20210317Final_Order_No_34957.pdf

ORDER NO. 34957 1

Office of the Secretary
Service Date
March 17, 2021

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

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

ORDER NO. 34957

On March 17, 2020, Black Mesa Energy, LLC, (“Black Mesa”) filed a formal
complaint against Idaho Power Company (“Idaho Power”) asserting that Black Mesa had formed
two legally enforceable obligations (“LEO” or “LEOs”) that require Idaho Power to buy the energy
from Black Mesa’s Qualifying Facilities (“QF” or “QFs”) pursuant to the Public Utility Regulatory
Policies Act of 1978 (“PURPA”). Black Mesa asserted each LEO commits Idaho Power to buy
the net output of Black Mesa’s QFs for 20 years at the published avoided cost rates for “Other”
facilities approved by the Idaho Public Utilities Commission (“IPUC”) and in effect on the date of
its complaint. Black Mesa Formal Complaint at 1. Specifically, Black Mesa asserted its QFs are
eligible for “the published, non-levelized, non-fueled avoided cost rates for ‘Other’ facilities.” Id.
at 8.
The parties were given the opportunity to brief the issues. Order Nos. 34663, 34715,
34747. Now, having reviewed the record, we deny Black Mesa’s claim that it established a LEO.
BACKGROUND
PURPA “established a program of cooperative federalism that allows the States, within
limits established by federal minimum standards, to enact and administer their own regulatory
programs, structured to meet their own particular needs.” Idaho Power v. Idaho Public Utilities
Comm’n, 155 Idaho 780, 782 (2013) [hereinafter Grouse Creek] citing Federal Energy Regulatory
Comm’n v. Mississippi, 456 U.S. 742, 767 (1982). PURPA requires electric utilities to buy energy
and capacity from QFs (the “must-purchase obligation”). 18 C.F.R. § 292.303(a). QFs are
independent power producers that meet federally established fuel and size requirements and have
filed a notice of self-certification with, or been certified by, the Federal Energy Regulatory
Commission (“FERC”). 18 C.F.R. § 292.203(a). PURPA caps a QF’s maximum size at 80 MW.
16 U.S.C. § 824a-3(a); see also 18 C.F.R. § 292.204(a). The “primary energy source of the [QF]

ORDER NO. 34957 2
must be biomass, waste, renewable resources, geothermal resources, or any combination thereof,
and 75 percent or more of the total energy input must be from these sources.” 18 C.F.R. §
292.204(b). Electric utilities must buy the energy and capacity produced by QFs at the utility’s
incremental (marginal) cost of energy, which is referred to in the regulations as the “avoided cost.”
16 U.S.C. § 824a-3(b), (d); 18 C.F.R. § 292.304(a). It is the price the utility would pay for energy
or capacity but for its purchase from the QF.
FERC requires states to offer standard (also called “published”) avoided cost rates for
QFs that have a design capacity of 100 kW or less. 18 C.F.R. § 292.304(c)(1). FERC gives states
the discretion to offer standard rates for QFs with a design capacity above 100 kW. 18 C.F.R. §
292.304(c)(2). The IPUC established a project eligibility cap of 100 kW for wind and solar QFs.
Order Nos. 32176 at 9, Case No. GNR-E-10-04; 32697 at 13, Case No. GNR-E-11-03. Other
types of resources have a project eligibility cap set at 10 average MW (“aMW”), calculated based
on the QF’s output over a month. See Order Nos. 32176 at 9; 32697 at 14. QFs below the project
eligibility cap are eligible for avoided cost rates calculated using the surrogate avoided resource
method (“SAR Method”). See e.g., Order No. 32697 at 7-8. The SAR Method assumes Idaho
Power’s marginal resource is always a hypothetical combined cycle combustion turbine (“CCCT”)
natural gas plant and calculates the costs to build the hypothetical CCCT, fuel it, and pay the
operation and maintenance costs necessary to keep the plant in working order, then converts these
costs into rates. Id.
QFs above the project eligibility cap are eligible for avoided cost rates calculated using
the incremental cost integrated resource plan method (“IRP Method” or “negotiated rates”). See
id. at 17. The IRP Method calculates the marginal value of energy on Idaho Power’s system on
an hourly basis using Idaho Power’s preferred portfolio of resources acknowledged in its most
recent Integrated Resource Plan (“IRP”). Idaho Power’s preferred portfolio of resources consists
of Idaho Power’s actual owned resources, resources under contract, and resources Idaho Power
forecasts adding to or retiring from its system over the IRP’s 20-year planning horizon. A
forecasted generation profile specific to the QF is then applied to the IRP Method model to
determine the marginal costs that the QF would cause Idaho Power to avoid. See id. at 20-21. The
marginal costs, as determined by the IRP Method model, are the starting point of negotiations
between the QF and the utility, allowing the parties to adjust for any unique operational

