20140821final_order_no_33103.pdf

Office of the Secretary
Service Date
August 21.2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-14-06
APPROVAL OR REJECTION OF AN )
ENERGY SALES AGREEMENT WITH )
WILLIAM ARKOOSH FOR THE SALE )
AND PURCHASE OF ELECTRIC ENERGY )ORDER NO.33103
FROM THE LITTLE WOOD RIVER )
RANCH II PROJECT.)
On April 30,2014,Idaho Power Company filed an Application requesting that the
Commission accept or reject an Agreement between Idaho Power and William Arkoosh for the
sale and purchase of electric energy produced by the Little Wood River Ranch II Project
(Project).On May 27,2014,Idaho Power filed an Amendment to its Application that included a
summary of terms and conditions contained in the proposed Agreement that are different from
prior agreements approved by this Commission.The Commission issued a Notice of Application
and Notice of Modified Procedure on June 11,2014,setting comment and reply deadlines.
Order No.33055.Commission Staff,Idaho Power,and the Renewable Energy Coalition filed
comments.
By this Order,we approve the Agreement between Idaho Power and William
Arkoosh for the sale and purchase of electric energy generated by the Little Wood River Ranch
II Project.
THE APPLICATION
On April 23,2014,Idaho Power and William Arkoosh entered into an Agreement
pursuant to the terms and conditions of various Commission Orders applicable to PURPA
agreements for non-seasonal hydro projects.Idaho Power states that Mr.Arkoosh proposes to
operate and maintain a 1.28 megawatt (MW)non-seasonal hydro energy facility to be located
near Shoshone,Idaho.The Company maintains that the Project will be a qualified facility (QF)
under the applicable provisions of the Public Utility Regulatory Policies Act (PURPA).
Under the terms of the Agreement,Mr.Arkoosh elected to contract with Idaho Power
for a 20-year term using the non-levelized published avoided cost rates as currently established
by the Commission in Order No.32817 for energy deliveries of less than 10 average MW
(aMW).As defined in paragraphs 1.20 and 4.1.4 of the Agreement,Mr.Arkoosh will be
ORDER NO.33103 1
required to provide data on the facility that Idaho Power will use to confirm that under normal
and/or average conditions,the facility will not exceed 10 aMW on a monthly basis.As described
in paragraph 7.5 of the Agreement,should the facility exceed 10 aMW on a monthly basis,Idaho
Power will accept the inadvertent energy that does not exceed the maximum capacity amount,
but will not purchase or pay for inadvertent energy.
Mr.Arkoosh has selected June 1,2015,as the Project’s Scheduled Operation Date.
Various requirements have been placed upon Mr.Arkoosh in order for Idaho Power to accept
energy deliveries from this facility.Idaho Power will monitor compliance with these
requirements.Idaho Power will continue to monitor the ongoing requirements throughout the
term of the Agreement.
The Agreement provides that all applicable interconnection charges and monthly
operational or maintenance charges under Schedule 72 will be assessed to Mr.Arkoosh.A
Schedule 72 Generator Interconnection Agreement (GIA)between Mr.Arkoosh and Idaho
Power was executed on July 29,2013.Idaho Power states that PURPA QF generation must be
designated as a network resource (DNR)to serve Idaho Power’s retail load on its system.In
order for the facility to maintain its DNR status and maintain compliance with Idaho Power’s
non-discriminatory administration of its Open Access Transmission Tariff (OATT)and FERC
requirements there must be a power purchase agreement (PPA)associated with its transmission
service request.
Article 21 of the Agreement provides that the PPA will not become effective until the
Commission has approved all terms and conditions and declared that all payments Idaho Power
makes to Mr.Arkoosh for purchases of energy will be allowed as prudently incurred expenses
for ratemaking purposes.
