20140131reconsideration_order_no_32974.pdf

Office of the Secretary
Service Date
January 31,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
GRAND VIEW PV SOLAR TWO,LLC,)
)CASE NO.IPC-E-ll-15
COMPLAINANT,)
)
v.)
)ORDER NO.32974
IDAHO POWER COMPANY,)
)
RESPONDENT.)
On August 2,2011,Grand View PV Solar Two,LLC 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 is the developer of a proposed 20 megawatt (MW)solar generating project to be
located in Elmore County.In its initial complaint,amended complaint,and subsequent Motion
for Summary Judgment,Grand View alleged that the sole dispute between the parties concerned
the ownership of renewable energy credits (“RECs”)’in the draft PPA that Idaho Power
forwarded to Grand View on March 10,2011.In its complaint and on summary judgment,
Grand View requested the Commission order Idaho Power to remove the REC provision (8.1)
of the draft PPA and instead insert a clause that requires Idaho Power to expressly disclaim
ownership of all RECs in the Agreement.In June 2012,the Commission denied summary
judgment.
In March 2013,Grand View raised a new argument claiming it had perfected a
“legally enforceable obligation”(LEO)on the date Idaho Power had forwarded the draft PPA to
Grand View (March 10,2011),or no later than August 2,2011 (the date it filed its formal
complaint).A LEO may be established by a PURPA qualifying facility (“QF”)when the QF
makes a binding commitment to sell power to an electric utility.18 C.F.R.§292.304(d).Grand
View also argued the REC provision in the draft PPA should be removed and the Agreement
“otherwise remain silent as to REC ownership.”Motion for Declaratory Order at 12.In July
2013,the Commission issued Order No.32861 finding that Grand View had not perfected a
A single REC represents the intangible environmental attributes associated with one megawatt-hour (MWh)of
electricity generated from an eligible renewable energy facility.
ORDER NO.32974 1
LEO.The Commission gave Grand View one final opportunity to present evidence that it
created a legally enforceable obligation.Grand View filed a response and Idaho Power filed an
answer.
On October 29,2013,the Commission issued final Order No.32913 rejecting Grand
View’s REC and LEO arguments.Addressing the REC issue,the Commission found that absent
an agreement to do otherwise,it was reasonable and consistent with Idaho common property law
interests to apportion ownership of the RECs equally between Grand View and Idaho Power.
Order No.32913 at 16;Order No.32861 at 9-10.Addressing the LEO issue,the Commission
found Grand View’s purported LEO was conditioned upon removal of the REC provision in §
8.1 and requiring Idaho Power to disclaim all REC ownership.The Commission declared that 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 Nos.32913 at 12,20,
22;32861 at 20 quotingArmco Advanced Materials v.Pennsylvania PUC,579 A.2d 1337,1347
(Pa.1990),aff’dper curiam 634 A.2 207 (1993),cert.denied,513 U.S.925 (1994);A.W.Brown
v.Idaho Power Co.,121 Idaho 812,827,818 P.2d 841,847 (1992).“Thus,we find Grand View
did not make a binding and unconditional legally enforceable obligation to provide power to the
utility.”Order Nos.32861 at 20;32913 at 21-22.
GRAND VIEW’S PETITION FOR RECONSIDERATION
On November 18,2013,Grand View filed a timely Petition for Reconsideration of
final Order No.32913 raising three primary issues.First,Grand View alleges the Commission
failed to recognize that a LEO and a PURPA contract are not the same but are two distinct
concepts.Petition at 2.Second,Grand View asserts the Commission has impermissibly tied the
creation of a LEO to resolution of the REC ownership issue.Id.at 3.Finally,Grand View
maintains the Commission’s decision regarding RECs constitutes “retroactive ratemaking”by
relying upon two Commission REC Orders issued in the concurrent generic PURPA
investigation,Case No.GNR-E-l1-03.Grand View argues it filed its complaint and created its
LEO in August 2011 —before the Commission issued its final REC Order in its generic PURPA
investigation in December 2012.Petition at 8.
On November 25,2013,Idaho Power filed an answer to Grand View’s Petition
urging the Commission to deny the Petition in its entirety.On December 16,2013,the
Commission issued Order No.32950 granting reconsideration so that it could consider Grand
ORDER NO.32974 2
View’s arguments in greater detail.The Commission found that the record in this proceeding is
sufficient and further briefing or evidentiary proceedings are unnecessary.Idaho Code §61-
626(2).
On January 10,2014,Grand View advised the Commission’s attorney that the parties
were scheduled to meet on January 13,2014,“to see if we can settle [the]Grand View [case].”
On the same day,Idaho Power submitted two judicial opinions issued by the West Virginia
Supreme Court of Appeals and the Federal District Court of West Virginia (S.D.)that address
RECs.
On January 16,2014,counsel for the Commission sent a letter to the parties inquiring
about the status of their settlement discussions.The parties were instructed to report on the
status of such discussions no later than January 21,2014.Both parties separately replied that
settlement discussions were unfruitful.
Having thoroughly reviewed the issues raised in Grand View’s Petition for
Reconsideration and the record in this case,the Commission issues this final Order on
reconsideration granting in part and denying in part reconsideration,As set out in greater detail
below,the Commission amends portions of its original final Order No.32913 to conform to this
Order.Idaho Code §sS 6 1-624 and 6 1-626(3).
BACKGROUND
A.The Parties’Negotiations
Commission Order Nos.32861 and 32913 review the underlying facts and procedural
history of this case.Briefly,Grand View and Idaho Power engaged in negotiations regarding the
terms of a draft PURPA agreement.Pursuant to these discussions,Idaho Power sent Grand
View a draft PPA on March 10,2011 (hereinafter the “March 2011 draft PPA”or “draft
Agreement”).The parties agreed that the avoided cost rates contained in the draft Agreement be
calculated using the Integrated Resource Plan (IRP)Methodology.Grand View alleged that it
agreed to all material terms in the draft Agreement except the REC provision.Order No.32580
at 5.However,the Commission later noted that several material terms in the draft Agreement
contained in the record had not been reduced to writing including:the amount of energy to be
delivered each month (S 6.2);the date for performance under the contract (App.B-3);and the
maximum capacity amount of the project (App.B-4).Order No.32913 at 3.
ORDER NO.32974 3
Grand View maintained in its initial complaint,amended complaint and in its
November 2011 Motion for Summary Judgment that the sole dispute between the parties was the
inclusion of the REC2 provision in §8.1 of the draft Agreement.During their negotiations,
Idaho Power suggested the parties split REC ownership on a 50%-50%basis.In the alternative,
Idaho Power also proposed the parties equally divide the RECs with Grand View receiving the
RECs for the first 10 years and Idaho Power receiving the RECs for the last 10 years of the
Agreement.Order No.32580 at 6 citing Complaint at ¶J 11,12;Idaho Power Answer at ¶f 11,
12.Grand View refused both alternatives.Id.
The parties then discussed submitting the dispute to the Commission for resolution.
Order No.32580 at 6 citing Complaint at ¶14;Answer at ¶14.In an e-mail dated June 8,2011,
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 [proposed]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 Idaho Power]argue[s]for and one without
and we accept the judgment of the Commission as the final outcome.”Order Nos.32913 at 3;
32861 at n.1 1;Idaho Power Answer to Amended Complaint,Atch.1 at 2 (emphasis added).On
July 10,2011,counsel for Idaho Power responded that the utility
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 [and the]
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 and/or any regulatory
body or agency deemed to have authority to regulate these [REC5]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
[REC]language in Article 8.[Grand View]seeks to have Article 8 remain
blank.The parties have agreed to all other terms and conditions of this
2 RECs are also known in various jurisdictions as environmental attributes,green tags,or renewable trading
certificates.“RECs may be created at renewable generating facilities operated by utilities,exempt wholesale
generators (EWGs),non-PURPA generators,or PURPA qualifying facilities (QFs)”such as Grand View.Order
Nos.32580 at4;32913 at I ni.