ORDER NO. 34957 3
characteristics of the QF, such as dispatchability, that might allow the utility to offset more or less
costs. See Order No. 32697 at 2.
QFs below the project eligibility cap are eligible for 20-year contracts and QFs above
the project eligibility cap are eligible for two-year contracts. Order No. 33357 at 25, Case No.
IPC-E-15-01. In reducing the contract term for projects above the project eligibility cap, the IPUC
determined that the first capacity deficit date, beyond which the QF is eligible for capacity
payments, is to be determined when the QF enters its initial IRP Method contract. Id. “As long
as the QF renews its contract and continuously sells power to the utility, the QF is entitled to
capacity based on the capacity deficiency date established at the time of its initial contract.” Id. at
25-26. This allows the QF to receive capacity payments when the QF offsets the utility’s need for
capacity while ensuring ratepayers do not pay for a commodity they are not receiving.1 The
utility’s first capacity deficit date is determined in a proceeding following Commission
acknowledgment of the utility’s IRP. E.g., Order No. 34649 at 4, IPC-E-19-20.
In establishing a different project eligibility cap for wind and solar QFs, the IPUC
determined that wind and solar QFs are intermittent resources with unique characteristics that
allow large QFs to disaggregate into smaller QFs to either take advantage of the FERC-established
project size threshold of 80 MW or the state-established project eligibility cap. Order No. 32697
at 13. To deter disaggregation and hold ratepayers harmless, the IPUC established a project
eligibility cap of 100 kW for wind and solar QFs. Id. at 13-14. PURPA requires avoided cost
rates to be “just and reasonable to the electric consumer of the electric utility and in the public
interest” to “[n]ot discriminate against [QFs]” and the electric utility not “pay more than the
avoided costs for purchases.” 18 C.F.R. § 292.304(a). The IPUC has recognized that the IRP
Method more accurately values the energy and capacity produced by QFs. E.g., Order No. 32176
at 10 (stating, “We believe that the IRP Methodology appropriately assesses when the QF is
capable of delivering its resources against when the utility is most in need of such resources. The
resultant pricing is reflective of the value of QF energy to the utility.”).

1A utility must only purchase capacity from a QF when the utility is capacity deficient. See City of Ketchikan et al.
94 FERC ¶ 61293 (March 15, 2001) stating “[A]n avoided cost rate need not include capacity unless the QF purchase
will permit the purchasing utility to avoid building or buying future capacity. Thus, while utilities may have an
obligation under PURPA to purchase from a QF, that obligation does not require a utility to pay for capacity that it
does not need.”

ORDER NO. 34957 4
The LEO concept was created by FERC in its regulations implementing PURPA. At
the time Black Mesa’s purported cause of action arose, the LEO concept was found in 18 C.F.R.
§ 292.304(d),2 which stated,
Purchases ‘as available’ or pursuant to a [LEO]. Each [QF] shall
have the option either:
(1) To provide energy as the [QF] determines such energy to be
available for such purchases, in which case the rates for such
purchases shall be based on the purchasing utility’s avoided costs
calculated at the time of delivery; or
(2) To provide energy or capacity pursuant to a [LEO] for the delivery
of energy or capacity over a specified term, in which case the rates
for such purchases shall, at the option of the [QF] exercised at 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). In creating the concept, FERC stated,
Paragraph (d)(2) permits a [QF] to enter into a contract or other
[LEO] to provide energy or capacity over a specified term. Use of
the term ‘[LEO]’ is intended to prevent a utility from circumventing
the requirement that provides capacity credit for an eligible [QF]
merely by refusing to enter into a contract with the [QF]. . . . The
Commission intends that rates for purchases be based, at the option
of the [QF], on either the avoided costs at the time of delivery or the
avoided costs calculated at the time the obligation is incurred. This
change enables a [QF] to establish a fixed contract price for its
energy and capacity at the outset of its obligation or to receive the
avoided costs determined at the time of delivery.
45 Fed. Reg. 12214, 12224 (Feb. 25, 1980). The LEO “is FERC’s response to the reluctance of
traditional electric utilities to purchase power from nontraditional electric generation facilities, a
problem identified by Congress which could hinder the development of such nontraditional

