20110211final_order_no_32180.pdf

Office of the Secretary
Service Date
February 11 , 2011
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 HIDDEN HOLLOW
ENERGY 2, LLC FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY.
ORDER NO. 32180
CASE NO. IPC-10-
On December 10, 2010, Idaho Power Company filed an Application with the
Commission requesting approval of a 20-year Firm Energy Sales Agreement (Agreement)
between Idaho Power and Hidden Hollow Energy 2, LLC (Hidden Hollow) dated December 8
2010. The Application states that Hidden Hollow would sell and Idaho Power would purchase
electric energy generated by the Hidden Hollow Landfill Gas Project (Facility) located near
Boise, Idaho.
On January 10, 2011 , the Commission issued a Notice of Application and Notice of
Modified Procedure setting a 21-day comment deadline. Staff was the only party to file
cominents. By this Order, the Commission approves the Agreement between Idaho Power and
Hidden Hollow without change or condition and declares that all payments made by Idaho Power
to Hidden Hollow be allowed as prudently incurred expenses for ratemaking purposes.
THE AGREEMENT
The Application states that Hidden Hollow proposes to design, construct, install, own
operate and maintain a 3.2 MW landfill gas generating facility to be located at Ada County
Hidden Hollow Landfill (Landfill). Application at 2. An existing 3.2 MW landfill gas-powered
generating unit owned by G2 Energy Hidden Hollow, LLC (G2) is already operating at the
Landfill. Order No. 29928. Hidden Hollow is proposed by a separate, affiliated company
utilizing the same landfill gas reserves as its fuel source.
Because this Facility utilizes the same landfill gas fuel source as the previously
approved G2 project, Idaho Power has negotiated provisions for the Hidden Hollow project
intended to preserve the value of the G2 contract while still enabling additional generation to be
developed at this location. The Hidden Hollow Agreement provides that the first 1 100 scfm of
ORDER NO. 32180
fuel is dedicated to the generation units under the G2 contract. 1 The Hidden Hollow Agreement
also allows Idaho Power to audit the fuel distribution to the various generation units. By these
terms, the parties ' intent is to preserve the value of the lower rates applicable to power provided
under the G2 contract and prevent the Hidden Hollow Facility from providing power at a higher
cost before G2's nameplate capacity is reached.
Idaho Power warrants that the Agreement comports with the terms and conditions of
the various Commission Orders applicable to PURP A agreements (Order Nos. 30415 and
31025). The Agreement is for a term of 20 years and contains the current non-Ievelized
published avoided cost rates established by the Commission in Order No. 31025 for energy
deliveries of less than 10 average megawatts ("aMW"). The Application states that, should the
Commission approve the Agreement, Idaho Power intends the effective date of the Agreement to
be December 8 , 20 10 - the date the parties entered into the Agreement.
Hidden Hollow selected February 28 , 2012, as its Scheduled First Energy Date and its
Scheduled Operation Date. Agreement, Appendix B. Idaho Power asserts that various
requirements have been placed upon the Hidden Hollow Facility in order for Idaho Power to
accept the Facility s energy deliveries. Idaho Power states that it will monitor the Facility
compliance with initial and ongoing requirements through the term of the Agreement. The
Application maintains that all applicable interconnection charges and monthly operational or
maintenance charges under Schedule 72 will be assessed to Hidden Hollow. Idaho Power states
that the Facility is currently in good standing with the generator interconnection process. Hidden
Hollow and Idaho Power have agreed to liquidated damages and security provisions of $45 per
kW of nameplate capacity. Agreement, ~~ 5.
By its own terms, the Agreement will not become effective until the Commission has
approved all of the Agreement's terms and conditions and declares that all payments made by
Idaho Power to Hidden Hollow for purchases of energy will be allowed as prudently incurred
expenses for ratemaking purposes. Agreement ~ 21.
THE COMMENTS
Staff has reviewed the Agreement and confirms that it comports with all of the terms
and conditions of the various Commission Orders applicable to PURP agreements. The
I The 1 100 scfm is an engineering calculated value ofthe quantity of the average fuel quality required to operate the
first generation units at their nameplate capacity.
ORDER NO. 32180
Agreement contains the same rates, terms and conditions as other recently-approved contracts.
The only unique feature of this Agreement is that it essentially represents an expansion of the
previously-approved G2 project and that it will utilize the same landfill gas fuel source. Staff
supports the contract provisions intended to protect the lower rates of the existing G2 contract
and believes that they adequately preserve the value of the existing contract for Idaho Power and
its ratepayers.
On November 5 2010, a Joint Petition was filed with the Commission requesting an
immediate reduction in the published avoided cost rate eligibility cap from 10 aMW to 100 kW.
Reference Case No. GNR-IO-04. The Commission s decision in that case is effective as of
December 14 2010. The Agreement submitted for approval was executed by Hidden Hollow on
December 6, 2010, and by Idaho Power on December 8, 2010. The Agreement was filed for
Commission approval on December 10, 2010. Because the Agreement was executed prior to
December 14 , 2010, Staff does not believe it should be impacted by the final decision in the
GNR-10-04 case. Consequently, Staff recommended the Commission approve all of the
Agreement's terms and conditions and declare that all payments made by Idaho Power to Hidden
Hollow for purchases of energy be allowed as prudently incurred expenses for ratemaking
purposes.
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 (PURP A). 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.
The Commission has reviewed the record in this case, including the Application, the
Agreement, and the comments and recommendations of Commission Staff. As represented and
pursuant to contract, under normal and/or average conditions the Facility will not exceed 10
aMW on a monthly basis. As such, we find that the Hidden Hollow project is qualified to
receive the non-Ievelized published avoided cost rates approved by the Commission in Order No.
ORDER NO. 32180
31025. We commend Idaho Power for negotiating a contract intended to preserve the lower rates
of the existing G2 contract while still allowing for additional generation to be developed.
Based on the record established in this case, we find that the proposed Agreement
submitted in this case contains acceptable contract provisions including the non-Ievelized
published avoided cost rates approved by the Commission in Order No. 31025. We further find
it reasonable to allow payments made under the Agreement as prudently incurred expenses for
ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the December 8 , 2010, Firm Energy Sales
Agreement between Idaho Power and Hidden Hollow is approved without change or condition.
IT IS HEREBY CERTIFIED that if the energy project identified in this Order is
constructed as specified above, the completed facility will generate at least twenty-five (25)
kilowatts of electricity and may be eligible for a tax rebate pursuant to Idaho Code ~ 63-
3622QQ.
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 ~ 61-626.
ORDER NO. 32180
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this It-It
day of February 2011.
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D. KEMPTON, P DENT
J&;Jl
MARSHA H. SMITH, COMMISSIONER
ATTEST:
' enD. Jewe
ommission Secretary
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ORDER NO. 32180