20140731Application.pdf

DONOVAN E. WALKER
Lead Gounsel
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An IDACORP Company
July 31 ,2014
VIA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
47 2 W estWash i ngton Street
Boise, ldaho 83702
Re: Case No. IPC-E-14-21
United Materials of Great Falls, lnc. - Idaho Power Company's Application
Regarding First Amendment to Firm Energy Sales Agreement
Dear Ms. Jewell:
Enclosed for filing please find an origina! and seven (7) copies of ldaho Power
Company's Application in the above matter.
DEW:csb
Enclosures
1221 W. ldaho 5t. (83702)
P.O. Box 70
8oise, lD 83707
hovan E. Walker
DONOVAN E. WALKER (lSB No. 5921)
Idaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwal ker@ idahopower. com
Attorney for ldaho Power Company
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF THE
FIRST AMENDMENT TO THE FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER COMPANY AND UNITED
MATERIALS OF GREAT FALLS, INC.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-14-21
APPLICATION
ldaho Power Company ("!daho Powe/'or "Company"), in accordance with RP 52
and the applicable provisions of the Public Utility Regulatory Policies Act of 1978
("PURPA'), hereby respectfully applies to the ldaho Public Utilities Commission
("Commission") for an order accepting or rejecting the First Amendment to the Firm
Energy Sales Agreement between ldaho Power Company and United Materials of Great
Falls, lnc. ("Amendment").
ln support of this Application, ldaho Power represents as follows:
I. INTRODUCTION AND BACKGROUND
1. ldaho Power and United Materials of Great Falls, lnc. ("UM") entered into
a Firm Energy Sales Agreement ("FESA') pursuant to PURPA on January 6, 2004, for
APPLICATION - 1
the purchase and sale of energy produced by UM's facility, Horseshoe Bend Wind Park
("Facility"). UM's Facility is a nine megawatt PURPA wind generation qualifying facility
("QF') located at UM's industrial facility near Great Falls, Montana. This FESA is the
first wind energy sales agreement that was executed by ldaho Power. The FESA was
approved by the Commission on April 23, 2004. Order No. 29479, Case No.
tPc-E-04-01.
2. The FESA contains 901110 firmness requirements that apply a "Market
Energy Cost" price to energy deliveries that do not meet the 90/1 10 requirements. The
FESA defines the Market Energy Cost with reference to the Dow Jones Mid-Columbia
lndex prices for non-firm energy. The FESA provisions for Surplus Energy and the
Market Energy Cost generally correlate to ldaho Power's Schedule 86, Cogeneration
and Small Power Production Non-Firm Energy.
3. The Dow Jones Mid-Columbia lndex was discontinued by the publisher as
of October 2013. Case No. IPC-E-13-25 was initiated to address a replacement market
index reference for the non-firm energy price reflected in Schedule 86. The parties to
Case No. IPC-E-13-25 executed a settlement stipulation ("Stipulation"), approved by the
Commission in Order No. 33053, which sets forth reference to the Intercontinental
Exchange ('lCE') Mid-Columbia index prices, with a revised formula for calculating the
non-firm price in Schedule 86. In addition, the parties to Case No. IPC-E-13-25 agreed
to amend the FESAs between ldaho Power and each intervening party to reference the
ICE index using the same language as, and consistent with, the Schedule 86 language
agreed upon in the Stipulation. ln approving the Stipulation, the Commission stated,
"We also find it reasonable to allow any additional existing PURPA QFs that currently
have a contract with ldaho Power containing reference to the Dow Jones non-firm Mid-
APPLICATION - 2
C electricity price index, should they so choose, to amend their respective agreements
consistent with the terms of this Settlement Stipulation and similar to the contract
amendments approved by this Order." Order No. 33053, p. 4.
