20200710Order_No_34715.pdf

ORDER NO. 34715 1

Office of the Secretary
Service Date
July 10, 2020

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE FORMAL
COMPLAINT OF BLACK MESA ENERGY,
LLC TO ESTABLISH A LEGALLY
ENFORCEABLE OBLIGATION
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CASE NO. IPC-E-20-17

ORDER NO. 34715

On March 17, 2020, Black Mesa Energy, LLC (“Black Mesa”) filed a formal complaint
against Idaho Power Company (“Idaho Power” or “Company”) seeking a Commission
determination that Black Mesa established two legally enforceable obligations (“LEO” or “LEOs”)
with Idaho Power; one for Black Mesa 1 and one for Black Mesa 2, each a qualifying facility
(“QF”) under the Public Utility Regulatory Policies Act of 1978 (“PURPA”).
On April 2, 2020, the Commission issued a Summons to Idaho Power notifying the
Company that a formal complaint had been filed against it and directing the Company to answer
the complaint within 21 days.
On April 23, 2020, the Company filed an Answer and Motion to Dismiss.
On April 28, 2020, Black Mesa filed a Motion to Extend Time.
On May 6, 2020, the Commission granted Black Mesa’s Motion to Extend Time. Order
No. 34663.
On May 15, 2020, Black Mesa filed an Answer to Idaho Power’s Motion to Dismiss.
Now, the Commission denies Idaho Power’s Motion to Dismiss and sets briefing
deadlines for the parties.
BACKGROUND
Black Mesa first attempted to sell its energy and capacity to Idaho Power in 2017 as a
single 20 MW energy storage QF. In February 2017, Black Mesa submitted to Idaho Power a
Schedule 73 Application requesting a 20-year contract with published avoided cost rates. In
response to Black Mesa’s Application and similar Applications filed by other energy storage
QFs—Franklin Energy Storage One, Franklin Energy Storage Two, Franklin Energy Storage
Three, and Franklin Energy Storage Four (collectively, the “Franklin Energy QFs”)—Idaho Power
petitioned the Commission “to issue an order determining the proper contract terms, conditions,
and avoided cost pricing to be included in [PURPA] contracts requested by several battery storage
facilities.” IPC-E-17-01 Petition for Declaratory Order.

ORDER NO. 34715 2
The Commission issued Order Nos. 33785 and 33858 in IPC-E-17-01 determining that
Black Mesa and the Franklin Energy QFs were eligible for the same contract term and avoided
cost pricing methodology as solar QFs. Order No. 33785 at 11-12. Solar QFs up to 100 kW are
eligible for published avoided cost rates calculated by the Surrogate Avoided Resource (“SAR”)
Method and a 20-year contract. Solar QFs above 100 kW are eligible to receive avoided cost rates
calculated by the Integrated Resource Plan (“IRP”) Method and a two-year contract. The Franklin
Energy Storage QFs appealed the Commission’s decision to the United States District Court for
the District of Idaho pursuant to 16 U.S.C. § 824a-3(h)(2)(B).
In January 2020, the district court held that the Commission violated PURPA and
usurped the jurisdiction of the Federal Energy Regulatory Commission (“FERC”) by determining
the “QF status” of the energy storage QFs. The district court held that the Commission
“impermissibly classified the QF status of Plaintiffs’ energy storage facilities that are certified
under such Act as energy storage facilities. Classifying such facilities as ‘solar QFs’ is outside the
Commissioners’ authority as state regulators and therefore in violation of federal law.” Franklin
Energy Storage One, LLC et al. v. Kjellander et al., Case No. 1:18-cv-00236-REB. The district
court prohibited the Commission from “considering the energy source input into Plaintiffs’ energy
storage QFs for the purpose of classifying the QFs in any way other than as energy storage QFs.”
However, the district court “specifically decline[d] to order Defendants to require utilities under
their jurisdiction to afford energy storage QFs all rights and privileges afforded to ‘other QFs’
under the IPUC’s PURPA implementation plan.” Id.1
Following the district court’s decision, Black Mesa states it “immediately reiterated its
request for a fixed-rate 20-year PPA utilizing the published, non-levelized, non-fueled avoided
cost rates for ‘Other’ facilities for Black Mesa Energy 1 storage QF and submitted a request for its
Black Mesa Energy 2 storage QF.” Formal Complaint at 8. For its part, Idaho Power immediately
petitioned the Commission to initiate a proceeding to “determine the proper avoided cost rates as
well as contract terms and conditions applicable to, and to be included in [PURPA] contracts
requested by energy storage [QFs].” Petition Case No. IPC-E-20-02. The Commission is currently
processing Idaho Power’s petition to determine the project eligibility cap for entitlement to

1 The Commission is appealing the district court’s order. Ninth Circuit Case No. 20-35146. Idaho Power is also
appealing the district court’s order. Ninth Circuit Case No. 20-35144.

