20210309Enel Green Power Comments.pdf

Gregory M. Adams (ISB No. 7454)
Peter J. Richardson (ISB No. 3195)
Richardson Adams, PLLC
515 N. 27tr Street
Boise,Idaho 83702
Telephone: [phone]
Fax: [phone]
[e-mail]
peter@richardsonadams. com
Attorneys for Enel Green Power North America, [nc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
WOOD HYDRO, LLC,)
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COMPLAINANT,CASE NO. IPC-E-20-28
vs.
CROSS.RESPONDENT ENEL GREEN
POWER NORTH AMERICA, INC.'S
COMMENTS REGARDING
SETTLEMENT STIPULATIONIDAHO POWER COMPANY,
RESPONDENT/CROSS.
COMPLAINANT,
vs.
ENEL GREEN POWERNORTH AMERICA,
INC.,
CROSS-RESPONDENT,
vs.
CENTRAL RTVERS POWER US, LLC,
CROSS-RESPONDENT.
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
IPC-E-20-28 _PAGE 1
In accordance with Order No. 34929 issued by the Idaho Public Utilities Commission
("IPUC" or "Commission"), Enel Green Power North America, Inc. ("Enel") hereby files its
Comments regarding the Settlement Stipulation submitted for consideration by the Commission in
this matter. As explained in Enel's Motion to Dismiss, Enel maintains that the Commission lacks
subject matter jurisdiction and reserves its right to renew such arguments should this litigation
proceed. Without waiving its jurisdictional objections, Enel submits these comments to provide
the Commission with a record of the nature of the contractual dispute at issue and the risks ffierent
for Idaho Power if the Settlement Stipulation is not finalized through approval by the Commission.
As explained below, Enel submits that the Settlement Stipulation is a reasonable resolution of the
underlying contractual dispute at issue and should be supported by the Commission.
I. BACKGROTJI\D
This case involves contractual disputes between Idaho Power and three separately owned
and operated hydroelectric qualiffing facilities ("QFs" or the "QF Parties") under the Public Utility
Regulatory Policies Act of 1978 ("PURPA"), each with its own 35-year Firm Energy Sales
Agreement ("FESA") and unique facts related to its dispute. Idaho Power claimed that it was
entitled to liquidated damages under the terms of the respective FESAs with each of the QF Parties.
According to Idaho Power's pleading filed with the Commission, each QF Party experienced a
generation shortfall, characterized by Idaho Power as a'opermanent curtailment" under each FESA,
and thus such permanent curtailment triggered payment of liquidated damages under the FESAs.
Idaho Power originally claimed that Mile 28 Hydro owed $1,163,125 (to be offset by 90%oto
$116,312 pursuant to a term of Mile 28's FESA if the QF resumed generation within one year).
Idaho Power's Answer and Cross Complaint at fl 15. Idaho Power originally claimed that Enel
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
IPC-E-20-28 _ PAGE 2
owed $4,059,472 for Rock Creek #2.1 Id. atl20. Idaho Power originally claimed that Central
Rivers owed $3,616,983 for Lowline #2. Id. atl26.
The damages claims presented by Idaho Power are premised on the theory that a permanent
curtailment in the latter years of a levelized-rate FESA results in the QF failing to "pay[] back
customers for the early years' overpayments." Id. at fl l. The Lump Sum Refund Payment table,
upon which Idaho Power relies in the Rock Creek #2 FESA to calculate liquidated damages,
provides a calculation for potential overpayment liability for the remainder of the FESA's term.
Id. at\fi 16-21. However, Rock Creek #2had already recorrmenced deliveries of energy to Idaho
Power before its cross complaint was even fied., id. at fl 19, and it appears the other two QFs have
also recommenced deliveries under their FESAs.
Enel and Central Rivers Power US, LLC each moved to dismiss this case. Both parties
asserted that the Commission lacks subject matter jurisdiction to award contractual damages or
otherwise adjudicate this contactual dispute.
