20170908Reply Comments.pdf

Gregory M. Adams (ISB No. 7454)
Peter J. Richardson (ISB No. 3195)
Richardson Adams, PLLC
515 N. 27th Street
Boise, Idaho 83702
Telephone : [phone]
Fax: [phone]
gr e g@richardsonadam s. com
peter@richardsonadams. com
Attorneys for Clark Canyon Hydro, LLC
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO
APPROVE OR REJECT ENERGY SALES
AGREEMENT WITH CLARK CAI\YON
HYDRO, LLC, FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
FROM THE CLARK CANYON PROJECT
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. IPC.E.14.15
REPLY COMMENTS OF
CLARK CANYON HYDRO,
LLC
INTRODUCTION AIID SUMMARY
Clark Canyon Hydro, LLC ("Clark Canyon") hereby submits its reply comments to the
Idaho Public Utilities Commission ("Commission") in the above-captioned matter. For the reasons
explained below and in its opening comments, Clark Canyon respectfully requests that the
Commission approve the Energy Sales Agreement (the *2014 ESA") submitted by Idaho Power
Company ("ldaho Power") in this docket with a revised Scheduled Operation Datel of December
3l , 2019, instead of the previously proposed date of June 1 , 2017 .
t Cupitalized terms in these comments are intended to have the same meaning as defined in ESA
submitted for Commission approval.
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ili t,. 7
BACKGROUND
Although Idaho Power and Staff question whether the Commission should approve the
2014 ESA, no party disputes the facts set forth in Clark Canyon's opening comments and the
Affidavit of Alina Osorio.
The critical facts include that at the time of the Memorandum of Understanding ("MOU")
and final discussions of the 2014 ESA, the parties intended to select a Scheduled Operation Date
that was reasonably achievable by Clark Canyon, and based on information known to the
representatives of Clark Canyon and Idaho Power at that time the June I ,2017 date appeared
reasonable. Affidavit of Alina Osorio at fl I 3. Idaho Power provided no indication it would have
objected to a later Scheduled Operation Date such as one in 2019, as proposed here by Clark
Canyon, had that been understood as necessary at the time to accommodate unavoidable
regulatory delays. See id.
Furthermore, this is not a standard arrangement. Clark Canyon has made material
concessions to ldaho Power throughout the parties' entire course of dealing and has already
performed in large part under the contractual arrangements agreed to by the parties. The 2014
ESA before the Commission includes provisions stating that Idaho Power will own 50 percent of
the renewable energy certificates (o'RECs"), carried through from the 201 I ESA per the terms of
the MOU. Additionally, Idaho Power has retained the $21 I ,500 security deposit previously
posted by Clark Canyon, as delay security for the 2014 ESA, id. atll14, unlike standard ESAs
signed in2014 where the security deposit is posted only after the Commission approves the ESA.
See OrderNo. 32697 at 32 (Dec. 18,2012). Clark Canyon and ldaho Power already have an
executed the Generator Interconnection Agreement and Clark Canyon paid a total of
$l,l 14,545.29 to Idaho Power to make upgrades necessary to the Peterson substation. Affidavit
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of Alina Osorio at fl 16.
Nobody disputes that the Commission Staff recommended the stay in this proceeding to
correct the discrepancies created by the unexpected Notice of Probable Termination of the first
Federal Energy Regulatory Commission ("FERC") license issued shortly after the 2014 ESA was
submitted to this Commission. See id. atl23. No party argues that Clark Canyon acted
unreasonably by expending substantial resources to secure a second FERC license in response to
Staff s proposal that Clark Canyon would have the opportunity to "correct the discrepancies and
resolve some underlying matters that have arisen with regard to its project." Order No. 33088 at
l. There is no dispute that the project has received extensive Congressional support and
enactment of bills to extend construction dates.
Nor does anyone dispute that Clark Canyon informed Commission Staff during the stay
of this proceeding that it was seeking both a relicensing and legislative fix to either have the old
license reinstated or receive a new one. Affidavit of Alina Osorio at !l 30. There is no dispute
that the case remained in stay without ldaho Power or Commission Staffseeking to terminate the
proceeding while Clark Canyon pursued those costly corrections to its license. Nor is there any
question that had ldaho Power or Commission Staff sought to terminate the contractual right to
the2014 rates in 2014, Clark Canyon could have secured another replacement contract with
similar rates from 2014 with PacifiCorp in a power purchase agreement containing a more
appropriate scheduled operation date in light of the regulatory delays. Instead of complaining in
2014, however, Commission Staff now presents a case for rejection of the 2014 ESA on the
ground that the currently available avoided cost rates are lower than in that submitted agreement.
