20200625Formal Complaint.pdf

C. Thomas Arkoosh,ISB No. 2253
ARKOOSH LAW OFFICES
802 W. Bannock Street, Suite LP 103
P.O. Box 2900
Boise,ID 83701
Telephone: [phone]
Facsimile: [phone]
Email: tom. arkoosh(Earkoosh.com
Admin copy: stacie. [e-mail]
Attorney for Wood Hydro, LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMII{ISSION
*[CTIVEE
?ii?0 JUtt 25 Pl{ l: 55
WOOD HYDRO, LLC,
Complainant,
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CaseNo. IPC-E- |to.7S
vs.FORMAL COMPLAINT
TDAHO POWER COMPANY,
Defendant.
IL
2 INTRODUCTION
3 This is a formal complaint by Wood Hydro, LLC, ("Wood") the successor in interest to
4 the Mile 28 Hydro General Facility ("Project") Firm Energy Sales Agreement of August 23,
5 1993 ("Agreement"), Exhibit A. lagainst Idaho Power Company ("Idaho Powero'or "Company")
6 with the Idaho Public Utilities Commission ("Commission" or "IPUC") pursuant to the Idaho
7 Administrative Procedures Act and Idaho Administrative Rule ("IDAPA") 31.01.01.054. In
8 summary, this Complaint seeks a determination concerning the impropriety of Idaho Power
9 withholding Net Firm Energy payments due to Wood under the Agreernent as liquidated
t All Exhibits are incorporated herein as though set forth in full.
FORMAL COMPLANT - PAGE 1
10 damages because the Project did not produce electricity from November, 2018, through March,
I I 2019, its usual nonproducing winter months, and April, 2019 through July, 2019, when it was
12 "offline" for repairs. Although Idaho Power claims the Project permanently curtailed its
l3 'oAnnual Net Firm Energy," Annual Net Firm Energy is the Agreement's estimate of Net Firm
14 Energy Wood was to deliver, and that estimate has never changed. Because the Project did not
15 permanently reduce this estimate, and the estimate is the same as it has always been, Idaho
16 Power is not entitled to withhold liquidated damages. Further, the liquidated damages clause in
17 the Agreement is unenforceable under ldaho law.
18 II.
19 CONTACT INFORMATION
20 Tom Arkoosh
2I III.
22 IDENTITY OF THE PARTIES
23 Wood is an Idaho limited liabilities company that is qualified to do and doing business in
24 the state of ldaho. Wood is the successor in interest to the Agteement and operates the Project.
25 Idaho Power is an Idaho corporation and investor owned electric utility qualified to do
26 and doing business in the state of Idaho with it principal place of business at l22l West Idaho
27 Street, Boise, Idaho 83702. Idaho Power is subject to the jurisdiction of the Commission.
28 IV.
29 JURISDICTION AI\D APPLICABLE LAW
30 This case involves enforcement of the Agreement, which was entered on August 13,
31 1993, pursuant to the Public Utilities Regulatory Policy Act of 1978 (*PURPA") between Idaho
FORMAL COMPLANT _ PAGE 2
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Power as buyer of the electricity produced by the Project and Contractor's Power Group, Inc., as
seller. Wood is the successor to this Agreement and operator of the Project.
ln Idaho, the Commission possesses jurisdiction to implement PURPA and adjudicate
complaints against public utilities under PURPA. Afton Energt Inc. v. Idaho Power Co.,lll
Idaho 925 (1986). FurtheE the parties acknowledged this jurisdiction of paragraphzl.l of the
Agreement, reciting language approved by the Commission:
All disputes related to or arising under this Agreement, including, but not limited to, the
interpretation of the terms and conditions of this Agreement, will be submitted to the
Commission for resolution.
Further, liquidated damages clauses are not enforceable in Idatro unless:
1. The amount so fixed is a reasonable forecast ofjust compensation for the harm that is
caused by the breach, and
2. The harm that is caused by the breach is one that is incapable or very difficult of
accurate estimation.
Restatement of Contracts section 339 as adopted by the Idaho Supreme Court.
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49 THE AGREEMENT
50 The 1993 Agreement provides that seller will make a one-time estimate of expected
51 power deliveries labeled "Annual Net Firm Energy" amount. Agreement paragraph l.l. The
52 electricity actually produced is called "Net Firm Energy." Agreement paragraph 1.1 l. Thus,
53 while Annual Net Firm Energy is the estimate established at the commencement of the
54 Agreanent, Net Firm Energy is what actually is produced under the Agreement.
55 The Agreement provides in paragraph2I.3 for liquidated damages if the Project
56 o'permanently curtails in whole or in part its long-term average deliveries of the Annual Net Firm
FORMAL COMPLANT _ PAGE 3
57 Energy amount specified in paragraph 6.3." Paragraph 6.3 states the Annual Net Firm Energy
58 Amount (the estimate) is 5,798,590 kwh.
59 Although Wood did not produce the expected energy from April2019, through July
60 2019, because of repairs, the Annual Net Firm Energy Amount has never changed.
6M.
62 FACTS
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As recited above, the Project did not produce electricity during the winter months of
November 2018 through March 2019, which it usually does not. December through March are
estimated in paragraph 6.2 of the Agreement as 0 kWh deliveries. Because of repairs, the Project
did not deliver energy from April20l9 through July 2019, but did deliver starting in August
2019 after repairs were complete.
On August 1,2019, Jerry Jardine wrote Ted Sorenson of Wood, Exhibit B, alleging
liquidated damages were owed from Wood to Idaho Power for the "Failure to Deliver the Annual
Net Energy Amount," stating:
Paragraph 2 I .3 of the Agreement specifies if the Facility fails to deliver Net Energy as
stated in Article 6.3 (Annual Net Energy Amount of 5,798,590 kwh), a Lump Sum
Repayment Amount ("Repayment Amount") shall be calculated and payable to Idaho
Power.
Paragraph 21.3 does not provide for payment for the failure to deliver the Annual Net
Energy Amount (the estimate), but instead provides for liquidated damages for permanently
curtailing its long-term Annual Net Energy Amount estimate, which the Wood has not done for
the Project. For that matter, the only time actual Net Firm Energy amounts (the actual deliveries)
are mentioned in the paragraph is:
For purposes of this paragraph, neither reduced deliveries of Net Firm Energy due to
short-term below -normal, water conditions (paragraph 6.4) nor Idaho Power's voluntary
FORMAL COMPLANT _ PAGE 4
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termination in accordance with paragraph 5.2.2 shall be considered a permanent
curtailment.
This strongly suggests that short term curtailments of the actual deliveries are not permanent
curtailment of the estimates.
On August 7,2019, Ted Sorenson responded to Jerry Jardine, Exhibit C, explaining that
no "permanent curtailment" occurred.
On August 14,2019, Jerry Jardine replied, Exhibit D, again propounding the confusing
between permanent curtailment of the estimated annual amount and actual deliveries; insisting
the Agreement gave Idaho Power no choice but to withhold money; and, finally, assessing
$l16,312 of damages that would be withheld from the Projects monthly Net Energy payments.
On October 8,2019, Exhibit E, Ted Sorenson wrote Jerry Jardine protesting the
misreading of the Agreement and reiterating there was no permanent curtailment.
On March 17,2020, Exhibit F, this office took up the matter for Wood and wrote to
Idaho Power's counsel that not only was there no permanent curtailment of the estimated
deliveries, but the liquidated damage clause was unenforceable. As part of this argument, this
oflice explained that it was because a Project was not required to deliver the Annual Net Energy
Amount estimate that Idaho Power insisted after the Agreement that in its new agreements there
must be a firm energy estimate which would in fact cause the imposition of liquidated damages if
the project did not deliver within a90ll10 performance band of the estimate. To justi$ this
material change, Idaho Power had complained to the Commission that projects were not required
to deliver the Annual Net Energy Amount estimate.
On April l5,2020,Idaho Power's counsel responded to this office, Exhibit G, reiterating
Idaho Power's position that, "[b]ecause the project failed to deliver its Annual Net Firm Energy
amount from Section 6.3 during Contract Year 25, and thus permanently curtailed its annual
FORMAL COMPLANT _ PAGE 5
108 delivery for that yan," the liquidated damage imposition was justified. Note the confusion
109 between failure to deliver an estimated amount (which the contract allows) and permanent
I l0 curtailment of the estimated amount (which the contract does not allow, and which did not
lll happenhere.)
tt2 vII.
1I3 PRAYER
tt4 WHEREFORE, Wood respectfully request that the Commission issue an Order providing
I 15 for:
116 l. A declaration by the Commission that Wood has not "permanently curtailed the Annual
Net Energy Amount" estimate under the Agreement.
2. A declaration by the Commission that he liquidated damages clause in the Agreement is
not enforceable.
