20110321Comments.pdf

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KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
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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 BETWEEN
IDAHO POWER AND MURPHY FLAT MESA,
LLC
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER AND MURPHY FLAT
ENERGY, LLC
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER AND MURPHY FLAT WIND,
LLC
¡ CASEE-E_l~~
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) CASE NO. IPC-E-IO-57
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) CASE NO. IPC-E-IO-58
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) COMMENTS OF THE
) COMMISSION STAFF
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COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Applications and Notice of Modified Procedure issued in Order No. 32189 on February 24, 201 i, in
Case Nos. IPC-E-lO-56, IPC-E-lO-57, and IPC-E-lO-58, submits the following comments.
STAFF COMMENTS MARCH i 7,201 i
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BACKGROUND
On December 16, 2010, Idaho Power Company fied Applications requesting acceptance or
rejection of three 20-year Firm Energy Sales Agreements (Agreements) between Idaho Power and
Murphy Flat Mesa, LLC; Murphy Flat Energy, LLC; and Murphy Flat Wind, LLC. All three
projects (Facilities) are located near Murphy, Idaho. The projects wil be "Qualifying Facilities"
(QFs) under the applicable provisions of the Public Utility Regulatory Policies Act of 1978
(PURPA).
The Agreements
On December 15, 2010, Idaho Power and each of the three wind projects entered into their
respective Agreements. Brian Jackson, Manager of American Wind Group, LLC signed each
Agreement as the authorized manager of each QF Facilty. Applications at 2. 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.3 1 025 for energy deliveries of less than 10 aMW. Applications at 4.
The nameplate rating of each Facility is 25 MW. Under normal and/or average conditions, each
Facility wil not exceed 10 aMW on a monthly basis. Idaho Power warrants that the Agreements
comport with the terms and conditions of the various Coinission Orders applicable to PURP A
agreements for wind resources. Order Nos. 30415, 30488, 30738 and 31025.
Each Facility has selected December 31, 201 1, as its Scheduled First Energy Date and
December 31, 2012, 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 Facilties' compliance with
initial and ongoing requirements through the term of the Agreements. 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 suffcient time and resources wil 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, 20 i 2, Scheduled Operation Date.
Idaho Power asserts that each Facilty 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 wil be assessed. ¡d. at 7. The Applications further
maintain that each Facility has acknowledged and accepted the risk inherent in proceeding with its
STAFF COMMENTS 2 MARCH 17,2011
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Agreement without knowledge of the requirements of interconnection and possible transmission
upgrades. ¡d. 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 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) abilty to
manage its thermal, hydro, and other resources in order to meet its obligation to reliably serve loads
on its system." Applications at 7-8.
By their own terms, the Agreements wil 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 wil be allowed as prudently incurred expenses for ratemaking
purposes. Agreement ~ 21.1.
Idaho Power's Applications specifically note the Joint Petition it fied 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
Commission Orders to enter into power purchase agreements with PURPA QFs. ¡d. at 3. However,
Idaho Power asserts in each of its Applications that the Commission has specifically directed the
utilty "to assist the Commission in its gatekeeper role of assuring that utility customers are not
being asked to pay more than the Company's avoided cost for (its) QF contracts." ¡d. at 3-4. 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 reliabilty and operational issues, but it also increases the price its customers must pay for
their energy needs." ¡d. at 4.
STAFF COMMENTS 3 MARCH 17,201 i
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ST AFF ANALYSIS
All three of the Agreements submitted for approval are identical except for the names of the
facilties and the LLCs under which each is being developed. All three of the projects are also
proposed to be built in the same general vicinity as shown on the map included as Attachment A.
The three facilities collectively are expected to generate 169,988 MWhs annually. Under
the non-levelized rates in the Agreements, the annual energy payments by Idaho Power for the
expected generation wil be approximately $ 1 0.3 millon in 2013 increasing to approximately $20.2
milion in 2032, or a cumulative total of$299.0 milion over the 20-year term of the Agreements.
The collective net present value of the energy payments over the life of the Agreements wil be
approximately $114.6 millon.
With the exception of rates, all of the other terms and conditions included in the Agreements
are consistent with recent Commission Orders. There are no disputes between the parties over any
terms and conditions.
