20110211final_order_no_32185.pdf

Office of the Secretary
Service Date
February 2011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT WITH
SALMON CREEK WIND PARK, LLC FOR
THE SALE AND PURCHASE OF
ELECTRIC ENERGY.
ORDER NO. 32185
CASE NO. IPC-10-
On December 10, 2010, Idaho Power Company filed an Application with the
Commission requesting acceptance or rejection of a 20-year Firm Energy Sales Agreement (the
Agreement") between Idaho Power and Salmon Creek Wind Park, LLC (the "Facility ). The
Application states that Salmon Creek would sell and Idaho Power would purchase electric
energy generated by the Facility located near Rogerson, Idaho. The Application further states
that the Facility will be a "qualifying facility" (QF) under the applicable provisions of the federal
Public Utility Regulatory Policies Act of 1978 (PURP A). The Company requested that its
Application be processed by Modified Procedure.
On January 10, 2011 , the Commission issued a Notice of Application and Notice of
Modified Procedure setting a 21-day comment deadline. By this Order, the Commission
approves the Agreement between Idaho Power and Salmon Creek without change or condition
and declares that all payments made by Idaho Power to Salmon Creek be allowed as prudently
incurred expenses for ratemaking purposes.
THE AGREEMENT
On December 10, 2010, Idaho Power and Salmon Creek entered into an Agreement
for a 20-year term using the current non-Ievelized published avoided cost rates as established by
the Commission in Order No. 31025 for energy deliveries ofless than 10 aMW. The nameplate
rating of the Facility is 20 MW.! Idaho Power warrants that the Agreement comports with the
terms and conditions of the various Commission Orders applicable to PURP A agreements for a
wind resource. Order Nos. 30415 , 30488, 30738 and 31025.
The Facility has selected May 30, 2012, as its Scheduled First Energy Date and June
, 2012, as its Scheduled Operation Date. Agreement, Appendix B. Idaho Power asserts that
I Under normal and/or average conditions, the Facility will not exceed 10 aMW on a monthly basis.
ORDER NO. 32185
various requirements have been placed upon the 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 parties have
agreed to liquidated damage 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 terms and conditions and declares that all payments made by Idaho Power to
Salmon Creek for purchases of energy will be allowed as prudently incurred expenses for
ratemaking purposes. Agreement ~ 21.
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 k W. Application at 2. 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 PURP
QFs. Id. at 3. However, Idaho Power asserts in its Application 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 PURP A 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.Id.
THE COMMENTS
Staff 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
Agreement contains the same rates, terms and conditions as other recently-approved contracts.
However, while not new, the Agreement does contain a couple of provisions that are worthy of
mention because of the relatively recent approval of numerous contracts for purchase of wind
generation by Idaho Power.
The Agreement specifies a Scheduled Operation Date of June 30, 2012. Idaho Power
asserts that it has advised the Facility of the Facility s responsibility to work with Idaho Power
delivery business unit to ensure that sufficient time and resources will be available to construct
ORDER NO. 32185
the interconnection facilities, and transmission upgrades if required, in time to allow the Facility
to achieve its Scheduled Operation Date. The Application states that the Facility has been
advised that delays in the interconnection or transmission process do not constitute excusable
delays, and if the Facility fails to achieve its Scheduled Operation Date, delay damages will be
assessed. Application at 6. The Application further maintains that the 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.
Although the risk of delay and uncertain costs associated with interconnection and transmission
upgrades has been addressed in the Agreement, Staff has some concerns that this risk is not
being mitigated prior to the parties signing the power sales agreement. One way to mitigate this
risk would be to require that a Generation Interconnection Agreement (GIA), in which
interconnection and transmission upgrade costs are specified with certainty, be submitted
concurrently with the power sales agreement. If disputes arise in the future over delays or costs
related to interconnection and transmission, the Commission may wish to consider concurrent
filings.
Another significant feature of the Agreement relates to provisions regarding non-
compensated curtailment or disconnection of the 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. Staff has no objection to the contract
provisions, but believes that if non-compensated curtailment becomes a frequent event, the
economic viability of numerous QFs could be adversely affected.
Idaho Power s Application specifically notes the Joint Petition 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 , Reference Case No. GNR-
10-04. The Commission indicated that any decisions it makes in the GNR-10-04 case will be
effective December 14, 2010. The Agreement submitted for approval was executed by Salmon
Creek on December 9, 2010, and by Idaho Power on December 10 2010. The Agreement was
ORDER NO. 32185
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 any decisions the
Commission issues in the GNR - E-1 0-04 case. Staff was sympathetic to the concerns expressed
by Idaho Power in its Application, but does not believe there are sufficient grounds for the
Commission to provide any relief due to the fact that the Agreement was fully executed and
submitted prior to December 14 2010, the effective date of the Commission s Order in Case No.
GNR-I0-04. Consequently, Staffrecommended that the Commission approve all of the terms
and conditions of the Agreement and declare that all payments made by Idaho Power to Salmon
Creek for purchases of energy be allowed as prudently incurred expenses for ratemaking
purposes.
Public Comments
Northern Power Systems (NPS) of Barre, Vermont, filed comments in support of a
temporary reduction of Idaho s PURPA avoided cost rate eligibility cap from 10 aMW to 100
kW "until such time it can be proven that current and future wind development under PURPA
will not have a negative impact on ratepayers." NPS encourages Idaho Power to make concerted
efforts through its Integrated Resource Planning process to allow for greater wind integration on
its system.
J.R. Simp lot Company (Simplot) filed comments in support of the approval of the
Salmon Creek Agreement. Simplot explained that it owns the land upon which the project will
be constructed. Simplot maintains that the Agreement is in full compliance "with all of the of
the (sic) provisions previously deemed reasonable and/or necessary by this Commission in a
PURPA QF contract with Idaho Power." Comments at 3. Simplot takes exception to Idaho
Power s characterization of its Application with the Commission Simplot emphasizes that the
GNR-I0-04 case currently before the Commission should have no bearing on the
Commission s determination regarding this Agreement.
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 PURP A and the implementing regulations of the Federal
2 Idaho Power asked that the Commission "accept or reject" the Agreement, instead of requesting approval.
ORDER NO. 32185
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
December 10, 2010, Agreement, the comments and recommendations of Commission Staff, and
public comments. As represented and pursuant to contract, under normal and/or average
conditions the Facility will not exceed 10 aMW on a monthly basis. Based on the foregoing, 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 specifically note that the Agreement between Idaho Power and Salmon Creek
was executed on December 10 2010, prior to the December 14 2010 effective date established
in Case No. GNR-I0-04. As such, a determination in the GNR-10-04 case does not affect
the terms of this Agreement. 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 10, 2010, Firm Energy Sales
Agreement between Idaho Power and Salmon Creek Wind Park 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 963-3622QQ.
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. 32185
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 11-f-1t
day of February 2011.
;J. ~d~
D. KEMPTON PRES ENT
ARSHA H. SMITH, COMMISSIONER
MACK A. REDFO , COMMISSIONER
ATTEST:
J n D. Jew I
Commission Secretary
O:IPC-IO-SO ks2
ORDER NO. 32185