20101210final_order_no_32136.pdf

Office of the Secretary
Service Date
December 10,2010
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
AND IDAHO WINDS LLC.
)
) CASE NO. IPC-E-09-25
)
)
)
) ORDER NO. 32136
)
BACKGROUND
On September 10, 2009, Idaho Power fied an application with the Commission
requesting approval of a 20-year Finn Energy Sales Agreement between Idaho Power and Idaho
Winds LLC dated September 1, 2009. The application was processed by Modified Procedure.
After reviewing and considering the application and comments filed by Staff and other interested
paries in the case, the Commission found it reasonable to accept termination of the Alkali Wind
Project contract and approve the September 1, 2009, Firm Energy Sales Agreement between
Idaho Power and Idaho Winds LLC for the Sawtooth Wind Project. Order No. 30964.
On October 5, 2010, Idaho Power filed a Motion with the Commission for approval
of a Generator Interconnection Agreement (Agreement) between Idaho Winds LLC and Idaho
Power regarding the Sawtooth Wind Project (Project). On November 1,2010, the Commission
issued a Notice of Filing/otice of Modified Procedure and set a comment deadline of
November 22,2010. Order No. 32103. Staffwas the only pary to comment. By this Order, the
Commission approves the Generator Interconnection Agreement between Idaho Winds LLC and
Idaho Power regarding the Sawtooth Wind Project.
THE MOTION
The Company's Motion states that interconnection of the Project is provided at 138
kV at an estimated cost to the Project of approximately $844,000. The addition of the Project to
Idaho Power's system requires substantial network transmission system upgrades at an estimated
cost of approximately $2,176,000. The estimated milestone date for construction completion is
July 22,2011.
This Agreement is the second outside of the Twin Falls queue involving PURP A
generating facilties subject to Idaho Power's Schedule 72 which require substantial upgrades to
Idaho Power's transmission system. The Commission first authorized a sharing formula for
ORDER NO. 32136 1
transmission upgrade costs outside of the Twin Falls queue in Case Nos. IPC-E-06-34 and IPC-
E-06-35 - Hot Springs Windfar and Bennett Creek Windfarm, respectively. i Idaho Power
asserts that the Sawtooth Wind Project wil be interconnected to the same transmission line as
the Hot Springs and Bennett Creek projects and the network transmission upgrades required to
interconnect wil have a similar impact. Therefore, as a similarly situted project, Idaho Power
and Idaho Winds LLC believe it is appropriate for this Agreement to include the cost sharing
allocation developed and accepted in the Cassia case and approved by the Commission in the
Hot Springs and Bennett Creek interconnection agreement.
The Company requested that its Motion be processed by Modified Procedure.
The Cassia Formula
In 2006, numerous PURP A qualifying facility projects were proposed to be
developed in the Magic Valley area of southern Idaho (the "Twin Falls queue"). Because these
proposed projects were clustered in a defined geographic area, were subject to many of the same
transmission constraints, and would utilze common transmission facilties, all of the proposed
facilities in the Twin Falls queue were considered in adoption of a Settlement Stipulation in Case
No. IPC-E-06-21 (the "Cassia Case"). In the Cassia Case, a cost sharing formula was adopted
for determining how the costs of necessar transmission upgrades would be allocated amongst
proposed projects and Idaho Power. The cost sharing was allocated as follows:
. 25% of the costs wil be funded by Idaho Power and included in Idaho
Power's rate base;
. 25% of the costs will be paid by the Project as a non-refudable
contribution in aid of construction (CIAC);
. 50% of the costs wil be fuded by the Project as an advance in aid of
construction (AIAC), subject to refund by Idaho Power over a term of up
to 10 years. This portion of the costs wil be rate based over time as
refunds are made.
In Order No. 30414, the Commission concluded that use of the Cassia Formula was
appropriate for the Cassia Wind Farms as well as the other PURP A generation projects in the
Twin Falls 138 kV transmission queue. However, the Commission did not authorize the
Company to automatically apply the Cassia Formula in other locations on its system where
i These wind farm projects shared the same developer, interconnection, and generator interconnection agreement.
