20191023Comments.pdf

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DONOVAN E. WALKER
Lead Counsel
[e-mail]
RECEIVED
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October 23,2019
VIA HAND DELIVERY
Diane M. Hanian, Secretary
ldaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A
Boise, ldaho 83714
Re Case No. IPC-E-'|9-14
Power Purchase Agreement with Jackpot Holdings, LLC - Comments of
ldaho Power Company Regarding PPA Elections
Dear Ms. Hanian:
Enclosed forfiling in the above matter please find an original and seven (7) copies
of the Comments of ldaho Power Company Regarding PPA Elections.
truly yours,
novan E. Walker
DEW:kkt
Enclosures
?ilazc-
DONOVAN E. WALKER (lSB No 592'l)
ldaho Power Company
'122'l West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
P.ECEIVED
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23 Plt 2: l8
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CASE NO. |PC-E-19-14
COMMENTS OF IDAHO
POWER COMPANY
REGARDI NG PPA ELECTIONS
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I. INTRODUCTION
ldaho Power Company ("ldaho Power" or "Company") hereby respectfully submits
the following Comments to the ldaho Public Utilities Commission ("Commission") to
update and provide additional information to the Commission and Commission Staff
regarding elections within the Power Purchase Agreement ("PPA" or "Agreement")
between ldaho Power and Jackpot Holdings, LLC ("Jackpot Solar" or "Selle/') which has
been submitted to the Commission for its approval in this case. The PPA provides forthe
purchase of 120 megawatts ("MW") of renewable solar electric generation from the
COMMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS - 1
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF A POWER PURCHASE
AGREEMENT WITH JACKPOT HOLDINGS,
LLC, FOR THE SALE AND PURCHASE
OF UP TO 220 MEGAWATTS OF
RENEWABLE SOLAR GENERATION.
Jackpot Solar Facility, with an option to purchase an additional 100 MW of renewable
solar generation from the adjacent Franklin Solar Facility. The PPA also contains
provisions that grant ldaho Power, or any ldaho Power Affiliate, a Right of First Offer
('ROFO) to purchase the Facility prior to Seller's ability to sell the Facility to any other
party. Under the terms of the PPA, ldaho Power has given Notice regarding both of these
provisions to Jackpot Solar as of October 18, 2019. This Notice is attached hereto at
Attachment 1. Capitalized terms used in these Comments but not defined in these
Comments have the definition given to them in the Agreement.
II. BACKGROUND
Section 8.3 of the PPA grants to ldaho Power the right to an additional 100 MW of
Capacity from the Franklin Solar Project. This option was to expire on September 1,
2019. Additionally, Section 8.4 of the PPA grants ldaho Power a ROFO which prohibits
Jackpot Solar from selling the Facility, or any interest therein, to any other party without
first allowing ldaho Power to negotiate for the purchase of the Facility or any other Offered
lnterests therein. On August 12,2019, Alternative Power Development, Northwest, LLC
('APD') (Jackpot Solar's parent entity and project developer) delivered to ldaho Power a
Seller ROFO Notice pursuant to Section 8.4.1 of the PPA indicating that it intended to
enter into a Restricted Transaction by selling the Jackpot Solar project, including but not
limited to the PPA, GlA, permits, studies, leases, and everything existing and
contemplated with an outright purchase of the project in its entirety, to a third party. Under
the terms of Section 8.4.1 of the PPA ldaho Power had 30 days after receipt of this Seller
ROFO Notice to elect to enter into negotiations to purchase the Facility and Offered
lnterests. Pursuant to several subsequent meetings between APD and ldaho Power
regarding the ROFO, and as evidenced in several letter agreements signed by APD and
ldaho Power, both the 30 day deadline referenced in Section 8.4.1 related to the Buyer
COMMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS - 2
ROFO Notice and the September 1,2019, deadline referenced in Section 8.3.1 related
to the Additional 100 MW of Capacity from Franklin Solar Project were moved to a
common deadline of October 20,2019.
III. NOTICE REGARDING 1OO MW AND ROFO NEGOTIATIONS
ldaho Power delivered a Notice to APD on October 18, 2019, stating that it elected
not to exercise its right and option to purchase the 100 MW of Additional Output identified
as Franklin Solar in Section 8.3.1 of the PPA, and that ldaho Power was electing to
exercise its right to negotiate for the purchase of the Jackpot Solar Facility pursuant to its
ROFO in Section 8.4 of the PPA.