While the motions to dismiss remained unresolved, the QF Parties and Idaho Power
reached a mutually acceptable resolution that would avoid further litigation. The QF Parties and
Idaho Power have agreed to settle the dispute through payments to Idaho Power in the following
amounts: $14,000 for Mile 28, $44,000 for Lowline #2, and$50,000 for Rock Creek#2. Settlement
t With respect to Rock Creek #2,Idaho Power's cross complaint brought a claim for damages against
Enel,allegingthattheRockCreek#2QFis"owned"byEnel. Id.,atp.1, l0-13. However,theRockCreek
#2 hydroelectric QF is owned and controlled by BP Hydro Associates, and the counter party to Idaho Power
under the Rock Creek #2 FESA is BP Hydro Associates. Id. at Attaclwtent No. 2 at Rock Creek#2 FESA,
Second Amendment Recitals. BP Hydro Associates is an Idaho general partnerchip, and at the time Idaho
Power filed the cross complaint in this matter, Enel Green Power North America, lnc. and CHI Idaho LLC
were the partners of BP Hydro Associates. In the interest of completeness, both Enel Green Power North
America, Inc. and BP Hydro Associates are parties to the Settlement Stipulation. At the present time, Enel
Green Power North America, Inc. has sold all of its interests in BP Hydro Associates. Accordingly, Enel
reserves the right to move to be dismissed as an improper party if the litigation moves forward.
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
TPC-E-20-28 _PAGE 3
Stipulation at fl 10. The Settlement Stipulation also clarifies each FESA's use of the term
"permanent curtailment" to "mean a failure to deliver Net Energy for the entire remaining term of
the FESA, and failure to deliver for a period of time less than the entire remaining term will not
be a permanent curtailment." Id. at \ ll. If approved by the Commission, the Sefflement
Stipulation would be "a full and complete settlement of all rights, claims, damages, enforcements,
objections, etc. arising from the facts presented in IPC-E-20-28." Id. atl12.
Any party may withdraw from the Settlement Stipulation if it is not approved by the
Commission. Id. atl14. With respect to Commission approval, the Settlement Stipulation states:
Idaho Power seeks to obtain Commission approval of the Settlement Stipulation as
a condition precedent to the Sefflement Stipulation's effectiveness; Mile 28, Rock
Creek #2, and. Lowline #2 have agreed to such condition precedent to the
effectiveness of the Settlement Stipulation, but in doing so and thus joining in this
Motion in support of Commission approval of the Settlement Stipulation, Rock
Creek #2 and Lowline #2 do not waive any objection to the Commission's subject
matter jurisdiction as challenged in the pending motions to dismiss discussed
herein.
Settlement Stipulation at fl l. This provision reflects the fact that Idaho Power desires to obtain
the Commission's approval of the Settlement Stipulation for its own ratemaking assurances as to
the reasonableness of the Settlement Stipulation, and that the QF Parties agreed to such condition
precedent to the sefflement's effectiveness without intending to waive jurisdictional objections.2
The Commission issued Order No. 34929 requesting comments in support or opposition to
the Settlement Stipulation. Enel now submits these comments in support of the Commission's
approval of the Settlement Stipulation.
2 In any event, it is well established that courts and administrative agencies cannot obtain subject
matter jurisdiction by waiver or agreement of the parties. H & V Engineers, Inc. v. Idaho State Bd. Of
Profl Eng'rs & Land Surveyors, ll3 Idaho 646, 648,747 P .2d 55, 57 (1987); 2 Am. Jur. 2d
Adrninistrative Law $ 283 (2004).
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
IPC-8.20.28 -PAGE 4
II. COMMENTS
The Settlement Stipulation is a reasonable resolution of this contractual dispute for Idaho
Power and its customers. While Enel takes no position on the contactual disputes between Idaho
Power and the Lowline #2 andMile 28, Idaho Power's claim for liquidated damages against Enel
with respect to Rock Creek #2 facility has many deficiencies and brings with it significant risks
for Idaho Power and its customers absent approval of the Settlement Stipulation.
With respect to Rock Creek #2,ldaho Power has claimed the $4,059,472 ndamages is due
under Article 2l .3 .l and Appendix D of the FESA, which Idaho Power characterizes as a liquidated
damages provision purportedly designed to repay Idaho Power for alleged overpayments for
deliveries made in the early years of the contact. Idaho Power's Answer and Cross Complaint at
flti l7-1S. There are several flaws with that damages claim.
If this case were litigated, the facts would demonstrate that Rock Creek #2 experienced an
unexpected equipment failure that caused the inability to safely operate the facility during Contract
Year 31 of the 35-year FESA. This forced outage was repaired at substantial expense, and the
facility is now expected to operate at normal levels for the remainder of the term of the FESA.
