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 FOUR APPLICATIONS FOR APPROVAL OF
POWER PURCHASE AGREEMENTS WITH WIND PARK
DEVELOPERS: DEEP CREEK, COTTONWOOD, ROGERSON FLATS,
AND SALMON CREEK; CASE NOS. IPC-E-10-47, IPC-E-10-48, IPC-E-
10-49 AND IPC-E-10-50, RESPECTIVELY

On December 10, 2010, Idaho Power Company filed Applications requesting
approval of four 20-year Firm Energy Sales Agreements (Agreements) between Idaho Power and
Deep Creek Wind Park, LLC; Cottonwood Wind Park, LLC; Rogerson Flats Wind Park, LLC;
and Salmon Creek Wind Park, LLC. The four projects (Facilities) are all located near Rogerson,
Idaho. The identical Applications recite that each wind generating project will have a maximum
capacity amount of 20 MW. The projects will all be “qualifying facilities” (QFs) under the
applicable provisions of the federal PURPA.
THE AGREEMENTS
On December 10, 2010, Idaho Power and each of the four wind projects entered into
their respective Agreements. Under the terms of the Agreements, the wind projects each agree to
sell electric energy to Idaho Power for a 20-year term using the current non-levelized published
avoided cost rates as currently established by the Commission in Order No. 31025 for energy
deliveries of less than 10 aMW. Idaho Power warrants that the Agreements comport with the
terms and conditions of the various Commission Orders applicable to PURPA agreements for a
wind resource. Order Nos. 30415, 30488, 30738 and 31025.
Each Facility has selected May 30, 2012, as its Scheduled First Energy Date and June
30, 2012, as its Scheduled Operation Date. Agreement, Appendix B. Idaho Power asserts that
various requirements have been placed upon the Facilities in order for Idaho Power to accept the
DECISION MEMORANDUM 2
Facilities’ energy deliveries. Idaho Power states that it will monitor the Facilities’ compliance
with initial and ongoing requirements through the term of the Agreements. The parties have
each agreed to liquidated damages and security provisions of $45 per kW of nameplate capacity.
Agreement, ¶¶ 5.3.2, 5.8.1.
Idaho Power asserts that it has advised each Facility of the Facility’s responsibility to
work with Idaho Power’s delivery business unit to ensure that sufficient time and resources will
be available for delivery to construct the interconnection facilities, and transmission upgrades if
required, in time to allow each Facility to achieve its June 30, 2012, Scheduled Operation Date.
The Application states that each Facility has been advised that delays in the interconnection or
transmission process do not constitute excusable delays and if a Facility fails to achieve its
Scheduled Operation Date delay damages will be assessed. Application at 6. The Application
further maintains that each Facility has acknowledged and accepted the risk inherent in
proceeding with its Agreement without knowledge of the requirements of interconnection and
possible transmission upgrades. Id. at 7.
Idaho Power states that each Facility has also been made aware of and accepted the
provisions in each Agreement and Idaho Power’s approved Schedule 72 regarding non-
compensated curtailment or disconnection of its Facility should certain operating conditions
develop on Idaho Power’s system. The Application notes that the parties’ intent and
understanding is that “non-compensated curtailment would be exercised when the generation
being provided by the Facility in certain operating conditions exceeds or approaches the
minimum load levels of [Idaho Power’s] system such that it may have a detrimental effect upon
[Idaho Power’s] ability to manage its thermal, hydro, and other resources in order to meet its
obligation to reliably serve loads on its system.” Id.
By their own terms, the Agreements will not become effective until the Commission
has approved all of the terms and conditions and declares that all payments made by Idaho Power
to the Facilities for purchases of energy will be allowed as prudently incurred expenses for
ratemaking purposes. Agreement ¶ 21.1.
Idaho Power’s Application specifically notes the Joint Petition it filed with the
Commission on November 5, 2010, requesting an immediate reduction in the published avoided
cost rate eligibility cap from 10 aMW to 100 kW. Application at 2. The Commission is
processing the case by Modified Procedure with a date scheduled for oral argument. Order No.
DECISION MEMORANDUM 3
32131. Idaho Power states that it is aware of and in compliance with its ongoing obligation
under federal law, FERC regulations, and Idaho Public Utilities Commission Orders to enter into
power purchase agreements with PURPA QFs. Id. at 3. However, Idaho Power asserts in each
of its wind park Applications that “the request in this Application . . . is made with the specific
reservation of rights and incorporation of the averments set forth in the Joint Petition regarding
the possible negative effects to the [sic] both the utility and its customers of additional and
unfettered PURPA QF generation on system reliability, utility operations, and costs of
incorporating and integrating such a large penetration level of PURPA QF generation into the
utility’s system.”
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.
STAFF RECOMMENDATION
Staff recommends that each Application be processed by Modified Procedure with a
21-day comment period.
COMMISSION DECISION
Does the Commission agree with the recommendation that each of these four Power
Purchase Agreements be processed under Modified Procedure with a 21-day comment period?

M-IPC-E-10-47_IPC-E-10-48_IPC-E-10-49_IPC-E-10-50_ks