20171102Petition for Clarification.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]
gre g@richardsonadams. com
peter@richardsonadams. com
RECE IVED
t0ll HOI -2 Pll 3: t+3
?ii f';tu*?,hl8t'o*il
IJTILi
Attorneys for Clark Canyon Hydro, LLC
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
oF rDAHO POWER COMPANY TO )
APPROVE OR REJECT ENERGY SALES )
AGREEMENT WITH CLARK CANYON )
HYDRO, LLC, FOR THE SALE AI\D )
PURCHASE OF ELECTRIC ENERGY )
FROM THE CLARK CANYON PROJECT )
CASE NO.IPC.E.I4.Is
PETITION FOR
CLARIFICATION OF CLARK
CAIYYON HYDRO, LLC
INTRODUCTION AND SUMMARY
Clark Canyon Hydro, LLC ("Clark Canyon") hereby respectfully petitions the Idaho Public
Utilities Commission ("Commission" or "IPUC"), under IPUC Procedural Rule 325, IDAPA
31.01.01 .325, to clarify its Order No. 33904. For the reasons explained below, Clark Canyon
respectfully requests that upon the Commission's termination of the Energy Sales Agreement (the
*2014 ESA") submitted by ldaho Power Company ("[daho Power") in this docket, Clark Canyon
may elect to enter into a new contract with ldaho Power at the currently effective rates for
qualiffing facilities ("QF") seeking a replacement contract, i.e. with capacity payments in the rates
from the start of the replacement contract.
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE I
BACKGROUND
In this proceeding, Idaho Power and Staff argued that there could be up to a $6.6-million
difference in net present value between the payments to Clark Canyon in the rates contained in
the 2014 ESA and the rates that would be available to a new QF approaching tdaho Power today
contracting under today's rates. Clark Canyon disputed this comparison on the basis, among
other reasons, that Idaho Power's calculation ignored that Clark Canyon would be entitled to the
capacity payments from the start of a replacement contract, whereas Idaho Power's calculation
assumed that Clark Canyon would not be paid for capacity with a replacement contract until the
end of Idaho Power's current surplus period in2024. See Order No. 33904 at 5 & n.l.
Specifically, in its reply comments, Clark Canyon explained the premise for its
entitlement to capacity payments in a replacement contract in detail. See Clark Canyon Reply
Comments at 13-14. As explained therein, the most significant difference in the two scenarios in
Idaho Power's analysis is the fact that the 2014 ESA included a very short sufficiency period,
whereas the rates in effect at the time of reply comments included a sufficiency period that
reached into 2024, and capacity payments do not start until that time.l However, as further
explained in reply comments, 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. Clark Canyon also explained that the Commission requires Idaho
Power'oto include long-term contract considerations in an IRP Methodology calculation at such
time as the QF and utility have entered into a signed contract for the sale and purchase of QF
I After Clark Canyon filed reply comments, the Commission approved an updated capacity
deficiency date for Idaho Power's avoided cost rates that commences capacity payments in 2026 in an
order issued on October 5,2017. See Order No. 33898.
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE 2
power." Id. at22 (emph. added). Thus, Clark Canyon argued, 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's
reply comments concluded that it should be considered to have contributed to Idaho Power's
current capacity deficiency ever since 201I 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.
Clark Canyon further explained that 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 to reply comments).
Additionally, Idaho Power agrees that the 2015 and 2017 IRPs included Clark Canyon as a
committed resource based on its executed contract, the 2014 ESA.2 But Idaho 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 2015 and2017 IRPs. Idaho Power's
position appears to be that even though the 2014 ESA was signed by both parties at the time of
the 2015 and 2017IRPs, the2014 ESA was not yet approved by the Commission, and according
to Idaho Power unapproved QF ESAs should not be included in the load and resource balance in
the IRP for purposes of calculating the end of the capacity surplus period.
2 See also ldaho Power's 2013 IRP, Appendix C, at p. 99 2015 tRP, Appendix C, at p. 132; and
201 7 IRP, Appendix C, at p. I l2 (each listing Clark Canyon Hydro, LLC as an existing resource).