3. A directive to Idaho Power to refund any withheld Net Firm Energy amount payments
withheld and reimburse Wood for the cost of the letter of credit wrongfully required by
Idaho Power to continue to accept deliveries of energy from the Project.
DATED this_24!h_ day of June 2020,
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t25 Arkoosh Law Offrces
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128 C. Tom Arkoosh
FORMAL COMPLANT _ PAGE 6
JgN lz,94 t6:e? FROm ROSHOLT ROEER'ISON IO RR]-TF
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On Not'aobor l0,lE88,Idrbo Powcr Coapeay (IPCo) EIcd en Applicrtiou
rith tbr Idrbo Public Utilithr C,ouaiaaion rrgrrertiag rpprorel of r Fira Eacrpr
Sdrr Atraoout brtrces ldrho Porrr rod CouEadrrt't Porcr Grrup, Iac- (CPG).
CPG ir thc dgvdoper of tb MiL 28 Eydro Paojcct e prporad 1500
Lilorrtt ndity letod ou tbr lGlau{codbg Csotl ia tb. rcutlwst U{ of Soction
?, SorarhB E South, Baugt 20 Euf Boiro Mrridira, Jersrnc Couuty, Ideho.
Coaurctot'r phnr to uhlir rn abtiag ernd rytbE rrrd tlo ruior ntar r{Ltr for
irfirtioa oraod by thc Aacricra Frllr Rrsoroir Direia No. 2 to obtrio rdrquete
rrtrr for tbr fr+itit /. Ar rrpreotrd, ttrrc projcct arrrrutly hrr e yirlid EERC liconrs
or t:euptioa rod ri[ bc e $ulifyias facility (QF) prhr to iatorconnoctiou. The
uticipted rnaul 6nn rocrSr produdiou it 5,79E590 LWt. Thc A€rorrueut
pmvidm forlPCo'r pur&r* of ray nrrplus energr ia scere of thc roticipeta'd uaual
Erro cuergy ettheuoa-firtn evoidcd soerg/ rctsiaucordrsca ritb IPCot ?sifil0l,
Schedulo 86. ltc rcbedubd oprntioo dete of th f8ri[ty ir Mry 15, 1994. Ite
A3rrroenL &t d Aqr:et 18, 1983, provides for a 36-year eoutnct tcra rcd csot&il!
evoidcd st ntar conputad for 35 ycln busd oa tlhc Isvelired avoided coctc
approvod by tbr Coanirion b Cr.cs No. IPC-E-83-4.
Prngrrpb 21.1of thr A€rrEeDr providec tbrt ray disputm erisiag under
ttro l3rumrnt riU b. ruba,itted to fbe Coumirrioa for rsolutioa. Tbo Coanqirdon
rauindr tbr prrtil thet jurididiou Ery Dot br coufrand ou tbs Cou:airdou by
coabrr{nr} rtipulrtiou. tLc rutlrority rad jurirdiction of tbe Conmirrion ir
oRDER NO. 2635{1
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JRN I? ,94 16'Z? FROI1 ROSHOLI ROBE RI SON TO RRI-IF PRGE . e'O3rez1
rrrtricrd tr tbt rrprrrly rnd by D,glrry iryUcrfioo oaftrrrd upoD it by
corblia3thlsbt thc artun eDd cxt ut ofCoonirioajrrridiction to rarolvr rfid
diryu!.t ttrb. drtrrniood by tbc Comrairim o r cuotyqr bub.
DCosuirrhu [Ddr tlrtthrA3rruorat er rifrcdend rubnittrd by tb.
Ffi.., mhb rvoiitd st ntn tbrt, u *ructn{ rn rcptrbb for tf,ir Drcjrct
rud en la rdrteatirl oarouity ritb rpplicrbb Coumisioa ordcrr. Thc trmr of
tbc oqtsrctrr raoourbh rsd rr rpprw. tbru. Wo rbo sppElvG pr)'rlcab nrdc
tradsr tlb lfronoot rr pubatly iacorrcd crpoulor for ntamnkiag ptupor6!.
OONCLUSIIONT OF I.AW
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Tbr Idrho Ptrblic Udlids Corq'nimi,on hu jurirdictiou ovcr ld^rho Poryor
Coapeun rrrlcctric utili$, pumuat to tbe ruttrority rad porrr 3nated it gudsr
Titlc 61 of tb ldaho Code rsd tb. Psblic UHIiW Ecgulgtory Polidos Ast of lg?8.
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fr ldrho hblic Utilitior.Corqnirrioa bu eutbority undcr tbo hrblic
U6lity n gt btat Policis ltd, of 19?b (PUBPA) rad thr iuphmeatiug rsnrtrtion^r
of thr ftd.si erp B.${rtory Conruigion (EEBC) to rt rvtidod cottr, to order
olcctric udlllho to GDht iDto 6red tarrn obtigetionr to purcheee cuerpr froa
qurli&ias fuliHor, r^ud ta inphneut lERc nrter PURPA l! zlo, zroA,, 2l0F; 16
us.c,A" $ a+A.3 , 82*A-3(tXfl; Afton Dwrgl firc. a. Id4tto pwq hmpany, lo7
Idrbo 78I" 5ft1 P.U 4ll7 (19S{).
ORDq.R
ITEi TIEq,rtsY ORDERED that the Fira Eacrgr Saler A3rcomeat bstracn
Idrho Porf Couprny rnil Costractor'r Pwer Group, hc rubqitt d in this
procecdiaf il brmby spprwd.
IEI IS A FINAL ORDER Aay pcnou iatanted iD thtu Ordrr ury
potitioa hr maridcratioa rithiu treaty<oe (21) drn of the ;3rrrice drtr of thir
ffirv rith ryrd to rny rurtt r d*ided iD thL ordrr. within roven (?) dryr lfter
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FIRM ENERGY SALES AGREEMENT
BETWEEN
IDAHO POWER COMPANY
AND
CONTRACTOR'S POWER GROUP. INC
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TABLE OF CONTENTS
DEFINITIONS . .
NO RELIANCE ON iDAHO POWER
WARRANTIES . .
CONDITIONS TO INTERCONNECTION
TERI.I EARLY TERMTNATION AND OPERATION DATE
SALE OF NET FIRM ENEBGY
PURCHASE PRICE AND METHOD OF PAYMENT;
ADJUSTTTENT OF PURCHASE PRTCE
FACILITY AND INTERCOI{NECTION . . . .
DISCONNECTION EOUIPMENT
METERING
RECORDS
PROTECTION
OPERATIOIiS
INDEMNIFICATION AND INSURANCE
LANDRIGHTS ...
FORCE MAJEURE
LIA BILITY; DEDICATI OhJ
SEVERAL OBLIGATIONS
WAIYER
CHOICE OF LAWS . .
DISPUTES Al,lD DEFAULT.
GOVERNt 4 Etr'TAL AUTHORIZATION
COh'lt,llSSlOtl ORDER
SUCCESSORS AND ASSIGNS . . . .
MODIFICATION
TAXES
NOTICE
ADDITIONAL TERh,IS AND CONDITIONS . .
ENTIRE AGREEMENT . SIGNATURES
APPENDIX N . .
APPENDIX B . .
APPEI.IDIX C
APPENDIX D . .
APPENDIX E
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3
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APPENDIX F
..48.,49.. 51
FIRM ENERGY SALES AGREEMENT
BETWEEN
IDAHO POWER COMPANY
AND
CONTRACTOR'S POWER GROUP, INC
TABLE OF CONTENTS
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DEFINlTIONS
.14.15
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3
4
4
10
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13
16
NO RELIANCE ON IDAHO POWER
WARRANTIES .
CONDITIONS TO INTERCON NECTION
TERM EARLY TERMINATION AND OPERAT]ON DATE
SALE OF NET FIRM ENERGY
PURCHASE PRICE AND METHOD OF PAYMENT;
ADJUSTMENT OF PURCHASE PRICE
FACILITYAND INTERCONNECTION . . . . .
DISCONNECTION EOUIPM ENT
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METERING
RECORDS
PROTECTION
OPERATIONS
LAND RIGHTS
INDEMNIFICATION AND INSURANCE .
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LIABILITY; DEDICATION
SEVERAL OBLIGATIONS
WAIVER . .
FORCE MAJEURE
CHOICE OF LAWS
DISPUTES AND DEFAULT.
