20101018Reply Comments.pdf

DONOVAN E. WALKER
Senior Counsel
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An IDACORP Company
October 18,2010
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-10-22
IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
FOR APPROVAL OF A FIRM ENERGY SALES AGREEMENT WITH
YELLOWSTONE POWER, INC., FOR THE SALE AND PURCHASE OF
ELECTRIC ENERGY
Dear Ms. Jewell:
Enclosed for filing please find an original and seven (7) copies of Idaho Power
Company's Reply Comments in the above matter.
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Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise. ID 83707
DONOVAN E. WALKER (ISB No. 5921)
LISA D. NORDSTROM (ISB No. 5733)
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
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Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF A FIRM ENERGY SALES
AGREEMENT WITH YELLOWSTONE
POWER, INC., FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY.
)
) CASE NO. IPC-E-10-22
)
) IDAHO POWER COMPANY'S
) REPLY COMMENTS
)
)
Idaho Power Company ("Idaho Powet' or "Company") in response to Comments
filed in this docket respectfully submits the following Reply Comments.
I. BACKGROUND
On August 13, 2010, Idaho Power filed an Application with the Idaho Public
Utiities Commission ("Commission") requesting approval of a Firm Energy Sales
Agreement ("FESA") with Yellowstone Power, Inc. ("Yellowstone") containing the
published avoided cost rates in effect prior to March 16, 2010. Staff was the only party
to file Comments in this case by the October 1, 2010, comment deadline. The
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
Commission subsequently set a Reply Comment deadline of October 18, 2010, and an
Oral Argument date of October 26, 2010, at 2:00 p.m.
Since the March 16, 2010, change in the published avoided cost rate by the
Commission, Idaho Power has submitted six Applications for the approval of FESAs
with PURPA qualifying facilties ("QF"). Five of these six Applications have been
approved. The sixth, the present case of Yellowstone Power, Inc., is stil pending, and a
seventh case, AgPower Jerome, is expected to be filed with the Commission this week.
The previously approved matters, in the order in which they were filed, are: (1)
IPC-E-10-15, Cargil, Inc., Battencourt B6 Dairy, a 2.25 MW Anaerobic Digester
("Battencourt"); (2) IPC-E-10-16, New Energy One, LLC, Rock Creek Dairy, a 4 MW
Anaerobic Digester ("Rock Creek"); (3) IPC-E-10-17, New Energy Two, LLC, Swagger
Farms Dairy, a 2 MW Anaerobic Digester ("Swagger Farms"); (4) IPC-E-10-18, New
Energy Three, LLC, Double B Dairy, a 2 MW Anaerobic Digester ("Double B"); and (5)
IPC-E-10-19, Grandview Solar PV One LLC, a 20 MW Photo Voltaic Solar ("Grandview
Solat'). Yellowstone is an 11.7 MW woody biomass fueled, combined heat and power
project co-located with the Emerald Forest Sawmil in Emmet, Idaho.
II. THE "REQUIREMENT" OF A COMPLAINT
A formal Complaint, or the lack thereof, is not in and of itself a dispositive factor
for the Commission's determination as to which vintage of published avoided costs
rates apply to a given FESA. As stated by the Company in its Application, as well as by
Staff in its Comments:
The first criteria that would qualify a particular generating
facilty to receive a superseded rate requires that the
developer have executed a power sales agreement with the
utilty at the rate in question before a successor rate
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
becomes effective. If the QF cannot meet the first criteria,
the second criteria requires that prior to the new rates'
effective date, the QF developer must have filed a
meritorious complaint alleging that the project was
sufficiently mature and far enough along in the contracting
process that but for the conduct of the utilty company, the
developer would have been able to sign a contract with the
utilty containing the superseded rates.
Staff Comments p. 3, Application p. 4-5.
