20100701final_order_no_32024.pdf

Office of the Secretary
Service Date
July 1 , 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 CARGILL INCORPORATED
) CASE NO. IPC-IO-
) ORDER NO. 32024
On May 5, 2010, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting approval of a
10-year Firm Energy Sales Agreement between Idaho Power and Cargill Incorporated (Cargill)
dated May 2010 (Agreement).
AGREEMENT
Under the terms of the Agreement, Cargill will sell and Idaho Power will purchase
electric energy generated by the Bettencourt B6 Dairy Anaerobic Digester Power Project (B6
Facility) located near Jerome, Idaho. The location of the B6 Facility is more particularly
described as Section 19, Township 8 S, Range 16 E, Boise Meridian, Gooding County, Idaho.
Appendix B-2. Cargill warrants that the B6 Facility is a qualifying facility (QF) under applicable
provisions of the Public Utility Regulatory Policies Act of 1978 (PURP A). ~ 3.
The B6 Facility is already providing energy to Idaho Power under an existing Non-
Firm Schedule 86 Agreement (June 30, 2009). ~ 4.1. The nameplate rating of the B6 Facility is
2.25 MW. Appendix B-1. The Maximum Capacity Amount is 2.13 MW. Appendix B-
Under normal and/or average conditions, the Facility will not exceed 10 aMW on a monthly
basis. Should the Facility exceed 10 aMW on a monthly basis, Idaho Power will accept the
energy (Inadvertent Energy) that does not exceed the Maximum Capacity Amount; however, the
Company will not purchase or pay for the Inadvertent Energy. ~ 7.
Cargill has elected a Scheduled Operation Date 30 days past the date the Agreement
is approved by the Commission. Appendix B-
The Agreement contains the non-Ievelized published avoided cost rates approved in
Order No. 30744 and comports with the terms and conditions of Order Nos. 30738 (SAR non-
fueled cost variables) and 30415 (daily load shape adjustment). ~ 7.
ORDER NO. 32024
Idaho Power notes that the purchase rates set forth in the Agreement, Order No.
30744, had on the May 4, 2010, date of contract signing been replaced by the lower rates of
Order No. 30125 approved by the Commission on March 16 2010, in Case No. GNR-10-01.
Idaho Power recites that the Commission has previously determined grandfathering eligibility for
(older and higher) published avoided cost rates by requiring (1) a signed power sales agreement
be executed prior to the change in rates; or (2) a meritorious complaint filed with the
Commission demonstrating project maturity and that but for the actions of the utility a sales
agreement would have been signed prior to the change in rates. Although not filing a complaint
with the Commission, by signing the Agreement and voluntarily presenting it to the
Commission, Idaho Power has nevertheless concluded that Cargill meets the second test of the
Commission and should be entitled to the rates established by Order No. 30744.
In determining that Cargill was entitled to grandfathering under the higher rates of
Order No. 30744, the Company concluded that Cargill satisfied the following grandfathering
criteria prior to March 16, 2010:
a. Interconnection and Transmission
Filed an interconnection application; and
11.Received and accepted an interconnection feasibility study report for
the project and paid any requested study deposits (or established credit)
for the next phase of the interconnection process in accordance with
Schedule 72; and
111.Received confirmation from Idaho Power that transmission capacity is
available for the project and/or received accepted transmission capacity
study results and cost estimates.
b. Purchase Power Agreement
An agreement was materially complete and would have been executed
by both parties prior to March 16, 2010, and except for routine Idaho
Power final processing, an agreement would have been executed prior
to March 16, 2010.
It is Idaho Power s opinion that the Cargill B6 Facility meets all of the above-referenced criteria.
The Interconnection and Transmission criteria were met at the time the 86 Facility was
interconnected with Idaho Power to make sales of non-firm energy under the Schedule 86
Agreement.
ORDER NO. 32024
With respect to the Power Purchase Agreement criteria, the Company contends that
Cargill and Idaho Power had finally resolved all outstanding contract issues and that Cargill had
agreed to execute the Agreement after being notified that the B6 project had passed Idaho
Power s final internal review process. Both parties expected final review to be a relatively
straightforward process given that the parties had recently executed a substantially similar Firm
Energy Sales Agreement for the Dry Creek Dairy Anaerobic Digester Project which was
approved by the Commission in Order No. 31034 issued on April I , 2010. The B6 Facility
Agreement was commercially and legally similar to the Dry Creek Firm Energy Sales
Agreement. Approximately 10 days prior to March 16 2010, Idaho Power s management started
the process of reviewing the agreed-upon draft for final approval and execution. The final
Sarbanes-Oxley review process and the routine internal approval had not been completed as of
March 16 2010.
