20110407Comments.pdf

RECElVED
20" APR - 7 PH~: l 7
~r.((lJE.lIATTORNEYS AT LAW
Tel: [phone] Fax: [phone]
P.O. Box 1218 Boise. ID 83707 - 515 N. 27th St. Boise. ID 83702
April 7, 2011
Ms. Jean Jewell
Commission Secretar
Idaho Public Utilties Commission
472 W. Washington
Boise, ID 83702
RE: IPC-E-ll-Ol
Dear Ms. Jewell:
We are enclosing for filing in the above-referenced docket an original and seven (7)
copies of West em Desert Energy, LLC's COMMENTS OF WESTERN DESERT
ENERGY, LLC and the AFFIDAVIT OF ROWE SANDERSON.
An additional copy is enclosed for you to stap for our records.
~ereiy,
~oBts
Richardson & O'Lear PLLC
encL.
Peter J. Richardson (lSB No. 3195)
Gregory M. Adams (ISB No: 7454)
Richardson & O'Lear, PLLC
515 N. 27th Street
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter~richardsonandolear.com
greg~richardsonandoleary.com
RECEIVED
2011 APR - 7 PM~: 18
Attorneys for Western Desert Energy, LLC
BEFORE THE IDAHO
PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ) CASE NO. IPC-E-ll-Ol
APPLICATION OF IDAHO POWER )
COMPANY FOR A DETERMINATION ) COMMENTS OF WESTERN DESERT
REGARDING A FIRM ENERGY SALES ) ENERGY, LLC IN SUPPORT OF
AGREEMENT WITH WESTERN DESERT ) APPROVAL OF THE ENERGY
ENERGY, LLC FOR THE SALE AND ) SALES AGREEMENT
PURCHASE OF ELECTRIC ENERGY )
)
COMES NOW, Western Desert Energy, LLC, and pursuant to the Idaho Public Utilties
Commission's ("Commission's") Notice of Modified Procedure and Order No. 32203, hereby
files these Comments. For the reasons set forth below, Western Desert Energy (or "the Project")
respectfully requests that the Commission approve the Firm Energy Sales Agreement ("FESA")
with Idao Power, containing the published avoided cost rates.
INTRODUCTION
Western Desert Energy has planed a 5 MW wind project that will use three 1.6
megawatt ("MW") turbines in Idaho Power's service territory in Owyhee County, and wil sell
its output to Idaho Power as a qualifying facilty ("QF") under the Public Utilities Reguatory
Policies Act of 1978 ("PURP A"). The Project's developers have a lease to develop the wind
far, and have obtained a conditional use permit from Owyhee County. The Project's
developers have been in touch with Idaho Power's interconnection and PURP A contracts
personnel regarding this 5 MW project since March 2010 to complete the necessary
interconnection, transmission, and power sales contracting processes. They received a
Feasibility Study stating that interconnection is feasible in August 2010, and proceeded to the
final interconnection study stage - the Facility Study. The Project's developers began requesting
a PURPA power sales contract in August 2010, and requested that Idaho Power complete any
necessary transmission studies. But the Project did not obtain a draft contract for several
months. After Idaho Power eventually confirmed that transmission to the load center is available
and no study was needed, provided the Project with a FESA in early Januar 2011. The
Project's developers promptly executed the FESA.
Thus far, the Project developers have spent approximately $105,000 on the land lease,
meteorological tower and equipment, interconnection studies, engineering work, and other
development costs. Because Western Desert Energy had made substatial progress through the
interconnection process and had requested and intended to execute a power sales contract well in
advance of December 14, 2010, the Commission should approve the FE SA containing the
published avoided cost rates.
1
Western Desert Energy notes that several paries to GNR-E-10-04 have disputed whether
the effective date of Order No. 32176 could be retroactively effective on December 14, 2010.
For puroses of these comments, Western Desert Energy wil use December 14, 2010, as the
effective date, without conceding that the Commission had the authority to make the reduction in
the eligibility cap retroactively effective.