ORDER NO.32974 4
Agreement,and hereby agree to submit the issue of whether to include the
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.32913 at 3-4 quoting Idaho Power Answer to Amended Complaint,Atch.1 at 1
(emphasis added).On July 20,2011,Grand View’s counsel replied to Idaho Power’s counsel in
an 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 project 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.
Order No.32913 at 4 quoting Idaho Power Response to Grand View Submission,Atch.1 at pp.
1-2 (Aug.12,2013)(emphasis added);see also Order No.32861 at n.1 1.
B.The Concurrent PURPA Investigation
Shortly after Grand View filed its formal complaint in this case,the Commission
initiated the third phase of its generic PURPA investigation,Case No.GNR-E-1 1-03.On
September 1,2011,the Commission opened its concurrent PURPA investigation to review
various PURPA issues including REC ownership.Order No.32352 at 4.Both Idaho Power and
ORDER NO.32974 5
Grand View were parties in that case.Order No.32697 at 5-6.Legal briefs addressing the
ownership of RECs were filed in July 2012,and the Commission conducted its technical hearing
in August 2012.Id.at 1.Afler the technical hearing,the Commission directed the parties to
engage in settlement discussions.Id,at 6.A partial settlement was reached and the Commission
took additional comments on the settlement in October 2012.Id.
On December 18,2012,the Commission issued its final Order in the generic PURPA
investigation.Among other things,the Commission found that absent an agreement between the
parties to do otherwise,the QF and the utility should equally share ownership of RECs when the
avoided cost rates are calculated using the IRP Methodology.Order No.32697 at 45-47.On
reconsideration,the Commission affirmed its decision in Order No.32697 that it was reasonable
and consistent with common law property interests to apportion REC ownership equally between
the QF and the utility,absent an agreement by the parties to do otherwise.Order No.32802 at
19-20.No party,including Grand View,sought judicial review of that decision.Order No.
32913 at 16.
THE COMMISSION’S PRIOR ORDERS
A.The REC Decision
1.Jurisdiction.The Commission observed in its prior Orders that “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.32913 at 15 quoting
Order No.32861 at 9;Empire Lumber Co.v.Washington Water Power Co.,114 Idaho 191,192,
755 P.2d 1229,1230 (1988)(the Commission “is the appropriate forum to resolve”PURPA
contract disputes).“Our Supreme Court has declared that ‘the Commission has jurisdiction to
examine common law contract issues between QFs and utilities.”Order No.32913 at 15
quotingA.W.Brown,121 Idaho at 819,828 P.2d at 848 (emphasis added);Order No.32580 at 7.
In resolving the ownership of RECs in Idaho,“the Commission relied upon Idaho common law
to determine the property interest[s]associated with RECs.”Order No.32913 at 15,16.
In its Summary Judgment Order No.32580 and in its final Order No.32913,the
Commission quoted approvingly from the Second Circuit’s opinion in Wheelabrator Lisbon v.
Connecticut Dept.Pub.Util.Control,531 F.3d 183,186 (21(Cir.2008).The Court and the
Commission explained that:
ORDER NO.32974 6
RECs are “tradable certificates ...that correspond to a certain amount of
renewable energy generated by a third party.”American Ref-Fuel,105 FERC
at ¶61,005.[3]Generally speaking,RECs are inventions of state property law
whereby the renewable attributes are “unbundled”from the energy itself and
sold separately.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 Nos.32580 at 4;32913 at 7 (emphasis added).“[I]nsofar as RECs are state-created,
different states can treat RECs differently.”Order Nos.32580 at 5;32913 at 7 quoting American
Ref-Fuel,107 FERC ¶61,016 at n.4;Idaho Wind Partners,136 FERC ¶61,174 at P.10 (2011)
(the sale and trading of RECs are for the States to determine,and it is not an issue that PURPA
controls.”).In other words,PURPA “does not address the ownership of RECs States,in
creating RECs,have the power to determine who owns the RECs in the first instance,and how
they may be sold or traded;it is not an issue controlled by PURPA.”Order Nos.32580 at 5,8;
32913 at 8 (emphasis original)quoting American Ref-Fuel,105 FERC ¶61,004 at P.23;
Wheelabrator Lisbon,531 F.3d at 189;City of Martinsville v.Public Service Comm ‘n of W.
Virginia,729 S.E.2d 188,194 (W.Va.2012);Morgantown Energy Assoc.v.Public Service
Comm’n of W.Virginia,slip op.at *3,8,2013 WL 5462386 (S.D.W.Va.)(Sept.30,2013).
2.REC Ownership.Turning to the issue of REC ownership,the Commission found
and the parties agreed that no Idaho statute specifically addresses the ownership of RECs.Order
Nos.32580 at 9;32913 at 7.The Commission found and Grand View has not challenged that
RECs are 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;
32913 at 7 citing Black’s Law Dictionary,808 (6th ed.1990);City ofMartinsville,729 S.E.2d at
197 (RECs “are an intangible creation...“).“RECs are not tangible and do not ‘exist’until the
renewable project produces power.”Order No.32913 at 15.The Commission noted in this case
that there are no RECs without the generation of renewable power.Order Nos.32697 at 45-46
(footnote omitted);32802 at 12;32913 at 15.
In final Order No.32913,the Commission cited two primary reasons why it was
appropriate to equally apportion RECs in this instance between Grand View and Idaho Power
American Ref-Fuel Co.,105 FERC ¶61,004 (2003),reh’g denied,107 FERC ¶61,016 (2004),dismissed sub nom.
for lack ojjurisdiction,Xcel Energy Services v.FERC,407 F.3d 1242 (D.C.Cir.2005).
ORDER NO.32974 7
(absent their agreement to do otherwise).First,the Commission relied upon the property interest
factors developed in the concurrent generic PURPA investigation (GNR-E-11-03)to support its
decision to equally apportion the RECs.Order No.32913 at 15.In the PURPA investigation,
the Commission stated that the “question of REC ownership hinges upon which party has a
property interest in RECs.Whether a party has a compensable property interest in RECs
presents ‘a question of law based upon factual underpinnings.”Order No.32802 at 18 quoting
Mohlen v.United States,74 F.Cl.656,660 (2006)quoting Waichek v.United States,303 F.3d
1349,1354 (Fed.Cir.2002)citing Wyatt v.United States,271 F.3d 1090,1096 (Fed.Cir.2001),
cert.denied sub norn.E.Minerals Int’l v.United States,535 U.S.1077,122 S.Ct.1960 (2002).
3.Property Interest Factors.The Commission found the Supreme Court of
Connecticut’s opinion in Wheelabralor Lisbon v.Dept.of Pub.Util.Control,931 A.2d 159
(Conn.2007),was instructive in analyzing the factors pertaining to the property interests of REC
ownership.In that opinion,the Connecticut Court listed several property interest factors.First
and foremost,PURPA’s “must purchase”provision compels utilities to purchase power that they
would not otherwise be obligated to purchase but for PURPA.Wheelabrator,931 A.2d at 174;
Order No.32913 at 7,15.As the Commission explained in its final Order No.32913,“[b]ut 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 No.32913 at 15
citing Order Nos.32580 at 10;32802 at 12.
The second factor relied upon by the Commission is that RECs are “inexplicably tied
to the [QF’s]production of electricity.”Order No,32802 at 18 quoting Wheelabrator,931 A.2d
at 174;Order No.32913 at 15.When a QF utilizes PURPA to compel a utility to purchase its
renewable power,RECs would not be created but for PURPA’s must purchase provision.Order
No.32802 at 15.The Commission noted that the disposition of RECs has now become a
standard provision in Idaho PURPA contracts.Order Nos.32697 at 44,46;32802 at 15.
