20120712final_order_no_32593.pdf

Office ofthe Secretary
Service Date
July 12,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AMENDMENTS TO )
THE FIRM ENERGY SALES AGREEMENT )CASE NO.IPC-E-1O-19
BETWEEN IDAHO POWER COMPANY )
AND GRAND VIEW SOLAR ONE PV,LLC.)ORDER NO.32593
__________________________________________________________________________________
)
On April 11,2012,Idaho Power Company filed a Letter of Understanding and
Agreement with the Commission.The Letter memorializes an agreement reached between idaho
Power and Grand View Solar One PV (the Project)regarding Grand View’s required security
and scheduled operation date.Idaho Power requested that the Commission “file the enclosed
letter in the contract file for this matter.”
The Commission chose to process the Letter through the use of Modified Procedure
because the amendments pertained to material terms of the Firm Energy Sales Agreement.On
April 24,2012,the Commission issued a Notice of Proposed Amendments to FESA and Notice
of Modified Procedure and set a comment deadline of May 31,2012.Order No.32535.Idaho
Power,Grand View Solar One and Commission Staff filed comments.By this Order,the
Commission approves the amendments to the FESA between Idaho Power and Grand View
Solar One.
THE PROPOSED AMENDMENTS
On March 22,2012,idaho Power sent Grand View Solar One a Notice of Material
Breach.Idaho Power deemed the Project in material breach of its Firm Energy Sales Agreement
(FESA)for failing to maintain the required security and failing to meet its scheduled operation
date.Grand View disputed Idaho Power’s inteipretation of the FESA and asserted that it had a
“rolling”scheduled operation date for which a deadline had not expired.
The parties met in an attempt to settle the dispute.As a result of negotiations,Idaho
Power and Grand View Solar One agreed to the following:
1.A (scheduled)commercial operation date of no later than January 12,
2013;
2.The commercially reasonable time period granted to Grand View Solar
One to achieve its operation date is fair and reasonable;
ORDER NO.32593 1
3.Grand View Solar One shall post security in the amount of $810,000 no
later than April 6,2012,to secure the scheduled operation date.If Grand
View Solar One fails to achieve a January 12,2013,operation date Idaho
Power has the right to immediately draw funds from the Project’s posted
security and terminate the Project’s FESA without further action or notice;
4.In the event that Grand View Solar One achieves its operation date by or
before January 12,2013,Idaho Power shall release the posted security;
5.If Grand View Solar One does not post the required security by April 6,
2012,the FESA will be terminated without further notice;
6.If Grand View Solar One does not achieve commercial operation on or
before January 12,2013,the FESA will be terminated without further
notice;
7.Grand View Solar One shall pay $475,000 no later than April 6,2012,
representing the required construction deposit pursuant to the Generator
Interconnection Agreement (GIA).If the payment is not made the FESA
will be terminated without further notice;and
8.If it could be reasonably demonstrated that Idaho Power was the cause of
any delays that would prevent Grand View Solar One from achieving its
operation date of January 12,2013,then the operation date shall be
extended by the length of such delays or to a reasonable date mutually
agreed upon by Idaho Power and the Project.
The Letter of Understanding and Agreement is dated April 3,2012,and signed by Grand View
Solar One and Idaho Power.
COMMENTS
Staff Comments
Staff acknowledges that Appendix B to the FESA is unclear with regard to the
Scheduled Operation Date.Paragraph B-3 provides for two alternative ways of defining the
Scheduled Operation Date.The first option ties the Scheduled Operation Date to 90 days past
the date identified in the Facility Study report in which Idaho Power shall have completed
installation of the necessary interconnection equipment.The second option seems to contemplate
delays caused by Grand View,but clearly sets January 30,2011,as the Scheduled Operation
Date.The first option that ties the Scheduled Operation Date to the Facility Study could
conceivably imply a date either prior to or after January 30,2011.
ORDER NO.32593 2
In its Application to the Commission seeking approval of the original FESA,Idaho
Power stated that “Grand View has elected a Scheduled Operation Date of January 30,2011,for
the Facility.”Application at 3.Grand View admits that development and funding challenges
have caused the Project’s operation date to be pushed later in time than originally hoped and
anticipated.Grand View now argues that the Scheduled Operation Date is 90 days after the date
specified in the Facility Study and,therefore,Grand View is not in default.
Grand View submitted a letter from Idaho Power dated December 7,2010,in which
Idaho Power seems to agree to a request from Grand View to delay Idaho Power’s pursuit of
construction of interconnection facilities.In the letter,Idaho Power agrees to modify the
milestones specified in the Facility Study to provide a rolling timescale rather than specific dates.