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 2
LEGAL BACKGROUND
A. The Public Utilty Regulatory Policies Act of 1978's Mandatory Purchase Provisions
This case involves the Commission's implementation of the mandatory purchase
obligation of PURP A, which requires electric utilities to purchase power produced by
cogenerators or small power producers that obtain status as a QF. 16 U.S.C. § 824a-3(a)(2).
Congress's intent "was to encourage the promotion and development of renewable energy
technologies as alternatives to fossil fuels and the constrction of new generating facilities by
electric utilities." Rosebud Enterprises, Inc. v. Idaho Pub. Uti!. Commn., 128 Idaho 609, 613,
917 P.2d 766, 780 (1996). "Traditional electric utilities were reluctat to purchase power from,
and sell power to, the nontraditional facilities." FERC v. Mississippi, 456 U.S. 742, 750, 102
S.Ct. 2126, 2132-2133 (1982). To overcome this problem, "§ 21O(a) (of PURPA) directs the
(Federal Energy Regulatory Commission ("FERC")), in consultation with state regulatory
authorities, to promulgate such rules as it determines necessary to encourage cogeneration and
small power production, including rules requiring utilities to offer to sell electricity to, and
purchase electricity from, qualifying cogeneration and small power production facilties." Id.,
456 U.S. at 750-51, 102 S.Ct. at 2133.
The price PURPA section 21O(b) requires the utilties to pay to QFs in exchange for a
QF's electrical output is termed the avoided cost rate, which is the cost to the utility of producing
the energy itself or purchasing it from an alternative source. 16 U.S.C. § 824a-3(b), (d). FERC
promulgated regulations requiring utilities to compensate QFs for the utilities' full avoided cost.
18 C.F.R. § 292.304(a), (b); Small Power Production and Cogeneration Facilties; Regulations
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 3
Implementing Section 210 of the Public Utilty Regulatory Policy Act of 1978, 45 Fed. Reg.
12,214, 12,222-12,223 (Feb. 25, 1980). The U.S. Supreme Cour directly affrmed FERC's
"full-avoided-cost rule," American Paper Institute, Inc. v. FERC, 461 U.S. 402, 417-18, 103
S.Ct. 1921, 1930 (1983), and that rule is stil in effect today.
FERC's regulations entitle QFs to long term contract rates set at the utilities' full avoided
costs at the time the QF commits itself to a legally enforceable obligation to deliver its project's
output. 18 C.F.R. § 292.304(a), (b), (d)(2)(ii); JD Wind 1, LLC, "Order Denying 'Request for
Rehearing, Reconsideration or Clarfication,''' 130 FERC ir 61,127, ir 23 (February 19, 2010).
Furher, FERC's regulations require utilities to publish "standard rates" available for long term
contracts available to QFs below a state-implemented maximum generating capacity. 18 C.F.R.
§ 292.304(c)(1)-(3). The Idaho Commssion requires utilities in Idaho to make the rates in the
published rate schedule available to QFs that generate less than 10 average monthy MW. See Us.
Geothermal, Inc. v. Idaho Power Company, Case No. IPC-E-04-8, Order No. 29632, p. 14
(2004). On February 7, 2011, however, the Commission reduced the eligibilty cap to 100
kilowatts for wind and solar QFs and stated the effective date of this reduction would be
December 14,2010. See Order No. 32176, at pp. 11-12.
B. PURP A Grandfathering Criteria
When the published rates change, or become otherwse unavailable to a QF before the QF
can obtain a contract, the QF is entitled to grandfathered rates if it can "demonstrate that 'but for'
the actions of (the utility, the QF) was otherwse entitled to a power purchase contract." Earth
Power Resources, Inc. v. Washington Water Power Company, Case No. WWP-E-96-6, Order
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 4
No. 27231 (1997) (finding utilty delayed negotiations and therefore QF was entitled to
grandfathered rate); see also Blind Canyon Aquaranch v. Idaho Power Company, Case No. IPC-
E-94-1, Order No. 25802 (1994); Snow Mountain Pine v. Maudin, 84 Or. App. 590, 600, 734
P.2d 1366, 1371 (1987).