Third,“PURPA compels the utility to purchase power whether it needs the power to
serve load or not.Even if the 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 [as well as]the QF power.”Order Nos.32913 at 15;32802 at 18.Fourth,
ratepayers are ultimately paying for both the purchase of QF power and the assets of the utility’s
base load generating plants that are supposedly displaced by the QF power.Order No.32913 at
ORDER NO.32974 8
15.Finally,the Commission noted that “providing all the RECs to the QF would result in a
windfall to them.”Order No.32802 at 19;Wheelabrator,931 A.2d at 174-75.
After weighing these property interest factors,the Commission affirmed its decision
that the RECs in this case should be equally divided between Grand View and Idaho Power.The
Commission concluded 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
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.32913 at 15-16 quoting Order Nos.32802 at 12;32697 at 46 (internal citations and
footnote omitted).
The second primary reason supporting the Commission’s REC decision in final Order
No.32913 was that Grand View and Idaho Power “were on notice that REC ownership would be
addressed in [the]parallel PURPA investigation.”Order No.32913 at 16 citing Order No.
32861 at 9-10.The Commission observed that both “Grand View and Idaho Power were parties
and participated in the GNR-E-11-03 case.”Id.The Commission noted that no party in the
generic PURPA investigation,including Grand View,sought judicial review of the
Commission’s decision to apportion REC ownership equally between the QF and the utility.
Order No.32913 at 16.“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.;Order No.32861 at 9-10.
The Commission also examined property interest factors that cut in favor of the QF.In particular,the Commission
noted that “QFs must first generate the power before a REC is created.QFs must build their facilities and
interconnect with the utility purchasing the generated power....Second,providing all the RECs to the utility
would result in a windfall to the utility....[Providing the RECs to the QF constitutes a]secondary source of.
income for QFs [that]further encourages the development of renewable resources consistent with the goals of
PURPA and the intent of this Commission.”Order No.32802 at 19 citing Wheelabrator,931 A.2d at 175 n.24.
The Commission also noted in its Summary Judgment Order that early cases from other states without REC
statutes held that RECs “are the property of the purchasing utility rather than the producer.”Order No.32580 at 13
quoting In re Ownership of RECs,913 A.2d 825,828 (N.J.App.Div.2007)citing Holt,Who Owns Renewable
Energy Cert/Icates?at 14 (published by Ernest Orlando Lawrence Berkley National Laboratory,available at:
eetd.lbl .gov/ea/emp/reports/599965 .pdf).
ORDER NO.32974 9
B.The LEO Decision
Grand View asserted the draft PPA was designed to memorialize the LEO and that
the “LEO issue was the very heart of its complaint.”Petition at 6.The Commission dismissed
this characterization of the case for several reasons.First,the Commission found 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 Nos.
32913 at 16;32861 at 19.The Commission found that Grand View first advocated it had
perfected a LEO in March 2013 —19 months6 after it had filed its complaint in this matter.Order
No.32913 at 16-17.Second,the Commission found the March 2011 draft PPA did not
“memorialize”a LEO because the parties were still negotiating the REC provision of the draft
Agreement in June and July of 2011.Id.at 16.In addition,the March 2011 draft PPA was
clearly marked “Draft for Discussion Purposes Oniy”on each page.Id.
Third,the Commission found Grand View was not willing or able to unconditionally
bind or commit itself to sell its output to Idaho Power un1ess Idaho Power disclaimed ownership
of RECs.”Order No.32913 at 20;Complaint at ¶8,p.6.Grand View refused to obligate itself
by insisting it was entitled to all the RECs.More specifically,Grand View’s offer to supply
power to the utility was based upon two conditions:(1)the removal of the REC provision in §
8.1;and (2)ordering Idaho Power to disclaim any and all ownership of RECs.Order Nos.32861
at 19-20;32913 at 18-22.
The Commission also relied on the conduct of the parties to find there was no LEO.
During negotiations with Idaho Power,Grand View’s counsel stated in the June 8,2011 e-mail
that the QF was “willing to sign the contract with the REC language you have if we make it
contingent upon whether the Commission specifically requires that language.”Order No.32913
at 16.The Commission noted it was Grand View’s counsel that made the initial offer to submit
the REC dispute to the Commission for resolution.He suggested the parties sign and submit two
versions of the PPA to the Commission:“one with the [REC]language of [8.11 ...and one
without and we accept the judgment of the Commission as the final outcome.”Id.at 3,21
quoting Order No.32861 at n.11.However,after having suggested its willingness to submit the
6 Although the Commission’s Order No.32913 calculates that Grand View filed its Motion for Declaratory Order
17 months after it first tiled its complaint in August 2011,the actual number of months is 19 (from August 2011 to
March 2013).
ORDER NO.32974 10
dispute to the Commission,Grand View subsequently refused to obligate itself to supply power
without receiving all of the RECs.Order No.32913 at 4,21.
Finally,the Commission declared that its findings were supported by several Idaho
Supreme Court opinions.In discussing the necessary criteria for perfecting a LEO,the Court
stated in A.W.Brown v.Idaho Power Co.,that a QF “must show 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 817,828 P.2d at 846 (emphasis added);Order
Nos.32913 at 22;32861 at 20.In Rosebud Enterprises v.Idaho PUC,131 Idaho 1,6,951 P.2d
521,526 (1997),our Court held that a QF was not entitled to an earlier rate because the QF’s
offer was expressly conditioned on it obtaining concessions....“Order No.32913 at 20
(emphasis original).The Commission concluded that 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 Order No.32861 at 20 quoting Armco Advanced
Materials v.Pennsylvania PUC,579 A.2d 1337,1347 (Pa.1990);In re Mid Atlantic Cogen,193
WL 561981*7 (N.J.Bd.of Reg.Control 1993).
LEGAL STANDARDS
Reconsideration provides an opportunity for a party to bring to the Commission’s
attention any question previously determined and thereby affords the Commission with an
opportunity to rectify any mistake or omission.Washington Water Power Co.v.Kootenai
Environmental Alliance,99 Idaho 875,879,591 P.2d 122,126 (1979).The Commission may
grant reconsideration by reviewing the existing record,by written briefs,or by evidentiary
hearing.IDAPA 31.01.01.332.If reconsideration is granted,the Commission must complete its
reconsideration within 13 weeks after the deadline for filing petitions for reconsideration.Idaho
Code §61-626(2).The Commission must then issue its Order on reconsideration.
If the Commission believes the original final Order “should be changed,the
Commission may ...change the same.”Idaho Code §61-626(3).An Order on reconsideration
that changes “the original final order,shall have the same force and effect as the original order.”
Id.see also Idaho Code §6 1-624.We now turn to Grand View’s arguments raised in its Petition
for Reconsideration.These arguments can be divided into two general disputed areas:whether
Grand View perfected a legally enforceable obligation (LEO)and the ownership of RECs.
ORDERNO.32974 11
ISSUES ON RECONSIDERATION
A.A PURPA Contract and a LEO are not the Same
1.Grand View.Grand View first asserts the Commission has conflated two separate
and distinct concepts into one.In particular,it points to two sentences in Order No.32913 to
support its argument.It argues the Commission’s determination that Grand View did not create
a legally enforceable obligation rests upon the Commission’s finding that Grand View was
“unwilling to enter into a binding...contract.”Petition at 2 (emphasis added).In other words,
Grand View maintains the Commission required Grand View to enter into a PURPA contract as
a condition precedent for the formation of a LEO.Id.In support of its argument,Grand View
points to two sentences in the “Conclusion”section of the Commission’s final Order No.32913
and insists that this passage constitute the Commission’s “ultimate finding”(Petition at 2):
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.
Order No.32913 at 26.Grand View alleges these two sentences demonstrate the Idaho
Commission continues to require a fully executed contract before a QF can create a legally
enforceable agreement.Petition at 2.
2.Idaho Power.In its answer,Idaho Power maintains this argument is without merit.
