20211130Final_Order_No_35239.pdf

ORDER NO. 35239 1
Office of the Secretary
Service Date
November 30, 2021
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On August 16, 2021, Idaho Power Company (“Company” or “Idaho Power”) applied
to the Commission for approval or rejection of an energy sales agreement (“Replacement ESA”)
with Michael Branchflower, (“Seller”) under which Seller would sell and the Company would
purchase electric generation from the Trout-Co Hydro Project (“Facility”). Application at 1. The
Facility is a qualifying facility (“QF”) under the Public Utility Regulatory Policies Act of 1978
(“PURPA”). Application at 2 and 4.
On September 8, 2021, the Commission issued a Notice of Application and set
deadlines for public comments and the Company’s reply comments. See Order No. 35161.
Commission Staff (“Staff”) and the Company filed comments. The public did not file comments.
Having reviewed the record, we now approve the Company’s Application as modified in the
discussion below.
BACKGROUND
Under PURPA, electric utilities must purchase electric energy from QFs at purchase or
“avoided cost” rates approved by the Commission. 16 U.S.C. § 824a-3; Idaho Power Co. v. Idaho
PUC, 155 Idaho 780, 789, 316 P.3d 1278, 1287 (2013). The Commission has established two
methods for calculating avoided costs, depending on the size of the QF project: (1) the surrogate
avoided resource method, used to establish “published” avoided cost rates; and (2) the integrated
resource plan method, to calculate avoided cost rates for projects exceeding published rate limits.
See Order No. 32697 at 7-22.
THE APPLICATION
The Facility is located near the city of Hagerman, Idaho. Application at 1. The
Company and Seller entered into the Replacement ESA to replace the previous contract with the
Company that was executed on January 7, 1985, and expires on November 30, 2021. Id. at 2 and
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
MICHAEL BRANCHFLOWER, FOR THE
SALE AND PURCHASE OF ELECTRIC
ENERGY FROM THE TROUT-CO HYDRO
PROJECT
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CASE NO. IPC-E-21-26

ORDER NO. 35239
ORDER NO. 35239 2
4. The Facility is already interconnected and selling energy to Idaho Power and the Replacement
ESA specifies a Scheduled First Energy Date and Scheduled Operation Date of December 1, 2021.
Id. at 5. The Replacement ESA at “[A]rticle XXI . . . provides that the ESA will not become
effective until the Commission has approved all of the ESA’s terms and conditions and declared
that all payments Idaho Power makes to the Seller for purchases of energy will be allowed as
prudently incurred expenses for ratemaking purposes.” Id. at 6.
The Replacement ESA lists the nameplate capacity as 280 kW. Id. at 4. The
Replacement ESA was signed by the Seller on August 9, 2021, and by the Company on August
12, 2021. Application at Attachment 1 at p. 35. The Replacement ESA has a 20-year term with
non-levelized, non-seasonal hydro published avoided cost rates as set in Order No. 35052 for
energy deliveries of less than 10 aMW. Id. at 4. The Replacement ESA is a replacement contract,
and its rates contain capacity payments for the entire contract term. Application at 3-4.
According to the Replacement ESA, should the Facility exceed 10 aMW on a monthly
basis, Idaho Power will accept the energy (Inadvertent Energy) that does not exceed the Maximum
Capacity Amount, but will not purchase or pay for this Inadvertent Energy. Id.
The Replacement ESA provides that all applicable interconnection charges and
monthly operational or maintenance charges under Schedule 72 will be assessed to Seller. Id. The
Replacement ESA also provides for a Schedule 72 Generator Interconnection Agreement, or
“GIA”, between the Seller and Idaho Power. Id. The GIA is in the process but not yet signed. Id.
The Replacement ESA also provides that the notification of Net Energy Amount
monthly adjustments described in paragraph 6.2.3 must be provided no later than 5 p.m. Mountain
Standard Time on the 25th day of the month that is prior to the month to be revised. Id. at 6. If the
25th day of the month falls on a weekend or holiday, then written notice must be received on the
last business day prior to the 25th. Id.