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REPLY COMMENTS
The Commission should approve the 2014 ESA with a revised Scheduled Operation Date
for the reasons set forth in Clark Canyon's opening comments. While Commission Staff
diligently presents a contrary view for the Commission's consideration, StafFs comments
overlook the unique facts of this case and ultimately fail to address, let alone refute, any of the
basic points made in Clark Canyon's opening comments. Idaho Power likewise presents no
valid reason to reject Clark Canyon's proposed resolution of this matter, and instead asserts that
it lacks the authority to revise the Scheduled Operation Date without the Commission's approval.
A. The ESA Should be Approved with the Scheduled Operation Date Corrected to a
Date that Corresponds to the FERC Licensing Delay and this Commission's Stay of
this Proceeding - December 31,2019.
The major flaw in the Staff s analysis is its assumption that the critical elements of the
parties' agreement to replace the 201 I ESA was the guarantee that Clark Canyon would achieve
its Scheduled Operation Date by June I ,2017 (or within the 90-day contractual cure period
thereafter). This analysis improperly elevates the importance of the Schedule Operation Date of
June I ,2017, when in fact such heavy reliance on the June I ,2017 Scheduled Operation Date
would amount to nothing more than an opportunistic attempt to nullify the contractual
arrangement that Clark Canyon has already relied upon and largely performed.
As Clark Canyon demonstrated in its opening comments, the critical elements of the
parties' contractual obligations are established by the terms of the MOU. The MOU effectively
imposed a contractual obligation on the parties to enter into and then seek approval of an ESA
containing the significant terms agreed to in the MOU. Neither party to the MOU (or Staff)
attempted to terminate that binding contractual agreement when delays occurred in 2014, and
instead Staff now retroactively elevates the importance of the Scheduled Operation Date of June
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1,2017 in the 2014 ESA. Idaho Power did not list the Scheduled Operation Date as one of the
critical components of the MOU or the ESA in its application. Idaho Power's Application at 5.
Instead, the critical terms of the arrangement here are that Clark Canyon agreed to carry forth the
REC ownership provisions and other benefits of the 201I ESA, including downward pricing
adjustments to the 2014 avoided cost rates, in a replacement2Ol4 ESA. Id.; see also ldaho
Power Comments at 5-6.
If the parties had known of the impending FERC licensing issues before submitting the
2014 ESA for approval, Clark Canyon would have requested that the licensing delay be
incorporated into the Scheduled Operation Date in the 2014 ESA. There is no reason to believe
that Idaho Power would not have agreed in 2014 to a later Scheduled Operation Date to preserve
the benefits carried forward from the 201 I ESA. The effort to now elevate the importance of the
June I ,2017 Scheduled Operation Date re-writes the basic elements of the bargain after Clark
Canyon partially performed on that bargain.
Staffls position is contradictory and punitive to Clark Canyon. Had the avoided cost
rates available today (in 2017) gone up as compared to the rates in the 2014 ESA, Staff would be
making the opposite argument that Clark Canyon should be held to the rates it agreed to in the
2014 ESA, through extension of the Scheduled Operation Date or otherwise. In fact, that is
exactly the logic and reasoning of the MOU underlying the 201 4 ESA; it preserves the benefits
of the 201I ESA and rates instead of simply providing Clark Canyon with a new contract with
more favorable terms and rates that would have otherwise been available to any other seasonal
hydropower QF before June I ,2014. See ldaho Power Comments at3-6 (detailing the history of
carrying forward the beneficialparts of the 201I ESA in subsequent agreements for Idaho
Power's benefit). Those more favorable terms would have included Clark Canyon's ownership
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of 100 percent of the RECs, full avoided cost payments under the published rates in all months
including March and April, and no requirement to allow ldaho Power to retain liquid security
during the Commission approval process. Instead, Clark Canyon, in an act of good faith and
reasonable cooperation, agreed in the MOU to sign the 2014 ESA carrying forward ldaho
Power's ownership of 50 percent of the RECs, reduced market prices in the months of March
and April, and retention of liquid security prior to Commission approval of the ESA. Now that
the currently available rates have declined, the rules should not change in a way that arbitrarily
ignores Clark Canyon's good-faith commitment and reliance on the rates in the 2014 ESA.
Critically, Staff makes no argument that the 2014 ESA would have been rejected if it
were considered for approval in20l4. There is indeed no reason the Commission would have
rejected it then because it was more favorable to Idaho Power than an agreement otherwise
available to seasonal hydropower QFs at that time. Instead, Staff s comments suggest the
Commission could disallow the MOU, the2014 ESA, and the modified2014 rates therein on the
basis that the currently effective rates are lower than the rates in that agreement. That boils down
to a proposal to penalize Clark Canyon for the delay in getting the agreement approved by the
Commission. But that overlooks that Staff is the party that initially recommended the delay in
this proceeding to allow Clark Canyon to correct the discrepancies in its FERC license. Had the
agreement simply been withdrawn in 2014 or the Commission rejected the agreement in20l4,
Clark Canyon could have acted to lock in the 2014 market conditions in a new (and likely
superior) power purchase agreement with another utility.
