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 11, 2011

SUBJECT: IDAHO POWER’S TWO APPLICATIONS FOR A DETERMINATION
REGARDING POWER PURCHASE AGREEMENTS WITH GROUSE
CREEK WIND PARK AND GROUSE CREEK WIND PARK II, CASE
NOS. IPC-E-10-61 AND IPC-E-10-62, RESPECTIVELY.

On December 29, 2010, Idaho Power Company filed Applications requesting
acceptance or rejection of two 20-year Firm Energy Sales Agreements (Agreements) between
Idaho Power and Grouse Creek Wind Park, LLC and Grouse Creek Wind Park II, LLC. The two
projects (Facilities) are both located near Lynn, Utah. The projects will be “qualifying facilities”
(QFs) under the applicable provisions of the federal PURPA.
THE AGREEMENTS
On December 28, 2010, Idaho Power and each of the two 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 nameplate rating of each Facility is 21
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 wind
resources. Order Nos. 30415, 30488, 30738 and 31025.
Each Facility has selected June 1, 2013, as its Scheduled First Energy Date and
December 1, 2013, 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
DECISION MEMORANDUM 2
Facilities’ energy deliveries. Idaho Power states that it will 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 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 1, 2013, Scheduled Operation Date.
The Applications state that each Facility “is currently in the beginning stages of the
generator interconnection process. [Each] Facility is located outside of Idaho Power’s service
territory and thus must complete the interconnection process with a different host utility.” Id. at
6. The Agreements require each Facility to acquire interconnection and continuous firm
transmission capacity to a Point of Delivery on Idaho Power’s system. 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 Facility fails to achieve its Scheduled Operation Date delay
damages will be assessed. Id. 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.
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] 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.
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
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 Commission has specifically
directed the utility “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.” 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 24, 2011.
COMMISSION DECISION
Does the Commission agree with the recommendation that each of these two Power
Purchase Agreements be processed under Modified Procedure with a comment deadline of
March 24?

M:IPC-E-10-61_IPC-E-10-62_ks