These two criteria stated above are situations in which it has been affrmed
through the Idaho Supreme Court that a QF developer is entitled to receive the
previously effective avoided cost rate. However, it has never been the factual situation
that all claims for entitlement to a superseded ("grandfathered") rate fall neatly into one
of the two stated categories. Neither has it been the situation that any claim for a
grandfathered rate must meet one of the two stated criteria. In fact none of the five
approved FESAs containing grandfathered rates meet either of the above-stated
criteria. Even in cases where the QF developer has filed a Complaint, such as in the
New Energy and AgPower cases, the Complaints have been filed after the effective
date of the rate change - as is almost universally the case with a claim for
grandfathering. If a contract had been executed by both parties, or a complaint been
filed seeking the grandfathered rate, before the effective date of the rate change, there
would really be no issue for the Commission to resolve. It is the great majority of the
claims for a grandfathered rate, some of which have merit, that fall outside of the two
stated criteria, yet remain clearly within the Commission's authority and discretion to
consider whether it is in the public interest to determine if the particular facts of that QF
developets situation entitles them to the grandfathered rate.
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
In the present case of Yellowstone, as in the previous five grandfathering
Applications filed by Idaho Power, the Company examined the facts and equities of
each particular case and determined that the Company agreed with the QF developers'
claim that they were entitled to a grandfathered rate. Thus, rather than refusing to sign
a contract containing such grandfathered rates and requiring the QF developer to file a
formal Complaint with the Commission, the Company chose to sign the contracts and
submit the same for approval by the Commission. In this manner, the facts of each
case could be brought before the Commission for its examination and determination as
to whether the grandfathered rate is appropriate. If the Company had disagreed with
the QF's claim that it was entitled to the grandfathered rate, the Company would have
refused to sign a contract containing those rates, thus requiring the QF to file a
complaint to bring the facts of their particular case before the Commission for
examination and determination as to the proper rate.
II. IDAHO POWER'S GRANDFATHERING CRITERIA
Idaho Power developed two criteria by which it evaluated whether it would
entertain signing a FESA with a project that contained a grandfathered rate. The two
criteria are related to establishing that the project was in the final stages of establishing
interconnection and transmission for its proposed facilty and that the FESA contract
negotiations were materially complete. The specific criteria as set out in Idaho Powets
Applications are:
A.) Interconnection and Transmission. (i) The project had filed and
interconnection application; and (ii) the project had received and accepted an
interconnection feasibilty study report for the project and paid any requested
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
study deposits (or established credit) for the next phase of the interconnection
process in accordance with Schedule 72; and (iii) the project had received
confirmation from Idaho Power that transmission capacity is available for the
project and/or received and accepted transmission capacity study results and
costs estimates.
B.) Purchase Power Agreement (FESA) (i) An agreement was materially
complete prior to March 16, 2010, and except for routine Idaho Power final
processing, an agreement would have been executed by both parties prior to
March 16,2010.
The Interconnection and Transmission portion of the criteria was not and is not at
issue in any of five previously approved FESAs, nor with Yellowstone. The issues
surround the Power Purchase Agreement or the FESA, and whether it was materially
complete prior to March 16, 2010. A brief comparison of the facts of the Yellowstone
case to the other five previously approved FESAs containing grandfathered rates is
instructive.
Cargil, Battencourt B6 Dairy. This project was an existing QF project that had
been sellng power to Idaho Power under a Schedule 86 contract. Cargil and Idaho
Power had exchanged draft contracts and finally resolved all outstanding contract
issues prior to the March 16,2010, change in rates. Cargil had agreed to execute the
Agreement after being notified that the project had passed Idaho Powets final internal
review process. Approximately ten days prior to the March 16, 2010, change in rates
Idaho Powets management started the process of reviewing the agreed-upon draft for
final approval and execution. The final Sarbanes-Oxley review process and the routine
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
internal approval had not been completed as of March 16, 2010. There was some
additional delay in final execution as the parties sorted through the intervening change
in rates that had occurred, and a final contract was executed by both parties on April 30,
2010. The FESA with Cargil was approved by the Commission on July 1, 2010. Order
No. 32024.
