20120907reconsideration_on_remand_order_no_32635.pdf

Office of the Secretary
Service Date
September 7,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR A )SUPREME COURT
DETERMINATION REGARDING THE FIRM )DOCKET NO.39151-2011
ENERGY SALES AGREEMENT FOR THE )
SALE AND PURCHASE OF ELECTRIC )
ENERGY BETWEEN IDAHO POWER )IPUC CASE NOS.IPC-E-l0-61
COMPANY AND GROUSE CREEK WIND )IPC-E-10-62
PARK,LLC (10-61)AND GROUSE CREEK )
WIND PARK II,LLC (10-62).)
_________________________________________________________________________________
)
GROUSE CREEK WIND PARK,LLC and )
GROUSE CREEK WIND PARK II,LLC,)
)
Petitioners/Appellants,)
)ORDER NO.32635
V.)
)
IDAHO PUBLIC UTILITIES COMMISSION,)
)
Respondent,Respondent on Appeal,)
)
and )
)
IDAHO POWER COMPANY,)
)
Respondent-Intervenor/Respondent )
on Appeal.)
On July 27,2011,the Commission issued Final Order on Reconsideration No.32299
affirming its initial decision to not approve two Power Purchase Agreements (“PPAs”or
“Agreements”)entered into between the Grouse Creek Wind Park projects (collectively referred
to as “Grouse Creek”)and Idaho Power Company pursuant to the federal Public Utility
Regulatory Policies Act of 1978 (PURPA).Based upon the express terms of the Agreements,
the Commission found that the PPAs were not effective prior to December 14,2010—the date on
which the eligibility for PURPA published avoided cost rates in Idaho changed from 10 average
megawatts (aMW)to 100 kilowatts (kW)for wind and solar qualifying facilities (QFs).Final
Order No.32257.Because each of the PPAs requested published avoided cost rates but the
projects were in excess of 100 kW,the Commission found that the published rates were not
available to the wind projects.
ORDER NO.32635 1
On September 7,2011,Grouse Creek appealed the Commission’s Orders to the Idaho
Supreme Court.On October 4,2011,the Federal Energy Regulatory Commission (FERC)
issued a Declaratory Order in what appeared to be a similarly situated case (“the Cedar Creek
Case”)stating that the Idaho Commission’s decision not to approve Cedar Creek’s PPAs was
inconsistent with PURPA and FERC’s regulations.Notice of Intent Not to Act and Declaratory
Order,137 FERC ¶61,006 (Oct.4,2011).On November 3,2011,in response to FERC’s
Declaratory Order,Grouse Creek,this Commission and Idaho Power filed a Stipulated Motion
with the Idaho Supreme Court to suspend the appeal and remand the matter to the PUC.The
Court granted the Motion on November 22,2011.
Grouse Creek,Idaho Power and Commission Staff met to discuss settlement of the
issues on December 9,2011,and December 22,2011.Settlement discussions were unfruitful.
The Commission directed the parties to file legal briefs and oral argument was held on March 7,
2012.After reviewing the underlying record,arguments of the parties and controlling statutory
and case law,we decline to approve the two Power Purchase Agreements between Grouse Creek
and Idaho Power based on the avoided cost rates contained in the Agreements,and as more fully
described herein.
BACKGROUND
A.The Power Purchase Agreements (PPAs)
On December 28,2010,Idaho Power and the two Grouse Creek wind projects
entered into their respective PPAs.Under the terms of the PPAs,each wind project agrees to sell
electric energy to Idaho Power for a 20-year term using 10 aMW non-levelized published
avoided cost rates.Applications at 4.The nameplate rating of each project is 21 MW.Under
normal and/or average conditions,each wind QF will not sell more than 10 aMW on a monthly
basis to Idaho Power.The projects are located near Lynn,Utah.
Each project selected June 1,2013,as the “Scheduled First Energy Date”and
December 1,2013,as the “Scheduled Operation Date.”Applications at 5.Idaho Power asserted
that it advised each project of the project’s responsibility to work with Idaho Power’s delivery
business unit to ensure that sufficient time and resources would be available for the delivery unit
to construct the necessary interconnection facilities,and transmission upgrades if required,in
time to allow the projects to achieve their December 1,2013,Scheduled Operation Date.The
Applications state that the projects have been advised that delays in the interconnection or
ORDER NO.32635 2
transmission process do not constitute excusable delays and if a project fails to achieve its
Scheduled Operation Date,delay damages will be assessed.Id.at 6.The Applications further
maintain that Grouse Creek has acknowledged and accepted the risks inherent in proceeding with
its PPAs without knowledge of the actual requirements for interconnection facilities and possible
transmission upgrades.Id.at 7.In each PPA,the parties have agreed to liquidated damage and
security provisions of $45 per kW of nameplate capacity.Agreements ¶f 5.3.2,5.8.1.Idaho
Power also maintained that each project was aware of and accepted the provisions in the
Agreements and Idaho Power’s approved Schedule 72 regarding non-compensated curtailment or
disconnection of the project should certain operating conditions develop on Idaho Power’s
system.