The Commission has not applied a single test to determine eligibilty to grandfathered
rates throughout the years. Many factors can evidence a PURP A developer's intent to enter into
a power sales contract prior to a change in the published rates. During the last reduction in the
eligibilty cap for wind projects, the Commission considered factors such as the large sums of
money and time spent on developing the project and its stage of maturity as evidence of a
developer's intent to obligate itself to the contract. See In the Matter of Cassia Wind to
Determine Exemption Status, Case No. IPC-E-05-35, Order No. 29954, pp. 2-4 (2006) (finding
wid QF entitled to grandfathered rates based on matuity of development of project when it had
merely submitted a completed application for interconnection study, including the applicable fee,
and had performed wind studies, commenced preliminar permitting and licensing activities, and
made efforts to secure sites to place turbines). The Commission has also recently approved a
PURP A contract with grandfathered rates where there was no written correspondence or
exchange of a draft contract prior to the rate change. See In the Matter of the Application of
Idaho Power Company for Approval of a Firm Energy Sales Agreement with Yellowstone Power
Company, Case No. IPC-E-10-22, Order No. 32104, p. 12 (2010).2
2 The most onerous test the Commission has ever used for determining grandfather
eligibilty is the pre-filed complaint test. This test requires, prior to the effective date of the rate
change, the QF must have obtained an executed contract, or have filed a meritorious complaint at
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 5
Failure to receive a fully executed FESA prior to the date of the rate change is not
necessarily fatal to the PURP A developer's right to the grandfathered published rates. Indeed,
Idaho Power's Reply Comments in the Yellowstone Power case noted that the Commission had
approved contracts under such circumstaces afer the rate change in Order No. 31025 in the
following five cases: IPC-E-1O-15, Cargil, Inc., Battencour B6 Dairy, a 2.25 MW Anaerobic
Digester; (2) IPC-E-1O-16, New Energy One, LLC, Rock Creek Dairy, a 4 MW Anaerobic
Digester; (3) IPC-E-1O-17, New Energy Two, LLC, Swagger Fars Dairy, a 2 MW Anaerobic
Digester; (4) IPC-E-10-18, New Energy Three, LLC, Double B Dairy, a 2 MW Anaerobic
Digester; and (5) IPC-E-10-19, Grandview Solar PV One LLC, a 20 MW Photo Voltaic Solar.
In those cases, Idaho Power had supported the developers' entitlement to a grandfathered
contract because, prior to the rate change, they had received and accepted an interconnection
feasibility study, received and accepted a determination regarding transmission capacity and,
except for Idaho Power's routine processing, a power purchase agreement was materially
complete.
PROCEDURAL AND FACTUAL BACKGROUND
Western Desert Energy has been involved in the development of the 5 MW Project since
the fall of 2009. In late 2009, the Project's developers secured a lease to develop a wind far,
the Commission alleging it is entitled to a contract. See A. W Brown Co., Inc. v. Idaho Power
Co., 121 Idaho 812, 816-18, 828 P.2d 841, 845-47 (1992). The Idaho Supreme Cour has never
mandated this test as the Commission's only available way to test whether a QF had effected a
legally enforceable obligation, and the Commission has not applied this onerous pre-filed
complaint test consistently. See, e.g., Blind Canyon Aquaranch, Order No. 25802; Earth Power
Resources, Inc., Order No. 27231.
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 6
and approached Idaho Power regarding the size of a project that the nearby 69 kilovolt line could
accommodate. See Affdavit of Rowe Sanderson, at irir 5_7.3 From contact with Idaho Power and
other research, the Project developers determined they should develop a 5 MW project. Id. at irir
6-7. Subsequently they have obtained a conditional use permit from Owyhee County, erected
meteorological towers and conducted engineering work to plan for the development. Id. at irir 8,
9. The Project developers have been in touch with Idaho Power's interconnection and PURPA
contracts personnel regarding this 5 MW project since March 2010. Id. at irir 10, 20-23. They
received a Feasibilty Study stating that interconnection was feasible in August 2010, and
proceeded to the final interconnection study stage - the Facility Study. Id. at irir 13, 15-18.
