20131029final_order_no_32913.pdf

Office of the Secretary
Service Date
October 29,201 3
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
GRAND VIEW PV SOLAR TWO, LLC,
) CASE NO. IPC-E-11-15
COMPLAINANT, )
)
v. 1
) ORDER NO. 32913
IDAHO POWER COMPANY, )
)
RESPONDENT. 1
INTRODUCTION
On August 2, 201 1, Grand View PV Solar Two filed a formal complaint against
Idaho Power Company regarding the parties' negotiation of a Power Purchase Agreement (PPA
or Agreement) under the Public Utility Regulatory Policies Act of 1978 (PURPA). Grand View
proposes to develop a 20 megawatt photovoltaic (PV) solar generating project to be located in
Elmore County. In its initial complaint, amended complaint, and subsequent Motion for
Summary Judgment filed November 29, 201 1, Grand View alleged that the sole dispute between
the parties concerned the ownership of renewable energy credits (RECS)' in the draft PPA
forwarded to Grand View on March 10, 201 1. Grand View requested the Commission order
Idaho Power to expressly disclaim ownership of all RECs in the Agreement. Idaho Power and
Avista Corporation (an intervenor) each filed answers to the summary judgment motion arguing
that Grand View's Motion should be denied in its entirety.
In June 2012, the Commission issued Order No. 32580 denying Grand View's
Motion for Summary Judgment. The Commission found that no Idaho statute specifically
addresses the ownership of RECs. Order No. 32580 at 10. The Commission concluded that it
"cannot find as a matter of law that ownership of RECs vests solely in Grand View." Id. at 13.
After the Commission issued its Order denying summary judgment, Grand View
filed, in July 2012, a Petition for Clarification requesting the Commission clarify four points in
its Summary Judgment Order No. 32580. Idaho Power filed a Cross-Petition for Clarification.
On March 19, 2013, Grand View filed a Motion for Declaratory Order. Notwithstanding the
' RECs (also known as green tags, environmental attributes, or renewable trading certificates) typically represent the
environmental attributes associated with 1 megawatt-hour (MWh) of electricity generated from an eligible
renewable energy resource. Order Nos. 32580 at 4; 32802 at 8.
ORDER NO. 32913 1
parties' dispute regarding REC ownership, Grand View argued for the first time in its Motion for
Declaratory Order that a "legally enforceable obligation" (LEO) was created between the parties
on March 10,20 1 1 (the date Idaho Power forwarded the draft PPA to Grand View). Motion at 1.
Idaho Power filed an answer opposing the Motion for Declaratory Order.
On July 29, 2013, the Commission issued Order No. 32861 in response to the
separate Petitions for Clarification and Grand View's subsequent Motion for Declaratory Order.
In Order No. 32861 the Commission granted in part and denied in part the two Petitions for
Clarification and denied Grand View's Motion for Declaratory Order. In denying Grand View's
Motion, the Commission found that "Grand View had not perfected a [legally enforceable
obligation] on March 10, 201 1 [(the date Idaho Power forwarded the draft PPA to Grand View)],
August 2, 201 1 [(the date Grand View filed its initial complaint against Idaho Power regarding
RECs)], November 29, 201 1 [(the date Grand View moved for summary judgment on the REC
issue)], or December 20, 201 1 [(the date it filed an amended REC complaint against Idaho
Power)] . . . ." Order No. 32861 at 22.
The Commission specifically found that "Grand View failed to make a binding and
unconditional offer to sell power to the utility, which the utility could accept. In other words,
Grand View's purported LEO was conditioned upon the removal [of the 5 8.1 REC provision]
and [replacement with] the utility disclaiming all REC ownership." Order No. 32861 at 20
(emphasis added). Grand View's continued argument that receiving anything less than all the
RECs made its offer to sell conditional, and therefore did not perfect the LEO. "Consequently,
we find Grand View has not sufficiently demonstrated that it created a legally enforceable
obligation . . . [and] Grand View's Motion for a Declaratory Order is denied." Order No. 32861
at 22.
Nevertheless, the Commission allowed Grand View an opportunity to present
"evidence that it created a legally enforceable obligation without conditions." On August 5,
2013, Grand View submitted a response to the Commission's invitation. On August 12, 2013,
Idaho Power filed a response to which Grand View filed a reply on August 27,201 3.
In this final Order, the Commission affirms its prior Order No. 32861 and finds that
Grand View failed to present persuasive evidence that it is entitled to ownership of all the RECs
or that it perfected a legally enforceable obligation with Idaho Power.
ORDERNO. 32913
BACKGROUND
A. Initial Negotiations Between the Parties
The Commission's Order No. 32861 briefly reviewed the underlying facts and
procedural history of this case. The parties engaged in negotiations regarding the terms of the
draft PPA including agreed upon IRP-based avoided cost rates. Pursuant to these discussions7
Idaho Power sent Grand View a draft PPA on March 10,201 1 (hereinafter the "March 201 1 draft
PPA" or "draft Agreement") containing IRP-derived seasonal rates (3 7. I ) . ~
According to Grand View's complaints, the sole dispute between the parties was the
REC provision in 3 8.1 of the March 201 1 draft PPA. In an e-mail dated June 8, 201 1, Grand
View's counsel stated to Idaho Power's counsel that Grand View is "willing to sign the contract
with the REC language you have if we make it contingent upon whether the Commission
specifically requires that language. In other words we sign and submit two versions of the
contract; one with the language [that] you argue for and one without and we accept the judgment
of the Commission as the final outcome." Order No. 32861 at n.11; Idaho Power Reply at Atch.
1 (emphasis added). On July 10,201 1, counsel for Idaho Power responded that
[Idaho Power] would agree to submit a signed contract for the Commission's
review containing the current [REC] language in the draft - to which we
would include language requesting the Commission to approve or reject the
Article 8 [REC] language - and the parties will accept that Commission
determination. To clarify: the parties will sign the last tendered draft contract,
to which you indicate the project was in complete agreement with - except for
a change in the project name, and the [REC] language in Article 8. A contract
would contain the current Article 8 language:
Under this Agreement, ownership of [RECs] . . . will be governed by
any and all applicable Federal or State laws andlor any regulatory
body or agency deemed to have authority to regulate these [RECs] or
to implement federal and/or state laws regarding the same.
To which we will add:
As of the date of this Agreement, Idaho Power seeks inclusion of the above
[RECl language in Article 8. [Grand View1 seeks to have Article 8 remain
blank. The parties have agreed to all other terms and conditions of this
Agreement, and hereby agree to submit the issue of whether to include the
Although the parties have generally indicated that they agreed to all the terms save the REC provision, the draft
201 I Agreement contained in the record does not indicate the amount of energy to be deliverable each month ( 5
6.2), the date to begin commercial operation (App. B-3), and the maximum capacity amount (App. B-4). Motion for
Summary Judgment, Exh. 1; Idaho Power Reply to Grand View Response, Atch. 3.
ORDER NO. 329 13 3
above [REC] language in Article 8 or leave Article 8 blank in this Agreement
to the Commission for its determination. The parties intend to submit
comments to the Commission supporting their respective positions, and
hereby agree to abide by the Commission's determination of this issue in this
Agreement. The final Order of the Commission in response to the inclusion
of this Article 8 [REC] language will be included and become an integral part
of this Agreement, which the parties agree to support and uphold.
Please let me know how your client wishes to proceed.
Order No. 32861 at n. 1 1 ; Idaho Power Reply, Atch. 1 (emphasis added). On July 20, 201 1,
Grand View Solar's counsel replied to Idaho Power's e-mail of July 10, 201 1. In his e-mail,
Grand View's counsel stated:
You are correct in your assumption that Grand View Solar's position remains
that either (1) the contract is silent on REC ownership or (2) the contract
disavows any ownership on Idaho Power's part. The language you propose
is contrary to federal law on a QFs [sic] entitlement to a fixed obligation at
the time of signing a contract. . . .