Idaho Power filed an Amendment to its initial Application on May 27,2014.The
Amendment provides a summary of terms and conditions contained in the proposed Agreement
that are different from prior agreements approved by this Commission.In its Amendment,Idaho
Power explains that this Agreement is the first hydro-based agreement submitted for approval
“that contains revised terms and conditions subsequent to the Commission’s final and
reconsideration orders from Case No.GNR-E-11-03.As such,the form of the [Agreement]has
several terms and conditions that vary from previously approved agreements in order to comply
with the Commission’s recent orders.”Amendment at 5.
ORDERNO.33103
Idaho Power and Mr.Arkoosh also agreed to changes in some standard provisions
that the parties now propose for Commission approval.Idaho Power identifies the major
changes as follows:
•Change to the definition of “Mid-Columbia Market Energy Cost”to
replace reference to the Dow Jones index with reference to the
Intercontinental Exchange (ICE)index and formula consistent with the
proposed settlement in Case No.IPC-E-13-251;
•Addition of definitions and provisions,paragraphs 1 .29,1.38,1.39,3.4
and 7.6 to incorporate definitions of “non-seasonal hydro facility”and
“seasonal hydro facility”as well as “seasonal hydro facility test periods”
to incorporate and maintain separate rates for seasonal and non-seasonal
hydro projects and to ensure that seasonal hydro projects perform within
the requirements of generating 55 percent of their annual generation in the
months of June,July and August;
•Removal of the provisions providing for delay liquidated damages and
maintained provisions to provide for delay security and actual delay
damages as provided for by the Commission’s adoption of the partial
stipulation in Commission Order No.32697;
•Change to Article VIII.“Environmental Attributes,”to indicate that Mr.
Arkoosh owns all Environmental Attributes or Renewable Energy
Credits/Certificates;
•Change to paragraph 6.2 to allow Mr.Arkoosh to adjust the “Initial Year
Monthly Net Energy Amounts”on a monthly,rather than quarterly,basis;
•Revision to paragraph 12.4 relating to Scheduled Maintenance;and
Idaho Power also made several other minor revisions in an attempt to add clarity.
COMMENTS AND REPLIES
Commission Staff Comments
Because of the number of significant changes contained in this Agreement as
compared to prior power purchase agreements approved by this Commission,Staff thoroughly
reviewed the modified terms and conditions with regard to their overall impact on Idaho Power’s
system and the utility’s customers.Generally,Staff found the changes to be consistent with prior
This change is relevant to the 90/110 performance requirement.
ORDER NO.33103 3
Commission Orders and directives.However,Staff took exception to ¶6.2.3 of the Agreement
regarding monthly,rather than quarterly,revisions to energy generation estimates.
Staff considered the history of the 90/110 performance band in its analysis of whether
it was prudent to move to monthly generation estimates.Staff explained that,in Case No.IPC-E
04-08/10,Idaho Power proposed a performance band to firm up QF power and make it more
predictable and reliable.At that time,the Company contended that by providing economic
incentives for QF developers to more accurately estimate the amount of firm energy it would
deliver each month,the Company hoped to encourage developers to deliver firm rather than non-
firm energy.Obtaining better estimates of the monthly amounts of firm energy to be provided,
Idaho Power contended,would increase the Company’s ability to predict when QF generation
would be available and would improve the Company’s ability to integrate QF resources into its
resource planning and acquisition processes as firm resources.Based on the record developed in
that case,the Commission adopted provisions for a 90/110 percent performance band in order for
QFs to be entitled to firm energy rates.2 Order No.29632.Under the 90/110 provisions,QFs
must provide monthly generation estimates that,after the first year,can only be revised every
three months.Moreover,QFs are not allowed to revise their generation estimates in the
immediate three months of the forecast period.
The Company reasoned that the change in revised generation estimates benefits the
utility and the project by allowing more clarity and flexibility to the Project in adjusting its
estimated energy deliveries and maintaining stability in the energy estimates necessary for Idaho
Power’s planning and operation.However,because Staff believes that the new terms regarding
generation estimates fail to comply with the Commission’s prior Order,Staff recommended that
the proposed Agreement be rejected by the Commission.Staff suggested that any consideration
to change the 90/110 forecasting requirement with a monthly generation estimate should occur in
a docket that allows all three utilities and any other interested persons or parties to participate.