Risht to Additional 100 MW of Capacity from Franklin Solar Proiect - ldaho Power
is completing and providing to Staff through discovery updated portfolio analysis from its
2019 lntegrated Resource Plan ("lRP") relating to the inclusion of Jackpot Solar (120 MW)
and Franklin Solar (100 MW) as generation resources in the lRP. Although the
preliminary supplemental analysis regarding the additional 100 MW from Franklin Solar
in the IRP shows some incremental benefit to customers beyond inclusion of the 120 MW
of solar from Jackpot Solar, several factors contributed to the Company's decision to not
purchase the additional 100 MW of solar generation.
First, ldaho Power is concerned about adding intermittent and variable generation
beyond the 120 MW from the Jackpot Solar purchase. A 120 MW solar facility itself will
be the single largest solar facility in the state of ldaho once constructed, and a 220 MW
facility would be among the largest single facilities in the nation. The most recent
integration study, conducted in 2017-2O18, identified a 173 MW limit of additional variable
generation, particularly wind and solar, that the then current system configuration and
load could integrate without unacceptable reserve violations. The Company currently
integrates approximately 1,200 MW of generation from the Public Utility Regulatory
COMMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS . 3
Policies Act of 1978 ('PURPA') PPAs and another 101 MW from the Elkhorn Wind project.
The 2018 variable resource integration study indicated that additional investigation was
warranted into the combined reserve violation impact of the combined integration of
additional wind and solar, and that this would likely need to be done with a more
comprehensive inclusion of integration considerations into the IRP process as additional
resources and system considerations would likely be necessary beyond an additional 173
MW. Electing to take the additional 1 00 MW would surpass the previously identified 173
MW limit from the 2018 study. The new IRP modeling enabled by the longterm capacity
expansion ('LTCE) module can consider reserve violations, as well as the addition and
retirement of resources. While ldaho Power is confident in this modeling approach and
that the 120 MW will benefit customers and be capable of integration into the Company's
operations, the LTCE modeling is new and ldaho Power prefers to have more time and
experience with the capacity expansion modeling and conduct more specific work
regarding the integration of variable resources before acquiring generation beyond an
additional 120 MW
Second, the Application in this case states that the Contract Price for Jackpot Solar
in the PPA is among the lowest publicly reported solar PPA purchase prices in the nation,
with a Contract Price substantially lower than ldaho Power's approved PURPA avoided
cost rates applicable to solar faciiities and lower than average Mid-Columbia market
prices. Application, p. 9. The Contract Price for 120 MW is $21.75lMWh, andlor 220
MW is $23.1 1/MWh, escalated at 1.5 percent for 20 years. The incremental 100 MW in
the PPA causes an overall price increase, where typically it would be the contrary where
adding more would result in incrementally lower prices. While it remains true that the
$21.75 is among the lowest reported prices based on ldaho Power's information and
COMI/IENTS OF IDAHO POWER COMPANY REGARDING PPA ETECTIONS - 4
knowledge, the Company has received unsolicited offers since the filing of the Jackpot
Solar PPA lower than the $23,11, but not lower than the $21.75.
Third, ldaho Power has received several tentative requests and has undertaken
several high-level discussions with existing and potential customers interested in large
solar installations and the direct purchase from ldaho Power of generation and the
renewable attributes of that generation from ldaho Power. However, such customers
typically require that their purchase be directly tied to the incremental addition of such
generation and are not as interested in generation from an already committed resource
such as that available with the additional 100 MW from Franklin Solar.
Lastly, ldaho Power's credit rating agencies take an unfavorable view of additional
large PPA obligations, particularly those that are not required by law under PURPA. As
stated above, ldaho Power currently has approximately 1,200 MW of PPA obligations
from PURPA contracts, as well as another 136 MW of non-PURPA wind and geothermal
PPAs. All PPA obligations, and the imputed debt therefrom, are negatively viewed by the
Company's credit agencies and by many investors and can adversely impact the
Company's credit rating, as well as the overall financial health of the Company. This has
the effect of increasing costs for both the Company and for customers. Because PPA
cosUbenefit directly flows through to customers, with no earnings or opportunity for
earnings, there is a direct and negative impact upon the view held by credit rating
agencies and investors regarding whether to invest in ldaho Power and at what cost the
Company can access capital The continued viability of a utility system comprised of
mostly purchased power rather than utility-owned generation will likely require
subsequent regulatory proceedings and the Commission's consideration of alternative
regulatory policy regarding a utility's ability to earn, attract investment, and remain a viable
COMMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS - 5
going concern not only for the benefit of customers but also for shareholders.
