20120206Memorandum on Remand.pdf

RECEIVE
eHIDA~POR~
An IDACORP Company
DONOVAN E. WALKER
Lead Counsel
dwalker(ëidahopower.com
February 6, 2012
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilties Commission
472 West Washington Street
Boise, Idaho 83702
Re: Case No. IPC-E-10-62
IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
FOR A DETERMINATION REGARDING A FIRM ENERGY SALES
AGREEMENT BETWEEN IDAHO POWER AND GROUSE CREEK WIND
PARK II, LLC
Dear Ms. Jewell:
Enclosed for filng please find an original and seven (7) copies each of Idaho
Power Company's Memorandum on Remand and the Affidavit of Randy Allphin in
Support of Idaho Power Company's Memorandum on Remand in the above matter.
DEW:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
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e
DONOVAN E. WALKER (ISB No. 5921)
JASON B. WILLIAMS (ISB No. 8718)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalker(gidahopower.com
jwilliams(gidahopower.com
Attorneys for Idaho Power Company
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RECEIVED
1012 FEB -6 PH 4: 36
1""°" I";'''' I")l' !':', lC'
I U ¡H r ,U " è~'" -,.'
UTllIT!ES COMMìSSION
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
GROUSE CREEK WIND PARK, LLC
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT
BETWEEN IDAHO POWER AND
GROUSE CREEK WIND PARK II, LLC
)
) CASE NO. IPC-E-10-61
)
) IDAHO POWER COMPANY'S
) MEMORANDUM ON REMAND
)
)
)
) CASE NO. IPC-E-10-62
)
) IDAHO POWER COMPANY'S
) MEMORANDUM ON REMAND
)
)
Idaho Power Company ("Idaho Powet' or "Company"), in response to Order No.
32430, hereby respectfully submits the following Memorandum on Remand:
I. INTRODUCTION
The relevant background is recited by the Idaho Public Utilties Commission
("IPUC" or "Commission") in its Notice of Scheduling and Notice of Oral Argument for
this matter, Order No. 32430, Case Nos. IPC-E-10-61 and IPC-E-10-62. On July 27,
2011, the Commission issued a Final Order on Reconsideration affrming its prior
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 1
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decision to not approve two Power Purchase Agreements ("PPAs" or "Agreements")
entered into between Grouse Creek Wind Park, LLC, and Grouse Creek Wind Park II,
LLC ("Grouse Creek" or "Projects") and Idaho Power pursuant to the Public Utilty
Regulatory Policies Act of 1978 ("PURPA"). Order No. 32299. 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 eligibilty for PURPA published avoided
cost rates in Idaho changed from 10 average megawatts ("aMW") to 1 00 kilowatts
("kW") for wind and solar qualifying facilties ("OF"). 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 no longer available to the Projects.
On September 7, 2011, the Projects filed a Notice of Appeal of the Commission's
Order to the Idaho Supreme Court. On October 4, 2011, the Federal Energy Regulatory
Commission ("FERC") issued an Order in a similarly situated case that the IPUC's
decision to not approve the PPAs was inconsistent with PURPA and FERC's
regulations implementing PURPA. Notice of Intent Not to Act and Declaratory Order,
137 FERC 61006 (Oct. 4, 2011). On November 3, 2011, in response to FERC's Order,
the Projects, the IPUC, and Idaho Power ("Parties") filed a Stipulated Motion to
Suspend Appeal and Remand to the Administrative Agency with the Idaho Supreme
Court. That Motion was granted and the appeal was suspended unti March 15, 2012,
or until the IPUC has completed its review on remand. Order Granting Stipulated
Motion to Suspend Appeal and Remand to the Administrative Agency, Supreme Court
Docket No. 39151-2011, (Nov. 22, 2011).
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 2
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As indicated in the Stipulated Motion, the Parties asked that the appeal be
suspended: (1) to allow the IPUC to reconsider its Order in this matter in light of the
FERC Order and (2) to provide the Parties with an opportunity to discuss the possibilty
of settling the appeaL. The Commission stated in its Notice of Scheduling, Order No.
32430, "Given the agreement of the Parties, we find that settlement discussions are
reasonable and in the public interest . . .. The Commission also finds that it is
appropriate to grant a further rehearing so that the Commission may reconsider its
Order No. 32299 issued July 27,2011." Order No. 32430, p. 2.
