20091005final_order_no_30917.pdf

Office ofthe Secreta
Service Date
October 5, 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF A FIRM ENERGY SALES
AGREEMENT FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
BETWEEN IDAHO POWER COMPANY,
CASSIA GULCH WIND PARK LLC AND
TUANA SPRINGS ENERGY LLC
)
) CASE NO. IPC-E-09-24
)
)
)
) ORDER NO. 30917
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)
On August 11, 2009, Idaho Power Company (Idaho Power; Company) fied an
Application with the Idaho Public Utilties Commission (Commission) requesting approval of a
20-year Firm Energy Sales Agreement between Idaho Power and Cassia Gulch Wind Park LLC
(Cassia Gulch) and Tuana Springs Energy LLC (Tuaa Springs) dated August 5, 2009
(Agreement).
AGREEMENT
Cassia Gulch curently owns, maintains and operates an existing 18.9 MW wind
generating facility located near Hagerman, Idaho in an area known as Bell Rapids. Reference
Case No. IPC-E-06-11, Order No. 30087. The Cassia Gulch agreement is for a 20-year term and
contains the published non-Ievelized avoided cost rates set forth in Order No. 29646.
Tuaa Springs proposes to design, construct, own, operate and maintain a new 16.8
MW wind generating facilty adjacent to and as an expansion of the Cassia Gulch facility. It is
the contract paries' intent that the Cassia Gulch agreement remain in full force and effect until
such time as the expansion facilties (Tuana Springs Expansion) have achieved their operation
date of June 30, 2010. At such time the Cassia Gulch agreement shall automatically terminate
and shall be replaced by this new Agreement. The net energy from the Cassia Gulch and Tuana
Springs Expansion wil be combined into a single qualifying facility (QF) with a nameplate
rating of35.7 MW.
The purchase price contained in the Agreement was established by running the
Aurora economic dispatch model consistent with the Commission's requirements for projects
larger than 10 MW. The purchase price established by ruing the Aurora economic dispatch
model was then blended with the prices contained within the existing Cassia Gulch Wind Far
ORDER NO. 30917 1
Agreement in order to preserve the value of the existing Cassia Gulch Wind Farm agreement for
the Idaho Power ratepayers.
Idaho Power requests that the Commission issue an Order approving the Firm Energy
Sales Agreement with Cassia Gulch and Tuana Springs without change or condition and
declaring that all payments for purchases of energy under the Firm Energy Sales Agreement be
allowed as prudently incured expenses for ratemaking purposes. Agreement ~ 21.
On August 25, 2009, the Commission issued a Notice of Application and Modified
Procedure in Case No. IPC-E-09-24 and established a September 23, 2009 comment deadline.
Commission Staff was the only pary to file comments. Staff recommends that the Firm Energy
Sales Agreement between Idaho Power, Cassia Gulch and Tuana Springs be approved.
COMMISSION STAFF COMMENTS
Purchase Prices
Staff notes that the submitted i\greement is unusual because it proposes to combine
an existing project (Cassia Gulch) with a yet to be constructed expansion (Tuana Springs) into a
single contract that wil exceed 10 aMW. In accordance with prior Commission Orders, projects
smaller than 10 aMW are eligible for "published" avoided cost rates; projects 10 aMW and
larger are eligible for project-specific rates computed using a prescribed Integrated Resource
Plan (IRP) based methodology.
In order to establish appropriate purchase prices for this Agreement, Staff states that
Idaho Power analyzed three different alternatives for structuring contracts: (1) two separate 10
aMW agreements, the existing Cassia Gulch agreement and a proposed new Tuana Springs
agreement; (2) a single agreement for one large project (35.7 MW); and (3) a combination of the
existing agreement plus the expansion, resulting in a new Agreement for a 35.7 MW wind park.
The third option combining the two projects into a single contract with a blend of existing Cassia
Gulch existing rates and the AURORA pricing for the expansion resulted in total energy costs
less than the other two options. The result of blending those rates for the developer-estimated
kWh production over a 20-year period (1,635,024,570 kWh) is an estimated total energy
payment of $120,137,853. Idaho Power believes that this blended rate preserves for ratepayers
the benefits associated with the existing Cassia Gulch agreement. In addition, this option
includes the wind integration costs, wind forecasting, heavy and light hour load pricing and the
ORDER NO. 30917 2
Mechanical Availabilty Guaantee (MAG) requirements that were not previously required in the
Cassia Gulch Wind Park agreement. Staff believes that the blended rates proposed in the
Agreement are reasonable and in the best interests of Idaho Power and its ratepayers.
