20111104Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: NOVEMBER 2, 2011

SUBJECT: IDAHO POWER’S APPLICATION FOR A TERMINATION OF ITS
FIRM ENERGY SALES AGREEMENT WITH MAGIC WIND, CASE NO.
IPC-E-11-20

On October 25, 2011, Idaho Power Company filed an Application with the
Commission requesting termination of its Firm Energy Sales Agreement (Agreement) with
Magic Wind, LLC. Specifically, Idaho Power requests that the Commission
approve/acknowledge (1) the termination of the Agreement, (2) removal of Magic Wind from
Idaho Power’s interconnection queue; and (3) the disposition of amounts prepaid by Magic Wind
for Idaho Power’s transmission system network upgrades associated with the “cluster group” of
generators that was the subject of Case No. IPC-E-06-21 (the “Cassia Wind” case).
BACKGROUND
On October 11, 2006, Idaho Power and Magic Wind entered into a 20-year
Agreement pursuant to PURPA. Magic Wind’s first energy date was scheduled to be July 31,
2007, and its Scheduled Operation Date was scheduled for December 31, 2007. The
Commission approved the Agreement on December 21, 2006. Order No. 30206.
Magic Wind was unable to meet their December 31, 2007, Scheduled Operation Date.
In December 2008, Idaho Power agreed to revise the Scheduled Operation Date to be September
30, 2010. Pursuant to the terms of the Agreement, the project must be on-line within ten months
of the Scheduled Operation Date to avoid an event of default. Magic Wind failed to bring the
project on-line.
On August 3, 2011, Idaho Power and Magic Wind entered into a final agreement
(“Letter Agreement”) allowing Magic Wind to extend its Scheduled Operation Date to
September 30, 2012, so long as Magic Wind posted a delay security in the amount of $45 per
DECISION MEMORANDUM 2
kilowatt of the project’s nameplate capacity by no later than September 30, 2011. In addition,
the Letter Agreement required that Magic Wind pay or otherwise make credit arrangements with
Idaho Power to pay the $500,000 construction deposit for its interconnection (which was past
due from June 30, 2011) no later than September 30, 2011. The parties agreed that if Magic
Wind failed to post the delay security or the construction deposit by September 30, 2011, the
Firm Energy Sales Agreement would be terminated without further notice. Magic Wind did not
post either the required delay security or the required construction deposit by September 30,
2011. On October 4, 2011, Idaho Power sent Magic Wind a notice of termination of the Firm
Energy Sales Agreement.
At the time Magic Wind’s Agreement was submitted to the Commission for approval,
the Cassia Wind case was also pending before the Commission. See IPC-E-06-21. The Cassia
Wind case involved requests from (mostly PURPA) generators to integrate approximately 200
MW of new wind generation on Idaho Power’s 138 kilovolt transmission system in the Twin
Falls area (the “Cluster Group”). In June 2006, Idaho Power completed engineering studies
which showed it would cost approximately $60 million in network upgrades to interconnect the
Cluster Group to Idaho Power’s transmission system. The Cassia Wind case dealt with issues
related to the appropriate allocation of network upgrade costs among individual projects within
the Cluster Group and Idaho Power’s other customers.
In August 2007, the Commission approved a settlement stipulation in the Cassia
Wind case that set forth the methodology that would be used to allocate network upgrade costs
among the individual Cluster Group projects and other Idaho Power customers. Order No.
30414. As part of the stipulation, Idaho Power estimated through a “redispatch study” that the
total interconnection costs could be reduced from $60 million to $11 million if projects agreed to
the potential redispatch of their project’s output.
On March 9, 2010, Idaho Power sent a final Facility Study Report to the Cluster
Group members (including Magic Wind). Invoices were sent to each member for their allocable
share of the network upgrades. On April 9, 2010, Magic Wind tendered $562,536.75 as payment
for its allocable share. Idaho Power states that as of September 30, 2011, $76,569.83 has been
spent on network upgrades from Magic Wind’s $562,536.75 prepayment of allocated cluster
group costs.

DECISION MEMORANDUM 3
THE APPLICATION
Because the Firm Energy Sales Agreement was approved by the Commission in
Order No. 30206, Idaho Power requests that the Commission acknowledge and/or approve the
termination of the Commission-approved Agreement. Idaho Power also seeks Commission
acknowledgement and/or approval for Idaho Power to remove Magic Wind from its
interconnection queue. Magic Wind submitted a request to the Company’s interconnection
queue in May 2005. Because it has failed to timely submit the required construction deposits
necessary for its interconnection to move forward, and ultimately failed to pay both the
necessary delay security and interconnection construction deposits, Idaho Power states that
Magic Wind has now forfeited its position in the interconnection queue.
The removal of Magic Wind from the interconnection queue will have a direct impact
on the amounts that generators with a junior queue position to Magic Wind will be required to
pay for network upgrades, including other members of the Cluster Group. Because other
members will be directly impacted by the removal of Magic Wind from the queue, Idaho Power
seeks acknowledgement and/or approval of such removal from the Commission. Finally, Idaho
Power seeks acknowledgement and/or approval for the disposition of Magic Wind’s prepaid
funds and the reallocation of the Cluster Group network upgrade costs.
Idaho Power requests that its Application be processed by Modified Procedure
pursuant to Commission Rules of Procedure 201-204. IDAPA 31.01.01.201-.204.
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure with comments
due no later than December 15, 2011.
COMMISSION DECISION
Does the Commission wish to process this case under Modified Procedure and set a
comment deadline of December 15, 2011?

M:IPC-E-11-20_ks