ORDER NO. 32136 2
transmission upgrades would be necessary. The Commission indicated that application of the
Cassia Formula to other QF interconnection requests would "depend on the specific
characteristics of that situation." Order No. 30414 at 11.
THE COMMENTS
Staff reviewed Idaho Power's Motion and noted that Idaho Power offered the
following arguments in support of applying the Cassia Formula to the Sawtooth Wind Project:
(1) But for the construction of the Sawtooth Wind Project, Idaho Power would
not have constructed the transmission upgrades to provide adequate
service to its native load customers. Therefore, Idaho Power believes a
contribution by the developer of a portion of the transmission upgrade cost
is appropriate.
(2) In the Cassia case, the Commission directed Idaho Power to assess the
benefits of individual transmission upgrades taking into consideration "the
system wide benefits that accrue to all customers on an integrated
transmission grid." (Order No. 30414, p. 10). Idaho Power suggests that
one way to approach that assessment is to compare the level of benefits
that the Sawtooth upgrades wil provide to the system with the level of
benefits provided in the Cassia case. The Company acknowledges that it
is nearly impossible to precisely quantify the relative system benefits
conferred by two distinct and geographically separate transmission
upgrades. However, Idaho Power states, transmission engineers can
exercise their judgment and their knowledge of transmission systems they
have designed and operate. Based on their informed judgment, Idaho
Power's transmission engineers are of the opinion that the transmission
upgrades required for the Sawtooth Project wil provide different benefits
than the transmission system benefits the Cassia upgrades provide.
Consequently, the Company believes that the use of the Cassia Formula is
reasonable in this circumstance.
(3) The Company is also of the opinion that the application of the Cassia
Formula in this case wil maintain the balance between "the benefits
accruing to the customers of the grid with the cost responsibilty of the QF
necessitating the timing and the construction of the upgrade." (Order No.
30414,p.ll).
(4) Sawtooth, like the QF projects in the Twin Falls queue, wil displace or
defer the need for other or similar generation projects in Idaho Power's
Integrated Resource Plan that would likely require related transmission
investment by the Company. (Order No. 30414, p. 11).
ORDER NO. 32136 3
(5) Idaho Power believes that application of the Cassia Formula in this
instance wil allow it to successfully defend a comparabilty claim brought
by a Federal Energy Regulatory Commission ("FERC") jursdictional
customer claiming that Idaho Power and the Commission had given
unlawfl, preferential treatment to QF resources.
Staff regarded the Generator Output Limit Control or "Redispatch" provisions as a
key element of the Agreement. Under these provisions, Idaho Power is permitted to direct
Sawtooth Wind to forcibly reduce its generation output if and when outages on specified
transmission lines occur. Staff noted that, if enough transmission upgrades were made, Idaho
Power could ensure that Sawtooth would be able to deliver its full output to Idaho Power's
system under all loading conditions. To do so however, would require more substantial and
much more costly upgrades than those required in this Agreement. While the possibilty of
transmission outages exists with the upgrades required in this GIA, Idaho Power believes that
the likelihood and frequency of load-related outages on the specified transmission lines is
extremely remote. Because the likelihood of transmission outages is so remote and because the
cost of transmission upgrades would be so much higher to ensure deliverabilty under all
conditions, Idaho Winds has agreed to be subject to redispatch in exchange for Idaho Power
requiring less extensive transmission system upgrades?
Staff acknowledged that if too many projects in the Twin Falls queue or in other
locations nearby are permitted to redispatch, in the rare event transmission is severely
constrained, Idaho Power wil not have access to the generation provided by these facilties. The
aggregate amount of generation from these facilities has grown to several hundred megawatts,
collectively making it a major resource. However, Staff indicated that its concern is negated
somewhat by the fact that most of the projects subject to redispatch are wind facilties, which are
unlikely to be generating at or near capacity during the extremely hot hours of the year when
transmission congestion is most likely to occur. Consequently, Idaho Power does not plan to
rely on output from these facilities during extreme events anyway. Despite these factors, Staff
noted that there is no discount to the avoided costs paid to facilities subject to redispatch, which,
although extremely rare, is most likely to occur when generation from the facilty is needed
most.