The first major flaw with Idaho Power's claim to damages under the Rock Creek #2 FESA
is that the FESA contains no provision for damages in the case of a temporary forced outage of the
sort that occurred in this case. The FESA's Article 21.3.1and Appendix D that Idaho Power cites
in its pleading have no application to such temporary outages. Article 21.3.1is triggered only if
the "seller permanently curtails in whole or in part its long-term average deliveries of the Net
Firm Energy amount specified in paragraph 6.3." Id. at Attachment No. 2, Rock Creek #2 FESA,
at g 21.3.1. Similarly, the table in Appendix D, upon which Idaho Power points to as the basis to
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
tPc-E-20-28 -PAGE 5
calculate lump sum payment forpermanent curtailment, calculates potential overpayment damages
as if the Seller walks away from the contract for the remainder of the term and permanently ceases
selling under the FESA's levelized rutes. Id. at Appendix D. But Idaho Power acknowledges the
temporary outage at Rock Creek #2 endedbefore Idaho Power even filed its cross complaint. ^See
id. at\ 19; see also id. at Affachment 12 (letter to Idaho Power explaining this fact). Thus, the
facts would show there was no permanent curtailment, and instead all that occurred was an
unexpected equipment failure that has been repaired. In other words, there was no violation of
Article 21.3.I or any other provision of the FESA, and Idaho Power's claim would be dismissed
on that basis alone.
Additionally, even if Rock Creek #2's FESA contained a damages provision for a reduction
in annual production in a single contract year (which it does not), the delay in bringing the facility
back online during Contract Year 31 was due to factors beyond the contol of the Seller, which
would support defenses against any damages recovery. The circumstances beyond the control of
the Seller included an unexpected equipment failure, delays in obtaining replacement equipment,
and then an intervening global pandemic that delayed efforts to place the facility back in service.
These types of events are typically excused under other contract provisions, such as the force
majeure provision in Article XVI of the FESA, and other excuse doctrines in contact law.
Similarly, if the case were litigated, Idaho Power would face the defense that Idaho Power
did not promptly exercise its alleged rights through a properly asserted notice of default. As with
most contracts, the FESA requires a written notice of default be delivered and provides the Seller
an opportunity to cure such default. Id. at Attachment No. 2, Rock Creek FESA, First Amendment,
at $ 21.2. However, despite being promptly informed of Rock Creek #2's outage, Idaho Power
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
IPC-E-20-28 _PAGE 6
did not provide any written notice of default or other objection for almost a year before claiming
$4,059,472 in damages for the first time in the days before the plant was brought back online. .Id.,
at Attachment 12 (letter explaining this fact). The failure to timely object provides a strong defense
under the FESA and basic equity principles.
Another major problem with Idaho Power's damages claim is that the contract provisions
it cites would constitute unlawfully punitive liquidated damages provisions, even if they could be
construed as Idaho Power alleged in its pleading. Under Idaho law, courts will enforce a liquidated
damages clause only "where the circumstances are such that accurate determination of the damages
would be difficult or impossible, and provided that the liquidated damages fixed by the contract
bear a reasonable relation to actual damages." Magic Valley Truck Brokers v. Meyer,l33 Idaho
110, 1 17, 982 P.zd, 945, 952 (Ct. App. 1999) (quoting Graves v. Cupic,75 Idaho 451, 456, 272
P.2d 1020,1023 (1954)). If the breaching party proves that "the damages specified in the contract
bear no reasonable relation to actual damages or that the liquidated damages are exorbitant and
unconscionable[,]" then the liquidated damages clause is unenforceable. Id.
In this case, the purported liquidated damages clause would not be enforceable if the case
were to be litigated to conclusion for multiple reasons. First, the liquidated damages alleged are
far out of proportion to any reasonable estimate of actual damages. The purported liquidated
damages of $4,059,472 derived from the FESA's Appendix D is calculated from an assumed
permanent curtailment for Contact Years 31 through 35 when in fact the outage was resolved
within a single year. Next, Idaho Power calculates the liquidated damages for overpayment based
on the estimated Annual Net Firm Energy of 14,073,550 MWh contained in the FESA, not based
on the lesser amount of Net Firm Energy actually delivered in the years of such alleged
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
wc-E-20-28 - PAGE 7
overpayment. In fact, the Rock Creek #2 facility has been paid for an annual average generation
of only 7,654,000 kWh. See Declaration of Randald Bartlett ISO of Enel's Motion to Dismiss at
fl 6. In other words, the alleged overpayment for delivery of 14,073,550 kWh in the early years of
the FESA never occurred because the facility only generated an annual average of approximately
half that amount. Thus, the purported liquidated damages are grossly inflated by relying on almost
twice the annual generation for which the alleged overpayment occurred and by relying on a non-
delivery period five times as long as actually occurred.