Factual information regarding Idaho Powets processes for receiving requests,
negotiating, and executing power purchase agreements pursuant to PURPA and
generator interconnect agreements is contained in the Company's Reply Comments
filed in this proceeding on March 31, 2011. With this Memorandum on Remand, the
Company submits factual information regarding the negotiation and processing of the
Projects' PURPA power purchase agreements, and considers the same in the context
of FERC's Notice of Intent Not to Act and Declaratory Order, 137 FERC 61006 (Oct. 4,
2011) ("Cedar Creek Ordet'). Upon the Commission's reconsideration of Order No.
32299, the record establishes that Idaho Power negotiated with the Projects in good
faith, did not unreasonably delay or hinder the Projects' abilty to obtain a PURPA PPA,
did not refuse to sign a contract with the OF, and that a legally enforceable obligation to
receive published avoided cost rates for the Projects did not exist prior to December 14,
2010. Consequently, the decision not to approve the submitted PPAs in Order No.
32257 should be affrmed.
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 3
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II. THE FERC CEDAR CREEK ORDER
Although Grouse Creek was not a part to FERC Docket No. EL 11-59-000, nor
Cedar Creek Wind, LLC's Petition for Enforcement against the IPUC, Cedar Creek's
Petition concerned the IPUC's disapproval of its PPAs with Rocky Mountain Power in a
similar manner as Grouse Creek's PPAs with Idaho Power that were also disapproved
by the IPUC. Initially, it is important to note that FERC's Cedar Creek Order declines to
initiate an enforcement action against the IPUC. Notice of Intent Not to Act and
Declaratory Order, 137 FERC 61006, p. 1 (Oct. 4, 2011). The Cedar Creek Order is not
directly controllng as to Grouse Creek, as Grouse Creek did not seek enforcement at
FERC. The factual situation of Grouse Creek is distinct from that of Cedar Creek. That
said, the Cedar Creek Order may be instructive to this Commission in a similar manner
as dicta appearing in the decision of an appellate court, as it contains FERC's
understanding of some issues related to legally enforceable obligations.
Subsequent to declining the requested enforcement action against the IPUC,
FERC went on to comment about the IPUC's decision disapproving the Cedar Creek
PPAs in its declaratory order. FERC addressed the portion of the IPUC's Order that
found, "a Firm Energy Sales Agreement/Power Purchase Agreement must be executed,
i.e., signed by both parties to the agreement, prior to the effective date of the change in
eligibilty criteria." 137 FERC 61006, p. 6, see also Order No. 32257, p. 10. In
response to Cedar Creek's request to declare that a state commission may not limit
legally enforceable obligations to fully executed contracts, FERC stated, "we find that
the Idaho PUC decision denying Cedar Creek a legally enforceable obligation,
specifically the requirement in the June 8 Order that a Firm Energy Sales
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 4
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Agreement/Power Purchase Agreement must be executed by both parties to the
agreement before a legally enforceable obligation arises, is inconsistent with PURPA
and our regulations implementing PURPA." 137 FERC 61006 p. 7.
FERC acknowledged that certainly a legally enforceable obligation exists at the
point in time when both parties have executed the PPA. Id., at p. 9 ("a legally
enforceable obligation includes, but is not limited to, a contract."). In addition FERC
goes on to describe that the main reason why the "legally enforceable obligation"
language exists in its PURPA regulations, and the reason why a legally enforceable
obligation cannot be limited only to when both parties have signed the contract, are the
same. That reason is to address "the problem of an electric utilty avoiding PURPA
requirements simply by refusing to enter into a contract with a OF." Id., at pp. 9, 7, 10.
FERC next turns to the facts of Cedar Creek's particular contracts and their
negotiation. Although FERC finds, "that Idaho PUC's June 8 Order ignores the fact that
a legally enforceable obligation may be incurred before the formal memorialization of a
contract to writing" it also states, "Whether the conduct of Cedar Creek and Rocky
Mountain Power constituted a legally enforceable obligation subject to the
Commission's (FERC's) PURPA regulations is not before us." Id. at pp. 9-10. FERC
then goes on to recite an abbreviated timeline of the contract negotiations as submitted
by Cedar Creek. Id., at p. 10. FERC ends this recitation with a particular statement that
significantly distinguishes Cedar Creek's facts from those of Grouse Creek. "Cedar
Creek executed and delivered the Agreements to Rocky Mountain Power on December
13, 2011; notwithstanding having documents signed by Cedar Creek, Rocky Mountain
Power management refused to sign. Rocky Mountain Power held the Agreements for
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 5
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over a week, making no changes, before they signed them on December 22,2010." Id.
at p. 10 (emphasis added).