2 FERC amended 18 C.F.R. § 292.304 by Order 872-A, 173 FERC ¶ 61,158, 85 Fed. Reg. 86656 (December 30,
2020), which became effective on February 16, 2021. 18 C.F.R. § 292.304(d) is now 18 C.F.R. § 292.304(d)(1).
Other LEO revisions include: the addition of 18 C.F.R. § 292.304(d)(1)(iii), which states, “The rate for delivery of
energy calculated at the time the obligation is incurred may be based on estimates of the present value of the stream
of revenue flows of future locational marginal prices, or Competitive Prices during the anticipated period of delivery.”
FERC also added 18 C.F.R. § 292.304(d)(3), which states, “A [QF] must demonstrate commercial viability and
financial commitment to construct its facility pursuant to criteria determined by the state regulatory authority or
nonregulated electric utility as a prerequisite to a [QF] obtaining a [LEO]. Such criteria must be objective and
reasonable.” Because these regulatory amendments were made after Black Mesa’s purported cause of action arose,
they do not apply to the analysis in this case.

ORDER NO. 34957 5
facilities.” Power Resource Group, Inc. v. Public Utility Comm’n of Texas, 422 F.3d 231, 238
(5th Cir. 2005). “According to the FERC, it is up to the State, not [FERC], to determine the specific
parameters of individual QF power purchase agreements, including the date at which a [LEO] is
incurred under State law.” Rosebud Enterprises v. Idaho Public Utilities Comm’n, 128 Idaho 609,
623-24 (1996) citing W. Penn Power Co., 71 FERC ¶ 61,153, 61,495 (May 8, 1995); see also
Power Resource Group, 422 F.3d at 238.
The Idaho Supreme Court has reviewed IPUC determinations on LEOs at least five
times, and on each occasion the Court upheld the IPUC’s determination. Four times, the Court
upheld the IPUC’s determination that the QF had not established a LEO. Empire Lumber Co. v.
Washington Water Power Co., 114 Idaho 191 (1987) [hereinafter Empire Lumber]; A.W. Brown
Co., Inc. v. Idaho Power Co., 121 Idaho 812 (1992) [hereinafter A.W. Brown]; Rosebud
Enterprises v. Idaho Public Utilities Comm’n, 131 Idaho 1 (1997); Grouse Creek, 155 Idaho 780
(2013).
On one occasion, the Court upheld the IPUC’s determination that the QF had
established a LEO. The Court found,
The IPUC recognized that [the QF] was delayed in its efforts to
determine project viability by [the utility]. The IPUC’s effort to
correct the effect of this delay is within its authority. The IPUC
decision is not a final determination of avoided costs, but puts [the
QF] in the position of determining the viability of its project using
rates that reflect the time frame [the QF] should have been able to
proceed but for the delays caused by [the utility].
Rosebud Enterprises, Inc. v. Idaho Public Utilities Comm’n, 128 Idaho 609 (1996).
Following the most recent LEO litigation, Grouse Creek, the IPUC approved Idaho
Power’s Schedule 73—Cogeneration and Small Power Production Schedule – Idaho (“Schedule
73”). Order No. 33197, Case No. IPC-E-14-24. Schedule 73 sets forth the contracting procedures,
timelines, and conditions for a QF to obtain an Energy Sales Agreement (“ESA”) from Idaho
Power.3 In approving Schedule 73, the IPUC stated, “The intent of creating rules and timelines to
guide the negotiations process for PURPA projects, as discussed in great depth through the
workshops, is to create more certainty for both parties, to ensure that both parties are bargaining

3 An ESA is interchangeably referred to in this docket as a “contract” or as a “Power Purchase Agreement” or
“PPA”.

ORDER NO. 34957 6
in good faith, and to prevent avoided cost rates from becoming stale.” Order No. 33197 at 5 citing
Order No. 33048 at 5-6, Case No. AVU-E-14-03. Schedule 73 provides,
Prices and other terms and conditions will become final and binding
on the parties under only two conditions:
i. The prices and other terms contained in an ESA shall
become final and binding upon full execution of such ESA by both
parties and approval by the Commission, or

ii. The applicable prices that would apply at the time a
complaint is filed by a [QF] with the Commission shall be final and
binding upon approval of such prices by the Commission and a final
non-appealable determination by the Commission that:

a) a ‘[LEO]’ has arisen and, but for the conduct of
[Idaho Power], there would be a contract, and
b) the [QF] can deliver its electrical output within 365
days of such determination.
Idaho Power Schedule 73-5(1)(d).
In IPC-E-17-01, Idaho Power petitioned the IPUC for a declaratory order to determine
the proper eligibility cap for several battery storage projects, including Black Mesa. The IPUC
determined that the project eligibility cap for the battery storage QFs at issue was to be determined
based on the primary energy source that charged the batteries. The IPUC based its decision on its
interpretation of Luz Development and Finance Corporation, 51 FERC ¶ 61,078 (1990), a
declaratory order issued by FERC.
FERC confirmed that energy storage facilities are not renewable
resources/small power production facilities per se. [Luz at 61,171].
Electric input is required to produce electric output from a storage
facility. Id. at 61,172. For this reason, in order to qualify as a
PURPA resource, the primary energy source behind the battery
storage must be considered. We must, then, look to Franklin’s and
Black Mesa’s primary energy sources in order to determine their
eligibility under PURPA. The primary energy source for Franklin
and Black Mesa is solar generation. Moreover, the energy
generation output profiles for the battery storage facilities are a
direct reflection of the solar generation that operates as the primary
energy source for the battery storage facilities. [Citation omitted].
Accordingly, we find it appropriate to base Franklin’s and Black
Mesa’s eligibility under PURPA on its primary energy source –
solar.

ORDER NO. 34957 7
Order No. 33785 at 11-12.
The IPUC also denied Franklin Energy’s claim that it had established LEOs for its four
QFs. Id. at 12. The IPUC determined, “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 [LEO].” Id. (emphasis in original).
Franklin Energy requested reconsideration of Order No. 33785. The IPUC denied
reconsideration in Order No. 33858 and Franklin Energy appealed the IPUC’s decision pursuant
to 16 U.S.C. §824a-3(h)(2)(B). FERC declined to bring an enforcement action against the IPUC.
Franklin Energy Storage One LLC, et al., 162 FERC ¶ 61110 (Feb. 15, 2018). Franklin Energy
then sued the IPUC in the United States District Court for the District of Idaho.
On January 17, 2020, the Idaho District Court granted in part and denied in part
Franklin Energy’s motion for summary judgment. The Idaho District Court permanently enjoined
the IPUC from
enforcing or applying either [Order No. 33785 or Order No. 33858]
to [Franklin Energy’s] facilities as if such facilities are classified as
something other than energy storage QFs, to include but not be
limited to classifying Plaintiffs’ facilities as if they are ‘solar QFs’
under the IPUC’s prior implementation plan. Defendants are further
permanently enjoined 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.
2020 WL 265278 at *18. The District Court of Idaho denied Franklin Energy’s motion for
summary judgment in part. “The Court specifically declines 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.
On January 21, 2020, Idaho Power petitioned the IPUC to determine the avoided cost
rates and contract terms applicable to energy storage QFs in Idaho. On October 2, 2020, the IPUC
determined that energy storage QFs are capable of easy disaggregation and the IRP Method is
superior to the SAR Method in calculating avoided cost rates and recognizing project-specific

ORDER NO. 34957 8
attributes and therefore the IPUC established a 100 kW project eligibility cap for energy storage
QFs. Order No. 34794 at 11, IPC-E-20-02.4
IPUC JURISDICTION
The IPUC has jurisdiction over this matter under Idaho Code §§ 61-501, -502 and -
503. The IPUC 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. In addition, the IPUC 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 IPUC may enter any final order consistent
with its authority under Title 61 and PURPA.
FINDINGS OF FACT
Black Mesa 1 and Black Mesa 2 are each QFs self-certified with FERC. Declaration
of Brian Lynch in Support of Black Mesa’s Motion for Summary Judgment at 3. Each QF is
designed to have a net output of 20 MWac and be operated to generate less than 10 aMW on a
monthly basis. Id. Black Mesa 1 and Black Mesa 2 propose to use a common interconnection to
Idaho Power’s electrical system and separate the electric generating equipment by at least one
mile. Id. On each FERC Form 556, Black Mesa selected the box “Other renewable resource” and
described each QF as an “energy storage system [QF].” Id.
Black Mesa submitted a Schedule 73 application to Idaho Power for its original QF
(now Black Mesa 1) in February 2017. Black Mesa Formal Complaint at 7. In response, Idaho
Power informed Black Mesa that it had “filed an application to the [IPUC] requesting a declaratory
order that determines the contract term and avoided cost pricing methodology for which your
proposed project may be eligible.” Black Mesa Formal Complaint at 7. Idaho Power’s petition
for declaratory order initiated IPC-E-17-01. Black Mesa did not appeal the IPUC’s decision in
IPC-E-17-01. See Black Mesa Formal Complaint at 8.
On January 17, 2020, the Idaho District Court granted Franklin Energy’s motion for
summary judgment in part and denied Franklin Energy’s motion for summary judgment in part.

