20171109Response to Petition.pdf

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DONOVAN E. WALKER
Lead Counsel
dwal [e-mail]
November 9,2017
VIA HAND DELIVERY
Diane M. Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Case No. IPC-E-14-15
Clark Canyon Hydro, LLC - ldaho Power Company's Response to the
Petition for Clarification of Clark Canyon Hydro, LLC
Dear Ms. Hanian:
Enclosed for filing in the above matter please find an original and seven (7)
copies of ldaho Power Company's Response to the Petition for Clarification of Clark
Canyon Hydro, LLC.
ly yours,
Donovan E. Walker
DEW:csb
Enclosures
1221 W. ldaho St. (83702)
PO. Box 70
Boise, lD 83707
Re
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILIT!ES COMMISSION
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalker@ idahopower. com
!N THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO
APPROVE OR REJECT ENERGY SALES
AGREEMENT WITH CLARK CANYON
HYDRO, LLC FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
FROM THE CLARK CANYON PROJECT
RECEIVED
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CASE NO. |PC-E-14-15
IDAHO POWER COMPANY'S
RESPONSE TO THE PETITION
FOR CLAR!FICATION OF CLARK
CANYON HYDRO, LLC
ldaho Power Company ("ldaho Power" or "Company") hereby submits this
Response to the Petition for Clarification filed by Clark Canyon Hydro, LLC ("Clark
Canyon").
I. INTRODUCTION
Clark Canyon argues on clarification that it be entitled to capacity payments for all
years of a new contract. This is an incorrect interpretation of the ldaho Public Utilities
Commission's ("Commission") requirements and directives regarding the proper payment
of capacity in avoided cost rates. ldaho Power respectfully requests that the Commission
reject Clark Canyon's argument and clarify that Clark Canyon is not entitled to capacity
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 1
payments in a new contract until such time as ldaho Power is capacity deficient, which is
currently July 2026. Order No. 33898.
II. BACKGROUND
ln the October 13,2017, final order in this case, the Commission did not approve
the 2014 Energy Sales Agreement ('ESA") signed by ldaho Power and Clark Canyon.
Order No. 33904. Subsequent to the 2014 ESA being submitted to the Commission for
its review, Clark Canyon lost its Federal Energy Regulatory Commission ("FERC")
license, and the contract review case was suspended "until Clark Canyon is able to
resolve and/or clarify the discrepancies." Order No. 33088 (Aug. 5,2014). On April 26,
2017, Clark Canyon notified ldaho Power that it had received its renewed FERC license
on March 31,2017. The parties met with Commission Staff ("Staff') on May 11,2017 , to
discuss the status. At that meeting, the parties agreed to recommend lifting the
suspension and to propose a procedural schedule for submitting the ESA for the
Commission's review. On June 28,2017, the Commission lifted the stay on its review of
the 2014 ESA. Order No. 33800. Staff, ldaho Power, and Clark Canyon filed comments,
and the Commission, after consideration of the same, issued Order No. 33904 rejecting
the2014 ESA.
This was the third time that ldaho Power and Clark Canyon had a fully signed ESA
where Clark Canyon failed to construct the project and failed to meet the Scheduled
Operation Dates that it chose contained in those ESAs.l Because of the lengthy delay in
1 Clark Canyon initially had a 2011 ESA that was approved by the Commission where it failed to
construct the project by the Scheduled Operation Date it chose in that contract. ln 2013, ldaho Power and
Clark Canyon amended the 2011 ESA to extend the Scheduled Operation Date. Clark Canyon again failed
to construct the project or meet the amended Scheduled Operation Date, and the 2013 ESA was
terminated. ldaho Power and Clark Canyon then entered into the 2014 ESA, where Clark Canyon again
failed to construct the project and did not meet its chosen Scheduled Operation Date.
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 2
these proceedings where Clark Canyon lost and then regained its required FERC license,
the Scheduled First Energy Date and Scheduled Operation Date from the 2014 ESA had
already passed by the time that the suspension of the case was lifted, meaning that if the
2014 ESA were approved with no change or modification, that Clark Canyon would
immediately be in default and breach, subject to contract termination, having failed to
even start construction of the project. The Commission ordered:
The parties do not agree to Clark's proposed change, nor
does the public interest support it. Notably, Clark was
responsible for maintaining a valid FERC license, a
responsibility contemplated by the parties and provided for in
the very terms of Clark's Agreement with ldaho Power. . . .
