operation date from Januar 1, 1995 to January 1, 1996. Puruant to agreement of the
pares, if the Amendment is approved by the Commission, Rupert has stipulated to a
dismissal (with prejudice) of its Complaint against Idaho Power for "grandfathering" in
Case No. IPC-E-93-18.
The Company contends that deferral of the scheduled operation date of the
Magc West Project and settlement of the Rupert Complait would be beneficial to Idaho
Power Company and its Customers.
The proposed Amendment date Apri 12, 1994 (attached) defers the scheduled
operation date for the Magc West Project frm Januar 1, 1995 to Januar 1, 1996. The
Amendment alo modifies paraph 7.1.1 of the Magc West Ageement to adjust the
rates to correspond with the cunt "published" rates for a 20-year Firm Energy Sales
Ageement commencig in 1996. (Reference Commision Order No. 24911.)
FIINGS
The Commssion ha reviewed the filigs of recrd in Case No. IPC-E-94-7 and
ha reviewed its prior Orer approg the Magc West Prject, Orer No. 24674, Case
No. IPC-E-92-32. The Commsion fids the term of the Amendment to be reasnable
and we approve them. We also approve payments made under the Ageement (as
amended) as prudently incu expnss for ratemakg purses.
CONCLUSIONS OF LAW
The Idao Public Utities Commsion ha jurdictn over Idaho Power
Company, an elecc utilty, puruat to the authority and power grted it under Title
61 of the Idaho Cod and the Public Utity Regulatory Policies Ac of 1978 (PURA).
The Idaho Public Utities Commsion has authority under the Public Utility
Regulatory Policies Ac of 1978 and the implementig regulations of the Federal Energ
Regulatory Commssion (FRC) to set avoided costs, to order electrc utilities to enter
ORDER NO. 25505 .2-
PS441
;;..:.
intp fied term obligations for the purchase of energy from qualifying cogeneration
facilties; and to implement FERC rules.
OR DE R
In consideration of the foregoing IT IS HEREBY ORDERED that the Firt
Amendment to the Firm Energ Sales Ageement between Idaho Power Company and
Glenns Ferr Cogeneration Parners, Ltd. submitted in this proceeding be and the same
is hereby approved.
THS IS A FINAL ORDER. Any person interested in this Order (or in issues
finaly decided by this Order) may petition for reconsideration within twenty-one (21)
days of the servce date of this Order. Withi seven (7) days after any person has
petitioned for reconsideration, any other person may cross-petition for reconsideration.
See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
/82! day of May 1994.tt.g. Û~)MAHA H. SMITH, PRESIDENT
~U1 .
EA J. ILLER, COMMISSIONER
~d¿ ¿ ¿*'erRAPH NELSON, COMMISSIONER
ATTEST:
d;~4.Z-"~Myra W ters
Commion Secreta
JR\ O-INC-E-9L7.SW
ORDER NO. 25505 .3.
PS442
Facilitv No. i 1765151
Project: Magic West
FIRST AMENDMENT TO THE
FIRM ENERGY SAtES AGReEMENT
"
,J . . 11, THIS FIRST AMENDMENT entered into on the ~ day af ~ 1994, to
U1. FrRM ENERGY SAL.ES AGREEMeNT (the - Agreement-) dated as of Decem r 9. 1992. between
GLENS FEY COGENERTION PARTERS, LTD I-Seler-). and IDAHO POWeR COMPANY. (-Idaho
Pow..). hereinaher sometim.. referre to collecvelv as -Pal1..- # or individuaUv as · Par- , for
Selle"s COeneration project (-FacilitY-).
WIT N E SSE T H:
WHEREAS, the Agreeent was aøproved by the Idaho Public Utilities Commission
(-Commiuion-' on Januar 22. 1993 P'" Order No. 24674; and
WHERi:S. ih s. dura to del-V 1Ie Scedul Operation Date of this Facility by
one ye and
WHEREAS. th Pa da to ..bo vwi ~ mislaneo chng.. which
have Qk pl sinc Ú' Ag..t wu lf sine.
NOW THEREFORE. the Part have IQNl to amend 1Ie Agreen IS follos:
1. ARW Vo: PUROfSe PRICE AND METD OF PAYMEN; ADJUSTEN OF PURCHASE
PRies
In Paragraph 7.1.1 BaM Patm
-35.83 MilWh- is ch to -37.22- MîWh-.58.1 e Mi- is ch to -80."" MiI-
-48.47 Mi~- is ch to .50.84- MUIIiWh-
2. B-3 SOED OPEnON DATE
-.. 1. 1995- is ched to - J8f 1. 1991- (Scle OøemOft D.-a.
-Dlbe 1. 1994- ia cNed to Debe 1 l 1995- (Firs En D.-i
3. 8-11 COST is amed to tU .. fo
Th co of 1M 138 kV nn li Sp Fd is .155.50. Th co of
.1 .
ATrACB i OF 4
PS443
..- t:the distribution line Special Facilities is $3,444. The cost 01 right.ol.way acquisition \\
is $4,500. The cost of the Metering Equipment is $8.236. The cost of the
communication equipment is $8.500. In addition, there will be a monthly charge for
the communication circuit lease cast lIsociated with the telemetry equipment. The
comunicatiorn circuit lease is $280.00 per month as of the date of this Agreement.
