20100701final_order_no_32026.pdf

Office of the Secretary
Service Date
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
July 1 , 2010
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 NEW ENERGY TWO, LLC (SWAGER
FARMS)
) CASE NO. IPC-IO-
) ORDER NO. 32026
On May 25, 2010, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting approval of a
IS-year Firm Energy Sales Agreement between Idaho Power and New Energy Two, LLC dated
May 24 2010 (Agreement).
Under the terms of the Agreement, New Energy will sell and Idaho Power purchase
electric energy generated by the Swager Farms Dairy Anaerobic Digester Power Project
(Facility) located near Buhl in Twin Falls County, Idaho. The location of the Facility is more
particularly described as Section 21 , Township 10 S, Range 15 E, Clover Quadrangle, Twin Falls
County, Idaho. Appendix B-2. New Energy warrants that the Facility is a qualifying facility
(QF) under applicable provisions of the Public Utility Regulatory Policies Act of 1978 (PURP A).
~3.
The nameplate rating of the Facility is 2 MW. Appendix B-1. The Maximum
Capacity Amount is 2 MW. Appendix B-4. 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.
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). ~ 7.1. New Energy has selected
a Scheduled Operation Date of October 1 2012. Appendix B-
ORDER NO. 32026
Idaho Power notes that the purchase rates set forth in the Agreement, Order No.
30744, had on the May 24, 2010, date of contract signing been replaced by the lower rates of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-I0-01.
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 New Energy meets the second test of
the Commission and should be entitled to the rates established by Order No. 30744.
In determining that New Energy was entitled to grandfathering under the higher rates
of Order No. 30744, the Company concluded that New Energy 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
lll.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 New Energy Facility meets all of the above-referenced
criteria. The Interconnection and Transmission criteria were met at the time the B6 Facility was
interconnected with Idaho Power to make sales of non-firm energy under the Schedule 86
Agreement.
ORDER NO. 32026
With respect to the Power Purchase Agreement criteria, the Company contends that
New Energy and Idaho Power had resolved all material outstanding contract issues. Both parties
expected the final review to be a relatively straightforward process. However, in early February,
the Company became aware of some new procedural requirements from the Federal Energy
Regulatory Commission (FERC) that affected the way that the Facility would qualify for a
network resource designation and thereby obtain the transmission needed to bring the power to
be generated by the Facility from the interconnection to the Company load centers. The new
procedure required some changes to the internal process at Idaho Power. Idaho Power embarked
upon interpreting the regulations and implementing a process to be in compliance. In Idaho
Power s opinion the Agreement would have been signed by both parties prior to March 16 2010
except for the time required by Idaho Power to implement the new internal transmission and
network resource process and, as a result, the Facility should qualify for a contract including the
Order No. 30744 rates. New Energy is current in all its interconnection study payments and so
long as New Energy continues to provide requested information in a timely manner and pay
invoices on time, it appears that the interconnection can be completed in time for New Energy to
achieve its Scheduled Operation Date for the Facility.
In further support of its request for grandfathering, Idaho Power states that the
Facility Agreement 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 and the Dry Creek anaerobic digester projects, Order Nos.
31060 and 31034, respectively.
Agreement ~ 21.1 provides that the New Energy 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 New Energy for purchases of energy from the Facility
will be allowed as prudently incurred expenses for ratemaking purposes.
On June 3 , 2010, the Commission issued a Notice of Application and Modified
Procedure in Case No. IPC-I0-17. The deadline for filing written comments was June 23
2010. Commission Staff was the only party to file comments.
ORDER NO. 32026
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 approval of all of the Agreement's terms and
conditions including grandfathered purchase rates (Order No. 30744).
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case No. IPC-
1O-17 including the Firm Energy Sales Agreement between Idaho Power Company and New
Energy Two, LLC (Swager Farms) dated May 24, 2010 and comments and recommendations of
Commission Staff. The Agreement is for a IS-year term. The nameplate rating of the Swager
Farm Facility is 2 MW.
The Agreement contains the non-Ievelized published avoided cost rates established by
the Commission in Order No. 30744. On the May 24, 2010 date of contract signing the higher
contract rates had been replaced by the lower rates of Order No. 30125 (Case No. GNR-I0-0l)
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
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 New Energy 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, 2010, 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 New Energy is entitled to the grandfathered rates of
Order No. 30744. As represented and pursuant to contract terms, under normal and/or average
conditions the generation from the Swager Farms 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. 32026
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 24, 2010, Firm Energy
Sales Agreement between Idaho Power and New Energy One, LLC for the Swager Farms 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 g 61-626.
ORDER NO. 32026
/"'(
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of July 2010.
. KEMPTON, PRE IDENT
-----
MARSHA H. SMITH, COMMISSIONER
\~'~ ~. ~
"D-fr5Y
MACK A. REDFORD , COMMISSIONER
ATTEST:
D. Jew
Commission Secretary
bls/IPC-IO-17 sw2
ORDER NO. 32026