20101018Reply Comments.pdf

McDevitt & Miller LLP
Lawyers
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flEet D420 W. Bannock Street
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October 18, 2010 UTtUl1ES
Chas. F. McDevitt
Dean J. (Joe) Miler
Vìa Hand Delivery
Jean Jewell, Secreta
Idaho Public Utities Commssion
472 W. Washigton St.
Boise, Idaho 83720
RE: Yellowstone Power Inc.; Case No. IPC-E-l0-22
Dear Ms. Jewell:
Enclosed for fig, please fid an orial and seven (7) copies of Reply to Staff Comments of
Y ellowstonePower Inc.
Kidly retu fie stamped copies to me.
Very try yours,
McDEVITI & MIL IL
~.~Dean J. Mier
DJM/hh
Enclosures
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CD-0:o
Dean J. Miler (lSB No. 1968)
Chas F. McDevitt (ISB No. 835)
McDEVITT & MILLER LLP
420 West Banock Street
P.O. BOX 2564-83701
Boise, Idaho 83702
Tel: [phone]
Fax: [phone]
joeaymcdevitt-miler.com
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iumoeT IS. PH 3: 51
Attorney for Yellowstone Power Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF A FIR ENERGY SALES
AGREEMENT WITH YELLOWSTONE
POWER, INC., FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY.
CASE NO. IPC-E-IO-22
REPLY TO STAFF COMMENTS OF
YELLOWSTONE POWER INC.
COMES NOW Yellowstone Power Inc., (Yellowstone) and submits the
following Reply Comments to the Comments of the Commission Staf, dated October 1,
2010 (Sta Comments).
Introduction and Summary of Staff Comments
In this case, Idaho Power Company (Company or Idaho Power), seeks approval of
a Firm Energy Sales Agreement (FESA) between Idaho Power and Yellowstone
containing published avoided cost rates in existence prior to March 16,2010.
Yellowstone supports the Company's Application and in these Reply Comments urges
the Commission to approve it.
With minor exceptions, noted below, Yellowstone believes the Sta Comments
accurately describe the factul background associated with this Application. In short, the
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-l
Staf Comments state there are very good reasons, also discussed below, to approve the
FESA as presented. In the Staff analysis, however, the facts of this case do not fit neatly
into previously approved criteria for evaluating applications for approval of pre-existing
rates. Recognizing a dilemma-strong reasons for approval on the one hand, and lack of
clear fit with criteria on the other-Staf Comments do not recommend disapproval.
Rather, Staf Comments conclude with a neutral recommendation by stating, Sta is
"unable to recommend approval". (Staff Comments, pg. 8). From ths, Yellowstone
infers that Sta does not oppose approval. Ths interpretation is confrmed by Star s
observation that, "Staff believes this case presents a unique set of facts that permit the
Commission to look beyond the established criteria.. .and consider other aspects such as
strong public interest and impact of allowing a grandfathered rate." (Staf Comments,
Pg. 6). For the reasons set fort below, Yellowstone believes the Commission should
accept Staff s invitation and approve the FE SA as filed.
There are Strong Reasons for Approval
There are many good reasons why the FE SA should be approved. The Staff
Comments identify some of these reasons, and Yellowstone elaborates on them as
follows:
The Yellowstone Power Project (Project) is intended to be an integral par of a
sawmil facility constrcted by Yellowstone's sister company, Emerald Forest Inc. The
sawmil is located on property previously owned by Boise Cascade Corporations and
revives the now dormant sawmil industry in Emmett, Idaho. It wil employ
approximately 50 workers in an economically depressed area. Yellowstone estimates that
on an anual basis it will pay in excess of $200,000 in property taxes to Gem County.
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-2
For these reasons, the Project enjoys the support oflocal elected offcials, the Idaho
Deparent of Commerce and the Executive Brach of the State of Idaho.
Without pre-March 16 power purchase rates, the viabilty of the project is
impaired. The financial strength of the project is underpinned by the power purchase
agreement that has been executed by Idaho Power. Without pre-March 16 power
purchase rates the revenue stream of the project will be signficantly reduces without the
abilty to offset with cost savings in other areas. In addition, project financing has
proceeded based upon the executed IPCO Power Purchase Agreement and as a result
bond money has been allocated by the Idaho Housing & Finance Agency for the
Yellowstone project. If the curent IPCO Power Purchase Agreement were not to be
endorsed, the abilty to meet bonding timelines would be eliminated and the financial
proforma would be negatively impacted.
The Project is also beneficial to the Idaho Power electrcal system. Unlike
intermittent wind projects, the Project wil generate electrc power continuously with an
estimated anua average capacity of approximately 87,600,00 Kw with anticipated
availabilty of close to 95%. As noted by Staf Comments, "This high capacity factor,
renewable, cogeneration project would be a valuable addition to help diversify Idaho
Power's resource portfolio." (Staff Comments, pg. 6).