In the absence of notice to the contrary in2014,2015, or 2016, Clark Canyon had no
reason to expect that if it corrected the licensing deficiencies, ldaho Power, Staff, or the
Commission would seek to enforce the extreme remedy of termination of the 2014 ESA after a
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new FERC license was obtained. To now reject the agreement on the basis that the rates have
declined for new projects approaching Idaho Power for the first time in 2017 would be arbitrary
and unreasonable. Therefore, the Commission should approve the 2014 ESA with a corrected
Scheduled Operation Date, consistent with the parties' past conduct and course of dealing under
the unique circumstances here and consistent with this Commission's prior determination to
suspend the proceeding to allow for such correction.
B. Contract Law Requires Correction of the Scheduled Operation Date.
Although Clark Canyon submits that the Commission should correct the Scheduled
Operation Date to act consistently with its past order and to achieve a just result, there are also
independent bases to correct the Scheduled Operation Date under contract law doctrines. These
arguments have not been refuted by Staff or Idaho Power.
As noted above, the MOU constitutes a binding contractual arrangement between Clark
Canyon and Idaho Power to enter into arrangements for Clark Canyon to sell its output to ldaho
Power at the 2014 avoided cost rates for seasonal hydropower projects, while retaining the
benefits of the 201 I ESA for Idaho Power. Clark Canyon has in fact performed in large part
under that arrangement, but the final memorialization of all underlying terms and conditions of
the agreement in the 2014 ESA contains an impractical Scheduled Operation Date that was the
result of a mistake of fact as to the lack of any regulatory delays.
The critical flaw in Staff s comments is Staff s misunderstanding of the mistake of fact.
See StaffComments at 3 (arguing that the "missed Scheduled Operation Date" is Clark Canyon's
alleged mistake of fact). The mistake was the mistaken assumption at the time of execution of
the 2014 ESA that there were no latent defects in the project's regulatory approvals by FERC.
The mistake was the latent defect that existed in the first FERC license and construction
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approvals, which was unknown to both Clark Canyon and ldaho Power when they picked June l,
2017 as the Scheduled Commercial Operation Date in the 2014 ESA instead of a later date that
they indisputably would have chosen if the existence of that latent defect were known. Staff fails
to grapple with this mistake of fact and instead argues that because Scheduled Operation Date is
now "breached" there can be no mistake of fact. See Staff Comments at3-4.
Stafls argument would repealthe doctrine of mistake of fact and therefore cannot form
the basis for the Commission's order. Staff fails to distinguish any of the cases cited by Clark
Canyon. The Idaho Court of Appeals has repeatedly held that a mistake in this context is "an
unintentional act or omission arising from ignorance, surprise, or misplaced confidence," and the
doctrine of mistake of fact applies when a mutual mistake occurs with regard to a basic
assumption upon which the contract was made. Thieme v. Worst, I l3 Idaho 455, 458,745 P.2d
1076, 1079 (Ct. App. 1987) (internal quotation omitted). Correction of such mistakes "protects
the parties' reliance interests existing at the time the . . . agreement was entered into." .1d., I I 3
Idaho at 459. Staff fails to explain how the undisputed facts here do not establish such a mistake
as to the belief that June I ,2017 was an achievable Scheduled Operation Date given the status of
the FERC licensing process. Idaho Power does not need to agree to the modification for the
doctrine to apply, just as both parties did not agree to the modification in Thieme or the other
cases cited in this proceeding.
lnstead of applying the correct legal rule to the facts here, Staff effectively asks the
Commission to ignore it and capitalize on the mistake of fact as to a lack of regulatory delays as
the basis to opportunistically reject the 2014 ESA. Staff s position is not reasonable. It appears
to suggest that basic reliance interests and common law contract doctrines have no applicability
before this Commission. Clark Canyon respectfully disagrees. As in Thieme, correction of the
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Scheduled Operation Date would recognize Clark Canyon's reliance on the material terms of the
MOU and the parties' agreement to stay this proceeding (at Staff's suggestion) to allow Clark
Canyon to correct the errors and deficiencies before FERC.
Additionally, and separately, the related doctrine of impossibility or impracticality of
performance warrants excusing strict application of the June I ,2017 Scheduled Operation Date.
See Landis v. Hodgson, 109 ldaho 252,256-58,706 P.2d 1363, 1367-69 (Ct.App.l985). Staff
fails to even acknowledge, let alone attempt to distinguish, that the ldaho Court of Appeals has
specifically recognized that this doctrine applies after "government imposition of a new law,
regulation or order which makes the performance of a duty impractical." Landis, 109 ldaho at
257 (internal quotation omitted). That is exactly what happened here, as all parties implicitly
acknowledged when the case was placed in stay to correct the deficiencies created by FERC's
orders. As in Landis, FERC Staff s Notice of Probable Termination and FERC's subsequent
termination order constituted 'oan event the non-occurrence of which was assumed at the time the
contract was made," and therefore, even if the Commission approved the 2014 ESA with original
Scheduled Operation Date of June 1,2017, Idaho courts would hold Clark Canyon "will be
relieved of [it]s duty" to achieve that Scheduled Operation Date due to the impossibility of
lawfully doing so. Id., 109 ldaho at 257 . The Commission has itself previously applied this
concept to accommodate delays in a FERC licensing process in the Horseshoe Bend Hydropower
case referenced in opening comments.
