20120222notice_of_petition_order_no_32465.pdf

Office of the Secretary
Service Date
February 22,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF )
HOKU MATERIALS,INC.FOR )CASE NO.IPC-E-12-02
REPARATIONS AND REFORMATION OF )
ITS AMENDED SPECIAL CONTRACT )NOTICE OF PETITION
WITH IDAHO POWER COMPANY )
)NOTICE OF
)PROPOSED SETTLEMENT
)
_________________________________
ORDER NO.32465
On January 9,2012,Hoku Materials,Inc.filed a Petition’requesting that its
“Amended and Restated Agreement for Electric Service”(the “amended special contract”)with
Idaho Power Company dated June 19,2009,be reformed.Hoku is a special contract customer of
Idaho Power and is constructing a new polysilicon manufacturing facility in Pocatello.Under
the amended special contract,Hoku takes service under two rate blocks.The first block rate is
equivalent to Idaho Power’s avoided cost rates in 2009.The first block is “take-or-pay”and
requires Hoku to either “take”power every month or “pay”a monthly minimum amount
regardless of consumption.Order No.32437 at 2.The amended special contract runs from
December 1,2009 through December 1,2013,and provides that Hoku’s peak monthly demand
would not exceed 82 MW.Amended Contract at §6.
BACKGROUND
The history of the special contract between Hoku and Idaho Power is set out in Order
No.32437 but the pertinent facts are set out here.In June 2009,Idaho Power and Hoku
amended several terms of their original special contract.Among other terms,the parties agreed
to delay the start date of the amended contract and its take-or-pay provision until December 1,
2009.In approving the amended special contract,the Commission observed that it was “mindful
of the current economic downturn which precipitated Hoku’s decision to seek a delay in the start
Hoku initially filed its Petition as a “complaint”seeking reformation and reparations under the amended special
contract.In Order No.32437,the Commission noted that this case was more properly considered to be a “petition”
rather than a “complaint.”Order No.32437 at n.2.Consequently,on January 17,2012,Hoku filed a Motion to
Coffect the Caption ofthe present proceeding.
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NOTICE OF PROPOSED SETTLEMENT
ORDER NO.32465 1
date of its [special contract]with Idaho Power.”Order No.32437 at 2 citing Order No.30869 at
4.
In November 2009,the parties subsequently agreed to waive payment of the
minimum energy charge (i.e.,the minimum take-or-pay provision)until April 1,2011.In Order
No.31005 issued in February 2010,the Commission approved the temporary waiver of the take
or-pay provision.The Commission acknowledged that the postponement of the minimum take-
or-pay provision will “assist Hoku in establishing a ‘firm footing amidst the current adverse
business climate.”Order No.32437 at 3 quoting Order No.31005 at 5.Since April 1,2011,
Hoku has paid the minimum charge under the take-or-pay provision of the amended special
contract.2
In December 2011,Hoku filed a formal complaint against Idaho Power requesting
that the Commission prohibit the utility from terminating service to Hoku for failure to pay its
monthly take-or-pay charges.Case No.IPC-E-11-28.In conjunction with the 11-28 case,Hoku
also filed the present Petition requesting that its minimum monthly bills starting in December
2011 be suspended until the Commission issues a final Order regarding Hoku’s request to reform
its amended special contract.Response at 3.In Order No.32437 issued January 13,2012,the
Commission declined to suspend Hoku’s December 2011 minimum monthly payment due
January 19,2012.Order No.32437 at 9.Instead,the Commission directed Idaho Power and
Hoku
to immediately enter into negotiations regarding Hoku’s Petition to reform the
amended special contract....Without deciding the issue,we advise the
parties that waiver of the first block energy charge beginning with the January
2012 bill should be part of their negotiations.If settlement negotiations are
not fruitful,the Commission will issue further instructions regarding the
processing of the Petition.
Order No.32437 at ii.
THE REFORMATION PETITION
In its Petition,Hoku seeks relief from the minimum take-or-pay provision.More
specifically,Hoku requests reformation of Section 5.7 of the amended special contract.As set
2 Although the minimum payments are seasonally adjusted,the November 2011 minimum charge was
approximately $1896 million.