New Wind Contract Provisions
Staff notes that the submitted Agreement is one of the first PURP A wind agreements
executed by the Company since issuance of Commission Order No. 30488, which requires the
inclusion of the Mechanical Availabilty Guarantee (Paragraph 6.4), wind integration cost
reduction (Paragraph 7.1), and wind forecasting cost sharng (Appendix E). The Commission
approved these provisions for future wind contracts as an acceptable substitute for the 90/110
requirements in earlier contracts. The 90/110 provisions require facilties to predict futue
monthly generation with a fairly high degree of certinty in order to justify payments of "firm"
energy rates. For resource technologies with intermittent generation (like wind), Staff states, the
90/110 requirements may prove difficult to meet.
Under the MAG provisions in this Agreement, the project is required to achieve a
minimum monthly mechanical availability of 85%. In other words, Staff states, the project must
be able to operate at least 85% of the hours in the month, not counting hours when wind speeds
are too low or too high, force majeure events, forced outages, and scheduled maintenance
periods. Failure to achieve an 85% mechanical availabilty results in damages being assessed
equal to the difference in the per kWh price between the contract rates and corresponding market
energy prices, subject to a minimum price penalty of 15 mils per kWh. The minimum price
penalty is intended to recognize that the Company will incur transaction and administrative costs
to acquire replacement power even if market prices are less than contract rates. Staf believes
that the MAG provisions in the Agreement are reasonable and recommends that they be
approved.
As specified in Order No. 30488, Idaho Power shall make use of a wind energy
production forecasting model to forecast the energy production from this facilty and other QF
wind generation resources. Idaho Power wil share the cost of wind energy production
forecasting equally with the project owner. The facility share of wind energy production
forecasting wil be prorated based on its generation in relation to all other QF wind projects
providing energy to Idaho Power. The project share will not be greater than 0.1 % of the total
energy payments made to the project by Idaho Power during the previous contract year.
ORDER NO. 30917 3
Delay Liquidated Damages and Security Provisions
Staff notes that the Agreement contains provisions for delay liquidated damages
(Paragraph 5.3) and associated delay security (Paragraph 5.7) to secure the established Scheduled
Operation Date of June 30, 2010, for the Tuana Springs expansion portion of the facilty. Delay
liquidated daages have been included in contracts since July 2007; however, this will be one of
the first contracts to require delay securty.
Under the terms of the Agreement, for online delays of up to 90 days, liquidated
damages are assessed if Idaho Power must pay more to acquire replacement power than it would
have otherwse paid to purchase power under the Agreement. If a delay in the project's online
date extends beyond 90 days, liquidated damages of $20 per kW will be assessed ($336,000
based on a capacity of 16.8 MW for the Tuana Springs expansion). In addition, Idaho Power can
choose to terminate the Agreement if the delay in meeting the Scheduled Operation Date extends
beyond 90 days. In order to ensure that the project wil be able to pay delay liquidated damages
should they be incurred, the project is required to post liquid security in an amount equal to $20
per kW of project capacity. Staff believes that these provisions are necessary and reasonable.
When projects are delayed, Staff contends that the Company must sometimes incur higher costs
to acquire replacement power.
Generator Interconnection and Transmission
The Cassia Gulch and Tuana Springs projects, Staff notes, are located in an area west
of Hagerman, adjacent to each other and in close proximity to several other proposed and
existing projects. Projects in this vicinity were studied as a cluster in connection with Case No.
IPC-E-06-21 (Cassia Case). One outcome of the Cassia Case was a Settlement Stipulation that
determined the transmission system improvements necessary in order to accommodate all of the
proposed projects in the cluster, and devised a method for allocating costs among Idaho Power
and each of the projects. The Cassia Gulch and Tuana Springs projects were included in the
Settlement Stipulation.