Proceedings of this nature are currently in process in some other states.
After careful consideration and substantial deliberations of many factors, most of
which are outlined above, ldaho Power declined to exercise its right to add the additional
100 MW to the existing 120 MW contained in the PPA.
Riqht of First Otfer to Purchase the Facilitv - Section 8.4.1 prohibits the Seller from
offering to sell the project and interest(s) in the project to any other party without first
offering that interest to ldaho Power. To summarize how the ROFO provisions operate,
after Seller gives ldaho Power Notice of a proposed sale of an Offered lnterest, ldaho
Power must elect whether to pursue negotiations with Seller to purchase that Offered
lnterest. lf ldaho Power does not elect to do so, then Seller may proceed to sell to a third
party. lf ldaho Power elects to negotiate and ldaho Power and Seller are unable to reach
a final purchase of the Offered lnterest, then Seller may sell to a third party, so long as
the materral terms of such sale, such as price, payment terms, and overall revenue
streams are not more favorable to Seller than those negotiated with ldaho Power.
As the Commission and Commission Staff are aware, the economic benefits of this
Facility and this transaction depend upon securing the current 30 percent federal tax
credits, which requires significant action prior to December 31, 2019. As such, ldaho
Power has asked the Commission for an Order approving the PPA prior to the end of this
year. Additionally, this effectively restricts the time with which a new owner would have
to take the necessary steps to both purchase the project and secure the tax credits.
Under the current Agreement, ldaho Power and APD must have a definitive agreement
reached prior to December 1, 2019, and close that transaction by December 15, 2019.
The necessary investment into the project's development must also be made prior to
December 31 to secure the tax credits.
COMMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS .6
ldaho Power will commence negotiations for the purchase of the Facility through
a non-regulated IDACORP affiliate of ldaho Power Company, and would leave the PPA
in place as submitted, with the only change being the IDACORP affiliate as the ultimate
owner of the Facility and counter-party to ldaho Power Company in the contract, and
deletion of the automatic termination provision in Section 8.8 of the PPA so that ldaho
Power's affiliate's purchase of the PPA does not automatically terminate the PPA. lf ldaho
Power had not exercised its ROFO to enter into negotiations for the purchase, or if ldaho
Power is unsuccessful in negotiating that purchase then APD has indicated that the
Facility will be sold to a third party. ln either scenario the PPA as submitted to the
Commission for its approval would not change, and any benefit to customers from that
PPA would not change or be negatively affected. However, there could be additional
benefits for the Company and its customers through affiliated ownership, such as tax
credit benefit and the aforementioned impact to credit ratings, and the resulting overall
cost of acquiring access to capital for the Company and its customers.
lf ldaho Power is able to successfully negotiate ownership of the Facility with APD
such that an unregulated affiliate of IDACORP is the owner, ldaho Power would make a
subsequent filing with the Commission regarding the affiliate transaction of having a PPA
between ldaho Power and the affiliate company. There should be no affiliate transaction
concerns with such an arrangement as the PPA, which was negotiated and executed at
arm's length with a non-affiliated company, would remain in tact and would not change
the benefit that flows to customers as a result of that PPA. Because of the time-limited
nature of the economic value associated with the current tax credits which step down at
year's end, it is imperative that the Commission continue its review of the Contract and
issue an Order approving the same prior to December 31.
COI\TIMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS - 7
IV. CONCLUSION
ldaho Power submits these Comments in order to update and provide additional
information to the Commission and Commission Staff regarding elections within the
Jackpot Solar PPA. ldaho Power has elected not to include the additional 100 MW of
generation from the Franklin Solar Facility and instead remain with the lower cost 120
MW Jackpot Solar generation. Additionally, ldaho Power has exercised its Right of First
Offer to negotiate for the ownership of the Facility, rather than have the project sold to a
third party. Should ldaho Power successfully negotiate ownership of the Facility by an
IDACORP affiliate company, the PPA with ldaho Power as presented to the Commission,
along with the associated benefits to ldaho Power customers, would not change. ldaho
Power would make a subsequent filing regarding the affiliate transaction between ldaho
Power and an IDACORP affiliate company.
Therefore, ldaho Power respectfully requests that the Commission approve the
PPA with a Final Order prior to December 31, 2019, and if approved declare that all
payments for purchases of generation under the PPA be allowed as prudently incurred
expenses for ratemaking purposes and be included for collection in future Power Cost
Adjustment filings.