These common law contract doctrines cannot be distinguished and thus apply to the facts
here. Staff s primary response appears to be that these doctrines do not apply because Clark
Canyon took the "business risk" that FERC would terminate its license. See StaffComments at
4-5. That argument misses the mark. ln Thieme, the Court of Appeals rejected the same type of
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argument regarding allocation of risks because, as is the case here, the mistake was logical,
mutually shared, and easily corrected to preserve the parties' reliance interests. I l3 [daho at
459. Additionally, there will be no reallocation of business risks by correcting the mistake.
Clark Canyon agrees that it assumed the business risk that FERC would terminate its license, but
Clark Canyon has now overcome that obstacle (at significant expense). Clark Canyon is not
asking the Commission to increase the contractually agreed-to rates in the 2014 ESA to
compensate Clark Canyon for extra and unexpected expenses associated with obtaining a new
FERC license, as a utility might do for one of its own generation facilities under similar
circumstances.2 Clark Canyon is merely asking for a reasonable tolling of the Scheduled
Operation Date in the 2014 ESA that is consistent with the critical terms of the underlying MOU
and will allow Clark Canyon to fully perform on its prior agreement to sell its output to Idaho
Power at the prices in the 2014 ESA. No business risk is shifted to Idaho Power's customers
here.
Therefore, the Scheduled Operation Date should be tolled as a basic matter of equity and
contract law during the time period that the FERC license was revoked and this proceeding
suspended - approximately two and half years.
C. Reliance on the Currently Effective Rates Is a Red Herring.
Staff focuses exclusively on the currently effective avoided cost rates as its basis to
recommend rejection of the 2014 ESA. Likewise, Idaho Power states that it cannot agree to
correct the Scheduled Operation Date in the 2014 ESA due to the fact that the rates currently
2 See, e.g., IPUC Case No. FERC-E-05-01 (the ongoing FERC relicensing for Hells Canyon);
Order No. 30722 at I l-14 (approving recovery in retail rates of ongoing Hells Canyon relicensing costs
before there is even any assurance FERC will issue a new license for the project); see also IPUC Case No.
IPC-E- I 6-32 (proposing further approval of expenditures on relicensing).
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available for new QFs are lower than the rates in the 2014 ESA. But these arguments do not
support rejection of the 2014 ESA or rejection of the proposed correction of the Scheduled
Operation Date therein.
As a preliminary matter, the currently available avoided cost rates are not directly
relevant because Clark Canyon acted in reliance upon the rates contained in the 2014 ESA. The
thrust of Staff s comments is that the 2014 ESA should be rejected because the avoided cost rates
available today are significantly lower than the avoided cost rates agreed to by Idaho Power and
Clark Canyon in the MOU and the 2014 ESA. As noted above, Staffwould take the contrary
position if the currently effective rates were higher than the rates in the 2014 ESA, just as Idaho
Power did in negotiating the MOU as a replacement to the 201 I ESA. Staffls proposal, if
adopted, would result in a one-sided exercise of the Commission's authority to the detriment of
Clark Canyon. Idaho Power's further suggestion that the Commission expects that contracts
with Idaho Power be "ruthlessly enforced" against the counter party - but presumably never
ruthlessly enforced against ldaho Power - underscores the problem created by the approach of
Staff s comments. See ldaho Power's Comments at 10. This type of one-way contract
enforcement is unreasonable. It is not in the public interest to ignore the reliance interests and
reasonable contractual expectations of parties who come before the Commission and act in good
faith.
Even if it were relevant or fair to attempt to compare the value of the 20 l4 ESA to the
currently available rates and ESA terms otherwise available to Clark Canyon, such a comparison
would be difficult due to the unique features of the 2014 ESA. Idaho Power and Staff rely on
Idaho Power's response to a production request that contains ldaho Power's calculation of the
present value of the difference in payments under the 2014 ESA and the currently effective
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avoided cost rates. According to Idaho Power's analysis, the difference in the scenarios is
approximately $6.6 million. However, Idaho Power's analysis has numerous flaws and cannot
be relied upon.