4 This too was after Black Mesa’s purported cause of action arose and, therefore, we do not apply the outcome of IPC-
E-20-02 to this case.

ORDER NO. 34957 9
On January 18, 2020, Black Mesa submitted Schedule 73 applications to Idaho Power
for Black Mesa 1 and Black Mesa 2 asserting it was entitled to 20-year contracts and published
non-levelized, non-fueled avoided cost rates for “Other” facilities. Black Mesa Formal Complaint
at 8.
On January 21, 2020, Idaho Power petitioned the IPUC to establish avoided cost rates
and contract terms applicable to PURPA energy storage QFs. Idaho Power Answer to Motion for
Summary Judgment at 6. This petition initiated IPC-E-20-02. Id. at 6-7. Black Mesa did not
intervene.
On January 24, 2020, Black Mesa submitted unilaterally signed ESAs to Idaho Power
with Black Mesa’s preferred terms. Black Mesa Formal Complaint at 9; Exh. 6. Idaho Power did
not sign the ESAs sent by Black Mesa. The proposed ESAs contained non-levelized, non-fueled
avoided cost rates for Other projects published June 1, 2019. Id. Exh. 6, p. 48, 96. The proposed
ESAs were for a 20 year term. Id. at 15, 63. The ESAs did not contain liquid security deposit
provisions. See Commission Staff Brief at 9; Black Mesa Formal Complaint Exh. 6. The ESAs
listed the Commercial Operation Date for Black Mesa 1 and Black Mesa 2 as June 1, 2023. Black
Mesa Formal Complaint, Exh. 6 p. 39, 87. Despite the distant Commercial Operation Date
included in the ESAs, Black Mesa later alleged it could produce energy within 365 days.
Declaration of Brian Lynch at ¶ 28.
On February 3, 2020, Idaho Power responded to Black Mesa’s Schedule 73
applications. Idaho Power Answer and Motion to Dismiss, Att. 1, Idaho Power Letter Dated Feb.
3, 2020. Idaho Power informed Black Mesa that Idaho Power did not agree that Black Mesa’s
QFs were entitled to 20-year contracts at published rates, and informed Black Mesa that Idaho
Power had petitioned the IPUC to determine the proper avoided cost rates and contract terms for
energy storage QFs. Id. Idaho Power identified two deficiencies with Black Mesa’s Schedule 73
applications. Idaho Power stated, “The schedule of estimated deliveries provided with your
Applications appear to have the same output shape as that of a solar project.” Id. Idaho Power
quoted Black Mesa’s FERC Form 556 filing included with its Schedule 73 application and stated,
However, based on the generation profile submitted with your
Applications, the battery storage project will be capable of
producing on average 91-95% of its nameplate capacity each hour
over a continuous 7-hour period in July. In addition, there are
several days identified in July that the battery storage project will be
capable of providing its full output (20 MWac) over continuous 9-

ORDER NO. 34957 10
hour periods. Please provide an hourly generation profile consistent
with the capability of your proposed battery storage facility that
represents the generation output you intend to deliver.
Id.
On February 5, 2020, Black Mesa responded to Idaho Power. Supplemental
Declaration of Brian Lynch, Exh. 1, Brian Lynch Letter Dated Feb. 4. 2020. Black Mesa replied
to Idaho Power’s first assertion of deficiency by stating: “Although your observation in this regard
may be accurate, it does not allege (nor even infer) a deficiency. Therefore, we have no choice
but to treat this observation for what it is, a mere observation and not an assertion of a deficiency.”
Id. Black Mesa responded to Idaho Power’s second assertion of deficiency by stating: “Your
request suggests that you have rejected (or at best, ignored) our submission of the 8,760 hourly
spreadsheets submitted with our Schedule 73 applications. Those spreadsheets do contain our
‘hourly generation profiles that are consistent with the capability of our proposed battery storage
facilities that we intend to deliver.” Id.
Idaho Power responded to Black Mesa’s February 5, 2020 letter on February 18, 2020.
Idaho Power Answer and Motion to Dismiss, Att. 1, E-Mail Dated Feb. 18, 2020. Idaho Power
reiterated that Black Mesa’s applications contained inaccurate generation profiles and reiterated
its disagreement that Black Mesa was entitled to published avoided cost rates and a 20-year
contract term. Id.
In Black Mesa’s 2020 application to Idaho Power for Black Mesa 1 and Black Mesa 2,
Black Mesa stated its QFs “will provide scheduled, dispatchable power output in forward looking
time intervals ranging from 5-240 minutes pending final system design.” Idaho Power Answer
and Motion to Dismiss, Att. 1, E-Mail From Brian Lynch Dated Jan. 18, 2020. The FERC Form
556 included with the Schedule 73 applications for Black Mesa 1 and Black Mesa 2 listed the
begin operation date as December 1, 2022. Id. The Schedule 73 applications for Black Mesa 1
and Black Mesa 2 listed the Commercial Operation Date as June 1, 2023. Id. Black Mesa
described Black Mesa 1 in its FERC Form 556 as follows:
The project consists of an energy storage system [QF] providing
scheduled and dispatchable electricity in forward-looking time
blocks. The energy storage system that comprises the energy
storage [QF] is designed to, and will, receive 100% of its energy
input from a combination of renewable energy sources such as wind,
solar, biogas, biomass, etc. The current initial design utilizes solar
photovoltaic (PV) modules mounted to single-axis trackers to

