20210406Final_Order_No_34982.pdf

ORDER NO. 34982 1

Office of the Secretary
Service Date
April 6, 2021

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE FORMAL
COMPLAINT OF WOOD HYDRO AGAINST
IDAHO POWER COMPANY
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CASE NO. IPC-E-20-28

ORDER NO. 34982

On June 25, 2020, Wood Hydro, LLC formally complained that Idaho Power Company
improperly withheld payments owed to Wood Hydro under a Firm Energy Sales Agreement
(“FESA”) for the Mile 28 hydroelectric (“Mile 28 Hydro”) qualifying facility (“QF”).
On August 3, 2020, Idaho Power filed an Answer and Cross-Complaint against Wood
Hydro, Enel Green Power North America, Inc. (“Enel”) for the Rock Creek #2 QF, and Central
Rivers Power US, LLC (“Central Rivers”) for the Lowline #2 QF. On September 17, 2020, Enel
and Central Rivers filed separate Motions to Dismiss and Wood Hydro filed a Reply. On October
1, 2020, Idaho Power filed an Answer to Cross-Respondents’ Motions to Dismiss.
On November 9, 2020, Idaho Power filed a Joint Motion to Stay signed by all parties.
The Motion asked the Commission to issue a stay so the parties would have time to negotiate a
settlement and submit it for Commission approval. The Commission granted the Motion and
issued the stay. Order No. 34846.
On January 25, 2021, the Company filed a Settlement Stipulation and Motion to
Approve Settlement Stipulation. On February 23, 2021, the Commission issued a Notice of
Settlement Stipulation and Notice of Modified Procedure setting deadlines for interested persons
to submit comments. Order No. 34929. Wood Hydro, Enel, and Central Rivers filed comments
supporting the Settlement Stipulation. No other comments were received.
Now, having reviewed the record, the Commission approves the Settlement
Stipulation.
BACKGROUND
Under the Public Utility Regulatory Policies Act of 1978 (“PURPA”), electric utilities
such as Idaho Power must purchase energy generated by QFs. 18 C.F.R. § 292.303(a). The rate
and contract terms by which the utility must purchase the energy are determined by state utility
commissions within broad contours established by PURPA and the federal regulations issued by

ORDER NO. 34982 2
the Federal Energy Regulatory Commission (“FERC”) implementing PURPA. 16 U.S.C. § 824a-
3(b); 18 C.F.R. § 292.304; Indep. Energy Prod. Ass’n v. Cal. Public Utilities Comm’n, 36 F.3d
848, 856 (1994) (stating, “PURPA delegates to the states broad authority to implement section 210
of the statute.” (formatting omitted)).
At issue in this case are three similar contracts for Idaho Power to buy energy from QFs
over 35-years at levelized rates. The QFs entered the contracts with Idaho Power between 1986
and 1993. Each contract has similar language requiring the QF to pay liquidated damages if it
“permanently curtails in whole or in part its long-term average deliveries [of energy].” Idaho
Power Answer and Cross-Complaint at 3. Idaho Power asserted “permanent curtailment” under
the contracts operates annually, and when the contract year ends there is no way for the QF to
compensate for the shortfall in a different contract year. Id. at 12, 15.
Wood Hydro’s complaint against Idaho Power alleged Idaho Power improperly
withheld payments due to Wood Hydro for energy from the Mile 28 Hydro QF. Formal Complaint
at 1. Idaho Power answered that the Mile 28 Hydro QF “permanently curtailed” its generation by
not delivering energy from November 2018 through July 2019 and Idaho Power withheld
payments to recover the liquidated damages. Idaho Power Answer and Cross-Complaint at 4. The
forecasted annual production of Mile 28 is 5,798,590 kWh, and its contract year runs from June 1
through May 31. See id. In the contract year in question, Contract Year 25, Wood Hydro delivered
3,355,049 kWh. Id. Idaho Power stated the curtailment continued into Contract Year 26 but this
did not become a “permanent curtailment” because the QF subsequently met its forecasted
generation for Contract Year 26. Id. at 9. Idaho Power initially calculated the liquidated damages
for Mile 28 Hydro to be $1,163,125. Id. at 4. The Mile 28 Hydro contract has a provision that
refunds 90% of the liquidated damages amount if the QF begins generating again within one year.
Id. at 5. With the 90% reduction, Idaho Power’s initial claim against Mile 28 Hydro was $116,312.
Id. The Settlement Stipulation requires Mile 28 Hydro to pay $14,000. Joint Settlement and
Motion at 7.
Idaho Power stated that Enel’s Rock Creek #2 facility delivered no energy to Idaho
Power from June 2019 through May 2020. Idaho Power Answer and Cross-Complaint at 12. Rock
Creek #2’s annual forecast is 14,073,550 kWh. Id. Idaho Power stated Rock Creek #2 delivered
978,479 kWh during the relevant contract year, Contract Year 31. Id. Idaho Power calculated the