Your proposed language also effectively destroys any ability to market RECs
on anything other than a year to year contract. It therefore puts us in the
untenable position of signing a contract, the terms of which are wholly
unacceptable to my client, and if approved would likely make the proiect un-
financeable. We run the risk of being a party to a contract that we cannot
perform on. That exposes my client to significant liability for failure to
perform and liquidated damages if it turns out to be un-financeable.
I have therefore recommended to my client that it lodge a complaint against
Idaho Power at the PUC if you continue to insist on this provision. Probably
the sooner the better. [Unless you] respond that you will accept our final
offer to have the contract remain silent, or that Idaho Power still insists on
the offending language by this time next week, we will proceed accordingly.
Id. (emphasis added). Grand View filed its complaint against Idaho Power on August 2,201 1.
B. Tlze Initial Complaint
Grand View maintained in its initial complaint, amended complaint, and again in its
Motion for Summary Judgment, that it agreed to all material terms in the March 201 1 draft
Agreement except the provision addressing the ownership of RECs. Order No. 32580 at 5;
Complaint at 2; Motion for Summary Judgment at 4. Grand View requested the Commission
order Idaho Power to delete 5 8.1 of the PPA (addressing RECs) and instead insert "a clause in
which Idaho Power explicitly disclaims ownership of the [RECs]." Complaint at 2, 6. Grand
ORDER NO. 32913
View asserted it "is ready and willing to enter into the standard PURPA PPA with IRP calculated
rates that disclaim REC ownership by Idaho Power." Id. at 7 8; see also g 9 , 13. The disputed
REC provision in Ej 8.1 of the draft PPA stated:
Under this Agreement, ownership of . . . Renewable Energy Certificate
(RECs), or the equivalent Environmental Attributes, directly associated with
the production of energy from the Seller's Facility sold to Idaho Power will be
governed by any and all applicable Federal or State laws and/or any regulatory
body or agency deemed to have authority to regulate these Environmental
Attributes or to implement Federal and/or State laws regarding the same.
March 201 1 draft PPA $ 8.1; Order No. 32580 at 6. A summons was issued on August 15,201 1,
directing Idaho Power to answer the complaint.3 On September 6, 201 1, Idaho Power filed a
timely answer urging the Commission to dismiss the complaint.
C. Summary Judgment
1. Grand View's Motion. In November 20 1 1, Grand View filed a Motion for
Summary Judgment reiterating its request that the Commission order that "Idaho Power
disclaims ownership of all [RECs] of Grand View's solar project. . . ." Motion at 2, 36. Grand
View stated that its complaint "involves a dispute over the ownership of valuable [RECs] of
renewable electric energy generation." Id. at 2. The QF maintained that it "clearly owns the
RECs for which Idaho Power will not pay and which no law transfers to Idaho Power." Id. at 22.
Grand View acknowledged Idaho Power offered to divide REC ownership equally (50150)
between the parties for the term of the Agreement, or one party taking RECs for the first 10 years
and the other party taking RECs for the last 10 years of the Agreement. Complaint at 17 11-12;
Motion at 25; Paul Aff. at 7 27. Grand View rebuffed these offers arguing that it is entitled to a
PURPA contract "in which REC ownership is disclaimed by Idaho Power." Complaint at 7 13;
Motion at 36.
Grand View's manager, Robert Paul, acknowledged that 5 8.1 of the draft PPA
"states that REC ownership will be determined by applicable state or federal laws" (Aff. at 7 22),
but maintained this provision makes the ownership of RECs dependent upon subsequent changes
in state or federal law. Aff. at 7 23. He stated that owning "only one half of the RECs from the
project compromises the financial viability of the project" and compromises Grand View's
"ability to raise the capital necessary to build and operate the project." Id. at Tlfj 28, 29. Equally
"vista subsequently petitioned to intervene and its request was granted in Order No. 32362.
ORDER NO. 3291 3 5
dividing RECs with Idaho Power "would undermine Grand View's entire going concern business
by removing RECs to be produced by the solar QF as a future revenue stream." Motion for
Summary Judgment at 25 citing Paul Affidavit at l f j 25-29.
Idaho Power and Avista each filed answers opposing Grand View's Motion for
Summary Judgment. The utilities argued that the Motion should be denied in its entiretyq4
2. The Order Denying; Summary Judgment. On June 21, 2012, the Commission
issued Order No. 32580 denying Grand View's Motion for Summary Judgment. The
Commission's Order traced the history of RECs and their relationship to renewable portfolio
standards (RPSs) now adopted in about 29 states. A Renewable Portfolio Standard (RPS)
typically requires utilities to generate or purchase a certain percentage of their annual electric
generation (their "portfolio") from designated renewable energy sources, or alternatively, meet
their RPS obligation by the purchase of unbundled RECs from renewable generators. Order No.
32580 at 3; Alliance to Protect Nuntucket Sound v. Dept. of Public Utilities, 959 N.E.2d 413, n.7
(Mass. 201 1); Order No. 32580 at 4 citing Steven Ferrey, et ul. "Fire and Ice: World Renewable
Energy and Carbon Control Mechanisms Confront Constitutional Barriers," 20 Duke Envt1.L. &
Policy F. 125, 146 (Winter 2010) (hereinqfter ~ e r r e ~ ) . ~ Thirteen states (including Idaho) have
no RPS programs and eight states have set RPS "goals." The Commission observed that the
adoption of RPS programs "are premised on promoting policy goals such as improved air and
water quality, reduction of greenhouse gas emissions, broader fuel diversity, enhanced energy
security, and hedging against the price volatility of fossil fuels." Order No. 32580 at 4 quoting
American ReFFuel Co., 105 FERC T/ 61,004 at P.4 (2003), reh 'g denied, 107 FERC 1 61,0 16
(2004), dismissed sub nom. for lack of jurisdiction, Xcel Energy Services v. FERC, 407 F.3d
1242 (D.C. Cir. 2005).
While the Motion for Summary Judgment was pending, Grand View filed an Amended Complaint on December
20, 201 1. Grand View alleged in its amended complaint at 7 34 that Idaho Power submitted a new draft PPA on
December 2, 201 1, that "contains rates and terms and conditions not in the originally tendered contract." Grand
View renewed its request that the Commission order Idaho Power to execute the March 201 1 draft PPA and compel
the utility to add language that Idaho Power "disclaim . . . ownership of the RECs generated by the operation of
Grand View Two's solar project." Id. at p. 3. On January 25, 2012, Idaho Power filed an answer to the amended
complaint requesting the Commission deny all relief and dismiss the complaint.
' For example, California's RPS is 33% renewable energy by 2020, Oregon's RPS for large electric utilities is 25%
by 2025; and Washington's RPS is 15% by 2020. www.dsireusa.orddocun~ents/sum~nar~ma~s/I<PS map.pdf (last
visited Oct. 15, 2013).
ORDER NO. 32913
The Commission stated that approximately 15 states have adopted RPS programs that
allow utilities to use unbundled RECs to meet their state-imposed RPS requirements. Id. citing
Ferrey at 146. The creation of state RPS programs occurred well after PURPA was enacted in
1978; RPS programs have generally been adopted since about 1995. Order No. 32580 at 3 citing
Ferrey at 146. There is no federal RPS. The Commission also declared that the issue of REC
ownership was an issue to be addressed in Phase I11 of its generic PURPA investigation, Case
No. GNR-E-11-03, Order No. 32580 n.9.
In explaining RECs, the Commission quoted approvingly from a Second Circuit
opinion in Wheelabrator Lisbon v. Connecticut Dept. Pub. Utility Control, 53 1 F.3d 183, 186 (2d
Cir. 2008 )that:
RECs are "tradable certificates . . . that correspond to a certain amount of
renewable energy generated by a third party." American Ref-Fuel, 105 FERC
at fj 61,005. Generally speaking, RECs are inventions of state property law
whereby the renewable energy attributes are "unbundled" from the energy
itself and sold sewaratelv. The credits can be purchased by companies and
individuals to offset use of energy generated from traditional fossil fuel
resources or . . . to satisfy certain requirements that [utilities] purchase a
certain percentage of their energy from renewable resources.