By its own terms,the “Effective Date”for each PPA is “[t]he date stated in the
opening paragraph of this Firm Energy Sales Agreement representing the date upon which this
Firm Energy Sales Agreement was fully executed by both Parties.”Agreements ¶1.11.The
opening paragraph of each Agreement reflects that they were “entered into”on December 28,
2010.Id.at p.1.Each Agreement further states that it 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 Grouse Creek for purchases of energy will be allowed as prudently incurred
expenses for ratemaking purposes.Agreements ¶21.1.
B.Order No.32257
On June 8,2011,the Commission issued final Order No.32257 disapproving the two
Agreements between Idaho Power and each of the wind projects —Grouse Creek Wind Park and
Grouse Creek Wind Park 11.1 The Commission determined that the Agreements were not fully
executed (signed by both parties)prior to December 14,2010,the date upon which the eligibility
for published avoided cost rates changed from 10 aMW to 100 kW for wind and solar projects.
Order No.32176.Consequently,the Commission found that the rates contained in the
Agreements were no longer available because each of the projects requested published avoided
cost rates and each QF was larger than 100 kW.Order No.32257 at 10.
The Commission found that Grouse Creek signed each Agreement on December 20,
2010,and Idaho Power signed on December 28,2010.Id.at 9.The Commission also noted that
The two projects had previously filed consolidated comments maintaining that the “relevant facts for each of these
two projects are substantially similar.”Project Comments at nI.Consequently,the Commission found it
reasonable and appropriate to consolidate the cases and issue a consolidated final Order.Order No.32257 at n.I.
ORDER NO.32635 3
the Agreements contain language regarding the effective date.The terms of the Agreements
unequivocally state that the Effective Date”of the Agreements is “The date stated in the
opening paragraph of this.Agreement representing the date upon which this [Agreement]was
fully executed by both Parties.”Agreements ¶1.10.The opening paragraph is dated “this 28
day of December,2010.”
The Commission stated that “[tjhe Commission does not consider a utility and its
ratepayers obligated until both parties have completed their final reviews and signed the
agreement.”Order No.32257 at 9.The Commission observed that “a thorough review is
appropriate and necessary prior to signing Agreements that obligate ratepayers to payments in
excess of $230 million”over the 20-year term of the Agreements.Id.The Commission
established a bright line rule that for a wind or solar QF larger than 100 kW to be eligible for
published avoided cost rates,the Power Purchase Agreement must have been executed,i.e.,
signed by both parties,prior to the December 14,2010,effective date of the change in eligibility
criteria.Id.at 10.The Commission concluded that it was “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.”Id.
C’.Reconsideration of Order No.32257
On June 29,2011,Grouse Creek filed a timely Petition for Reconsideration of the
Commission’s final Order No.32257.Grouse Creek argued that,pursuant to 18 C.F.R.§
292.304(d)(2)(ii),a QF is entitled to the rates that are in effect on the date the QF incurred a
legally enforceable obligation to provide energy.The projects maintained that the “obligation to
purchase a QF’s output is created by the QF committing itself to sell to an electric utility,which
also commits the electric utility to buy from the QF.”Reconsideration Petition at 5.Based on
this premise,Grouse Creek argued that the Commission’s final Order was arbitrary and
capricious and not in conformity with controlling federal law because it requires a utility’s
signature to establish a legally enforceable obligation.
On July 6,2011,Idaho Power filed an Answer to the Petition for Reconsideration.
Idaho Power maintained that the Commission’s final Order is based on substantial and
competent evidence.The utility asserted that it was “not in the public interest to allow parties
with contracts executed on or after December 14,2010,to avail themselves of [a published rate]
that is no longer applicable.”Answer at 6 quoting Order No.32257 at 9.Idaho Power asserted
ORDER NO.32635 4
that the Commission was acting within its discretion and,therefore,reconsideration should be
denied.Id.at 8-9.
On July 27,2011,the Commission issued Order No.32299 denying the projects’
Petition for Reconsideration.The Order stated that the parties entered into a legally enforceable
obligation at the time that both parties executed the Power Purchase Agreements.By their very
terms,the Agreements were not effective until December 28,2010.Agreements ¶1.11.On that
date,wind projects larger than 100 kW were no longer entitled to the 10 aMW published avoided
cost rate.This Commission explained that “FERC regulations grant the states latitude in
implementing the regulation of sales and purchases between QFs and electric utilities.”Order
32299 at 7 citing Federal Energy Regulatory Commission v.Mississippi,456 U.S.742,102 S.Ct.
2126,72 L.Ed.2d 532 (1982).In determining when the parties incurred a legally enforceable
obligation,the Commission properly exercised the authority granted us by FERC.Id.