Furher, approval of the FESA would reward honesty in business dealings and
benefit the Company's ratepayers. As set fort in paragraph 13 of the Compàny's
Application, Yellowstone's facilty had previously executed a PURPA Firm Energy Sales
Agreement with Idaho Power under a different company for this same site. That company
was Renewable Energy of Idaho LLC and the Firm Energy Sales Agreement was
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-3
approved in Case No. IPC-E-04-05, Order No. 29437. That Agreement went into default
and was ultimately terminated when Renewable Energy, for reasons that were beyond its
control, was unable to meet the operation date of the Agreement. Thereafter, Idaho
Power determined it had incured damages for non-performance in the amount of
$106,804. Idaho Power presented ths damage biling to Renewable Energy and was
informed that Renewable Energy did not have the fuds or assets to make payment. At
that time, Mr. Richard Vinson
i committed that he was stil pursuing development of both
a sawmil and a generation facilty at ths site and upon completion of a generation
facility at a future date he would honor this $106,804 obligation. At this time, the
sawmil has been constrcted and is operating and as evidenced by the FESA.
Although it may be arguable that the non-performance damage is the liabilty only
of the now defuct Renewable Energy of Idaho LLC, and likely unecoverable, Mr.
Vinson has agreed to pay the non-performance damage in the full amount as an offset to
the energy payments of the Yellowstone Power Agreement. Payment wil be
accomplished in 24 monthly instalments as a debit against monthy amounts Idaho
Power will owe Yellowstone for monthly energy purchases under the Firm Energy Sales
Agreement subject to ths Application. By approval of the Agreement, the Commission
will enable Idaho Power to recover, for the benefit of its customers, non-performance
damages which it otherwse likely could not collect.
Additionally, the Project is substatially matue, as evidenced by these facts, all
occurng prior to March 16,2010:
a. The real propert upon which the Project is to be located was purchased from
Boise Cascade, Inc., and Yellowstone is the fee owner;
i Mr. Vinson is the principal member of both Renewable Energy ofIdaho LLC and Yellowstone Power Inc.
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-4
b. Required environmental remediation has been completed and the Idao
Deparment of Environmental Quality has issued a fial acceptace and permt to
constrct; and
c. Signficant power plant equipment, including boiler, fuel conveyors, strctual
steel piping controls, and electrcal equipment, was purchased at a cost in excess
of $6,000,000 and is on the site or in storage ready for deployment.
A Materially Complete Agreement Existed Prior to March 16, 2010
Following the change in published avoided cost rates contained in Order No.
30744, issued on March 16,2010, Idaho Power developed certin criteria (Pre-March 16
Criteria) for evaluating requests for pre-March 16 rates, and these criteria have been
utilzed by the Commission in previous cases (See Order No. 32068, Case No. IPC-E-10-
10). The criteria are:
a. Interconnection and Transmission
1. 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
11. Received confirmation from Idaho Power that transmission capacity is
available for the project and/or received and accepted transmission capacity
study results and cost estimates; and
b. Purchase Power Agreement
1. 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 paries prior to March 16,2010.
In this case it is undisputed that Yellowstone met all of the criteria with respect to
transmission and interconnection. (Staff Comments, pg. 4).
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-5
The only question that is subject to debate is whether an agreement was
"materially complete" prior to March 16,2010. As Staf Comments note, and
Yellowstone acknowledges, there does not exist any wrtten document evidencing a
meeting ofthe minds prior to March 16,2010. (Staff Comments, pg. 5). It is the absence
of a wrtten document that leads Staff to the conclusion that Staf is unable to recommend
approval, and ths is where Yellowstone, respectfully, disagrees with Staff.
In Yellowstone's view, "material completeness" can be proven in other ways,
both by oral evidence and circumstantial evidence, which Yellowstone describes as
follows:
Attached hereto as Exhibit A, is the sworn Affdavit of Mr. Richard Vinson. This
Affdavit was prepared by Yellowstone and provided to Idaho Power to be included in
the Company's Response to Production Requests issued by the Staff in ths case. The
Staff Comments make a reference to the Affdavit (Sta Comments, pg. 5), but,
regrettbly, the Affidavit was not attched to the Staff Comments for consideration by the
Commission.
As established in the Affdavit, Mr. Vinson has substantial experience in the
business of electric power generation and is familar with terms customarily included in
Power Sales Agreements.
