20110707Answer.pdf

DONOVAN E. WALKER
Lead Counsel
dwalker~idahopower.com
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R An IDACORP Company
PM 4= 57
July 6,2011
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-10-59
IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
FOR A DETERMINATION REGARDING A FIRM ENERGY SALES
AGREEMENT BETWEEN IDAHO POWER AND RAINBOW RANCH WIND,
LLC
Dear Ms. Jewell:
Enclosed for filing please find an original and seven (7) copies of Idaho Power
Company's Answer to Petition for Reconsideration in the above matter.
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Donovan E. Walker
DEW:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
DONOVAN E. WALKER (ISB No. 5921)
JASON B. WILLIAMS
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalkerCâidahopower.com
jwilliams(Qidahopower.com
Attorneys for Idaho Power Company
RECEIVED
ZOfl JUt -6 Pri 4: 58
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
RAINBOW RANCH WIND, LLC
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT
BETWEEN IDAHO POWER AND
RAINBOW WEST WIND, LLC
~ CASE NO. IPC-E-10-59/
)
) IDAHO POWER COMPANY'S
) ANSWER TO PETITION FOR
) RECONSIDERATION
)
)
) CASE NO. IPC-E-10-60
)
) IDAHO POWER COMPANY'S
) ANSWER TO PETITION FOR
) RECONSIDERATION
)
Idaho Power Company ("Idaho Powet'), in accordance with Idaho Code § 61-626
and RP 331.05, hereby responds to the Petition filed by Rainbow Ranch Wind, LLC,
and Rainbow West Wind, LLC (collectively "Petitionet') for Reconsideration of
Commission Order No. 32256 issued on June 8, 2011.
Petitioner has failed to demonstrate that the Idaho Public Utilties Commission's
("Commission") Order No. 32256 is unreasonable, unlawful, erroneous, or not in
conformity with the law. RP 331.01. The Commission's Order No. 32256 is based upon
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 1
substantial and competent evidence in the record. The Commission regularly pursued
its authority and was acting within its discretion. Consequently, reconsideration should
be denied.
I. BACKGROUND
The relevant background is recited by the Commission in Order No. 32262, Case
No. GNR-E-11-01. On November 5, 2010, Idaho Power Company, Avista Corporation,
and PacifiCorp dba Rocky Mountain Power filed a Joint Petition requesting that the
Commission initiate an investigation to address various avoided cost issues related to
the Commission's implementation of the Public Utilty Regulatory Policies Act of 1978
("PURPA"). While the Commission pursued its investigation, the utilities also moved the
Commission to "lower the published avoided cost rate eligibility cap from 1 0 aMW to
100 kW (to) be effective immediately. . .." Id. citing Joint Petition at 7. When a
Qualified Facility ("QF") project is larger than the eligibilty cap set for access to
published avoided cost rates, the avoided cost rates for the project must be individually
negotiated by the QF and the utility using the Integrated Resource Plan ("IRP")
Methodology. Order No. 32176.
The purpose of utilzing the IRP Methodology for large QF projects is to more
precisely value the energy being delivered. Id. at 10. The IRP Methodology recognizes
the individual generation characteristics of each project by assessing when the QF is
capable of delivering its resources against when the utilty is most in need of such
resources. The resultant pricing is reflective of the value of QF energy to the utility.
Utilzation of the IRP Methodology does not negate the requirement under PURPA that
the utilty purchase the QF energy.
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 2
On December 3, 2010, the Commission issued Order No. 32131 declining the
utilties' motion to immediately reduce the published avoided cost rate eligibilty cap from
10 average megawatts ("aMW") to 100 kilowatts ("kW"). Order No. 32181 at 5.
However, the Order did notify parties that the Commission's decision regarding the
motion to reduce the published avoided cost eligibilty cap for published avoided cost
eligibilty cap would become effective on December 14, 2010. Id. at 5-6,9.
Based upon the record in the GNR-E-10-04 case, the Commission subsequently
found that a "convincing case has been made to temporarily reduce the eligibilty cap for
published avoided cost rates from 10 a MW to 100 kW for wind and solar only while the
Commission further investigates" other avoided cost issues. Order No. 32176 at 9
(emphasis original). The Commission also announced its intent to initiate additional
proceeding to investigate and address the disaggregation of large projects. Id. at 11.
On reconsideration, the Commission affirmed its decision to temporarily reduce
the eligibilty cap for published avoided cost rates from 10 aMW to 100 kW for wind and
solar projects. Order No. 32212. Thus, the eligibility cap for published avoided cost
rates for wind and solar QF projects was set at 100 kW effective December 14, 2010.
On June 8, 2011, the Commission issued Order No. 32262, after a full
evidentiary hearing in Case No. GNR-E-11-01, affirming and maintaining the 100 kW
published rate eligibilty cap for wind and solar QFs, and directing further investigation
into the appropriate avoided cost price. Order No. 32262, p. 9.
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 3
II. DISCUSSION
The Contracts Were Not Approved Because the Commission Found Them
to be Contrary to the Public Interest.