The Commission further explained that nothing cited by Grouse Creek demonstrated
that the Commission’s Order is arbitrary,capricious or inconsistent with federal law.The
Commission noted that FERC specifically delegated authority to the state commissions to
determine when and how a legally enforceable obligation is created.The Commission also
determined that its decision is in the public interest and strikes a balance between “the local
public interest of a utility’s electric consumers and the national public interest in development of
alternative energy sources.”Rosebud Enterprises v.Idaho PUC,128 Idaho 609,613,917 P.2d
766,770 (1996).
D.Appeal and Remand
On September 7,2011,Grouse Creek appealed the Commission’s Orders to the Idaho
Supreme Court.On October 4,2011,while the appeal was pending,FERC issued a Declaratory
Order in the Cedar Creek case that the PUC’s decision not to approve Cedar Creek’s PPAs was
inconsistent with PURPA and FERC’s regulations implementing PURPA.Notice of Intent Not
to Act and Declaratory Order,137 FERC ¶61,006 (Oct.4,2011).FERC construed this
Commission’s final Order in the Cedar Creek case as “limiting the creation of a legally
enforceable obligation only to QFs that have [PPAsI ...signed by both parties to the
agreement.”Id.at ¶26.FERC interpreted our Order as requiring a fully-executed contract as a
condition precedent to the creation of a legally enforceable obligation between the parties.Id.at
¶f 30,35.FERC concluded that our Cedar Creek Orders did not recognize that “a legally
ORDER NO.32635 5
enforceable obligation may be incurred before the formal memorialization of a contract to
writing.”Id.at ¶36.
On November 3,2011,in response to FERC’s Order,Grouse Creek,this Commission
and Idaho Power filed a Stipulated Motion to suspend the Idaho Supreme Court appeal and
remand the matter to the Commission for further consideration.The Motion stated that there “is
good cause for the Court to grant this Motion in order for the Parties to consider a recent decision
issued by the Federal Energy Regulatory Commission (“FERC”)regarding the subject matter of
the appeal.”Motion at 2.Moreover,Idaho Code §61-624 provides that the Commission “may
at any time,upon notice to the public utility affected,and after opportunity to be heard
rescind,alter or amend any order or decision made by it.”The Court granted the Stipulated
Motion on November 22,2011.
On remand,the Commission invited the parties to participate in settlement
negotiations.See IPUC Rule 353,IDAPA 3 1.01.01.353;Order No.32430.Grouse Creek,Idaho
Power and Commission Staff met to discuss settlement of the issues on December 9 and
December 22,2011.Settlement negotiations were ultimately unsuccessful.Consequently,the
Commission directed the parties to file legal briefs and scheduled an oral argument for March 7,
2012.Order No.32430.The parties’arguments on remand are set out below.
1.The Grouse Creek Projects
Grouse Creek maintains that it attempted to secure PPAs with Idaho Power for
several months prior to December 14,2010.Initially,in April 2010,the developer requested a
PURPA contract for a 65 MW project.Grouse Creek Brief at 9.In June 2010,Grouse Creek
indicated that,due to federal permitting issues,it intended to reduce the overall footprint of the
project and wanted to discuss two 10 aMW projects,instead of the larger 65 MW project.Id.at
6,9-10.
Grouse Creek maintains that,on July 14,2010,it submitted a formal request to Idaho
Power for two 10 aMW PURPA contracts.Id.at 9-10.The projects reiterated their request for
two PURPA contracts on August 17,2010.Id.at 11.Grouse Creek asserts that,on October 1,
2010,it sent a letter to Idaho Power “for each Grouse Creek QF,expressing [the projects]intent
to obligate the QFs to two power sales agreements for the two QF projects.”Id.Grouse Creek
insists that the letters “listed several standard terms applicable through Commission orders,”
including the load shape price adjustments,wind integration charge,mechanical availability
ORDER NO.32635 6
guarantee,and wind forecasting and cost sharing provisions.Id.However,the projects were
disputing the legality of a $45/kW delay liquidated damages provision.Id.at 12.On or about
November 1,2010,Idaho Power provided draft PPAs for the projects.The utility insisted on the
inclusion of the standard $45/kW delay security deposit.Id.
Grouse Creek observed that on November 5,2010,Idaho Power,Rocky Mountain
Power and Avista filed a Joint Motion to Reduce the Published Rate Eligibility Cap.See
generally Case No.GNR-E-10-04.In response,on November 8,2010,the Grouse Creek
projects each filed a complaint against Idaho Power for failing to negotiate in good faith.In
these complaints,Grouse Creek alleged that Idaho Power had acted in bad faith by requiring
completion of unnecessary interconnection processes and transmission requests and by refusing
to enter into an agreement without a $45/kW delay liquidated damages security provision.Id.at
13.Grouse Creek and Idaho Power subsequently settled the disputes asserted in the complaints
and entered into the two PPAs whose terms are at issue in this case.