Notably, FERC specifically states that it is "not ruling on the issue of whether a
legally enforceable obligation was incurred." Id. at p. 11. FERC also acknowledges that
prior precedent establishes that FERC "gives deference to the states to determine the
date on which a legally enforceable obligation is incurred," albeit subject to the terms of
FERC's regulations. Id., at p. 9. Consequently, while FERC provides guidance in the
Cedar Creek Order that it is inconsistent with FERC's regulations for a state
commission to limit a legally enforceable obligation only to when a fully-executed
contract exists, FERC specifically declined to state whether a legally enforceable
obligation exists under the facts as presented by Cedar Creek. Additionally, FERC
acknowledged that a state commission is entitled deference as to when a legally
enforceable obligation arises when one does exist.
Since the stated purpose of this remand is for the IPUC to reconsider its Final
Order on Reconsideration related to the Grouse Creek Projects in light of the FERC's
Cedar Creek Order, the remaining question is whether a legally enforceable obligation
arose, under the particular facts applicable to Grouse Creek's PPAs, prior to December
14, 2010, when the published rate eligibility cap changed from 10 aMW to 100 kW.
Examination of Grouse Creek's facts shows that a legally enforceable obligation did not
arise prior to December 14, 2010. As noted above, of particular distinction is the fact
that Idaho Power did not cause the December 14, 2010, date to pass by refusing to sign
Grouse Creek's PPAs. In fact, Idaho Power did not receive complete information from
Grouse Creek unti after December 14, 2010. Additionally, Grouse Creek did not
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 6
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obligate itself to sell its electricity to Idaho Power until well after December 14, 2010,
when it signed the PPA on December 21, 2010.1 Consequently, the decision not to
approve Grouse Creek's PPAs in Order No. 32257 should be affirmed.
II. NEGOTIATION OF GROUSE CREEK'S POWER PURCHASE AGREEMENTS
Idaho Power had numerous and frequent contacts and communications with
Grouse Creek regarding several iterations of its proposed project and projects over the
course of most of 2010. Idaho Power negotiated and proceeded with Grouse Creek in
good faith negotiations and attempts to move Grouse Creek's proposed projects to final
agreements pursuant to its PURPA obligations. Any delay was not attributable to a
refusal by Idaho Power to negotiate nor any refusal by Idaho Power to execute a
contract. Any delay that occurred was attributable to the fact that Grouse Creek
changed the configuration of its project numerous times, did not agree to previously
approved standard contract terms and conditions until December 9, 2010, did not
provide final and complete information about its projects' configuration unti December
15, 2010, and did not commit itself to sell its output to Idaho Power until December 21,
2010.
The course of dealings and many of the written communications between Grouse
Creek and Idaho Power are set forth in the accompanying Affidavit of Randy Allphin.
The totality of these communications demonstrate that Idaho Power proceeded in good
faith and fair dealings with Grouse Creek through many iterations of its proposed
Projects and did not unreasonably delay the Projects. Idaho Power was first contacted
1 One need only look to another open docket currently before this Commission, Case No. IPC-E-
11-23, to see an example of where a OF, Kootenai Electric, backed out of a negotiated agreement, after
substantial development and negotiations with the utility, Avista, to seek an agreement with a diferent
utility, Idaho Power, in a different jurisdiction, Oregon, pursuant to PURPA.
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 7
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by Grouse Creek in late February 2010. Idaho Power records indicate it was initially
contacted by Wasatch Wind, the developer behind the Projects, on February 26, 2010.
Affidavit of Randy Allphin, Attachment NO.1. The initial Wasatch Wind project was a
single 150 megawatt ("MW") project spread across 4,000 acres of private and public
land located in northern Utah. Grouse Creek Comments at 8. Discussions between
Wasatch Wind and Idaho Power on the single 150 MW project continued until April
2010, when Wasatch Wind informed Idaho Power that it was now considering a single
65 MW project instead of the previously discussed 150 MW project. Because this
proposed project was a OF larger than 10 aMW, Idaho Power prepared pricing for the
proposed project based upon its Integrated Resource Plan ("IRP")-based pricing
methodology, pursuant to Commission requirements. See Order No. 32176. Idaho
Power analyzed this proposal pursuant to the IRP-based methodology and provided
Wasatch Wind with the results, including a proposed price. Affidavit of Randy Allphin,
Attachment NO.4.