Renewable Energy Coalition Comments
The Coalition maintained that deviations from the original 90/110 provisions have
been supported by Staff and approved by the Commission in prior proceedings.Additionally,
2 Under the adopted provisions,monthly QF deliveries of energy in excess of 110 percent of scheduled “net energy”
receive only 85 percent of the market price,or the contract rate,whichever is less.Ifthe QF delivers less than 90
percent of the scheduled “net energy”amount,existing contracts provide for liquidated damages to compensate the
utility and its customers for having to acquire energy to make up the shortfall.
ORDERNO.33103 4
REC argued that,because the terms of the agreement between Idaho Power and William Arkoosh
were negotiated and agreed to by the contracting parties,the Commission should approve the
Agreement.REC further urged the Commission “to recognize the acceptability for broader
and/or future application”of the monthly generation estimate provision.REC Comments at 2.
The Coalition maintained that independent analysis supports the proposition that monthly
generation estimates will produce more favorable and reliable revenue for projects and more
reliable energy deliveries for Idaho Power.For these reasons,the Coalition supports approval of
the Agreement.
Commission Staff Reply
Staff took exception to the comments filed by Renewable Energy Coalition.Staff
believed that REC’s comments were misleading.Staff argued that deviation from the 90/110
provisions in another agreement do not justify deviation in this case.Staff further noted that,
although the Coalition cited an independent analysis that had been performed revealing the
impact of 90/110 provisions on a project’s revenue,REC failed to provide the analysis in support
of its argument.Staff maintained that the Coalition’s interest and involvement in this case
supports Staff’s recommendation to open a case including any and all interested parties.
Renewable Energy Coalition Reply
The Coalition filed a reply in order to address Staff’s characterization that its
comments were misleading.REC asserted that it did not intend to mislead.REC stated that its
organization has a broad membership across several states and that any comments made in regard
to 90/110 provisions should be viewed as an expression of general interest and concern on behalf
of the Coalition’s multi-state membership —not simply advocacy for approval of a few contracts
in Idaho.The Coalition reiterated that results of an independent analysis show potential revenue
loss when the traditional 90/110 provisions are utilized.However,REC stated that such an
analysis has not been performed specific to the Arkoosh Agreement.
Idaho Power Company Reply
Idaho Power filed reply comments on July 18,2014.The Company stated that it
believed the contractual change to monthly,rather than quarterly,generation estimates was “a
relatively straightforward and non-controversial revision that maintains the integrity of the
existing 90/110 performance and firmness requirements,but clarified a complicated and
confusing contractual provision that talks about yearly,monthly,quarterly,and nine month time
ORDER NO.33103 5
periods.”Reply at 7.Idaho Power further reasoned that “[fjrom the Company’s perspective,the
purpose of the 90/110 provisions,and the consequent direction about revision to the estimated
Net Energy Amounts used for the 90/110 requirement,is not to implement some kind of punitive
pricing policy,but,rather,to get an accurate estimate and forecast of QF generation to assist in
the real-time planning and operation of Idaho Power’s system for the benefit of its customers in a
least cost manner.”Id.at 8.
The Company maintained that monthly generation estimates are consistent with the
Commission’s prior Orders regarding 90/110 provisions because “the interest of the Company in
planning for QF resources is better served if the generation forecast is a reliable estimate.”Order
No.29632 at 23.Idaho Power argued that monthly estimates are much more beneficial in
meeting the Company’s short-term,operational planning needs for integrating QF generation.
Idaho Power explained that the purpose of the performance criteria is to allow the project to
provide Idaho Power with an accurate energy estimate that can be used in both long and short-
term planning by the utility —not to increase or reduce the energy payments made to a project.