Western Desert Energy executed the Facility Study Agreement and provided the $30,000 deposit
on September 21,2010. Id. at ir13-16.
The Project's developers also had been in touch with Idaho Power's PURPA contracts
administrators throughout 2010. Id. at irir 23-38. These communications included a request from
the Project on March 8, 2010, for information to determine how much transmission was available
at that time, and regarding any necessar upgrades. Id. at ir 24. Idaho Power's PURPA
administrators were provided with the applicable interconnection applications and studies. Id. at
irir 25,27,30.
After completion of the Feasibility Study, the Project began requesting a PURPA power
sales contract in August 2010, but did not obtain a draft contract for several months. Id. at irir 26,
40. Idaho Power instead provided a letter of understanding on September 28, 2010, which stated
3 Western Desert Energy has attched the Affdavit of Rowe Sanderson to these Comments,
and that affdavit provides a more complete description of the underlying development efforts.
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-l 1-01
PAGE 7
that before Idaho Power would execute a FESA, Western Desert Energy must have received an
Interconnection Feasibility Study with acceptable results, must have provided Idaho Power with
the necessary information to request transmission capacity on its own system, and must receive
acceptable results from initial transmission study. Id. at ir 29. But the Project had already
completed the Interconnection Feasibility Study and provided it to Idaho Power's PURPA
contracts administrators on August 15, 2010. Id. at irir 27, 30. The Project had also already
requested that Idaho Power's PURP A contracts administrators begin the transmission study
process on March 8, 2010, and on August 15,2010, and assumed that the Feasibility Study and
other documents in Idaho Power's possession included the information necessary to begin the
transmission study. Id. at irir 24,26,31.4 Through the fall of2010, the Project's developers were
in contact with Idaho Power's PURPA contracts administrators regarding the Project and its
efforts to secure a FE SA. Id. at ir 32.
Western Desert Energy executed Idaho Power's letter of understading on November 9,
2010, and retured it to Idaho Power. Id. at ir 33. The Project's developers leared that, prior to
Idaho Power beginning the transmission study, Idaho Power would required completion of a
form titled "Transmission Capacity Application Questionnaire," in addition to the information
already provided. Id. ir 34. The Project's developers completed the Transmission Capacity
Application Questionnaire and Idaho Power received it on December 13, 2010. Id. at ir 35.
Around this time, the Project's developers leared that Idaho Power had fied a petition on
4 The Affdavit of Rowe Sanderson contains a typo in ir 31, stating that Western Desert
Energy requested Idaho Power's PURP A contracts administrators begin the transmission request
process on March 2, 2010. This request was made through an email sent on March 8, 2010, as
stated correctly in ir 24.
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-II-0l
PAGE 8
November 5, 2010, to lower the eligibility cap for published avoided cost rates to 100 kilowatts.
Id. at ir 36. Nobody from Idaho Power had informed the Project of this filing durng
communcations throughout the fall. Id.
The Project developers decided to retain a law firm in mid-December 2010 to assist in
securng the power sales contract. Id. at ir 38. On Janua 3, 2011, Idaho Power sent a letter,
confirming that adequate transmission capacity was already available to deliver the Project's
output to Idaho Power's load center, and that no transmission studies were necessar. Id. at ir 39.
With the Janua 3, 2011 letter, Idaho Power provided a draft FESA for the very first time since
Western Desert Energy had first contacted it almost a year previously, regarding the 5 MW
project. 5 Id. at ir 40. The Project developers completed the project-specific information in the
stadard PURP A FESA provided by Idaho Power, and requested that Idaho Power provide
execution ready copies. Id. at ir 42. After receiving execution-ready copies of the FESA, a
managing member of Western Desert Energy executed final copies of the FE SA on Januar 22,
2011, and delivered them to Idaho Power. Id. at ir 43. Idaho Power executed the FE SA on
Januar 28, 2010, and fied it for Commission determination on Februar 2, 2011. Id. at ir 44.