Following successful negotiations,on December 9,2010,Grouse Creek “requested
through e-mail”that the “First Energy Date”and the “Commercial Online Date”in the PPA for
both projects be amended and deferred until June 2013 and December 2013.respectively.Id.at
14-15.On December 15,2010,Idaho Power consented to the deferrals in the First Energy and
Online Date.Id.at 15.Idaho Power forwarded the final PPAs to Grouse Creek for signatures on
December 16,2010.Id.at 15-16.
Grouse Creek argues that all material terms were well settled prior to December 14,
2010,despite the projects’inability to obtain fully executed contracts until December 28,2010.
Id.at 16.It is on this basis that Grouse Creek asserts a legally enforceable obligation was
formed that entitles the projects to the published avoided cost rates contained in Order No.
3 1025,and as reflected in their PPAs.
2.Commission Staff
Staff maintains that the Commission’s prior Orders relied only on the express terms
of the Agreements between the projects and Idaho Power.Staff acknowledges the PURPA
provisions for legally enforceable obligations.However,Staff argues that “the simple act of a
QF requesting a PURPA contract from a utility cannot reasonably be interpreted as a
commitment by the QF to sell electricity to the utility from which it requests a draft contract.
ORDER NO.32635 7
Something in furtherance of the QFs intent and ability to provide electricity is required.”Staff
Brief at 5.
In considering whether and when a legally enforceable obligation was incurred,
Commission Staff relied on the language in PURPA and the guidance of FERC in the Cedar
Creek case.See Notice ofIntent Not to Act and Declaratory Order,137 FERC ¶61,006 (Oct.4,
2011).Staff asserts that a legally enforceable obligation was incurred no later than December 9,
2010 —the date upon which the projects modified their on-line dates.Staff Brief at 5.“At that
time,QF projects with a design capacity of 10 aMW and smaller were entitled to Idaho’s
published avoided cost rates.Consequently,Grouse Creek Wind Park and Grouse Creek Wind
Park II are entitled to published avoided cost PURPA contracts at published rates that were in
effect on December 9,2010.”Id.at 6.
3.Idaho Power Company
Idaho Power maintains that it pursued good faith negotiations with Grouse Creek and
that any delay was not attributable to a refusal by Idaho Power to negotiate or execute a contract.
Idaho Power argues that any delay was the result of Grouse Creek’s conduct.Idaho Power states
that Grouse Creek changed the configuration of the project numerous times,did not agree to
standard contract terms and conditions until December 9,2010,did not provide final and
complete information regarding the projects’configuration until December 15,2010,and did not
commit itself to sell its output to Idaho Power until December 21,2010.Idaho Power Brief at
11.
Idaho Power asserts that it forwarded updated draft PPAs to the projects on December
7,2010,and notified Grouse Creek of missing information that was necessary for the Company
to confirm the required one-mile separation between projects.On December 9,Grouse Creek
agreed to the security provisions and requested a change in the Scheduled First Energy Date and
Scheduled Operation Date for each Agreement.On December 14,2010,Idaho Power maintains
that it sent communications to Grouse Creek requesting that the projects provide missing
necessary information to complete the draft PPAs.2 Grouse Creek confirmed the operation dates
and the legal descriptions on December 15,2010.Id.at 11-12.
2 Idaho Power maintains that the projects failed to name the transmission entity —the projects had indicated at
different times that it would either be BPA or PaciflCorp.In addition,Idaho Power states that the projects failed to
provide a complete location designation which is necessary to establish both compliance with the one-mile
separation rule and provide a proper legal description of the projects’locations.
ORDER NO.32635 8
Idaho Power states that it provided Grouse Creek with executable copies of two PPAs
on December 15,2010.Grouse Creek signed the Agreements on December 21,2010,and
returned the PPAs to Idaho Power via overnight mail.Idaho Power reviewed the Agreements
and signed on December 28,2010.Id.The Agreements were filed with the Commission on
December 29.2010.Idaho Power argues that the facts of this case are distinguishable from the
Cedar Creek case.Because Idaho Power did not refuse to enter into a contract with Grouse
Creek,the projects’legally enforceable obligation is incurred on the date that they signed the
PPAs and obligated themselves to sell output to Idaho Power —on December 21,2010.Based on
these facts,Idaho Power concludes that Grouse Creek is not eligible for published rate contracts.
Therefore,Idaho Power maintains that the Commission’s decision not to approve the contracts
should be affirmed.
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 PURPA.The Commission has authority under PURPA and the
implementing regulations of the Federal 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.