First, Idaho Power makes no effort to assign any value for the RECs Clark Canyon will
supply Idaho Power under the 2014 ESA. tdaho Power would own, and be able to sell, 50
percent of Clark Canyon's RECs under the2014 ESA. But in a new ESA with today's rates
Idaho Power would own no RECs. On average, Idaho Power's 2017 lntegrated Resource Plan
("lRP") projects that RECs are worth $4.59 per MWh in 201 7 and escalate to $ I 0.34 in 2034, as
explained in ldaho Power's response to Clark Canyon's production response number 4 (attached
hereto). Additionally, the RECs may be more valuable to ldaho Power than to another entity
since ldaho Power can more easily resell the RECs bundled with energy at a higher value than
just an unbundled REC, and should be able to access markets that have an express bundled
delivery requirement for the purchasing utility. BEGIN CONFIDENTIAL
END CONFIDENTIAL.3 It is highly likely the RECs will be
quite valuable in the 20 years of sales under this ESA beginning in 2019 because some Western
states have already increased their renewable portfolio standards ("RPS") to require that their
utilities serve 50 percent of load with renewable energy (through acquisition of RECs or direct
ownership of renewable generation), including California and Oregon. Further increases are
likely, with California recently introducing legislation to raise its RPS to 100 percent renewable
3 The redacted material includes information designated confidential by ldaho Power under the
protective agreement and is being filed separately under the terms of that agreement.
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energy. Cal. Senate Bill 100 (Revised Sept. I ,2017).4 Clark Canyon's RECs should qualify
under both Oregon and California's RPS laws. See Or. Rev. Stat. $$ 4694.010(3),4694.020(l),
469A.025(4).s Idaho Power's analysis unreasonably assigns zero value to these RECs.
Additionally, Idaho Power's analysis assumes that if the 2014 ESA were terminated by
the Commission in this proceeding, then Clark Canyon would not be entitled to the rates
available for a replacement PURPA contract. The major difference in the two scenarios in Idaho
Power's analysis is the fact that the 2014 ESA included a very short sufficiency period, whereas
today's rates include a sufficiency period that reaches into 2024, and capacity payments do not
start until that time. However, the Commission's policy is that if the QF is securing a
replacement contract, it is entitled to the capacity payments from the start of its replacement
contract. See Order No. 32697 at2l-22. The rationale behind this rule is that it would not be
reasonable to deprive the QF of the capacity payments from the start of the replacement contract
as though it were a QF approaching ldaho Power for inclusion in its IRP for the first time. Id.
The Commission requires ldaho Power "to include long-term contract considerations in an IRP
Methodology calculation at such time as the QF and utility hqve entered into a signed contract
for the sale and purchase of QF power." Id. at22 (emph. added). Under the plain language of
the order, the QF should be included in the relevant IRP analysis whether or not the contract has
been approved by the Commission. Therefore, under the Commission's rules, Clark Canyon
a Available online at
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180S8100.5 The Califomia Energy Commission's RPS eligibility guidebook is available online at
http://docketpubl ic.energy. ca. gov/Publ icDoc uments/ I 6-RPS-
0l/TN2l7317_20170427T14204S_RPS_EIigibility_Guidebook_Ninth_Edition_Revised.pdf. Generally
speaking, small hydroelectric resources under 30 MW without an adverse environmental impact are
eligible resources. Clark Canyon was already granted pre-certification under Califomia's RPS
preliminarily confirming its certification under the RPS, which can be viewed online under the public
search option available at https://rps.energy.ca.gov/Pages/Search/SearchApplications.aspx.
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should be considered to have contributed to ldaho Power's current capacity deficiency ever since
201 I when it first executed a contract, establishing a basis for its right to capacity payments from
the start of a new ESA under current rates similar to the treatment of a renewing QF.
There is a factual dispute over how this policy should be applied in this case. Idaho
Power agrees that Clark Canyon should have been included as a committed resource contributing
to the capacity deficiency in the 2013 IRP, and indicated Clark Canyon was in fact included in
calculations of the 2013 IRP's capacity deficiency dates, in response to Clark Canyon's
production request number 5 (attached hereto). Additionally, Idaho Power agrees that the 2015
and2017 IRPs included Clark Canyon as a committed resource based on its executed contract,
the 2Ol4 ESA.6 But ldaho Power indicated through discovery, with supporting work papers, that
it did not include Clark Canyon's output in the calculations of the capacity deficiency dates in
the 201 5 and 201 7 IRPs, apparently since the 201 4 ESA was not yet approved by the
Commission.
In any event, the non-inclusion of Clark Canyon's output in the calculations for the 201 5
and2017 IRPs should be immaterial under the facts of this particular case. First, as noted above,
the lack of Commission approval of the executed agreement should be immaterial under the plain
terms of Order No. 32697. Additionally, the Commission can only reach this question if it
concludes that Staff is correct that Clark Canyon had a contract under the 2014 ESA, but has
already breached that contract. It is contradictory to simultaneously argue that Clark Canyon
breached the 2014 ESA but that the 2014 ESA was not "a signed contract for the sale and
purchase of QF power," as used in Order No. 32697 at p.22, for purposes of entitling Clark
6 See also ldaho Power's 2013 IRP, Appendix C, at p. 991'2015 IRP, Appendix C, at p. 132; and
201 7 IRP, Appendix C, at p. I 12 (each listing Clark Canyon Hydro, LLC as an existing resource).