Order No. 32580 at 4 (emphasis original). "[Ilnsofar as RECs are state-created, different states
can treat RECs differently." Order No. 32580 at 5 quoting American RejLFuel, 107 FERC fj
6 1,O 16 at n.4; see Idaho Wind Partners, 136 FERC fj 6 1,174 at P. 10 (20 1 1) ("the sale and trading
of RECs are for the states to determine, and that this is not an issue that PURPA controls.").
Turning to the issue of REC ownership, the parties agreed and the Commission found
that no Idaho statute specifically implements an RPS program or addresses the ownership of
RECs. Id. at 9. The Commission further found that RECs were intangible assets or "non-
physical assets which exist only in connection with something else, i.e., the purchase of
renewable power under PURPA." Order No. 32580 at 10 citing Black's Law Dictionary 808 (6"'
Ed. 1990). "In other words, but for the 'must purchase' provision of PURPA" there might be no
PPA and RECs would not exist or be created." Id. (footnote added); see Order No. 32802 at 12
16 U.S.C. 3 824a-3(a)(2); 18 C.F.R. 5 292.303(a).
ORDERNO. 32913
("RECs are not tangible and do not 'exist' until the renewable QF project produces a MW of
power."). '
The parties also acknowledged and the Commission found that PURPA does not
control RECs - they are state-issued rights. Order No. 32580 at 8. Relying on FERC's
American Ref-Fuel case, the Commission found that "RECs exist outside the confines of
PURPA. PURPA thus does not address the ownership of RECs. . . . States, in creating RECs,
have the power to determine who owns the RECs in the initial instance, and how they may be
sold or traded; it is not an issue controlled by PURPA." Order No. 32580 at 5, 8 (emphasis
original) quoting American Rtlf-Fuel, 105 FERC 7 61,004 at P.23 (2003).~
After reviewing the parties' arguments, the Commission concluded that it "cannot
find as a matter of law that ownership of RECs vest solely in Grand View." Id. at 13. The
Commission determined that the language in tj 8.1 does not definitively confer REC ownership
on either Grand View or Idaho Power. "It merely states that REC ownership will be governed by
applicable state law at the time the contract is executed and approved." Id. at 14. Consequently,
Grand View's Motion for Summary Judgment was denied.
C. Petitions for Clarification
On July 9, 2012, Grand View filed a Petition for Clarification requesting that the
Commission "clarify" four points in its Summary Judgment Order No. 32580. Idaho Power filed
an answer urging the Commission to deny clarification and a Cross-Petition of its own. Grand
View's Petition for Clarification was followed up by a Motion for Declaratory Order on March
19, 2013. The Commission responded to both Petitions and Grand View's Motion by issuing
Order No. 32861.
1. Timing of REC Ownership and 6 8.1. Grand View requested that the Commission
clarify its Order and the REC provision in 5 8.1 of the draft Agreement by adding a final
sentence that provides REC "ownership will be determined by applicable law in effect at the
time when the legally enforceable obligation is incurred." Petition at 8. After reviewing the
7 The Commission found that RECs can also arise in non-PURPA renewable projects. Order Nos. 32580 at n.5;
32697 at n.9; 32802 at 8. Such non-PURPA projects might include: utility renewable projects; projects that are not
PURPA eligible (e.g., too large); or projects by exempt wholesale generators (EWG).
8 In its Motion, Grand View quoted a passage from another FERC order: ". . . the sale and trading of RECs are for
the states to determine, and that this is not an issue that PURPA controls." Motion at 9 quoting Idaho Wind
Partners, 136 7 FERC 6 1,174 at P. 10 (20 1 1).
ORDER NO. 3291 3
arguments of both parties, the Commission found that it was appropriate to clarify its prior Order
to eliminate confusion. Order No. 32861 at 9.
The Commission first noted that when a QF and the utility are unable to agree to a
term or terms contained in a PPA, the Commission has a responsibility to resolve the dispute
consistent with PURPA. However, the REC dispute in this case "concerns an issue that PURPA
does not control - the ownership of RECs." Id The Commission recognized in its Summary
Judgment Order there was no Idaho statute addressing REC ownership. "However, the parties
were on notice that REC ownership would be addressed in our parallel generic [PURPA]
investigation initiated shortly after Grand View filed its complaint in this case. Moreover, both
Grand View and Idaho Power were parties in the GNR-E-11-03 case." Id.
In the PURPA investigation, the Commission found that absent an agreement by the
parties to do otherwise, it is reasonable that REC ownership be equally divided between the QF
and the utilities for solar projects larger than 100 kW. No party, including Grand View, sought
judicial review of that decision. Having found in the PUWA investigation "that the ownership
of RECs should be equally divided between the QF and the utility, we find [that] result should
apply in this case." Order No. 32861 at 10. Consequently, the Commission denied Grand
View's request to add a sentence and instead amended its prior Order to reflect that ownership of
RECs will be split 50150 between Idaho Power and Grand View consistent with Order Nos.
32697 and 32802. Id. at 10-1 1. "Having decided the disputed issue of REX ownership in the
PURPA investigation in Order No. 32697 (Dec. 18, 2012), and affirmed in Order No. 32802
(May 6,2013), this issue is now settled." Id. at 10.
2. Legally Enforceable Obli~ation. Grand View also requested that the text of the
REC provision in 5 8.1 be applicable to when a "legally enforceable obligation" (LEO) is
incurred. Petition at 7, 12. The Commission denied clarification on this point because the focus
of 9 8.1 is the ownership of E C s , not when a LEO is formed. The Commission found that
addressing LEO "would unnecessarily expand the scope of the clarification." Order No. 32861
at 11. The Commission acknowledged "that a legally enforceable obligation may occur outside
of a contract, [but] the focus of our prior Order was the dispute between the parties concerning
RECs and the express[ed] language of $ 8.1 in the Agreement." Id.
3. Avoided Cost Rates do not include RECs. Grand View next requested the
Commission state that avoided cost rates do not compensate the QF for more than the value of
ORDER NO. 32913 9
the energy and capacity alone. Petition at 8. The Commission denied clarification on this point
finding that its prior Order denying summary judgment is "clear and needs no clarification."
Order No. 32861 at 12. The Commission stated in its Summary Judgment Order that PURPA
avoided cost rates "are intended to compensate the QF only for the purchased power - avoided
cost rates 'are not intended to compensate the QF for RECs.'" Id. citing Order No. 32580 at 3, 8,
Morgantown Energy Associates, 139 FERC 7 61,066 at P.47 (2012); American Ref-Fuel, 105
FERC 11 61,004 at P.22; Order No. 29480. "Compensation for 'RECs is outside of PURPA, and
is not part of the avoided cost calculation; RECs are separate commodities from the capacity and
energy produced by QFs. If a state chooses to create these separate commodities, they are not
compensation for [QF power]."'Id. quoting California PUC, 133 FERC 7 61,059 at P.31 n.62
(2010); Order No. 32580 at 8.
4. No Idaho Law Transfer RECs. Finally, Grand View requested that the
Commission clarify that no Idaho law transfers RECs to a purchasing utility without payment to
the QF. The Commission denied clarification on this point for two reasons. First, the REC
dispute in this case involved the "ownership of RECs" not the "transfer" of RECs. The
Commission found that Grand View was seeking clarification of an issue that was not contained
or addressed in the Commission's previous Summary Judgment Order. Order No. 32861 at 13.
Second, the Commission noted that it recently concluded in the generic PURPA investigation
that ownership of RECs should vest equally with the QF and utilities for projects with IRP-based
rates (absent an agreement to do otherwise). The Commission found that there was no "transfer"
of RECs, instead RECs are equally o w e d by the QF and the utility. Id. ; Wheelabrator Lisbon v.