The Facility Study appears to leave the timing for commencement of interconnection
construction by Idaho Power up to receiving a go-ahead from Grand View.Staff maintained that
it is inappropriate to allow any PURPA facility to have a rolling Scheduled Operation Date,
where the QF can,in effect,unilaterally dictate when it wishes to come on-line.Staff pointed
out that,in this particular case,Idaho Power and its ratepayers have not necessarily been harmed
by Grand View’s delay because Idaho Power has been able to purchase or produce power from
other sources at less cost than it would have paid Grand View.However,this will not always be
the case.In Staff’s opinion,both parties to a FESA should agree to a specific,unambiguous
Scheduled Operation Date,that date should be rigorously enforced,and should be changed only
when it benefits all parties (including ratepayers)and is approved by the Commission.
Staff noted that the Letter Agreement requires a Scheduled Operation Date of no later
than January 12,2013,approximately two years later than originally anticipated.Grand View
and Idaho Power have agreed that the revised Scheduled Operation Date provides Grand View a
“commercially reasonable”time to bring the facility on-line.It is Staffs understanding that
construction for the Project is well under way and the $810,000 security deposit and the
$475,000 construction deposit as required by the Letter Agreement have already been posted by
Grand View.Given the progress of the Project to date and the fact that all required deposits have
been made,Staff believes that a revised Scheduled Operation Date of January 12,2013 is
reasonable.
Staff recommended that the Commission approve the Letter of Understanding and
Agreement relating to Contract Default,Scheduled Operation Date and Generator
ORDER NO.32593 3
Interconnection Agreement as submitted by Idaho Power.Article VII of the FESA lists the rates
to be paid by year by Idaho Power for purchases from Grand View.Rates in the FESA are only
listed through the year 2031.Therefore,if the Commission agrees to a revised Scheduled
Operation Date of January 12,2013,Staff recommended that the FESA be modified to display
rates through 2033 in order to accommodate a 20-year contract term.
Idaho Power Comments
Idaho Power stated that the FESA between it and Grand View Solar One is unique.
The original Agreement contained no firm Scheduled Operation Date and,therefore,no firm
Commercial Operation Date.The ambiguity led to an interpretation dispute between the parties.
Idaho Power and the Project settled the dispute by agreeing to cash payments to bring Grand
View Solar One current and setting a firm Commercial Operation Date of January 12,2013.
Idaho Power maintained that establishing this date would remove the ambiguity created by the
original FESA,give both parties certainty as to their obligations and performance under the
Agreement,and utilize contractual terms consistent with Idaho Power’s other PURPA projects.
Grand View Solar One Comments
Grand View recommended that the Commission approve the modified terms to its
FESA with Idaho Power in order to provide clarity to the parties regarding expectations and
responsibilities.Grand View states that the Project is currently under construction with millions
of dollars of panels and equipment currently staged on the site.“It is Grand View’s
understanding that changes in operation date have been routinely,without the need for formal
Commission action,approved by Idaho Power with simple notice to the file at the Commission.
Grand View sees no reason for it to be treated any differently.”Comments at 2.
FINDINGS AND CONCLUSIONS
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 PURPA 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 NO.32593 4
The Commission has reviewed the record in this case,including the Letter of
Understanding and Agreement,and the comments of Commission Staff,Idaho Power and Grand
View Solar One.Based on the record,we find that the amendments made in this FESA are
reasonable and contain acceptable contract provisions.The original Agreement only displays
avoided cost rates through 2031.In order to reflect the new Scheduled Operation Date of
January 12,2013,we direct Idaho Power to supplement the Agreement to display rates through
2033 to accommodate the full 20-year contract term.
Pursuant to the terms of the Agreement,“[n]o modification to this Agreement shall be
valid unless it is in writing and signed by both Parties and subsequently approved by the
Commission.”Agreement,¶22.1.Contract terms regarding default and a project’s scheduled
operation date are undeniably material terms to a firm energy sales agreement.As such,any
amendments to these terms must be approved by this Commission if Idaho Power expects to
recover the costs associated with the Project.Because we find that the amendments made in this
FESA are reasonable,we further find it reasonable to allow payments made under the modified
Agreement as prudently incurred expenses for ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the April 3,2012,Letter of Understanding and
Agreement between Idaho Power and Grand View Solar One be approved and that the modified
terms contained therein become part of the June 8,2010,Firm Energy Sales Agreement currently
on file with this Commission.
IT IS FURTHER ORDERED that Idaho Power supplement the June 8,2010,
Agreement to display rates through 2033 to accommodate the full 20-year contract term.
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 §6 1-626.
ORDER NO.32593 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this /
day of July 2012.
/L 7.
PAUL KJELLANER,kESIDENT
MACK A.REDFORD,COMMISSIONER
/7
MARSHA H.SMITH,COMMISSIONER
ATTEST:
I I
Jean D.Jewell
Cmmission Secretary
O:IPC-E-1O-19 ks2
ORDER NO.32593 6