In particular,Idaho Power notes the Commission states in its prior Order No.32861 that QFs
may obligate electric utilities to buy QF power by entering into PURPA contracts by
perfecting a legally enforceable obligation.Answer at 6 (emphasis added).Idaho Power states
that a fully executed and approved contract is always a legally enforceable obligation but a LEO
“may not always be represented by fully executed and approved contract.”Id.
Commission Finding:After reviewing Grand View’s Petition,Idaho Power’s answer
and our prior Orders,we do not agree with Grand View’s interpretation of the quoted passage set
out above for two reasons.First,we find the two sentences are taken out of context.Contrary to
Grand View’s assertion,this passage does not constitute the Commission’s “ultimate findings.”
The two sentences quoted by Grand View are included in a section entitled “CONCLUSIONS”
and are located at the end of our prior final Order No.32913 at page 26.The Commission’s
actual findings regarding the disputed issues presented in this case are clearly denoted in Order
No.32913 in Order sections entitled “Commission Findings.”(Emphasis original.)
ORDER NO.32974 12
Second,we reject Grand View’s argument that the Commission failed to find Grand
View had not created a LEO based upon a “conclusion that the QF was ‘unwilling to enter into a
binding ...contract.”Petition at 2 (emphasis added).As explained in greater detail in Section
C (infra p.15),we found that Grand View’s purported LEO “was not a binding offer but was
conditioned upon two points:the removal of [the REC provision in]§8.1 and Idaho Power
disclaiming any ownership in RECs,”Order No.32913 at 12,18-22.Our LEO findings did not
rest upon whether Grand View executed a contract.More importantly,the Commission has
acknowledged in this case “that a legally enforceable obligation may occur outside of a contract.
.“OrderNos.32913 at9;32861 at 11.
The Commission has indicated on many occasions that a LEO and a PURPA contract
are one and the same.As we said in our prior Order in this case denying Grand View’s
Motion for Declaratory Order,there “are two general methods by which a QF can provide power
to utilities:(1)by entering into a signed contract with the utility;or (2)pursuant to a legally
enforceable obligation (LEO).”Order No.32861 at 18 (emphasis added)citing 18 C.F.R.§
292.304(d);Power Resource Group v.PUC of Texas,422 F.3d 231,237 (5th Cir.2005).See
also Idaho Power Co.v.Idaho PUC (hereinafter “Grouse Creek”),Idaho ,No.135,slip
op.at 10-11 (Dec.18,2013);Order No.25528,152 P.U.R.4th 495 (1994).As we previously
stated in this case,“FERC specifically adopted the concept of a legally enforceable obligation to
prevent utilities from circumventing the ‘must purchase’PURPA provision ‘merely by refusing
to enter into a contract with the”QF.Order No.32861 at 18 quoting Power Resource,422 F.3d
at 238 quoting 45 Fed.Reg.12,214,12,224 (Feb.25,1980);Grouse Creek,slip op.at 10.The
Commission “has never made a determination that the creation of a legally enforceable
obligation ç]y occurs when a QF and utility enter into a written and signed agreement.”Order
No.32635 at 10,11(2012),aff’d,Grouse Creek,slip op.at 10;see also Rosebud Enterprises v.
Idaho PUC,131 Idaho at 6,951 P.2d at 526 citingA.W.Brown,121 Idaho at 815,828 P.2d at
844;Order No.25638.
Having rejected Grand View’s argument,we nevertheless believe it is appropriate to
remove any doubt about the meaning of the quoted passage from Order No.32913 at page 26.
Consistent with our authority to amend the prior final Order pursuant to Idaho Code §6 1-626(3),
we amend Order No.32913 to clarify its meaning.Consequently,the quoted passage in our
prior final Order No.32913 is amended as set out below.
ORDER NO.32974 13
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.We also conclude that Grand View was
not willing to unconditionally obligate and bind itself to supply power to the
utility.Therefore,we conclude that Grand View did not create a legally
enforceable obligation in this case.
B.RECs and LEOs are Separate and Distinct Concepts
Grand View next takes issue with a statement in the Commission’s final Order No.
32913 where we said:“we conclude that the REC and LEO issues are not two separate and
distinct issues.”Petition at 4 quoting Order No.32913 at 16-17.Grand View maintains that
statement is erroneous because RECs and a LEO are in fact separate issues.
Commission Findings:Again,Grand View cherry-picks a sentence in an attempt to
obfuscate the issues.In this part of the Order,the Commission was responding to Grand View’s
argument that this case had nothing to do with RECs but rather the only disputed issue was
whether the draft Agreement was a memorialization of a legally enforceable obligation (LEO).
To the contrary,we found that this case was not solely about the LEO issue as Grand View
argued in its March 2013 Motion for Declaratory Order.We noted in our final Order “Grand
View has repeatedly alleged that the sole dispute between the parties concerned the ownership of
RECs in the March 2011 draft PPA.”Order Nos.32913 at 14 citing 32580 at 1,7;32861 at 1;
Grand View Summary Judgment Motion at 2.The Commission found that Grand View’s
argument that the REC issue should be entirely separate and distinct from the LEO issue ignored
the facts and pleadings of this case that “the REC issue ‘was the gravamen of the initial
complaint and summary judgment.”Order No.32913 at 14 citing Order No.32861 at 17.It
was Grand View that stated on summary judgment that this “case involves a dispute over the
ownership of [RECs].”Motion for Summary Judgment at 2.In other words,we recognized that
Grand View presented both REC and LEO issues.
Upon reconsideration in an abundance of caution,we find it is appropriate to clarify
this sentence and its meaning.We recognize that REC issues and LEO issues may be separate
and distinct.However,in this case,the two issues are intertwined.In particular,the
Commission found that Grand View’s purported LEO was conditioned upon Grand View
receiving ownership of all the RECs.So in that sense,the two distinct issues are interwoven in
this particular case.Consistent with our authority in Idaho Code §61-626(3),we amend Order
ORDER NO.32974 14
No.32913 at pages 16-17 to clarify this sentence to read:“Consequently,we conclude that
although the REC and LEO issues are net two separate and distinct issues,they are intertwined
in this particular case.”
C.Grand View did not Perfect a Legally Enforceable Obligation
1,Grand View’s Arguments.Grand View asserts it had perfected a legally
enforceable obligation (LEO)when it purportedly obligated itself to sell power to Idaho Power
as of August 2O11.Petition at 13.Grand View asserts the Commission’s Orders in this case
impermissibly tied creation of a LEO to resolution of the REC ownership issue.Id.at 3.Grand
View advances two primary arguments.First,Grand View again asserts the “LEO issue was the
very heart of its complaint.”Petition at 6.It insists that its initial complaint in this case made “it
abundantly clear that [Grand View]had created a LEO....“Id.Second,Grand View argues the
Commission erred when it found that Grand View’s offer to sell power to the utility was
conditional and non-binding.
2.Idaho Power’s Answer.In its answer,Idaho Power maintains the Commission
properly found that Grand View had not created a LEO “because Grand View,not Idaho Power,
was the party that refused to obligate itself to the previously effective rates,and did not obligate
itself to deliver power to Idaho Power.”Answer at 3.The utility insists the Commission
properly found that Grand View did not create a legally enforceable obligation.It states the
Order clearly lays out the reasons for its finding that Grand View’s offer to supply power to the
utility was conditioned upon the QF receiving all of the RECs.Id.at 4.Even when the
Commission allowed Grand View another opportunity to “present evidence that it created a
legally enforceable obligation without conditions,”Grand View failed to provide persuasive
evidence that it had perfected a LEO.Id.at 3.
Idaho Power insists the Commission’s findings that Grand View’s offer was
expressly conditioned and non-binding are consistent with Idaho Supreme Court precedent.Id.
at 4 citing A.W.Brown,121 Idaho at 817,828 P.2d at 846.Quoting from A.W.Brown,Idaho
Power asserts 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...
