20090724final_order_no_30869.pdf

Office of the Secretary
Service Date
July 24, 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF ITS AMENDED AND
REST A TED ENERGY SALES AGREEMENT
WITH HOKU MATERIALS, INc.ORDER NO. 30869
CASE NO. IPC-08-
On October 24, 2008, Idaho Power Company ("Idaho Power" or "Company ) filed an
Application with the Commission seeking approval of a special contract to supply electrical
power to Hoku Materials, Inc. ("Hoku ). On November 6, 2008, Staff submitted production
requests to the Company and Idaho Power submitted written responses to those requests on
November 28 , 2008.
On December 3, 2008 , the Commission issued a Notice of Application and Notice of
Modified Procedure and established a 60-day open comment period. Order No. 30697.
Commission Staff, Idaho Irrigation Pumpers Association, Inc. ("IIP A") and an individual Idaho
Power customer all filed written comments within the established comment period.
On March 16, 2009, the Commission issued an Order approving Idaho Power
special Energy Sales Agreement ("ESA") with Hoku. See Order No. 30748. On May 28 2009
Idaho Power submitted a Motion for a Commission Order authorizing a delay in the
commencement of its ESA with Hoku.On June 23, 2009, Idaho Power submitted a
supplemental filing seeking approval of the Amended and Restated Energy Sales Agreement
implementing the changes described in the Company s Motion to Delay Start Date and Letter
Agreement.
On July 9, 2009, Commission Staff issued supplemental comments regarding the
Amended and Restated Energy Sales Agreement.
THE COMPANY'S ORIGINAL APPLICATION
The original ESA entered into between Idaho Power and Hoku dictated that Idaho
Power will sell and Hoku will purchase in excess of 25 000 kW. Application at 2. The parties
entered into a special contractual arrangement that comports with the requirements outlined in
Idaho Power Tariff No. 101. Id. Idaho Power agreed to construct, at Hoku s expense, certain
ORDER NO. 30869
interconnection facilities necessary to enable delivery of electrical service to Hoku s facilities.
Id.
The original effective date of the ESA was June 1 2009, and would conclude on May
2013. Id. at 3. Under the terms ofthe special contract, either party can terminate the ESA by
issuing prior written notice to the other party within one year of the effective termination date.
Id. The ESA stipulated that if the effective termination date occurred prior to the implementation
of a subsequent ESA between the parties, then Hoku s energy and demand rates will be
equivalent to the Company s Schedule 19-T rates until a replacement contract is approved by the
Commission. Id.
Under the terms of the original ESA, Hoku s demand would vary during the summer
and non-summer seasons. Id. Hoku s peak demand during the term of the ESA would not
exceed 82 MW. Id. The parties agreed that Hoku s scheduled load demand for the summer of
2012 would be contingent upon Idaho Power s ability to integrate "major transmission and
generation projects" into its system. Id.
The parties agreed to divide Hoku s demand and energy requirements into "two
blocks for pricing purposes.Id. at 4. The first block is equivalent to the Company s "current
Commission-approved avoided cost rates.Id. Any change to the avoided cost rate during the
term of the Agreement will not affect the first block energy rate contained in the Agreement. Id.
The second block rates, 25 MW or more, are consistent with the Company s approved Schedule
19- T rates. Id.
Hoku is required to "take-or-pay" a certain amount of energy from Idaho Power every
month but it is also allowed to "request a release of all or part of its first block energy purchase
commitment." Id. Idaho Power stated that it will "make a commercially reasonable effort to
absorb or resell the released energy and provide a credit to Hoku.Id. The amount credited will
depend upon the rate period during which the Company receives timely notice of Hoku s request
to release its energy demands as well as the Company s ability to "manage and supply
commitments to serve Hoku s load.Id.
In addition, if Hoku wished to procure additional power during the summer rate
period, then Idaho Power is obligated to make the same "commercially reasonable efforts to
obtain proposals to supply Hoku s additional energy request.Id. at 5. Hoku will be responsible
for the costs of these "purchases and any associated transmission and ancillary service expense to
ORDER NO. 30869
transport such purchase to the Hoku Facility.Id. Hoku s ability to expand its first block up to
175 000 kWs hinges upon the Company s ability to supply and deliver additional power. Id.
Idaho Power s Application stated that it was seeking an effective date of June 1
2009, to coincide with the effective date of the parties' ESA. Id. The Application asked that the
first block revenues and expenses be treated similarly to wholesale purchases and sales and thus
not be included under the Company s yearly PCA. Id. Finally, the Application stated that the
ESA will become effective only if all of its "terms and provisions" are approved by the
Commission "without change or condition.Id.