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Canyon to capacity payments from the start of a replacement contract. The upshot here is that if
the 2014 ESA is terminated, Clark Canyon should be entitled to capacity payments from the start
of a new ESA with rates in effect now, significantly increasing the prices under a new ESA that
could replace the 2014 ESA and significantly reducing the $6.6 million rate differential in Idaho
Power's analysis.
There are also additional possible costs to Idaho Power if the 2014 ESA is terminated.
As noted above, Clark Canyon has already partially performed by paying over $ I .l million to
ldaho Power to complete the interconnection construction for this project at Idaho Power's
Peterson substation. If the 2014 ESA were terminated due to Idaho Power's refusalto agree to a
new Scheduled Operation Date consistent with the MOU, Clark Canyon may be forced to recoup
its damages from ldaho Power. Under the doctrines of unjust enrichment or quantum meruit,
Clark Canyon would be entitled to compensation from Idaho Power for the benefit retained by
Idaho Power by upgrades to its Peterson substation at Clark Canyon's payment.T Clark Canyon
may be entitled to other contractual or common law damages under the unique facts of this case.
Of course, Idaho Power would have no risk of any damages payments to Clark Canyon if the
2014 ESA were approved with a corrected Scheduled Operation Date.
Given these considerations in the overall economic analysis (value of RECs, capacity
payments beginning in 2019, and damages that may be owed to Clark Canyon), Idaho Power and
its customers should be indifferent as to whether the 2014 ESA is approved. Clark Canyon has
7 Under Idaho law, quantum meruit permits recovery of the reasonable value of the services
rendered or the materials provided, regardless of whether the defendant was enriched. Farrell v.
llrhiteman,l46 ldaho 604,672,200 P.3d I 153, I l6l (2009). Unjust enrichment, on the other hand,
allows recovery where the defendant has received a benefit from the plaintiff that would be inequitable
for the defendant to retain without compensating the plaintiff for the value of the benefit. Id.
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provided a detailed calculation of the two scenarios conducted by Dr. Don Reading, supported by
his affidavit, for the Commission's consideration. Dr. Reading's calculations include three
significant changes to ldaho Power's assumptions: (l) consideration of the value of the RECs to
ldaho Power under the 2014 ESA, including a higher REC value scenario than projected in the
201 7 IRP, beginning at $ 1 5 per MWh in 201 9, to account for recent increases in regional RPS
laws; (2) capacity payments beginning in 2019 in the rates for a replacement agreement in the
event of termination of the 2014 ESA; and (3) an estimate of $l million in repayments of
substation upgrades in the event of termination of the 2014 ESA. This calculation shows that the
present value of the difference in revenue requirement between the two possible scenarios, with
and withoutthe2014 ESA, is approximately $700,000, not $6.6 million as ldaho Power's
analysis suggests. Furthermore, this analysis is conservative because it assumes Clark Canyon
would be paid the full contract prices in the 2014 ESA for all of its output when in reality
hydropower QFs are at risk of being paid less than the contract rates in any given month if their
generation falls outside of the 90-l l0 performance band in the ESA.
In sum, the Commission should not assume that the delay of time or approval of the 2014
ESA harms Idaho Power's customers because the20l4 ESA contains terms with material
benefits to ldaho Power as compared to other PURPA agreements and the final economic
outcome is uncertain in the event that the 2014 ESA is terminated.
CONCLUSION
For the reasons explained below, Clark Canyon respectfully requests that the
Commission approve the Energy Sales Agreement submitted by Idaho Power in this docket with
a revised Scheduled Operation Date of December 31,2019, instead of the previously proposed
date ofJune 1,2017.
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Dated September 8, 2017.
By:
M. Adams (lSB No. 7454)
Richardson Adams, PLLC
515 N.27th Street
Boise, lD 83702
Telephone : 208.938.223 6
Fax: [phone]
[e-mail]
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC.E.I4-15
ATTACHMENT 1
CLARK CANYON HYDRO, LLC'S REPLY COMMENTS
REQUEST NO. 4: Reference the renewable energy certificate (REC) price
forecast in the 2017 lRP, Appendix C, at p. 107, attached hereto as Exhibit A of these
production requests. Please explain the basis for this REC forecast and provide all
supporting data and documents used to develop the forecast.
RESPONSE TO REQUEST NO. 4: The REC market can be generally divided
into a compliance market, such as to fulfill a state Renewable Portfolio Standard
("RPS'), and a voluntary market, such as private companies wishing to be green in their
energy consumption or utility green power programs for their retail customers. The
state compliance market depends on state legislatures' decisions to expand the RPS
percentages. The voluntary program (needs to have Green-e certification) depends on
how willing companies and retail customers are to purchase RECs.
ln general, for the voluntary market, prices for geothermal, wind, and solar RECs
are priced higher than small hydro RECs. In the compliance market, buyers wil! not
favor one technology over a different type of technology. However, the qualification for
the state RPS program could be different for different technologies. ln most cases,
wind, solar, and geothermal are relatively easy to qualify. Hydro and biomass projects
have greater difficulty attaining eligibility from the states.