No person sought reconsideration of Order No.32437.
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NOTICE OF PROPOSED SETTLEMENT
ORDER NO.32465 2
out below,this provision provides that Idaho Power may release Hoku from its first block energy
commitment.Hoku alleges that Idaho Power has “unreasonably refused”to release Hoku from
its first block purchase or payment commitment.Petition at ¶J 10.13.Consequently,Hoku
requests that the Commission reform Section 5.7 of the contract by adding the underlined text
Release of First Block Energy:With adequate notice and the written consent
of Idaho Power or by order of the Commission,Hoku may request a release of
all or part of its First Block Energy purchase commitment in return for credit
on its First Block Energy Charge.The value of the credit will be determined
by mutual agreement or by order of the Commission and will take into
consideration the timing of the notice and Idaho Power’s ability to manage
any supply commitments made on Hoku’s behalf.
Petition at ¶14.In addition to reformation of the special contract,Hoku also asserts that it is
entitled to reparation for its First Block Energy and Demand (i.e.,take-or-pay)payments in an
amount to be determined by the Commission.Id.at ¶15.Finally,while the Commission is
processing the Petition,Hoku also seeks suspension of the minimum payments under its take-or-
pay provision “until such time as Hoku is prepared to commence the production ramp-up of its
polysilicon deposition reactors.”Id.at ¶16.
Following issuance of the Commission’s final Order No.32437 in the 11-28 case,
Hoku,Idaho Power,and Commission Staff (hereinafter “the Parties”)met on five occasions in
settlement negotiations.The Parties subsequently entered into a “Settlement Stipulation”that
would resolve all the disputed issues in Hoku’s Petition.On February 17,2012,the Parties filed
a Joint Motion to Approve the Settlement Stipulation and filed testimony in support of the
proposed settlement.
NOTICE OF PROPOSED SETTLEMENT
The Parties agreed to resolve all the disputed issues in Hoku’s Petition.As set out in
the Stipulation,the Parties agreed to reduce the monthly minimum payments for the first block to
$800,000 for a period not to exceed 18 months from January 1,2012,through June 30,2013.
Hoku will continue to pay the applicable energy efficiency surcharge (Schedule 91).The
amended special contract will be extended for another year (until December 1,2014),and the
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cumulative total of the reduced minimum payments will be added to the end of the contract.4
Stipulation §6.4.
Other elements of the proposed Settlement Stipulation include:
1.Up-front Payment.In consideration for amending the contract,Hoku shall pay to
Idaho Power $3.8 million as an “up-front payment.”Idaho Power will immediately collect $2
million for the up-front payment from the existing $4 million deposit held by Idaho Power.The
remaining balance will be collected by assessing Hoku an additional monthly payment of
$100,000 for 18 months.Stipulation §6.3.
2.Balancing Mechanism.Effective January 1,2012,Idaho Power will establish a
“balancing mechanism”capped at $16.5 million and the balancing mechanism will accrue
interest at 6%.The purpose of the mechanism is to track the difference between:(1)the deferred
first block minimum energy charges under the amended special contract;and (2)the “modified”
minimum monthly billed energy charges (excluding demand)under the proposed Settlement
Stipulation.Beginning with the invoice for service in December 2013,Idaho Power will then
charge and recover from Hoku 1 /12 of the balance in the balancing mechanism.In other words,
Idaho Power will charge and recover minimum payment amounts that were deferred during the
18-month deferral period over 12 months,in addition to all other energy and demand charges.
All payments collected from the balancing mechanism will be allocated to ratepayers in the
Company’s PCA mechanism.Stipulation §6.2.
3.Usage.If Hoku plans to begin commercial operation during the 18-month deferral
period,it must provide a 6-month advance notice before its monthly consumption may exceed 20
MW.Id.§6.5.Once Hoku uses more than 20 MW of energy in any given month,then Hoku
shall be obligated to pay the minimum billed energy charge according to the current amended
special contract for the remainder of the deferral period.Stipulation §6.6.