Meanwhile, the Project received a draft Facility Study Agreement on January 24, 2011,
and is now awaiting the Commission's determination on the approval of the FESA containing the
published avoided cost rates before it commits fuher resources to the interconnection process.
Id. at ir 19.
5 In this Januar 3, 2011 letter, Idaho Power also notified Western Desert Energy for the
first time that it had filed a joint petition to lower the eligibility cap for published avoided cost
rates on November 5, 2010, and that this filing may impact the Project's right to published rates.
Id. at ir 41.
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-II-01
PAGE 9
COMMENTS
A. The Commission should find that Western Desert Energy, LLC is entitled to the
FE SA with published avoided cost rates.
Western Desert Energy should be entitled to a FESA with published avoided cost rates
because it attempted to entitle itself to a long-term contract before December 14, 2010. The
large sums of money and time spent on developing the Project and the advanced stage of its
matuity evidence the developers' intent to obligate themselves to the FE SA. See In the Matter
of Cassia Wind to Determine Exemption Status, Case No. IPC-E-05-35, Order No. 29954, at pp.
2-4. Prior to the rate change date, Western Desert Energy had received a completed Feasibility
Study for interconnection, and had proceeded to the Facilty Study stage. It had also secured real
property rights necessar to develop the project, obtained a County permit, and commenced wind
studies. As expected from the initial contacts with Idaho Power in 2009, transmission capacity
has proved not to be an issue.
Although the Project was unable to obtain a fully executed FESA prior to December 14,
2010, that factor should not preclude entitlement to grandfathered rates in this case because
Idaho Power did not make the Project's developers aware of the proceeding to reduce the
eligibility cap. The swiftess with which the Project received a final executed FE SA once made
aware of the proceeding to reduce the eligibility cap evidences that the Project would have
obtained an executed FESA prior to the reduction in the eligibility cap. The Project's developers
leared of the proceeding to reduce the cap in mid-December and obtained a fully executed
FESA approximately a month and a half later on Januar 28, 2010. Had they been adequately
made aware of the proceeding in early November, they would have secured an executed FE SA
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 10
prior to December 14,2010. Whether by intention or neglect due to other more pressing matters,
Idaho Power did not make the Project developers aware of the proceeding to reduce the cap,
despite knowing that the Project was seeking a published rate contract.
In this case, the equities weigh in favor of approval of the contract. The Project
developers spent substatial sums developing the project in reliance on the availability of the
published rates, and were not timely made aware that the rates may become unavailable. There
is Commission precedent for approval of a grandfathered rate contract, for a project in the
advanced stages of the interconnection process, even where no written contracts were exchanged
prior to the rate change. See In the Matter of the Application of Idaho Power Company for
Approval of a Firm Energy Sales Agreement with Yellowstone Power Company, Case No. IPC-
E-1O-22, Order 32104, at p. 12.
B. The Contract terms and Idaho Power's most-current wind integration study allay
the concerns raised in Idaho Power's Application regarding system reliabilty and
cost.
Idaho Power asserted in its Application that "the request in this Application. . . is made
with the specific reservation of rights and incorporation of the averments set fort in the Joint
Petition and the Company's comments regarding the possible negative effects to the (sic) both
the utilty and its customers of additional and unfettered PURPA QF generation on system
reliability, utility operations, and costs of incorporating and integrating such a large penetration
level ofPURPA QF generation into the utilty's system." Application, at p. 3. Because the terms
of the FESA in this case and the curent wind integration charge protect ratepayers, and because
the Project attempted to obligate itself prior to the effective date of the eligibilty cap reduction,
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-II-0l
PAGE 11
Idaho Power's concerns should not preclude Commission approval of the FESA.