The purported liquidated damages provision also suffers from the problem that it bears no
relation to the replacement cost of power to Idaho Power during period of the outage at the Rock
Creek #2 facility. The result of the Rock Creek #2 facility's outage was that Idaho Power was
deprived of the right to purchase the facility's net energy at the FESA's price, which during the
period of the outage was: $37.41lIvIWh in March, April, and May; $50.04/Ivfwh in January,
February, October, November, and December; and $60.03/Ivtwh in June, July, August, and
September. See Declaration of Randald Bqrtlett ISO of Enel's Motion to Dismiss atlT . Because
Idaho Power was likely able to replace the shortfall from Rock Creek #2 at a cost equivalent to, or
less than, the price in the Rock Creek #2 FESA, there are likely no actual damages. This is yet
another reason why a court would hold the purported liquidated damages calculation far out of
proportion to the actual damages and thus unenforceable.
Further, liquidated damages are inappropriate at the outset because the actual damages
would be easily calculated through the costs of replacement power, which are readily available.
See Magic Yalley Truck Brokers,l33Idaho at 117 (liquidated damages only available if "accurate
determination of the damages would be difficult or impossible"). Thus, the liquidated damages
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
IPC-E-20-28 _PAGE 8
provision would be unenforceable for the separate reason that actual damages (if any) are not
difficult to calculate.
On top of all of those problems with Idaho Power's damages claim that would have to be
litigated, the dispute remains as to the Commission's jurisdiction over Idaho Power's damages
claims. That procedural dispute would expose all parties to additional litigation expense over and
above the expense of contractual litigation where the proper venue is not in dispute.
Finally, if Idaho Power were unsuccessful in pursuing its damages clairn, it would be
required to pay attomey fees to any of the QF Parties that are able to prevail. The prevailing party
in a civil action to recover on a commercial transaction "shall be allowed a reasonable attorney's
fee to be set by the court, to be taxed and collected as costs." I.C. $ 12-120(3). This provision is
not discretionary - meaning that if Idaho Power were to litigate the damages claims unsuccessfully
in court, it would owe attorney fees to any of the QF Parties who successfully defeated the claim.
In sum, for the reasons explained above, it is unlikely that any damages award could be
justified were this matter litigated to judgment in court, and indeed Idaho Power could end up
owing money to the QF Parties if it were unsuccessful in recovering the alleged damages. Thus,
the agreed-to settlement amount to be paid to Idaho Power of $50,000 for the Rock Creek #2
outage is reasonable and will allow all parties to avoid protracted and costly litigation.
Additionally, the Settlement Stipulation's clarification that the term "permanent curtailment" only
covers curtailments lasting for the remaining term of the FESA will prevent future disputes over
this subject.
III. CONCLUSION
For the reasons set forth above, the Commission should approve the Settlement Stipulation.
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
IPC-E-20-28 - PAGE 9
DATED this 9th day of March 2021
RICHARDSON ADAMS, PLLC
/s/ Gresorv M. Adams
Gregory M. Adams (ISB No. 7454)
Peter J. Richardson (ISB No. 3195)
515 N.27ft Steet
Boise,Idaho 83702
Telephone: [phone]
Fax: [phone]
[e-mail]
peter@richardsonadams. com
Attomeys for Cross-Respondent Enel Green Energy
Norlh America, Inc.
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
LPC-E-20-28 -PAGE 10
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 9m day of March z}zl,ldelivered true and correct
copies of the foregoing Comments to the following parties via electonic mail:
JanNoriyuki
Commission Secretary
Idaho Public Utilities Commission
P.O. Box 83720
Boise, lD 83720-0074
j an.noriyuki@puc. idaho. gov
Tom Arkoosh
Stacie Foor
Arkoosh Law Offices
802 W. Bannock Sheet, Ste. LP 103
P.O. Box 2900
Boise,ID 83701
tom. arkoosh@arkoosh. com
stacie. foor@arkoosh. comEdward Jewell
Deputy Attomey General
Idaho Public Utilities Commission
P.O. Box 83720
Boise, D 83720-0074
edward j ewell@puc. idaho. gov
Preston Carter
Givens Pursley LLP
P.O.Box2720
Boise,ID 83701
preston. carter@givenspursley. com
Donovan Walker
Lead Counsel
Idaho Power Company
P.O. Box 70
Boise, lD 83707
dwalker@idahopower. com
Bv: /s/ Gresorv M. Adams
Gregory M. Adams
CROSS-RESPONDENT ENEL GREEN POWER NORTH AMERICA, INC.'S COMMENTS
REGARDING SETTLEMENT STIPULATION
wc-E-20-28 - PAGE 1l