20110407Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
RECEIVED
2U1\ APR -1 PH \ti 00
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
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 WITH )
WESTERN DESERT ENERGY, LLC FOR THE )
SALE AND PURCHASE OF ELECTRIC )
ENERGY.
CASE NO. IPC-E-ll-Ol
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Kristine 1. Sasser, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 32203 on March 10,2011, in
Case No. IPC-E-11-01, submits the following comments.
BACKGROUND
On February 2, 2011, Idaho Power Company filed an Application requesting acceptance or
rejection of a 20-year Firm Energy Sales Agreement (Agreement) between Idaho Power and
Western Desert Energy, LLC. The project (Facility) is located near Oreana, Idaho. The project wil
be a "qualifying facility" (QF) under the applicable provisions of the federal PURPA. Idaho Power
requests that its Application be processed by Modified Procedure.
On January 28,2011, Idaho Power and Western Desert entered into an Agreement wherein
Western Desert proposes to design, construct, install, own, operate, and maintain a 5 MW
STAFF COMMENTS 1 APRIL 7, 2011
(maximum capacity) wind generating Facility. Under the terms of the Agreement, the Facilty
agrees to sell electric energy to Idaho Power for a 20-year term using the current non-Ie~lized
published avoided cost rates as curently established by the Commission in Order No. 31025 for
energy deliveries ofless than 10 aMW. Application at 4. Under normal and/or average conditions,
the Facilty wil not exceed 10 aMW on a monthly basis. Idaho Power warrants that the Agreement
comports 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.
The Facilty has selected September 1,2012, as its Scheduled First Energy Date and
December 1,2012, as its Scheduled Operation Date. Application at 5. Idaho Power asserts that
various requirements have been placed upon the Facilty in order for Idaho Power to accept the
Facility's energy deliveries. Idaho Power states that it wil monitor the Facility's compliance with
initial and ongoing requirements through the term of the Agreement. Idaho Power asserts thatthe
Facilty has been advised that delays in the interconnection or transmission process do not constitute
excusable delays and if the Facility fails to achieve its Scheduled Operation Date delay damages
wil be assessed. ¡d. at 6. 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.
By its own terms, the Agreement 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
Facilty for purchases of energy wil be allowed as prudently incurred expenses for ratemaking
puroses. Agreement ~ 21.1.
Idaho Power's Application specifically notes the Joint Petition it fied with the Commission
on November 5, 2010, requesting an immediate reduction in the published avoided cost rate
eligibilty cap from 10 aMW to 100 kW. Application at 2. Idaho Power states that it is aware of
and in compliance with its ongoing obligation under federal law, FERC regulations, and Idaho
Public Utilties Commission Orders to enter into power purchase agreements with PURP A QFs. ¡d.
at 3. However, Idaho Power asserts that the Commission has specifically directed the utilty "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. Idaho Power furter 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
STAFF COMMENTS 2 APRIL 7, 2011
operational issues, but it also increases the price its customers must pay for their energy needs." ¡d.
at 4.
ST AFF ANALYSIS
The Facility is expected to generate 12,930 MWhs annually. Under the non-Ievelized rates
in the Agreement, the annual energy payments by Idaho Power for the expected generation wil be
approximately $ 0.8 milion in 2013 increasing to approximately $1.5 millon in 2031, or a
cumulative total of $23.3 milion over the 20-year term of the Agreement. The net present value of
the energy payments over the life of the Agreement wil be approximately $8.7 milion.
With the exception of rates, all of the other terms and conditions included in the Agreement
are consistent with recent Commission orders. There are no disputes between the parties 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 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 eligibilty cap, but did establish a schedule for
processing the Utilties' request to reduce the eligibilty 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 advisabilty of reducing the published avoided cost eligibility cap;
(2) if the eligibilty cap is reduced, the appropriateness of exempting non-wind QF projects
from the reduced eligibilty 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
STAFF COMMENTS 3 APRIL 7, 2011
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.
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 J~nuary 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 eligibilty cap would be effective December 14, 2010. Reference Order No. 32176
at 11-12.
The Agreement presented for Commission approval was signed by the project developer on
January 22, 2011, and signed by Idaho Power on January 28,2011. The Agreement was filed with
the Commission on Februar 2, 2011. The Agreement contains rates from Order No. 31025, the
published rates curently in effect. However, as a result of Order No. 32176, wind and solar QF
contracts executed on or after December 14, 2010 for facilties larger than 100 k Ware ineligible for
those rates.
As a matter of law, Staff considers the effective date of a contract to be that date upon which
both parties have signed the agreement. A signature by only one party, Staff believes, does not
create an enforceable contract nor establish an effective date. Consequently, for the submitted
Agreement, Staff considers the effective date to be January 28, 2011.
Because the effective date of the Agreement is not prior to December 14, 2010, the date on
which the lowered eligibilty cap became effective, and because the size of the proposed wind
project clearly exceeds 100 kW, the curent eligibilty cap for wind and solar facilties to obtain a
published rate contract, Staff considers the rates contained in the Agreement to be in violation of
Commission Order No. 32176. Consequently, Staff recommends denial of the Agreement.
In order for the rates in the Agreement 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 Agreement without prejudice and permit a revised agreement to
be submitted containing rates computed under the prescribed IRP methodology. Alternatively, the
Agreement could be voluntarily withdrawn, then held pending the outcome of the initial phase of
Case No. GNR-E-I1-01 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 4 APRIL 7, 2011
RECOMMENDATION
Staff recommends that the Commission not approve the Agreement.
Respectfully submitted this "7 I! day of April 2011.
if~a ~UA.Kris ne A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentsipcel I. lksrps comments
STAFF COMMENTS 5 APRIL 7, 2011
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 7TH DAY OF APRIL 2011,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-11-01, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOVAN E WALKER
LISA D NORDSTROM
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(iidahopower.com
lnordstrom(iidahopower .com
RANDY C ALLPHIN
ENERGY CONTRACT ADMIN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rallphin(iidahopower.com
~~
SECRETAR1
CERTIFICATE OF SERVICE