Temporary Lowering of the Eligibilty Cap for Published Rates
On November 5, 2010, Idaho Power Company, Avista Corporation, and PacifiCorp dba
Rocky Mountain Power (Utilities) fied a Joint Petition requesting that the Commission initiate an
investigation to address various avoided cost issues related to PURP A. While the investigation is
underway, the Petitioners also requested that the Commission "lower the published avoided cost
rate eligibilty cap from 10 aMW to 100 kW (to) be effective immediately. .." Petition at 7. On
December 3, 20 i 0, the Commission issued Order No. 32131, Notice of Joint Petition, Notice of
Intervention Deadline, and Notice of Oral Argument. In the Order, the Commission declined to
immediately reduce the published avoided cost rate eligibilty cap, but did establish a schedule for
processing the Utilities' request to reduce the eligibilty cap via Modified Procedure and to schedule
an oral argument. In particular, the Commission stated its desire to receive comments regarding the
following:
(l) the advisabilty of reducing the published avoided cost eligibility cap;
(2) if the eligibility cap is reduced, the appropriateness of exempting non-wind QF projects
from the reduced eligibilty cap; and
(3) the consequences of dividing larger wind projects into 10 aMW projects to utilze the
published rate.
STAFF COMMENTS 4 MARCH 17,2011
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In its Order, the Commission went on to state "Finally, it is our intent that our decision
regarding the 'Joint Motion' to reduce the published avoided cost eligibilty cap shall become
effective on December 14,2010." Reference Order No. 32131 at 5-6, emphasis added. By stating
its intent, paries were given clear, unambiguous, advance notice that the eligibility cap may be
reduced.
Written comments were submitted by the paries on December 22, 2010, written reply
comments were submitted on January 19,2011, and Oral Argument was heard on January 27, 201 1.
On February 7, 2011, the Commission issued Order No. 32176, which temporarily reduced the
eligibility cap for published avoided cost rates from 10 aMW to 100 kW for wind and solar QFs
only. In accordance with its stated intent in Order No. 32131, Order No. 32176 confirmed that the
reduction in the eligibilty cap would be effective December 14,2010. Reference Order No. 32176
at 11-12.
Each of the three Agreements presented for Commission approval was signed by the project
developer on December 13,2010, and signed by Idaho Power on December 15,2010. The
Agreements were filed with the Commission on December 16, 2010. The Agreements contain rates
from Order NO.3 1025, the published rates currently in effect. However, as a result of Order
No. 32176, wind and solar QF contracts executed on or after December 14, 2010 for facilities larger
than 100 kW are ineligible for those rates.
As a matter of law, Staff considers the effective date of a contract to be that date upon which
both paries have signed the agreement. A signature by only one party, Staff believes, does not
create an enforceable contract nor establish an effective date. Consequently, for the submitted
Agreements, Staff considers the effective date to be December 15, 2010.
Because the effective date of each of the Agreements is not prior to December 14, 2010, the
date on which the lowered eligibility cap became effective, and because the size of each proposed
wind project clearly exceeds 100 kW, the current eligibilty cap for wind and solar facilties to
obtain a published rate contract, Staff considers the rates contained in the Agreements to be in
vio lation of Commission Order No. 32176. Consequently, Staff recommends denial of each of the
three Agreements.
In order for the rates in the Agreements to comply with Commission Orders, Staff believes
that they would have to be determined using the IRP methodology. Staff suggests that the
Commission deny approval of the Agreements without prejudice and permit revised agreements to
be submitted containing rates computed under the prescribed IRP methodology. Alternatively, the
STAFF COMMENTS 5 MARCH 17,2011
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Agreements could be voluntarily withdrawn, then held pending the outcome of the initial phase of
Case No. GNR-E- 11 -0 I in which the Commission will determine the disposition of its prior
decision to temporarily lower the eligibility cap from 10 aMW to 100 kW.
STAFF RECOMMENDATION
Staff recommends that the Commission not approve any of the three Agreements.
Respectfully submitted this '7~ day of March 201 1.
~a,~
Kris . ne A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentslipce 10.56_57 _58ksrps comments
STAFF COMMENTS 6 MARCH 17,2011
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 17TH DAY OF MARCH 2011,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NOS. IPC-E-1O-56_57_58, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
DONOV AN E WALKER
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(iidahopower.com
lnordstrom(iidahopower. com
RANDY C ALLPHIN
ENERGY CONTRACT ADMIN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rallphin(iidahopower.com
BRIAN D JACKSON
AMERICAN WIND GROUP LLC
2792 DESERT WIND RD
OASIS ID 83647-5020
\~.\(odSEêRY
CERTIFICATE OF SERVICE