2 Idaho Power believes that the need for possible redispatch wil
likely be relieved in the future if the Gateway West
project is built, sometime after 2015, making redispatch a relatively short-term possibilty.
ORDER NO. 32136 4
Because the Sawtooth Project presents similar circumstances to the projects in the
Twin Falls queue and also the Hot Springs and Bennett Creek projects, Staff believes that
utilization of the Cassia Formula and redispatch provisions in the Idaho Winds GIA are
appropriate. Staff recommended approval of the Generator Interconnection Agreement between
Idaho Winds, LLC and Idaho Power without change or condition.
FINDINGS AND CONCLUSIONS
The Idaho Public Utilities Commission has jurisdiction over Idaho Power Company,
an electric utilty, pursuant to the authority and power granted it under Title 61 of the Idaho Code
and the Public Utilty Regulatory Policies Act of 1978 (PURP A). The Commission has authority
under PURPA 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 QFs and to implement FERC rules.
The Commission has exclusive authority and jurisdiction over the interconnection
and allocation of interconnection costs for QFs when an electric utilty is required to interconnect
under 18 C.F.R. § 292.303 of FERC's PURPA regulations (i.e., when the QF's entire output is
sold to a regulated utility). 18 C.F.R. § 292.306. Under FERC rules, interconnection costs,
including all reasonable costs of connection, switching, metering, transmission, distribution,
safety provisions and administrative costs caused solely by such QF interconnection may be
assessed by this Commission against a QF. 18 C.F.R. §§ 292.101(7); 292.306(a), (b).
The Commission has reviewed the Company's Motion, including the Generator
Interconnection Agreement, and the comments of Commission Staff. We have also reviewed the
Firm Energy Sales Agreement for the Sawtooth Project and our Order approving the same.
Order No. 30964. Finally, the Commission has reviewed the related Cassia Case/Formula
Orders wherein we approved a methodology and formula for sharing transmission upgrade costs
related to QF requests for interconnection. Order Nos. 30414, 30453.
In prior cases, the Commission specifically declined to automatically apply the
Cassia Formula where transmission upgrades would be necessary. In this case, we reaffirm that
position. Consideration and application of the Cassia Formula will be dependent upon the
specific characteristics of each interconnection request. We find the circumstances of the
Sawtooth Project to be consistent with our prior cases approving use of the Cassia Formula.
Order Nos. 304 i 4 and 30453. The assignment of costs in this case balances the benefits accruing
ORDER NO. 32 i 36 5
to utilty customers against the cost responsibilty of the QFs who are dictating the timing and
construction of the upgrade. We further find that the Cassia Formula's cost sharing approach
creates an incentive for QFs to consider economic efficiencies in the siting of their generating
facilties. Based on the foregoing, the Commission finds it reasonable to approve the Generator
Interconnection Agreement between Idaho Power and Idaho Winds LLC, which utilzes the
Cassia Formula for allocation of transmission upgrade costs for the Sawtooth Wind Project.
ORDER
IT IS HEREBY ORDERED that the Generator Interconnection Agreement between
Idaho Power and Idaho Winds LLC regarding the Sawtooth Wind Project is approved without
change or condition.
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.
DONE by Order of the Idaho Public Utilties Commission at Boise, Idaho this IOrA
day of December 2010.
Qd~JI . KEMPT00IDENT
ti ¿f~
MARSHA H. SMITH, COMMISSIONER
~~MACK A. REDFORD, C MISSIONER
ATTEST:~if~
Je D. Jewell
Commission Secretary
O:IPC-E-09-25_ks2
ORDER NO. 32136 6