20110218Decision 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: FEBRUARY 10, 2011

SUBJECT: IDAHO POWER’S FIVE APPLICATIONS FOR A DETERMINATION
REGARDING POWER PURCHASE AGREEMENTS WITH WIND
DEVELOPERS: ALPHA, BRAVO, CHARLIE, DELTA, ECHO. CASE
NOS. IPC-E-10-51, IPC-E-10-52, IPC-E-10-53, IPC-E-10-54 AND IPC-E-10-
55, RESPECTIVELY

On December 16, 2010, Idaho Power Company filed Applications requesting
acceptance or rejection of five 20-year Firm Energy Sales Agreements (Agreements) between
Idaho Power and Alpha Wind, LLC; Bravo Wind, LLC; Charlie Wind, LLC; Delta Wind, LLC;
and Echo Wind, LLC. The five projects (Facilities) are all located near Burley, Idaho. The
projects will all be “qualifying facilities” (QFs) under the applicable provisions of the federal
PURPA.
THE AGREEMENTS
On December 15, 2010, Idaho Power and each of the five 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. Applications at 4. The Applications recite that the Alpha,
Bravo, Delta and Echo facilities will have a maximum capacity amount of 29.9 MW. Id.
Charlie will have a maximum capacity of 27.6 MW. Under normal and/or average conditions,
each Facility will not exceed 10 aMW on a monthly basis. 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.
DECISION MEMORANDUM 2
Each Facility has selected October 31, 2014, as its Scheduled First Energy Date and
December 31, 2014, as its Scheduled Operation Date. Applications at 5. Idaho Power asserts
that various requirements have been placed upon the Facilities in order for Idaho Power to accept
the 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 damage 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 December 31, 2014, Scheduled Operation
Date. The Applications state 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. Applications at 7. The
Applications further maintain 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 Applications note 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. at 7-8.
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.
DECISION MEMORANDUM 3
Idaho Power’s Applications specifically note 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. Applications 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 PURPA
QFs. Id. at 3. However, Idaho Power asserts in each of its 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.” Id. Idaho Power further states that “the
continuing and unchecked requirement for the Company to acquire additional intermittent and
other QF generation regardless of its need for additional energy or capacity on its system not
only circumvents the Integrated Resource Planning process and creates system reliability and
operational issues, but it also increases the price its customers must pay for their energy needs.”
Id. at 4.
Idaho Power requests that its Applications 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
comment deadline of March 17, 2011.
COMMISSION DECISION
Does the Commission agree with the recommendation that each of these five Power
Purchase Agreements be processed under Modified Procedure with a comment deadline of
March 17?

M:IPC-E-10-51_IPC-E-10-52_IPC-E-10-53_IPC-E-10-54_IPC-E-10-55_ks