20111222Magic Wind, LLC Reply Comments.pdf

McDevitt & Miller LLP
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420 W. Bannock Street
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I.JTI
Chas. F. McDevitt
Dean J. (Joe) Miler
December 22, 2011
Via Hand Delivery
Jean Jewell Secreta
Idao Public Utities Commssion
472 W. Washigton St.
Boise, Idao 83720
Re: Case No. IPC-E-11-20
Magic Wind, LLC
Dear Ms. Jewell:
Enclosed for fig, please fid an orial and seven r) copies of Magic Wind, liC's Reply
Comments.
Kidly retu a fie stamped copy to me.
Very Truy Yours,
McDevitt & Mier liP
~~DJM/hh
Encl.
ORIGINAL
Dean J. Miler (ISB No. 1968)
Chas. F. McDevitt (ISB No. 835)
McDEVITT & MILLER LLP
420 West Banock Street
P.o. Box 2564-83701
Boise, ID 83702
Tel: [phone]
Fax: [phone]
joe~cdevitt-miller.com
cha~cdevitt-miller.com
RE:f::E 1
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Attorneys for Magic Wind, LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPAN FOR )APPROVAL AND/OR )
ACKNOWLEDGEMENT OF THE )
TERMNATION OF THE FIRM ENERGY )
SALES AGREEMENT, REMOVAL FROM )
THE INTERCONNECTION QUEUE, AN )
DISPOSITION OF THE CLUSTER GROUP )
NETWORK UPGRAE FUNDS FOR MAGIC )WIND,LLC. )
CASE NO. IPC-E-1l-20
REPLY COMMENTS OF
MAGIC WIND, LLC
COMES NOW MAGIC Wind LLC ("Magic Wind") and submits the followig Reply
Comments, pursuant to the Commssion's Notice of Application, Order No. 32395, dated
November 9,2011.
INTRODUCTION
Pursuat to Order No. 32395, the deadline for intial Comments in ths matter was
December 15,2011. Magic Wind and the Commission Sta ("Staf') filed timely Comments.
Idaho Power Company ("Idao Power" or "Company") did not file Comments.
Sta Comments supports the Company's Application. As noted in its initial Comments,
Magic Wind acknowledges that Idaho Power is entitled to terminate the FESA and to remove the
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project from the Twin Falls Cluster Group interconnection queue. On these points Magic Wind
does not disagee with the Company and Sta.
Magic Wind, however, disagrees with Stas support of two proposals contaed in the
Company's Application:
· The proposal to deduct amounts spent on Network Upgrade Costs from a refud of the
deposit made by Magic Wind;
· The proposal not to pay interest on amounts to be refuded to Magic Wind.
ARGUMENT
Staff Comments Misunderstand the Cassia Stipulation and Order Regarding Sharing of
Network Upgrade Costs
As Sta notes, the rights and obligations of paries to the Twin Falls Cluster Group were
established in IPUC Case No. 06-21, Cassia Wind v. Idaho Power Company. There, the paries
entered in to a Stipulation ("Cassia Stipulation") and the Commssion approved the Cassia
Stipulation in Order No. 30414. The terms of the Cassia Stipulation and Order No. 30414, were
later incorporated in the Generator Interconnection Agreement between Magic Wind and Idaho
Power.
The Cassia Stipulation established a sharg formula by which the costs of Network
Upgrades were allocated to the members of the Twin Falls Cluster Group. The formula is:
"For Phase 1 upgrades, Idao Power would assume 100 percent cost responsibilty.
For Phases 2,3,4 and 5, which encompass Magic Wind's requied upgrades, cost
responsibilty would be paid as follows:
1. Twenty-five percent of the costs would be provided by Cluster Group members as
a non-refudable contrbution in aid of constrction ("CIAC");
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ii. Twenty-five percent of the costs would be fuded by Idaho Power and included in
Idaho Power's rate base; and
iii. Fift percent of the costs would be fuded by the Cluster Group members as an
advance in aid of constrction ("AIAC") and refuded back to the Cluster Group
members over a 10-year period contingent upon Cluster Group member's
individual power purchase agreements remaig in good stading". See Cassia
Stipulation, Paragraph 13, pgs. 6-7.