SeI.r recognizes that the monthly communications circuit charg. may be adjusted by
Idaho Power as me cost to Idaho Power is adjusted by the owner of the
comunications circuit. The cost of me Disconnecng Equipment is $103,000. The
to CO to be pa by the Sell.r is $283, t 80. The *283.180 represents the amount
that will be chrged by Idaho Power if the Seller makes the payment on or b.for.
Fery 1. 1995. If the Seller does not mike thii payment by the specifed date. the
cost wil be subjec to updai.. Idah Power wi11 not sced\.le constrcton or order
Spe Facirniu wh ire not ordinarily mantned in Idiho Powers invenory untl
pa ha tM ma In ad to . in an coon chare. abov..
during the ter of th agl't Se wi pa Idao Po~ it. Qperati and
~nc charg ii in Scedul. 72 INTCONNECONS TO NON-uUT
GE nON Qr it iu .øed..'.l. 'l math opon and manc.
charge wiD be calc ba on $160.00.00 of t 38 kV ra Intneon
F.. pl _ ad . t 19.738.00 Qf Intne Faclit ra be 138
tV. Th to ca sh abve ia an II calc on it. bu of avee
c: WM it cuaa cc ia dein. Ida Powe wi adius it. tota ca
lIunt to re 1M IC tø e: In by Ida Powe. Beinnin wi the
mø of il ad th QØ II manU chii wi 1LI be adjum.
Wh ih 8Caa CO ia kn. wi iØ (80) da Ida Poer wiD ref any
ovymen at Se wi re I" und~
-l. &c as rn by 1l Am Amen II ot .- of 11. Agren shll rw in
fu fo 8f ef
.2.
ATTACH 2 OF 4
PS444
/.'-'. 0.' ,
/
IN WITNESS WHEREOF. the Parties hereto have executed this Amendment as of the
day and year herein wrinen.
IDAHO POWER COMPANYBvaß~
/h PackwooVice pr.si~t. Power Supply
Daie 1; 'd/94 '/
By
Date
- 3-
A'rACH 3 OF 4
PS445
'. STATE OF ICAHO : SS \1,CountY ot Ada ) ." #-. ~ iI' ad
" On this ~ day of 12 y . 19~, before me. the undersigned. a
Notary Public. øersonalfy aøøeared J~ ;:kWOOd. øersonallv known, who being duly sworn, did
say that he is the Vice President. Power Suøøly of the corporation that executed the within
instrment, and acknowledged to me that such corporation executed the same as a free act and
dee.
IN WITNESS WHEREOF, I have hernto set my hand and affxed my offcial seal, the
day and y.ar in this certficate first above wrtten.
(NOTARIAL SEAL)
~~~~ahO '¡J
Aesiding at:,"D A dJ,
STATE OF r':lúrc..dG ))..Caum of A (' C"i:Cd'¡cc J.
On this "Jdav of A r~; L \ , 19~, _ me, 1h. uniged. i
Noi Public. pely IØøa ~ pe knwn, wh beng duly
sworn, did sa 1ht h. is th inWf wh ue 1h wi in an acoMged to
me itat h. ex it. sa .. a fr ac .i de.
IN WIesS WHEREOF, I haw IW .. my ha an afxe my of SU, m.
day an yur in itia cd ti ave wr.-
(NOTARrAL SeAU --so¥p2lfFi8'/
.4.
ATrACH 4 OF 4
PS446
EXHIBITG
~~4w_. .~ .:-"-"
I ,--~.1",
i
APPRO PER MIN ENi..ayDATE JAN 81 1996.~~~tLL~J. WATE
c:ISlal SECAR
Facilty No. 21765151
Project: Magic West
SECOND AMNDMENT TO THE
FIRM ENEGY SAES AGREEMENT
i
L
THIS SECOND AMNDMENT entered into on the !l day of tv../w 1991
to the FIRM ENERGY SAES AGREEMNT (the "Agreement" dated as of December 9. 1992.
between GLENNS FERRY COGENERATION PARTNERS, LTD ("SeUer"). and IDAHO POWER
COMPAN, ("daho Power''). hereinaftr sometimes referred to collectively as "Paries". or
individually as "Party", for Seller's cogeneration project ("Facilty").
WIT N E SSE T H:
WHREA, the Agreement was approved by the Idaho Public Utilties
Commssion ("Commssion'') on January 22. 1998 per Order No. 24674; and
WHEREA. the First Amendment was approved by the Idaho Public Utilties
Comnssion ("Commssion") on May 18,1994 per Order No. 25505; and
WHERE. the Paries desire to embody various other nnscellaneous changes
which have taken place since the Agreement was first signed.
NOW THEREFORE, the Parties have agreed to amend the Agreement as
follows:
1. Paragraph 4. 1.8.1 ~ "$ 15,000,000.00" is changed to read "$17.000,000.00"
2. Paragraph 4.1.8.2 ~ is changed to read:
"Other than the first mortgage liens pernutted herein. Permtted
Encumbrances as that term is defined in that certain Credit Agreement between
Seller and Toronto Dominion (Texas) Inc.. as Agent and as Collateral Agent. and The
Toronto Donnnion Bank. Houston Agency, as Lettr of Credit Issuing Bank as Lender.
pursuant to which the Lender extends credit to Seller to construct, install and equip
the Facility (the "Credit Agreement")) or temporary mechanics, statutory or similar
liens incurred in the ordinary course of business in an amount not to exceed in
aggregate ten thousand dollars ($10.000.00), Seller wil not permit any liens or
encumbrances of any nature whatsoever to be placed on the Facilty without Idaho
Power's prior written consent. which consent wil not be unreasonably withheld. If
any unpermtted lien or encumbrance is placed on the Facilty. Seller wil provide
. 1 -
PS265
,'" ~'! l! .r-"..~
Idaho Power with a bondt insurance or other security acceptable to Idaho Power in
an amount suffcient to secure the full discharge of such unpermitted lien or
encumbrance."
