20100317notice_of_application_order_no_31026.pdf

Office of the Secretary
Service Date
March 17,2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR CASE NO. IPC-09-
APPROVAL OF AN AGREEMENT TO
PURCHASE CAPACITY AND ENERGY NOTICE OF APPLICATION
FROM USG OREGON, LLC AND
AUTHORIZE RECOVERY IN THE NOTICE OF
COMPANY'S POWER COST ADJUSTMENT MODIFIED PROCEDURE
ORDER NO. 31026
YOU ARE HEREBY NOTIFIED that on December 28, 2009, Idaho Power
Company filed an Application requesting approval of a Purchase Power Agreement and an
accounting order authorizing the Company to recover purchases of energy and associated costs
from the USG Oregon, LLC, Neal Hot Springs Unit No.1 geothermal generation facility. The
Company seeks recovery of its costs and purchases in its annual Power Cost Adjustment (PCA).
YOU ARE FURTHER NOTIFIED that Idaho Power asserts it indicated in both its
2004 and 2006 Integrated Resource Plans (IRPs) that it intended to actively seek acquisition of
geothermal generating resources. In 2006, the Company issued a request for proposal (RFP) to
acquire geothermal resources and then entered into an agreement with US. Geothermal to
purchase power from its Raft River No.1 geothermal power plant. Idaho Power issued a new
request for proposal in 2008 to acquire additional geothermal resources. The Company received
three responses, two of which were withdrawn by the bidders, and the Company concluded that
the third bid was too speculative and thus unacceptable. The Company s Application states that
this experience with the unsuccessful RFP process demonstrates that "the competitive RFP
process is not the optimal means to acquire geothermal resources." Application, pp. 3-
Accordingly, the Company actively pursued discussions with developers of five different
potential geothermal sites, including the Neal Hot Springs site. The Company believes the Neal
Hot Springs development is advantageous for several reasons, including (1) substantial prior
geotechnical exploration at the site, (2) its location in Idaho Power s service area and proximity
to Treasure Valley load centers, (3) available transmission capacity, and (4) favorable energy
pricing in comparison to other proposals.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 31026
YOU ARE FURTHER NOTIFIED that on December 11 , 2009, Idaho Power and
USG Oregon, LLC entered into a Power Purchase Agreement providing for the Company
purchase of energy from the Neal Hot Springs Unit No. I geothermal generation facility. USG
Oregon, LLC is a subsidiary of US. Geothermal. The Neal Hot Springs project is located
approximately 12 miles west northwest of Vail, Oregon. The project is expected to produce
approximately 22 MW of power with an estimated online date late in 2012. The Purchase
Agreement provides an initial term of 25 years with an option for Idaho Power to extend the term
of the Agreement. The Agreement provides that Idaho Power will receive the rights to all
environmental attributes and renewable energy credits now available or created during the term
of the Agreement. The Agreement grants Idaho Power the first right of offer to participate in any
future U.S. Geothermal resource development at the site or in close proximity to the site.
YOU ARE FURTHER NOTIFIED that the energy price stated in the Agreement will
be seasonally adjusted consistent with seasonality factors currently used in Idaho Power
PURP A agreements. The Company asserts that seasonal prices give the correct price signal by
promoting production when the value of the energy to the Company is highest. Beginning in
2012, the flat energy price is $96/MWh. The price escalates annually by 6% in the initial years
and by 1.33% in the later years of the Agreement. The approximate 25-year levelized contract
price is $117.56/MWh. This compares to a levelized price for a 20-year PURPA contract of
$95.56/MWh. The Company asserts that, while the price of energy under this Agreement is
higher than energy purchased under PURP A contracts, there are benefits to this Agreement that
bring value to Idaho Power s customers that PURP A contracts do not. The Company identifies
these benefits as (1) the Company s rights to any of the project's renewable energy credits, (2)
the limited ability to curtail energy, (3) the right of first offer on ownership of other site
development, (4) exploration, development and construction milestone requirements and
associated damages, and (5) the right to extend the terms of the contract. The Application states
that with the addition of a relatively minor system upgrade, sufficient firm transmission capacity
is available for the full output of the project to be delivered to Idaho Power s load centers.
YOU ARE FURTHER NOTIFIED that because the Agreement is not a PURPA
contract, the Company proposes that the cost of power purchased under the Agreement be
recovered in its annual PCA in a manner similar to other non-qualified facility power purchase
expenses. The Company requests that its Application be processed by Modified Procedure, that
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 31026
the Commission find that the Agreement is prudent for ratemaking purposes and that the
Commission approve its request for recovery of the power purchase expense associated with the
Agreement in the Company s power cost adjustment rate.
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission s Rules
of Procedure , IDAPA 31.01.01.201-204. The Commission notes that Modified Procedure and
written comments have proven to be an effective means for obtaining public input and
participation.
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this
Application may file a written comment in support or in opposition with the Commission within
forty-five (45) days from the service date of this Notice and ten (10) days to file reply comments.
The comment must contain a statement of reasons supporting the comment. Persons desiring a
hearing must specifically request a hearing in their written comments. Written comments
concerning this Application may be mailed to the Commission and Idaho Power at the addresses
reflected below:
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, Idaho 83720-0074
Street Address for Express Mail:
Barton L. Kline
Donovan E. Walker
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
Mail: bkline~idahopower.com
dwalker~i dahopower .com
472 W. Washington Street
Boise, ID 83702-5918
These comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.idaho.gov. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to Idaho Power at the e-mail addresses listed
above.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 31026
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set, the Commission will consider this matter on its merits and
enter its Order without a formal hearing. If written comments are received within the time limit
set, the Commission will consider them and, in its discretion, may set the same for formal
hearing.
YOU ARE FURTHER NOTIFIED that the Application and supporting workpapers
have been filed with the Commission and are available for public inspection during regular
business hours at the Commission offices or on the Commission s web site at
www.puc.idaho.gov by clicking on "File Room" and then "Electric Cases.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission s jurisdiction under Title 61 of the Idaho Code and that the
Commission may enter any final order consistent with its authority under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
IT IS HEREBY ORDERED that the Application of Idaho Power Company for
approval of the purchase of energy from USG Oregon , LLC, Neal Hot Springs Unit No.
geothermal generation facility be processed by Modified Procedure, IDAPA 31.01.01.201-204.
Persons interested in submitting written comments in this matter must do so within forty-five
(45) days from the service date ofthis Notice and ten (10) days thereafter to file reply comments.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 31026
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /1~
day of March 2010.
MARSHA H. SMITH, COMMISSIONER
~~~Q~A ~
MACK A. REDFORD, COMMISSIONER
ATTEST:
Je D. Jewell Co ISSlon Secretary
bls/O:IPC-O9-34 ws
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 31026