New Energy One, LLC., Rock Creed Dairy, Swagger Farms, and Double B Dairy.
New Energy and Idaho Power had exchanged draft FESAs prior to March 16, 2010, and
finally resolved all outstanding contract issues prior to that date for all three of New
Energy's projects. In early February 2010, some new procedural requirements from the
Federal Energy Regulatory Commission ("FERC") that affected the way that the New
Energy facilties would qualify for a Network Resource designation and thereby obtain
the transmission needed to bring the power to be generated by the facilities from the
interconnection point to the Company load centers arose which necessitated some
changes to the internal processes at Idaho Power. On April 15, 2010, New Energy filed
a Complaint with the Commission alleging that it was entitled to a grandfathered rate for
its three projects. Upon further review, the Company agreed, and once the FERC
Network Resource designation issues were worked through by Idaho Power, the parties
executed a final FESA on May 24,2010. New Energy's FESAs were approved by the
Commission on July 1, 2010. Order No. 32027 (Double B); Order No. 32026 (Swagger
Farms); Order No. 32025 (Rock Creek).
Grandview Solar PV One. Grand View Solar and Idaho Power had exchanged
draft FESAs and resolved all material issues prior to March 16, 2010. However, the
FESA negotiations were placed on hold because the parties were also evaluating an
IDAHO POWER COMPANY'S REPLY COMMENTS - 6
alternative, non-PURPA power purchase agreement with Grand View Solar regarding
this facilty. Idaho Power completed this evaluation and review on or about May 6,
2010, and elected not to proceed with a non-PURPA contract for the project. The effect
of pursuing the evaluation of a non-PURPA power purchase with the facilty was
essentially to place the otherwise complete, but unexecuted, PURPA agreement on
hold, during which time the March 16, 2010, order was issued changing the rate. The
parties executed a final FESA on June 8, 2010. That FESA was approved by the
Commission on September 14, 2010. Order No. 32068.
Yellowstone Power. Similar to the previously described five projects, Idaho
Power and Yellowstone had discussed, agreed to, and finally resolved all material terms
and conditions of a final FESA prior to March 16, 2010. Similar to the previously
approved New Energy grandfathered projects, starting in early February 2010, due to
new interpretation of FERC regulations, Idaho Power filed for transmission capacity for
this proposed project and received confirmation that adequate transmission capacity
exists and that the project can be designated as an Idaho Power Network Resource.
Staffs Comments expressed concern about whether the Yellowstone agreement
was materially complete prior to March 16, 2010, and whether the agreement only
lacked routine Idaho Power final processing prior to March 16,2010. The only material
difference between the facts of Yellowstone's case and that of the other five approved
grandfathered cases is the lack of an exchange of written draft FESAs prior to the
change in rates. The main difference in Yellowstone's facts boils down to the difference
between an unexecuted draft agreement that was circulated with the other
grandfathered projects prior to the rate change, and an oral agreement as to all of the
IDAHO POWER COMPANY'S REPLY COMMENTS - 7
material terms and conditions to a FESA with Yellowstone prior to the change in rates.
Idaho Power does not feel that the mere lack of an exchange of written drafts, in the
case of Mr. Vinson and Yellowstone, should exclude this project from receiving like
treatment to the previously described five grandfathered projects approved by the
Commission. From the Company's previous history and course of dealings with Mr.
Vinson, including the previously executed and approved FESA for a different project at
this same project site, Idaho Power can confidently say that based upon the several oral
communications and discussions that took place between the parties prior to March 16,
2010, that all material terms and conditions of the FESA had been finally resolved and
agreed to. Once all material terms and conditions of a FESA are agreed upon by the
parties, the Company considers the FESA to be materially complete. Even though
materially complete there can be a number of details and processes to get the
materially complete agreement finally approved and executed. Upon review and when
presented with the other additional facts associated with this project as set forth in the
Application and in Staffs Comments, the Company felt that the mere difference of a
lack of the exchange of written drafts was not a significant enough of a difference from
other approved grandfathered projects to warrant refusing to sign a contract with
Yellowstone.