Idaho Power does not believe that a separate,larger proceeding is required to
consider a change to the contract provisions for adjusting generation estimates.The Company
requests that the Commission approve the Agreement without change or condition and declare
that payments for purchases of energy between Idaho Power and William Arkoosh be allowed as
prudently incurred expenses for ratemaking purposes.
FINDINGS AND CONCLUSIONS
The Idaho Public Utilities Commission has jurisdiction over Idaho Power,an electric
utility,and the issues raised in this matter pursuant to the authority and power granted it under
Title 61 of the Idaho Code and the Public Utility Regulatory Policies Act of 1978 (PURPA).The
Commission has authority under PURPA and the implementing regulations of the Federal
Energy Regulatory Commission (FERC)to set avoided costs,to order electric utilities to enter
into fixed-term obligations for the purchase of energy from qualified facilities (QFs)and to
implement FERC rules.
The Commission has reviewed the record in this case,including the April 23,2014,
Agreement,comments and replies of Commission Staff,Idaho Power and Renewable Energy
Coalition.We find that the proposed Agreement submitted in this case contains acceptable
contract provisions including the current,non-levelized published avoided cost rates approved by
ORDERNO.33103 6
the Commission in Order No.32817 for energy deliveries of less than 10 average MW (aMW).
We further find that the terms and definitions regarding Mid-Columbia Market Energy Cost,
seasonal and non-seasonal hydro rates,delay security and damages,ownership of renewable
energy credits,and generation estimates for purposes of the 90/110 provision are consistent with
prior Commission orders.
Specifically,we find that monthly,as opposed to quarterly,reporting of energy
generation estimates is a reasonably negotiated term between the parties and not inconsistent
with the Commission’s guidance and findings in Order No.29632.As we stated in that Order,
“it is reasonable and operationally expedient to require QFs to provide Idaho Power with
monthly kWh production estimates....The Commission finds it reasonable to provide more
frequent opportunities to revise generation estimates than [the two years]proposed by the
Company.We find that the interest of the Company in planning for QF resources is better
served if the generation forecast is a reliable estimate.”Order No.29632 at 23.The
Commission did not approve the 90/110 provisions in order to implement a punitive pricing
mechanism.The intent of a QF providing generation estimates has always been to assist the
utility in forecasting and operational planning so that the utility can provide the most reliable
service possible to its customers.We find that a provision allowing for monthly generation
estimate updates is consistent with that purpose.
We acknowledge Staffs concerns that monthly generation estimates would likely
allow more energy production to fall within the 90/110 band.However,no evidence was
presented that this result is unreasonable or would work to the detriment of Idaho Power’s
ratepayers.Moreover,Staff ultimately agreed that “much of the justification provided by Idaho
Power”in defense of utilizing monthly generation estimates has merit.Staff Comments at 7.
Consequently,based on our review of the evidence presented,we find that the use of monthly
generation estimates is just and reasonable.We encourage Idaho Power to be mindful of the
effects that this change may have on both its operations and its ratepayers.We expect that the
Company will weigh the benefits and detriments of monthly generation estimates as projects
with these provisions come on line.
Based on the foregoing,we find that the Agreement as a whole is just,reasonable and
in the public interest.Therefore,we approve the Agreement between Idaho Power and William
ORDERNO.33103 7
Arkoosh without material change or condition.We further find it reasonable to allow payments
made under the Agreement as prudently incurred expenses for ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the Energy Sales Agreement between Idaho Power
and William Arkoosh for the Little Wood River Ranch II Project is approved without change or
condition.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 1
day of August 2014.
PAUL KJELLA D ,PRESIDENT
MACK A.REDFORD,OMMISSIONER
£L4L /i&JL
MARSHA H.SMITH,COMMISSIONER
ATTEST:
1 fl/iiJqanD.Jewell
Secretary
O:IPC-E-I 4-06ks2
ORDERNO.33103 8