20140821final_order_no_33104.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-14-12
APPROVAL OR REJECTION OF AN )
ENERGY SALES AGREEMENT WITH )
EIGHTMILE HYDRO CORPORATION )
FOR THE SALE AND PURCHASE OF )ORDER NO.33104
ELECTRIC ENERGY FROM THE )
EIGHTMILE HYDRO PROJECT.)
On May 27,2014,Idaho Power Company filed an Application requesting that the
Commission accept or reject an Agreement between Idaho Power and Eightmile Hydro
Corporation (Eightmile Hydro),for the sale and purchase of electric energy generated by the
Eightmile Hydro Project.The Commission issued a Notice of Application and Notice of
Modified Procedure on June 26,2014,setting comment and reply deadlines.Order No.33063.
Commission Staff filed comments and Idaho Power filed a reply.
By this Order,we approve the Agreement between Idaho Power and Eightmile Hydro
Corporation for the sale and purchase of electric energy generated by the Eightmile Hydro
Project.
THE APPLICATION
On May 5,2014,Idaho Power and Eightmile Hydro 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 Eightmile Hydro proposes
to operate and maintain a 360 kilowatt (kW)non-seasonal hydro energy facility to be located
near Leadore,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,Eightmile Hydro elected to contract with Idaho
Power for a 20-year term using the non-levelized other 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,Eightmile Hydro will
be 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
ORDER NO.33104 1
Power will accept the inadvertent energy that does not exceed the maximum capacity amount,
but will not purchase or pay for inadvertent energy.
Eightmile Hydro has selected August 30,2014,as the project’s Scheduled Operation
Date.Various requirements have been placed upon the project 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 Eightmile Hydro.A
Schedule 72 Generator Interconnection Agreement (GIA)between Eightmile Hydro and Idaho
Power was executed on December 4,2013.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.
Idaho Power explains that the recent hydro agreements are the first hydro-based
agreements submitted for approval “that contain revised terms and conditions subsequent to the
Commission’s final and reconsideration orders from Case No.GNR-E-l 1-03.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.”Application at 4.
Idaho Power and Eightmile Hydro 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
This change is relevant to the 90/110 performance requirement.The settlement was approved by the Commission
on June 10,2014.OrderNo.33053.
ORDERNO.33104 2
“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 hvdro 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 fbr by the Commission’s adoption of the partial
stipulation in Commission Order No.32697;
•Change to Article VIII,“Environmental Attributes,”to indicate that
Eightmile Hydro owns all Environmental Attributes or Renewable Energy
Credits/Certificates;
•Change to paragraph 6.2 to allow Eightmile Hydro 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
•Several other minor revisions in an attempt to add clarity.
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 Eightmile Hydro for purchases of energy will be allowed as prudently incurred
expenses for ratemaking purposes.
Idaho Power also made several other minor revisions in an attempt to add clarity.
COMMENTS
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
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
ORDERNO.33104 3
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.
Idaho Power Company Reply
Idaho Power filed reply comments on July 31,2014.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
periods.”Reply at 7.Idaho Power further reasoned that “[fjrom the Company’s perspective,the
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.If the 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.33104 4
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 Eightmile Hydro 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 May 5,2014,
Agreement,comments filed by Commission Staff and reply filed by Idaho Power.We find that
the proposed Agreement submitted in this case contains acceptable contract provisions including
the non-levelized published avoided cost rates approved by the Commission in Order No.32817
for energy deliveries of less than 10 aMW.We further find that the terms and definitions
ORDER NO.33104 5
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 yearsl 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 Staff’s 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 Eightmile
Hydro Corporation 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 NO.33104 6
ORDER
IT IS HEREBY ORDERED that the Energy Sales Agreement between Idaho Power
and Eightmile Hydro Corporation 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 §6 1-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this cc/
day of August 2014.
PAUL KJELLA D ,ESIDENT
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MACK A.REDFORD,OMMISSIONER
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MARSHA H.SMITH,COMMISSIONER
ATTEST:
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Jçan D Jewell
Cbmmission S’ecretary
0:IPC-E-14-1 2ks2
ORDERNO.33104 7