Dept. of Public Util. Control, 93 1 A.2d 159, 177 (Conn. 2007).
D. Motion for Declaratory Order
In its March 2013 Motion for Declaratory Order, Grand View made two new
arguments. First, it argued that the Commission's Orders determining REC ownership in the
recently completed generic PURPA investigation (GNR-E-11-03) do not apply in this case
because there was no controlling REC policy or law in Idaho when Idaho Power tendered the
March 201 1 draft PPA to Grand View. Thus, Grand View insisted the REC provision in Ej 8.1
should be removed and the PPA should "remain silent as to REC ownership in the contract
pursuant to the Commission's ruling in Order No. 32580." Motion at 7. Second, Grand View
argued it had perfected a "legally enforceable obligation" (LEO) under FERC's PURPA
ORDER NO. 3291 3 10
regulations9 on March 10, 201 1 or no later than August 2, 201 1 - before the Commission
decided the REC ownership issue. Id. Thus, Grand View maintained that a LEO can be formed
without deciding REC ownership. The Commission rejected both these arguments and denied
Grand View's Motion.
1. RECs. The Commission found Grand View's REC argument unpersuasive for
two reasons. First, the Commission observed that Grand View is now attempting to recast the
facts in this case. The Commission specifically found that Grand View's REC dispute was the
gravamen of its initial complaint, amended complaint, and summary judgment motion. Grand
View's attempt to separate the REC issue from the newly introduced LEO issue is inconsistent
with the facts and the positions of the parties. The Commission noted that Grand View had
conceded several times throughout this proceeding that the only disputed issue in this case is the
ownership of RECs. "The facts of this case demonstrate without a doubt there was a dispute
about REC ownership and the Commission was asked [by Grand View] to resolve that disputed
issue." Order No. 32861 at 17.
Second, the Commission advised Grand View in the Summary Judgment Order that
REC ownership would be addressed in the generic PURPA investigation. Id. at 17-18. Both
Grand View and Idaho Power were parties in the concurrent generic investigation that decided
the issue of REC ownership. Many parties in the generic investigation submitted legal briefs and
extensive testimony on the issue of REC ownership; the REC issue was thoroughly examined. In
its Orders, the Commission found that absent an agreement to do otherwise, "RECs in situations
such as this should be equally divided between the QF and the utility." Order No. 32861 at 18.
Moreover, the Commission observed that its REC decision in Order No. 32697 was made in
December 2012, "well in advance of Grand View's current Motion for Declaratory Order filed in
April 2013. Having found that REC ownership should be equally divided in our PURPA
investigation between the utility and the QF (especially where both Idaho Power and Grand
View were parties), it is appropriate to consistently apply the REC determination to this case."
Id.
2. LEO. The Commission noted in its Order denying the Motion for Declaratory
Order that Grand View is making its LEO argument for the first time. The Commission found
that Grand View did not mention the term LEO in its initial complaint, in its amended complaint
9 8 C.F.R. $ 292.304(d).
ORDER NO. 32913
and only once in passing in its Motion for Summary Judgment. Order No. 32861 at 19.
Although Grand View asserted it was ready, willing and able to supply power to Idaho Power,
the Comrnission found that "the record does not support that [Grand View] was willing and able
to supply power for two reasons." Id
First, the Commission found that Grand View's offer to supply power was not a
binding offer but was conditioned upon two points: the removal of tj 8.1 and Idaho Power
disclairning any ownership in RECs. In particular, the Commission noted that Grand View's
Motion for Summary Judgment requested that the Commission "order Idaho Power to disclaim
'ownership of all WCs, and order that Idaho Power enter into such a PPA with rates calculated
under the methodology in effect on the date of the filing of Grand View's complaint." Order No.
32861 at 20 citing Motion at 2, 36.
Based upon these facts contained in Grand View's pleadings, the commission found
"that Grand View failed to make a binding and unconditional offer to sell power to the utility,
which the utility could accept." Id. at 20. In other words, Grand View's purported LEO was
conditioned upon the removal of 5 8.1 and the utility disclaiming all REC ownership.
The Commission stated that its findings were also supported by several judicial
opinions. In Idaho Power v. Cogeneration, the Idaho Supreme Court found that a QF's offer of a
security payment was conditional "and therefore did not legally constitute a tender [offer]." 134
Idaho 738, 746, 9 P.3d 1204, 1212 (2000). Likewise, in A. W. Brown v. Idaho Power, our
Supreme Court rejected a QF's claim that it had perfected a LEO. In discussing the necessary
criteria for a LEO, the Court stated that the QF "must show that but for the actions of the utility it
was otherwise entitled to a contract [or LEO]. In most cases this will entail making a
comprehensive binding offer. . . ." 121 Idaho 812, 817, 828 P.2d 841, 846 (1 992) (emphasis
added); Order No. 32861 at 20. "A LEO does not exist when the QF has not unconditionally
obligated itself to provide power 'and remains free to walk away from the transaction without
liability. "' Id. quoting Armco Advanced Materials v. Pennsylvania PUC, 579 A.2d 1337, 1347
(Pa. 1990), aff'd per curium 634 A.2d 207 (1993), cert. denied 51 3 U.S. 925 (1 994). In other
words, no contract or obligation could exist unless and until Idaho Power accepted Grand View's
two conditions (striking tj 8.1 and disclaiming ownership of RECs),
Second, the Comrnission was unconvinced that Grand View was "able" to perform its
legal obligation. In particular, the Commission pointed to Grand View's affidavit of its manager
ORDER NO. 329 13 12
Robert Paul who stated that the inability to sell all the RECs compromises the project's financial
viability. Order No. 32861 at 22 citing Paul Aff. at r/ 24. If Grand View was unable to sell all
the RECs, his ability to raise the capital necessary to build and operate the project would be
c~m~romised.'~ Id. citing 77 25, 26, 28. The Commission found these statements undermined
Grand View's argument that it was willing and able to legally obligate itself to supply power to
the utility. Id. at 22.
Despite the Commission's findings that no LEO had arisen between the date when the
draft Agreement was submitted and Grand View's amended complaint (March 201 1 to
December 201 I), the Commission gave Grand View one last opportunity to "provide any
evidence that it made an unconditional offer that would give rise to a legally enforceable
obligation." Id. at 22. It ordered Grand View to provide the necessary evidence within seven
days and allowed Idaho Power the ability to file a response within 14 days.
With this extensive background on the proceedings to date, we now turn to Grand
View's "Response" and Idaho Power's reply submitted August 5, 2013 and August 12, 2013,
respectively. ' '
RESPONSES TO ORDER NO. 32861
As noted above, the Commission's Order No. 32861 gave Grand View another
opportunity to provide any evidence that it made an unconditional offer that would give rise to a
LEO. More specifically, the Commission observed that the parties engaged in settlement
negotiations between June 1, 2012, and February 5, 2013. G.V. Notice of Failure of Settlement
Discussion at 2. Grand View submitted its response on August 5, 2013. Grand View's response
consists of 17 pages and 18 exhibits totaling approximately 170 pages.
A. Separating tlze I'CK and LEO Issues
1. Grand View's Response. Grand View maintains that from the outset, this docket
was not about RECs but the memorialization of a legally enforceable obligation. Response at 2.
Grand View insists that the March 201 1 draft PPA "was designed to memorialize the previously
created LEO" and the issue of "REC ownership is a red herring and a mere distraction from the
real issue at hand . . . did Grand View obligate itself to sell its electrical output to Idaho Power in
LO Equally dividing RECs with Idaho Power "would undermine Grand View's entire going concern business by
removing RECs to be produced by the solar QF as a future revenue stream." Motion for Summary Judgment at 25
citing Paul Affidavit at 17 25-29.
I I Grand View also submitted comments to Idaho Power's reply on August 27, 2013.