COMMENTS
A. Staff Comments
Staff’s comments focused on: (1) eligibility for and the amount of capacity payments;
(2) the 90/110 Rule with at least five-day advance notice for adjusting Estimated Net Energy
Amounts; and (3) avoided cost rates. Staff Comments at 2.
According to the Application, the Facility has operated at a nameplate capacity of 280
kW since the Facility began operation, and the Replacement ESA reflected this amount for
ORDER NO. 35239 3
determining the amount of immediate capacity payments. Id. at 3. However, the original 1985
contract approved by the Commission listed the nameplate capacity of the Facility at 240 kW, and
the contract has never been amended to update the nameplate capacity of the Facility. Id. As a
result, Staff believed that the original contract provides the basis for rates and compensation in a
renewal contract. Id.
Staff noted that the Facility has contributed to meeting the Company’s need for capacity
and should be granted immediate capacity payments. However, because the Facility’s current
contract has a stated nameplate capacity of 240 kW rather than 280 kW, Staff recommended that
two sets of avoided cost rates be used in the Replacement ESA between the Company and the
Seller from 2021 through 2025. Id. These two sets of rates would be the same starting in 2026,
which is the Company’s first deficit year. Id. The first rate is for any hourly generation equal to or
less than 240 kilowatt hours (“kWhs”) and would receive immediate capacity payments. Id. The
second rate is for any hourly generation above 240 kWhs and would not receive capacity payments
until the Company becomes capacity deficient in 2026. Id.
Staff confirmed the Replacement ESA contains the 90/110 Rule as required by
Commission Order No. 29632. Id. at 4. Staff recommended implementing the 90/110 Rule based
on two sets of avoided cost rates. Id. Similar to how the Sagebrush Hydro project was directed to
implement the 90/110 Rule in Case No. IPC-E-19-38, Staff proposed to blend the two sets of All
Hours Energy Price. Id.
Staff also noted that the Replacement ESA requires the Seller to give the Company at
least five-day advance notice if the Seller plans to adjust its Estimated Net Energy Amounts for
purposes of complying with the 90/110 Rule. Id. at 5.
Staff verified that the published avoided cost rates contained in the Replacement ESA
are correct. Id.
Staff recommended that the Company review all QF contracts to ensure they reflect
their actual facility parameters, and if they do not match, submit an amended contract to the
Commission for approval. Id. at 4. In addition, Staff recommended that the Commission order the
Company to include a provision to all new QF contracts, requiring the QF to submit an “as-built”
description of the facility by its first operation date. Id. at 6. If the “as-built” description does not
match the description in the original approved contract, then the contract should be amended to
reflect the “as-built” description. Id.
ORDER NO. 35239 4
B. Company’s Reply Comments
The Company asserted that when the original contract was signed on January 7, 1985,
it stated that the Facility had a 240 kW nameplate capacity. Reply Comments at 2. However, the
Company stated that when construction was completed and the project became operational in
December of 1986, the installed Facility had a 280 kW nameplate capacity. Id. The Company
admitted that the original contract was not updated to reflect the 280 kW nameplate capacity. Id.
The Company argued that contrary to the assertion in Staff’s Comments, the Sagebrush
Hydro project and the Facility are not similarly situated. Id. The Company reasoned that the
Facility’s installed nameplate capacity (versus what was stated in the original contract) has always
been 280 kW since it was built in 1986 while the Sagebrush Hydro project renewal energy sales
agreement involved a facility whose nameplate capacity increased from 430 kW to 575 kW after
it was rebuilt following expiration of the original contract. Id. Based on this distinction the
Company argued that the Facility should receive capacity payments up to 280 kW. Id. The
Company also asserted that no changes should be made to the implementation of the 90/110 Rule
because the nameplate capacity has always been 280 kW since the Facility was built. Id. The
Company also argued that bifurcating the rate and maintaining two separate 90/110 firmness
calculations would cause administrative burdens to the Company. Id. at 5. Last, the Company
asserted that the nameplate capacity has remained at 280 kW since the Facility was installed and
the fact that the Replacement ESA has a different value from the expiring contract does not reflect
a change in the physical characteristics or capabilities of the generator, but rather is simply a
typographical error. Id.