ORDER NO. 34982 3
liquidated damages for Rock Creek #2’s shortfall at $4,059,472. Id. at 12-13. The Settlement
Stipulation requires Rock Creek #2 to pay $50,000. Joint Settlement and Motion at 7.
Idaho Power stated that Central Rivers’ Lowline # 2 facility delivered no energy to
Idaho Power from June 2019 through at least April 2020. Idaho Power Answer and Cross-
Complaint at 15. Lowline #2’s annual forecast is 15,755,610 kWh. Idaho Power stated that
Lowline #2 delivered 1,287,678 kWh during the relevant contract year, Contract Year 32. Id.
Idaho Power calculated the liquidated damages for Lowline #2’s shortfall at $3,616,983. Id. The
Settlement Stipulation requires Lowline #2 to pay $44,000. Joint Settlement and Motion at 7.
THE SETTLEMENT STIPULATION
Besides the settlement amounts, the Settlement Stipulation states that the parties agree
to define “permanent curtailment” as 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.” Joint Settlement and Motion at 7. The parties agreed that the
Settlement Stipulation, if approved by the Commission, fully resolves their dispute and no party
will bring additional actions at the Commission or elsewhere based on the facts arising before the
execution of the Settlement Stipulation. Id. at 8
Idaho Power acknowledged that the settlement amounts are “less than the [liquidated
damages] calculated by Idaho Power under the facility’s respective FESAs, discounted by 90
percent for projects that come back online (based on the application of the discount provisions
contained in Mile 28’s FESA), but [are] proportional across the QF parties in relation to that larger
amount[.]” Joint Settlement and Motion at 6. Idaho Power stated it would accept the settlement
amounts in full satisfaction of the liquidated damages amounts for the periods of non-generation
that are the subject of the dispute. Id. at 7.
ARGUMENTS OF PARTIES IN SUPPORT OF SETTLEMENT STIPULATION
The QF parties assert the Settlement Stipulation is a fair, just, and reasonable resolution
of the dispute because of the numerous uncertain legal claims that would need to be litigated in
absence of the Settlement Stipulation. The QF parties’ arguments focus on 1) the definition of
“permanent curtailment” and whether failure to deliver for a number of months is “permanent”
under the terms of the contract; and 2) whether the Annual Net Firm Energy, or similar terms in
the respective FESAs, are a commitment to deliver energy or an estimate to deliver energy; and 3)
the Commission’s jurisdiction to interpret the contracts or whether the dispute belongs in district

ORDER NO. 34982 4
court; and 4) if the Commission cannot award damages for breach of contract, as all parties seem
to agree, whether the dispute is better suited for district court; and 5) the enforceability of the
liquidated damages provisions under Idaho law; and 6) whether the Company and its ratepayers
were actually injured by the non-delivery because the Company was likely able to purchase
replacement energy cheaper than the contract prices. In addition to removing litigation
uncertainty, the QF parties assert that the Settlement Stipulation clarifies the definition of
“permanent curtailment” going forward.
a.) Wood Hydro on Behalf of Mile 28.
Wood Hydro pointed to the term “permanent curtailment” as the crux of the dispute
and stated, “A curtailment of less than four months is not ‘permanent’ in a 30-year contract. The
clear language of the contract itself is not applicable to the circumstance before the Commission.
This is the major reason for the settlement between the parties.” Wood Hydro Comments at 2.
Wood Hydro argued that Idaho Power added the 90/110 requirement in later contracts because its
earlier contracts, such as those at issue in this dispute, did not have a penalty for intermittent non-
delivery of power, only for “permanent curtailment.” Id.
Wood Hydro also argued that the liquidated damages provision in its contract was non-
enforceable because it is simple to prospectively and retrospectively ascertain the replacement cost
of the energy by looking at nearby energy markets. Id. at 3. Despite filing the complaint with the
Commission, Wood Hydro also joined in the other QF parties’ argument that a contract cannot
convey subject matter jurisdiction on the Commission. Id. Lastly, Wood Hydro cited to Idaho’s
Energy Plan, adopted in 2007, and expounded upon by House Concurrent Resolution 9 in 2019,
for the proposition that the Commission “should administer its responsibilities under [PURPA] in
a way that encourages the development of customer-owned renewable generation and combined
heat and power facilities[,]” and “recognize hydropower as our state’s greatest renewable resource
and further recognize the immense benefit hydropower provides to our state as a carbon-free,
inexpensive electrical power source and as an economic driver for tourism, recreation, and
agriculture in Idaho.” Id. at 3-4. Wood Hydro stated that “the unwarranted penalization for these
plants being offline for repair and upgrade ranges from damaging to permanently putting
hydropower offline in contravention of the state’s energy policy.” Id. at 4.