This Commission has been granted authority to implement PURPA and is the
appropriate state forum to review contracts and resolve disputes between QFs and electric
utilities.Idaho Code §61-502,61-503;A.W.Brown v.Idaho Power Co.,121 Idaho 812,816,
828 P.2d 841,845 (1992);Empire Lumber Co.v.Washington Water Power Co.,114 Idaho 191,
755 P.2d 1229 (1987).Moreover,the Commission has the authority to engage in case-by-case
analysis in setting out its standards and requirements for implementation of PURPA.Power
Resources Group v.PUC of Texas,422 F.3d 231,237 (5th Cir.2005)citing Policy Statement
Regarding the Commission’s Enforcement Role Under Section 210 of [PURPA],23 FERC ¶
61,304,1983 WL 39627 (May 31,1983);Rosebud Enterprises v.Idaho PUC,128 Idaho 609,
917 P.2d 766 (1996).It is up to the States,not FERC,
to determine the specific parameters of individual QF power purchase
agreements,including the date at which a legally enforceable obligation is
incurred under State law.Similarly,whether the particular facts applicable to
an individual QF necessitate modifications of other terms and conditions of
ORDER NO.32635 9
the QF’s contract with the purchasing utility is a matter for the States to
determine.
West Penn Power Co.,71 FERC ¶61.153 at 61,495 (1995),Accord:Jersey Central Power &
Light Co..73 FERC ¶61.092 at 61,297-61,298 (1995);Metropolitan Edison Co.,72 FERC ¶
61,015 at 61,050 (1995).FERC is not a forum for adjudicating the specific provisions of each
individual QF contract.Id.The exercise of a State commission’s discretion in the application of
PURPA standards to particular contracts has long been recognized as outside the scope of
FERC’s enforcement authority.3
This case was remanded to the Commission from the Idaho Supreme Court based on
the Stipulated Motion to Suspend the Appeal.The remand was intended to allow the
Commission to consider the implication of FERC’s Cedar Creek Declaratory Order on the
specific facts of this case.Grouse Creek relies upon FERC’s determination that this
Commission’s final Order —in the Cedar Creek case —limits ‘the creation of a legally
enforceable obligation only to QFs that have [PPAs]...signed by both parties to the
agreement.”Notice of intent Not to Act and Declaratory Order,137 FERC ¶61,006 at ¶26
(Oct.4,2011).Based on this premise,FERC stated that the Commission’s decision to not
approve the Cedar Creek PPAs was inconsistent with PURPA and FERC’s regulations
implementing PURPA.Id.Grouse Creek extrapolates from FERC’s Declaratory Order that the
Commission’s decision to not approve its two PPAs is likewise inconsistent with PURPA and
FERC’s regulations implementing PURPA.
At the outset,we note that this Commission did not and has never made a
determination that the creation of a legally enforceable obligation çpjy occurs when a QF and a
utility enter into a written and signed agreement.In our prior Orders in this case,we found that
Grouse Creek and Idaho Power entered into Agreements with one another that specifically stated
the terms and conditions of the Agreements —including the effective date.We recognized and
chose to enforce the terms of the Agreements that the parties entered into voluntarily.We
specifically noted that “each Firm Energy Sales Agreement states that the ‘Effective Date’of the
Agreement is ‘The date stated in the opening paragraph of this ...Agreement representing the
Policy Statement Regarding the Commission ‘s Enforcement Role Under Section 2/0 of the Public Utility
Regulatory Policies Act of 1978,23 FERC ¶61,304 at 61,645 (1983)(“...the Commission’s role is limited
regarding questions of the proper application of these rules on a case-by-case basis”).See Power Resource Group,
Inc.v.Pub.Utils.Comm’n of Texas,422 F.3d 231,238 (5th Cir.2005);Mass.Inst.Tech.V.Mass.Dept.ofPub.
titUs.,941 F.Supp.233,236-237 (D.Mass.1996).
ORDERNO.32635 10
date upon which this [Agreement]was fully executed by both Parties.’Agreements J 1.11.The
opening paragraph is dated this 28 day of December,2010.’Agreements at 1.”Order No.
32257 at 9;Agreements ¶5.1.We find that the Agreements were negotiated,agreed to and
executed by both parties and clearly and unambiguously state that the effective date of the PPAs
is December 28.2010.
As we previously explained.FERC regulations grant the states latitude in
implementing the regulation of sales and purchases between QFs and electric utilities.”FERC v.
Mississippi,456 U.S.742,102 S.Ct.2126,72 L.Ed.2d 532 (1982).According to FERC,“it is up
to the States,not [FERC]to determine the specific parameters of individual QF power purchase
agreements.”Rosebud Enterprises v.Idaho PUC,128 Idaho 609,623,5624,917 P.2d 766,781,
782 (1996)citing West Penn Power Co.,71 FERC II 61,153 (1995).This Commission
determined that,by the clear and unambiguous terms of the Agreements themselves,the
Agreements were not effective until December 28,2010.Order No.32299 at 7.Because the
size of each Grouse Creek project exceeds 100 kW and each Agreement became effective after
December 14,2010,we found that the terms within the Agreements,i.e.,published avoided cost
rates,did not comply with Order No.32176.Order No.32257 at 9-10;Order No.32299 at 7,8-
10.Our findings in this respect are supported by substantial and competent evidence —the
request by Idaho Power and Grouse Creek to approve its PPAs and the unambiguous terms of the
Agreements.We clearly did not make a finding that the creation of a legally enforceable
obligation çpjy occurs when a QF and a utility enter into a written and signed agreement.We
found,based on the specific facts of the two Grouse Creek projects that the parties entered into
Agreements that unequivocally state an effective date.We are simply recognizing the express
terms of the executed Agreements.This finding is entirely consistent with Idaho law and the
authority granted to us by PURPA and FERC.