Relying on ths formula, Sta Comments supports the Company's proposal that the
$76,569 that ha been spent on upgrades not be refudable. "Stafbelieves ths amount should
be considered a Contrbution in Aid of Constrction (CIAC) which is not subject to refud
consistent with the Stipulation in Order No. 30414". Staf Comments, pg. 5
Here, Staf misunderstands the intended operation of the sharg formula. The Cassia
Stipulation makes it clear that the sharng formula was intended to apply to projects tht
completed constrction and became connected to the Idao Power tranmission system. It was
not intended to apply to projects tht withdrew from the Twin Falls Cluster Group before
completion. The following provisions of the Cassia Stipulation support ths interpretation:
Paragraph 12 of the Cassia Stipulation, "Responsibilty for Network Upgrade Costs"
provides in par:
"Cassia recognzes that the final cost of its share of the Network Upgrades will not be
known until construction is completed. Cassia also recognes that its share of the fina
Network Upgrade cost will increase or decrease, subject to the provisions of paragraph 10
depending on whether the projects, both earlier and later in the Idaho Power Queue are
constructed." (Emphasis added).
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Paragraph 13 of the Cassia Stipulation, "Sharng of Network Upgrade Costs" provides in
Par:
"As projects in the Idaho Power Queue are interconnected, Idaho Power will relocate the
CIAC and AIAC portons of the costs of Phases 2 through 4. For example, when
additional projects in the Idaho Power Queue are constrcted afer the Cassia Projects are
constrcted, Idaho Power will collect monies from these subsequent projects and refud
monies to Cassia. It is Idaho Power's intent that each QF Project in the Idaho Power
Queue wil pay its respective pro-rata share, based on nameplate generation capacity, of
each phase of Network Upgrade they utilze." (Emphasis Added).
And, as Magic Wind pointed out in its intial Comments, treating amounts spent for
Constrction as a non-refudable contribution would produce inequitable results: Magic Wind
would pay for a benefit it will never receive and projects that do eventully connect will receive
a windfall to the extent amounts paid by Magic Wind reduce Network Upgrade costs of projects
that do connect.
Staffs Support of the Proposal Not to Pay Interest on a Refund is Punitive
The Staf Comments advance two reasons in support of the proposal that amounts
refuded to Magic Wind be without interest. First, Staf asserts amounts deposited by Magic
Wind should be considered as a contribution in aid of constrction under the sharng formula.
(Sta Comments, pg. 6). As discussed above, Sta misunderstads the intent of the sharng
formula-it applies to projects that are finally constrcted, not to projects that withdraw prior to
completion.
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The second reason for witholdig interest is even more perplexing. The Sta
Comments say:
"Furermore, Staff does not believe that a project's delay, default and termination of its
power purchase agreement presents reasonable grounds to justify entitlement to interest on a
refud. To require interest to be paid on the refud amount would unjustly reward Magic Wind
even though it failed to perform." (Staf Comments pg. 7).
Stafr s use of the phrase "failed to perform" is troublesome to Magic Wind. It implies
some kind of willfu or wrongful default. It would be more accurate to say Magic Wind was
unable to perform despite a long period of diligent effort. There can be a multitude of reasons
why wid generation projects do not reach completion. But, in the case of Magic Wind, willful
failure was not one ofthem.
Likewise, it is not clear what Staff intends to convey by the phrase "unjustly reward."
Payment of interest would only give to Magic Wind that to which it is entitled-reasonable
compensation for the use of its fuds while those fuds were in the possession of Idao Power
Company. Magic Wind canot conceive of a rationae to support the idea that payment of
reasonable compensation for use of fuds is an unjust reward. As noted above, Magic Wind has
accepted the consequences of its inabilty to perform: termnation of the FESA and the loss of
many thousands of dollars of its investment in the project. A fuher penalty in the form of denial
of just compensation for use of fuds is unwaranted.
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CONCLUSION
For the reasons cited herein Magc Wind respectfly requests that any fial order of the
Commission approvig termation of the Magic Wind FESA conta the following provisions:
1. That Idao Power Company promptly refud to Magic Wind the ful deposit amount of
$562,536.75.
2. That Idaho Power Company pay to Magic Wind interest on the deposit, from the date of
deposit to the date of retur calculated in accordace with 18.C.F.R.35.19a.
DATED this ~ day of December, 2011.
ER,LLP
ean J. Miler
Attorneys for Magic Wind, LLC
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CERTIFICATE OF SERVICE
I hereby certify that on the 1JdaY of December, 2011, I caused to be served, via the
methodes) indicated below, tre and correct copies of the foregoing document, upon:
Jean Jewell, Secreta
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise,ID 83720-0074
jjewell(gpuc.state.id. us
Donovan E. Walker
Jason B. Wiliams
Idaho Power Company
1221 W. Idao Street
P.O. Box 70
Boise, ID 83707
dwaler(gidaopower.com
jwillmas(gidahopower.com
Krstine Sasser
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise,ID 83720-0074
krs.sasser($uc.idaho.gov
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