Clark's failure to maintain a valid FERC license is no one's
fault but their own. Further approving the Agreement with
its 2014 avoided cosf rafes instead of current rates could
have as much as a $6.6 million impact on customers,
which we find demonstrably contrary to the public
interest. Accordingly, we find it appropriate, just, and
reasonable to reject the Agreement.
Order No. 33904, p. 6 (emphasis added)
Clark Canyon now attempts to argue that it is an existing Qualifying Facility ("QF")
project entering into a renewal, extension, or replacement contract continuing to sell
energy and capacity to ldaho Power, entitling it to capacity payments for the entire term
of a new contract. This is incorrect. This is essentially the same issue as before with a
slightly different context: Clark Canyon proposes to inappropriately pass on unreasonably
high avoided cost rates to ldaho Power customers, contrary to the Commission's orders.
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 3
We find it would not be just or reasonable to approve the
Agreement with a provision we know is incorrect, as is the
case with the Scheduled Operation Date that has passed. lf
we approved the Agreement with a lapsed Scheduled
Operation Date, Clark would be immediately in breach. We
further find it would not be just or reasonable to approve the
Agreement and modify the Scheduled Operation Date. . . .
The Commission found it to be contrary to the public interest to subject customers to a
$6.6 differential in rates between lhe 2014 ESA and a new contract for Clark Canyon
today, and thus rejected the 2014 ESA. Order No. 33904.
I!I. COMMENTS
ln Order No. 326972, the Commission directed that avoided cost rates contain
payment for capacity only when the utility becomes capacity deficient. Order No. 32697,
p. 21. The Commission also announced the sole exception to that directive where it
further ordered that existing QF projects under current contracts where the QFs are being
paid for capacity at the end of and expiration of such current contracts, would be entitled
to capacity payments for the full term of the extension, renewal, or new contracts. Order
No. 32697, pp. 21-22; Order No. 32737, p. 5. Clark Canyon acknowledges that the
Commission's order rejecting the 2014 ESA "suggests that . . . Clark Canyon would not
be entitled to capacity payments from the start of its replacement contract." Clark Canyon
also acknowledges that what it is suggesting would need to be inferred from the
Commission's previous orders. ("Entitlement to the capacity payments from the start of
a replacement contract for the 2014 ESA can be reasonably inferred from the
Commission's policy.") Petition for Clarification of Clark Canyon Hydro, LLC, pp. 4-5.
ldaho Power disagrees. Such an inference is contrary to the Commission's orders,
harmful to ldaho Power customers, and contrary to the public interest.
Clark Canyon's argument completely ignores the Commission's express language,
direction, and intent when it adopted the avoided cost provisions that capacity is only paid
once a utility is capacity deficient. The Commission's exception was clearly meant to
2 Case No. GNR-E-11-03.
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 4
apply to an existing QF project, that had been constructed and actually providing
generation to the utility for the entire term of a previous Public Utility Regulatory Policies
Act of 1978 ("PURPA") contract, and, upon the expiration of the term of that agreement,
such a QF would be entitled to a capacity payment for all years of a renewal, extension,
or replacement contract.
By including a capacity payment only when the utility
becomes capacity deficient, the utilities are paying rates that
are a more accurate reflection of a true avoided cost for the
QF power. However, we find merit in the argument made by
the Canal Companies that contract extensions and/or
renewals present an exception to the capacity deficit rule that
we adopt today. lt is logical that, if a QF project is being paid
for capacity at the end of the contract term and the parties are
seeking renewal/extension of the contract, the
renewal/extension would include immediate payment of
capacity. An existing QF's capacity would have already been
included in the utility's load and resource balance and could
not be considered surplus power. Therefore, we find it
reasonable to allow QFs entering into contract extensions or
renewals to be paid capacity for the full term of the extension
or renewal.
Order No. 32697, pp.21-22. The Commission's subsequent clarification of this portion
of Order No. 32697 stated that the Commission "did not implicitly or explicitly authorize
contract extensions or renewals for existing contracts that do not contain such provisions."
Order No. 32737, p. 5.