All PURPA Firm Energy Sales Agreements ("FESA") contain a provision stating,
"This Agreement shall become finally effective upon the Commission's approval of all
terms and provisions hereof without change or condition. . .." Case No. IPC-E-10-59,
and IPC-E-10-60, Application, Attachment No.1, FESA between Petitioner and Idaho
Power at p. 27, Article 21. Commission review is not a rubber stamp formality once the
FESA is signed. It is, and must be, a meaningful review of the terms and conditions,
reasonableness, and prudency of the contractual relationship and obligations. It must
be a meaningful review of whether, as a whole, the FESA is in the public interest.
The Commission, in its role as the regulatory authority for all investor-owned,
public utilities in the state of Idaho, has an independent obligation and duty to assure
that all contracts entered into by the public utilities it regulates are ultimately in the
public interest. In the state of Idaho, contracts are afforded constitutional protection
against interference from the State. Idaho Const. Art. I, § 16. However, despite this
constitutional protection, the Commission may annul, supersede, or reform the contracts
of the public utilties it regulates in the public interest. Agricultural Products Corp. v.
Utah Power & Light Co., 98 Idaho 23, 29, 557 P.2d 617, 623 (1976) ("Interference with
private contracts by the state regulation of rates is a valid exercise of the police power,
and such regulation is not a violation of the constitutional prohibition against impairment
of contractual obligations."); see also Federal Power Comm's v. Sierra Pac. Power Co.,
350, U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956); United Gas Pipe Line Co. v. Mobile
Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956) (U.S. Supreme
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 4
Court finding that rates fixed by contract could be modified only "when necessary in the
public interest"). The Commission may interfere in such a way with the contracts of a
public utility only to prevent an adverse affect to the public interest. Agricultural
Products, 98 Idaho at 29. "Private contracts with utilities are regarded as entered into
subject to reserved authority of the state to modify the contract in the public interest."
Id.
Petitioner has asked for reconsideration of Commission Order No. 32256 which
disapproved the December 14,2010, PURPA Firm Energy Sales Agreements ("FESA")
between Petitioner and Idaho Power. Petitioner and Idaho Power had entered into two
separate FESAs for wind QF resources of 20 MWs each. The Commission found that it
was not in the public interest to allow large projects to disaggregate into 10 aMW
increments in order to qualify for the published avoided cost rate calculated pursuant to
the Surrogate Avoided Resource methodology. Order No. 32262 p. 8. Case No. GNR-
E-11-01.
Avoided cost rates are to be just and reasonable to the
utilty's ratepayers. 18 C.F.R. § 292.304(a)(1). PURPA
entitles QFs to a rate equivalent to the utilty's avoided cost,
a rate that holds utility customers harmless - not a rate at
which a project may be viable. 18 C.F.R. § 292.304(a)(2). If
we allow the current trend to continue, customers may be
forced to pay for resources at an inflated rate and,
potentially, before the energy is actually needed by the utility
to serve its customers. This is clearly not in the public
interest. . . . While we recognize the impact that this
decision wil have on small wind and solar projects, it would
be erroneous, and illegal pursuant to PURPA, for this
Commission to allow large projects to obtain a rate that is
not an accurate reflection of the utility's avoided cost for the
purchase of the QF generation. Rosebud Enterprises, 128
Idaho at 623, 917 P .2d at 780, citing Connecticut Light &
Power Co., 70 F.E.R.C.,- 61,012 (1995).
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 5
Id. at p. 8 (emphasis added). Additionally, in the present cases, the Commission found
that the FESAs entered into between Petitioner and Idaho Power were not in the public
interest. Order No. 32256 p. 8.
The Idaho Supreme Court has recognized that 'a balance
must be struck between the local public interest of a utility's
electric consumers and the national public interest in
development of alternative energy sources.' Rosebud
Enterprises, 128 Idaho at 613, 917 P.2d at 770. We find
that it is not in the public interest to allow parties with
contracts executed on or after December 14, 2010, to avail
themselves of an eligibility cap that is no longer applicable.
Order No. 32256 p. 8, Case Nos. IPC-E-10-59, 10-60; Order No. 32254 p. 9, Case Nos.
IPC-E-10-51 through 10-55; Order No. 32257 p. 9, Case Nos. IPC-E-10-61 , 10-62
(emphasis added).
Idaho Power stated in its Reply Comments for this matter that it executed the
FESAs in good faith and that if those agreements were approved by the Commission,
the Company would honor and comply with the requirements therein. Idaho Power
Reply Comments, p. 8.