(Emphasis added.)See also Rosebud Enterprises,131 Idaho at 6,951 P.2d at 526 (the QF
During this case Grand View has argued that it perfected a LEO at several different times:on March 10,2011 (the
date of the draft PPA)(Motion for Declaratory Order at 1);between March 10 and August 2,2011 (Id.at 7);prior to
August 2,2011 (Response to Order No.32861 at 17);and “in August 2011”(Petition for Reconsideration at 13).
ORDERNO.32974 15
“made its willingness to commit to a ‘definitive agreement’expressly conditioned on its
obtaining concession....“).Idaho Power also observed that 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.at 5 quoting Armco Advanced Materials,579 A.2d at
1347;see also Order Nos.32913 at 12,20,22;32861 at 20.
Commission Findings:We do not agree with Grand View’s assertion that from the
time of its opening complaint “Grand View made it abundantly clear that it had created a LEO.”
Petition at 6.To the contrary,the facts and Grand View’s pleadings in this case do not support
this characterization.“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 Nos.32913 at 16;32861 at 19.It was Grand View that declared in its
complaint and on summary judgment that the sole dispute was the REC provision in the draft
PPA.Order No.32913 at 14 citing Grand View’s Motion for Summary Judgment at 2 (“this
case involves a dispute over the ownership of [RECs].”);Order Nos.32580 at 1,7;32861 at 1;
32913 at 14.The Commission previously found the REC dispute “was the gravamen of the
initial complaint and summary judgment.”Order No.32913 at 14 quoting Order No.32861 at
17.
Moreover,the Commission found Grand View did not advocate it had perfected a
LEO until it filed its Motion for Declaratory Order in March 2013.Order No.32913 at 16 citing
Motion at 7.Thus,the Commission found that Grand View waited 19 months after its complaint
before first asserting it perfected a LEO.Id.at 17.The Commission also found the March 2011
draft PPA could not “memorialize a LEO”because the parties were still negotiating the REC
issue in June and July 2011.Id.at 16.Consequently,we find the evidence clearly does not
support Grand View’s position that the LEO issue was the only issue in this case.
Grand View also points to the second sentence in its Motion for Summary Judgment
(November 2011)to support its assertion that the “LEO was the very heart of its complaint.”
Petition at 6.As set out in its Petition for Reconsideration,the second sentence of Grand View’s
Motion states:
Grand View has requested a standard Public Utility Regulatory Policies Act of
1978 (“PURPA”)power purchase agreement (“PPA”)with Idaho Power
Company containing Integrated Resource Plan Methodology (“IRP
ORDER NO.32974 16
Methodology”)rates valuing only the energy and capacity to be sold from
Grand View’s solar power generating facility.
Petition at 6 quoting Motion for Summary Judgment at 1.However,a review of this passage
above does not reveal any mention of the terms “legally enforceable obligation”or “LEO.”
Consequently,we find this argument is without merit.8
After reviewing the record in this case,we affirm our prior Order Nos.32861 and
32913 that found Grand View did not perfect a LEO.Grand View’s offer to supply power to
Idaho Power was an offer with two conditions:(1)the removal of the REC provision in §8.1;
and (2)directing Idaho Power to disclaim any ownership of RECs.Grand View’s initial
complaint states that it is willing to enter into a PURPA contract “with IRP calculated rates th
disclaim REC ownership by Idaho Power.”Order Nos.32913 at 20;32861 at 19 quoting
Complaint at ¶8,p.6.Grand View repeats in its amended complaint and again in its Motion for
Summary Judgment that its offer is contingent upon “Idaho Power disclaim[ing]ownership of all
[REC5].”Motion at 36;Amended Complaint at p.3.
We find these statements demonstrate that Grand View was not willing to bind or
commit itself to either a contract or a LEO unless Idaho Power disclaimed ownership of RECs.
Because Grand View’s REC conditions have not been satisfied,there is no LEO.“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 Nos.32913 at 20;32861 at 20
quoting Armco Advanced Materials,579 A.2d at 1347;In re Mid Atlantic Cogen,1993 WL
56 198*7 (N.J.Bd of Reg.Control 1993).Moreover,in the parties’negotiations,Grand View’s
counsel stated in his June 8,2011 e-mail to Idaho Power that Grand View is willing to sign the
draft PPA “if we make it contingent upon whether the Commission specifically requires that
[REC]language.”Order No.32913 at 21.We found this declaration “persuasive evidence that
Grand View was not willing to unconditionally obligate itself to supply power and thus no LEO
was perfected.”Id.
Our findings are also consistent with PURPA opinions issued by the Idaho Supreme
Court.This Commission has authority to determine whether a LEO has been perfected under
8 Grand View also cites to nine paragraphs in its initial complaint to further support its argument that the LEO issue
is the heart of its complaint.Petition at 6-7.However,but for the one mention of the word “obligation,”the terms
“legally enforceable obligation”or “LEO”do not appear anywhere in these nine paragraphs.Simply put,we find
that the complaint and the Motion for Summary Judgment were about the REC issue.
ORDER NO.32974 17
state law.Power Resource,422 F.3d 238-39;Rosebud Enterprises v.Idaho PUC,128 Idaho
609,624,917 P.2d 766,781 (1996);Grouse Creek,slip op.at 9-10.In A.W.Brown,our Court
held that for a LEO to be created,a QF “must show but for the actions of the utility it was
otherwise entitled to a contract.In most cases this will entail making a comprehensive binding
offer....“121 Idaho at 817,828 P.2d at 846 (emphasis added);Order Nos.32861 at 20;32913
at 22.In Rosebud Enterprise v.Idaho PUC,131 Idaho at 6,951 P.2d at 526,the Court held that
a QF ‘was not entitled to an earlier avoided cost rate because it had not legally obligated itself to
deliver power to the utility.In affirming this Commission’s decision,the Court observed that
‘Rosebud made its willingness to commit to ‘a definitive agreement’expressly conditioned on its
obtaining concessions from vendors,financers,and suppliers.”Order No.32861 at 20;see
generally Grouse Creek,slip op.at 9-11;Idaho Power Co.v.Cogeneration,134 Idaho 738,746,
9 P.3d 1204,1212 (2000)(a QF’s offer of a security payment was conditional “and therefore did
not legally constitute a tender.”).Based upon the foregoing,we again conclude that Grand View
did not perfect a LEO in this case.
D.Idaho Power’s Conduct did not Prevent the Formation of a Contract
1.Grand View.Grand View next argues Idaho Power “was actively preventing the
parties from executing the [PURPA]contract ...[b]y insisting on [the REC]terms that it knew
was objectionable...“Petition at 13.In other words,Grand View argues that it was Idaho
Power’s conduct that prevented Grand View from executing the PURPA contract.
2.Idaho Power.Idaho Power vigorously disputes this contention.Idaho Power
insists it was Grand View that maintained it was entitled to all the RECs and that Idaho Power
should disclaim any ownership interest in RECs.The utility maintains the initial language of the
REC provision in §8.1 simply stated that “REC ownership would be determined by the proper
authority to make such determination.”Answer at 6.
Idaho Power also states it accepted Grand View’s proposal to sign the contract and
submit the dispute with its two separate REC alternatives to the Commission for resolution.Id.
at 6-7.After proposing the REC dispute be submitted to the Commission for resolution,Grand
View later opposed its own proposal.“If Grand View wanted to obligate itself,it had the
opportunity to do so,but refused,Idaho Power,to the contrary,was willing to enter into the
contractual obligation at that time,but Grand View refused.There was no legally enforceable
obligation created because Grand View refused to obligate itself.”Id.
ORDER NO.32974 18
Commission Findings:We reject Grand View’s assertion that Idaho Power was
actively preventing the parties from executing the contract.Petition at 13.We noted in Order
No.32861 “FERC specifically adopted the concept of a legally enforceable obligation to prevent
utilities from circumventing the ‘must purchase’PURPA provision ‘merely by refusing to enter
into a contract with the’QF.”Order No.32861 at 18 quoting Power Resource,422 F.3d at 238
quoting 45 Fed.Reg.12,214,12,224 (Feb.23,1980);see also Grouse Creek,Idaho slip
op.at 10.When examining whether a LEO has been created,the Idaho Supreme Court recently
held “that a finding of a legally enforceable obligation requires a showing that there would have
been a contract but for the actions of the utility.”Grouse Creek,slip op.at 10.