GOVERNMENTAL AUTH ORIZATI ON
COMMISSION ORDER
SUCCESSORS AND ASSIGNS
MODIFICATION
TAXES
NOTICE
ADDITIONAL TERMS AND CONDITIONS
ENTIRE AGREEMENT . SIGNATURES
APPENDTX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
,,,17
Facility No:31615154
Projsct Mile 28
Less Than 10 MW
FIRM ENERGY SALES AGREEMENT
THIS AGREEMENT, entered into on this 13th day of Auoust . 1993, is between
CONTRACTOR'S POWER GROUP, !NC., an ldaho Corporation hereinafter referred to as "Seller", and
IDAHO POWER COMPANY, an ldaho corporation hereinafter referred to as "ldaho Power" hereinafter
sometimes refered to collectively as "Parties" or individually as "Party."
WITNESSETH:
WHEREAS, Seller plans to construct, own and operate an electrlc generation Facility;
and
WHEREAS, Seller wishes to sell, and ldaho Power is legally obligated to purchase firm
elestric Bnergy generated by Setler's electric generation Facility.
THEREFORE, ln consideration of the mutual covenants and agreements hereinafter set
forth, the Parties agree as follows:
ARTICLE l: DEFINITIONS
As used in this Agreement and the appendices attached hereto, the following terms shall
have the following meanings:
1 .1 'Annual Net Firm Enerov" - The amount of Net Firm Enargy Seller estimates it
will deliver to ldaho Power at the Point of Delivery during edch Contract Yoar.
1.2 "Commission" - The ldaho Public Utilities Commission,
1,3 "Contract Year" - The period commencing each calEndar year on thE samE
calendar date as the Operation Date and ending 364 days thereafter.
1.4 'Desionated Disoatch Faciliwn - ldaho Power's Boise Bench System Dispatch
Center.
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1.5 "Disconnection Eouioment' - Any device or combination of devices by which
l4aho. Epfrygr can manually and/or automaticatly intenupt the tlg_w of. energy trom"the Selle.r to [d_aho-
Power's systgm. including enclosurgs or other equipment as may be required to ensure that only ldaho
Power will have access to the devices.
1.6 "FacilitVl - That electric generation facility described in Appendix B of this
Agreement.
1.7 "Flrst Enerov Date" -ThedatewhantheSellerbeginsdeliveringanergytoldaho
Power's system.
1.8 "lnterconnection Facilities" ' All facilities which are reasonably required by
Prudent Electrical Practices and the National Electric Safety Code to interconnect and to altow the
delivery of energy frorn the Seller's electric aeneration plant to ldaho Power's system including, but
not limated to, Special Facilities, Disconnection Equipment and Metering Equipment.
1.9 "Losses" - The loss of energy occurring as a result of the transformation and
transmission of energy between the Facility and the Point of Delivery.
1.10 "Meterino Eouioment" - Equipment as described in Appendix B and Schedule
72 reguired to measure, record or telemeter powerflows between th6 Seller's electric generation plant
and ldaho Powe/s system.
1.11 "Net Firrn Enerovn - Electric energyproduced bythe Facility, less Station Use
and less Losses, expressed in kilowatt hours ("kWh"), which Seller commits to deliver to ldaho Power
at the Point of Delivery on a long-term average basis for the fullterm of the Agreernent.
1.12 "Ooeration Daten - The day commencing at 0001 hours Mountaih Time,
following the day on which the Facility demonstrates that it has baen completed and reached a degree
of reliability such that it is capable of delivering Net Firm Energy continuously into ldaho Power's
system.
1 . 1 3 " Pqint of Deliverv" - The location specified in Appendix B, where ldaho Power's
and Seller's electrical facilities are interconnected.
1.14 "PrudenS Electrical Practices" - Those practices, methods and equipmsnt that
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are commonly and ordinarily used in electrical engineering and operations to operate electric equipment
larvfully_and w_ith safety, depend_alility, gfiqLglcy and economy,
1.15 "S-cheduled Ooeration Date" - The date specified in Appendix B when Seller
anticipates achieving the Operation Date.
1.16 "Schedule 72" - ldaho Power's Tariff No 101, ScheduleT2 or its successor
schedules as approved by the Commission.
1.17 "Season" - The three time periods identified in Article Vl.
1 .18 "Seasona! Net Firm Enerov" - The amount of Net Firm Energy Seller estimates
it will deliver to ldaho Power at the Point of Delivery during each Season.
1 .1 I "Soecial Facilities" - Additions or alterations of transmission and/or distribution
lines and transformers as described in Appendix B and Schedule 72 required to safely interconnect the
Seller's electric generation plant to the ldaho Power's system.
1,24 "Station Use'- Electric energy which is used solely to operate the Facility's
equipment which is auxiliary or directly related to the production of electricity and which, but for the
generation of electricity, would not be consumed by Seller.
1.21 "Surolus Enerov' - Electric energy which is delivered and accepted prior to the
Operation Date or which Seller does not commit to provide on a long-term average basis for the full
term of ths Agreement.
ARTICLE ll: NO RELIANCE ON IDAHO POWER
2.1 Seller lndeoendent lnvestioation - Except for the Disconnection Equipment and
any other facilities exclusively within the control of tdaho Power, Seller warrants and represents to
ldaho Power that in entering into this Agreement and the undertaking by Seller of the obligations set
forth herein, Seller has investigated and determined that it is capable of performing hereunder and has
not relied upon the advice, experience or expertise of ldaho Power in connection with the transactions
contemplated by this Agreement.
2.2 Seller lndeoendent Exoerts - Except for the Disconnection Equipment and any
other facilities within tho exclusive control of ldaho Power, all professionals or experts including, but
not limited to, angineers, attorneys or accountants. that Seller may hav-e-qonsulted or r_elied-onjn.
undertaking the transactions contemplated by this Agreemant, have been solely those of Setler.
ARTICLE lll: WARRANTIES
3,1 NoWarFntv bv ldaho Power - Any review, acceptance or failure to review
Seller's design, specifications, equipment or facilities shall not be an endorsement or a confirmation
by ldaho Power, and ldaho Power makes no warranties, expressed or implied, regarding any aspect
of Seller"s design, specifications, equipment or facilities, including but not limited to safety, durability,
reliability, strength, capacity, adequacy or economic feasibility.
3,2 Oualifvino Faciliw Status - Seller warrants that prior to interconnection with
ldaho Power the Facility will be a qualifying facility ("OF'). as fiat terrn is used and defined in I 8 CFR,
,292.207. After initial qualification, Seller willtaka such steps as may be required to maintain the
Facility's OF status during the term of this Agreement and Seller's failure to maintain OF status wilt
be a material breach of this Agreement.
3.3 FEHC License - Seller warrants that Seller possesses a valid license or exemption
from lieensing from the Federal Energy Regulatory Commission {"FERC") for the Facitlty. Seller
recognizes that Seller's possession and retention of a valid FERC license or exemption is a material pan
of the consideration for ldaho Power's execution of this Agreement. Seller will take such steps as rnay
be requlred to maintain a valld FERC licenss or exemption for the Facility during the tsrm of this
Agreement, and Seller/s failure to maintain a valid FERC license or exemption will be a material breach
of this Agreement.
ARTICLE lV: CONDITIONS TO INTERCONNECTION
4.1 Prior to the First Energy Date and as a condition of interconnection with ldaho
Power, Seller shal! provide the following:
4.1,1 Licenses and Permits - Submit proof to ldaho Power that all licenses,
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permits or approvals necessary for Seller's operations have been obtained from applicable
--fg!e-ral, s.tate or lqq.al aulhorities, i0.c-l-ud-ing but ngt linnited-tp-tllqs9-llc-enses,. perojts--oJ
approvals specified in Appendix C.
4,1,2 Hvdrolooical Data - Submit proof to ldaho Power that the hydrological
data associated with the water flows applicable to the Facility and other factors relevant to the
future security of such water flows, assuming normal weather conditions, demonstrate that
the Application for Permit to appropriate water referred to in Appendix C provides Seller with
sufficient water rights to generate the Net Firm Energy as specified in this Agreement.
4.1.3 Ooinion of Counsgl - Submit to ldaho Power an opinion of counsel
signed by an attorney admitted to practice and in good standing in the State of ldaho certifying
as follows:
(1) That Seller's licenses, permits and approvals as set forth
in paragraph 4.1.1 above are legally and validly issued, are held in the name of the Seller,
provide the rights set forth therein, and are enforceable in accordance with their terms; and
l2l That the aftorney has reviewed the approved Application
for Permit to appropriate water referred to in Appendix C, that the Application for Permit to
appropriate water is legally and validly issued to Seller, is held in the name of Seller and grants
to Seller the rights therein specified, and is enforceable in accordance with its terms; and
(31 That downstream of the Facility, there are existing,
agricultural senior water rights sufficient to ensure the availability of the water rights applied
for in the Permit to Appropriate Water referred to in Appsndix C; and
(4) That the agricultural water rights described in (3) above are
senior to the Facility's requested water rights and are not dependent on inflows below Seller's
Point of Diversion specified in the Permit to Appropriate Water referred to in Appendix C; and
(5) That the attorney has read Commission Order No. 21690
and it is his legal opinion that Seller possesses water rights that do not require the application
by ldaho Power of the nKn factor described in said Order.