It is also important to note that a declaratory order issued by FERC is not legally
binding on this Commission.A declaratory order “that does no more than announce the
[FERC’s]interpretation of the PURPA or one of the agency’s implementing regulations is of no
legal moment unless and until a district court adopts that interpretation when called upon to
enforce the PURPA.”Niagara Mohawk Power Coip.,v.FERC,117 F.3d 1485,1488,326
U.S.App.D.C.135,138 (1997).
ORDERNO.32635 11
Unlike the declaratory order of a court.which does fix the rights of the parties,
this [FERC]Declaratory Order merely advised the parties of the [FERC’s]
position.It was much like a memorandum of law prepared by the FERC staff
in anticipation of a possible enforcement action;the only difference is that the
[FERC]itself formally used the document as its own statement of position.
While such knowledge of the FERC’s position might affect the conduct of the
parties,the Declaratory Order is legally ineffectual apart from its ability to
persuade (or to command the deference of)a [district]court that might later
have been called upon to interpret the Act and the agency’s regulations in an
[sic]private enforcement action.
Industrial Cogenerators v.FERC,47 F.3d 1231,1235 (DC.Cir.1995).
In the matter before us,Grouse Creek relies on a FERC Declaratory Order,issued as
the result of an enforcement petition filed with FERC by an entirely separate QF project —Cedar
Creek.After the Declaratory Order was issued,the parties to the Cedar Creek case returned to
this Commission with terms of a stipulated settlement and requested its approval.Based on the
specific facts of the Cedar Creek case and the settlement proposal,we approved the settlement.
Order No.32419.The Grouse Creek projects are distinct in many ways.Grouse Creek has not
petitioned FERC for an enforcement order,Grouse Creek has been unable to negotiate a
settlement agreeable to all parties,and Grouse Creek is relying on a FERC Declaratory Order
that is not binding on this Commission.In addition,Grouse Creek did not sign its PPAs until
December 20,2010 —after the change in eligibility on December 14.Agreements at p.33.
Furthermore,the language of FERC’s Declaratory Order leads us to doubt whether FERC
understood the basis upon which this Commission made its initial decision to disapprove the
Agreements.
The Idaho Commission has aggressively and proactively enforced PURPA,as
evidenced by the abundance of QF projects that now operate in our State.We have a long
history of recognizing two methods by which a QF can obtain an avoided cost rate in Idaho:(1)
by entering into a signed contract with the utility;or (2)by filing a meritorious complaint
alleging that “a legally enforceable obligation”has arisen and,but for the conduct of the utility,
there would be a contract.Rosebud Enterprises v.Idaho PUC,131 Idaho 1,951 P.2d 521
(1997);see also A.W.Brown v.Idaho Power Company,121 Idaho 812,816,828 P.2d 841,845
(1992).Our application of this framework conforms with FERC’s analysis of its standards.In
JD Wind 1,FERC succinctly stated,
ORDER NO.32635 12
Thus,under our regulations,a QF has the option to commit itself to sell all or
part of its electric output to an electric utility.While this tnav be done through
a contract,if the electric utility refuses to sign a contract,the QF may seek
state regulatory authority assistance to enforce the PURPA-imposed
obligation on the electric utility to purchase from the QF,and a non-
contractual,but still legally enforceable.obligation will be created pursuant
to the state ‘s implementation of J’URPA.Accordingly,a QF,by committing
itself to sell to an electric utility,also commits the electric utility to buy from
the QF;these commitments result either in contracts or in non-contractual,
but binding,legally enforceable obligations.
JD Wind],129 FERC ¶61,148 at 61,633 (Nov.19.2009)(emphases added).FERC determined
that,regardless of whether the energy offered was firm or non-firm power,the QF was entitled to
a legally enforceable obligation because the utility in JD Wind was refusing to enter into a
contract with the OF.FERC reiterated its conclusions on reconsideration.JD Wind 1,130
FERC ¶61,127 at 61,628.The matter before this Commission involves two parties who
voluntarily entered into PPAs with negotiated terms and conditions.
Idaho’s framework for determining whether and when a QF can obtain an avoided
cost rate is entirely consistent with the federal standards as set out by FERC.Either the parties
enter into a contract or,if the utility is failing to negotiate or refusing to enter into a contract with
a QF,the QF can file a complaint with this Commission,at which time the Commission will
make a determination as to whether and when a legally enforceable obligation arose.In this
case,the parties negotiated and executed two Agreements.On December 29,2010,the parties
submitted their PPAs to the Commission for approval.A determination regarding whether and
when a legally enforceable obligation arose —outside the specific contract terms —was wholly
unnecessary.The Agreements submitted to the Commission for approval included all of the
terms and conditions negotiated and agreed to by the parties —including the effective date of the
Agreements.
