20110324Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
RECEIVED
iOll MAR 24 PM 4: 02
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-IO-61
)
)
)
)
)
)
) CASE NO. IPC-E-IO-62
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)
) COMMENTS OF THE
) COMMISSION STAFF
)
COMES NOW the Staff of the Idaho Public Utilities 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. 32191 on February 24, 2011,
in Case Nos. IPC-E-1O-61 and IPC-E-I0-62, submits the following comments.
BACKGROUND
On December 29,2010, Idaho Power Company fied 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
(Facilties) are both located near Lynn, Utah. The projects wil be "qualifying facilities" (QFs)
STAFF COMMENTS MARCH 24, 2011
under the applicable provisions of the Public Utility Regulatory Policies Act of 1978 (PURP A).
Idaho Power requests that its Applications be processed by Modified Procedure.
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-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 Facility is 21
MW. Under normal and/or average conditions, each Facility wil not exceed 10 aMW on a
monthly basis. Idaho Power warants 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 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 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 sufficient 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 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 ofIdaho Power's service
territory and thus must complete the interconnection process with a different host utilty." ¡d. 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 wil
be assessed. ¡d. 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. 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.
STAFF COMMENTS 2 MARCH 24, 2011
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 paries' 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.
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 puroses.
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. Id at 3.
However, Idaho Power asserts in each of its Applications that the Commission has specifically
directed the utilty "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 Planing
process and creates system reliabilty and operational issues, but it also increases the price its
customers must pay for their energy needs." Id at 4.
STAFF ANALYSIS
Both of the Agreements submitted for approval are identical except for the names of the
facilties 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.
STAFF COMMENTS 3 MARCH 24, 2011
The two facilities collectively are expected to generate 128,887 MWhs anually. Under the
non-Ievelized rates in the Agreements, the anual energy payments by Idaho Power for the
expected generation will be approximately $8.3 milion in 2014 increasing to approximately $15.9
milion in 2033, or a cumulative total of$236.4 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 $83.8 million.
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 (Utilities) filed 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 eligibilty 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 paricular, the Commission stated its desire to receive comments
regarding the following:
(1) the advisability of reducing the published avoided cost eligibilty cap;
(2) if the eligibility 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 utilize 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 eligibilty cap may be
reduced.
STAFF COMMENTS 4 MARCH 24, 2011
Written comments were submitted by the parties on December 22, 2010, written reply
comments were submitted on January 19,2011, and Oral Argument was heard on January 27,
2011. On February 7, 2011, the Commission issued Order No. 32176 which temporarily reduced
the eligibilty cap for published avoided cost rates from 10 aMW to 100 kW 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 eligibility 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 20,2010, and signed by Idaho Power on December 28,2010. The
Agreements were fied with the Commission on December 29,2010. 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 kW 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 28,2010.
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
facilities 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-II-0l in which the Commission wil determine the disposition of its prior
decision to temporarily lower the eligibilty cap from 10 aMW to 100 kW.
STAFF COMMENTS 5 MARCH 24, 2011
STAFF RECOMMENDATION
Staff recommends that the Commission not approve either of the two Agreements.
Respectfully submitted this ¡ip1 day of March 2011.
~~ J a. £.4OA
Kris me A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentslipce i 0.6 i _ 62ksrps comments
STAFF COMMENTS 6 MARCH 24, 2011
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF MARCH 2011,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NOS. IPC-E-1O-61_62, BY MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
DONOV AN E WALKER
LISA D NORDSTROM
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(fidahopower.com
Inordstrom(fidahopower .com
RANDY C ALLPHIN
ENERGY CONTRACT ADMIN
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707.0070
E-MAIL: rallphin(fidahopower.com
BRETT WOODARD
WASATCH WIND INTERMOUNTAIN
STE 210
2700 HOMESTEAD RD
PARK CITY UT 84098
,1oß~SECRET~ . ..
CERTIFICATE OF SERVICE