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4.1.3.1 The opinion of counsel required in 4.1.3 above will be in
a form acceptable to ldaho Power and will acknowledge that the attorney rendering the
opinion understands that ldaho Power is relying on said opinion. ldaho Power's
acceptance of the form will not be unreasonably withheld.
4.1.4 Schedule 72 Pavments - Make payment to ldaho Power for all costs
of Disconnection Equipment, Metering Equipment and Special Facilities as provided for in
Schedule 72 and Appendix B of this Agreement;
4.1.5 Written Acceotance - Obtain written acceptance from ldaho Power as
provided in paragraph 8,3;
4.1.6 lnsurance - Submit written proof to ldaho Power of all insurance
required in Article XIV;
4.1 .7 Demonstration of Safe Ooeration - Demonstrate to ldaho Power's
reasonable satisfaction that Seller's Facility has been completed, and is capable of operating
safely to commence deliveries of electric energy into ldaho Power's system;
4.1 .8 Maintenance Escrow Account - Demonstrate to ldaho Power's
satisfaction that the Seller has established and funded (11 a debt service reserve account in a
form and with a fund holder which complies with paragraph 21 ,4.2 and (2) a maintenance
escrow account in a form and with an escrow manager which complies with Commission Order
Nos 21690 and 21800. Said maintenance escrow account shall be structured and funded as
follows:
4.1.8.1 The escrow instructions establishing the maintenance
escrow account will provide that the funds in the maintenance escrow account will be
prudently invested and that all costs of implementing and operating the maintenance
escrow account shall be paid by the Seller. All interest earned on the funds on deposit
will be retained in the maintenance escrow account. At the end of the term of this
Agreement, any balance remaining in the maintenance escrow account shall be the
property of the Seller.
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4.1,8.2 Within sixty (60) days after the completion of each
Qontract Yoar, -ths Seller will deposit-cash in the.maintenance ascrow account in an
amount equal to five percent (5%) of the Facility's estimated gross income for the
ensuing Contrac{ Year, less an amount equal to the Facility's actual maintenance,
repair and replacement expense {maintenance expenses) incurred during the prior
Contract Year.
4.1 .8.3 The maximum amount of deposit retained in the
maintenance reserve account shal! be two hundred thousand dollars ($200,000.001.
This maximum amount will be adjusted either upward or downward to reflect current
replacement cost of the turbine/generator. This adjustrnent will bs mada at a minimum
every fifth Contract Year during the term of this Agreement and will be based on tho
Handy-Whitman lndex "CostTrends of Electricity Utility Construction .. Plateau Region"
-- "Hydro Production Plant' as published by Whitman Requardt & Associates, 2315
Saint Paul St, Baltimore, MD 21218.
4.1.8.4 At the time Seller makes the deposit described in
paragraph 4,1,8.2, Seller will provide both the escrow manager and ldaho Power with
a report prepared by an independent accounting firm showing the prior Contract Yea/s
actual maintenance sxpenses, identified by appropriate FERC maintenance account
number, and the estimate of the Facility's gross income for the ensuing Contract Year
used to compute the deposit amount, together with documentation supporting that
estamate of gross income.
4.1.8.5 lf Seller determines that the maintenance expense for a
Contract Year will exceed five percent (5%) of the Facility's estimated gross income
for that Contract Year, the Seller may request that the escrow manager release funds
from the maintenance escrow account in an amount sufficient to pay the anticipated
additional maintenance expenses. The request must include documentation supporting
the Seller's projection of excess maintenance expense, identified by appropriate FERC
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maintonance account number, and such documentstion shall be submitted to both the
. escro-w- manager..and- ldaho- Power, - Following-receipt-of-the reguest.and. documen---- -
tation, the gscrow manager, shall, within five (51 working days, release the raquired
funds to Seller.
4.1 .8.6 At the end of each Contract Yoar, Seller will provide ldaho
Power with evidence of compliance with the maintenance escrow account
requirements set out in thls Agreement and Commission Order Nos 21690 and 2180O.
This evidence of compliance wil! be provided In a manner and form acceptable to ldaho
Power. The maintenance escrow fund will be subject to the llen rights described ln
4.1.9 below.
4.1.9 Securiw lnterests-Provide ldaho Power with acceptable security
against Seller's default under this Agreement. Acceptable security will conform to Commission
Order Nos 21690 and21800 and may include, but will not be limited to, titls insuranco,
security interests in the real property associated with the Facility, equipment, fixtures,
contracts, permits, the FERC license or exemption from licensing, water rights, including
evidence of third party downstream water rights, easements, rights-of-way, funds held in
escrow in which Selter has an interest and that relate to the operation of the Facitity, and other
reasonable security arrangements consistent with the Facility's financing and ownership
arrangements.
4.1 .9.1 ldaho Power's security interests will be superior and senior
to all liens other than the first moftgage lien and other security interests permitted in
accordance with paragraphs 4. 1 .9.2.
4.1.9.2 lf Seller desires to incur a first mortgage lien or other
security interests that will be superior to ldaho Power's security interests in the
Facility, at least twenry-ons (21 ) days prior to their execution Seller shall provide ldaho
Power with draft copies of the deeds of trust, mortgages and other security
agreements that will be used to secure such first lien. Upon their exscution Seller shall
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provide ldaho Power with copies of the executed first lien documents. The executed
first_ lien d-o-qu-m_en!c -shgll n-a!. b.c -ass-'gn"ed,-.ameoded,--mo-d[fied, or -extended,- and no-
replacement or refinancing of any nature shall be undertaken, without ldaho Power's
prior written consent which consent shall not be unreasonably withheld. ln no event
willtha amount of any first mortgage lien exceed S700,000. The total arnount of atl
refinanced or replaced first liens shall not exceed the unpaid principal balance of the
first rnortgage liens they replace.
4.1.9.3 Other than the first mortgage liens permitted herein, or
temporary mechanic's, statutory or similar liens incurred in the ordinary course of
business in an amount not to exceed in aggregate five thousand dollars (95,000) Seller
will not permit any liens or encumbrances of any nature whatsoever to be placed on
the Facility without ldaho Power's prior written consent, which consent will not be
unreasonably withheld. lf any unpermitted lien or encumbrance is placed on the
Facility, Seller will provide ldaho Power with a bond, insurance or other security
acceptable to ldaho Power in an amount sufficient to secure the full discharge of such
unpermitted lien or encumbrance.
4.1.9,4 tf, after the initial first lien has been established, Seller
desires to assign this Agreement or assign, replace or refinance said first IiEn, Seller will
reimburse tdaho Power for the reasonable out-of-pocket costs ldaho Power incurs for
document review and revision including any consents to assignment or subordination
agreements that Seller requests from ldaho Power. ldaho Power's out-of-pocket costs
will include but not be limited to filing fees, tiile insurance premiums, and fees of legal
counsel.
4.1.10 Confirmgtion - Obtain written confirmation from ldaho Power that all
conditions to interconnection have been fulfilled. such written confirmation shall not be
unreasonably withheld by ldaho Power.
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ARTICLE V: TERM. EARLY TERMINATION, AND OPERATION DATE
- - 5...1 Term - Except.as.q$gfWiSe prgvidg{, thjq Agr-eemgnt shall.be-cqm9_Cff_6qli-v9 _
on the date first above written, and shall continue in fullforce and effect for a period of thirty-fiv€ (351
Contract Years.
5.2 Earlv Termination - Either Party may terminate this Agreement at the end of the
twentieth, twenty-ffth, or thirtieth Contract Years by giving the other Party written notice of
termination a minimum of one (1! year prior to the beginning of the twentieth, twenty-flfth, and
thirtieth Contract Years orovided, @9f, that neither Party shall be allowed to terminate until at
least five (51 years after the date of expiration of the initial permansnt first lien financing for the
proiect.
5.2.1 Liouidated Administrative Costs - lf either Party exereises its
option to terminate, in addition to any payments due under paragraph 21.3, the Perty
initiating termination will pay the other Party liquidated administrative costs which will
be determined according to the following formula:
(kwhl x (Rate/kWh) x {Percent} = liquidated administrative costs
Where:
"kwh" is the Annual Net Firm Energy amount shown in paragraph 6.3; and
"RatB/kWh" is the sum of the base payment shown in paragraph 7.1.1 plus the
adjustable payment in accordance with paragraph 7,1.2 as set on the July 1st
immediately prior to the notification of intention to terminate; and
"Percent" is a multiplier based on the following schedule:
4 Year's prior notice of termination: 1.5%
3 Year's prior notice of termination: 2.0%
2 Year's prior notice of termination: 2.5%
1 Year's prior notice of termination: 3.0%
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5.2.2 ldaho Power - Early termination under this paragraph by ldaho Power
_.ls not a default by the Seller and will_not constitute a permanent cuftailment. under
paragraph 21.3.