In further support of its request for grandfathering, Idaho Power states that the 86
Facility is a small project that is already certified as a QF and is currently selling power to Idaho
Power under a Schedule 86 contract. The Agreement also contains the most recent contract
terms and conditions, including the liquidated damages and security provisions previously
approved by the Commission in the contracts for the Arena Drop hydro project and in the
contracts for the Dry Creek anaerobic digester projects, Order Nos. 31060 and 31034
respectively.
Agreement ~ 21.1 provides that the Cargill Agreement will not become effective until
the Commission has approved all of the Agreement's terms and conditions and declared that all
payments Idaho Power makes to Cargill for purchases of energy from the Facility will be
allowed as prudently incurred expenses for ratemaking purposes.
On May 26, 2010, the Commission issued a Notice of Application and Modified
Procedure in Case No. IPC-10-15. The deadline for filing comments was June 16, 2010.
Commission Staff was the only party to file comments.
Staff Comments
Staff believes that the grandfathering criteria developed and applied by Idaho Power
in this case are fair and reasonable. Based on the facts presented in this case, Staff believes that
but for the actions of Idaho Power, the Agreement would have been fully executed prior to
March 16, 2010. Consequently, Staff recommends that the Order No. 30744 purchase rates
ORDER NO. 32024
contained in the Agreement be approved. Staff recommends further that the Commission
approve all ofthe Agreement's terms and conditions.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case No. IPC-
10-15 including the May 4 2010 Cargill Agreement and the comments and recommendations
of Commission Staff. We have also reviewed Cargill's existing Schedule 86 Agreement (June
2009) for the B6 Facility (Case No. IPC-09-, Order No. 30874).
Submitted in this case is a Firm Energy Sales Agreement between Idaho Power
Company and Cargill Incorporated dated May 4, 2010. The Agreement is for a 10-year term.
The nameplate rating of the B6 Facility is 2.25 MW. We acknowledge that the B6 Facility is
currently providing energy to Idaho Power under an existing Non-Firm Schedule 86 agreement
(June 30, 2009).
The Agreement contains the non-Ievelized published avoided cost rates established by
the Commission in Order No. 30744. On the May 4, 2010 date of contract signing the higher
contract rates of Order No. 30744 had been replaced by the lower rates of Order No. 30125
(Case No. GNR-10-01) approved by the Commission on March 16, 2010. We find that the
Company has fairly represented our past grandfathering criteria requirements. We further find
the Company s approach in this case regarding contract rates to be in concert with the spirit of
those prior grandfathering cases. See A. W Brown v. Idaho Power 121 Idaho 812, 828 P.2d 841
(1992); Order No. 29872, Case No. IPC-05-22.
In this case , Idaho Power and Staff believe that Cargill is entitled to grandfathering
and the rates of Order No. 30744. Idaho Power represents that all outstanding contract issues
had been resolved prior to March 16, 20 I 0, and that but for the internal review process of the
Company a contract would have been signed prior to March 16. Based on the record established
in this case, we find that Cargill is entitled to the grandfathered rates of Order No. 30744.
represented and pursuant to contract terms, under normal and/or average conditions the
generation from the B6 Facility will not exceed 10 aMW on a monthly' basis. The Commission
finds the Agreement submitted in this case contains acceptable contract terms. We further find it
reasonable to allow payments made under the Agreement as prudently incurred expenses for
ratemaking purposes.
ORDER NO. 32024
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power, an electric
utility, and the issues raised in this matter pursuant to the authority and power granted it under
Title 61 of the Idaho Code and the Public Utility Regulatory Policies Act of 1978 (PURPA).
The Commission has authority under PURP A and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed-term obligations for the purchase of energy from qualified facilities
(QFs) and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby approve the May 4 2010, Firm Energy
Sales Agreement between Idaho Power and Cargill Incorporated for the Bettencourt B6 Dairy
Anaerobic Digester Power Project.
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.
ORDER NO. 32024
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 5tJ
day of June 2010.
11 D. KE PTON RE ENT
MARSHA H. SMITH, COMMISSIONER
. ~-::::,~"
MACK A. REDF , C MISSIONER
ATTEST:~fJp
J a D. Jewel
Commission Secretary
bls/O:IPC-IO-15 sw2
ORDER NO. 32024