II. THE AMENDMENT
4. ldaho Power and UM have agreed to amend the FESA to include, nearly
word for word, the reference to the ICE index and revised formula that was adopted for
Schedule 86 in Case No. IPC-E-13-25. Attached hereto as Attachment 1, and
incorporated herein by this reference, is the executed First Amendment to the Firm
Energy Sales Agreement Between ldaho Power Company and United Materials of
Great Falls, lnc. The Amendment simply sets forth, virtually verbatim, the provisions
from Schedule 86 to define "Market Energy Cost" in Article 1 , Section 1 .13 of the FESA.
The Amendment was executed by ldaho Power and UM on June 24,2014.
5. Prior to executing the Amendment, ldaho Power and UM entered into a
letter agreement agreeing to settle disputed claims regarding the FESA by entering into
the Amendment to replace the Dow Jones index with the ICE index, as approved in
Case No. IPC-E-13-25. Attached hereto as Attachment 2, and incorporated herein by
this reference, is a copy of the letter agreement dated June 3,2014, signed by ldaho
Power and UM. Pursuant to the parties' agreement, and pursuant to the FESA which
requires both parties to agree upon a replacement index should the Dow Jones index
be discontinued, an effective date of October 2O'13 for use of the ICE index and
calculation referenced in the Amendment is requested. This provides for a switch to
and use of the agreed upon ICE index from the time the Dow Jones index was
discontinued.
APPLICATION .3
III. MODIFIED PROCEDURE
6. ldaho Power believes that a hearing is not necessary to consider the
issues presented herein and respectfully requests that this Application be processed
under Modified Procedure; i.e., by written submissions rather than by hearing. RP 201,
ef seg. lf, however, the Commission determines that a technical hearing is required, the
Company stands ready to prepare and present its testimony in such hearing.
IV. COMMUNICATIONS AND SERVICE OF PLEADINGS
7. Communications and service of pleadings, exhibits, orders, and other
documents relating to this proceeding should be sent to the following:
Donovan E. Walker
Lead Counsel
Regulatory Dockets
ldaho Power Company
1221West ldaho Street
P.O. Box 70
Boise, ldaho 83707
dwal [e-mail]
dockets@ idahopower.com
Randy C. Allphin
Energy Contract Admin istrator
ldaho Power Company
1221West ldaho Street
P.O. Box 70
Boise, ldaho 83707
ral I phin@ ida hopower. com
V. REQUEST FOR RELIEF
8. ldaho Power respectfully requests that the Commission issue an order
accepting or rejecting the First Amendment to the Firm Energy Sales Agreement
between ldaho Power Company and United Materials of Great Falls, lnc., without
change or condition
Respectfully submitted this 31"t day of July 2014.
Attorney for ldaho Power Company
APPLICATION - 4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 31"t day of July 20141 served a true and correct
copy of the within and foregoing APPLICATION upon the following named parties by the
method indicated below, and addressed to the following:
United Materials of Great Falls, Inc.
Lonnie Anderson
United Materials of Great Falls, lnc.
21OO 9th Avenue North
P.O. Box 1690
Great Falls, Montana 59403
William A. Pascoe
Pascoe Energy Consulting, LLC
104 Country Club Lane
Butte, Montana 59701
Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email [e-mail]
Hand Delivered
U.S. Mail
Overnight Mai!
FAXX Email [e-mail]
Christa Bearry,
APPLICATION - 5
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-14-21
IDAHO POWER COMPANY
ATTACHMENT 1
FIRSTAMENDMENT
TO THE
FIRM ENERGY SALES AGREEMENT
BETWEEN
IDAHO POWER COMPANY
AND
UNITED MATERIALS OF GREAT FALLS,INC.
This First Am.endment of the Firm Energy Sales Agreernent ("First Amendment") is
entered into on Ur[Lday of ,Jl*nI. ,z}l4by and betrveen Idaho Power Company, an Idaho
corporation ("Idatro Power") and United Materials of Great Falls, INC., a Montana Corporation
("United Materials" or "Seller") (individually a"Parttf'and collectively the "Parties").