5,2,3 $ellet - Early termination under this paragraph by the Seller witl
constitute a permanent curtailment under paragraph 21.3.
5.3 Ooeration Date - The Operation Date may occur only after Seller has achieved
the First Energy Date, and the necessary degree of completion and reliability has been demonstrated
to ldaho Power's satisfaction, and ldaho Power has confirmed that satisfaction in writing. Seller shall
have the dutl, to obtain that confirmation and it wlll not be unreasonably withheld by ldaho Power.
Prior to the Operation Date, Seller must provide the following:
(1) As-built drawings of the Seller-furnished lnterconnection Facilities, and
l2l An executed Enginee/s Certification of Design & Construction
Adequaey, and an Engineer's Certification of Operations and Maintenance ('O&M"l Policy as described
in Commission Order No 21690. These cenificates witl be in the form specified in Appendix F, but
may be modified to th€ extent necessary to recognize the different engineering disciplines providing
tho certificates.
ARTICLE VI: SALE OF NET FIRM ENERGY
6.1 Deliy.erv--A.nd Acceotance of Net Firm Eneroy - Except when either Party's
performance is prevented by events of foree majeure (Article XVll or otherwise excused as provided
herein, ldaho Power will purchase and Seller will sell all of the Net Firm Energy and Surplus Energy
produced by the Facility and delivered by Seller to the Point of Delivery.
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6.2 Seasonal Net Firm Enerov Amounts - Based on long-term historical water flow
records and long-term average energy production estimates based thereon, Seller estimates that it can
deliver Net Firm Energy in the following monthly amounts:
Season 1
Season 2
March
April
May
June
July
August
September
October
November
December
January
February
0
446,515
892,746
kwh
kwh
kwh
927,547
1,012,953
985,026
887,890
kwh
kwh
kwh
kwh
Season 3
6.3 Annual Net Firm Enerov Amount - The Annual Net Firm Energy amount shall be
5,798,590 kWh and shall be the sum of the three (3) Seasonal Net Firm Energy amounts Seller
specified above. At ldaho Power's option the Annual Net Firm Energy amount and the resulting
Appendix D lump sum repayment amount may be adjusted based on the actual performance of the
Facility.
6.4 Averaoe Water Conditions - The Net Firm Energy amounts Seller has estimated
it can supply are based upon the anticipated tong-term average water flows at the Facility. The Parties
have reviewed these anticipated water flows, Seller's water right filings and the water records
supporting those projected water flows and have agreed that, for purposes of this Agreement, the
projected water flows used to calculate the Annual Net Firm Energy amount in paragraph 6.3 are
reasonable and shall constitute the water flows available to the Facility under "average" water
conditions. No later than one hundred twenty {120} days after the Operation Date, Seller will install
such water flow measuring equipment as is reasonably reguired to permit the Parties to monitor the
water flows at the Facility site. Seller will operate and maintain this water flow measuring equipment
and will perform such other water flow analyses as may be required to cairy out the provisions of
Article XXl.
512,497
133.416
0
0
0
kwh
kwh
kwh
kwh
kwh
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6.5 Net.Fi(m,,,Enerov.9hanoes-
6.5.1 lncreased Generation Caoabilitv.= lf, at any time during the term-of this
Agreement, as a result of some action by Seller, i.e. procurement of additional tong-term water
supplies or improvements to the efficiency of the installed genErating equiprnent, Seller intends
to permsnently increase the amount of Annual Net Firm Energy from the Facility above the
amount specified in paragraph 6.3 above, Seller will promptly notify ldaho Power of that intent.
lf ldaho Power concurs that Seller is capable of actually providing such increased Net Firm
Energy, ldaho Power will have the option to purchase this increased amount of Net Firm Energy
in accordance with eithor of the following alternatives: (1 ) the purchase will be under the same
terms and conditions of this Agreement except that the rate for the incremental increase of Net
Firm Energy shall not be the rate in paragraph 7.1 of this Agreement, but instead will be priced
at the appropriate firm energy rate in effect at the time of such increase; or (21 the purchase
will be made under a separately negotiated agreement. The choice of purchase alternative will
bE ldaho Power's,
ARTTCLE VII: PURCHASE PRICE AND METHOD OF PAYMENT;
ADJUSTMENT OF PURCHASE PRICE
7,1 Net Firm Enerov Purchase Price - The price to be paid to Seller for Net Firm
Energy will be tre sum of the following paymcnts:
7,1,1 Base Pavment -
SEason 1 36.03 Mills/kWh
Season 2 58.82 Mills/k\Mh
Season 3 49.02 Mills/kWh
7,1,2 Adlustable Pavment - ln addition to the base payrnent specified in
paragraph 7.1.1, ldaho Power shall pay to Seller an adjustable payment which shall be
established by the Commission and subject to change pursuant to Commission Order effective
on July 1 of each year during the term of this Agreement, While the PartiEs do not know what
the adjustable payment amount will be as of the Operation Date under this Agreement, the
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Pardes acknowledge that the adjustable payments as of the date of the signing of this
Agree. me.nt_ a_r-q as_ fpllo_ws :
Season 1 7.34 Mills/kWh
Season 2 11.99 Mills/kWh
Season 3 9.99 Mills/kWh
7.2 Surolus Enerov Purchpse Price - Surplus Enargy will ba purchased at the non-
firm avoided energy rate computed in accordance with Option B in ldaho Power's Tariff 101, Schedute
86 or with its successor schedules as approved by the Commlssion.
7.3 ContinuinoJurisdictionoftheCommission - This Agreement is a special
contract and as such, the rates, terms and condhions contained in this Agreement will be construed
in accordance with ldaho Power Comoanv v. ldaho Public Utitities Cg,Lnm'n and Aftpa.Egglgy, Lre,
107 ldaho 781, 693 Pzd 427 (19841, ldaho Power Comoanv t& ldehg Public Utilities Comm'n, 1O7
ldaho 1 122, 695 P2d 1261 {ldaho 1985}, Afton -hgrgy, lne, .u, tdaho Power Comoanv, 11 I ldaho
925, 729 P2d 4OO (t 986), Section 21O ot the Public Utilities Regulatory Poticies Act of 1978 and 1 8
cFR !292.303-308.
ARTICLE Vlll: FACILITY AND INTERCONNECTION
8.1 Desion of Faciliw - Seller shall design, construct, lnstalt, own, operate and
maintain the Facility and any Seller owned lnterconnection Facilities so as to allow safe, reliable
delivery of electric energy to ldaho Power's system for the futl term of this Agreement.
8.2 lnterconnection Facilities - ExceptasspecificallyprovidedforinthisAgreement,
interconnection of the Facility will be in accordance with Schedule 72. Selter will pay al! costs of
interconnecting the Facility with ldaho Power.
8.3 ldah-qJower Review - To assure the Facility and Seller-furnished lnterconnection
Facilities are of suitable size and are compatible wtth ldaho Power's system, Seller shall submit the
designs, plans, specifications and performance data for the Facility and Seller-furnished lnterconnection
Facilities to ldaho Power for review. ldaho Power shall, in writing and in conformance with paragraph
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4.1.5, notify Seller of lts acceptance and confirmation of system compatibilW or conversely, notify
-Seller,._in. writing,_ol_ any changes which,. consistant.with Prudent Electrical .Practices, -ldaho Power.-
detErmines ars necessary to assure the safe delivery of electric energy from the Facility to ldaho
Powe/s system.
ARTTCLE lX: DISCONNECTION EOUIPMENT
9.1 Disconneet Eouioment - ldaho Power will, at Selter's oxp6nss, provide, own,
operate, and maintain att Disconnection Equipment. At Seller's reguest, ldaho Power will provide Seller
wath the general specifications and an itemization by category of the costs of such Disconnection
Equipment. ldaho Power will establish the settings of Disconnection Equipment to disconnect auto-
matically from the Facility for the protection of ldaho Power's system and personnel consistent with
Prudent Electrical Practices. Upon Seller's request, ldaho Power will notify Seller as to the original
setting and any adjustments thereof. Except as otherwise required by Prudent Electrical Practices. Dis-
connoction Equipment will be designed so thatthe closure of any breaker or other disconnecting device
which connects the Facility to ldaho Power's system shall be controlled by equipment which will
perform thE following:
(1) Automatically monitor the status of the electrical system on ldaho
Powsr's side of the disconnecting device; as to voltage and frequencyi and
l2l Prohibit ctosure or reconnection until voltage and frequency have been
within approved limits for a continuous period of not less than five (5) minutes; and
(31 Operate so that if ldaho Power's system is de-energized within sixty
(601 seconds after closure of the disconnecting device, the disconnecting device will immediately open
and not close again until it has been manually reset and/or ldaho Power can safely reclose the
Disconnesting Equipment.