More specifically, he was previously the principal member of a company known
as Renewable Energy of Idaho, Inc (REI). In 2004, REI negotiated a Firm Energy Sales
Agreement with Idaho Power Company for the sale of electric power intended to be
produced by a biomass generation project. As explained in the Application in this case,
that contract went into default and Yellowstone Power has agreed to pay, on behalf of
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-6
REI, daages incured by Idaho Power, in the event this Application is approved. As a
consequence of negotiations that lead up to execution of the REI Firm Energy Sales
Agreement, Mr. Vinson was familar with the terms and conditions contained in Idaho
Power's stadard form of Firm Energy Sales Agreements.
Prior to March 16,2010, Mr. Rady Allphin explained to him changes that had
occured withn Idaho Power's standard form Firm Energy Sales Agreement, primarly
related to damages and security for delay in performance. Mr. Vinson understood those
additional terms and agreed to them. Prior to March 16,2010, he believed all the terms of
the Firm Energy Sales Agreement fied in this case were agreed upon. If a wrtten Firm
Energy Sales Agreement had been presented to me prior to March 16, 2010, Yellowstone
Power would have signed the Agreement.
Oral evidence might car less weight than wrtten evidence when there is a
dispute between paries about the substace or existence of an agreement. Here,
however, there is no dispute. Idaho Power agrees there was a meeting of the minds and a
materially complete agreement prior to March 16,2010. In response to Staff Production
Requests in this case, Idaho Power states, "Extensive discussions were conducted with
Yellowstone prior to March 16,2010, and both paries were in agreement with all terms
and conditions of the power sales agreement." This confirms the Company's
representation in the Application that "Yellowstone and Idao Power had resolved and
agreed to all material outstading contract issues prior to March 16,2010". (Application,
pg6).
Idaho Power's representation that an agreement was materially complete is
entitled to significant weight. In the undersigned's experience, the Company taes
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-7
seriously its obligation to insure that its retal customers, though their rates, are not
paying for PURP A rates higher than avoided cost. In the recent Grandview Solar case
the Commission acknowledged this role and accepted the Company's representations:
"We accept the representations of Idaho Power as to the contract negotiations of
the paries. The Company s role regarding appropriate rates is one of gatekeeper,
assurng that its customers are not being asked to pay more than the Company s
avoided cost. We find no reason to doubt the Company's representations". (Order
No. 32068, Case No, IPC-E-1O-10).
Similarly, in this case, there is nothing in the record that casts doubt on the
Company's representations.
Mr. Vinson's sworn testimony is also consistent with observable facts. When, as
in this case, a project sponsor is willing to accept, without negotiation, all of the terms in
Idaho Power's stadad form FE SA, there is very little additional information required to
complete a wrtten agreement and most of it is not material to whether there was a
meeting of the minds on essential terms. The only additional information required is:
· Name of project owner (FE SA pg.1);
· Address for notices (FESA paragraph 28);
· Sellers contact information (FESA Exhibit A);
· Short description of facilty (FESA Exhbit B);
· Legal description of project location (FESA Exhibit B);
· Requested operation date (FESA Exhibit B); and
· Point of delivery (FESA Exhibit B).
The above described items are in the natue of technical details, unelated to
whether there was a meeting of minds on essential terms. In consequence, there is no
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-8
good reason for requiring that a fully complete FESA be in existence prior to March 16,
2010, as proof of a meeting of the minds.
A Commission has Flexibilty to Regulate in the Public Interest
As noted above, the Commission has previously utilized the Pre-March 16
Criteria identified above to determine whether a FESA containing Pre-March 16 rates
should be approved.2 It is axiomatic, however, that the Commission is not a cour oflaw,
bound to rigidly follow prior precedent. As the Commission explained in Order No.
29872, pg. 10, "This Commission is not rigidly bound by priciples of stae decisis to
follow prior precedent so long as a record is developed and suffcient findings supported
by the evidence show that our action is not arbitrar and capricious". (Application of
Idaho Power Company to Suspend PURP A Obligations, Case No. IPC-E-05-22,). Staf
Comments also recognze the Commission's flexibilty to depar from established
criteria. (Supra, pg.2).
To the extent the Commission believes the facts of this case do not fit squaely
within the criteria, for the lack of a pre-March 16, 2010 writing, it may depar from them.
As demonstrated in these Reply Comments the public interest benefits of the Project are
great, and the required depare, if any, from established criteria is smalL. Approval of
the FESA would be neither arbitrar nor capricious, and the record support a conclusion
that approval would be in the public interest.
2 In Comments dated October 15,2010 Rocky Mountain Power characterizes the Pre-March 16 Criteria as
a "clear and easily understood bright line test". (Comments of Rocky Mountain Power, pg 2). It is also
possible to charcterize the criteria as guidelines that inform the Commission's discretion to regulate in the
public interest. Regardless of how the criteria are characterized, the record in this case supports approval of
the Application. And, a key distinction is that in the case Rocky Mountain Power is curently defending,
Case No. PAC-E-IO-08, the utilty does not agree that an agreement was materially complete prior to
March 16, 2010, whereas in this case Idao Power does agree the agreement was materially complete.