Despite Grand View’s protest to the contrary,we find that Idaho Power did not
prevent or delay Grand View from signing a contract.During the parties’negotiations in June
and July 2011,Grand View indicated it was willing to sign the PURPA contract “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.32913
at 3,21;Order No.32861 at 21 n.11.Idaho Power’s counsel agreed to submitting the matter to
the Commission for resolution.Id.at 3-4.However,counsel for Grand View ultimately rejected
his own proposal.
In the negotiations regarding the REC provision,Idaho Power offered to divide REC
ownership equally (50%-50%)between the parties,or one party taking RECs for the first 10
years and the other party taking the RECs for the last 10 years of the Agreement.Order No.
32913 at 5 citing Complaint at ¶11-12;Motion for Summary Judgment at 25;Paul Aff.at ¶27.
Grand View rebuffed these offers arguing that it is entitled to a PURPA contract “in which REC
ownership is disclaimed by Idaho Power.”Order No.32913 at 5 citing Complaint at ¶13;
Motion for Summary Judgment at 36.It was Grand View that insisted it was entitled to own all
the RECs.
In rejecting the proposal to submit the matter to the Commission for resolution,Grand
View’s counsel noted that agreeing to such a contract “runs the risk of being a party to a contract
that we cannot perform on ...[Unless]you respond that you will accept our final offer to have
the contract remain silent,or that Idaho Power still insist on the [REC]language remaining in §
8.1,we will proceed [by filing a complaint against Idaho Power at the PUC].”Order No.32913
ORDER NO.32974 19
at 4.Based upon the conduct of the parties.we do not find that Idaho Power delayed or impeded
the signing of the contract.Indeed,it was Grand View that rejected the offer that it initially
proposed to submit the dispute to the Commission for resolution.Id.Thus,we find it was Grand
View’s conduct that caused there to be no written contract,as well as no LEO.
E.Prior Orders
Grand View next asserts the Commission’s Orders in this case are inconsistent with
prior Orders in two respects.These arguments are discussed below.
1.Right-of-first-refusal.Grand View renews a prior argument that it made on
summary judgment that the Commission acted inconsistently with an Order the Commission
issued 10 years earlier in Case No.IPC-E-04-2.Petition at 4-5.In that Order,the Commission
dismissed Idaho Power’s Petition for a Declaratory Order that it be granted a “right-of-first-
refusal”to purchase unbundled RECs in PURPA contracts.Order No.29480.Grand View
maintains the Commission’s prior Order expressly declared that Idaho utilities may not condition
their mandatory purchase of QF power on a right-of-first-refusal.Petition at 5.Grand View
insists the holding in that Order should be equated to prohibiting utilities from being allocated
REC ownership.Thus,Grand View argues the Commission acted arbitrarily by failing to follow
the holding of prior Order No.29480.
Commission Findings:Consistent with our previous decisions in Order Nos.32580
and 32913,we again find Grand View’s interpretation of Order No.29480 is erroneous.In that
earlier case,the Commission dismissed Idaho Power’s Petition for a Declaratory Order “because
it did not present an actual or judiciable controversy and was not ripe for a declaratory judgment
by the Commission.”Order No.32580 at 9 citing Order No.29480 at 16;Order No.32913 at
25.Thus,the Commission never reached the merits of that case and certainly did not address the
issue of REC ownership.
The earlier case and this case simply address two different issues.A right-of-first
refusal is the right to have first opportunity to purchase the intangible asset of a REC when it
becomes available,or the right to meet any other offer.Black’s Law Dictionary,1191 (5th ed.
1979).In contrast,this case addresses and resolves a different issue —the ownership of RECs in
the first instance.Thus,the Commission did not address the issue of REC ownership in that
earlier case because “Idaho Power’s petition was not ripe for a declaratory judgment.”Order
No.32580 at 9-10;32913 at 26.
ORDER NO.32974 20
We also find the Commission is not bound to decide future cases in the same way as
past cases.The Commission is a regulatory agency that performs both judicial and legislative
functions and it is not bound by stare decisis.Grouse Creek,slip op.at 12;Building Contractors
Ass’n ofSouthwestern Idaho v.IdahoFUC,151 Idaho 10,15,253 P.3d 684,689 (2011).Even if
we rejected the right-of-first-refusal for RECs in Order No.29480 which we did not because
there was no judiciable controversy —we are not bound to adhere to a policy decision made
almost 10 years ago.
2.Negotiating RECs,Grand View also maintains it is impossible “to reconcile the
Commission’s declaration that QFs and utilities may voluntarily negotiate RECs,with the
conclusion in its final Order that Grand View’s failure to negotiate RECs with Idaho Power was
fatal to its creation of a LEO.”Petition at 4 quoting Order No.32580 at 12.Grand View points
to a statement made in our earlier Order No.32580 in this case that declared “QFs and utilities
may voluntarily negotiate RECs.”Citing Order Nos.29480 and 29577.
Commission Findings:In Order No.32580,we were discussing the historical
development of the REC issues.On summary judgment,Grand View was arguing it is the
default owner of RECs and relied on the “rules or orders of neighboring states,”such as Oregon
and Montana to support its position.Order No.32580 at 12.The prior Order noted there was no
specific federal or state law governing the ownership of RECs in Idaho at that time.Id.at 9.
The Commission was not persuaded by Grand View’s reliance on the REC programs
of Oregon and Montana.The Commission held that “Oregon and Montana ...have RPS
programs and sometime confers REC ownership on QFs.”Given the differences between RECs
in these States and Idaho,the Commission found “rules or decisions from other states are not
controlling [in Idaho]....What this Commission has said [in the past]is that QFs and utilities
may voluntarily negotiate RECs.”Id.at 12.
It is possible to reconcile our statement that QFs and utilities may voluntarily
negotiate RECs with our particular findings in this case.The sentence that Grand View
maintains is incongruent was discussing the REC policies of other states.In that earlier Order
we were simply acknowledging the flexibility that parties have to negotiate REC ownership.
However,in this adjudication the parties were unable to settle their REC dispute so the
Commission resolved the dispute by equally dividing REC ownership.We find that Grand
View’s argument is not persuasive.
ORDER NO.32974 21
F.Retroactive Ratemaking and Contract Impairment
Grand View next argues the Commission erred in its final Order No.32913 by the
“retroactive application of the Commission’s REC ownership order”from the concurrent,
generic PURPA investigation,Case No.GNR-E-1 1-03.Petition at 7.In essence,Grand View
asserts it was inappropriate for the Commission to resolve the disputed issue of REC ownership
in this case by applying the REC decision from our PURPA investigation Order No.32697
issued in December 2013.Grand View raises three arguments why the application of the prior
REC decision from the generic PURPA investigation is inappropriate to resolve the REC dispute
in this case.
Idaho Power insists in its answer the Commission did not engage in retroactive
ratemaking or rulemaking.Idaho Power points out that this case and the Commission’s generic
PURPA investigation were both ongoing at the same time.Answer at 7.Idaho Power maintains
that “although a determination as to REC ownership had not been made at the time Grand View
initially filed its complaint,that determination was made in parallel proceedings,to which both
Grand View and Idaho Power were parties[.The generic REC]determination was made while
Grand View’s complaint and LEO issues were still pending with the Commission.”Id.Idaho
Power maintains that “Grand View’s claim of retroactivity simply does not lie.”Id.
In our final Order No.32950 the Commission granted Grand View’s Petition for
Reconsideration so the Commission could consider Grand View’s three retroactive arguments in
greater detail.These arguments are discussed below.