ORDER NO. 34982 5
b.) Enel on Behalf of Rock Creek #2.
Enel stated that it had recommenced delivering energy to Idaho Power before Idaho
Power filed its cross-complaint. Enel Comments Regarding Settlement Stipulation at 3. Enel
stated 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.” Id. at 5. Enel stated that its contract “contains no
provision for damages in the case of a temporary forced outage of the sort that occurred in this
case.” Id. Enel stated that the liquidated damages provision in its contract was only triggered if
the QF “permanently curtails in whole or in part its long-term average deliveries of the Net Firm
Energy amount . . .” and the damages were calculated as “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 rates.” Id. at 6.
Enel also argued circumstances beyond its control that would excuse performance
under the contract including “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.” Id. Enel also asserted that Idaho Power did not promptly notify Enel of the alleged
default, instead waiting almost a year before claiming almost $4 million in damages after Enel
brought the plant back online, another defense against recovery under contract and equity. Id. at
6-7. Enel also argued that the liquidated damages clause would be unenforceable because under
Idaho law, liquidated damages provisions are unenforceable 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.” Id. at 7 citing Magic Valley Brokers v.
Meyer, 133 Idaho 110, 117, 982 P.2d 945, 952 (Ct. App. 1999).
Enel stated that historically it has generated about half of the 14,073,550 kWh estimated
as the Annual Net Firm Energy in its FESA and therefore the liquidated damages, calculated on
the full estimate, are grossly inflated. Id. at 8. Enel also stated that the cost of replacement energy
during the outage period was likely less than or equivalent to what it would have received during
its outage. Id. Finally, Enel questioned the Commission’s jurisdiction to hear the complaint and
noted that if Idaho Power were unsuccessful in its court claims against the QFs, Idaho Power would
have to pay the QFs’ attorney fees. Id. at 9. Enel stated that the Settlement Stipulation allows the

ORDER NO. 34982 6
parties to avoid protracted and costly litigation and prevents further disputes over the term
“permanent curtailment.”
c.) Central Rivers on Behalf of Lowline # 2.
Central Rivers asserted that the Settlement Stipulation reasonably accounts for the
litigation uncertainties in the case. Central Rivers Comments at 2. Central Rivers pointed to
uncertainties around the Commission’s authority to award damages for breach of contract, whether
the liquidated damages clause is enforceable, proper interpretation of the term “permanent
curtailment,” and whether there was any actual damage to Idaho Power and its ratepayers. Id. at
3-4. Central Rivers asserted that approving the Settlement Stipulation would protect ratepayers
from litigation expense and uncertain litigation outcomes and promotes certainty going forward.
Id. Central Rivers asserted that the relatively small settlement amounts compared to the initially
claimed damages reflect the risks for Idaho Power to litigate the case and that the Settlement
Stipulation provides a benefit by settling the interpretation of “permanent curtailment” going
forward. Id. at 5.
COMMISSION FINDINGS AND DISCUSSION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-502 and 61-
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. In addition, the Commission has authority under PURPA and FERC
regulations to set avoided costs, to order electric utilities to enter fixed-term obligations for the
purchase of energy from QFs, and to implement rules. The Commission may enter any final order
consistent with its authority under Title 61 and PURPA. Under Commission Rules, the
Commission must independently review proposed settlements. “The Commission is not bound by
settlements. It will independently review any settlement proposed to it to determine whether the
settlement is just, fair and reasonable, in the public interest, or otherwise in accordance with law
or regulatory policy.” IDAPA 31.01.01.276.
First, the Commission finds that approving the Settlement Stipulation is well within the
Commission’s jurisdiction under Title 61 and PURPA. Because it is unnecessary to do so, we will
not opine on whether we would have had jurisdiction to interpret the contracts or whether it would
have been prudent to do so. Having reviewed the Settlement Stipulation and the record, we find

ORDER NO. 34982 7
that the Settlement Stipulation is a fair, just, and reasonable settlement of the dispute and is in the
public interest. We find that Idaho Power’s ratepayers benefit from the Settlement Stipulation.
Idaho Power did not refute the QF parties’ arguments that Idaho Power was able to purchase the
anticipated QF generation at a rate equal to or less than what would have been owed to the QFs
had they delivered under their contracts. Further, the Settlement Stipulation prevents what
otherwise likely would have been costly, time-consuming, and uncertain litigation to determine
the parties’ rights under their contracts. Finally, the originally claimed liquidated damages appear
to be calculated based on each QF never coming back online, and each QF has since returned to
service. This helps to explain the disparity between the originally claimed liquidated damages and
the settlement amounts.
O R D E R
IT IS HEREBY ORDERED that the Motion to Approve Settlement Stipulation is
granted and the Settlement Stipulation is approved.
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.
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ORDER NO. 34982 8
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 6th day
of March 2021.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

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