It would be unreasonable and arbitrary for us to supplant the agreed upon terms of a
negotiated and signed contract with additional terms and/or conditions without a compelling
reason.Moreover,Grouse Creek urged the Commission to approve the Agreements as
submitted,When a contract has been entered into by the parties and submitted for approval,
there is no need for a determination regarding any other legally enforceable obligation.FERC
refers to a legally enforceable obligation in the disjunctive —either a contract is entered into QE
a legally enforceable obligation is created.With regard to the subject PPAs between Idaho
ORDERNO.32635 13
Power and Grouse Creek,the legally enforceable obligations of the parties are contained within
the four corners of the Agreements.
More importantly,Section 29.1 of each Agreement states that “[t]his Agreement
constitutes the entire Agreement of the Parties concerning the subject matter hereof and
supersedes all prior or contemporaneous oral or written agreements between the Parties
concerning the subject matter hereof.”Agreements ¶29.1 (emphasis added).This integration
clause4 is consistent with the general rule that “when a contract has been reduced to writing,
which the parties intend to be a complete statement of their agreement,any other written or oral
agreements or understandings..made prior to or contemporaneously with the written ‘contract’
and which relate to the same subject matter are not admissible to vary,contradict or enlarge the
terms of the written contract.”Chapman v.Haney Seed Co.,Inc.,102 Idaho 26,28,624 P.2d
408,410 (1981).Thus,Grouse Creek accepted that,by entering into the PPAs,all prior
agreements would be replaced by the terms of the written and signed PPAs —including any
agreement or understanding as to a prior legally enforceable obligation.Section 29.1 functions
as an acknowledgement by the parties that the terms of the written Agreements supersede all
prior oral or written agreements between the parties.Thomas v.Thomas,150 Idaho 636,644-
645,249 P.3d 829,837-838 (2011);Silver Syndicate v.Sunshine Mining Co.,101 Idaho 226,
235,611 P.2d 1011,1020(1979).
Grouse Creek’s arguments on remand rely on the FERC Declaratory Order as support
that Grouse Creek perfected a legally enforceable obligation “no later than November 8,2010”
(the date that Grouse Creek filed complaints against Idaho Power)or alternatively,it established
a legally enforceable obligation “at the very latest on December 9,2010.”Brief at 3.In either
case,Grouse Creek asserts that it formed a legally enforceable obligation prior to December 14,
2010 —the date that the eligibility cap for published avoided cost rates decreased to 100 kW.Id.
at 2.Even assuming,arguendo,that a legally enforceable obligation could somehow preempt
the terms of subsequently written and signed Agreements between the parties,we find that a
legally enforceable obligation did not exist prior to December 14,2010.
Turning first to the November 8 date,we find this claim unsupported by the evidence
for two reasons.First,we acknowledge that Grouse Creek filed a complaint on November 8,
‘In Primary Health Network v.Idaho Dept.of Administration,the integration clause stated that “the Agreement
supersedes all prior and contemporaneous arrangements,understandings,negotiations and discussion.”137 Idaho
663,668 n.2,52 P.3d 307 312 n.2 (2002).
ORDER NO.32635 14
2010 —just three days after the Joint Motion to Reduce the Published Rate Eligibility’Cap was
filed by the utilities.However,Grouse Creek subsequently’requested that the Commission not
serve a summons on Idaho Power because the parties were negotiating and had tentatively
reached a settlement.Indeed,a summons was never issued and the parties filed two PPAs for
approval with this Commission six weeks later.The complaint process did not need to be
initiated because the parties were actively negotiating terms of their Agreements.Grouse Creek
also urged the Commission in its written comments in the PPA cases to approve the PPAs —it
did not pursue the complaints.Comments at 24.Second,the parties subsequently negotiated
and executed PPAs that specifically included language about the written Agreements
superseding all prior agreements.See supra pp.13-14.Based on these facts,we cannot find that
a legally enforceable obligation arose on or by November 8,2010.
The utility did not refuse to sign a contract.In fact,ongoing negotiations led to the
parties’voluntarily entering into two subsequent PPAs.Grouse Creek never initiated a
complaint process because Agreements were negotiated and Grouse Creek urged the
Commission to approve the terms of the Agreements.We find that no conduct by the utility
unnecessarily delayed or impeded Grouse Creek’s ability to enter into its Agreements.Because
the utility did not impede Grouse Creek’s ability to enter into PPAs,a determination regarding a
legally enforceable obligation was never triggered.This Commission did not substitute a fully
executed contract”standard in place of a “legally enforceable obligation,”nor did we require a
fully executed contract as a condition precedent to the creation of a legally enforceable
obligation.We simply acknowledged the distinction between the concepts and looked to the
terms of the unambiguous Agreements signed by both parties and submitted to the Commission
for approval.Grouse Creek cannot now argue against terms that are included in its contracts
simply because those terms do not provide it with a favorable outcome.