Clark Canyon clearly does not meet either the express language, nor the
Commission's intent of being an existing QF providing generation under an existing
contract, being paid for capacity, and having that contract expire or run its full term-and
thus entitling such project to full capacity payments for all years of renewal, extension, or
replacement contract. Here, Clark Canyon was never constructed, never provided any
generation to ldaho Power, did not contribute to ldaho Power's capacity sufficiency, and
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC.5
did not even have a valid contract, as the same was rejected by the Commission and thus
never of any legal force or effect. As provided to the parties in discovery, Clark Canyon
did not contribute any generation, nor forecast generation, to the capacity sufficiency
periods identified in either the 2015 or 2017 lntegrated Resource Plans ("lRP'). Clearly,
the Commission exemption contemplated existing QF projects that had been on-line and
generating pursuant to existing PURPA contracts with the utility. Further, when such
contracts had run their full term, such QFs having been existing generators contributing
to and being paid for capacity were entitled to continue being paid for capacity in renewal,
extension, or new contracts where those QFs continue to provide generation to the utility.
Clark Canyon not only did not provide any generation to ldaho Power, it never
constructed its facility, and never had an effective contract. All PURPA QF agreements
in ldaho are subject to Commission approval or rejection before such agreements
become finally effective contracts between the parties. Article 21 of the 2014 ESA signed
by ldaho Power and Clark Canyon states, "This Agreement shall only become finally
effective upon the Commission's approval of all terms and provisions hereof without
change or condition and declaration that all payment to be made to Seller hereunder
shall be allowed as prudently incurred expenses for ratemaking purposes." 2014 ESA,
p. 31 (emphasis added). Having been rejected by the Commission, the ESA is not a
finally effective and binding contract between the parties.
Clark Canyon's suggestion that a proposed QF could enter into a signed ESA with
the utility, and subsequently never construct its project, never provide generation to the
utility, and have its contract terminated (2013 ESA) and not approved by the Commission
(2014 ESA)-and then by operation of its past failure to perform be entitled to full capacity
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 6
payments for all years, including nine years of capacity sufficiency by the utility, of a new
ESA is absolutely contrary to the Commission's intent, contrary to the public interest, and
harmful to ldaho Power customers. lt goes against the very existence of the
Commission's determination that a QF not be paid for capacity when the utility is capacity
sufficient. To allow Clark Canyon to have full capacity payment during ldaho Power's
current capacity surplus period through July 2026 in a new contract results in the same
harm to customers that the Commission found to be contrary to the public interest in
rejecting the 2014 ESA. Idaho Power respectfully requests that the Commission reject
Clark Canyon's arguments as contrary to the Commission's past orders and contrary to
the public interest.
IV. CONCLUSION
The Commission should reject Clark Canyon's strained arguments inviting an
extension of the Commission's rule that allows existing QFs that have provided
generation and been paid for capacity for the entire term of previously effective PURPA
contracts to continue to receive capacity payments for all years of renewal, extension, or
replacement contracts for those projects to continue such deliveries to the utility. Clark
Canyon was never constructed, never provided generation to the utility, never paid for
capacity contributions, and did not contribute to the capacity sufficiency determination
from ldaho Power's lRPs. Under these circumstances, it would be contrary to the public
interest, and contrary to the Commission's determination that it is unreasonable for
customers to pay for QF capacity during times when the utility is capacity sufficient, to
grant Clark Canyon's request. The Commission should clarify that Clark Canyon is not
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 7
entitled to capacity payments in a new contract until such time as ldaho Power is capacity
deficient, which is currently July 2026.
Respectfully submitted this 9th day of November 2017.
DONOVAN E.
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 9th day of November 2017 I served a true and
correct copy of IDAHO POWER COMPANY'S RESPONSE TO THE PETITION FOR
CLARIFICATION OF CLARK CANYON HYDRO, LLC, upon the following named parties
by the method indicated below, and addressed to the following:
Commission Staff
Daphne Huang
Deputy Attorney General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
Glark Canyon Hydro, LLC
Gregory M. Adams
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street
Boise, ldaho 83702
X Hand Delivered
_U.S. Mai!
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peter@ richardsonad ams. com
n Bearry,
IDAHO POWER COMPANY'S RESPONSE TO THE PETITION
FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC - 9