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-9
Conclusion
Yellowstone appreciates the opportunty to fie these Reply Comments, and for
the reasons herein contained, respectfully requests that the Commission approve Idaho
Power's Application as filed.
Respectfully Submitted \ ç- day of October, 2010.
McDEVITT & MILLER LLP
By:
e J. Miler (ISB No. 1968)
Attorneysfor Yellowstone Power Inc.
REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-tO
CERTIFICATE OF SERVICE
I hereby certify that on the J(day of October, 2010, I caused to be served, via
the methodes) indicated below, tre and correct copies of the foregoing document, upon:
Jean Jewell, Secreta
Idaho Public Utilties Commission
4 72 West Washington Street
P.O. Box 83720
Boise,ID 83720-0074
j jewel(ßpuc.state.id. us
Krstine Sasser
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise,ID 83720-0074
krs.sasser(ßpuc.idaho. gov
Donovan E. Walker, Esq.
Idaho Power Company
1221 W. Idaho Street
P.O. Box 70
Boise, ID 83707
dwalker(ßidahopower.com
Jeffey S. Lovinger, Esq.
Lovinger Kaufian LLP
825 NE Multnomah Suite 925
Portland, OR 97232-2150
Lovinger(ßLKLaw.com
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REPLY TO STAFF COMMENTS OF YELLOWSTONE POWER INC.-tt
De J. Miller (JSB No. 1968)
Cha F. McDevitt (ISB No. 835)
McDEVITT & MILLER LLP
420 Wes Baoc Str
P.O. BOX 256483701
Boise, Ida 83702
Tel: [phone]
Fax: 208-33~9i2
idcdevitt-mDer.eom
A.ttorny for Yellowstone Power Inc.
BEFORE THE IDAHO PUBLIC UTLITIES COMMISSION
IN THE MArrER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR CASE NO. IP-E-io-19
APPROVAL OF A FIRM ENERGY SALES
AGREEMENT WITH YELLOWSTONE AFFIDAVIT OF RICHAR VISON
POWER, INC., FOR THE SALE AND
PURCHASE OF ELECTIC ENERGY.
STATE OF IDAHO )
: ssCounty of Ada )
RICHARD VINSON, being fi duly swom upn an oa depse an says:
i. I am over the age of 2 i yea an make ths Affdavit of my ovv knwledge.
2. I am one of the pnncipa membe of Yellowstone Power Inc.
3. Durng the cour of my buiness caer, spag more th 58 y~ I have
gaed substti expeenc in elecc power generon an th sae of elec
power to public utilities. I am thfore famliar with te cumaly inlud
in a power saes agrent
AFFIAVIT OF RICHARD VISON-!ExmA
hi i 013
4. More spificaly, I wa prviously th prncipa member of a compay known as
Renewable Energ of Ida, Inc (REI). In 200, REI negotia a fi en
saes agment wìth Ida Power Compay for th sae of elec power
intended to be prouced by a bioma genertion projec As explaine in th
Application in this ca, tht cotr went into defaut and Yellows Pow
ha agred to pay, on behalf of REI, dages in by Ida Powe, in th
event ths Application is apved. As a conseue of negotitions th lea up
to executon of the REI finn energ saes ageeent, I was fa1ìa wìth th te
and conditions conta in Idao Power's st fonn of fi en saes
agents.
Pror to Marh 16, 2010, Mr. Ray Allph explained to me chaes tht
ha ocured witrn Idao Power's sta fonn fi en saes agent,
pnarly relate to daes and seurty for delay in peorm. I unrsto
thse aditiona tes and ag to th. Pror to Marh 16, 2010, I believe al
the tenu of th fi energy saes agrent filed in trs ca we ag upon.
If a wrtten finn energy saes agent had be prsete to me pror to Ma
16, 2010, Yellowstone Power would have signed the agent.
5. Pror to Marh 16,2010, Yellowstone Power wa not rete by regutory
counsel and I was un of any risk tht publish avoide co migh
sudey chage. Had I be awar of such nsk I would have reue th
Idao Power prepa for sign a wrtt fi enegy sa agrent"
contaning th ter included in th finn energy sales agrent tht ha be
submitted in ths ca.
AFFIAVIT OF RICHA VlNSON-1
EXHA"'2eU
DATED ils .:day of~be. 2ottUc¿¿ '.
"". .. '. .. .....f~1&
icha Vinsn
Yellowston Po~'C In.
'bl.~Nam~:S .". L ¿~,,r~s==~l .MYooion~~&~~t?'â.
EXHA..Jo13