3. PaJ:agraph 13.3.2 - is changed to read:
''If Idaho Power determies that curtn~ inteJ:uption or reducton of Net
Firm Energy deliveries is necessar because of line constructon or mantenance
requirementst emergencies, operat_ng conditions on its system, or as otherwise
required by Prudent Electrica Practces. I~ for reasons other than an event of force
majeure, Idaho Power requiJ:es such a curaiimen~ interruption or reduction of Net
Firm Energy deliveries for a period that exceeds twenty (20) consecutive dayst
beginning with the twenty-first day of such interruption, cuilent or reduction,
Seller wil be deemed to be delivering Net Firm Energy at a rate determined by
dividing the seasonal Net Firm Energy amount specified in paragraph 6.2 for the
season in which the interruption or curtailment occurs by the numer of hours in that
season. Idaho Power shall be obligated to mae payments in accordance with this
Agreement for Net Firm Energy so calculated for the remainder of any such
curtlment period. Idaho Power wil notify Seller when the interruption, curtilment
or reduction is terminated."
4. Paragraph 14.2.4 is changed to read:
''Business Interruption (Loss ofIncome) Insurance with minimum daily limits
not less than seventy-five percent (75%) of the Facilty's estimated gross daily
electrical revenue or one hundred percent (100%) of annual business income (i.e.,
profit before income taxes, debt service and continuing operating expenses)
whichever is greater and total policy limits not less than twenty percent (20%) of the
Facility's estimated gross annual revenue from the sale of electrical energy or one
hundred percent (100%) of the annual business income (as described above) for a
period of up to twelve (12) months, whichever is greater,"
5. Paragraph 14.2.4(c) is changed to read:
"The deductible for this insurance coverage shall not exceed thirty (30) days
gross daily revenues from the sale of electrical energy."
6. Article XV (4) is changed to read:
"Seller's obligation under paragraph 21.3 to pay liquidated damges as a result
of a permanent curtailment will not be excused even if the permaent curtailment
arises out of an event of force majeure."
- 2-
PS266
" , ~/--/,,
7. Paragraph 21.2 De£ault is changed to read:
Default - If either Part fa to perform any of the term or conditions of this
Agreement, (an "event of default") the nondefaulting Party shall cause notice in
writing to be given to the defaulting Par, specifing the maner in which such
default occurred. If the defaulting Part shall fai to cure such default within the
sixty (60) days afer servce of such notice, or if the defaulting Pary reasonably
demonstates to the other Par that the default ca be cured within a commercially
reasonable time but not within such six (60) day period, and if the defaulting Pary
does not commence such cure within the sixt (60) day period and continue to
dilgently pursue such cure, then, the nondefaulting Part may pursue its legal or
equitable remedies.
8. Paragraph 21.4.2 Debt Service Reserve Account - (a) is changed to read:
Debt Service Reserve Account - (a) During the period of time in which the
Facilty acts as security for a first mortgage lien which is senior to Idaho Power's
security interest in the Facilty as described in paragraph 4.1.8 above, Seller shall
mantain a debt service reserve account containing cash in an amount equal to fifty
percent (50%) of the Faciltys estimated Annual Debt Service rounded to the nearest
$1,000. With Idaho Power's consent, this debt servce reserve account may be
coordinated with any debt service reserve account required by Seller's first mortage
lender to avoid duplication of accounts.
9. Paragraph 21.4.3 is changed to read:
In lieu of establishing and funding the above-described d~bt service reserve
account, with Idaho Power's prior written consent Seller may substitute irrevocable
standby letter(s) of credit, book entry certificate(s) of deposit or other security
instrunient(s) acceptable to Idaho Power. During the period when the Facilty is
security for a first mortgage lien that is senior to Idaho Power's lien, the Seller may,
in lieu of establishing and funding the above-described debt service reserve account,
substitute Debt Service Loan(s) as such term is defined in Section 2.1(c) of the Credit
Agreement and Idaho Power and the first mortgage lender wil be joint beneficiaries
of the security instrument(s). When Idaho Power's security interest is the senior
security interest in the Facilty, Idaho Power wil be the sole beneficiary of the
security instrument(s) acceptable to Idaho Power.
- 3 .
PS267
. ~. l
"
, "".,,~,
10. ARTICLE XXI: NOTICES
Notices are amended to read as follows:
"To Seller:Toronto Domion (Texas) Inc
Attn: Manager, Agency
909 Fannin, Suite 1700
Houst~ TX 77010
To Idaho Power:Vice President, Bul Power Markets
Idao Power Company
POBox70
Boise, ID 83707"
11. Appendix B to this Agreement is deleted in its entirety and the following is
substituted in its place:
"APPENDIXB
SPECIA FACILITIES, POINT OF DELIVRY, METERING,
AN OPERATION DATE
PROJECT NO 21765151
MAGIC WEST COGENERATION PROJECT
B-1 DESCRIPTION OF FACILITY
The Seller's electrical Facilty is described as a natural gas fired turbine
synchronous generator package with total net rating of less than 10 MW net at
12,470 volts, three phase, 60 Hz.