Respectfully submitted this 23'd day of October 2019.
E. WALKER
Attorney for ldaho Power Company
y/u-
COMMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS .8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 23'd day of October 2019 I served a true and
correct copy of the within and foregoing COMMENTS OF IDAHO POWER COMPANY
REGARDING PPA ELECTIONS upon the following named parties by the method
indicated below, and addressed to the following:
Commission Staff
Edward Jewell
Deputy Attorney General
ldaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A(83714)
P O. Box 83720
Boise, ldaho 837 20-007 4
o
Kim rly Towe xecutive Assistant
_Hand Delivered
_U.S. Mail
_Overnight Mail
_FAXX Email edward. iewell@ouc. idaho. oov
COMMENTS OF IDAHO POWER COMPANY REGARDING PPA ELECTIONS . 9
BEFORE THE
IDAHO PUBLIG UTILITIES COMMISSION
cAsE NO. IPC-E-19-14
IDAHO POWER COMPANY
ATTACHMENT 1
atmlollptgyy6p"
Ar TDAC0RP C0mpany
October 18,2019
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street
Boise, ldaho 83702
e-mail: [e-mail]
Elizabeth Woolstenhulme
Alternative Power Development, Northwest, LLC
515 North 27th Street
Boise, ldaho 83702
e-mail: [e-mail]
HAND DELIVERY
Buyer ROFO Notice and Notice Regarding Right to Additional 100 MW of
Capacity from Franklin Solar Project - Sections 8.3 and 8.4 of the Power
Purchase Agreement Between Jackpot Holdings, LLC and ldaho Power
Company
Peter and Elizabeth
As referenced above, thrs Notice is provided pursuant to Sections 8.3 and 8.4 of
the Power Purchase Agreement Between Jackpot Holdings, LLC and ldaho Power
Company dated March 22,2019, ('PPA). Capitalized terms used and not defined in
this lefter have the meaning set forth in the PPA.
On August 12,2019, Alternative Power Development, Northwest, LLC ('APD')
delivered to ldaho Power Company ("ldaho Power") a Seller ROFO Notice pursuant to
Section 8.4.1 of the PPA indicating that Seller intended to enter into a Restricted
Transaction. Pursuantto several subsequent meetings between APD and ldaho Power
regarding the Right of First Offer ('ROFO"), and as evidenced in the letter agreements
dated August 28, 2019; September 17 , 2019; and September 27 , 2019; signed by APD
and ldaho Power, both the 30 day deadline referenced in Section 8.4.'t related to the
Buyer ROFO Notice and the September 1, 2019, deadline referenced in Section 8.3.1
related to the Additional 100 MW of Capacity from Franklin Solar Project were moved to
a common deadline of October 20,2019. This Notice serves as ldaho Power's
response regarding both items.
Re
*/Y
l22r w. rdaho sr (a3702)
8oke. lO 83707
DONOVAN E. IflALKER
Lead Counsel
[e-mail]
Peter J. Richardson
Elizabeth Woolstenhulme
October 18,2019
Page 2 of 2
Rioht to Additional 100 MW of Capacitv from Franklin Solar Proiect - Please be
advised that ldaho Power, pursuant to Section 8.3 of the PPA, hereby elects not to
exercise its right and option to purchase the Additional Output identified as Franklin
Solar in Section 8.3.1 of the PPA.
Buver ROFO Notice - Please be advised that ldaho Power, pursuant to Section
8.4 of the PPA, hereby elects to exercise its right to negotiate with ROFO Seller for the
purchase of the Offered lnterests, which ldaho Power understands to be a purchase of
the entire Jackpot Solar 120 MW project (comprise of the Facilig and Offered lnterests)
including bu1 not limited to the PPA, GlA, permits, studies, leases, and everything
existing and contemplated with an outright purchase of the project in its entirety.
Pursuant to the September 27,2019,letter agreement between ldaho Power and APD,
the ROFO Period during which ROFO Seller (APD) is to negotiate in good faith and
exclusively with Buyer (ldaho Power), shall expire on December 1 , 2019.
ldaho Power expresses its deepest sympathy at the untimely passing of Robert
Paul, and appreciates APD's October 13, 2019, communication and continued
commitment to the project in Robert's absence. ldaho Power looks fonitrard to our
continued relationship and moving into negotiations for the purchase of the project.
Since
Ylr
Donovan E. Walker
Lead Counsel
ldaho Power Company