Three months later, Wasatch Wind once again changed the configuration of its
proposed project and informed Idaho Power on July 14, 2011, that it "intended to reduce
its overall footprint and wished to discuss power sales contracts for two single 10 aMW
projects, instead of a large 65 MW project." Grouse Creek Comments at 13. Idaho
Power records indicate that initially Wasatch Wind was anticipating two projects, one
with a 30 MW nameplate capacity and the other with a 21 MW nameplate capacity.
Consistent with its existing processes, Idaho Power began drafting PPAs for these two
projects. During negotiations, Wasatch Wind continued to object to certain terms in the
PPAs related to Idaho Powets standard security deposit requirements. Grouse Creek
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 8
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Comments at 15. In addition, and consistent with prudent utility business practices,
Idaho Power required confirmation from Wasatch Wind that since its proposed projects
were located off Idaho Powets system, the Projects would need to provide suffcient
evidence of the proper arrangements to deliver its output to Idaho Powets system. As
Grouse is an off-system QF, Idaho Power's obligation to contract with the Projects
pursuant to PURPA does not arise until the Projects demonstrate a firm delivery to a
point on Idaho Powets system.
Discussions continued between the parties and during August communications
were exchanged regarding clarification as to the Project configuration, the number of
proposed Projects, accuracy of the data, and the requirements of 10 aMW and one-mile
separation. Affdavit of Randy Allphin, Attachment NO.6. On October 1, 2010, Grouse
Creek sent formal correspondence through legal representation for now two Projects,
Grouse Creek Wind and Grouse Creek Wind II. The letter requests PPAs, provides
information, objects to the posting of security required by the contracts, changes the
project from 30 MW to 21 MW, and requests revision of the transmission service
request ("TSR") from 30 MW to 21 MW, among other things. Id., Attachment NO.7. On
November 1, formal correspondence was sent to counsel for Grouse Creek responding
to the October 1 letter and pointing out several of the open items remaining with the
various proposed projects. Also forwarded with these letters were copies of: required
Network Resource Integration Study Agreements, required Transmission Capacity
Application Questionnaires, and Draft Firm Energy Sales Agreements. Id., Attachment
NO.8. On November 4, Idaho Power notified the Projects that the submitted TSRs were
rejected because the information provided by the Project did not sync up with the
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 9
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Project's transmission requests on BPA's system. The communication asks for updated
transmission information from the Project that was needed to proceed with the TSRs,
and advised of the need for ancilary services. Id., Attachment NO.9. On November 24,
Idaho Power sent correspondence confirming a prior letter and meeting between the
Project and Idaho Power, and summarizing the current status of negotiations as to
some of the previously contested terms and conditions. Id., Attachment NO.9.
On December 2, 2010, Wasatch Wind sent marked-up versions of Draft PPAs
previously sent by Idaho Power. Id., Attachment No. 10; Grouse Creek Comments at
17. These mark-ups were the first time Idaho Power was definitively informed of the
Projects' size and configuration (i.e., two 21 MW projects). Negotiations continued
between the parties, and on December 6, Idaho Power received a revised Transmission
Questionnaire from the Projects containing corrected information for re-submission of
the TSRs, which was forwarded to Idaho Power transmission on the same day.
Affidavit of Randy Allphin, p. 5. On December 7, Idaho Power forwarded updated Draft
PPAs for the Projects, incorporating the information provided by the Projects, and
working toward executable versions of the FESAs. This communication also notifies the
Projects of missing information from the Projects necessary to confirm the required one-
mile separation between the Projects and necessary to complete the Draft FESAs. Also
on December 7, Idaho Power began the internal review process on the Draft FESAs,
even though they were not yet complete, nor accepted by the Projects, so as not to
unduly impede the ultimate execution of the FESAs once accepted by the Projects,
since the December 14, 2010, date previously set by the Commission as the effective
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 10
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date for the reduction in the published rate eligibilty cap to 100 kilowatts was drawing
near. Id., Attachment No. 12.
On December 9, 2011, Grouse Creek sent communication confirming the
Projects' agreement to the security provisions of the contract and requesting a change
in the Scheduled First Energy Dates as well as the Scheduled Operation Dates. Id.,
Attachment No. 12. On December 14, 2010, Idaho Power sent communications to
Grouse Creek requesting that the Projects provide missing necessary information
required for completion of the Draft FESAs. This information included naming the
proper transmission entity, as previous communications from the Projects had indicated
at different times both BPA and PacifiCorp. This communication also requested, again,
that the Project provide a complete location designation, which is necessary to establish
the proper one-mile separation and legal description of the Projects' location. Id.,
Attachment No. 13.