ORDER NO. 34957 11
provide the electric energy input to the [QF]’s battery storage
system. The PV modules are planned to be connected in
series/parallel combinations to solar inverters, rated approximately
2.5 MWac each, (subject to change). The proposed electric energy
storage [QF] will consist of an electro-chemical battery and will
have a maximum power output capacity of 20 MWac for a sustained
time period of 5 – 240 minutes. The Facility will consist of an
alternating current (AC) to direct current (DC) control system. The
[QF] will be utilized to provide the purchasing utility with pre-
scheduled and dispatchable AC energy within pre-determined time
blocks. The sole source of electric power and energy provided to
the purchasing utility will be the electro-chemical reaction giving
rise to the discharge of electric power and energy by the battery. In
turn, the sole direct source of energy input provided to the battery
Facility will be, as described above, renewable sources.
Id. Black Mesa described Black Mesa 2 in the same manner in its FERC Form 556 but stated,
“The proposed electric energy storage [QF] will consist of an electro-chemical battery and will
have a maximum power output capacity of 20 MWac for a sustained time period of 5 – 60
minutes.” Id. Black Mesa described its resource for both QFs as “The energy storage (battery)
system will take its input from 100% renewable energy sources such as wind, solar, biogas,
biomass, etc. The system is designed with flexibility to most efficiently utilize the resources
available at the site, at the present time as well as in the future.” Id.
On March 17, 2020, Black Mesa filed a formal complaint with this Commission.
On July 29, 2020, Black Mesa filed a Motion to Stay Briefing Schedule. Black Mesa
stated, “The parties are currently engaged in discussions that could obviate the need for further
briefing.” The IPUC suspended the briefing schedule to allow the parties to negotiate. Order No.
34747. On November 13, 2020, Black Mesa submitted a Motion to Reinstate Briefing Schedule.
Black Mesa stated,
Idaho Power Company and Black Mesa have utilized the additional
time provided by the Commission’s stay of the original briefing
schedule to engage in settlement discussions. Those discussions
have now concluded with no definitive resolution, therefore Idaho
Power and Black Mesa respectfully, and jointly, request the
Commission reinstate a briefing schedule in this matter.
LEGAL STANDARDS
Historically, the IPUC has analyzed numerous factors in determining whether a QF has
established a LEO. The general test, as summarized by the Court is:

ORDER NO. 34957 12
IPUC has authority, under state and federal law, to require that
before 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, 6 (1997) citing A.W.
Brown, 121 Idaho at 815 (1992). Because there is no contract signed by both parties, the question
is whether Black Mesa submitted a meritorious complaint.
In Idaho, a LEO requires a commitment made by the QF that is reciprocal to the utility’s
must-purchase obligation under 18 C.F.R. § 292.303(a). In A.W. Brown, the Court upheld the
IPUC’s determination that the QF had not reciprocally committed to sell to the utility, and therefore
had not established a LEO. The Court cited the IPUC’s finding,
Taken together, the implementing regulations and comments appear
to mean that a [QF] is entitled to receive avoided cost rates if it
obligates itself to the delivery of energy or capacity and if that
obligation is legally enforceable against the [QF]. This is the
essence of the relationship between a [QF] and the utility: the utility
must pay avoided cost rates, but in return the utility is entitled to
know that the facility is obligated to deliver capacity and energy and
that obligation is legally enforceable.
A.W. Brown, 121 Idaho 812, 818 (1992) citing Order No. 23271, Case No. IPC-E-88-9. “While a
QF is entitled to a PURPA contract or a [LEO], its offer to sell power to a utility must be firm,
binding, and unconditional.” Order No. 33419 at 16 citing Order No. 32974; Whitehall Wind v.
Montana Public Service Commission, 347 P.3d 1277 (Mont. 2015). The QF must be “ready,
willing and able to sign a contract with [the utility].” Empire Lumber, 114 Idaho at 193. The
Court has also distinguished a LEO and an option.
We deem it clear that the intent of PURPA is not to require an
electric utility company to enter into a contract to purchase electrical
power from an entity which in essence only desires to obtain an
option to sell some amount of electrical power to be generated at
some plant of unknown size or capacity. Such an entity must first
become a QF, and in the instant case any concrete facts relating to
the proposed generation facility were not known by [the utility]
during the negotiation process, and such facts, as were defined,
became known only following the filing of the complaint with the
[IPUC].
Empire Lumber, 114 Idaho at 194.

ORDER NO. 34957 13
In Grouse Creek, the Court upheld the IPUC’s determination that a LEO had not been
formed stating,
Considering FERC’s declared purpose for adopting the concept of a
[LEO] and the broad discretion that IPUC has in implementing
FERC’s rules and in determining the requirements for a [LEO], we
again affirm IPUC’s requirement that a finding of a [LEO] requires
a showing that there would have been a contract but for the actions
of the utility.
Grouse Creek, 155 Idaho at 787.
CONCLUSIONS OF LAW
Based on our review of the record and the legal standards, we find that Black Mesa did
not establish a LEO with Idaho Power for either Black Mesa 1 or Black Mesa 2. Black Mesa did
not establish that either QF would have a contract on IPUC-approved terms but for the actions of
the utility. Relatedly, Black Mesa did not demonstrate that its QFs were sufficiently mature.
Within the jurisdictional framework of PURPA, FERC is tasked with determining
whether a facility is a QF. This is a yes or no determination. FERC does not determine which
avoided cost rates the QF is eligible to receive. PURPA and Title 61 of Idaho Code grant the IPUC
the exclusive jurisdiction to determine eligibility for contract terms such as avoided cost rates and
duration. See 16 U.S.C. § 824a-3(f); Idaho Code § 61-502; Afton Energy, Inc. v. Idaho Power Co.,
107 Idaho 781, 785-86 (1984). State utilities commissions “play the primary role in calculating
avoided costs and overseeing the contractual relationship between QFs and utilities operating
under the regulations promulgated by [FERC].” Independent Energy Producers Ass’n, Inc. v.
California Public Utilities Comm’n, 36 F.3d 848, 856 (9th Cir. 1994).
In this instance, the IPUC had not established the project eligibility cap for energy
storage QFs. Idaho Power sought clarification on which project eligibility cap applied to the QFs.
The project eligibility cap, under the IPUC’s implementation of PURPA, determines whether the
QF is eligible for IRP Method rates and two-year contracts or SAR Method rates and 20-year
contracts. Idaho Power understood that it is required to purchase the energy and capacity from the
QF, and that the QF was entitled to have the rates determined at the outset of the contract or LEO
under the then-current version of 18 C.F.R. § 292.304(d)(2)(ii). Idaho Power did not seek to evade
this duty, rather Idaho Power only sought clarification on the appropriate method of calculating
the rates and term of the contract. Some showing of bad faith or intransigence by Idaho Power is
necessary to deem Black Mesa’s complaint meritorious and, therefore, grant a LEO. The