B-2 LOCATION OF FACILITY
The Facilty is located in the SE Quarter of Section 29, Township 5 South,
Range 10 East, Boise Meridian, Elmore County, at the Magic West, Inc potato
processing facilty in Glenns Ferry, Idaho.
B-3 SCHEDULED OPERATION DATE
Seller has selectd March 7, 1996, as the Scheduled Operation Date and
February 5, 1996, as the First Energy Date. In making these selections, Seller
recognizes that to allow for adequate testing of the Facilty's degree of
completion and reliabilty, it must achieve its First Energy Date at least thi
(30) days prior to the Operation Date. Idaho Power, based on the information
supplied by Seller, wil schedule its construction so that all Special Facilties,
Disconnection Equipment and Metering Equipment wil be completed in time
so as not to delay Seller's achieving the First Energy Date. However. if Seller
fails to pay the costs specified in B-ll below at the time specified therein, or
materially changes the specifications or design of the Facìlty or Seller-
furnished Interconnection Facilties from what was previously provided to
- 4-
PS268
~,:. ',r .~\
Idaho Power, Idaho Power may be required to reschedule its construction of
these facilties which could adversely impact Sellerls abilty to achieve its
scheduled First Energy Date.
B-4 FAIURE TO ACHI OPERATION DATE
If Seller ha not achieved the Operation Date within eleven (11) months of the
Scheduled Operation Date, such failure shall be deemed to be an event of
default pursuant to Aricle XX.
B-5 POINT OF DELIVRY
The Point of Delivery of energy from the Seller to Idaho Power wil be the
12.47 kV bushings on the Idaho Power side of the Sellerls transformer. The
10,000 kVA transformer wil be owned and maintained by the Seller. The
transformer connection wil be 12.47 kV Grounded Wye I 12.47 kV Delta.
B-6 LOSSES
The metering point and the Point of Delivery of energy are at the same
location, so no adjustment to energy for losses wil be necessary.
B-7 METERING AN TELEMETRY
The Metering Equipment, wil be on the Idaho ~ower side of the Seller's
transformer. Idaho Power provided metering equipment wil consist of:
current and potential transformers, a meter enclosure, an electronic bi-
directional meter for measuring net generation, an isolation relay, transducer,
communication equipment, and all meter wiring. Seller will arrange for and
make available at Seller's cost, a telephone circuit dedicated to Idaho Power's
use termnating in an RJ-ll receptacle to be used for load profiling. At Seller's
cost, Idaho Power wil arrange for a second telephone circuit dedicated to
Idaho Power's communication equipment for continuous telemetering of the
project's kilowatt output to Idaho Power's Designated Dispatch Facilty. The
meter wil register kilowatt-hours and kilowatts of demand. Idaho Power
provided meter and conuunication equipment wil be owned aid maintained
by Idaho Power with total cost of purchase, installation, operation and
mantenance, including administrative cost to be reimbursed to Idaho Power
by the Seller.
B-8 SPECIAL FACILITIES
The construction of a substation breaker, with associated buss, relaying,
control equipment and 138 kV PT's for fault detection, and a 3 phase 12.47 kV
dedicated distribution line including all appropriate poles, crossar,
cond~ctor, and disconnects and other associated hardware wil be supplied
and mantained by Idaho Power. The total cost of these facilties wil be
reimbursed to Idaho Power by the Seller.
- 5 -
PS269
\ ~t"',~
..
RECTIV POWER
The Seller shal operate the synchronous generators within plus or iinus õ%
of unity power factor, or as listed in Appendix A.
B-I0 DISCONNECTION EQUIPMENT
B-9
Disconnection Equipment is required to insure that the Seller's Facilty wil
be disconnected from Idaho Power's system in the event of a disturbance on
either Idaho Power's system or the Seller's Facilty. Ths equipment is Cor the ,
protecton ofIdaho Power's equipment only and wil be located at the Point of. .
Delivery. Idaho Power wil provide and instll a thee phase pole mounted 15
kV oil switch to be used as a breaker, the disconnection panel which includes
the relays and associated logic, a pole mounted transformer ban for ground
fault detecton, and a pole with three single phase safety switches which wil
also be for the connection of Seller's conductor at the Point oCDelivery. Seller
wiU supply and install conduit and cable connecting CT's on the Seller's
transformer to the disconnecting paneL. Idaho Power wil supply details for
the disconnection panel and wil connect and test the equipment prior to
operation of the facilty. Seller wil provide drawings of their interconnection
wiring for engineering approval before installation. The total cost of the
disconnection equipment, installation, connection and testing will be
reimbursed to Idaho Power by the Seller.
B-ll COSTS
The total cost or the substation Special Facilties is $157,000. The total cost of
the distribution line Special Facilties is $16,700. The total cost of the Metering
Equipment is $10,800. The total cost of the communication equipment is
$8,500. In addition, there wil be a monthly -charge for the communication
circuit lease cost associated with the telemetry equipment. The
..-
communications circuit lease is $320.00 per month as of the date oC this
Agreement. Seller recogniz.es that the monthly communications circuit charge
may be adjusted by Idaho Power as the cost to Idaho Power is adjusted by the
owner of the co~unications circuit. The total cost of the Disconnecting
Equipment is $41,600. The total cost to be paid by the Seller is $234,600. This
represents the amount that wil be charged by Idaho Power if the Seller maes
the payment on or before December II, 1995. If the Selle~ does not make this
payment by the specified date, the costs wil be subject to update. Idaho
Power wil not schedule construction or order Special Facilties which are not
ordinarily maintained in Idaho Power's inventory until payment has been
made. In addition to the installation and construction charges above, during
the térm of the agreement Seller wil pay Idaho Power the operation and
- 6 -
PS270
-' .