We also find that the evidence and the conduct of the parties do not support that a
legally enforceable obligation was formed no later than December 9,2010.First,on December
9,2010,Grouse Creek requested that the PPAs be amended to delay the two operational dates by
six months.Brief at 14-15.In addition,Idaho Power notes that it requested information on both
December 7 and December 14,2010,and notified Grouse Creek that the projects failed to
provide a complete location designation which is necessary to establish both compliance with the
one-mile separation rule and provide a proper legal description of the projects’locations.Idaho
ORDER NO.32635 15
Power also maintains that the projects failed to name the transmission entity —Grouse Creek had
indicated at different times that it would either be BPA or PacifiCorp.Grouse Creek confirmed
the operation dates and the legal descriptions on December 15,2010 —a day after the eligibility
cap was reduced.Id.at 11-12.Idaho Power formally agreed to the delay on December 16,2010.
Id.at 15.
After receiving the final material terms,Idaho Power forwarded executable PPAs to
Grouse Creek for signature on December 16,2010.Brief at 15-16.Grouse Creek reviewed the
documents and signed the PPAs four days later —on December 20,20l0.Idaho Power
reviewed the documents and signed on December 28,2010.Consequently,we find that
negotiations were on-going and that material terms to the Agreements were still in flux on and
after December 14,2010 —the date upon which eligibility to published avoided cost rates
became effective.Therefore,assuming that a determination regarding when a legally enforceable
obligation arose is necessary,we find that a legally enforceable obligation did not arise prior to
December 14,2010,because material terms to the Agreements were still incomplete on that date.
Finally,this Commission determined that it was not in the public interest to approve
the Agreements.Specifically,we found that “allowing a project to avail itself of an eligibility
cap (and therefore published rates)that is no longer applicable could cause ratepayers to pay
more than the utility’s avoided cost.”Order No.32299 at 8.For this Commission to approve a
rate in excess of the utility’s avoided cost would clearly be a violation of PURPA and FERC’s
implementing regulations.A.W.Brown,121 Idaho 812,818,828 P.2d 841,847 (1992).
We find that Idaho Power and Grouse Creek were in the process of actively
negotiating terms of two PPAs when the eligibility for published avoided cost rates changed.
The parties entered into their contracts on December 28,2010.By the express terms of the
Agreements negotiated and signed by the parties,the Agreements’effective date”is December
28,2010 —the “date stated in the opening paragraph of this [Agreement]representing the date
upon which this [Agreement]was fully executed by both Parties.”Agreements ¶J 1.11.Because
the parties have existing contracts,and we find no undue or unreasonable delay on the part of
Idaho Power,a determination of the existence of a legally enforceable obligation at another point
in time is unnecessary.Moreover,the parties agreed that all prior agreements were superseded
The affidavit and comments both state that the PPAs were signed on December 21,2010,but the PPAs themselves
show the date as December20,2010.
ORDER NO.32635 16
by the December 28,2010 PPAs.Here the Commission did not have to determine whether a
legally enforceable obligation arose because the parties entered into written Agreements.
Therefore,we affirm our prior decision that,because each PPA became effective on December
28,2010,and each project is larger than 100 kW,published rates are not available to the
projects.6 We also find that the Agreements expressly supersede all prior agreements,including
any entitlement to an otherwise enforceable legal obligation.The rates in the Agreements,as
written,do not comply with Commission Order No.32176.These findings are consistent with
the expressed intent and spirit of PURPA and the FERC regulations.
ORDER
IT IS HEREBY ORDERED that the Power Purchase Agreements between Idaho
Power and Grouse Creek Wind Park and Grouse Creek Wind Park IT are not approved because
the rates included in the Agreements were no longer available at the time the Agreements were
executed and became effective.
THIS IS A FINAL RECONSIDERATION ORDER ON REMAND.Any party
aggrieved by this Order may appeal to the Supreme Court of Idaho as provided by the Public
Utilities Law and the Idaho Appellate Rules.See Idaho Code §61-627.
6 The same reasoning would apply if we were to use the date (December 20,2010)that Grouse Creek signed the
Agreement.
ORDERNO.32635 17
—i•14iDONEbyOrderoftheIdahoPublicUtilitiesCommissionatBoise,Idaho this /
day of September 2012.
PAUL KJELLAND R,PRESIDENT
MACK A.REDFOPØMMISSIONER
‘J4tL fJL
MARSHA H.SMITH,COMMISSIONER
ATTEST:
/1,I /
Jean D Jewell
Cl5mmission Secretary
O:IPC-E-I O-611PC-E-I O-62ks7
ORDERNO.32635 18