ORDER NO. 32913 13
the summer of 201 I?" Id. at 3, 5. It states that "resolution of the REC ownership issue was not
an essential element of the contract." Id. at 3. Grand View claims all of the other terms of the
contract were known and memorialized in the draft PPA. Id. at 5.
Grand View also argues that at the time it established its LEO in the summer of 201 1,
"neither the Commission nor the state Legislature had addressed the question of REC
ownership." Id. at 5. "In the absence of state law or policy in effect in August 201 1, . . . Idaho
Power's insistence on REC ownership was completely outside the context of the creation of a
LEO under PURPA." Id. at 5. Grand View insists that because the Order in the Commission's
generic PURPA docket apportioning REC ownership 50150 between the utility and the QF was
issued after the LEO was created in the summer of 201 1, it is not controlling in this instance. Id.
at 4. Thus, Idaho Power had no right to insist on a REC provision in the contract between the
parties.
2. Idaho Power's Reply. Idaho Power asserts it was Grand View that filed a
complaint and asked the Commission to resolve the REC issue "and now when the Commission
has made a determination regarding RECs that Grand View views as unfavorable, it claims such
decision is not applicable to it." Reply at 8. Idaho Power notes that Grand View participated as
a party in the Commission proceeding where the Commission decided the issue of REC
ownership. Id. Having resolved the REC issue which is the basis of Grand View's complaint
and Motion for Summary Judgment, the Commission should not allow Grand View to introduce
the new LEO issue. Id. at 10.
Commission Findings: Based upon our review of the record in this proceeding, we
find that Grand View's separation argument is unavailing for three reasons. First, as we noted in
our prior Orders, Grand View has repeatedly alleged that the sole dispute between the parties
concerned the ownership of RECs in the March 201 1 draft PPA. Order Nos. 32580 at 1, 7;
32861 at 1; Grand View Motion at 2. We find Grand View's argument that the REC ownership
issue should be separated from the LEO issue ignores the fact that the REC issue "was the
gravamen of the initial complaint and summary judgment." Order No. 32861 at 17. It was Grand
View that complained about the M C provision and subsequently moved for summary judgment.
Motion for Summary Judgment at 2 ("This case involves a dispute over the ownership of
[RECs]."). It sought a declaratory judgment that Idaho Power must disclaim ownership of all
ORDER NO. 3291 3
RECs. Id. at 2, 36. To now suggest that we simply ignore the REC dispute is inconsistent with
the facts of this case and the arguments advanced by Grand View.
As we noted in our prior Orders in this case, when a QF and a utility are unable to
agree to terms contained in a PPA, the Commission "has a responsibility to resolve the dispute
consistent with PURPA" and Idaho law. Order No. 32861 at 9. However, in this case, the
ownership of RECs is an issue that PURPA does not control. Id. at 5, 9; Order No. 32580 at 8,
10. Although there is no Idaho statutory law specifically addressing the ownership of RECs in
Idaho, the Commission relied upon Idaho common law to determine the property interest
associated with RECs. Our Supreme Court has declared that 'the Commission has jurisdiction to
examine common law contract issues between QFs and utilities."' A. W Brown v. Idaho Power
Co., 121 Idaho 8 12, 8 19, 828 P.2d 841, 848 (1 992) (emphasis added); Order No. 32580 at 7.
We affirm our prior Orders finding that RECs are intangible assets. Intangible assets
(i.e., RECs) are non-physical assets which exist only in connection with something else. Black's
Law Dictionary 808 (6th ed. 1990). Like in the draft PPA in this case, the allocation of RECs is
now a term that is found in most, if not all, PURPA contracts. RECs are not tangible and do not
"exist" until the renewable project produces power. "There is no REC without the generation of
renewable power." Order Nos. 32697 at 45-46 (footnote omitted); 32802 at 12.
But for the PURPA "must purchase" provision (16 U.S.C. $ 824a-3(a)(2)), the utility
would be free to not enter into a contract and RECs would therefore not exist or be created.
Order Nos. 32580 at 45; 32802 at 12. In other words, the utility
is not wholly free to bargain because PURPA compels utilities to purchase the
power output produced by QFs. PURPA compels the utility to purchase
power whether it needs the power to serve load or not. Even if QF power
replaces power the utility would otherwise generate, ratepayers are ultimately
paying for both the capital assets of the utility's base load generating plants in
rates and the QF power.
Order No. 32802 at 18; Wheelabrator Lisbon, 93 1 A.2d at 174. Based on this reasoning, the
Commission determined that:
Absent an agreement between the parties in a PURPA contract to do
otherwise, the Commission found it was reasonable to equally apportion
RECs between the utility and the QF when the contract is based upon rates
derived through the IRP methodology. "Because both the utility and QF are
contractually and inexplicably joined in the production, sale and purchase of
QF power, we find that it is reasonable to apportion the unbundled RECs by
ORDERNO. 32913 15
splitting RECs either 50%-50% each year over the life of the PPA, or equally
in terms of years over the length of the contract."
Order No. 32802 at 12 quoting Order No. 32697 at 46 (internal citations and footnote omitted).
Second, in our prior Order No. 32861 in this case, we stated that the parties were on
notice that REC ownership would be addressed in our parallel PURPA investigation. Both
Grand View and Idaho Power were parties and participated in the GNR-E-11-03 case. In that
generic investigation, the Commission found it reasonable and consistent with common law
property interests to apportion REC ownership equally between the QF and the utility for solar
projects larger than 100 kW, like the Grand View project here. Order No. 32861 at 9-10 citing
Order Nos. 32697 at 46; 32802 at 19-20." "No party, including Grand View, sought judicial
review of that decision. Having decided the disputed issue of REC ownership in the PURPA
investigation [case]," the Commission found it appropriate to consistently apply the REC
ownership decision in this case. Id. at 18. We affirm that decision in this Order.
Finally, we reject Grand View's assertion that the March 2011 draft PPA "was
designed to memorialize the . . . LEO." Response at 3. As we have previously observed, Grand
View's initial complaint and amended complaint do not mention the term "legally enforceable
obligation" and its Motion for Summary Judgment only mentions LEO in passing. Order No.
32861 at 19. In the months leading up to when Grand View filed its complaint in August 201 1,
the parties were negotiating the terms of the March 201 1 draft PPA and particularly the REC
provision in $ 8.1. Indeed, the June 8, 201 1 e-mail from Grand View's counsel states "we are
willing to sign the contract with the REC language you have if we make it contingent upon
whether the Commission specifically requires that language." Idaho Power Response, Atch. 1 at
2-3 (emphasis added). The March 10, 201 1 draft PPA could not "memorialize" a previously
established LEO because the parties were still negotiating the REC provision of the Agree~nent
in June and July 2011.'"n addition, the draft Agreement is clearly marked as a "Draft for
Discussion Purposes Only" on each page. Summary Judgment Exh. 1; Idaho Power Reply
Atch. 3. Grand View did not advocate that it had perfected a LEO until it filed its Motion for
Declaratory Order in March 2013. Motion at 7. Consequently, we conclude that the REC and
" See Order No. 32802 at 18-20 for our analysis of the property interests accompanying REC ownership related to
the Supreme Court of Connecticut's Wheelabrator Lishorl opinion.
I 3 Because the scope of Order No. 32861 was limited to providing evidence regarding the issue of unconditional
LEO, we decline to address Grand View's new retroactive argument about RECs.
ORDER NO. 32913 16
LEO issues are not two separate and distinct issues. We further find that the evidence clearly
shows that the REC issue preceded Grand View's introduction of the LEO issue.
B. The LEO Issue
Grand View asserts in its response to Order No. 32861 that the "existence of a LEO is
assumed, and indeed, is the very foundation" of its complaint. Id. at 2. Grand View does not
allege it created a LEO "without conditions" but simply said it "created a legally enforceable
obligation no later than August 2, 201 1 ." Grand View Response at 1, 17. Except for the
question of REC ownership, Grand View maintains that the LEO was complete as to every
essential term and condition. Id. at 3. Grand View advances several arguments supporting its
LEO position and these arguments are discussed in greater detail below.