..
,C~"/--\
mantenance charge specied in Schedui~ 72 INTRCONNECTIONS TO NON-
UTILITY GENERATION or its successor schedules(s). The tota cost shown
above is an estimte calculated on the basis of average costs. When the act
total cost is determined, Idaho Power wil adjust the tota cost amount to
reflect the actual tota cost incurred by Idaho Power. Beginning with the
month of this adjustment, the operation and mantenance charges wil also be
adjusted. When the act tota cost is known, within six (60) days Idaho
Power wil refund any overpayment or Seller wil remit any underpayment.
B-12 SALVAGE
No later than sixty (60) days afr the termnation or expiration of this
Agreement, Idaho Power wil prepare and forward to Seller an estimate olthe
remaining value of those Idaho Power furnished Interconnection Facilties
described in this Appendix, less the cost of removal and transfer to Idaho
Power's nearest warehouse. if the Interconnection Facilties will be removed.
If Seller elects not to retain ownership of the Interconnection Facilties but
instead wishes that Idaho Power purchase such facilities from Seller at the net
salvage value, Idaho Power may then be invoiced by Seller for the net salvage
value estimated by Idaho Power for the interconnection faciUties and shal pay
said amount to Seller within thirty (30) days after receipt of said invoice.
Seller shall have the right to offset the invoice amunt against any present or
future payments due Idaho Power."
- 7 -
PS271
. .,
"
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12. Appendix C - Lump Sum Refund Payent for Permnent Curtailmnt is deleted in
its entirety and (ollowing substituted in its place.
"APPENDIX C
LUM SUM REFUND PAYMNT FOR PERMANT CURTAILMENT
OF PORTION OR ALL OF ANAL NET ENERGY AMOUN
UNDER 20-YE CONTRACT
Contract Year of DollasCuraientPer Anual
Comnencement Megawatt Hour
1 32
2 46
3 59
4 72
5 85
6 96
7 107
8 116
9 124
10 130
11 134
12 135
13 134
14 130
15 121
16 109
17 91
18 68
19 38
20 19
13. Except as modified by this Second Amendment, all other pars of the Agreement shall
remain in full force and effect.
- 8-
PS272
,=
.'
~. l ..,0...--.,
IN WITNESS WHREOF, the Parties hereto have executed ths Amendment as
of the day and year herein writtn.
:~~Vice President, Bulk Power MarketsDate I~.
GLENNS FERRY COGENERATION
PARTNERS, LTD
By'fYWJ '1 !2iY.lJirr~
Its i PI!.ESIOc/JT
I L'i (:-ri 1..&. i JDate __
"
.9-
PS273
: ~r.. .' ¡_.. ~~ /~
.'STATE OF IDAHO )
) S8County of Ada. )
On this.l day of s\1Al.. . 19.K before me, the undersigned, a
Notary Public, personaly appeared Jan B Packwood, personally known, who being duly
sworn, did say that he is the Vice President, Bulk Power Markets of the corporation that
executed the within instrument, and acknowledged to me that such corporation executed
the sam as a tree act and deed,
IN WITNESS WHREOF, I have hereunto set my hand and afxed my offcial
seal, the day and year in this certificate first above written.
(NOTARIA SEA)
~.L.~Notay~liC for:Jho
Residing at: ~ ¡ It),?"
My Commssion Expires ~ JI, /99'1
STATE OF Ni/,'v ~I( )
V, ) S8County of New,o£/(. )
On this )Uii day of !:; l' t" c- ¿ -I , 19 1 j , before me, the undersigned, a
Notary Public, personally appeared Il/At/( ¿ Ft"'t-NI/.iw!tt ,personally known, who
being duly sworn, did say that he is the individual who executed the within instrument,f 'and acknowledged to me that he executed the same as a free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and afiied my offcial
seal, the day and year in this certificate first above writtn. '"
. l-t Uk-
(NOTAPIA SEA) No try Public for NEw "'C.£t.
Residing at: rvwi/¡:ic l
My Commssion E . ires
PETER J. FELTMANNotar Public, Stale of Ne YorkNo. 31-48281QualIfied In New York Conty .j 4Commssion expires June 22. 189r. .
, Pl:
~
. 10-
PS274
EXHIBITH
c../:. -- .:~.. ,r"...-,
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
RUPERT AND GLENNS FERRY COGENERA- ) CASE NO. IPC.E-95-19
TION PARTNERS FOR AN ORDER )
APPROVIG AMENDMENTS TO POWER )SALES AGREEMENTS ) MINUTE ENTRY
)
On December 19, 1995. Rupert Cogeneraon Parers Ltd. (Rupert) and Glenns Ferr
Cogeneron Parers Ltd. (Glenn Ferr) tied an Applicaon with the Idao Public Utities
Commssion (Commssion) requesting Commsion approval of proposed fit and second
amendments to the repectve Fin Energy Sales Agrement(s) of Rupert and Glenns Fer with
Idaho Power Company. The executed amendments were fied with the Commission on
Januar 3. 1996 (atthed).