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE 3
The Commission's order summarizes these arguments in the background section but the
order itself does not directly resolve the factual dispute in this case. See Order No. 33904 at 5 &
n. l. Instead, the order rejected the 2014 ESA on the basis that the public interest does not
support approving the agreement and then as an additional basis pointed to the risk of an impact
on customers of as much as $6.6 million, stating: "Further, approving the Agreement with its
2014 avoided cost rates 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." Id. at 6.
REQUEST FOR CLARIFICATION
The Commission should clarify that if Clark Canyon commits to enter into a new energy
sales agreement with Idaho Power to replace the 2014 ESA that the Commission rejected, then
Clark Canyon will be provided today's rates with capacity payments beginning in the first
contract year.
The Commission's statement in the order - that "approving the Agreement with its 2014
avoided cost rates 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"3 - suggests that the
Commission agrees with ldaho Power's position that Clark Canyon would not be entitled to
capacity payments from the start of its replacement contract. However, that point is not entirely
clear because the order states approving the 2014 ESA could have the ratepayer impact
suggested by Idaho Power. Clark Canyon seeks clarity on this point because if Clark Canyon is
entitled to capacity payments from the start of a replacement contract, there may be some chance
that it could market its ownership of 100 percent of the renewable energy credits ("RECs") in a
3 Order No. 33904 at 6.
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE 4
new ESA in a manner that may allow the Clark Canyon project to still be constructed. On the
other hand, that result is far less likely if capacity payments are not available for the full contract
term, and Clark Canyon will have to give greater weight to other options. Given the unresolved
dispute between Idaho Power and Clark Canyon on the point, the Commission should resolve it
now instead of requiring the parties to return to the Commission yet again to address the issue.
Clark Canyon submits that its proposed clarification is reasonable in this case.
Entitlement to the capacity payments from the start of a replacement contract for the 2014 ESA
can be reasonably inferred from the Commission's existing policy. As noted above, the
previously existing order on this topic requires Idaho Power "to include long-term contract
considerations in an IRP Methodology calculation at such time as the QF and utility have
entered into a signed contract for the sale and purchase of QF power." Order No. 32697 at22
(emph. added). This order is unambiguous. When a utility enters into a signed contract with a
QF, that contract is to be included in the load and resource balance in the IRP and thus contribute
to the capacity position of the utility for purposes of calculating avoided cost rates for subsequent
QFs. There is no delay in inclusion in the load and resource balance until after the Commission
approves the agreement the utility and the QF entered into. Such a delay would result in
subsequent QFs receiving rates that ignored the committed QF project and were thus inflated
avoided costs.
Because Clark Canyon and Idaho Power entered into the 2014 ESA, the 2014 ESA
entitled Clark Canyon to capacity payments from the start of its replacement contract. To hold
otherwise, would reverse the outcome in Order No. 32697 and require Idaho Power to wait
several months after entering into a QF contract to actually include that QF as a committed
resource for purposes of calculating subsequent QFs' avoided cost rates.
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
rPC-E-14-1s
PAGE 5
As further background, prior to Order No. 32697, the Commission required the utilities to
pay all QFs for capacity during all years of the contract. When the Commission decided to
implement a policy of not paying for the QF's capacity value during the sufficiency period, it
made an exception for QFs that already had a contract that the new contract was replacing.
However, there was some confusion as to how this policy would apply, and several parties
sought reconsideration of the question.
On reconsideration, the Commission explained more precisely which QFs would still be
entitled to capacity payments for the full contract term, stating: "when an existing QF under a
current contract desires to continue to sell energy to the same utility after expiration of the
current contract, and the parties enter into a new contract for the sale and purchase ofenergy, the
QF is entitled to be paid capacity for the full term of the new agreement." Order No. 32737 at 5
(emph. added). This policy was reconfirmed on a second reconsideration and clarification order,
with the caveat that the QF's first contract had to include capacity payments at the time that the
first agreement expired, so as to ensure that the QF was actually contributing to an assumed need
for capacity in the first contract. See Order No. 32871. Therefore, the Commission's existing
policy requires that a QF must meet three requirements to be entitled to capacity payments from
the start of a new contract: (l) it must be an existing QF; (2) it must have had been under a
current contract that includes capacity payments; and (3) its current contract must be subject to
"expiration."