For its part, Idaho Power maintains that Grand View's response "does not
demonstrate that it created a legally enforceable obligation without conditions as referenced in
Commission Order No. 32861." Idaho Power Reply at 2. The utility asserts that Grand View's
response actually supports the Commission's findings that Grand View had not established a
LEO. Although Idaho Power was willing to enter into a contract with Grand View, Grand View
"chose not to legally obligate itself to deliver power . . . at that time . . . and instead chose to
pursue a complaint asking the Commission to compel Idaho Power to disclaim any ownership of
RECs." Id.
1. LEO Predates the REC Dispute. Grand View first argues that its purported LEO
predates the Commission's December 2012 Order No. 32697 where it decided the disputed issue
of REC ownership. "Despite Grand View's acknowledgement that it and Idaho Power had not
come to an agreement as to the ownership of RECs, REC ownership does not control the creation
of a LEO under PURPA." Response at 5.
Commission Findings: As we found in the REC section above, Grand View's
complaint was filed in August 201 1 and declared the sole dispute between the parties involved
RECs. Grand View's REC dispute predates its LEO argument. Seventeen months after it first
filed its complaint in this matter disputing the ownership of RECs, Grand View requested the
Commission issue a declaratory order finding that Grand View had perfected a LEO in this
matter. Although Grand View alludes to the concept of a LEO in its July 2012 Petition for
Clarification, it did not assert that it perfected a LEO (in March 201 1) until its Motion for
Declaratory Order filed in March 2013. The Commission issued its Order No. 32697 in
ORDER NO. 329 13
December 2012 resolving the REC ownership issue. We also find that the parties were still
negotiating the REC provision of the March 201 1 draft PPA in June-July 201 1. See supra p. 3-4.
Moreover, we found in our Summary Judgment Order that Grand View did not raise the LEO
issue in its Motion for Summary Judgment filed in November 20 1 1. Order No. 3286 1 at n. 10.
We held the "Commission need 'not decide an issue not raised in the moving party's Motion for
Summary Judgment."' Id. citing Esser Electric v. Lost River Ballistics Technologies, 145 Idaho
912, 919, 188 P.3d 845, 861 (2008). Because the LEO issue was not asserted in Grand View's
complaint, the date of the filing of the complaint is inapposite for a determination of whether or
when a LEO was formed.
2. RECs not Essential. Grand View next maintains that the "REC ownership issue
was not an essential element of the [March 201 1 draft] contract." Id. at 3. Grand View argues
that the Commission acknowledged that RECs were not an essential element in its prior Order
No. 32861 when we stated:
The Commission also observed that "RECs exist outside the confines of
PURPA. PURPA thus does not address the ownership of RECs. . . . States,
in creating RECs, have the power to determine who owns the RECs in the
initial instance, and how they may be sold or traded; it is not an issue
controlled by PURPA."
Id. at 4 quoting Order No. 32861 at 4-5 quoting Order No. 32580 at 5 (emphasis original)
quoting American Relf-Fuel, 105 FERC 7 61,004 at P.23 (2003).
Commission Findings: We find this argument unpersuasive for two reasons. First,
Grand View's own pleadings in this case refute the argument that REC ownership was not an
essential element of its contract. As indicated at pages 3 and 4 of this Order, the ownership of
RECs was a prominently disputed and negotiated issue between Grand View and Idaho Power.
Indeed, it was Grand View that subsequently filed a complaint urging the Commission to delete
the REC provision found in tj 8.1 of the March 201 1 draft PPA and instead insert a clause "in
which Idaho Power explicitly disclaims ownership of the [RECs]." Complaint at 2, 6; Motion
for Summary Judgment at 2, 36. To say that ownership of RECs was not an essential element of
either the contract, the alleged LEO, or this case is contrary to the evidence, ignores the facts of
this case, and disregards Grand View's own pleadings. As Grand View acknowledged in its
initial complaint, amended complaint, and Motion for Summary Judgment, the only reason it
refused to sign the draft PPA was the dispute over REC ownership.
ORDER NO. 3291 3 18
Second, Grand View's reliance on the quote from our prior Orders that "PURPA does
not control the ownership of RECs" is misplaced. This off-repeated passage from the
Commission's Orders denying summary judgment (No. 32580) and Motion for Declaratory
Order (No. 32861) addresses whether REC ownership is a matter subject to federal PURPA law
or state property law. As indicated in the Commission's prior Orders, both this Commission and
FERC have declared that PURPA does not address the ownership of RECs, and States have the
power to determine who owns the RECs. Order Nos. 32580 at 5, 32861 at 4-5, American Ref-
Fuel, 105 FERC 7 61,004 at P.23 (other citations omitted). We quoted approvingly from the
U.S. Court of Appeals for the Second Circuit where that Court observed that "RECs are
inventions of state property law whereby the renewable energy attributes are 'unbundled' from
the energy itself and sold separately." Order Nos. 32861 at 5, 32580 at 4 quoting Wheelahrator
Lisbon v. Connecticut Dept. of Pub. Utility Control, 53 1 F.3d at 186. Because "RECs are state-
created, different states can treat RECs differently." Order Nos. 32861 at 5, 32850 at 5 quoting
American ReflFuel, 107 FERC 7 61,016 at n.4; see also Idaho Wind Partners, 136 FERC 1/
6 1,174 at P. 10 (201 1) (the "sale and trading of RECs are for the states to determine, and that this
is not an issue that PURPA controls."). Grand View made RECs an essential element of the
draft contract when it conditioned performance on Idaho Power disclaiming REC ownership.
Order No. 32861 at 17.
3. Proof of Unconditional LEO. As previously mentioned, the Commission provided
Grand View with an opportunity to provide evidence that that it created a LEO without
conditions. Order No. 32861 at 22. Although the Commission specifically found in its Order
No. 32861 at 22 that Grand View had not perfected a LEO on March 10, 201 1 (the date Idaho
Power forwarded the draft PPA to Grand View); August 2, 201 1 (the date of Grand View's
initial complaint); November 29, 201 1 (the date Grand View moved for summary judgment); or
December 20, 201 1 (the date it filed its amended REC complaint), it allowed Grand View a final
opportunity to present contrary evidence. The Commission recognized that Grand View and
Idaho Power had engaged in prolonged settlement negotiations between June 20 12 and February
2013. Notice of Failed Settlement Discussion at 2. Thus, Grand View was provided an
opportunity to present evidence of making an unconditional offer during the initial negotiation or
as part of the later settlement process.
ORDER NO. 3291 3
Idaho Power asserts in its reply that Grand View could have entered into a binding
contract containing the avoided cost rates of the March 201 1 draft PPA "yet Grand View chose
not to obligate itself." Reply at 9. "Grand View cannot escape the simple fact that it chose not
to obligate itself, and thus did not obligate Idaho Power and its customers, to the previously
effective rates." Id. Idaho Power states it was willing to submit the March 201 1 contract and the
REC dispute to the Commission for resolution but Grand View expressly refused to obligate
itself by insisting it was entitled to all of the RECs. Having failed in its attempt to compel Idaho
Power to disclaim any ownership interest in the RECs, Grand View now attempts to go back and
create a LEO at a time it affirmatively chose not to obligate itself. Simply put, "Grand View
chose to gamble, and lost. It chose of its volition not to obligate itself to the transaction." Id.
Commission Findings: In its initial complaint, Grand View stated that it was
"willing to enter into the standard PURPA PPA with IRP calculated rates that disclaim REC
ownershir, by Idaho Power." Complaint at T/ 8, p. 6. In its amended complaint filed in December
201 1, Grand View renewed its request that the Commission order Idaho Power to tender the draft
contract "with the addition of language disclaiming [Idaho Power's ownership of RECs . . . ."