ORDER NO. 34957 14
substantial and competent evidence provided by the parties to form this record shows no such bad
faith. Utilities subject to PURPA have a duty not only to contract with and accept the energy
produced by a QF but also to ensure that ratepayers are not harmed by the purchase. 18 C.F.R. §
292.304(a). Idaho Power was not being intransigent or engaging in delay tactics. To the contrary,
Idaho Power was fulfilling its obligations under the Act.
Idaho Power’s assertions of deficiency to Black Mesa’s Schedule 73 applications are
further evidence of Idaho Power’s continued engagement with Black Mesa. Schedule 73 requires
Idaho Power to notify the QF within 10 business days if Idaho Power determines that the QF has
not provided sufficient information. Schedule 73-5, 1(b). Idaho Power did so. Schedule 73 also
requires that Idaho Power be in “satisfactory receipt” of information before Idaho Power provides
a QF with an indicative pricing proposal. Idaho Power determined it was not in satisfactory receipt
of pertinent information and requested additional information. Black Mesa’s responses did not
address Idaho Power’s stated concerns in any meaningful way.
Instead of addressing Idaho Power’s concerns, Black Mesa unilaterally executed ESAs
with published avoided cost rates and 20-year terms and sent the ESAs to Idaho Power for
countersignature. The take-it-or-leave-it approach employed by Black Mesa, without negotiating
in good faith to address the utility’s concerns, shows that Black Mesa was not ready, willing, and
able to enter a contract on terms that would be approved by the Commission. See Empire Lumber,
114 Idaho at 193. Therefore, Idaho Power did not have any assurance that Black Mesa was able
to commit to the type of reciprocal obligation required by Idaho precedent to form a LEO. See
A.W. Brown, 121 Idaho at 818. Even beyond the Company’s attempt to address deficiencies in
the Schedule 73 applications, the record further reflects Idaho Power’s willingness to negotiate
with Black Mesa, as the parties jointly suspended the briefing schedule to allow further
negotiations. See Order No. 34747 (granting the Joint Motion to Stay Briefing Schedule submitted
by Black Mesa).
Black Mesa has consistently declined to provide Idaho Power with pertinent
information about its QFs, including the technology it intends to use to generate and store
electricity. Similar to Empire Lumber, we find that “concrete facts relating to the proposed
generation facility were not known by [the utility] during the negotiation process, and such facts,
as were defined, became known only following the filing of the complaint with the [IPUC].”
Empire Lumber, 114 Idaho at 194. Black Mesa never committed to a resource type to generate

ORDER NO. 34957 15
the electricity that would charge the battery, nor did it ever commit to a battery technology to
discharge the energy. While this may be sufficient to self-certify as a QF (a FERC determination,
not ours) it is not sufficient to establish a LEO under decades of Idaho precedent. Black Mesa
repeatedly stated that its project designs were “initial,” “subject to change” or “pending final
system design.” It never described its battery technology as anything more than an “electro-
chemical” battery. In its Schedule 73 applications, Black Mesa stated, “The proposed electric
energy storage [QF] will consist of an electro-chemical battery and will have a maximum power
output capacity of 20 MWac for a sustained period of 5 – 240 minutes.” Formal Complaint, Exh.
1, Exh. 5. Five to 240 minutes is a large range. Additionally, for Black Mesa 2, there is a
discrepancy between what Black Mesa represented on its Schedule 73 application (where it listed
5-240 minutes) and on its FERC Form 556 (where it listed 5-60 minutes).
The Idaho Supreme Court has deemed it clear “that the intent of PURPA is not to
require an electric utility company to enter into a contract to purchase electrical power from an
entity which in essence only desires to obtain an option to sell some amount of electrical power to
be generated at some plant of unknown size or capacity.” Empire Lumber, 114 Idaho at 194.
Based on the facts before us, Black Mesa’s unilaterally executed ESAs and failure and/or
unwillingness to provide details of its QFs evidence an attempt to establish nothing more than an
option to sell energy to the utility at some later date.
The weight of the evidence supports the proposition that Black Mesa 1 and Black Mesa
2 were not sufficiently mature to establish a LEO. Black Mesa made contradictory statements
about the timing by which it could deliver energy to Idaho Power. In the unilaterally executed
ESAs Black Mesa sent to Idaho Power, by which Black Mesa purported to bind itself, Black Mesa
indicated that it could deliver energy by June 2023. Later, Black Mesa stated it could deliver
energy within one year of a final Commission determination. Given the vague descriptions of its
technology, we find the 2023 timeframe to be more plausible. Black Mesa also did not include
delay deposits in the ESAs it sent to Idaho Power that would compensate Idaho Power, and its
ratepayers, if Black Mesa did not meet the June 2023 online date and the utility had to cover the
shortfall of otherwise expected QF energy. This omission in the ESAs belies Black Mesa’s own
assessment of its projects’ maturity.
Black Mesa did not establish that it would have a contract but for the actions of Idaho
Power. Furthermore, Black Mesa refused to provide sufficient information to demonstrate that its

ORDER NO. 34957 16
QFs were mature. It was Black Mesa’s actions that prevented contract formation and its complaint
is not meritorious.
O R D E R
IT IS HEREBY ORDERED that Black Mesa’s formal complaint is denied for the
reasons described above.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 17th day
of March 2021.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\IPC-E-20-17\IPCE2017_final order_ej.docx