20210608Final_Order_No_35067.pdf

ORDER NO. 35067 1

Office of the Secretary
Service Date
June 8, 2021
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On April 5, 2021, Idaho Power Company (“Company”) requested that the Idaho Public
Utilities Commission (“Commission”) approve or reject an energy sales agreement (the “ESA”)
with Hydroland Omega LLC (“Seller”) for energy generated by the Elk Creek Hydro Project (the
“Facility”). Application at 1. The Facility is a qualifying facility (“QF”) near New Meadows,
Idaho under the Public Utility Regulatory Policies Act of 1978 (“PURPA”) and has a 2350-
kilowatt nameplate capacity. Id. The Company requested that its Application be processed by
Modified Procedure. Id. at 5.
On April 29, 2021, the Commission set deadlines for interested persons to comment on
the Application, and for the Company to reply. See Order No. 35024. Commission Staff (“Staff”)
filed the only comments and recommended the Commission approve the ESA. The Company filed
a Notice stating that it would not file reply comments.
Having reviewed the record, the Commission issues this Order approving the ESA as
described in further detail below.
APPLICATION
The Company asserted that the Seller has been delivering energy generated by the
Facility to the Company under an August 31, 1984, firm energy sales agreement that expired on
April 30, 2021. Application at 4. The Company represented that the replacement ESA has a 20-
year term with non-levelized, non-seasonal hydro published avoided cost rates as set by Order No.
34683. Id. Further, the Company stated the ESA contains capacity payments for the entire term
of the agreement. Id. at 2. 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. Id. at 7.

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
HYDROLAND OMEGA LLC, FOR THE
SALE AND PURCHASE OF ELECTRIC
ENERGY FROM ELK CREEK HYDRO
PROJECT
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CASE NO. IPC-E-21-08

ORDER NO. 35067

ORDER NO. 35067 2

STAFF COMMENTS
Staff recommended that the Commission approve the ESA. Staff Comments at 2.
Staff’s recommendation is based upon its review of the ESA, which focused on: 1) the 90/110 rule;
2) eligibility for and the amount of capacity payments; 3) pricing for the lapsed contract period;
and 4) the avoided cost rates. Id.
Staff verified the ESA contains the 90/110 provision. Id. Staff also confirmed the ESA
requires the Seller to give the Company at least five-day advanced notice if the Seller wants to
adjust its Estimated Net Energy Amounts to comply with 90/110 firmness requirements. Id. Staff
noted that the Monthly Estimated Net Energy Amounts for January, February, August, September,
October, November, and December are zero. Id. This is consistent with the Facility’s historical
generation under the previous firm energy sales agreement. Id.
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. Id. 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 because the Company was energy—not—
capacity constrained at the time. Id. Staff stated that because the Facility has operated since the
mid-1980s, through the Company’s capacity deficiency periods, Staff is confident the Facility has
contributed to meeting the Company’s need for capacity. Id. Staff also believed the Facility should
be granted capacity payments for its entire generation capacity amount during the term of the ESA
since the nameplate capacity of the Facility did not change. Id.
Staff stated the original contract expired on April 30, 2021. Id. According to Article
XXI of the new ESA, it will not be effective until the Commission has approved the ESA and
declared all payments the Company makes to the Seller for purchases of energy are allowed as
prudently incurred expenses for ratemaking purposes. Id. As a result, Staff noted if the
Commission approves the ESA, there would be a lapsed contract period between May 1, 2021,
and the new ESA’s effective date (“Lapse Period”). Id.
Staff pointed to 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. Id. In this case,
Staff stated that the Seller desires to continue generating during the Lapse Period. Id. The
Company will accept the delivery and pay the Surplus Energy Price as defined in Article 7.2 of
the ESA. Id. The Company’s payment, if approved, will be subject to any true-up, adjustment, or

ORDER NO. 35067 3

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 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 paid accordingly. Staff believed
this is reasonable. Staff Comments at 4.
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”). Id. According to Staff, this Facility is a Company DNR because of
the ESA. Id. Section B-7 also provides that the DNR status will continue if this ESA 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. Id. 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. Id.
Staff also reviewed the avoided cost rates proposed in the ESA and verified that the
proposed rates are correct. Id.
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 Federal Energy
Regulatory Commission (“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
Staff’s comments. Based on our review, we find it reasonable 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

ORDER NO. 35067 4

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
the Company’s payments for purchases of energy and capacity under the ESA are prudently
incurred expenses for ratemaking purposes.
We also find it appropriate for the Company to pay the Seller for any generation
delivered from the Facility for the Lapse Period (May 1, 2021, until the service date of this Order)
at the Surplus Energy Price as defined in Article 7.2 of the ESA as agreed to by the Company and
the 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. We remain concerned,
as we noted in the Stimson Lumber case, 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. See Order No. 34692 at 4-5.
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 any generation
delivered from the Facility during the Lapse Period at the Surplus Energy Price as defined in
Article 7.2 of the ESA.
IT IS FURTHER ORDERED that the Company’s payments for energy and capacity
under the renewal ESA and 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. 35067 5

DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this 8th day
of June 2021.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\IPC-E-21-08\orders\IPCE2108_final_jh.docx