20120731final_order_no_32601.pdf

Office ofthe Secretary
Service Date
July 31,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-10-22
APPROVAL OF A FIRM ENERGY SALES )
AGREEMENT WITH YELLOWSTONE )
POWER,INC.,FOR THE SALE AND )ORDER NO.32601
PURCHASE OF ELECTRIC ENERGY.)
_______________________________________________________________________________
)
On May 31,2012,Idaho Power Company and Yellowstone Power,Inc.filed a
Motion requesting that the Commission accept a Settlement Stipulation entered into between the
parties.On June 19,2012,the Commission issued a Notice of Filing/Notice of Modified
Procedure and set a comment deadline of July 10,2012.Order No.32573.Commission Staff
was the only party to file comments.Two public comments were also received.By this Order,
the Commission approves the Settlement Stipulation entered into by Idaho Power and
Yellowstone Power on May 31,2012.
BACKGROUND
On May 4,2004,the Commission approved a Firm Energy Sales Agreement (FESA)
between Idaho Power and Renewable Energy of Idaho,Inc.(“Renewable Energy”),for a 17.5
megawatt (MW)biomass generating facility to be located at the old Boise Cascade Plant site
near Emmett,Idaho.Order No.29487.The FESA subsequently went into default and was
terminated by Idaho Power after Renewable Energy failed to meet its scheduled operation date.
Idaho Power determined that the project had incurred damages in the amount of $106,804 for
Renewable Energy’s non-performance.Renewable Energy was unable to pay the assessed
damages.
On August 13,2010,Idaho Power filed an application with the Commission
requesting approval of a 15-year FESA between Idaho Power and Yellowstone Power for an
11.7 MW biomass fueled combined heat and power generator located at the same site as the
Renewable Energy project.Richard Vinson,a principal of Yellowstone Power,was also a
principal of Renewable Energy.Mr.Vinson agreed,as part of the Yellowstone FESA
negotiations,to pay the non-performance damages of the Renewable Energy FESA as an offset
to the energy payments Yellowstone was to receive in its FESA.On November 2,2010,the
ORDER NO.32601 1
Commission approved the FESA between Idaho Power and Yellowstone,including the payment
by Yellowstone of Renewable Energy’s $106,804 in non-performance damages.Order No.
32104.Yellowstone chose a scheduled operation date of December 31,2011.
SETTLEMENT STIPULATION
Yellowstone has failed to achieve its December 31,2011,scheduled operation date.
On May 3,2012,Idaho Power sent Yellowstone a Notice of Material Breach.Yellowstone
responded by alleging that a force majeure event had occurred.Settlement discussions between
the parties ensued.
The Settlement Stipulation provides for termination of the FESA between Idaho
Power and Yellowstone Power and mutual release of any future claims or causes of action
between the parties.Yellowstone agrees to pay Idaho Power $200,000 for its material breach of
the FESA,which amount includes Renewable Energy’s pre-existing debt of $106,804.If
Yellowstone fails to make the $200,000 then Yellowstone agrees to allow Idaho Power to draw
on the current $450,000 Letter of Credit.
Idaho Power and Yellowstone state that the Settlement Stipulation is in the public
interest and that all of its terms and conditions are fair,just,and reasonable.
COMMENTS
Staff Comments
Staff maintains that because the project has not achieved operation within 90 days of
the scheduled operation date,the project is in material breach and Idaho Power is entitled to
terminate the FESA.Idaho Power provided notice to the project of the material breach,and
termination of the FESA,as well as the utility’s request for payment of the $450,000 delay
liquidated damages pursuant to the terms of the FESA.The project responded to the notification
of material breach with a claim of force majeure regarding its non-performance.Yellowstone
alleges that conditions beyond its control have made it impossible to complete the project and
achieve the scheduled operation date specified in the FESA.
Staff argues that Idaho Power is entitled to the full amount of delay liquidated
damages ($450,000),in addition to the pre-existing debt of $106,804.The proposed settlement
collects the pre-existing debt ($106,804)and provides approximately $93,196 in damages for
default of the current agreement.Staff recognized that,although it would normally be reluctant
to recommend approval of a settlement that appears to be inconsistent with the terms of the
ORDER NO.32601 2
FESA,current circumstances may support acceptance of the proposed settlement.Staff noted
that,currently,electric market prices are far below the avoided cost rates specified in the
contract.In addition,the proposed settlement eliminates the uncertainty and additional cost and
resources necessary to litigate the termination of the agreement and validity of the delay
liquidated damages.Consequently,Staff asserted that approving the proposed settlement is in
the public interest.
Public Comments
Both public comments were in support of resolving the issue amicably for all parties
involved.The commenters encouraged the parties and the Commission to decide the matter
responsibly.
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.
The Commission has reviewed the record in this case,including the Settlement
Stipulation between Idaho Power and Yellowstone Power,the public comments and the
comments of Commission Staff.The proposed settlement provides for termination of the FESA
and mutual release of any future claims or causes of action between Idaho Power and
Yellowstone Power.In exchange,Yellowstone agrees to pay Idaho Power $200,000 for its
material breach of the Agreement.The Settlement Stipulation acknowledges Yellowstone
Power’s default under the terms of the Agreement,recognizes the complications in calculating
actual damages,and avoids costly litigation.Therefore,we find that the terms of the proposed
settlement are fair,just and reasonable to all parties,including Idaho Power’s ratepayers.
ORDER
IT IS HEREBY ORDERED that the Settlement Stipulation entered into between
Idaho Power and Yellowstone Power on May 31,2012,is approved.
ORDER NO.32601 3
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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of July2012.
PAUL KJELLA.DER,PRESIDENT
MACK A.REDFORD,COMMISSIONER
(/1
MARSHA H.SMITH,COMMISSIONER
ATTEST:
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Jn D.Jewefl’J
6mmission Secretary
O:IPC-E-I O-22ks6
ORDER NO.32601 4