HomeMy WebLinkAbout20130503Comments.pdfKRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0357
BAR NO. 6618
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE AMENDMENT TO )
THE FIRM ENERGY SALES AGREEMENT ) CASE NO. IPC-E-13-07
BETWEEN IDAHO POWER COMPANY AND )
CLARK CANYON HYDRO, LLC FOR THE ) COMMENTS OF THE
SALE AND PURCHASE OF ELECTRIC ) COMMISSION STAFF
ENERGY. )
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Amendment and Notice of Modified Procedure issued in Order No. 32791 on April 17, 2013, in
Case No. IPC-E-13-07, submits the following comments.
BACKGROUND
On May 20, 2011, Idaho Power Company (Idaho Power; Company) and Clark Canyon,
LLC (Clark Canyon) entered into a Firm Energy Sales Agreement (Agreement) for the sale and
purchase of electric energy from a 4.7 MW hydroelectric facility to be located near Dillon,
Montana. On July 19, 2011, the Commission approved the Agreement without change or
condition. See Order No. 32294. The Agreement contains a First Energy Date of November 1,
2012, and a Scheduled Operation Date of March 31, 2013.
STAFF COMMENTS 1 MAY 3, 2013
Because the project failed to achieve its First Energy Date and its Scheduled Operation
Date, on March 20, 2013, Idaho Power filed a Motion to Amend its Firm Energy Sales Agreement
with Clark Canyon. The amendment extends the First Energy Date to November 30, 2013 and
extends the Scheduled Operation Date to December 31, 2013. The amendment also adds a
provision granting Idaho Power a first right of purchase should the facility be sold and provides
for payment of liquidated damages and continued maintenance of delay security.
STAFF ANALYSIS
Idaho Power maintains that the avoided cost rates contained in the Agreement are
substantially similar to the avoided cost rates that the project would receive if it entered into a new
contract at today's rates. Idaho Power calculated the Net Present Value (NPV) of the estimated
energy payments under the current contract as well as under a new contract at today's rates.
Energy payments under the current contract are two percent higher in NPV terms than energy
payments under a new contract.
However, the existing Agreement splits renewable energy credits equally between the
Company and the project rather than assigning all of them to the project as would be required
under a new contract. In addition, the amendment requires Clark Canyon to pay $211,500 in delay
liquidated damages. Idaho Power contends that these factors more than make up for the slightly
higher NPV of the existing contract as compared to a new contract. Furthermore, Clark Canyon
will maintain the posting of liquid financial security in the amount of $211,500 with an expiration
no sooner than April 30, 2014. Idaho Power asserts that the amendment is fair and equitable and
in the public interest.
Staff performed an analysis similar to that of Idaho Power by calculating the NPV of the
estimated energy payments under the current contract as well as under a new contract at today's
rates. However, Staff used assumptions that differed slightly than those used by Idaho Power.'
Staffs analysis indicated that the NPV of the energy payments under the current contract would
be lower than the energy payments under a new contract. In other words, Staff found that the
current contract would cost Idaho Power less than a new contract. The benefits of remaining with
'Staff used a discount rate of 8.18% consistent with the rate used in the avoided cost rate model used to compute
published avoided cost rates, rather than 7% used by Idaho Power. Staff also computed NPV beginning January 1,
2014, the assumed Scheduled Operation date for the project, rather than January 1, 2013 as used by Idaho Power.
Staff also used actual monthly heavy and light load hours, rather than annual splits used by the Company. Finally,
Staff computed NPV on a monthly basis, rather than an annual basis.
STAFF COMMENTS 2 MAY 3, 2013
the current contract are enhanced by both the payment of delay liquidated damages and the value
of ownership of half of the renewable energy credits.
RECOMMENDATIONS
Staff recommends that the Commission approve the amendments to the Agreement
between Idaho Power and Clark Canyon and declare that all payments made by Idaho Power to
Clark Canyon for purchases of energy be allowed as prudently incurred expenses for ratemaking
purposes.
Respectfully submitted this day of May 2013.
Krigfihe A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
Cathleen McHugh
i:umisc:eomments/ipce 13.7ksrpscm comments
STAFF COMMENTS 3 MAY 3, 2013
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 3 DAY OF MAY 2013, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN CASE NO.
IPC-E-13-07, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DONOVAN E WALKER
LEAD COUNSEL
IDAHO POWER COMPANY
P0 BOX 70
BOISE ID 83707-0070
EMAIL: dwalker@idahopower.com
dockets@idahopower.com
KIM L JOHNSON
CLARK CANYON HYDRO
2000 S OCEAN BLVD #703
DELRAY BEACH FL 33438
EMAIL: kim.johnson@riverbankpower.com
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SECRET,,4RY
CERTIFICATE OF SERVICE