The 2017 lntegrated Resource Plan ("lRP) REC price forecast was based on
discussions with market participants, especially with REC brokers about prices in the
future for different products and vintages. ln general, the REC market is not liquid.
Prices for the same product and vintage could be quite different when executed within
relatively short periods. !n the 2017 IRP REC price forecast, ldaho Power considered
prices for California Compliance REC Category 3 (tradable RECs), Green-e product
IDAHO POWER COMPANY'S RESPONSE TO CLARK
CANYON HYDRO, LLC'S FIRST SET OF PRODUCTION REQUESTS - 5
(voluntary RECs), California Compliance REC Category 2 (bundled RECs), Oregon
Compliance RECs, and Washington Compliance RECs. The final 2017 IRP composite
REC price forecast was calculated from the forecast prices for each product and the
percentages of RECs ldaho Power could sell for each product. Please note that REC
prices forecastfor 2035 ($11.32) and 2036 ($11.79) forthe 2017 IRP were found by
extrapolation.
The table below shows the price forecasts for each product.
CEC 83 G/e
CEC 82
delivered
outside OR RPS WA RPS
2017 $
2018 $
2019 $
2020 $
2021 $
2022 $
2023 $
2024 $
2025 $
2026 $
2027 $
2028 $
2029 $
2030 $
2031 $
2032 $
2033 $
2034 $
2.50 $
2.50 $
2.50 $
2.50 $
4.00 $
4.25 $
4.50 $
4.75 $
5.00 $
5.25 $
5.50 $
5.75 $
6.00 $
6.25 $
6.50 $
6.7s $
7.00 $
7.25 $
$ 5.00
$ s.25
$ 5.2s
$ 5.75
$ 6.25
$ 6.7s
$ 7.25
$ 7.75
$ 8.25
$ 8.75
$ 9.2s
$ 9.75
$ 10.25
$ 10.75
$ 11.25
$ 1 1.75
$ 12.25
$ 12.75
$ 5,00
$ 5.50
$ 5.7s
$ 6.00$ o.so
$ 7.00
$ 7.50
$ 8.00
$ 8.s0
$ 9.00
$ 9.50
$ 10.00
$ 10.50
$ 1 1.00
$ 1 1.50
$ 12.00
$ 12.50
$ 13.00
't.25
1.25
1.25
1.50
1.50
1.50
1.50
1.50
1.50
1.75
1.75
1.75
'1.75
1.75
1.75
2.00
2.00
2.00
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5.00
5.79
4.75
5.00
5.25
5.25
5.51
6.08
6.38
6.70
7.04
7.39
7.76
8.14
8.55
8.98
9.43
9.90
IDAHO POWER COMPANY'S RESPONSE TO CLARK
CANYON HYDRO, LLC'S FIRST SET OF PRODUCTION REQUESTS - 6
The table below shows the weighted REC prices.
CEC 83 or G/e
10o/o
$ 0.19
$ 0.19
$ 0.19
$ 0.20
$ 0.28
$ 0.29
$ 0.30
$ 0.31
$ 0.33
$ 0.35
$ 0.36
$ 0.38
$ 0.39
$ 0.40
$ 0.41
$ 0.44
$ 0.45
$ 0.46
CEC 82
4oo/o
$ 1.90
$ 2.00
$ 2.00
$ 2.10$ z.to
$ 2.21
$ 2.32
$ 2.43
$ 2.55
$ 2.68
$ 2.81
$ 2.95
$ 3.10
$ 326
$ 3.42
$ 3.5e
$ 3.77
$ 3.96
OR RPS
30%
$ 1.50
$ 1.58
$ 1.5E
$ 1.73
$ 1.88
$ 2.03
$ 2.18
$ 2.33
$ 2.48
$ 2.63
$ 2.78
$ 2.93
$ 3.08
$ 3.23
$ 3.38
$ 3.53
$ 3.6E
$ 3.83
WA RPS
20%
$ 1.00
$ 1.10
$ 1.1s
$ 1.20
$ 1.30
$ 1.40
$ 1.50
$ 1.60
$ 1.70
$ 1.80
$ 1.90
$ 2.00
$ 2.10
$ 2.20
$ 2.30
$ 2.40
$ 2.s0
$ 2.60
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Total
4.59
4.86
4.91
5.23
5.55
5.92
6.29
6.67
7.05
7.46
7.85
8.25
E.67
9.08
9.51
9.95
10.40
10.85
CEC = California Energy Commission
83 = only RECs are traded. No energy is involved.
G/e = Green-e certified
82 = Energy and RECs bundled together. RECs can be firmed and shaped within a calendar
year and the renewable energy can be used outside California and a substitute energy can be
bundled with the RECs. lmporters must have firm transmission to the loads in Califomia.