9.2 Securiw of Disconnqcl.Eguioment - The Disconnection Equipment will be
located in an enclosure secured by a lock or otherwisa secured in a manner designed to gnsurs that
only ldaho Power's authorized personnel will have access to the disconnecting devices.
-1 5-
9.3 Remote Disconnection - Other Disconnection Equipment, including equipment
.. -which wjll-Brqvide ldaho Power:s gperating.personnel with the abitity to-r.emotely- co.Dtrol andmo-nito-r: -
the status of the breaker or other disconnecting device by radio or hard-wire circuit between the
Facility and the Designated Dispatch Facility may be specified by ldaho Power when, in ldaho Power'g
reasonable iudgment, such equipment is reguired by Prudent Electrical Praclices, Seller recognizes that
such remote control equipment may not initially be required by ldaho Power, but at suctr time as
operating conditions on ldaho Power's system dictate, ldaho Power will install this remote control
equipment at Seller's expense. lf Seller disputes tdaho Power's determination that the installation of
such remote Disconnectlon Equipment is required, such dispute shalt be submitted to the Commission
for resolution.
9.4 Interferencq with Disconnection Eouipment - lf Seller attempts to modify, adjust
or otherwise interfsre with the Disconnection Equipment or its enctosure, such action shall constitute
an event of default pursuant to Article XXI and a material breach of this Agreement.
ARTICLE X: METERING
10.1 Meterino and Telemetrv - ldaho Power shall, for th6 account of Seller, provide,
install, and maintain required Metering Equipment to be located at a mutually agreed upon location to
record and measure power flows to ldaho Power in aecordance with the standards set forth in
Appendix A of this Agreement. lf required by ldaho Power, metering will also include measurement
of kilovar-hours in a manner agreed to by both Parties. All Metering Equipment and installation costs
shall be borne by Seller, including costs incurred by ldaho Power for inspecting and testing such
equipment at reasonable intervals at ldaho Power's actual cost of providing this Metering Equipment
and services. The point of metering shall be at the location described in Appendix B of this Agreement.
All metars used to determine the billing hereunder shall be seated and the seals shall be broken only
by ldaho Powgr when the meters are to be inspected, tested or adjusted.
1O,2 Meter lnspection - ldaho Power shall inspect and test all meters upon their
installation and at least once every four (41 years thereafter. lf requested by Seller, ldaho Power shall
-1 6-
make a spociel inspection or test of a meter and Seller shall pay the reasonable costs of such sp€cial
inspeotiqn-.- Both_ Pa"rties shall ba notified-of the- time-w-hen. any inspection or test shall-take. placa, and
each Party may have representatives present at the test or inspection, lf a meter is found to be
inaccurate or defective, it shall be adjusted, repaired, or replaced, at ldaho Power's 6xpense, in order
to provide accurate metering. lf a meter fails to register, or if the measurement made by a meter
during a test varies by more than two perce ntl2%lfrom tho m€asuremsnt made by the standard ,neter
used in the test, adjustment (either upward or downward) to the payments Selter has received shal!
be made to correst thoss payments affected by the inaccurate meter for the actual period during which
inaccurate measurements wers made. lf the actual period cannot be determined, corrections to the
payments will be based on the shorter of (1) a period equal to one-half the time from the date of the
last previous test of the meter to the date of the test which established the inaccuracy of the mster;
or (21six [6) months.
1O.3 TelqEnetrv - Consistent with Appendix A of this Agrsement, ldaho Power will
install, operate and maintain at Seller's expens€ metering, communications and telemetry equipment
which will be capable of providing ldaho Power with continuous instantaneous telemetry of Seller's
net generation to ldaho Power's Designated Dispatch Facility.
ARTICLE XI: RECORDS
1 1.1 Maintenance of Records - Seller shall maintain at the Facility or such other
location mutualty acceptabte to the Parties, adequate metering and related power production records,
in a form and content recommended by ldaho Power.
11.2 lnsoection - Either Par4r, after reasonable notice tothe othsr Party, shallhave
th6 right, during normal business hours, to inspect and audit any or all such metering and related power
production records pertaining to Setler's account.
-17-
ARTICLE Xll: PROTECTION
. - .12.1 Seller-shall-construct, operate and maintain the-Facility-and Seller:furnished--.
lnterconnestion Facilities in accordance with Appendix A, Prudent Electrical Practices, the National
Electrical Code, the National Electrical Safety Code and any other applicable local, state, and federal
codes. lf, in the reasonable opinion of ldaho Power, Seller's operation of the Facility or lnterconnectaon
Facilities is unsafe or may otherwise adversely affect ldaho Power's equipment, personnel, or service
to its customers, ldaho Power may physically interrupt the flow of energy from the Facility or take such
other reasonable steps as ldaho Power deems appropriate. Except in the case of an emergenc"y, ldaho
Power wall attempt to notify Seller of such interruption prior to its occurrence as provided in paragraph
13.8. Seller shall provide and maintain adequate protec-tive equipment sufficient to prevent damage
to the Facility and Seller-furnished lnterconnection Facilities. ln some cases, some of Seller's
protectave relays will provide back-up protec'tion for ldaho Power's facilities. ln that event, ldaho
Power willtest such relays annually and Seller will pay the actual cost of such annual testing.
ARTICLE Xlll: OPERATIONS
13.1 Emeroencv Conditions - Seller agress that in ths event of and during a period
of a shortaga of power on ldaho Power's system as declared by ldaho Power in its reasonable
discretion, Seller shall, at ldaho Power's request and within the limits of reasonable safuty requirements
as determined by Seller, use its best efforts to provide the reguested energy, and shall, if necessary,
delay any scheduled shutdown of the Facility.
13.2 Communications - ldaho Power and Seller shall maintain appropriate operating
communications through ldaho Power's Designated Dispatch Facility, and Seller shall report to ldaho
Power at the times and in the manner set forth in Appendix A of this Agreement.
13.3 Enerov Acceotance - ldaho Power shallbe excused from accepting and paying
for Net Firm Energy delivered by Seller to the Point of Delivery under the following circumstances:
13.3.1 lf it is prevented from doing so by an event of force majeure.
13.3.2 lf ldaho Power determines that curtailment, interruption or reduction
-1 8-
of Net Firm Energy deliveries is necessary because of line construction or maintenance
requiraments, emergencies, operating conditions on its system. or as otherwise required by
Prudent Electrical Practices. lf, for reasons other than an event of force majeure, ldaho Power
requires such a curtailment, interruption or reduction of Net Firm Energy deliveries for a period
that exceeds twenty (20) consecutive days, beginning with the twenty-first day of such
interruption, curtailment or reduction, Seller will be deemed to be delivering Net Firm Energy
at a rate determined by dividing the monthly Net Firm Energy amount specified in paragraph
6.2 for the month in which the interruption or curtailment occurs by the number of hours in
that month. ldaho Power will notify Seller when the interruption, curtailment or reduction is
terminated.
13,4 Voltaoe Levels - Seller shall use its best efforts to minimize voltage fluctuations
and to maintain voltage levels acceptable to ldaho Power. ldaho Power may, upon one hundred eighty
(1 801 days' notice to Seller, change its nominal operating voltage level by more than ten percent (1 0%l
at the Point of Delivery, in which case Seller shall modify, at ldaho Power's expense, Seller's
equipment as necessary to accommodate the modified nominaloperating voltage level.
13.5 Generator Ramoino ' ldaho Power shall have the right to limit the rate that
generation is changed at startup, during normal operation or following reconnection to ldaho Power's
system. Generation ramping may be required to permit ldaho Power's voltage regulation equipment
time to respond to changes in power flow.
13.6 Scheduled Maintenance - On or before January 1 of each year, Seller shall
submit a written proposed maintenance schedule for that year and ldaho Power and Seller shall
mutually agree as to the acceptability or unacceptabitity of the proposed date(s), The Parties'
determination as to the acceptability of Seller's timetable for scheduled maintenance will take into
consideration Prudent Electrical Practices and neither Party shall unreasonably withhold its acceptance
of the proposed date for scheduled maintenance.
13.7 Maintenance Coordination - The Parties shall, to the extent practical, coordinate
their respective line and Facility maintenance schedules such that they occur simultaneously.
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13.8 -Contact Priorto Curtailment - ldaho Power will make a reasonablo attempt to
cgntag't.Seller prig.t to exercising its rights-to-curtail,-ln-tenupt-of.feduce-de-liverles-fr:om-Selle"r," Seller
understands that in the case of emergency circumstances, no notice will be given to Selter prior to
interruption, curtailment, or reduction.