Rupert Cogeneration Parers Ltd. is the developer of a natu gas cogeneraon
project (approxily 10 MW) adjacent to the Magic Valey Foods. Inc. potao processing
facilty in Rupert, Idaho. The estimated annua net fi energy production is 83,220,000 kWh.
The Agrement dated June 25, 1993. provides for levelized ra over a 20 year contrct term.
Reference Case No. IPC-E-93-15, Order No. 25050. The scheduled operaon dat is Janua i.
1996.
Glenn Ferr Cogeneration Parers Ltd. is the developer of a na gas
cogeneron project (approximately 10 MW) at the Magic West Pota Processing Faciity in
Glenns Ferr, Idao. The estimated annual net fum energy producton is 83,220.000 kWh. The.
Agment dated December 9, 1992, provides for levelized rate over a 20-year contrt term.
Reference Case No. IP-E-92-32, Order No. 24674. Scheduled operation da puruant to Firt
Amendment is Januar i, 1996. Reference Case No. IPC-E-94-7. Order No. 25505.
The submittd amendments make the following changes:
Aricle 4.1.8 Security Interests (Rupert)
'J 4.1.7.1 The first mortgage lien amount is increed frm $15 miionto $17 millon. .
ei 4.1.7.2 The term "encumbrace" is furter dermed.
MI ENY -,1 -
PS437
/!
..( 'w r',,r",
.
Arcle 4.1.8 Security Interest (Glenn Ferr)
, 4.1.8.1 The fit mortage lien amount is incrased frm $15 miion
to $17 millon.
, 4.1.8.2 The term "encumbrce" is fuer defied.
Arcle 13.3 Ener Acceptace
, 13.3.2 Idao Power's obligatons in the event of curent ar fuer
defied.
Arcle 14.2 Insurce
, 14.2.4 Alteratie laguage added regardig business interrption (loss
of income) inurce.
, 14.2.4(c) Amount of authorized deductble increased frm ten days to
thir days grss daily revenues from sale of electrca energ.
Arcle 16 Force Majeure
, 16.4 Language added to clafy that obligation to pay ljquidated
damages as a result of permanent curent wil not be excused even
if the perment curtlment arses out of an event of force majeure.
Arcle 21 Disputes and Default
, 21.2 Amended to permit cur of default "with a commerialy
reasonable tie,"
, 21.4.2 Debt Service Reserve Account requirement amount changed
from 20% of the facilty's estimated grss revenue frm net fi ener-
sales for the firs contrct year to 50% oftle facilty's estimated anua
debt service.
, 21.4.3 Amended to permit seller, with Company approval, to substitute
Debt Servce Loan in lieu of Debt Service Reserve Account.
Aricle 27 Notices
Notice Requirement of Seller Amended.
Agreement AppendiA-B, Special Facilties, Point of Delivery, Metering and Operation Date
Deleted in its entirety and substitute language submitted.
MI ENRY - 2 -
PS438
. .,¡i;t
~'(~.,..--'./ '\
Schedued operon da extended to March 7. 1996.
Agrment Appendix C. Lum Sum Refud Payment for Penn anent Cuent (Glenns Ferr'
ony)
Deleted in its entity and sutitute laguge submitt.
Refud Payment Amount adjust for chage in scheduled operaon date.
The negotited changes and amendments to the respective underlyig Fin Energy
Sales Agrements of Ruper and Glenns Ferr in Ca No. IPC-E-9S-19 have been revrewed and
considered by the Commsion as a regul"'-sheduled item on its Janua 8. 1996 decsion
agènda. It is the Comnssion' s fidig that the proposed changes do not matenaly afect the
nsk to the Company or its customers and that the amendment(s) ar reaonable and should be
approved. The Commsion contiues to fid that al cost incud by Idao Power related to
the Fir Energ Sales Agrments should be alowed as prudently incUI expenses for
ratemakg pmposes.
DATE at Boise. Idaho ths 8 th day of Janua 1996.
k~æl1¿..~~
RÅÑÊLSON. PRESIDEN..o'~, J/~
MARSHA H. SMITH. COMMSSIONER
Commissioner Hansen was out of the
office on this date.
DENNS S. HASEN. COMMSIONER
ATTST:
~~~.r2~-_.
Myiia J. W~tersCommssion Secretar L
blsC-ipce9S 19.me
MI'I ENTY - 3 -
.~
PS439
EXHIBIT I
/orders/21953.0RD/21800.wp (3 hits)
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION )
ON THE COMMISSION'S OWN MOTION OF )CASE NO. U-I006-292
REASONABLE TERMS FOR SECURITY IN )
AGREEMENTS BETWEEN IDAHO POWER --
SMALL POWER PRODUCERS.
)
)
)
)
COMPAN AND COGENERATORS AND
On Februar 1, 1988, Utah Power & Light Company (U&L) filed a Petition with the Idaho
Public Utilities Commission (Commission) requesting clarfication and reconsideration of Order
No. 21690 issued Januar 11, 1988 in Case No. U-1006-292. That Order required qualifyng
cogenerators and small power producers (CSPPs) to provide Commission approved forms of
liquid securty and/or risk mitigation in the amount of the computed overpayment liability that
occurs with levelized rates in CSPP power purchase contracts.