As applied here, Clark Canyon meets the three requirements. First, Clark Canyon is an
existing QF. It has a valid Form 556 on file with the Federal Energy Regulatory Commission
("FERC"). See FERC Docket No. QFI l-144. The legal precedent on this point establishes that
a facility meets the definition of "qualifying facility" in PURPA and the Federal Power Act,
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE 6
U.S.C. $ 796(17)(C), by filing a self-certification Form 556 with FERC, even if it is not
producing electricity. 16. See Winding Creek Solar LLC v. Peevey, No. l3-cv-04934-JD,2015
U.S. Dist. LEXIS 18887, at **6-18 (N.D.Cal. Feb. 17,2015). InWinding Creek, the question
was important because the plaintiff (Winding Creek) filed a PURPA enforcement action, but the
defendant state commission argued that PURPA only allows existing qualiffing facilities to bring
such actions, not Winding Creek's unbuilt facility. After exhaustively reviewing the statutory
and regulatory provisions, the court concluded that proposed facilities that have self-certified
with FERC are qualifying facilities, even before they begin to produce energy. This makes sense
because "encouraging small power production and development are necessarily forward-looking
activities in which yet-to-be-built facilities will obviously play an important role." Id. at*12.
Second, Clark Canyon was under a current contract that provided capacity payments.
There is no question the parties had an executed contract - the 2014 ESA. That contract stated
its was effective on the date it was signed . See 2014 ESA at Recitals & Articles l.l2 & 5.1.
Clark Canyon had already partially performed under the contract by posting its delay security,
among other activities. Additionally, as explained in reply comments, the Commission's policy
is to measure the effectiveness of the contract in this context as of the date the parties execute the
agreement, not the later point in time when the Commission approves the contract. See Order
No.32697 at22.
Third, Clark Canyon's 2014 ESA has now been subjected to "expiration" by the
Commission's order rejecting it. The lead definition of the word "expiration" is as follows: "a
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE 7
coming to an end; termination; close: the expiration of a contract."4 The contract does not need
to run its natural course of 20 years to expire; it simply must be terminated, as occurred here.
Finally, it bears noting that when the Commission adopted its surplus period policies in
Order No. 32697, it also expressly indicated that its policies were still intended to encourage QF
development. The Commission explained: "As we have stated previously in this docket and
other PURPA related matters, this Commission has a long history of encouraging PURPA
development. With the changes adopted herein, we believe that PURPA development can
continue to thrive in a way that holds ratepayers harmless." Order No. 32697 at 52. To the
extent there may be ambiguity as to the applicability of the replacement-contract policy under the
facts of this case, the Commission should err on the side of encouraging QF development,
especially the development of a project that has already received significant Congressional
support as noted in prior comments.
In sum, because Clark Canyon can be reasonably considered to meet all of the
requirements for capacity payments from the start of a new contract as set forth in existing
Commission orders, the Commission should clarify that point to limit the need of the parties to
return to the Commission. Therefore, Clark Canyon respectfully requests that the Commission
clarify this point in its Order No. 33904.
CONCLUSION
For the reasons explained below, Clark Canyon respectfully requests that the
Commission clarify Order No. 33904 as requested herein.
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE 8
Se e http: I I www.d ictionary.com/browse/expiration?s:t (emph. in origi nal).
DatedNovember T;ZOtl.
By:
M. Adams (ISB No. 7454)
Adams, PLLC
515 N. 27th Street
Boise, ID 83702
Telephone: 208.938.223 6
Fax: [phone]
gre g@ri chardsonadams. com
PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC
IPC-E-14-15
PAGE 9
CERTIFICATE OF SERVICE
\
I HEREBY CERTIFY that on ttrdPAay of Novemb er 2017 a true and correct copy of the within
and foregoing PETITION FOR CLARIFICATION OF CLARK CANYON HYDRO, LLC in
Case No. IPC-E-14-15 by electronic mail and United States Mail, postage prepaid, to:
Diane Hanian (hand delivery)
Commission Secretary
Idaho Public Utilities Commission
472 W est Washington Street
Boise, Idaho 83702
[e-mail]. gov
Donovan Walker
Idaho Power Company
1221 West Idaho Street
Boise, Idaho 83702
dwalker@idahopower. com
[e-mail]
M. Adams
Daphne Huang
Deputy Attorney General
Idaho Public Utilities Commission
472 W est Washington Street
Boise, Idaho 83702
daphne.huang@puc. idaho. gov
L^-^--