The Parties recommend that the Commission issue a Notice of Proposed Settlement
and request comments within 14 days of the Commission’s Notice.Stipulation at 10.Each party
also filed testimony supporting the approval of the proposed Settlement Stipulation.The Parties
assert that the Settlement Stipulation is in the public interest and that all of its terms and
The Stipulation also required that Hoku make the first payment under the Settlement Stipulation for services
rendered in January 2012 in the amount of $932,000.Stipulation §6.1.Idaho Power received the first payment on
February 17,2012.
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NOTICE OF PROPOSED SETTLEMENT
ORDER NO.32465 4
conditions are fair,just and reasonable.If the Commission approves of the proposed settlement,
then the Stipulation provides that the Parties shall submit a “revised”amended special contract
within 30 days that “reflect[s]the terms and conditions of this Settlement Stipulation.”Id.at 8.
NOTICE OF COMMENT PERIOD
YOU ARE HEREBY NOTIFIED that the Commission has decided to seek public
comment regarding the proposed Settlement Stipulation and modification of the amended special
contract between Hoku and Idaho Power.Given the request of the Parties and the press of time,
the Commission finds there is good cause to seek comments within 14 days from the date of this
Order.
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commissions Rules
of Procedure,IDAPA 31.01.01.201 through .204.
YOU ARE FURTHER NOTIFIED that the Settlement Stipulation together with the
Parties’supporting testimony can be viewed at the Commission offices during regular business
hours.The Petition,Settlement Stipulation,Joint Motion,and supporting testimony are also
available for review on the Commission’s web site at www.idaho.puc.gov by clicking on “File
Room”and then “Electric Cases.”
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on the
proposed Settlement Stipulation may file a written comment in support or opposition with the
Commission no later than 14 days from the date of this Order.The comment must contain a
statement of reasons supporting the comment period.Written comments concerning this Petition
shall be mailed to the Commission and the Parties at the addresses reflected below:
Commission Secretary Idaho Power Company:
Idaho Public Utilities Commission
P0 Box 83720 Jason B.Williams
Boise,ID 83720-0074 Lisa D.Nordstrom
Idaho Power Company
Street Address for Express Mail:P0 Box 70
Boise,ID 83707-0070
472 W.Washington Street E-Mail:jwilliamsidahopower.com
Boise,ID 83702-5918 [e-mail]
NOTICE OF PETITION
NOTICE OF PROPOSED SETTLEMENT
ORDER NO.32465 5
Hoku Materials,Inc.
Dean J.Miller
McDevitt &Miller LLP
420 W.Bannock Street
P0 Box 2564 (83701)
Boise,ID 83702
E-mail:[e-mail]
All comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission’s home page located at www.puc.idaho,gov.Click the “Comments and Questions”
icon and complete the comment form using the case number as it appears on the front of this
document.These comments must also be sent to the Parties at the e-mail addresses listed above.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set,the Commission will consider this matter on its merits and
enter its Order without a formal hearing.If written comments are received within the time limit
set,the Commission will consider them and,in its discretion,may set the same for formal
hearing.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission’s jurisdiction under Title 61 of the Idaho Code,and specifically
Idaho Code §61-503.The Commission may enter any final Order consistent with its authority
under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission’s Rules of Procedure,IDAPA 3 1.01.01.000 et seq.
YOU ARE FURTHER NOTIFIED that the Commission is not bound by any
settlement reached by the Parties.The Commission will independently review any proposed
settlement to determine whether the settlement is just,fair and reasonable,and in the public
interest,or otherwise in accordance with law and regulatory policy.The Commission may
accept the settlement,reject the settlement,or state additional conditions under the which the
settlement will be accepted.IDAPA 31.01.01.274-.276.
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ORDER NO.32465 6
ORDER
IT IS HEREBY ORDERED that persons wishing to file comments in this matter do
so no later than 14 days from the date of this Order.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this ‘
day of February 2012.
/7 /
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PAUL KJELLANDER,PRESIDENT
\i’_%...A \.L
MACK A.REDFORD,COMMISSIONER
ATTEST:
I
Jn D.Jewe1
Cbmmission Secretary
bls/O:IPC-E-1 2-O2dh
NOTICE OF PETITION
NOTICE OF PROPOSED SETTLEMENT
ORDER NO.32465
K0 /I
MARSHA H.SMITH,COMMISSIONER
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