Although characterized as a Petition for Reconsideration, the Petition fails to comply with the
requirements of Petitions for Reconsideration as set forth in Rule 33.1(a) ofthe Commission's
Rules of Practice and Procedure:
Petitions for Reconsideration must set forth specifically the ground or grounds why the petitioner
contends that the Order or Rule is uneasonable, unlawful, erroneous or not in conformity with
the law, and a statement of the nature and quantity of evidence or arguent the petitioner wil
offer if reconsideration is granted.
from failing to comply with procedural requirements, a simple reading ofthe Petition reveals that
petitioner is asking for nothing more than clarfication. We therefore characterize UP&L's
Petition as one for clarfication only under Rule 32.4 and not one for reconsideration as defined
in Rule 33.
UP&L suggests that the Commission leaves many questions unanswered regarding
implementation. UP&L's concerns can be best addressed in the order of their presentation.
I. GENERA CONCERNS (UP&L)
UP&L states that although Order No. 21690 requires CSPPs to comply with certain risk
reducing factors or, in the alternative, to post up to 100% liquid securty... the Order does not
address the consequences of a CSPP's failure to comply with the risk reducing factors. Using
that statement as a springboard, the Company then poses the following questions:
o Is the utilty's only remedy to force the CSPP to post the appropriate percentage of liquid
securty through a breach of contract or a similar action?
o Wil the utilty be allowed to stop paying the CSPP for energy (or refuse to receive any
more energy) until the CSPP posts adequate securty?
o Wil the CSPP be considered to be in breach of contract thus allowing the utiity to
terminate the Power Purchase Agreement?
o Who has the burden of "discovering" that the CSPP is or is not in compliance with the
risk reducing factors?
o What are the consequences to a utility (and its customers and shareholders) that does not
"discover" noncompliance?
response:
Order No. 21690 unequivocably states that failure to establish and maintain adequate required
liquid securty is a breach of contract. Failure to maintain the terms and conditions of risk
mitigation factors results in an immediate revocation of the related percentage reduction in liquid
securty requirement. Failure to establish and maintain the resulting new level of liquid
overpayment securty constitutes a breach of contract.
As a general rule, the rights of the paries in the event of default or breach of contract are set out
with some specificity in the Power Purchase Contract. Those rights are appropriately determined
by negotiation between the paries and, although subject to review and approval of the
Commission, should not be dictated by the Commission.
A Power Purchase Contract establishes attendant rights and obligations between the
contracting parties. The Commission is not a contract signator. Accordingly, contracting and
contract enforcement, administration and monitorig are the responsibility of the utility, not the
Commission. It is not the fuction of the Commission to assume that responsibility nor
determine in advance what constitutes prudent management. The Company canot divorce itself
from the contractual responsibility attendant to implementation of a federally mandated
requirement of purchase.
II. SPECIFIC CONCERNS (UP&L)
A. Liquid Security Cash Escrow
To the extent that the computed liquid amount of overpayment liabilty is not reduced by
application of the identified risk reducing factors the Commission requires a CSPP to post and
maintain the resulting level ofliquid overpayment securty. UP&L seeks clarfication on the
following issues related to the liquid securty cash escrow account:
o Who is to choose the escrow account holder?
o When can cash be withdrawn from the escrow account and by whom?
o Who wil pay taxes on the interest eared by the fuds?
o Who wil decide disputes regarding the escrow fuds?
o Is UP &L entitled to an Aricle IX securty interest in the liquid securty escrow fuds?
Response:
The identified issues are an appropriate subject for negotiation between the contracting paries.
It is clearly the intent of the Order that the security escrow must be maintained at the required
level at all times.
Income taxes are normally the responsibility of the pary receiving income. Except at project
default, it is envisioned that the escrow wil belong to the CSPP. It follows that the CSPP
should be responsible for the payment of income taxes on interest accruing to the escrow fud.
IRS Code Section 51 ir1510.
Contract disputes and interpretation in the event of alleged default or breach are normally
appropriate for judicial determination, not Commission determination.
B. Basic Insurance
Order No. 21690 defines essential types of "adequate basic business insurance" and establishes
minimum levels for coverage to qualify for a related reduction in liquid securty requirement.
UP&L seeks clarfication on the following issues related to the five identified types of basic
business insurance:
o Are the utilty and Commission entitled to a notice of cancellation or a notice of change
of policy limits directly from the insurance company rather than rely on the CSPP for notice?
o Wil the utility be added to the insurance policies as an additional insured with regards to
the utility's interests?
o Is the utility entitled to pay for the basic insurance if the CSPP fails to do so, and deduct
the costs from such insurance premium from payments made to the CSPP?
o Are the Commission and the utility entitled or expected to review the insurance policies
issued to the CSPP to verify compliance with the insurance requirements of the Order?
o Who decides if the insurance companies issuing the policies are reputable companes
capable of handling the risks assumed?
Response:
The identified issues are an appropriate subject for negotiation between the contracting paries.
While it is the fuction of the Commission to identify essential elements that should be
addressed and included in Power Purchase Contracts, it is not appropriate that the Commission
draft or define contract terms with any greater specificity, nor is it the fuction of the
Commission to monitor compliance or to devise fuher standards and a mechanism for doing so.
C. Engineering Certifcation
UP&L seeks Commission clarfication that certification as to the adequacy ofthe QF design,
construction and O&M must be performed by an independent registered professional engineer to
qualify for the related percentage reduction and liquid securty required to be posted.