In addition to the Power Sales Agreement, Staff states it wil be necessar for a
Generator Interconnection Agreement to be signed before the Tuana Springs expansion can
proceed. The terms and costs to be included in the Generator Interconnection Agreement will be
in accordance with the Cassia formula as included in the Stipulation in Case No. IPC-E-06-2L.
These cost estimates are the project's pro rata share of upgrades for the cluster of proposed
ORDER NO. 30917 4
projects in the Twin Falls area based on their position in the generator interconnection queue and
megawatt value. The upgrade costs are the same whether Cassia Gulch and Tuana Springs are
considered separate projects or combined under one power sales agreement. The transmission
interconnection costs to be assigned to the projects wil be based on "re-dispatch" as described in
the Stipulation in the Cassia Case.
The Agreement provides that all applicable interconnection charges and monthly.
operation and maintenance charges under Schedule 72 will be assessed to Cassia Gulch and
Tuana Springs. The Cassia Gulch portion of the project is already complete, interconnected to
Idaho Power's system, and operationaL. The facility study portion of a generator interconnection
process for the expansion phase of the facilty - the last in the series of three transmission studies
- has been completed, and the execution of a Generator Interconnection Agreement is the next
step of that process. Idaho Power's delivery business unit is continuing its design work under
the facilty study agreement and, in that process, has undertaken discussions with Cassia Gulch
and Tuana Springs. Based on the studies to date and the discussions with Cassia Gulch and
Tuana Springs, Idaho Power has concluded that, assuming the developer continues to provide
necessary technical information and pay for long lead time materials in a timely manner, the
Company wil have sufficient time and available resources to construct the interconnection
facilities in time to allow the expansion facilties to meet the Scheduled Operation Date.
COMMISSION FINDINGS
The Commission has reviewed the filings of record II Case No. IPC-E-09-24,
including the proposed Agreement and fied comments. The Commission has also reviewed its
related Order No. 30087 in Case No. IPC-E-06-11 approving the existing firm energy sales
agreement for Cassia Gulch. Idaho Power has presented a Firm Energy Sales Agreement
whereby the net energy from the Cassia Gulch and Tuana Springs expansion wil be combined
into a single qualifying facilty with a nameplate rating of 35.7 MW. We acknowledge that the
existing Cassia Gulch Agreement will remain in full force and effect until such time as the Tuana
Springs expansion facilities have achieved their operation date of June 30, 2010. We note that
Idaho Power appears satisfied in this case that transmission and generator interconnection issues
are unlikely to cause a delay in the project's Scheduled Operation Date for Tuana Springs
expansion.
ORDER NO. 30917 5
The Commission finds that the proposed Agreement submitted in this case contains
acceptable contract provisions and includes rates calculated in a reasonable maner and
representative of the costs Idaho Power wil avoid in making the purchase. We find it reasonable
that the submitted Agreement be approved without fuher notice or procedure. IDAP A
31.01.01.204. We further find it reasonable to allow payments made under the Agreement as
prudently incurred expenses for ratemaking puroses.
CONCLUSIONS OF LAW
The Idaho Public Utilties Commission has jurisdiction over Idaho Power Company,
an electric utilty, pursuant to the authority and power granted under Title 61 of the Idaho Code
and the Public Utility Regulatory Policies Act of 1978 (PURP A). The Commission has authority
under PURP A and the implementing regulations of the Federal Energy Regulatory Commission
(FERC) to set avoided costs, to order electric utilties to enter into fixed-term obligations for the
purchase of energy from qualified facilties and to implement FERC rules.
ORDER
IT IS HEREBY ORDERED and the Commission hereby approves the August 5,
2009, Firm Energy Sales Agreement between Idaho Power Company and Cassia Gulch Wind
Park, LLC and Tuana Springs Energy, LLC.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code § 61-626.
ORDER NO. 30917 6
DONE by Order of the Idaho Public Utilties Commission at Boise, Idaho this Sf'
day of October 2009.~d~g)~KÊMPTON, :ENT
-
~ dtfL
MARSHA H. SMITH, COMMISSIONER
Out of the Office on this Date
MACK A. REDFORD, COMMISSIONER
ATTEST:
~~~Commission Secretary
bls/O:IPC-E-09-24_sw
ORDER NO. 30917 7