WHEREAS, Idaho Power and Seller entered into a Firm Energy Sales Agreement on
January 6,2004 (the "Agreement") for the purchase and sale of energy produced by the Seller's
facility that was approved by the Idaho Public Utilities Commission ("Idaho PUC") in Order No.
29479 on April 23,2004;
WHEREAS, as agreed to in the Parties' letter settlement agreement, Seller and Idaho
Power desire to amend the definition of Market Energy Cost in this Agreernent to reflect the
stipulation which parties reached in Case No. IPC-E-13-25 before the Idaho Public Utilities
Commission;
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound, the Parties hereto agree as follows:
1. Incorporation of Recitals. The above-stated recitals are incorporated into and made a part of
this Agreanent by this reference to the same extent as if these recitals were set forth in full at this
point.
2. Definitions. Article l, section 1.13 shall be deleted in its entirety and the following section
shall be substituted in its stead:
l.l3 "Market Energy Cost" - Eighty-five percent (85%) of (82.4% of the
monthly arithmetic average of each day's Intercontinental Exchange
("ICE") daily firm Mid-C Peak Avg and Mid-C Oft-Peak Avg index prices).
Each day's index prices will reflect the relative proportions of peak hours
and off-peak hours in the month as follows:
Heavy Load (HL) Hours: The daily hours from hour ending 0700-2200
Mountain Time, (16 hours) excluding all hours on all Sundays, New Years
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christrnas Day.
Energy Sales Agreement
First Amendment - Page I of 3
Light Load (LL) Hours: The daily hours from hour ending 2300-0600
Mountain Time (8 hours), plus all other hours on all Sundays, New Years
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The actual Market Energy Cost calculation being:
.85 * (.824 * ti ttfCe Mid-C Peak Avg* * HL hours for day) +
x=l
(ICE Mid-C Off-Peak Av& * LL hours for day)) I (n*2$))
where n: number of days in the month
If the ICE Mid-C Index prices are not reported for a particular day or days,
prices derived from the respective averages of HL and LL prices for the
immediately preceding and following reporting periods or days shall be
substituted into the formula stated in this definition and shall therefore be
multiplied by the appropriate respective numbers of HL and LL Hours for
such particular day or days with the result that each hour in such month shall
have a related price in such formula. If the day for which prices are not
reported has in it only LL Hours (for example a Sunday), the respective
averages shall use only prices reported for LL hours in the immediately
preceding and following reporting periods or days. If the day for which prices
are not reported is a Saturday or Monday or is adjacent on the calendar to a
holiday the prices used for HL Hours shall be those for HL hours in the
nearest (forward or backward) reporting periods or days for which HL prices
are reported.
If the ICE Mid-C Index reporting is discontinued by the reporting agency,
both Parties will mutually agree upon a replacement index, which is similar
to the ICE Mid-C Index. The selected replacement index will be consistent
with other similar agreements and a commonly used index by the electrical
industry.
3. Effect of Amendment. Except as expressly amended by this First Amendment, the Agreement
shall rernain in full force and effect.
4. Capitalized Terms. All capitalized terms used in this First Amendment and not defined herein
shall have the same meaning as used in the Agreement.
5. Scope of Amendment. This First Amendment shall be binding upon and inure to the benefit of
the Parties hereto, and their respective heirs, executors, administrators, successors, and assigns,
who are obligated to take any action which may be necessary or proper to carry out the purpose
and intent thereof,
Energy Sales Agreement
First Amendment - Page 2 of 3
6. Authority. Each Party represents and warants that (i) it is validly existing and in good
standing in the state in which it is organized, (ii) it is the proper party to amend the Agreement, and
(iii) is has the requisite authority to execute this First Amendment.
7. Counterparts. This First Amendment may be executed in any number of counterparts, each of
which shall be deemed an original and all of which taken together shall constitute a single
instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this First Amendment to be duly
executed as of the date above written.
