20130614Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
FROM:CATHLEEN MCHUGH
DATE:JUNEII,2013
SUBJECT:CASE NO.IPC-E-09-24
INCLUSION OF OMITTED PRICING INFORMATION IN THE FIRM
ENERGY SALES AGREEMENT BETWEEN IDAHO POWER AND
CASSIA GULCH WIND PARK AND TUANA SPRINGS ENERGY.
On May 14,2013,Idaho Power Company (Idaho Power;Company)submitted for
Commission approval an Application to include additional pricing information to the
August 5,2009,Firm Energy Sales Agreement (2009 Agreement)between Idaho Power and
Cassia Gulch Wind Park,LLC (Cassia Gulch)and Tuana Springs Energy,LLC (Tuana Springs).
The 2009 Agreement is for a 20-year term and was approved on October 5,2009,in Order No.
30917.
BACKGROUND
In the 2009 Agreement,Tuana Springs proposed to design,construct,own,operate and
maintain a new wind generating facility adjacent to and as an expansion of the existing Cassia
Gulch facility.At the time,Cassia Gulch was operating under a April 7,2006 Firm Energy Sales
Agreement (Cassia Gulch Agreement),which was for a 20-year term and contained rates in
accordance with Order No.29646.Under the 2009 Agreement,the Cassia Gulch agreement was
to remain in full force and effect until such time as the Tuana Springs expansion facilities had
achieved their operation date.In the 2009 Agreement,Tuana Springs had selected June 30,2010
as the Operation Date.According to Idaho Power’s current application,Tuana Springs achieved
an Operation Date of May 14,2010.At that point,the Cassia Gulch agreement was
automatically terminated and replaced by the 2009 Agreement.The net energy from the Cassia
Gulch facility and the Tuana Springs Expansion was combined into a single qualifying facility.
The purchase prices in the pricing schedule in the 2009 Agreement were a blending of the
prices in the existing Cassia Gulch Agreement and prices established by running the Aurora
DECISION MEMORANDUM I JUNE 11,2013
economic dispatch model.The pricing schedule contained in the 2009 Agreement extended until
2028—only 18 years from both the anticipated and actual Operation Dates.
In April 2013,Cassia Gulch and Tuana Springs notified Idaho Power that the pricing
schedule did not extend for the Ml term of the Agreement.On May 3,2013,Idaho Power
provided Cassia Gulch and Tuana Springs with a letter setting forth the pricing to be applied in
2029 and 2030.Idaho Power did not replicate the methodology they used to generate the prices
for the first 18 years of the agreement.Instead,Idaho Power escalated the 2009 Agreement
prices by approximately 2.3 percent annually.This escalation factor was chosen to replicate the
escalation found in the standard published avoided cost rates set forth in Order No.29646.
STAFF REVIEW
Idaho Power states in its Application that the Company attempted to notify the
Commission of its additional pricing by letter.Commission Staff requested that Idaho Power file
an application seeking Commission approval of the pricing and verifying that Cassia Gulch and
Tuana Springs acquiesced in the pricing additions.Staff has verified that the 2029 and 2030
prices provided by Idaho Power are based upon a 2.3 percent annual escalation factor.Staff
believes Idaho Power’s approach is reasonable.In addition,the Commission was notified by a
letter dated May 31,2013,that Cassia Gulch and Tuana Springs agree,understand and accept the
updated pricing.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the inclusion of these additional prices
into the terms of the 2009 Agreement between Idaho Power and Cassia Gulch and Tuana Springs
without further process.
COMMISSION DECISION
Does the Commission wish to approve,without further process,the inclusion of pricing
information so that the pricing schedule extends through the fulL term of the Agreement?
Cathleen McHugh
I udmcmos/cassia gulch luana springs doc
DECISION MEMORANDUM 2 JUNE 11,2013