On December 15, 2010, Idaho Power sent an e-mail confirming Idaho Powets
receipt and acceptance of the Projects' revised First Energy and Scheduled Operation
dates, and indicating the same would be incorporated into the final Draft FESAs. This
communication also reiterates Idaho Powets December 14 request from the previous
day for additional required information regarding the Transmitting Entity and completion
of the location description for the Projects. The Projects were informed that this
information was required to continue processing the proposed agreements. Id.,
Attachment No. 14.
On December 15, Idaho Power requested Grouse Creek's confirmation that the
Scheduled First Energy and Scheduled Operation Dates, as well as the location
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 11
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description for the Projects, were correct. This information was confirmed on December
16, by the Projects. Id., Attachment No. 15. On that same day, Idaho Power provided
execution copies of the PPA that were picked up from Idaho Powets offce by the
Projects' counseL. From December 16 through December 21, Grouse Creek reviewed
the Draft Agreements, and on December 21, 2011, Grouse Creek executed the PPAs
and sent them via overnight mail to Idaho Power. Idaho Power executed the PPAs on
December 28,2010, and filed them at the Commission the next day.
iv. CONCLUSION
Idaho Power did not refuse to sign a contract with Grouse Creek. As FERC
stated:
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 may be done through a contract, if the
electric utilty refuses to sign a contract, the QF may seek
state regulatory authority assistance to enforce the PURPA-
imposed obligation on the electric utilty to purchase form the
QF, and a non-contractual, but stil legally enforceable,
obligation wil be created pursuant to the state's
implementation of PRUPA.
137 FERC 61006 p. 8.
Not only is it clear that Idaho Power did not refuse to sign a contract with Grouse
Creek, the record demonstrates that Idaho Power proceeded reasonably and in good
faith in the negotiation and eventual signing and execution of the published avoided cost
rate 10 aMW PURPA contracts with the Projects as required by the then current
applicable law, rules, and regulations. Examination of Grouse Creek's facts shows that
a legally enforceable obligation did not arise prior to December 14, 2010. As noted
above, of particular distinction is the fact that Idaho Power did not cause the December
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 12
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14, 2010, date to pass by refusing to sign Grouse Creek's PPAs, nor by refusing to
negotiate with the QF. In fact, Idaho Power did not receive complete information,
required to finalize the PPAs, from Grouse Creek until after December 14, 2010.
Additionally, Grouse Creek did not obligate itself to sell its electricity to Idaho Power
until well after December 14, 2010, when it eventually signed the PPAs on December
21, 2010. The main concern of FERC in the Cedar Creek Order - that a utilty would
avoid the requirements of PURPA by refusing to enter into a contract with a QF is not
implicated by the above facts. Grouse Creek did not obligate itself to sell its output to
Idaho Power until it signed the PPAs on December 21, 2010, and thus a legally
enforceable obligation did not exist prior to the December 14 effective date. In fact
Grouse Creek reviewed and considered said draft PPAs from December 16, when it
picked up execution drafts from Idaho Power, until its eventual signature on December
21. Consequently, the decision not to approve Grouse Creek's PPAs in Order No.
32257 should be affirmed.
DATED at Boise, Idaho, this 6th day of February 2012.
OVAN E. WALKER
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 13
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 6th day of February 2012 I served a true and
correct copy of IDAHO POWER COMPANY'S MEMORANDUM ON REMAND upon the
following named parties by the method indicated below, and addressed to the following:
Commission Staff
Kristine Sasser
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
Grouse Creek Wind Park, LLCs
Brett Woodard
Wasatch Wind Intermountain, LLC
2700 Homestead Road, Suite 210
Park City, Utah 84098
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY, PLLC
515 North 2ih Street (83702)
P.O. Box 7218
Boise, Idaho 83707
-- Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-- Email Kris.Sasser(gpuc.idaho.gov
Hand Delivered
-- U.S. Mail
_ Overnight Mail
FAX
-- Email bwoodard(gwasatchwind.com
Hand Delivered
-- U.S. Mail
_ Overnight Mail
FAX
-- Email
IDAHO POWER COMPANY'S MEMORANDUM ON REMAND - 14