UNITE F GREAT FALLS, INC IDAHO POWER
By:
Name:
ritte.' P^zqoz.u -
Energy Sales Agreement
First Amendment - Page 3 of 3
Lisa Grow
Sr. Vice President, Power Supply
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-14-21
IDAHO POWER GOMPANY
ATTACHMENT 2
ffiffiffi*.
June 3,2014
Pasco Energy Consulting, LLC
Attr: Bill Pascoe
104 CountryClub Lane
Butte, MT 59701
E-mail Copy: Bill Pasco
Lonnie Anderson
Randy C. Allphin
Energy Conftacts Coordinator, Ldr
Tel: [phone]
[e-mail]
[e-mail]
lonnie. Andcrson@unitedmat€rialsstf.com
Re: United Materials, Horseshoe Bend Wind generation Project
Bil[,
Idaho Power is in receipt of your letter dated March 13, 2014, in which you have
requested revised payments for Strplus Energy deliveries to Idatro Power that occurred in the
months of December 2013 and January 2014. Idaho Power disagrees with your assertions that it
did not corectly calculate and pay for Surplus Energy according to the Firm Energy Sales
Agreement (FESA). The calculation, as specified in the FESA and as described further in this
letter, resulted in a payrnent of $0 for Surplus Energy. However, Idatro Power proposes,
consistent with your stated "possible options for moving forward" number 2, that we reach an
agreement to replace the index and calculation in our FESA with new provisions that have been
negotiated as part of Idaho Public Utilities Commission Case No. IPC-E-13-25, summarized
below. Upon your agree,ment to amend the FESA with a new index and calculation, Idatro
Power would agree to apply this new index and calculation to the months of Decernber 2013, and
January 2014, as desstibed in this letter.
Confidential Offer to Settle Disputed Clalms
Page I of6
l22l W ldaho St. Boise, Idaho 83702P O Box 70 Boiss ldaho 83707
Surolus Enerav and Monthlv Marl@!Enersv Cost Calculation
In your letter of March 13,2014, you state,
It is my understanding that Idaho Power did not pay for Surplus
Energy in Decernber 2013 and January 2014 because Platt's did
not report any non-firm energy transactions during those months-
United Materials does not have access to the Platt's index or
supporting information, but my understanding is that Platt's did in
fact report nonfinn index prices in December 2013 and January
201,4. Althoug[r these prices were based on a survey of market
participants rather ttran specific fansactions, they are nonetheless
the Platt's nonfirm index p,rices for this period.
The FESA for your project contains specific provisions that define Surplus Energy to be
Net Energy that is scheduled and delivered to Idaho Power that exceeds 110% of the Net Energy
Amount, The Net Energy Amount being monthly klvh estimates provided by the Seller. The
FESA also contains provisions that provide the project with mechanisms to ensure it performs
within its monthly kWh estimates.
Paragraph 7.3 of the FESA states, "For all Surplus Energy, Idaho Power shall pay to the
Seller the current month's Martet Energy Cost of or the Base Energy Purchase Price specified in
paragraph 7. I whichever is lower." Paragraph 1 .13 of the FESA states, "Market Energy Cosf' -
eighty-five percent (85%) of the weighted average of the daily on-peak and off-peak Dow Jones
Mid-Columbia Index (Dow Jones Mid-C Index) prices for non-firm energy. If the Dow Jones
Mid-Columbia Index price is discontinued by the reporting agency, both Parties will mutually
agree upon a replacement index, which is similar to the Dow Jones Mid-Columbia lndex. The
selected replacement index will be consistent with other similar agreernents and a commonly
used index by the electrical industry.
