20100401Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 1895
F~ f: (~; E: l
2010 APR -I M1 9: 23
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
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-10-05
OF A FIRM ENERGY SALES AGREEMENT )
FOR THE SALE AND PURCHASE OF ) COMMENTS OF THE
ELECTRIC ENERGY BETWEEN IDAHO ) COMMISSION STAFF
POWER COMPANY AND RIVERSIDE )INVESTMENTS, LLC. )
COMES NOW the Staff of the Idaho Public Utilties Commission (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 of Comment/rotest
Deadline issued on March 17,2010 in Case No. IPC-E-IO-05, submits the following comments.
BACKGROUND
On March 9,2010, Idaho Power Company (Idaho Power; Company) fied an Application
with the Idaho Public Utilties Commission (Commission) requesting approval of a March 8,
2010, Firm Energy Sales Agreement (Agreement) between Idaho Power and Riverside
Investments, LLC (Riverside).
Riverside is the owner/developer of a 450 kW hydro-generation facility (Arena Drop)
located near Para, Idaho. Riverside warrants that it is a qualified small power generation
facility (QF) as defined in Sections 201 and 210 of the Public Utilty Regulatory Policies Act of
STAFF COMMENTS 1 APRIL 1, 2010
1978 (PURPA) and the implementing regulations of the Federal Energy Regulatory Commission
(FERC), 18 C.F.R. § 292. ~ 3.2.
The purchase price for Riverside generation is the non-Ievelized published avoided cost
rates established by the Commission for monthly energy deliveries of less than 10 average
megawatts (aMW). Order Nos. 30744, 30738 and 30415; Agreement Article VII. The term of
the Agreement is 20 years. ~ 5.1. The scheduled Operation Date for Arena Drop is July 15,
2010. If the facility has not achieved its Operation Date prior to 90 days past that date, Delay
Liquidated Damages of $45 per nameplate kW rating wil be assessed and collected from the
facilty. ~ 5.3.2. In addition, as specified in ~ 5.7, within 30 days of the date of the Commission
Order approving this Agreement, Riverside shall post security of $45 per nameplate k W rating.
Idaho Power represents that an interconnection feasibilty study was not required for the
Arena Drop facility. A final Facility Study was completed on March 4,2010. All applicable
interconnection charges and monthly operation and maintenance charges under Schedule 72 wil
be assessed and collected from Riverside.
The Idaho PowerlRiverside Firm Energy Sales Agreement wil not become effective until
the Commission has approved all of the Agreement's terms and conditions and declared that all
payments the Company makes to Riverside for purchases of energy wil be allowed as prudently
incurred expenses for ratemaking purposes. ~ 20.
STAFF ANALYSIS
Staff has carefully reviewed the Agreement and finds that the rates contained therein are
consistent with the non-Ievelized published avoided cost rates for projects smaller than 10 aMW
that were approved and in effect at the time the Agreement was signed by both paries. The
Agreement was submitted for Commission approval on March 9, 2010, exactly one week before
the Commission issued Order No. 31025 on March 16, 2010 that significantly lowered avoided
cost rates.
All of the other terms and conditions included in the Agreement are identical to those
contained in recent PURP A contracts approved by the Commission. One of the significant new
features of recent Agreements is an increase in Delay Liquidated Damages and an associated
requirement for Delay Security equal to the greater of$45 per kW or the sum of three months'
estimated revenue. Consequently, for this Facilty, the total Delay Security amount wil be
approximately $20,250. ~ 5.7.1. The purose of Delay Security is to insure that liquid fuds
STAFF COMMENTS 2 APRIL 1,2010
wil be available in the event Delay Liquidated Damages are assessed. Delay Liquidated
Damages would be assessed if the Facilty failed to come online within 90 days following the
Scheduled Operation Date.
Prior to December 2006, Idaho Power's Firm Energy Sales Agreements for PURP A
projects did not include a Delay Liquidated Damages penalty. However, due to the failure of
some PURP A projects to achieve their scheduled operation date, Idaho Power began including
the penalty in recent contracts. The Company had been requiring Delay Security in an amount of
$25 per kW prior to January 29, 2010.
Idaho Power increased the amount of Delay Security from $25 per kW in prior
agreements to $45 per kW in this and one other recent Agreement because it did not believe that
the lower amount was sufficient to cover actual Delay Liquidated Damages should they be
incurred. In addition, the Company believed that the lower amount did not provide suffcient
motivation for project owners to complete their projects on time. In adopting the $45 per kW
amount, Idaho Power reviewed the security levels required by ten other electric utilties
throughout the U.S. in their renewable energy procurements and contracts. Only one requires
security less than $25 per kW, while the remainder require security of at least $50 per kW.
Staff believes that the $45 amount is reasonable. Staff believes that the amount should be
high enough to cover possible damages and to motivate owners to complete projects on time, yet
not so high as to make it too difficult for owners and developers to post the security and obtain
project financing.
Staff notes that the Delay Liquidated Damages provisions of the Agreement and the
associated requirement for Delay Security of $45 per kW were reached through mutual
agreement of the parties. Staff maintains that whether the project achieves its scheduled
operation date is mostly in control of the project owner. The Facilties Study needed to
determine interconnection requirements for the project has already been completed by Idaho
Power. Construction by Idaho Power of the necessar interconnection facilities commences
once the project owner pays the expected interconnection costs.
STAFF COMMENTS 3 APRIL 1,2010
STAFF RECOMMENDATIONS
Staff recommends that the Commission approve all of the Agreement's terms and
conditions as submitted, and declare that all payments Idaho Power makes to Riverside
Investments for purchases of energy wil be allowed as prudently incurred expenses for
ratemaking puroses.
Respectfully submitted this
i 'l day of April 2010.
Technical Staff: Rick Sterling
i:umisc:commentsipce i O.05swrs comments
STAFF COMMENTS 4 APRIL 1, 2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 1ST DAY OF APRIL 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-IO-05, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOV AN E WALKER
BARTON L KLINE
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(iidahopower.com
bkl ine(iidahopower .com
RANDY C ALLPHIN
CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: rallphin(iidahopower.com
Jo~
SECRETARY
CERTIFICATE OF SERVICE