ORDER NO. 34715 3
published avoided cost rates and the contract term for energy storage facilities in Case No. IPC-E-
20-02.
In IPC-E-17-01, the Commission denied Black Mesa’s claim that it had established a
LEO at that point in time.
The facts and evidence in this case reveal that the parties were in
active negotiations which resulted in Idaho Power’s Petition for a
declaratory ruling. We decline to interpret a reasonable dispute
between the parties regarding contract terms and conditions as
intransigence or a failure to negotiate on the part of the utility.
Therefore, we find that no action (or inaction) of the utility has
triggered the creation of a legally enforceable obligation.
Id. at 12. The district court did not determine whether Black Mesa formed a LEO with Idaho
Power.
LEGALLY ENFORCEABLE OBLIGATIONS UNDER IDAHO’S IMPLEMENTATION
OF PURPA
FERC rules implementing PURPA give QFs the opportunity to form a LEO with the
purchasing utility.
Each qualifying facility shall have the option . . . [t]o provide energy
or capacity pursuant to a legally enforceable obligation for the
delivery of energy or capacity over a specified term, in which case
the rates for purchases shall, at the option of the qualifying facility
exercised prior to the beginning of the specified term, be based on
either: (i) The avoided costs calculated at the time of delivery; or (ii)
The avoided costs calculated at the time the obligation is incurred.
18 C.F.R. § 292.304(d)(2). In creating this opportunity for QF developers, FERC stated,
Paragraph (d)(2) permits a qualifying facility to enter into a contract
or other legally enforceable obligation to provide energy or capacity
over a specified term. Use of the term ‘legally enforceable
obligation’ is intended to prevent a utility from circumventing the
requirement that provides capacity credit for an eligible qualifying
facility merely by refusing to enter into a contract with the
qualifying facility.
45 Fed. Reg. 12214, 12224 (February 25, 1980).
FERC established the LEO concept but left it to the states to determine the specific
parameters required to establish a LEO. “FERC has given each state the authority to decide when
a LEO . . . arises in that state.” Power Resource Group, Inc. v. Public Utility Comm’n of Texas,

ORDER NO. 34715 4
422 F.3d 231, 239 (5th Cir. 2005); Idaho Power Company v. Idaho Pub. Util. Comm’n, 155 Idaho
780, 316 P.3d 1278, 1285 (2013). In Idaho, a QF can establish a LEO with an electric utility by
filing a meritorious complaint with the Commission that demonstrates the QF would have a signed
contract with the utility but for the intransigent conduct of the utility. “[B]efore a developer can
lock in a certain rate, there must be either a signed contract to sell at that rate or a meritorious
complaint alleging that the project is mature and that the developer has attempted and failed to
negotiate a contract with the utility; that is, there would be a contract but for the conduct of the
utility.” Rosebud Enterprises, Inc. v. Idaho Public Utilities Comm’n, 131 Idaho 1 (1997); see also
A.W. Brown Co., Inc. v. Idaho Power Co., 121 Idaho 812, 815 (1992) (stating, “[B]efore a QF can
lock-in a certain rate, there must be a signed contract to sell at that rate or a meritorious complaint
alleging that the project was mature and that the developer had attempted, and failed, to negotiate
a contract with the utility.”). Because there is no duly executed contract between Black Mesa and
Idaho Power, the question is whether Black Mesa filed a meritorious complaint with the
Commission establishing that the project is mature and there would be a contract but for the
conduct of the utility.
Schedule 73 details the contracting procedures and timelines Idaho Power and QFs
must abide by when negotiating PURPA Energy Sales Agreements (“ESA” or “ESAs”). In
establishing Schedule 73, the Commission stated: “The intent of creating rules and timelines to
guide the negotiations process for PURPA projects . . . is to create more certainty for both parties,
to ensure that both parties are bargaining in good faith, and to prevent avoided cost rates from
becoming stale.” Order No. 33197 at 5.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-501, -502
and -503. The Commission is empowered to investigate rates, charges, rules, regulations,
practices, and contracts of public utilities and to determine whether they are just, reasonable,
preferential, discriminatory, or in violation of any provision of law, and to fix the same by
order. Idaho Code §§ 61-502 and 61-503. The Commission has the authority to determine the
merits of any complaint “setting forth any act or thing done or omitted to be done by any public
utility including any rule, regulation or charge heretofore established or fixed by or for any public
utility, in violation, or claimed to be in violation of any provision of law or of any order or rule of
the commission[.]” Idaho Code § 61-612. The Commission determines the procedure to process

ORDER NO. 34715 5
formal complaints. IDAPA 31.01.01.054. In addition, the Commission has authority under
PURPA and FERC regulations to set avoided costs, to order electric utilities to enter into fixed-
term obligations for the purchase of energy from QFs, and to implement FERC rules. The
Commission may enter any final order consistent with its authority under Title 61 and PURPA.
After reviewing the filings to date, the Commission believes the record would benefit
from further development. We therefore deny Idaho Power’s Motion to Dismiss and establish
briefing deadlines for the parties. Doing so gives the parties full opportunity to highlight pertinent
facts and make arguments about how the facts apply to the legal standard for creating a LEO.
O R D E R
IT IS HEREBY ORDERED that Idaho Power’s Motion to Dismiss is denied.
IT IS FURTHER ORDERED that Black Mesa will submit its brief on the merits by
August 6, 2020. Idaho Power will submit its reply brief by September 3, 2020.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 10th
day of July 2020.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Diane M. Hanian
Commission Secretary

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