Commission response:
It is clearly the intent of the Commission that all certification be performed by independent
registered professional engineers. The logistics related to the certification process are an
appropriate subject for negotiation between the contracting paries.
D. Maintenance Escrow
As an approved method of risk mitigation for related percentage reduction in liquid securty
requirement, the Commission has established minimum guidelines for a maintenance escrow to
provide a fud for maintenance and repair to the physical plant. UP&L seeks clarfication on the
following issues related to the maintenance escrow:
o If initial generation of a CSPP project occurs on or soon after March 2 of a given year, is
the CSPP relieved of placing fuds in the escrow account until March 1 of the following year?
o Who is to audit O&M expenses?
o Who is to give evidence to whom that the required amount was placed in the escrow
account?
o Does the utility have input in the decision whether to release the funds from the escrow
account?
o Is the liquid securty escrow account to be maintained separately from the maintenance
account?
o To whom wil escrow fuds be released?
The Commission response:
It is the Commission's intent that the maintenance escrow be fuded only after the first full year
of operation. This allows the escrow to be fuded out of operating revenue or cash flow, rather
than investment capitaL.
The remaining questions or identified issues are an appropriate subject for negotiation between
the contracting parties. It is assumed that the contracting paries are acting in good faith. The
utility should reconsider whether it wants to involve itself in QF decisions regarding the timing
or need for maintenance and repair. The utility should also be mindful ofthe ramifications and
preclusive effect of Section 21O(e)(1) ofthe Public Utility Regulatory Policies Act of 1978
regarding exemption of qualifyng CSPPs from traditional utilty-type cost of service regulation
or respecting the financial or organzational regulation of such facilities.
E. Lien Rights
Order No. 21690 establishes the granting of "adequate lien rights" as an approved method of
risk mitigation for the qualifyng facility (QF) to reduce the level or required amount ofliquid
overpayment securty. The Commission found that "The cost of administering reasonably
wrtten liens wil not substantially burden the utilities and that QFs shall not be required to pay a
fee to the utilties." UP &L contends that "The cost of administering the lien rights and other
aspects of the order wil be tremendous. . . and that if done properly it wil require constant
attention from (UP&L's) planing deparent, risk management deparent, legal deparent
and other deparents." UP&L recommends that the cost be borne by the CSPPs.
Commission response:
UP&L's assertion that the costs attendant to administering its power purchase contracts wil be
"tremendous" is unsupported and speculative. It is expected that reasonable administrative costs
wil be incured by the utility. Washington Water Power, in comments of record, relates that it
has had extensive experience with CSPP liens and considers them simple to administer. We trust
that UP&L wil engage in economic and prudent administration of its power purchase contracts.
F. "K" Factor
UP&L states that it is confused by the Commission's explanation ofthe "K" factor in Order No.
21690 and does not understand why the Commission subtracted "1" from the raised value.
Commission response:
The "K" factor is a model that mathematically represents risk increasing with time. It should be
obvious that there is no risk associated with a contract of zero-length. Hence, "K" ought to be
zero for contract length zero, but:
ifK = (1 + d)n, (where contract length = n and discount rate = d)
then at n = 0, K = (1 + d)O = 1.0
therefore, to meet the logical restraint that K = 0 at n = 0,
K is defined as ((1 + d)n - 1)
therefore, K = (1 + d)O - 1
= 1 - 1 = 0 at n = 0
CONCLUSIONS OF LAW
I
The Idaho Public Utilities Commission has jursdiction over Idaho Power Company, The
Washington Water Power Company, Utah Power & Light Company and Pacific Power & Light
Company pursuant to the authority and power granted it under Title 61 of the Idaho Code, and
the Rules of Practice and Procedure of the Idaho Public Utilities Commission, IDAPA 31.A.
II
The Idaho Public Utilities Commission has authority under the Public Utility Regulatory
Policies Act of 1978 (PUR A) and implementing regulations ofthe Federal Energy Regulatory
Commission (FERC) to set avoided costs, to order electric utilities to enter into fixed term
obligations to purchase energy from qualifying cogeneration and small power production
facilities, and to implement FERC rules. PURA §§21O, 210A, 21OF, 16 U.S.C.A. §§824-a-3,
824-a-3(a), (f); Afton Energy, Inc. v. Idaho Power Company, 107 Idaho 781, 693 P.2d 427.
OR DE R
In consideration of the foregoing IT IS HEREBY ORDERED that the Petition for
Reconsideration fied by Utah Power & Light Company in Case No. U-1006-292 be dismissed
for failure to comply with the requirements ofIDAP A 31.A.33.1(a). IT IS FURTHER
ORDERED that said Petition be characterized as a Petition for Clarfication under IDAP A
31.A.32.4.
IT is FUTHER ORDERED that the Petition for Clarfication ofUP&L be granted and
answered as set forth above. We find ourselves unable to answer UP&L's concerns more fully in
the absence of a paricular case or more specific facts being presented to us.
THIS is A FINAL ORDER. Any person interested in this Order (or in issues fially decided
by 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 §61-626.
IIIII
IIIII
IIIII
IIIII
IIIII
IIIII
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
March, 1988.
day of
DEAN J. MILLER, PRESIDENT
PERRY SWISHER, COMMISSIONER
RAPH NELSON, COMMISSIONER
ATTEST:
MYAJ. VVALTERS, SECRETARY
SW:vs/817L
Filename: E:\Common\UT _ ORD\21953.0RD\21800.wp
dtSearch 6.03 (6079)