First, the Commission should consider the system reliability and wind integration
discussion in the Northwest and Intermountain Power Producers Coalition's ("NIPPC")
Comments in GNR-E-1O-04. See NIPPC Opening Comments, Case No. GNR-E-1O-04, pp. 13-
16 (Dec. 22, 2010). In those Comments, NIPPC pointed out that, despite Idaho Power's
statements in the Joint Motion regarding 1100 MW being near Idaho Power's minimum loads,
Idaho Power's own wind integration study concluded that even at 1200 MW of wind capacity on
the Company's system, wind would reach only 80% of its loads and it would do so only for a
few hours per year. See Enernex's Idaho Power 2007 Wind Study, Case No. IPC-E-07-03, p. 34
(February 6, 2007). The settlement that resulted after conclusion of that wind integration study
made the avoided cost rates available to wind developers at a rate reduced by $6.50IMWh for
projects coming online when Idaho Power's cumulative wind power is "501 MW and above."
See Order No. 30488, at p. 8. There is no upper cap contained in the order, and Idaho Power has
not availed itself of the opportunity since to update its wind integration study. Furer, Idaho
Power's wind integration study did not consider the firming ability of any of the Company's 744
MW of gas combustion tubine capacity that will be online by the time the Project here is online
in December 2012. See NIPPC Opening Comments, Case No. GNR-E-1O-04, at p. 15.
The Commission should also consider that the rates in this PURP A agreement are lower
than those in contracts and self-built projects recently approved for Idaho Power. See NIPPC
Reply Comments, Case No. GNR-E-1O-04, pp. 15-20 (Jan. 21, 2011). Furher, the FESA
contains extensive protections for ratepayers which address the concerns raised by Idaho Power's
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 12
application. Idaho Power warants that the Agreement comports with the terms and conditions
of the various Commission Orders applicable to PURP A agreements for a wind resource. See
Application, at p. 4 (citing Order Nos. 30415, 30488, 30738 and 31025). According to those
orders, the rate in the FE SA is reduced by Idaho Power's wind integration charge. Order No.
30488, at pp. 8-9. The FE SA also contains a Mechanical Availability Guaantee, which requires
reduced payment to the QF if its tubines are unavailable for inexcusable reasons. Id. The FESA
requires that the QF share in the costs of wind forecasting. Id. The FESA also provides for a
reduced rate at times of the day and months of the year when the energy is worth less to Idaho
Power due to demand and regional market conditions. See Order No. 30415.
Western Desert Energy has selected December 1,2012, as its Scheduled Operation Date,
and sections 5.3.2 and 5.8.1 of the FESA contain a liquidated damage and security provision of
$45 per kw of nameplate capacity for failure to achieve that date. That will require the Project to
post $225,000 as delay default security after Commission approval of the contract. Finally, the
Project in this case is only a single 5 MW facility and there appears to be no allegation by Idaho
Power that this Project could impose unanageable diffculties on Idaho Power's system.
CONCLUSION
For the reasons set forth above, Western Desert Energy, LLC, respectfully requests that
the Commission approve the Firm Energy Sales Agreement.
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 13
Respectfully submitted this 7th day of April 2011,
RICHARSON & O'LEARY, PLLC
~n
Gregory M. Adams
Attorneys for Western Desert Energy, LLC
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 14
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 7th day of April, 2011, a tre and correct copy of the
within and foregoing COMMENTS OF WESTERN DESERT ENERGY, LLC and the
AFFIDAVIT OF ROWE SANDERSON was served as shown to the followig paries:
Lisa Nordstrom
Donovan Walker
Idaho Power Company
POBox 70
Boise, Idaho 83707
dwalker~idahopower.com
lnordstrom~idahopower.com
( ) U.S. Mail, Postage Prepaid
(x) Hand Delivered
( ) Overnight Mail
( ) Facsimile
( ) Electronic Mail
Randy Allphin
Idaho Power Company
PO Box 70
Boise, ID 83707
rallphin~idahopower.com
( ) U.S. Mail, Postage Prepaid
(x) Hand Delivered
( ) Overnght Mail
( ) Facsimile
( ) Electronic Mail
Signed~~
Adams
COMMENTS OF WESTERN DESERT ENERGY, LLC
CASE NO. IPC-E-11-01
PAGE 15