1.Retroactive Ratemaking.Grand View first argues the Commission’s decision to
equally divide REC ownership under the IRP methodology (absent an agreement by the parties
to do otherwise)is “retroactive ratemaking.”Petition at 7-8.
Commission Findings:The Commission is a regulatory agency that performs both
judicial and legislative functions.Grouse Creek,slip op.at 12;Building Contractors,151 Idaho
at 15,253 P.3d at 689.“The function of ratemaking is legislative and not judicial.”Industrial
Customers of Idaho Power Co.v.Idaho PUC,134 Idaho 285,289,1 P.3d 786,790 (2000).
After reviewing Grand View’s argument regarding retroactive ratemaking,we find this argument
is misplaced for two reasons.First,its characterization that the Commission’s Order No.32913
constitutes “ratemaking”concerning the issue of RECs is simply mistaken.Contrary to Grand
View’s argument,the Commission is not and has not “made or set any rates”for RECs.In
ORDER NO.32974 22
neither the Orders issued in the generic PURPA investigation nor this case,has the Commission
established any “rates”to be paid for RECs.Our Orders allow the QF and the utility to market
their respective RECs to obtain whatever price they can obtain in the marketplace.
Second,even Grand View acknowledges that “the Commission is not setting rates”in
this case.Petition at 11.With this admission,Grand View’s ratemaking argument must fall.
2.Retroactive Rulemaking.Grand View next argues the Commission engaged in
“retroactive rulemaking”by applying the REC ownership decision from the concurrent PURPA
investigation to the disputed REC issue in this case.Petition at 9.Grand View seemingly
suggests the Commission simply applied our determination regarding REC ownership from the
then concurrent PURPA investigation (Order Nos.32697 and 32802),to the facts of this case.It
supports its argument with two United States Supreme Court opinions.In essence,Grand View
maintains the PURPA investigation was a “rulemaking”and that case began after Grand View
filed its complaint in this case.Thus,the REC decision in the PURPA Orders should not control
the disposition of REC ownership in this complaint.Grand View asserts the two opinions stand
for the proposition that the Commission is “prohibited from engaging in retroactive rulemaking
unless that authority is expressly authorized by statute.”Id.at 9 citing Bowen v.Georgetown
University Hospital,488 U.S.204,208,109 S.Ct.469 (1988);Landgrafv.USI Film Products,
511 U.S.244,265,114 S.Ct.1483 (1994).
Commission Findings:Before we examine the retroactive rulemaking argument,it is
helpful to review the interplay between the Commission’s generic investigation of RECs in the
then concurrent PURPA investigation,and the resolution of the REC dispute in this complaint
case.On August 2,2011,Grand View filed its formal complaint in this case alleging the sole
dispute between the parties concerned the ownership of REC ownership.Shortly thereafter on
September 1,2011,the Commission initiated the third phase of its generic PURPA investigation
to examine several PURPA-related issues including RECs.Order No.32352 at 4 (September 1,
2011).Grand View and Idaho Power were both parties in the concurrent PURPA investigation.
In final Order No.32697 (December 2012)in the generic investigation,the Commission found it
reasonable and consistent with common law property interest 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.32913 at 16 quoting Order No.32861 at 9-10 citing Order Nos.32697 at
46;32802 at 19-20.
ORDER NO.32974 23
Several parties requested the Commission reconsider its REC decision.In Order No.
32802 issued May 6,2013,the Commission affirmed its decision in final Order No.32697 that
REC ownership in cases such as this should be shared equally by the utility and the QF.Order
No.32802.
In final Order No.32913 in this case,we observed that “no party,including Grand
View,sought judicial review of”the Commission’s decision that REC ownership should be
equally divided.Order No.32913 at 16.“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.With this background,we now turn to Grand
View’s retroactive rulemaking argument.
Grand View maintains the PURPA investigation was a “rulemaking”and that the
Commission cannot retroactively apply the REC determination in that case (that was initiated a
month after Grand View’s complaint)to resolve the REC dispute in this complaint proceeding.
However,what Grand View ignores is that our final Order No.32913 in this case contained two
primary reasons for dividing REC ownership equally between the parties.Grand View ignores
the first reason and focuses its retroactive rulemaking argument on the second reason.After
reviewing the arguments and the record,we find there are two reasons for denying the retroactive
rulemaking claim.
First,in final Order No.32913,the Commission’s first reason for dividing REC
ownership equally was simply not based on the holding of final Orders in the PURPA
investigation (i.e.,to divide REC ownership)but actually on the property interest factors set out
by the Connecticut Supreme Court in Wheelabrator Lisbon v.Dept.of Pub.Util.Control,931
A.2d 159,174-75 (Conn.2007)and adopted in Order No.32802 at 18-21.In particular,the
Commission found in its final Order that 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.32913 at 15;32580 at 45;32802 at 12.We
continued by noting three of the property interests relating to Idaho Power.We declared that
Idaho Power is:
[1.]is not wholly free to bargain because PURPA compels utilities to
purchase the power output produced by QFs.[2.]PURPA compels the utility
to purchase power whether it needs the power to serve load or not.[3.]Even
if QF power replaces power the utility would otherwise generate,ratepayers
ORDER NO.32974 24
are ultimately paying for both the capital assets of the utility’s base load
generating plants in rates and the QF power.
Order No.32913 at 15;Order No.32802 at 18;Wheelabrator Lisbon,931 A.2d at 174.The
Commission’s final Order in this complaint case specifically referred to the property interest
factors analyzed in the PURPA REC Order No.32802.Order No.32913 at 16,n.12 citing Order
No.32802 at 18-20.Thus,the Commission’s first reason to equally divide REC ownership in
this case was expressly based upon the property interest factors set out in Wheelabrator Lisbon.
We further find that our first reason set out in Order No.32913 at 15 clearly supports our
decision to equally divide REC ownership in this case.Moreover,Grand View has not
challenged the first reason.
Second,we find Grand View’s reliance and application of the two U.S.Supreme
Court cases to support its retroactive rulemaking argument is misplaced.In Bowen,the U.S.
Department of Health &Human Services adopted a rule in November 1984 “requiring private
hospitals to refund Medicare payments for services rendered before promulgation of the rule.”
Landgraf 511 U.S.at 265,114 S.Ct.at 1496-97.“In effect,the Secretary promulgated a rule
retroactively....“Bowen,488 U.S.at 207,109 S.Ct.at 471.As framed by the Court in Bowen,
“the threshold question is whether the Medicare Act authorized retroactive rulemaking.”Id.at
208,109 S.Ct.at 471.The Court found that the cost-limit rule was invalid because the
retroactive provision in the statute applies “only to case-by-case adjudications,not rulemaking.”
Id.at 209,109 S.Ct.at 472.However,we find that using the property interest factors from the
PURPA investigation to resolve the REC dispute in this case is not retroactive rulemaking.
As Justice Scalia discussed in his concurring opinion in Bowen,there is difference
between rulemaking (the PURPA investigation)and adjudication (this complaint case).He
explained:
Rule making [(i.e.,the PURPA investigation)]is agency action which
regulates the future conduct of either groups of persons or a single person;it is
essentially legislative in nature,not only because it operates in the future but
also because it is primarily concerned with policy considerations...
Conversely,adjudication [(resolving the REC dispute in this complaint case)1
is concerned with the determination of past and present rights and liabilities.
Bowen,488 U.S.at 2 18-19,109 S.Ct.at 477 (emphasis added),quoting 1947 Attorney General’s
Manual on the Administrative Procedures Act at 13-14.Based upon this distinction,we find that
ORDER NO.32974 25
the generic PURPA investigation was a “legislative”case,while this complaint case is an
adjudication”case that resolves the REC dispute relating to the past and present rights of REC
ownership from the date of Grand View’s complaint on August 2.201 1.In other words,our
REC ownership decision contained in the Orders from the PURPA investigation were applicable
to new PURPA contracts on a prospective basis,while our REC ownership decision in this
adjudication relates to the past and present (retroactive)rights of the parties.Consequently,our
determination regarding the REC dispute between Grand View and Idaho Power was an
adjudication of the parties’rights and,therefore,cannot be a violation of the rule against
retroactive rulemaking.Bowen,488 U.S.at 2 18-19,109 S.Ct.at 477 (J.Scalia concurring).