Amended Complaint at p. 3 . I 4 In Grand View's November 20 1 1 Motion for Summary Judgment
it argued it is entitled "to a standard PURPA PPA wherein Idaho Power disclaims ownership of
all [RECs]." Motion at 36. In its March 2013 Motion for Declaratory Order, Grand View
argued that the REC provision of the draft PPA should be removed and the contract "should
otherwise remain silent as to REC ownership. . . ." Motion at p. 7. We find these statements
from Grand View's pleadings are express conditions that demonstrate Grand View was not
willing or able to bind or commit itself unless Idaho Power disclaimed ownership of RECs. "A
LEO does not exist when the QF has not unconditionally obligated itself to provide power 'and
remains free to walk away from the transaction without liability."' Order No. 32861 at 20
quoting Armco Advanced Materials v. Pennsylvania PUC, 579 A.2d 1337, 1347 (Pa. 1990); In
Re Mid Atlantic Cogen, 1993 WL 56 198 1 *7 (New Jersey Board of Regulatory Control 1993).
Despite its initial proposal to sign and submit the dispute to the Commission, Grand
View refused to obligate itself by insisting it was entitled to all the RECs. Indeed, it was Grand
View's counsel that made the initial offer to submit the dispute to the Commission for resolution.
14 The amended complaint also notes that Grand View's complaint "was predicated upon [the draft] contract" -
without mention of a LEO. Amended Complaint at T/ 38.
ORPERNO. 32913 20
He stated in his June 8, 201 1 e-mail to Idaho Power's counsel that Grand View is willing to sign
the March 201 1 draft PPA "if we make it contingent upon whether the Commission specifically
requires that FREC1 language. In other words, we sign and submit two versions of the
[Agreement]: one with the language of [' 8.1 1 . . . and one without and we accept the judgment
of the Commission as the final outcome." Order No. 32861 at n. 11, Idaho Power Reply at Atch.
1 (emphasis added). However, after having suggested such a process, Grand View subsequently
refused to obligate itself in an e-mail dated July 20, 201 1. Id. We find this exchange is
persuasive evidence that Grand View was not willing to unconditionally obligate itself to supply
power and thus no LEO was perfected.
Having been unsuccessful in its REC arguments, Grand View now "attempts to go
back and create a legally enforceable obligation to the prices in effect at that time it affirmatively
chose not to obligate itself to the transaction." Idaho Power Reply at 9. Moreover, Grand
View's counsel explained in his e-mail rejecting his own proposal that if Grand View committed
itself to the obligation to supply power under the contract, it "would likely make the project un-
financeable. We run the risk of being a party to a contract that we cannot perform on.'' Reply
Exh. 1; supra p. 4. Taken at face value, Grand View's statements regarding financial risk'' raise
substantial doubts about its ability to proceed with the project if it receives anything less than
ownership of all the MCs. Grand View also refused Idaho Power's offer to split REC
ownership. Instead, Grand View "seeks a contract in which REC ownership is disclaimed by
Idaho Power." Id. at fj 13; Motion for Summary Judgment at p. 36. Based upon this record we
cannot find that Grand View made an unconditional binding offer or commitment to supply
power to Idaho Power.
As we declared in our prior Order, it is up to the States, not FERC, to determine "the
date at which a legally enforceable obligation is incurred under State law." Order No. 32861 at
19; Rosebud Enterprises v. Idaho PUC, 128 Idaho 609, 623-24, 917 P.2d 766, 780-81 (1996);
Rosebud Enterprises v. Idaho PUC, 13 1 Idaho 1, 6, 95 1 P.2d 52 1, 526 (1 997); Power Resources
Group v. PUC of' Texas, 422 F.3d 231, 239 (5''' Cir. 2005) ("FERC has given each state the
authority to decide when a LEO arises in that state."). Our Supreme Court has stated it is the
Commission that has the authority to determine whether a LEO exists. Rosebud, 128 Idaho at
624, 917 P.2d at 781.
See also section 5 below.
ORDER NO. 32913
Our finding is also supported by the Idaho Supreme Court's opinion in A. K Brown v.
Idaho Power Co., 121 Idaho 812, 828 P.2d 841 (1992) and other cases. See Order No. 32861 at
20-21. In discussing the necessary criteria for a LEO, the Court stated in A. W Brown that the
QF "must show that but for the actions of the utility it was otherwise entitled to a contract [or
LEO]. In most cases this will entail making a comprehensive binding offer. . . ." 121 Idaho at
827, 828 P.2d at 846 (emphasis added); Order No. 32861 at 20. The Commission further found
that a LEO "does not exist when the QF has not unconditionaIly obligated itself to provide power
'and remains free to walk away from the transaction without liability."' Id. quoting Armco, 579
A.2d at 1347. It was Grand View that chose not to obligate itself when it declined to sign the
March 201 1 draft PPA and submit the dispute to the Commission for resolution.
Based upon our review of the record, we affirm our prior Order finding that Grand
View failed to make a binding and unconditional legally enforceable obligation to provide its
electric output to Idaho Power. Despite its arguments to the contrary, we continue to find that
"Grand View's purported LEO was conditioned upon the removal of $ 8.1 [of the draft PPA] and
the utility disclaiming all REC ownership." Order No. 32861 at 20. Consequently, Grand View
did not create a legally enforceable obligation.
4. Site Preparation and Interconnection. Grand View also insists that its actions
regarding its interconnection activities and site preparation demonstrate that it is ready to
perform under its purported legally enforceable obligation. In particular, Grand View argues that
Idaho Power conceded that Grand View had created a LEO when as part of the interconnection
process Idaho Power informed Grand View that it had "received all of the required materials"
and that "this application is now considered complete." Response at 16 citing Exh. 11. Grand
View maintains that this statement is recognition that the QF perfected a LEO.
Idaho Power replies that Grand View's submission of additional documents contained
in Exhibits 10-1 8 do "not in any way provide evidence that it unconditionally obligated itself to
sell to Idaho Power." Reply at 3. Instead, Idaho Power maintains that Grand View was merely
taking preliminary actions consistent with developing a project. This conduct and preliminary
activities "do not refute Grand View's express refusal to obligate itself to the [draft] contract."
Id. Idaho Power also argues that the creation of a WREGIS account and obtaining
precertification for eligibility to California's renewable portfolio standard (Grand View Exh. 1-3)
do not evidence an obligation to sell power to Idaho Power. Id. at 3. The utility observed that
ORDERNO. 32913
these precertification actions "do not guarantee that a facility will be eligible for [REC]
certification in the future." Exh. 3. In other words, these acts have no bearing on Grand View's
ultimate obligation to sell power. Site studies and permit extensions (Exh. 4-9) also do not
obligate the QF to build the facility. Id.
Idaho Power also asserts that many of Grand View's "exhibits" relating to
interconnection (Exh. 10-18) are not relevant because those exhibits pertain to Grand View's
initial interconnection request (interconnection queue No. 369) that was subsequently withdrawn.
Having withdrawn its interconnection request queue No. 369, Grand View re-applied for
interconnection and has been issued a new queue No. 397 to coincide with the interconnection
requests of Grand View's other projects. Although Idaho Power acknowledges that Grand View
has signed a new Generator Interconnection Agreement (GIA), it maintains the GIA does not
commit Grand View nor prove that the QF obligated itself to sell power pursuant to the draft
20 1 1 PPA. Id. at 5.
Commission Findings: Some procedural background is helpful in examining this
issue. The typical PURPA transaction in Idaho contains two separate and independent parts.
One part is the parties' mutual obligations to sell and to purchase the electrical output from a QF
project embodied either in a power purchase agreement (PPA) or perfected in a LEO. 16 U.S.C.
§ 824a-3(a)(2); 18 C.F.R. 5 292.304(d). The other part is the "interconnection process" where
the utility and the renewable project negotiate and contract for the construction of the necessary
interconnection facilities to "connect" the renewable project with the purchasing utility's system.
