20140620Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: JUNE 20, 2014

SUBJECT: IDAHO POWER’S APPLICATION FOR APPROVAL OR REJECTION
OF A PPA WITH CLARK CANYON HYDRO, CASE NO. IPC-E-14-15

On June 4, 2014, Idaho Power Company filed an Application requesting that the
Commission accept or reject an Agreement between Idaho Power and Clark Canyon Hydro, LLC
(Clark Canyon), for the sale and purchase of electric energy generated by the Clark Canyon
hydroelectric Project. Idaho Power asks that its Application be processed by Modified
Procedure.
BACKGROUND
On May 20, 2011, this Commission approved an agreement between Idaho Power and
Clark Canyon for a 4.7 megawatt (MW) hydro project at a facility located near Dillon, Montana.
Order No. 32294. The agreement contained a scheduled operation date of March 31, 2013.
Idaho Power states that, for various reasons, the project was unable to meet the March 2013
scheduled operation date. Idaho Power agreed to extend the operation date until December 31,
2013, based on Clark Canyon’s agreement to forfeit the posted delay security as liquidated
damages. Idaho Power required that the project post an additional security amount as delay
security associated with the revised, December 2013, scheduled operation date. The extension
agreement was approved by the Commission on May 24, 2013. Order No. 32814. The project
subsequently failed to meet its revised, December 2013, operation date.
Ultimately, Idaho Power and the project entered into a Memorandum of
Understanding (MOU) that addressed termination of the previously approved agreement and
execution of a new seasonal hydro QF agreement. The MOU provides for:
 Termination of the previously approved agreement;

 Collection of delay liquidated damages;
DECISION MEMORANDUM 2
 Negotiation and execution of a new seasonal hydro agreement that retains
the delay liquidated damages provision, requires the Project to post delay
security for the new agreement at $45 per kilowatt of nameplate, and
allows the Project to offset this delay security by the previously forfeited
delay security;

 Any energy deliveries to Idaho Power in the months of March or April
will be paid the market value of energy and not the SAR published
avoided cost rate;

 If the Project fails to meet the seasonal hydro requirements (i.e. 55% of
generation delivered during the months of June, July and August),
payments will be revised to reflect non-seasonal hydro SAR published
avoided cost rates; and

 The provision in the approved/terminating contract with regard to
ownership of renewable energy credits is retained for the new agreement
(Idaho Power owns 50% and Clark Canyon owns 50%).

Idaho Power states that, “in negotiating these terms and conditions with Clark Canyon, Idaho
Power adhered to its PURPA obligation to contract with this new proposed QF project,
addressed the project’s previous lack of performance, satisfied the project’s requests to contract
and purchase in a timely and reasonable manner, and maintained the value from the terminated
[Agreement] for Idaho Power and its customers by requiring terms and conditions that would
carry certain provisions from the terminated [Agreement] forward into the new [Agreement].”
Application at 4.
THE APPLICATION
On May 30, 2014, Idaho Power and Clark Canyon entered into a new Agreement
pursuant to the terms and conditions of various Commission Orders applicable to PURPA
agreements for seasonal hydro projects. Idaho Power states that Clark Canyon now proposes to
operate and maintain a 7.55 megawatt (MW) seasonal hydro energy facility located near Dillon,
Montana. 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, Clark Canyon elected to contract with Idaho
Power for a 20-year term using the non-levelized seasonal hydro 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 1.23 and 4.1.4 of the Agreement, Clark Canyon
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
DECISION MEMORANDUM 3
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.
In its new Agreement, Clark Canyon has selected June 1, 2017, 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 Clark Canyon. A
Schedule 72 Generator Interconnection Agreement (GIA) between Clark Canyon and Idaho
Power was executed on August 10, 2011, for a 4.7 MW facility. Idaho Power maintains that the
Company has constructed the required interconnection facilities pursuant to the executed GIA.
With the increase in nameplate capacity from 4.7 MW to 7.55 MW, Idaho Power states that
Clark Canyon has been advised that it will need to submit an additional interconnection request
to accommodate the additional 2.85 MW, and execute a GIA increasing the interconnection
capacity to 7.55 MW.
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 further 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-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.” Application at 4. Idaho
Power and Clark Canyon also agreed to changes in some standard provisions that the parties now
propose for Commission approval. In addition to the specifically negotiated provisions pursuant
to the MOU, Idaho Power identifies that 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
DECISION MEMORANDUM 4
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, 1.41, 1.42, 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;

 Change to paragraph 6.2 to allow Clark Canyon 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.

Finally, 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 Clark Canyon for purchases of energy will be allowed as prudently incurred
expenses for ratemaking purposes.
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure with a comment
deadline of August 5, 2014, and a reply deadline of August 12, 2014.
COMMISSION DECISION
Does the Commission wish to process this case under Modified Procedure with a
comment deadline of August 5, 2014, and a reply deadline of August 12, 2014?

M:IPC-E-14-15_ks

1 This change is relevant to the 90/110 performance requirement. The settlement was approved by the Commission
on June 10, 2014. Order No. 33053.