ARTICLE XIV: INDEMNIFICATION AND INSURANCE
14.1 lndemnification - Each Party shall agree to hold harmless and to indsmnify the
other Party, its officers, agents. and employees against all loss, damage, expense and liability to third
persons for injury to or death of person or injury to property, proximately caused by the indemnifying
Party's construgtion, ownership, operation or maintenanco of, or by failure of, any of such Party's
works or facilities used in connection with this Agreement. The indemnifying Party shal!, on the other
Party's reguest, defend any suit asserting a claim covered by this indemnity. The indemnifying Party
shall pay all costs that may be incurred by the other Party in enforcing this indemnity.
14.2 Insurance - During the term of this Agreement. Seller shall secure and
continuously carry the following insurance coveragesl
14.2.1 Commercial General Liability lnsurance for both bodily injury and
propert'y damage with limits equal to fifteen percent (15%) of the total cost of the Facility, gf
$1,000,000, whichever is greater, each occurrence, combined single limit. The deductible for
such insurance shal! not exceed one-half of one percent (0.5%l of the total cost of the Facility.
14.2.2 All Risk Property lnsurance with minimum limits not less than ninety
percBnt (90%) of the total cost of the Facility. The Property lnsurance coverags will be written
on a replacement cost basis and will include:
(a) Standard fire policy.
(b) Extended coverage endorsement.
(c) Vandalism and malicious mischief endorsement.
(dl The deductible for the above property insurance coverage shall not
excsed five percent (5%l of the total cost of tho Facility g 925,000 whichever is greater.
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14.2.3 Boilerand machinery insurance with minimum limhs not lessthan ninety
.--percent-(9o%.)-of-the-total.cost-of-the-equipment-covered'in.(a) below:--
(a) Allboilerand machinery coverage must bo written on a "comprehensive
form" basis to provide covErage against the sudden and accidental breakdown of all boilers,
machinery and electrical equipment, turbines, generators, and switchgear;
(b) Coverage under this insurance must be written on a 'Replacement
Cost" basis; and
{c) The deductible for this insurance shall not exceed five percent (5%} of
the total cost of the equipment covered in (a) above g 925,000 whichever is greater.
(d) Earthquake & Flood (catastrophic perils) tnsurance with limits not less
than sixty percent (60%) of the total cost of the Facility. The deductible for this insurance
shall not exceed five percent (5%) of the Facility cost.
14,2.4 Business lnterruption (Loss of lncome) lnsurance with minimum daity
limits not less than seventy-five percent 175%l of the Facility's estimated gross daily electrical
revenue and total poliry limits not less than twenty percent l20%l of the Facility's estimated
gross annusl revenue from the sale of electrical energy;
(a) Coverage will include Seller's loss of earnings when business operations
are curtailed or suspended because of a loss due to an insured peril. Coverage may be written
on an actual loss sustained basis.
(b) This insurance coverage must be endorsed to both the AllRisk Property
lnsurance Policy and the Boiler and Machinery lnsurance Policy;
(c) The deductible for this insurance coverage shall not exceed thirty (30)
days gross daily revenues from the sale of electrical energy; and
(d) The estimated gross daily revenue and estimated gross annual revenue
shall be computed on the basis of the kWh produetion estimates contained in paragraph 6.2.
14,2,5 All of the above insurance coverages shall be placed with insurance
companies with an A.M. Best rating of A- or betrer and shall include:
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(a) An endorsement naming ldaho Power as an additional insurgd and loss
pay6e as applicable;
(b) A provision stating that such policies shall not be canceled or their
limits of liability reducod without sixty (601 days' prior written notico to ldaho Power; and
{c) !n the case of the insurance coverages described in sub-
paragraphs 14.2.1, 14,2.2 and 14,2.3 above, the total cost of the Facility will include any
Seller-furnished Disconnection Equipment and/or lnterconnection Facilitias. The totsl cost of
the Facility and total cost of equipment will be adjusted either upward or downward to reflest
the cunent replacement cost of the Facility or equipment. Thls adjustment will be based on
either (11 an appraisal made by, or for, the Seller's insurance company, or (2) the Handy-
Whitman Index 'Cost Trends of Electric Utiliry Construction - Plateau Region' -- "Hydro
Production Plant" as published by Whitman, Reguardt & Associates, 2315 Saint Paul St.
Baltimore, MD 21218. Such adjustment shall be made, at 6 minimum, every fifth Contract
Year during the term of this Agreernent. A copy of these computations and/or appraisals will
be submitted to ldaho Power for ldaho Power's review and approval.
14.3 Seller to Provide Certificates of lnsurance - Seller shall annually furnish ldaho
Power cortificates of insuranco, together with the endorsements required therein, evidencing the
covaraggs as set forth above.
14,4 Seller te Provide CooieE-gf Policies of lnsurance - Wnhin one hundred twenty
(120) days after the Operation Date, and within ninety (90) days of the effective date of any
modifications to tho policy, Seller will furnish to ldaho Power a ceftified copy of the original of each
insurance policy and all endorsements for each of the insurance coverages described abovs. ln the
case of policy renewals. Seller may provide a ceftificate from the insurance carrier that there have been
no changes to the policy in lieu of providing the required certified copy of the policy.
14.5 Seller to Notifv ldaho Power of Laosejf Co-yelaog - lf any of the insurance
coverages required by paragraph 14.2 shall lapse for any reason, Seller witl immediately notify ldaho
Power in writing. The notice will advise ldaho Power of the specific reason for the lapse and the steps
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Seller is taking to reinstate the coverage.
ABTICLE XV: LAND RIGHTS
15.1 Seller to Providg Accesq - Seller hereby grants to ldaho Power for the term of
this AgreemEnt all necessary rights-of-way and easements to install, operate, maintain, replace, and
remove ldaho Power's Metering Equipment, Disconnection Equipment and other Special Facilitias
necessary or usefulto this Agreement, including adequate and continuing access rights on property
of Seller. Seller warrants that it has procured sufficient easernents and rights-of-way from third parties
so as to provide ldaho Power with the access described above. All documents granting such
easements or rights-of-way shall be subject to ldaho Power's approval and in recordabte form.
15,2 Use of Public Biohts-of-Wav - The Parties agree that it is necessary to avoid the
adverse environmental and operating impacts that would occur as a result of duplicate electric lines
being constructed in close proximity. Therefore, subject to ldaho Power's compliance with paragraph
15.4, Seller agreos that shoutd Setler seek and receive from any local, state or federal governmental
body the right to erect, construct and maintain Seller-furnished lnterconnection Facilities upon, along
and over any and all public roads, streets and highways, then the use by Seller of such public right-of-
way shall be subordinate to any future use by tdaho Power of such public right-of-way for construction
and/or maintenance of electric distribution and transmission facilities and ldaho Power may claim use
of such public right-of-way for such purposes at any time. Except as required by paragraph 15.4,
ldaho Power shall not be required to compensate Seller for exercising its rights under this
paragraph 5.2.
15.3 Joint Use of .F?cilities - Subject to ldaho Power's compliance with paragraph
15.4, ldaho Power may use and attach its distribution and/or transmission facilities to Seller's
Interconnection Facilities, hay reconstruct Seller's lnterconnection Facilities to accommodate ldaho
Power's usage or ldaho Power may construct its own distribution or transmission facilities along, over
and above any public right-of-way acquired from Seller pursuant to paragraph 15.2, attaching Seller's
lnterconnection Facilities to such newly constructed facilities, Except as required by paragraph 15.4,
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ldaho Power shall not bE required to compensate Seller for exercising its rights under this paragraph
15.3.
15.4 Conditions of Use - lt is the intention of the Parties that the Seller be left in
substantially dra same condition, both financially and electricatly, as Seller existed prior to ldaho
Power's exercising its rights under this Article XV. Therefore, the Parties agree that the exercise by
ldaho Power of any of the rights enumerated in paragraphs 15.2 and 15.3 shatl: (1) comply with all
applicable laws, codes and Prudent Electrical Practices, (2) equitably share the costs of installing,
owning and operating jointly used facilities and rights-of-way. lf thE Parties are unable to agrsE on the
method of apportioning these costs. the dispute will be submitted to th6 Commission for resolution and
the decislon of the Commission will be binding on the Partios, and (3) shall provide Seller wath an
intErconnection to ldaho Power's system of equal capacity and durability as existed prior to ldaho
Power exercising its rights under this Article XV.