As the Company did with all PURPA contracts that were
executed subsequent to the filng of the Joint Petition of the
three Idaho electric utilties in Case No. GNR-E-10-04, Idaho
Power filed the Projects' PURPA contracts for review with
the Commission specifically seeking the Commission's
acceptance or rejection of the agreements. Idaho Power
specifically did not ask for the Commission's approval, nor
did the Company specifically ask for the Commission's
rejection. Instead, the Company asked for and seeks the
Commission's independent review of the agreement. The
Commission's independent review of the agreement serves
several functions including: (1) Commission approval as
required by the terms of the contract in order for it be
effective; (2) if accepted by the Commission, the Company
seeks authorization that all payments for purchases of
energy under the agreement be allo\Ned as prudently
incurred expenses for ratemaking purposes; and (3) a
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 6
Commission determination as to whether such agreement( s)
is/are in the public interest.
Id. at p. 7. However, Idaho Power also recognized the broader context and
environment that these agreements were a part of:
As stated in its Application, Idaho Power clearly understands
its obligation under federal law, FERC regulations, and this
Commission's Orders, that it has not been relieved of, to
enter into power purchase agreements with PURPA QFs.
As stated in the Joint Petition filing, Idaho Power has
received a very large amount, in terms of both number of
projects and volume of MWs, of requests from PURPA QF
developers in a very short time frame demanding to enter
into published avoided cost rate PURPA contracts. The
Company dilgently and in good faith processed these
requests, in the ordinary course of business and on an
expedited basis, and filed the same for review with this
Commission, as is its legal obligation. The Company
executed these contracts in good faith and if those contracts
are approved by the Commission, wil honor and comply with
the requirements therein.
However, the request for review of the Projects' Agreements,
as well as several other executed PURPA agreements that
were filed subsequent to the November 5, 2010, Joint
Petition in Case No. GNR-E-10-04, were made with the
specific reservation of rights and incorporation of the
averments set forth in that Joint Petition regarding the
possible negative effects to the both the utility and its
customers of additional and unfettered PURPA QF
generation on system reliability, utilty operations, the costs
of incorporating and integrating such a large penetration
level of PURPA QF generation into the utility's system, and,
most importantly, the dramatic increase in costs that must be
borne by the Company's customers because of the
disaggregation of large projects into 10 aMW increments and
the inflated avoided cost rates obtained thereby from the use
of the Surrogate Avoided Resource methodology.
Even though Idaho Power was legally obligated to continue
to negotiate, execute, and submit PURPA QF contracts for
Commission review containing published rates for projects at
and below 10 aMW, the Company is also obligated to
reiterate that the continuing and unchecked requirement for
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 7
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 Plan ('IRP') planning process and creates system
reliabilty and operational issues, but it also increases the
price its customers must pay for their energy needs above
the Company's actual avoided costs.
Id. p. 7-9.
The Company specifically asked the Commission to review Petitionets FESAs in
this light, "Idaho Power respectfully reiterates its request for the Commission to review
the Projects' contracts as to whether they are in the public interest and issue its Order
either accepting or rejecting the same." Id. p. 10-11. The Commission gave a very
clear answer, "We find that that it is not in the public interest to allow parties with
contracts executed on or after December 14, 2010, to avail themselves of an eligibilty
cap that is no longer applicable." Order No. 32256 p. 8, Case Nos. IPC-E-10-59, 10-60;
Order No. 32254 p. 9, Case Nos. IPC-E-10-51 through 10-55; Order No. 32257 p. 9,
Case Nos. IPC-E-10-61 , 10-62.
II. CONCLUSION
The individual grounds alleged by Petitioner for reconsideration are moot when,
as was done here, the Commission finds that the contract as a whole is not consistent
with the public interest. However, should the Commission grant reconsideration, or
otherwise desire additional authorities and briefing, Idaho Power is prepared to offer the
same, although the Company believes it to be unnecessary.
Petitioner has failed to demonstrate that the Commission's Order No. 32256, or
any issue decided in that Order, is unreasonable, unlawful, erroneous, or not in
conformity with the law. RP 331. The Commission's Order No 32256 is based upon
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 8
substantial and competent evidence in the record. The Commission regularly pursued
its authority and was acting within its discretion to protect the public interest.
Reconsideration should be denied.
DATED at Boise, Idaho, this 6th day of July 2011.
OVAN E. WALKER
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 6th day of July 2011 I served a true and correct
copy of IDAHO POWER COMPANY'S ANSWER TO PETITION FOR
RECONSIDERATION upon the following named parties by the method indicated below,
and addressed to the following:
Commission Staff
Kristine Sasser
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
-l Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-l Email Kris.Sasser(Qpuc.idaho.gov
Rainbow Ranch Wind & Rainbow
West Wind, LLCs
Brian D. Jackson
American Wind Group LLC- Manager
2792 Desert Wind Road
Oasis, Idaho 83647-5020
Hand Delivered
-l U.S. Mail
_ Overnight Mail
FAX
-l Email brian(Qamericanwind.net
Dean J. Miler
McDEVITT & MILLER LLP
420 West Bannock Street
P.O. Box 2564
Boise, Idaho 83701
Hand Delivered
-l U.S. Mail
_ Overnight Mail
FAX
-l Email joe(Qmcdevitt-miller.com-~
IDAHO POWER COMPANY'S ANSWER TO PETITION FOR RECONSIDERATION - 10