Your understanding of how the Surplus Energy is calculated is not correct. Idaho Power
receives daily on-pcak and off-peak non-firm index ffansaction volumes and pricing directly
from a third-party index provider. This provider has consistently been McGraw Hill (1999
through September 2013 it was the McGraw Hill Non-Firm Dow Jones Index, October 2013
forward is has bee,n the McGraw Hill Non-Firm Platts Index). These daily transaction volumes
(MWh) and pricing received from McGraw Hill are then directly input into a calculation that is
used to calculate the monthly weighted average non-firm market price. To achieve this weighted
average, the reported daily on-peak and off-peak tansaction volumes (M!Vh) are multiplied by
the applicable reported price for every day of the month. These individual transaction dollar
values are then added togethet creating a total month's dollm value of the rcported transactions.
This total month's dollar value is then divided by the total volume of transactions (MWh)
reported for the month resulting in a weighted average of the non-firm on-peak and off-peak
reported transactions for each month. This resulting value is then multiplied by 85% to provide
the Market Energy Cost as defined in the FESA.
Confidential Offer to Settle Disputed Claims
Pagc 2 of 6
l22t W ldaho St. Boise, Idaho 83702P O Box 70 Boise, Idaho 83707
ln various Idaho Public Utility Commission flPUC) orders the IPUC has noted that the
90% and ll0% perfonnance band and the associated provisions establish a reasonable
expectation for QF firm energy deliveries and any deliveries that do not meet these criteria are to
be considered non-firm energy deliveries (i.e. Surplus Energy, Shortfall Energy) and priced
accordingly. The IPUC approved the use of the non'firm on-peak and off-peak index prices in
May of 1999 and Idaho Power has used this approved surplus energy price definition in all QF
conhacts since that time and has consistently applied the following weighted average calculation.
Idaho Power believes that the Surplus Energy calculations and the associated Surplus Energy
Prices have been calculated correctly. You are correct that the project did deliver Surplus
Energy to Idaho Power in the months of December 2013 and January 2014 and the payment to
the project for this energy was $0. However, this is a result of the calculated Surplus Energy
Price per kWh, in accordance with the FESA, resulting in $0, urd thus the $0 payment.
Prooosed resolution
In your letter of March 13, 2014 you have presented two possible options for moving
fonrard. You state that United Materials would prefer to resolve the mafter anicably rather than
being forced to pursue legal or regulatory remedies. Idaho Power welcomes this opportunity and
proposes, consistent with your stated "possible options for moving forward" number 2, that we
reach an agreement to replace the index and calculation in our FESA with new provisions that
have been negotiated as part of Idaho Public Utilities Commission Case No. IPC-E-13-25. Idaho
Power makes the following offer of settlement:
Surolus enerov orice definition
At the present time there is a case being processed by the IPUC (Case No. IPC-E-13-25)
in which the energy prices to be included in the Idaho Power Schedule 86 Non Firm agreerrents
is being reviewed. The existing Schedule 86 energy prices are the same provisions included in
the FESA regarding the Surplus Energy Prices and many of the same questions and concems you
have raised in your letter are consistent with issues being addressed in this IPUC case. The
prties to this case have reached agre€ment on a settle,ment to this case and have filed this
settlement with the IPUC for approval. The settlement provides for a revised definition of the
Market Energy Cost to be used for future deliveries of non-firm energy (i.e. Surplus Energy),
Idaho Power is willing to enter into an amendment of your FESA consistent with the settlement
agreement reached by the parties to the IPC-E-13-25 case. The settl€rnent agreement provides
for the use of the Intercontinental Exchange ("ICE") firm daily Mid-C price index, at a discount
that represents conversion of the firm index to a non-firm index. This would include agreement
to amend your FESA with the following provisions:
Confldential Ofler to Settle Dlsputed Claims
Page 3 of6
l22l W ldaho St. Boisg Idaho 83702P O Box 70 Boise, Idaho 8370?
Deleting the current paragraph 1.13 and replacing it with the following:
l.l3 "Mgrket-Egglgll-Cost" - 85o/o of (82.4% of the monthly
arithmetic av€rage of each day's Intercontinental Exchange
('[CE ) daily firm Mid-C Peak Avg and Mid-C Off-Peak Avg
index prices).
