20150519Comments.pdf

DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8370
Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-59I 8
Attomey for the Commission Staff
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION TO APPROVE
FIRST AMENDMENT TO POWER PURCHASE
AGREEMENT WITH TELOCASET WIND
POWER PARTNERS, LLC.
ir"' :,
J illiili:3
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-15.09
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Daphne Huang, Deputy Attorney General, and in response to the Notice of
Application and Notice Modified Procedure issued in Order No. 33290 on April 28,2015, in Case
No. IPC-E-15-09, submits the following comments.
BACKGROUND
On April 1,2015, Idaho Power Company filed an Application asking the Commission to
approve the First Amendment to its Power Purchase Agreement (PPA) with Telocaset Wind
Power Partners, LLC. The PPA is not a contract under the Public Utility Regulatory Policies Act
(PURPA), but includes many provisions similar to those in PURPA contracts. See Order No.
30259 at2.
The proposed Amendment deletes and replaces the PPA's Section l2.l andAppendix J.
The new Section l2.l changes the nature of financial statements Telocaset must provide,
STAFF COMMENTS MAY t9,2015
following administrative changes implemented by Telocaset's new parent organization.
Application at2-3. The amended Appendix J resolves the parties' conflicting interpretations of
the PPA's provisions regarding assumption of "curtailment risk." Id. at6.
The Commission approved Idaho Power's PPA with Telocaset in2007. Order No. 30259.
Under the PPA, Idaho Power purchases energy generated by Telocaset's 100.65 megawatt (MW)
Elkhorn Wind Park facility, located in eastern Oregon between Baker City and La Grande.
Application at2. The facility is connected directly to Idaho Power's La Grande-Brownlee 230
kilovolt transmission line. Id. at2.
Under PPA Section9.2 and Appendix J, Idaho Power could - on notice to Telocaset -
elect to pay lower prices ("Post-Operation Date Alternative Pricing") for energy deliveries, brrt in
exchange, Idaho Power would accept more financial risk for possible transmission curtailment. Id.
at 4. In December 2}ll,Idaho Power gave notice to Telocaset that it would use the Post-
Operation Date Alternative Pricing. Id. In August 2012, Telocaset sent its first invoice to Idaho
Power requesting payment for "Lost Output" related to transmission curtailments from March
through July 2012; this was followed by additional monthly invoices for Lost Output. Id. at 4-5.
On review of its documented curtailments and the applicable provisions of the PPA, Idaho Power
disagreed with Telocaset's Lost Output calculations. Id. at 5.
On December 31, 2ll2,Idaho Power paid Telocaset the undisputed Lost Output amount of
$485,985.33 for the period from January 2012 throtgh September 2012. Id. at 6. On May 21,
2\l3,Idaho Power paid Telocaset an additional undisputed Lost Output amount of 552,544.05, for
the period from October 2012 through December 2012. Id. The remaining disputed balance is
$145,378.97. Id. In essence, the remaining dispute concerned the parties' disagreement about
how Appendix J applies to the PPA. Id.
Throughout 2013 and2014, the parties engaged in meetings and discussions about their
interpretations of Appendix J. Id. at 7. Under Telocaset's interpretation of Appendix J,Idaho
Power "assumed curtailment risk for the full 100.65 [megawatt (MW)] nameplate rating of the
Facility." Id. at 6. Under Idaho Power's interpretation of Appendix J, Idaho Power "only
accepted curtailment risk for the 66 MW of the Facility's nameplate rating, as the Facility elected
to only secure 66 MW of network transmission capacity for its output" under Section 6.8 of the
PPA. Id. On December 19, 2074,the parties agreed to and signed the First Amendment for which
they now seek the Commission's approval. Id. at7.
STAFF COMMENTS MAY 19,2015
As noted in the Application, "as part of the Amendment, each party agreed to settle and
release any and all claims arising under or pursuant to Appendix J . . . including, but not limited
to, the disputed Lost Output payment claim of $145,378.97." Id. at8. The parties also agreed to
amend the language in the PPA that led to the parties' disparate interpretations. To this end, the
parties have "mutually resolved and agreed to flanguage] . . . memorialized in the Amended
Appendix J." Id.
