20100616Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 1895
RECE 0
26m JUN 16 AM 10: 21+
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
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-IO-15
OF A FIRM ENERGY SALES AGREEMENT )
FOR THE SALE AND PURCHASE OF ) COMMENTS OF THE
ELECTRIC ENERGY BETWEEN IDAHO ) COMMISSION STAFF
POWER COMPANY AND CARGILL )INCORPORATED. )
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment/rotest Deadline issued on
May 26, 2010 in Case No. IPC-E-IO-15, submits the following comments.
BACKGROUND
On May 5, 2010, Idaho Power Company (Idaho Power; Company) fied an Application
with the Idaho Public Utilties Commission (Commission) requesting approval of a 10-year Firm
Energy Sales Agreement between Idaho Power and Cargil Incorporated (Cargil) dated May 4,
2010 (Agreement). Under the terms of the Agreement, Cargil wil sell and Idaho Power wil
purchase electric energy generated by the Bettencourt B6 Dairy Anaerobic Digester Power
Project (B6 Facilty) located near Jerome, Idaho. The nameplate rating of the B6 Facilty is 2.25
STAFF COMMENTS 1 JUE 16,2010
MW. Cargil warants that the B6 Facilty is a qualifying facility (QF) under applicable
provisions of the Public Utilty Regulatory Policies Act of 1978 (PURPA). ~ 3.2.
The B6 Facilty is already providing energy to Idaho Power under an existing Non-Firm
Schedule 86 Agreement (June 30, 2009). The Facilty began actual energy deliveries to Idaho
Power under the Schedule 86 agreement in November of 2009. The Firm Energy Sales
Agreement specifies that the existing Schedule 86 agreement shall be terminated at the time the
Facilty achieves its Operation Date.
The Firm Energy Sales Agreement
The paries entered into the Firm Energy Sales Agreement on April 30, 2010, pursuant to
the terms and conditions of Commission Order Nos. 30415,30488,30738, and 30744. The
Agreement is for a 10-year term and utilzes the non-levelized published avoided cost rates as
established by the Commission in Order No. 30744.
The Scheduled Operation Date for the Agreement is 30 days after the approval of the
Agreement by the Commission. The Agreement includes a formula for the assessment and
calculation of Delay Liquidated Damages and associated Delay Securty provisions if Cargil
fails to achieve the Scheduled Operation Date. The Agreement states that it is effective once the
Commission has approved all of the Agreement's terms and conditions and declared that all
payments to Cargil wil be allowed as prudently incurred expenses for ratemaking puroses.
Idaho Power states in its Application that if the Commission approves the Agreement the
effective date of the Agreement will be April 30, 2010.
Interconnections with the Facilty and applicable charges have been completed in
accordance with the paries' existing Schedule 86 Agreement transacted in 2009. All applicable
interconnection charges and monthly operation and maintenance charges under Schedule 72 have
already been assessed and collected from CargilL.
STAFF ANALYSIS
Staff has carefully reviewed the Agreement and notes that the terms and conditions
included in the Agreement are identical to those contained in other recent PURP A contracts
approved by the Commission. The purchase rates contained in the Agreement are consistent
with approved non-Ievelized published avoided cost rates for projects smaller than 10 aMW.
However, there is a legitimate question as to whether the rates should be grandfathered under the
STAFF COMMENTS 2 JUE 16, 2010
higher rates of Order No. 30744, or based on the lower rates of Order No. 31025, the avoided
cost rates in effect on the date of contract signing.
The purchase rates set fort in the Agreement are from Order No. 30744. However, those
rates 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-E-I0-0L. Idaho
Power states that the Commission has previously determined grandfathering eligibilty 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 fied with the Commission
demonstrating project maturty and that but for the actions of the utilty a sales agreement would
have been signed prior to the change in rates. Clearly, a signed power sales agreement had not
been signed prior to the change in rates, nor had a complaint been fied with the Commission.
Nevertheless, by signing the Agreement and voluntaily presenting it to the Commission, Idaho
Power represents that Cargil satisfies the second test of the Commission and should be entitled
to the rates established by Order No. 30744.
In determining that Cargil was entitled to grandfathering under the higher rates of Order
No. 30744, the Company concluded that Cargil satisfied the following grandfathering criteria
prior to March 16,2010:
a. Interconnection and Transmission
1. Filed an interconnection application; and
11. Received and accepted an interconnection feasibilty 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 fromIdaho Power that transmission capacity is
available for the project and/or received accepted transmission capacity
study results and cost estimates.
b. Purchase Power Agreement
1. 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.
STAFF COMMENTS 3 JUE 16,2010
It is Idaho Power's opinion that the Cargil B6 Facility meets all of the above-referenced criteria.
The Interconnection and Transmission criteria were satisfied at the time the B6 Facilty was
interconnected with Idaho Power to make sales of non-firm energy under the Schedule 86
Agreement.
With respect to the Power Purchase Agreement criteria, the Company contends that
Cargil and Idaho Power had finally resolved all outstanding contract issues and that Cargil had
agreed to execute the Agreement after being notified that the B6 project had passed Idaho
Power's final internal review process. Both paries expected final review to be a relatively
straightforward process given that the paries 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.3 1034 issued on April 1, 2010. The B6 Facilty
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 stared
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 B6
Facilty is a small project that is already certified as a QF and is curently sellng 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 securty 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.
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 concludes that the Order No. 30744 purchase rates contained in
the Agreement are appropriate.
STAFF COMMENTS 4 JUE 16,2010
STAFF RECOMMENDATION
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 Cargil for
purchases of energy from the B6 Facilty will be allowed as prudently incured expenses for
ratemaking purposes.
Respectfully submitted this \l()~ day of June 2010.
~l-i!~ ç.S~ry~
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentsipce i o. i 5swrs comments
STAFF COMMENTS 5 JUNE 16, 2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 16TH DAY OF JUE 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-IO-15, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOV AN E WALKER
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: dwalkercmidahopower.com
lnordstromcmidahopower .com
RANDY C ALLPHIN
ENERGY CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rallphincmidahopower.com
-.~
SECRETAR
CERTIFICATE OF SERVICE