20210603Final_Order_No_35060.pdf

ORDER NO. 35060 1
Office of the Secretary
Service Date
June 3, 2021
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On April 2, 2021, Idaho Power Company (“Company”) applied to the Commission for
approval or rejection of an energy sales agreement (“ESA”) with Reynolds Irrigation District
(“Seller”) for the energy generated by the Reynolds Irrigation Hydro Project (“Facility”). The
Facility has a nameplate capacity of 350 kilowatts and is near Melba, Idaho.
On May 4, 2021, the Commission set deadlines for interested persons to comment on
the Application and for the Company to reply. See Order No. 35031. Commission Staff filed the
only comments and recommended the Commission approve the ESA. The Company then filed a
Notice stating that it would not file reply comments.
Having reviewed the record, the Commission approves the Company’s Application as
discussed below.
APPLICATION
The Seller has been delivering energy generated by the Facility to the Company under
an August 1, 1985, firm energy sales agreement that expired on April 30, 2021. The Company
represented that the ESA has a 20-year term with non-levelized, non-seasonal hydro published
avoided cost rates as set by Order No. 34683. The Company requested that the Commission
approve the ESA and declare all payments for purchases of energy under the ESA be allowed as
prudently incurred expenses for ratemaking purposes.
STAFF COMMENTS
Staff recommended the Commission approve the ESA. Staff’s recommendation is
based upon its review of the ESA, which focused on (1) the 90/110 rule; (2) eligibility for and the
IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
REYNOLDS IRRIGATION DISTRICT FOR
THE PURCHASE OF ELECTRIC ENERGY
FROM THE REYNOLDS IRRIGATION
HYDRO PROJECT
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CASE NO. IPC-E-21-07

ORDER NO. 35060

ORDER NO. 35060 2
amount of capacity payments; (3) pricing for the lapsed contract period;1 and (4) the avoided cost
rates.
Staff verified the ESA contained the 90/110 Rule required by Order No. 29632, which
requires the seller of energy from a QF to provide the purchasing utility with a monthly estimate
of the energy the facility expects to generate. Staff also verified the five-day ahead monthly
generation forecast provision is consistent with comparable provisions approved by the
Commission in prior orders. See Order Nos. 34263 and 34870.
Staff stated the Facility should receive capacity payments for the replacement ESA’s
full term even though the original contract did not contain capacity payments. Staff asserted that,
like the Black Canyon #3 project in Case No. IPC-E-19-04, the Facility’s original contract included
avoided cost rates without a capacity payment as determined in Order No. 18190, because the
Company was energy—not capacity—constrained at the time. Staff stated the Facility has operated
since the mid-1980s—through several capacity additions. Staff was confident the Facility has
contributed to meeting the Company’s need for capacity during that time and recommended the
Facility should be granted capacity payments for its entire generation during the term of the ESA.
Staff stated the original contract expired on April 30, 2021. According to Article XXI
of the ESA, the ESA will not be effective until the Commission has approved the ESA and declared
all payments made by the Company to the Seller are allowed as prudently incurred expenses for
ratemaking purposes. As a result, Staff noted if the Commission approves the ESA, there would
be a lapsed contract period between May 1, 2021, and the day before the new ESA’s effective
date2 (“Lapse Period”).
Staff cited Case No. AVU-E-19-16, where the Commission approved both energy and
capacity payments during a lapsed contract period for Stimson Lumber’s QF, which never stopped
generating. In the present case, Staff stated that the Seller desires to continue generating during
the lapsed contract period. The Company noted it would accept the delivery and pay the Surplus
Energy Price as defined in Article 7.2 of the ESA. The Company’s payment during the Lapse
Period, if approved, will be subject to any true-up, adjustment, or rejection of terms and provisions,
or the contract itself, by the Commission. See Response to Staff’s Production Request No. 3, Letter
Agreement, dated April 29, 2021, between the Company and the Seller. Staff noted the Surplus

1 Defined below.
2 The effective date of this Order and the ESA are the same date.

ORDER NO. 35060 3
Energy Price is the price used for Surplus Energy, such as energy delivered outside of the 90/110
firmness band, and the value is the lesser of 85 percent of the market price or the contract price.
See Article 7.1 and Article 7.2 of the ESA. The energy delivered during the Lapse Period would
be treated as non-firm energy and would be paid accordingly. Staff believed this is a reasonable
approach taken by the parties.
Section B-7 of the ESA states that the Company cannot accept or pay for generation
from this Facility if the Facility has not achieved the status of being a Company Designated
Network Resource (“DNR”). According to Staff, this Facility is a Company DNR pursuant to an
existing energy sales agreement. Section B-7 also provides that the DNR status will continue if
this Agreement is (1) executed and approved by the Commission; (2) a Generator Interconnection
Agreement (“GIA”) has been executed by both parties; and (3) the Seller complies with the
requirements of that GIA. The Company confirmed the Facility will be a DNR during the Lapse
Period. Response to Staff’s Production Request No. 3. If the Commission rejects the ESA, then the
Company would determine the DNR status at that time.
Staff also reviewed the avoided cost rates proposed in the ESA and verified that the
proposed rates are correct.
COMMISSION FINDINGS AND DECISION
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. The Commission also has authority under PURPA and FERC regulations to
set avoided cost rates, to order electric utilities to enter 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.
The Commission has reviewed the record, including the Application, the ESA, and the
Staff’s comments. Based on our review, we find it appropriate to approve the ESA because it
contains Commission-approved terms that the Facility is eligible for based on its characteristics
such as fuel source, project size, and renewal contract status. Additionally, the Facility has helped
meet the Company’s need for additional capacity. The Commission thus finds it just and
reasonable to include capacity payments for the duration of the ESA. The Commission also finds

ORDER NO. 35060 4
the Company’s payments for purchases of energy and capacity under the ESA are prudently
incurred expenses for ratemaking purposes.
We find it appropriate for the Company to pay the Seller for any generation delivered
by the Seller during the Lapse Period at the Surplus Energy Price as defined in Article 7.2 of the
ESA and as agreed to by the Company and Seller in the April 29, 2021, Letter Agreement. We
find this pricing for deliveries of generation from the Facility during the Lapse Period to be fair,
just, and reasonable considering the circumstances. We remain concerned that, after an energy
sales contract expires, the lack of contractual commitment could create uncertainty for the
Company’s resource planning and leave the Company with little recourse should the Seller
experience a sudden change in operation or decide not to sell to the Company going forward.
Ideally, the Company should file future renewal QF contracts with the Commission well before
the existing QF contract expires.
O R D E R
IT IS HEREBY ORDERED that the Company’s ESA with the Seller is approved,
effective as of the service date of this Order.
IT IS FURTHER ORDERED that the Company shall pay the Seller for capacity and
energy deliveries during the Lapse Period at the Surplus Energy Price as defined in Article 7.2 of
the ESA pursuant to the April 29, 2021, Letter Agreement between the Company and the Seller.
IT IS FURTHER ORDERED that the Company’s payments for energy and capacity
under the renewal ESA and the Surplus Energy payments made during the Lapse Period shall be
allowed as prudently incurred expenses for ratemaking purposes.
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 regarding 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. 35060 5
DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this 3rd day
of June 2021.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER
ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\IPC-E-21-07\orders\IPCE2107_final_dh.docx