OR RPS = Oregon Renewable Portfolio Standards
WA RPS = Washington Renewable Portfolio Standards
The response to this Request is sponsored by Nengjin Liu, Wholesale
Transaction Leader, ldaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO CLARK
CANYON HYDRO, LLC'S FIRST SET OF PRODUCTION REQUESTS - 7
REQUEST NO. 5: Reference ldaho Power's 2013 lRP, Appendix C, at p. 99;
2015 IRP, Appendix C, at p. 132; and2017 lRP, Appendix C, at p. 112, each listing
Clark Canyon Hydro, LLC as an existing resource.
a. Please confirm that Clark Canyon Hydro, LLC was included as an existing
resource for purposes of calculating ldaho Power's load and resource balance in ldaho
Power's 2013,2015, and 2017 IRPs. For purposes of this request, "load and resource
balance" has the same meaning as used in IPUC Order No., 32697 at p. 16, in the
sentence that states: "We further find it appropriate to identiff each utility's capacity
deficiency based on load and resource balances found in each utility's lRP."
b. Please provide the work papers from the referenced lRPs calculating the
capacity deficiency date and identifying the capacity contributions of each existing
resource. lf the work papers do not demonstrate ldaho Power's response in subpart a.,
please explain the basis for ldaho Power's response.
RESPONSE TO REQUEST NO. 5:
a. As noted above, Clark Canyon Hydro, LLC ("Clark Canyon") was included
on the list of Qualifying Facility Data (PURPA) with all other Qualifying Facility ("QF')
projects that had signed Energy Sales Agreements ("ESA") with ldaho Power as of June
17, 20'13, on page 99 of ldaho Power's 2013 lRP, Appendix C - Technical Report.
Estimated generation provided by the Clark Canyon project from the 2011 ESA was
included in the Cogeneration and Small Power Production ("CSPP") (PURPA) forecast
that was used in ldaho Power's Load and Resource Balance Data beginning on page
31 of the Company's 2013 lRP, Appendix C - Technical Report.
IDAHO POWER COMPANY'S RESPONSE TO CLARK
CANYON HYDRO, LLC'S FIRST SET OF PRODUCTION REQUESTS - 8
ln the Company's 2015 lRP, Clark Canyon was again included on the list of
Qualifying Facility Data (PURPA) with all other QF projects that had signed ESAs with
ldaho Power as of May 26, 2015, on page 132 of ldaho Power's 2015 lRP, Appendix C
- Technical Report. However, no generation from Clark Canyon was included in the
CSPP (PURPA) forecast used in ldaho Power's Load and Resource Balance Data
beginning on page 29 of the Company's 2015 lRP, Appendix C - Technical Report.
Therefore, the Clark Canyon project did not contribute to the capacity sufficiency period
identifled in the 2015 lRP.
Similar to the 2015 lRP, Clark Canyon is included on the list of Qualifying Facility
Data (PURPA) with all other QF projects that have signed ESAs with ldaho Power, on
page 112 of ldaho Power's 2017 lRP, Appendix C: Technical Report. No generation
from Clark Canyon was included in the CSPP (PURPA) forecast used in ldaho Power's
Load and Resource Balance Data beginning on page 19 of the Company's 2017 lRP,
Appendix C: Technical Report. Therefore, the Clark Canyon project did not contribute
to the capacity sufficiency period identified in the 2017 lRP.
Project generation was not included in the 2015 or 2017 IRPs due to the fact that
the 2011 ESA had been terminated and, although Clark Canyon and ldaho Power had
signed a new ESA in 2014, the 2014 ESA has not been approved by the ldaho Public
Utilities Commission, the project did not have a Federal Energy Regulatory Commission
license applicable to the project during the development of either lRP, and the project
has never been constructed or generated any electricity throughout the development of
the 2015 or2017 lRPs.
IDAHO POWER COMPANY'S RESPONSE TO C1ARK
CANYON HYDRO, LLC'S FIRST SET OF PRODUCTION REQUESTS.9
b. Please see the Company's response to subpart a, above.
The response to this Request is sponsored by Michael Darington, Energy
Contrasts Leader, ldaho Power Company.
DATED at Boise, ldaho, this 31"t day of July 2O17.
OVAN E. WALKER
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO CLARK
CANYON HYDRO, LLC'S FIRST SET OF PRODUCTION REQUESTS.lO
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the Sft day of September 2Ol7 a true and correct
copy of the within and foregoing REPLY COMMENTS OF CLARK CANYON
HYDRO, LLC in Case No. IPC-E-14-15 by electronic mail and hand delivery, to:
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
diane. hol(D.puc. idaho. gov
Donovan Walker
Idaho Power Company
l22l West Idaho Street
Boise, Idaho 83702
dwalke(ZDidahopowcr. c om
docketqEidahopower. com
M. Adams
Daphne Huang
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
daphne. huanq(Epuc. idaho. sov