The actual Market Energy Cost calculation being:
,35 'r 1.824 . O {tfCe Mid-C Peak Avg, + HL hours for day) +
X=l
ICE Mid-C Off-Peak Av& * LL hours for day)) I (n*24\)
where n = numberof days in themonth
If the ICE Mid-C Index prices are not reported for a particular day
or days, prices derived from the respective averages of HL and LL
prices for the immediately preceding and following reporting
periods or days shall be zubstituted into the formula stated in this
definition and shall therefore be multiplied by the appropriate
respective numbers of HL and LL Hours for such particular day or
days with the result that each hour in such month shall have a related
price in zuch formula. If the day for which prices are not reported
has in it only LL Hours (for example a Sunday), the respective
averages shall use only prices reported for LL hours in the
inmrediately preceding and following reporting perids or days. If
the day for which prices are not reported is a Saturday or Monday or
is adjacent on the calendar to a holiday, the prices used for HL
Hotrs shall be those for HL hours in the nearest (forward or
backward) reporting periods or days for which HL prices are
reported.
If the ICE Mid-Columbia Index reporting is discontinued by the
reporting agency, both Parties will mutually agree upon &
replacanent index, which is similar to the ICE Mid-Columbia
lndex. The selected replacement index will be consistent with
other similar agreements and a commonly used index by the
electrical industry.
Confidential Oft'er to Settle Dlsputed Clalms
Page 4 of 6
1221 W Idaho St. Boise, Idaho 83702P O Box 70 Boisq ldatro E3707
Prior months Sutolus Etursv mvmenE
As part of the proposed settlement, Idaho Power is willing to recalculate the Surplus
Energy Price for any months after Novernber 2013 using the revised Market Energy Cost as
defined above and revise the Surplus Energy payments made for those months.
Appllng the revised Surplus Energy Prices to the actual Surplus Energy delivered,
results in the following Surplus Energy payments:
Month
Surplus
Enerqv ftWh)
Surplus Energy
Price (oer kwh)
Surplus Enerry
Payment
Decernber 2013
January 2014
February 2014
March 2014
April2014
653,900
237,500
0
0
46,500
$0.03s7s4
$0.028195
$0.048133
$0.018236
$0.017671
Total
$23,379.80
$6,696.41
$0.00
$0.00
$82r.69
$30,897.89
Idaho Public Utilin Commission fiPUC) Aooroval
Upon your agreernent with this proposed resolution Idaho Power will prepare an
amendment for your FESA for execution by bo0r parties and documentation to file with the
IPUC seeking approval of the arnendment and the revised payment calculation. Only after the
IPUC has approved this resolution shall the amendment become effective and Idatro Power will
make the appropriate payments.
Due to the pending case at the IPUC, and the similarities between the issues within this
case and your FESA, Idaho Power is unable to substantially deviate from this proposed
resolution. Please provide any comments to Idaho Power at your earliest convenience and/or if
you agree with this proposed resolution please indicate by signing below and retuming a copy to
Idaho Power, at which time ldaho Power will prepare the Amendment and forward to you for
execution.
Corlidential OlTer to Settle Disputed Claims
Page 5 of6
l22t W ldaho St, Boise, ldaho 83702P O Box 70 Boise, Idaho 83707
Agreed, Understood and Acccpted:
PrintNamo andTitle
Sincerely,
$e a/r,*
Randy C. Allphin
Dmovan Walkcr(IPCo)
Tess Part (IPCo)
Julia Hilton (IPCo)
Jlll Glenn (lPCo)
Confldentlel Offer to Settlo Dlrputcd Clrlmr
Pagc 6 of6
P O Box 70 Boise, Idalrc E3707 l22l W Idaho St Boisc! Idtlto 83702