18 C.F.R. 9 292.308; Order Nos. 32755 at 2; 32780 at 2. The culmination of the interconnection
process is the execution of a Generator Interconnection Agreement (CIA) and the construction of
the transmission or interconnection facilities. Either of these parts (the obligation or the
interconnection) may be initiated first by the QF; sometimes the QF initiates the interconnection
process first and other times it first works on completing the PPA. See, e.g., Case No. IPC-E-12-
10 (PPA first) and Case Nos. IPC-E- 12-25, IPC-E-12-26 (interconnection first).
We first find that Grand View's interconnection and site preparation activities are not
directly relevant to the question of whether Grand View's alleged LEO was conditioned on Idaho
Power disclaiming all REC ownership. As we previously explained, there are two separate and
distinct parts. We are not persuaded that activities related to interconnection mitigate the lack of
a firm and binding commitment by Grand View to sell power. Second, Grand View's initial
ORDER NO. 32913
interconnection activities as part of queue No. 369 (Exh. 10-18) were withdrawn. Grand View
re-initiated the interconnection process and was assigned a later queue No. 397. Even though it
signed a new GIA for interconnection queue No. 397, Grand View has until December 3 1, 2013
to pay the required construction funds. Idaho Power Reply at 5.
Third, while Grand View's site permittinglpreparation activities may be viewed as
indications of its desire to construct the project, these activities do not mitigate the evidence of
Grand View's lack of binding or unconditional commitment under the PPNLEO part; i.e., its
obligation was conditional upon Idaho Power disclaiming all REC ownership. Likewise, the
WREGIS and California registrations and permitting extension do not mitigate the lack of a firm
commitment or obligation to supply power. As the trier of fact and based upon the totality of the
evidence, we do not find these interconnection measures convince us that Grand View
unconditionally committed to supply power to Idaho Power.
5. Financial Viability. Grand View also takes issue with the Commission's finding
that Grand View may not have been "able" to perform under a legally enforceable obligation
because the QF's inability to sell all of the RECs associated with the project compromised the
financial viability of the project. Response at 6; Order No. 32861 at 22. In its prior Order
denying a declaratory order, the Commission noted that Grand View's manager had stated the
project's financial viability, its profitability, and its ability to raise the capital necessary to build
and operate the project "could also be compromised" if Grand View could not sell all of the
RECs. Id. citing Paul Affidavit at ?[I[ 25-29. The Commission found these statements
"undermine Grand View's argument that it was willing and able to mutually obligate itself to
supply power" to the utility. Id.
In its response, Grand View concedes that its inability to sell all of the RECs
compromises the project but this loss of ancillary income "would not necessarily make the
project non-viable." Response at 6. However, Grand View maintains that its subsequent actions
(including site preparation, permitting, registering to sell RECs, etc.) refutes that it was not
taking its obligation to deliver pourer to Idaho Power seriously. In particular, Grand View notes
that it has extended its conditional use permit to construct the facility, extended its land lease,
prepared the site for the construction of the PV panels, and initiated actions to enter into a
generator interconnection agreement with Idaho Power. Response at 14-15; Exh. 6, 7. Grand
ORDER NO. 32913
View insists that at "no time did Grand View assert that it would not fulfill its obligation to
provide the power it had committed to provide under the agreed upon term[s]." Id.
Commission Findings: Although Grand View concedes that the REC dispute and the
reduction of REC income make it more difficult for Grand View to secure financing, it asserts
that at no time has it said it would not fulfill its obligation to provide power "under the agreed
upon term[s]." Response at 6. Grand View argues that the loss of the REC income from not
owning all the RECs "would not necessarily make the project non-viable." Id. at 6. However,
Grand View's own counsel stated that anything less than disclaiming ownership to Idaho Power
"would likely make the project un-financeable. We run the risk of being a party to a contract
that we cannot perform on." See supra p. 4. Grand View also declared that equally dividing
RECs with Idaho Power "would undermine Grand View's entire going concern business by
removing RECs to be produced by the solar QF as a future revenue stream." Motion for
Summary Judgment at 25 citing Paul Affidavit at 71 25-29. Based upon our review of the
record, we find that the Commission relied on Grand View's own assertions of project viability
in making a determination of whether Grand View obligated itself to provide power. The
Commission has not, nor do we now, make an independent determination of Grand View's
viability.
6. Prior Orders. Next, Grand View again asserts that the Commission has previously
ruled that Idaho Power may not condition a PURPA contract on the "right of first refusal" for
RECs. Response at 3. In the early case referenced by Grand View, Idaho Power requested the
Commission grant it a right of first refusal to purchase unbundled RECs in PPAs. Order No.
29480. Grand View asserts that the Commission's prior Order expressly declared that Idaho
utilities may not condition their mandatory obligation to purchase on a right of first refusal. Id.
at 3.
Commission Findings: Grand View seemingly ignores that the Commission has
already addressed this argument when it denied summary judgment. In Order No. 32580 at 9,
the Commission found that Grand View's characterization and "interpretation of this Order [No.
294801 is erroneous." In particular, the Commission explained in its Order denying summary
judgment that it did not reach the issue of REC ownership in Order No. 29480 because the
Commission dismissed Idaho Power's petition for lack of an actual or judicial controversy.
Thus, we found and we again affirm that Order No. 29480 does not stand for the proposition
ORDERNO. 32913
cited by Grand View. As we explained in the Summary Judgment Order, Idaho Power's petition
was not ripe for a declaratory judgment. Order No. 32580 at 9-10. Thus, we find this argument
is not relevant and that the Commission has previously ruled against Grand View on this issue.
7. Yellowstone Case. Lastly, Grand View asserts that an earlier proceeding (Case
No. PC-E-10-22) involving Yellowstone Power (a cogeneration QF) and Idaho Power supports
its argument that the Commission "grandfathered" a LEO in that case. Idaho Power insists that
the Yellowstone case does not support Grand View's argument. Unlike this case, Idaho Power
says both parties in the Yellowstone case did sign a contract and submitted it to the Commission.
Unlike Yellowstone, Grand View refused to obligate itself. Reply at 6.
Commission Findings: We find that Grand View's reliance on Yellowstone is
entirely misplaced. The parties in Yellowstone had agreed to all contract terms (including
RECS).'~ In this case, Grand View withheld consent for entering into a contract with Idaho
Power unless and until Idaho Power disclaimed REC ownership. There was no mention in the
prior case of creating a legally enforceable obligation. Indeed, the parties executed a contract.
As we have previously mentioned, FERC developed the concept of a LEO in response to
situations where the utility refused to enter into a contract. In Yellowstone and here, the utility
did not refuse to enter into a contract. The LEO issue simply did not arise and Yellowstone has
absolutely no bearing on this case.
CONCLUSIONS
The Commission has jurisdiction over electric utilities 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 to resolve common law contract disputes between QFs
and electric utilities. It is up to the States to determine the specific parameters of individual
power purchase agreements, including the date at which a legally enforceable obligation is
incurred under state law. We conclude that Grand View's insistence that Idaho Power disclaim
REC ownership left the QF unwilling to enter into a binding and unconditional PURPA contract
with Idaho Power. Therefore, we conclude that Grand View did not create a legally enforceable
obligation in this case.
l6 In the Yellowstone PPA, the parties agreed that the QF would retain ownership of the RECs
ORDER NO. 329 13 26
O R D E R
IT IS HEREBY ORDERED that Grand View Solar Two's complaint requesting that
the Commission order Idaho Power to delete 5 8.1 of the March 10, 201 1 draft PPA and disclaim
all ownership of RECs is denied.
IT IS FURTHER 0RI)ERED that Grand View's Motion for Declaratory Order that it
perfected a legally enforceable obligation as of March 10, 201 1, and no later than August 2,
201 1, is denied.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-E- 11 -1 5
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this case. Within seven (7) days afier any person has petitioned for reconsideration, any other
person may cross-petition for reconsideration. See Idaho Code 5 61 -626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 2 7 4
day of October 20 13.
MARSHA H. SMITH, COMMISSIONER
ATTEST:
ORDERNO. 32913