The parties also agreed to replace Section 12.1, which requires Telocaset to provide audited
financial statements to Idaho Power, with a new Section 12.1, that requires Telocaset to provide
unaudited financial statements. Id. at7. This amendment accommodates administrative changes
implemented by Telocaset's new parent organization. Id. at 3. Because Telocaset is already
required "to post $10 million of Performance Assurance" under an existing (and unaltered)
provision in the PPA, "Idaho Power believes there is little to no impact by accepting the proposed
change in financial reporting requirements." Id. at3.
STAFF ANALYSIS
Lost Output Payment Dispute and Amended Appendix J
As described in the Application, the primary driver for the First Amendment is the need to
resolve disputes between the parties relating to payment for Lost Output as a result of transmission
curtailments. The Amendment also replaces Appendix J to clariS going forward the terms
associated with Lost Output due to transmission curtailments.
Staff carefully reviewed the original Appendix J and believes that it fails to clearly specify
each party's responsibility for Lost Output due to transmission constraints. Both Idaho Power's
and Telocaset's interpretaions of the original Appendix J could be judged to be reasonable, and
Staff believes neither party's interpretation is more compelling than the other based on the
minimal relevant language contained in the Agreement. The original Appendix J leaves
considerable room for interpretation; therefore, the disagreement between the parties is legitimate
and cannot be resolved simply through reliance on language in the Appendix.
Staff also reviewed the amounts Telocaset alleged were owed by Idaho Power for Lost
Output, in addition to the adjustments proposed by Idaho Power relating to invoice errors,
maintenance, curtailment associated with maintaining system reliability, and unavailability of non-
firm transmission capacity. Staff believes the adjustments proposed by Idaho Power, and accepted
by Telocaset, are justified and reasonable. As stated in the Application, the parties previously
STAFF COMMENTS MAY 19,20t5
agreed to compensation for Lost Output in the amounts of $485,985 and $52,544, still leaving
$145,379 as disputed.
As a condition of the proposed Amendment, the parties have agreed to settle and release
any and all claims arising under or pursuant to Appendix J on or before the effective date of
January 1,2014, including, but not limited to, the disputed Lost Output payment claim of
$145,379. Had the parties elected to litigate the dispute rather than reach settlement, Staff believes
that the best outcome Idaho Power could have achieved would have been to be relieved of paying
the $145,379 disputed Lost Output payment claim. Because the parties have agreed to settle and
release all claims, Staff believes Idaho Power is in the same position it would have otherwise been
had it prevailed in a litigated case. Consequently, Staff supports the proposed Amendment and
believes that the settlement of all claims for Lost Output is fair and reasonable.
Audited vs. Unaudited Financial Statements
As further described in the Application, the parties also agreed to replace Section l2.l to
require Telocaset to provide to Idaho Power unaudited, rather than audited, financial statements.
According to Idaho Power, this Amendment accommodates administrative changes implemented
by Telocaset's new parent organization. Idaho Power contends that because Telocaset is already
required to post $10 million of Performance Assurance under an existing (and unaltered) provision
in the PPA, there will be little to no impact by accepting the proposed change in financial
reporting requirements.
Staff agrees with Idaho Power, that what is most important is that Telocaset provide
adequate Performance Assurance, not whether its financial statements are audited or not.
Consequently, Staff is not opposed to the proposed change to Section 12.1.
RECOMMENDATIONS
Staff recommends approval of the proposed First Amendment to the Power Purchase
Agreement between Idaho Power and Telocaset Wind Power Partners, LLC, without change or
condition.
STAFF COMMENTS MAY 19,2015
Respecttully submitted this I 4I O"rof May 2015.
Technical Staff: Rick Sterling
i:umisc:comments/ipce I 5.9djhrpsyy commonts
STAFF COMMENTS MAY 19,2015
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I9TH DAY oF MAY 2015,
SERVED THE FOREGOING COMMENTS OF' THE COMMISSION STAFF", IN
CASE NO. IPC-E-15.09, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
TELOCASET WIND POWER PARTNERS TELOCASET WIND POWER PARTNERS
DONOVAN E WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOrSE ID 83707-0070
E-mail : [e-mail]
dockets@idahopower. com
ATTN: VP, ASSET OPERATIONS
C/O EDP RENEWABLES NORTH
AMERICAN LLC
808 TRAVIS STE 7OO
HOUSTON TX77OO2
RANDY C ALLPHIN
ENERGY CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
ATTN: GENERAL COUNSEL
C/O EDP RENEWABLES NORTH
AMERICAN LLC
808 TRAVIS STE 7OO
HOUSTON TX77OO2
CERTIFICATE OF SERVICE