20090923Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895
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Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR APPROVAL ) CASE NO. IPC-E-09-24
OF A FIRM ENERGY SALES AGREEMENT )
FOR THE SALE AND PURCHASE OF )
ELECTRIC ENERGY BETWEEN IDAHO ) COMMENTS OF THE
POWER COMPANY, CASSIA GULCH WIND ) COMMISSION STAFF
PAR LLC AND TUANA SPRINGS ENERGY )LLC. )
)
COMES NOW the Staff ofthe Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbur, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice ofComment/rotest Deadline issued on
August 25,2009, submits the following comments.
BACKGROUND
On August 11,2009, Idaho Power Company (Idaho Power; Company) fied an
Application with the Idaho Public Utilities Commission (Commission) requesting approval of a
20-year Firm Energy Sales Agreement between Idaho Power and Cassia Gulch Wind Park LLC
(Cassia Gulch) and Tuaa Springs Energy LLC (Tuana Springs) dated August 5, 2009,
(Agreement).
STAFF COMMENTS 1 SEPTEMBER 23, 2009
Cassia Gulch currently owns, maintains and operates an existing 18.9 MW wind
generating facilty located near Hagerman, Idaho approximately 4.3 miles west ofIdaho Power's
lower Malad substation. Reference Case No. IPC-E-06-11, Order No. 30087.
Tuana Springs proposes to design, constrct, own, operate and maintain a new 16.8 MW
wind generating facilty adjacent to and as an expansion of the Cassia Gulch facilty (Tuana
Springs Expansion). Idaho Power, Cassia Gulch and Tuana Springs propose a new Agreement
that encompasses both the existing Cassia Gulch facilty and the Tuana Springs Expansion. It is
the contract paries' intent that the existing Cassia Gulch agreement remain in full force and
effect until such time as the Tuana Springs Expansion facilities have achieved their operation
date of June 30, 2010. At such time the Cassia Gulch agreement is proposed to automatically
terminate and 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.
STAFF ANALYSIS
Purchase Prices
This Agreement is unusual because it proposes to combine an existing project (Cassia
Gulch) with a yet-to-be-constrcted expansion (Tuana Springs) into a single contract that will
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 IRP-based methodology. Individually, both
Cassia Gulch and Tuaa Springs are less than 10 aMW, however, collectively they exceed 10
aMW.
This section of Staff's comments contains confidential information subject to
protective agreement.
STAFF COMMENTS 2 SEPTEMBER 23, 2009
This section of Staff's comments contains confidential information subject to protective
agreement.
STAFF COMMENTS 3 SEPTEMBER 23, 2009
This section of Staff's comments contains confidential information subject to protective
agreement.
Staff acknowledges the unusual proposal to combine an existing project with a new
expansion and believes that a unique approach to determining purchase prices is justified under
the circumstances. 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 comments on this Agreement are being submitted only one day following
comments, which were submitted regarding three other Idaho Power PURP A wind contracts.
1
Because certain terms in this Agreement are identical to terms contained in the three previous
agreements, yet are stil "new" compared to previously approved contracts, some comments on
those new contract terms wil be repeated here.
Like the three other wind contracts now pending before the Commission, this is one of
the first PURP A wind agreements executed since the issuance of Commission Order No. 30488,
which requires the inclusion of the Mechancal Availabilty Guarantee (,¡ 6.4), wind integration
cost reduction (,¡ 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 required facilities to predict future
monthly generation with a fairly high degree of certainty in order to justify payment of "firm"
energy rates. For resource technologies with intermittent generation (like wind), the "90/110"
requirements were diffcult to meet.
i IPC-E-09-18, IPC-E-09-19, and IPC-E-09-20.
STAFF COMMENTS 4 SEPTEMBER 23,2009
Under the MAG provisions in this Agreement, the project is required to achieve a
minimum monthly mechancal availabilty of 85 percent. In other words, the project must be
able to operate at least 85 percent 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 percent 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 15 mils per kWh minimum price penalty is intended to recognize that Idaho Power will
incur transaction and administrative costs to acquire replacement power even if market prices are
less than contract rates.
Staff believes that the MAG provisions in the Agreement are reasonable, but recognizes
that this will be one of Idaho Power's first contracts to include them. Consequently, Staff
recommends that the MAG provisions be approved, but that they not be viewed as precedential
should they later need to be modified or prove to be unworkable.