Clearly, inherent in any examination of a claim for grandfathering there exists a
case by case, factual analysis of the law and equities involved with whether ultimately
the project is entitled to receive the previously effective rate. Criteria and guidelines are
established to instruct this evaluation and analysis, but no set of guidelines and criteria
can possibly envision all possible scenarios that may arise, nor can all factual scenarios
IDAHO POWER COMPANY'S REPLY COMMENTS - 8
fit neatly into predetermined guidelines and criteria. It is clearly established law that the
Commission ultimately has the jurisdiction and authority to determine the rates that a
QF facilty wil receive for its power, and which vintage of QF rates should apply to a
PURPA contract.
IV. OTHER FACTORS
Idaho Power, in its Application set forth several "additional facts" unique to the
Yellowstone project for the Commission's consideration of the request to approve the
FESA containing a grandfathered rate. Application p. 8-10. Similarly Commission Staff
stated, "Staff believes that this case presents a unique set of facts that permit the
Commission to look beyond the established criteria applied to other recent requests to
grandfather the rates of Order No. 30744 and consider other aspects such as the strong
public interest and impact of allowing a grandfathered rate." Staff Comments p. 6.
Without repeating all of the additional facts that support approval of this FESA in the
public interest, a summary is as follows: The Yellowstone project is an integral part of
the Emerald Forest Sawmil in Emmett, Idaho, which began operating earlier this
summer and is expected to employ up to 47 workers in Gem County, an economically
depressed area. The Yellowstone project is a high capacity factor, renewable,
cogeneration project that is expected to provide steady, predictable generation around
the clock which wil help diversify Idaho Powets resource portolio. Yellowstone has
agreed to repay the non-performance damages liabilty of the now defunct Renewable
Energy in full as an offset to the energy payments of the Yellowstone Agreement as set
forth by both the Company and by Staff. This wil allow Idaho Power to recover, for the
benefit of its customers, non-performance damages which it otherwise likely could not
IDAHO POWER COMPANY'S REPLY COMMENTS - 9
collect. Prior to the March 16, 2010, rate change Yellowstone had acquired the real
property upon which the project is to be located from Boise Cascade, Inc.; completed
the required environmental remediation and obtained final acceptance and a permit to
construct from the Idaho Department of Environmental Quality; and made significant
investment into power plant equipment including the boiler, fuel conveyors, structural
steel piping controls, and electrical equipment at a cost of more than $6,000,000 and is
on the site or in storage ready for deployment.
V. CONCLUSION
Approval of Yellowstone's FESA is consistent with the previously approved
Applications submitted by Idaho Power for approval of grandfathered rate PURPA
projects, is consistent with the applicable legal and equitable principles, is soundly
within the Commission's jurisdiction, and is in the public interest. Idaho Power
appreciates this opportunity to respond to the comments filed in this docket and
respectfully requests that the Commission issue an Order approving the Firm Energy
Sales Agreement between Idaho Power and Yellowstone Power without change or
condition and declaring that all payments for purchases of energy under the Firm
Energy Sales Agreement between Idaho Power and Yellowstone Power be allowed as
prudently incurred expenses for ratemaking purposes.
DATED at Boise, Idaho, this 18th day of October 2010.
~fU/~DONOVAN E. WALKER
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 10
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 18th day of October 2010 I served a true and
correct copy of the foregoing IDAHO POWER COMPANY'S REPLY COMMENTS upon
the following named parties by the method indicated below, and addressed to the
following:
Commission Staff
Kristine A. Sasser
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
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FAX
-- Email kristine.sasser(Çpuc.idaho.gov
Dean J. Miler
McDevitt & Miler LLP
420 W. Bannock St.
Boise, ID 83701
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Dick Vinson
Yellowstone Power, Inc.
P.O. Box 1539
Thompson Falls, MT 59873
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-- Email dick(Çblackfoot.net
&af/
IDAHO POWER COMPANY'S REPLY COMMENTS - 11