Our adjudication of the REC dispute in this complaint “involves that form of
administrative action where retroactivity is not only permissible but standard.Adjudication
deals with what the law was;rulemaking deals with what the law will be.”Bowen,488 U.S.at
221,109 S.Ct.at 478 (J.Scalia,concurring)(emphasis original)(construing the federal
Administrative Procedures Act);compare Idaho Code §67-520(12)(“Order”)with (19)(“Rule”)
(defining terms in the Idaho Administrative Procedures Act).Justice Scalia goes on to say it is
important to note that the retroactivity limitation applies only to rulemaking.Thus,where legal
consequences hinge upon the interpretation [of property interests],and where no pre-existing
interpretative [order]construing those requirements is in effect,nothing prevents the agency
from acting retroactively through adjudication.”Bowen,488 U.S.at 224,109 S.Ct.at 480
(emphasis original).Thus,we find there is no prohibition to resolving the REC ownership
dispute in this adjudication.Here the Commission is acting in our quasi-judicial capacity to
adjudicate this dispute.
Finally,we reconsider the second reason supporting our REC ownership decision.In
our final Order we stated that both Grand View and Idaho Power “were on notice that REC
ownership would be addressed in our parallel PURPA investigation.”Order No.32913 at 16.
The Commission further explained it was “reasonable and consistent with common law property
law interest to apportion REC ownership equally between the QF and the utility for solar projects
larger than 100 kW,like the Grand View project here.”The Commission stated that 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.
We affirm that decision in this Order.”OrderNo.32913 at 16.
ORDER NO.32974 26
After reviewing this second finding (above)and Grand View’s retroactive rulemaking
argument,we find it is reasonable to clarify the second reason in Order No.32913 at page 16
supporting our decision to divide REC ownership equally.Rather than applying the result of our
PURPA investigation to equally dividing REC ownership,we should have stated that we are
applying the analysis of the property interest factors9 from our concurrent rulemaking
investigation to the dispute about RECs in this adjudication.Using the property interest factors
from the generic case (as we did in our first finding)would change the reasoning but not the
result of our REC decision in this adjudicatory proceeding.Consequently,we amend Order
No.32913 to reflect this clarification to the second reason at page 16 of the Order.Idaho Code §
61-626(3).Order No.32913 at 16 shall be changed as follows:“Having decided the disputed
issue of REC ownership in the PURPA investigation [casel,”the Commission finds it
appropriate to consistently apply the property interest factors regarding REC ownership decision
set out in Order Nos.32697 and 32802 to the REC dispute in this case.Id.at 18.Order Nos.
32697 at 45-47;32802 at 18-21.Applying those property interest factors to the dispute in this
case,leads us to find that REC ownership should be equally divided between the parties in this
adjudication.We affirm that decision in this Order.
3.Impairment of Contract.Grand View also argues the Commission’s REC
decision in this case violates the Contracts Clause provisions of the Idaho and United States
Constitutions.Article I,§16 of the Idaho Constitution provides “No bill of attainder expost
facto law,or law impairing the obligation of contracts shall ever be passed.”Grand View
argues its LEO was created in August 2011,and the Commission’s subsequent REC decision
impairs its LEO.Petition at 9-10.Grand View asserts the Commission’s retroactive application
of its REC decision reaches “back to the time Grand View created its LEO to take one half of its
RECs and give them to Idaho Power without compensation....“Petition at 11.
Commission Findings:In evaluating claims of contract impairment,our Supreme
Court has held that Idaho courts “should apply federal analytical principles when deciding
challenges under Article I,§16 of the Idaho Constitution....“CDA Dairy Queen v.State Ins.
See supra pp.8-9,n.4.
10 See the property interest facts contained in Order Nos.32802 at 18-20;32913 at 15,n.12;supra pp.8-9,n.4.
Article I §10 of the United States Constitution provides,in part,“no state shall pass any Bill of attainder,
expost facto Law,or Law impairing the Obligation of Contracts.”
ORDER NO.32974 27
Fund,154 Idaho 379,383,299 P,3d 186.190 (2013).The Court in Dairy Queen sets out a
threshold three-part analysis for determining when “a legislative act violates the contracts
clause.”Id.at 387,299 P.3d at 194.12 The Commission’s Order does not “violate the contract
clause unless there is a contractual relationship between the parties regarding the specific terms
at issue,the challenge act compares an obligation under that contract,and the impairment is
substantial.”Id.Applying this threshold inquiry to the facts of this case results in no
constitutional violation.
Turning to the first part of the three-part test,we find there is no contractual
relationship existing between Idaho Power and Grand View.As set out above,it is undisputed
that the parties did not enter into a contract.In addition,we found there was no legally
enforceable obligation (e.g.“a contractual relationship”)that was perfected by Grand View.
Having found no contract or LEO,there is no violation of a contractual relationship and no
violation of the contracts clause.
In conclusion,we find Grand View did not perfect a LEO in this case.We further
find there is substantial evidence supporting the Commission’s decision in this adjudicatory
proceeding to equally divide REC ownership under the IRP Methodology between Grand View
and Idaho Power.As set out in the body of this Order,we conclude it is reasonable and
appropriate to amend parts of the prior final Order No.32913.Consequently,Grand View’s
Petition for Reconsideration is granted in part and denied in part as set out in greater detail
above.
ORDER
IT IS HEREBY ORDERED that Grand View’s Petition for Reconsideration is
granted in part and denied in part.As set out in the body of this Order,the Commission amends
parts of its original final Order No.32913 pursuant to Idaho Code §61-626(3).The Commission
Secretary shall issue a correction sheet to Order No.32913 reflecting the changes set out above.
2 The Court in Daiiy Queen also observed an exception to the constitutional protections of contracts.“For almost
100 years,this Court has recognized the police power exception to the contracts clause in the context of regulating
public utilities.”154 Idaho at 385,299 P.3d at 192.In Agricultural Products Corp.v.Utah Power &Light Co.,
98 Idaho 23,29,557 P.2d 617,623 (1976),the Court held that “the state’s regulation of utility rates pursuant to its
police power,including statutorily alteration of rates set by private contracts,was ‘not a violation of constitutional
prohibition against impairment of contractual obligations.”See also AJio;Energy v.Idaho Power Co.,107 Idaho
781,792-94,693 P.2d 427,438-440 (1984)(discussing the authority of the Commission to adjust PURPA contract
rates.“In a matter not inconsistent with federal law to the extent that it may be applicable.”).Here,however,we do
not need to address the police power exception since there was neither a contract nor LEO.
ORDER NO.32974 28
IT IS FURTHER ORDERED that Grand View’s Petition for Reconsideration
asserting it created a legally enforceable obligation is denied.Grand View’s Petition that it is
entitled to ownership of all the RECs is also denied.
IT IS FURTHER ORDERED that Grand View’s underlying complaint against Idaho
Power is dismissed.
THIS IS A FINAL ORDER ON RECONSIDERATION.Any party aggrieved by this
Order or other final or interlocutory Orders previously issued in this Case No.IPC-E-1 1-15 may
appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho
Appellate Rules.See Idaho Code §6 1-627.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 31
day of January 2014.
)/
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A’L/,/7i_/
AUL KJELAMR,PRESIDENT
MACK A.REDF ,COMMISSIONER
MARSHA H.SMITH,COMMISSIONER
ATTEST:
/1
Jean D Jewell
Commission Secretary
hls/O :IPC-E-Il-I 5dh5 Reconsideration
ORDER NO.32974 29