The Company does not object to including a provision in all new PURPA contracts
requiring the QF to submit an “as-built” description of the facility by the first operation date and
if the “as-built” description does not match the description in the original approved contract, then
to amend the contract to reflect the “as-built” description. 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. Id. In addition,
the Commission has authority under PURPA and Federal Energy Regulatory Commission
ORDER NO. 35239 5
(“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 FERC rules. The Commission may enter
any final order consistent with its authority under Title 61 and PURPA.
Having reviewed the record, including the Company’s Application, the Replacement
ESA, Staff’s Comments, and the Company’s Reply Comments, the Commission finds it reasonable
to approve the Replacement ESA as modified herein.
The Commission finds that the information contained in a legally enforceable energy
sales agreement provides the parameters for the operation of the Facility and forms the basis for
the rates earned throughout the contract term because the rates and terms in the original contract
were, indeed, approved by the Commission. Consequently, we find that the terms of the original
energy sales agreement are determinative.
The Commission further finds that the Facility’s eligibility for capacity payments in
the Replacement ESA be based on the nameplate capacity in the original contract. The additional
incremental nameplate capacity (40 kW) will not receive capacity payments until the first deficit
date identified at the time of this contract renewal (2026). See Order No. 34956.
Consistent with the discussion above, the Commission directs the Company to
implement the 90/110 Rule for production during months that fall outside the 90/110 performance
band with a contract price that is blended using the same method established in Case No. IPC-E-
19-38. When capacity payments begin for the entire Facility (280kW) in 2026, blending will no
longer be necessary.
Five-day advance notice has been deemed reasonable and authorized in prior
Commission orders such as Order Nos. 34263, 34870, and 34937. The Commission approves the
Replacement ESA requiring the Seller to give the Company at least five-day advance notice if the
Seller plans to adjust its Estimated Net Energy Amounts for purposes of complying with the 90/110
Rule.
The Commission finds it reasonable and necessary for the Company to include a
provision in all new PURPA contracts requiring the QF to submit an “as-built” description of the
facility by the first operation date. If the “as-built” description does not match the description in
the original approved contract, the contract should be amended to reflect the “as-built” description.
The inclusion of this provision will proactively help to avoid errors of facility size in the future.
ORDER NO. 35239 6
Lastly, the Commission finds, as modified herein, that the avoided cost rates in the
Replacement ESA are just and reasonable, in the public interest, and that the Company’s
incurrence of such costs for purchases of energy and capacity are prudently incurred expenses for
ratemaking purposes.
O R D E R
IT IS HEREBY ORDERED that the Company’s Replacement ESA is approved with
the following modifications:
1. The Replacement ESA will use two sets of avoided cost rates between the Company
and the Seller from 2021 through 2025: any hourly generation equal to or less than
240 kWhs will receive immediate capacity payment, and any hourly generation
above 240 kWhs will not receive capacity payment until the Company becomes
capacity deficient in 2026.
2. The 90/110 Rule will be implemented based on two sets of avoided cost rates from
2021 through 2025 until the Facility becomes eligible for capacity payments.
The Company is directed to submit an updated or amended Replacement ESA consistent with this
Order.
IT IS FURTHER ORDERED that all payments made by the Company for purchases
of energy and capacity under the Replacement ESA, as modified herein, are allowed as prudently
incurred expenses for ratemaking purposes.
IT IS FURTHER ORDERED that the Company shall include a provision to all new QF
contracts requiring the QF to submit an “as-built” description of the facility by its first operation
date. If the “as-built” description does not match the description in the original approved contract,
then the contract should be amended to reflect the “as-built” description.
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. 35239 7
DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this 30th day
of November 2021.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

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