20101230Decision memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: DECEMBER 28, 2010

SUBJECT: IDAHO POWER’S APPLICATION FOR APPROVAL OF A FIRM
ENERGY SALES AGREEMENT WITH HIDDEN HOLLOW, CASE NO.
IPC-E-10-44

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.
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’s
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 affiliate 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 1100 scfm of
DECISION MEMORANDUM 2
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 PURPA agreements (Order Nos. 30415 and
31025). The Agreement is for a term of 20 years and contains the current non-levelized
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, 2010 – 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’s
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, ¶¶ 5.3.2, 5.8.1.
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 ¶ 21.1.
Idaho Power requests that its Application be processed by Modified Procedure
pursuant to Commission Rules of Procedure 201-204. IDAPA 31.01.01.201-.204.

1 The 1100 scfm is an engineering calculated value of the quantity of the average fuel quality required to operate the
first generation units at their nameplate capacity.
DECISION MEMORANDUM 3
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure.
COMMISSION DECISION
Does the Commission wish to process this case under Modified Procedure?

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