In support of its Application, the Company submitted testimony from Ric Gale, Vice
President of Regulatory Affairs. Mr. Gale s testimony explains, in greater detail, the Company
rationale for the specific elements of its ESA with Hoku.
AMENDED AND REST A TED ENERGY SALES AGREEMENT
In its initial Motion to Delay Start Date of its ESA with Hoku, Idaho Power submitted
a "Letter Agreement" describing various modifications to the terms and conditions of the parties
ESA and informed the Commission that it was involved in an ongoing process with Hoku to
draft a more formal document incorporating the provisions outlined in the Letter Agreement.
The Letter Agreement revealed that the parties mutually agreed to the following changes to their
original Agreement:
1. Delay the start date of the ESA until December 1 2009;
2. Hoku will receive service between June 1 2009, and November 30, 2009
as a Schedule 19T customer;
3. Hoku will limit its demand to no more than 5 MWs during July 2009; 10
MWs during August 2009; and no more than 25 MWs for each month
thereafter until November 30, 2009;
4. During the June through August 2009 time period, Hoku will coordinate
with Idaho Power to schedule appropriate times to impose any large loads
associated with the testing of its production equipment;
5. The termination date of the ESA will be extended through November 20
2013;
6. Hoku will reduce its contract demand levels during the summer of 2012 to
43 MWs from June 16 to August 15 and 67 MWs from August 16 through
September 15; and
ORDER NO. 30869
7. Hoku will incur additional Energy Efficiency Rider charges to its first
block energy usage beginning on December 1 , 2011.
In its supplemental filing, Idaho Power advised the Commission that the parties have
formally amended the ESA to incorporate the changes outlined in the Letter Agreement. A copy
of the new Agreement was included as an Attachment to the Company s supplemental filing.
STAFF SUPPLEMENTAL COMMENTS
Staff reviewed Idaho Power s filing and supports the Company s request for a
Commission Order approving the Amended and Restated ESA. Staff stated that "given the state
of the national economy, the Staff understands why a delay in the contract start date may benefit
Hoku." Supplemental Staff Comments at 2. However, Staffs primary concern "centers on the
impact to Idaho Power s other customers.Id. Accordingly, Staff met with representatives of
Idaho Power to discuss the practical effect that the delay in the start date of the ESA, as well as
other contract modifications, would have on the Company s power supply costs and/or Power
Cost Adjustment (PCA) mechanism. Id. At the meeting, the Company advised Staff that it had
made advance purchases as early as September 2008 in anticipation of including the Hoku load
to its Operating Plan. Id. Nonetheless
, "
the Company demonstrated that the profits and losses
caused by the delay "approximately netted to zero.Id.
Thus, Staff "found no disadvantage to other customers caused by the delayed start
date or other contract changes.Id. Staff recommended that the Commission approve the
parties' Amended and Restated ESA , including a delay in the ESA start date. Id. at 3.
COMMISSION DECISION AND FINDINGS
The Commission has reviewed and considered the filings in Case No. IPC-08-
including the Revised and Restated Energy Sales Agreement submitted for approval and filed
comments by Commission Staff. The Commission finds the terms and conditions of the
Amended and Restated Energy Sales Agreement to be reasonable.
The Commission is mindful of the current economic downturn which precipitated
Hoku s decision to seek a delay in the start date of its Energy Sales Agreement with Idaho
Power. Moreover, the Commission is appreciative of both the cooperative manner in which the
parties endeavored to reach a mutually beneficial result and Staffs efforts to verify that the
changes included in the Amended and Restated Agreement will not unduly prejudice Idaho
Power s other customers.
ORDER NO. 30869
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power, an electric
utility, and the issues raised in this matter pursuant to its authority under Title 61 of the Idaho
Code, and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
IT IS HEREBY ORDERED that the Commission approves Idaho Power Company
Amended and Restated Energy Sales Agreement with Hoku Materials, Inc. with a revised
effective date of December 1 2009.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) 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. Within 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 ofthe Idaho Public Utilities Commission at Boise, Idaho this d2 'If"
day of July 2009.
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D KEMPTON, P IDENT
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MARSHA H. SMITH, COMMISSIONER
ATTEST:
~ill le D. JewellCo ission Secretary
O:IPC-08-np3
ORDER NO. 30869