20110318Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 66.18
Strèet Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
i ì PH 12: 39
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-IO-59
)
)
)
)
)
)
) CASE NO. IPC-E-IO-60
)
)
) COMMENTS OF THE
) COMMISSION STAFF
)
COMES NOW the Staff of the Idaho Public Utilties 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. 32190 on February 24,
2011, in Case Nos. IPC-E-1O-59 and IPC-E-IO-60, submits the following comments.
BACKGROUND
On December 16,2010, Idaho Power Company fied Applications requesting acceptance
or rejection of two 20-year Firm Energy Sales Agreements (Agreements) between Idaho Power
and Rainbow Ranch Wind, LLC and Rainbow West Wind, LLC. Both projects (Facilities) are
STAFF COMMENTS 1 MARCH 17,2011
located near Declo, Idaho. The projects wil both be "Qualifying Facilities" (QFs) under the
applicable provisions of the Public Utilty Regulatory Policies Act of 1978 (PURP A).
The Agreements
On December 14,2010, Idaho Power and each of the two 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 Facility. 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 curent non-Ievelized 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 nameplate rating of each Facilty is 23 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 Commission Orders applicable
to PURP A agreements for wind resources. Order Nos. 30415, 30488, 30738 and 31025.
Each Facility has selected December 31, 2011, 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 wil monitor the Facilities'
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 Facilty to achieve its December 31, 2012, Scheduled Operation Date.
Idaho Power asserts that each Facility has been advised that delays in the interconnection
or transmission process do not constitute excusable delays and if a Facilty 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 Agreement without knowledge of the requirements of interconnection and possible
transmission upgrades. ¡d. The paries 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-
STAFF COMMENTS 2 MARCH 17,2011
compensated curtailment or disconnection of its Facility should certain operating conditions
develop on Idaho Power's system. The Applications note that the paries' intent and
understanding is that "non-compensated curailment 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." 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 utility "to assist the Commission in its gatekeeper role of assuring that utilty
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 ANALYSIS
Both of the Agreements submitted for approval are identical except for the names of the
facilities and the LLCs under which each is being developed. Both of the projects are also
proposed to be built in the same general vicinity as shown on the map included as Attachment A.
The two facilities collectively are expected to generate 117,077 MWhs annually. Under
the non-Ievelized rates in the Agreements, the anual energy payments by Idaho Power for the
expected generation wil be approximately $7.2 milion in 2013 increasing to approximately
STAFF COMMENTS 3 MARCH 17,2011
$14.1 milion in 2032, or a cumulative total of $208.8 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 $80.0 milion.
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
paries 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 (Utilties) 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 eligibility cap from 10 aMW to 100 kW (to) be effective
immediately. . .." Petition at 7. On December 3,2010, the Commission issued Order No.
32131, Notice of Joint Petition, Notice of Intervention Deadline, Notice of Oral Argument. In
the Order, the Commission declined to immediately reduce the published avoided cost rate
eligibility cap, but did establish a schedule for processing the Utilties' request to reduce the
eligibility cap via Modified Procedure and to schedule an oral argument. In particular, the
Commission stated its desire to receive comments regarding the following:
(1) the advisability of reducing the published avoided cost eligibilty cap;
(2) ifthe eligibilty cap is reduced, the appropriateness of exempting non-wind QF
projects from the reduced eligibility cap; and
(3) the consequences of dividing larger wind projects into 10 aMW projects. to utilze the
published rate.
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 Januar 19,2011, and Oral Argument was heard on January 27,
2011. On February 7, 2011, the Commission issued Order No. 32176 which temporarily reduced
STAFF COMMENTS 4 MARCH 17,2011
the eligibility cap for published avoided cost rates from 10 aMW to 100 k W 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.
Both of the Agreements presented for Commission approval were signed by the project
developer on December 13,2010, and signed by Idaho Power on December 14,2010. The
Agreements were fied with the Commission on December 16,2010. The Agreements contain
rates from Order No. 31025, 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 k W 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 part, 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 14, 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 eligibility cap for wind and solar
facilties to obtain a published rate contract, Staff considers the rates contained in the
Agreements to be in violation of Commission Order No. 32176. Consequently, Staff
recommends denial of both of the 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 Agreements could be voluntarily withdrawn, then held pending the outcome of
the initial phase of Case No. GNR-E-11-01 in which the Commission wil determine the
disposition of its prior decision to temporarly lower the eligibility cap from 10 aMW to 100 k W.
STAFF RECOMMENDATION
Staff recommends that the Commission not approve either of the two Agreements.
STAFF COMMENTS 5 MARCH 17,2011
Respectfully submitted this
Technical Staff: Rick Sterling
i:umisc:commentsipce i 0.59 _60ksrps comments
STAFF COMMENTS
11 T. day of March 2011.
~a.~~Kris . ne A. Sasser
Deputy Attorney General
6 MARCH 17,2011
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 9TH DAY OF MARCH 2011,
SERVED THE FOREGOING FIRST PRODUCTION REQUEST OF THE
COMMISSION STAFF TO IDAHO POWER COMPANY, IN CASE
NOS. IPC-E-1O-59_60, 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(fidahopower.com
Inordstrom(fidahopower. com
RANDY C ALLPHIN
ENERGY CONTRACT ADMIN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rallphin(fidahopower.com
BRIAN D JACKSON
AMERICAN WIND GROUP LLC
2792 DESERT WIND RD
OASIS ID 83647-5020
~y~SECRETA '=
CERTIFICATE OF SERVICE