As specified in Order No. 30488, Idao Power shall make use of a wind energy
production forecasting model to forecast the energy production from this facility and other QF
wind generation resources. Idaho Power will share the cost of wind energy production
forecasting equally with the project owner. The facilty's share of wind energy production
forecasting will be prorated based on its generation in relation to all other QF wind projects
providing energy to Idaho Power. The project's share will not be greater than 0.1 percent of the
total energy payments made to the project by Idaho Power during the previous contract year.
Delay Liquidated Damages and Security Provisions
The Agreement contans provisions for delay liquidated damages (,¡ 5.3) and associated
delay security (,¡ 5.7) to secure the established scheduled operation date of November 1,2009 for
the Tuana Springs Expansion portion of the facilty. Delay liquidated damages have been
included in contracts since July 2007; however, this will be one of the first contracts to require
delay security.
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 contract. 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
STAFF COMMENTS 5 SEPTEMBER 23, 2009
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 insure that the project wil be able to pay delay liquidated damages should
they be incured, the project is required to post liquid security in an amount equal to $20 per kW
of project capacity.
Staf believes that these provisions are necessar and reasonable. Many PURP A wind
projects with existing contracts have experienced delays in meeting their scheduled online dates,.
When new contracts are signed, Idaho Power plans accordingly. But when projects are delayed,
Idaho Power must sometimes incur higher costs to acquire replacement power. Staf believes
that these provisions wil help to protect Idaho Power and its ratepayers if higher costs are
incured due to project delays.
Generator Interconnection and Transmission
The Cassia Gulch and Tuana Springs projects 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 that case was a Settlement Stipulation that determined the
transmission system improvements necessar in order to accommodate all of the proposed
projects in the cluster, and devised a method for allocating costs amongst 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, 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 projects' prorata share of upgrades for the cluster of proposed projects in the
Twin Falls area based on their position in the generator interconnection queue and MW 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 will be based on "redispatch" as described in the Stipulation in the
Cassia Case.
STAFF COMMENTS 6 SEPTEMBER 23, 2009
The Agreement provides that all applicable interconnection charges and monthly
operation and maintenance charges under Schedule 72 wil 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 facilty study portion of the 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 the generation 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 necessar technical information and pay for long lead time materials in a
timely maner, the Company will have sufficient time and available resources to constrct the
interconnection facilties in time to allow the expansion facilties to meet the scheduled operation
date.
Staff would prefer that a signed Generator Interconnection Agreement be presented at the
same time as Idaho Power seeks Commission approval of the Power Sales Agreement.
Scheduled operation dates for other projects (many of which are being developed by Exergy)
have sometimes not been achieved due to delays in completing interconnection studies, delays in
completing a Generator Interconnection Agreement, delays in procuring interconnection or
substation equipment, or delays in completing constrction of transmission interconnection or
substation facilties. Staff stated its preference for concurent submittal of Power Sales
Agreements and Generator Interconnection Agreements in the Commission's approval of two of
Idaho Power's most recent PURP A wind contracts (Hot Springs - IPC-E-08-34 and Bennett
Creek - IPC-E-08-35). While stopping short of agreeing to require a signed GIA before signing
a power sales agreement, Idaho Power stated in reply comments in those cases that it would be
the Company's policy in the future not to sign any power sales agreements until the QF project
developer can demonstrate that it has completed its interconnection application to the extent that
the scheduled operation date is unlikely to be modified due to delays in the interconnection study
and transmission constrction process. Reference Order No. 30398 at p. 3. 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.
STAFF COMMENTS 7 SEPTEMBER 23, 2009
STAFF RECOMMENDATION
Staff recommends 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 incurred expenses for ratemaking puroses.
Respectfully submitted this vi
d3 day of
September 2009.
~~
Scott Woodbur
Deputy Attorney General
Technical Staff: Rick Sterling
i:/umisc/comments/ipce09.24swrps nonconfidential copy. doc
STAFF COMMENTS 8 SEPTEMBER 23, 2009
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 23rd DAY OF SEPTEMBER 2009,
SERVED THE FOREGOING NON-CONFIDENTIAL COMMENTS OF THE
COMMISSION STAFF, IN CASE NO. IPC-E-09-24, BY MAILING A COPY
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DONOVAN WALKER
BARTON L KLINE
IDAHO POWER COMPANY
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McDEVITT & MILLER LLP
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CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY
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RICHAR S. FREE
ASSISTANT SECRETARY
JOHN DEER RENEWABLES, LLC
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