AHTICLE XVI: FORCE MAJEURE
As used in this Agreement, "force majeure" or 'an event of force majeure" means any
cause beyond the control of the Seller or of ldaho Power which, despite the exercise of due diligence,
such Party is unable to prevent or overcome, including but not limited to an act of God, fire, flood,
explosion, strike, sabotage, an act of the public enemy, civil or military authority, court orders, laws
or regulations, insurrection or riot, an act of the elements or lack of precipitation resulting in reduced
water flows for power production purposgs. lf either Party is rendered wholly or in part unable to
perform its obligations under this Agreement because of an event of force majeure, both Parties shall
be excused from whatever performance is affected by the event of force majeure, provided that:
(1) The non-performing Party shall, as soon as is reasonably possible after
the occurrence of the event of force majeure, give the other Party written notice describing the
particulars of the occurrence.
l2l The suspension of performance shall be of no greater scope and of no
longer duration than is required by the event of force majeure.
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(3) No obligations of either Party which arose before the occurrence
-causing the-suspension.of-performance-and-which-could-and-should-have been-fully performed.before- . --.-
such occurrence shall be excused as a result of such occurrence.
ARTTCLE XVll: LIABILITY; DEDICATION
Nothing in this Agreement shatl be construed to create any duty to, any standard of
care with referancs to, or any liability to any person not a Party to this Agreement. No undertaking
by ona Party to the other under any provision of this Agreement shall constitute the dedication of that
Party's system or any portion thereof to the other Party or to the public, nor affect the status of ldaho
Power as an independent public utility corporation, or Seller as an independent indivldual or entity.
ARTICLE XVlllr SEVERAL OBLIGATIONS
Except where specifically stated in this Agreement to be otherwise, the duties,
obligations and liabilities of the Parties are intended to be several and not joint or collective. Nothing
contained in this Agreement shall ever be construed to create an association. trust, partnership, or joint
venture or impose a trust or partnership duty, obligation or liability on or with regard to either Party.
Each Party shall be individually and severally tiable for its own obtigations under this Agreement.
ARTICLE XIX: WAIVER
Any waiver at any time by either Party of its rights with respect to a default under this
Agreement, or with respect to any other matters arising in connection with this Agreement, shall not
be deemed a waiver with respect to any subsequent default or other matter.
ARTICLE XX: CHOICE OF LAWS
This Agreement shall be construed and interpreted in accordance with the laws of the
Sate of ldaho.
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ARTICLE XXI: DISPUTES AND DEFAULT
--21-l--DiillteS --All disputes-related-to or-arising under.this Agreementi includingrbut
not limited to, tho interpretation of the terms and conditions of this Agreement, will be submitted to
the Commission for resotution,
21,2 Default - lf either Party fails to perform any of the terms or conditions of this
Agreement, (an 'event of default") the nondefaulting ParW shall cause notice in writing to be given
to the defaulting Party, specifying the manner in which such default occurred. lf the defaulting Party
shallfai! to cure such default whhin the sixty (601 days after service of such notice. then, and only
then, may the nondefauhing Party pursue lts legal or equitabte remedies
21 ,3 Seller Permanent Curtailment - lf, at any time prior to the end of the tarm of the
Agreement, Seller permanently curtails in whole or in part its long-term average deliveries of the Annual
Net Firm Energy amount specified in paragraph 6.3, Seller shall pay to ldaho Power, as reasonable
liquidated damages arising out of this permanent cuftailment of Annual Net Firm Energy deliveries, the
appropriate lump sum repayment amount specified in Appendix D, multiplied by the difference in
megawatt-hours between the Annual Net Firm Energy amount specified in paragraph 6.3 and the
reduced Annual Net Firm Energy amount after the permanent curtailment. The Annual Net Firm Energy
amount in Article Vl and the resulting Appendix D lump sum repayment amount may be adiusted from
time to time based on the actual performance of the Facility. The lump sum repayment amount will
bear interest from sixty (60) days after ldaho Power gives or receives notice of Seller's permanent
redugtion of the Annual Net Firm Energy amount, until paid, at a rate equal to interest rates specified
in ldaho Code 5 28-2 2-104l2l or hs successor ldaho Code provision in effect during each month of that
period. For purposes of this paragraph, neither reduced deliveries of Net Firm Energy dus to short-term
below-normal, water conditions (paragraph 6.4) nor ldaho Power's voluntary termination in accordance
with paragraph5,2.2 shall be considered a perrnanent curtailment. The Parties further agree that this
paragraph does not constitute a waiver by ldaho Power of its right to pursu€ its remedies under
paragraph 21.6 or by eithar Party of their rightto an award of pre and post judgementinterest, costs
and attorneys fees as permitted by law in any litigation arising out of this Agreement.
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21,4 Securitv for Reoavment Oblioation - During the full term of this Agreement,
Seller will provide ldaho Power with adequate assurance that Seller will be able to repay the amounts
owing tdaho Power if Seller defaults under this Agreement. ln accordance with Commission Order
Nos 21690 and 21800, and Declaratory Order 23949 and subject to the provisions of paragraph 21.2
above, this assurance will be provided as follows:
21 .4.1 lnsurance - Seller shall comply with the provisions of paragraph 14.2. lf Seller
fails to comply, such failure will be an event of default.
(al ln the case of the liability insurance coverage, (paragraph 14.2.11, a
default will be a material breach and may onlv be cured by Seller supplying evidence that the
liability insurance coverage has been replaced or reinstated.
(b) For atl other insurance coverages described in paragraph 14.2, the
default may be cured by replacement or reinstatement of the insurance, or by Seller posting
liquid security in accordance with paragraph 21.5 in an amount equal to one hundred percent
(100%l of the accumulated overpayment liability specified forthat year in Appendix D.
21.4.2 Debt Service Reserve Account - (a) Because the Facility is located on
the canal system of the Milner-Gooding Canal Project and therefore receives the benefits of the
American Falls Reservoir District No. 2's senior water rights, ldaho Power is willing to permit
Seller to establish a debt service reserve account until conforming low water insurance
becomes available. Said debt service reserve account will be separate from the maintenance
escrow account and shall be structured as follows:
(b) During the period of time in which the Facility acts as security for a first
mortgage lien which is senior to ldaho Power's security interest in the Facility as described in
paragraph 4.1.9 above, Seller shall maintain a debt service reserve account in cash or an
irrevocable standby letter of credit in an amount equal to twenty percent l20ohl of the
Facility's estimated gross revenue for the first Contract Year rounded to the nearest $1,000.
(c) Upon full satisfaction of the above-referenced first mortgage lien and
when ldaho Power's security interest becomes the senior security interest in the Facility, the
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sscrow manager will pay to S€ll€r the amount in the debt service resarve account which
- exceeds-five percent-(5%) of-the-Facilityls estimated gross revenue for-the next Contract Year
rounded to the nearest $1,000.
(dl The amount to be retained in the debt service reserve account will be
recalculated every five (51 years to reflect any increases or decreases in thg adjustable payment
amount under paragraph 7,1.2 of this Agreement.
{e} During the period when the Facility is security for a first mortgage lien
that is senior to ldaho Power's lien, the escrow manager of the debt service reserve account
will be instructed to only release funds from the debt service reserve account to the holder of
the first mortgage lien. Funds from said account shall be released only when, and only to the
extent that Seller certifies to the escrow manager that after payment of all operating costs, the
Facility's revenues are insufficient to make full debt sarvice and/or lease payments on th€
Facllity.
(fl During the period when ldaho Power's security interest is the senior
security interest in the Facility, the escrow manager will be instructed to only release funds
from the debt service reservB account to pay operating costs for the Facility.
bl For purposes of the debt service reserve account, operating costs are
limited to those costs necessary for the operation of the Facility such as taxes, insurance
exponses, lease payments and other ordinary and necessary operating expens€s. Operating
costs shal! not include any disbursements other than lease payments which would constitute
a profit or return on investment.
(hl After any release of funds by the escrow manager, Seller shal! be
obligated to restore the debt service reservo account to the amounts provided for in paragraphs
21,4,21b1 and (c), which ever is applicable, prior to Seller disbursing funds which woutd
constitute a profit or return on investment. Until the debt service reserve account is fully
restored, Seller will, within sir$y (60) days of the completion of each Contract Year, provide
the escrow manager and ldaho Power with a report prepared by Seller's outside accountants
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showing that Seller has not breached its obligations under this paragraph 21 .4.2(h).
(i) Any breach of paragraph 21,4,21hl,by Seller will be an event of default
and wil! require posting liquid security in accordance with paragraph 21.5 in an amount equal
to one hundred percent (100%) of the accumulated overpayment amount specified forthat
year in Appendix D.
21 .4.3 Enoineer's Certification - Every three (3) years for the first twelve (12)
years after the Operation Date, and every two (2) years thereafter during the full term of this
Agreement, Seller will supply ldaho Power with a Certification of Ongoing O&M from a
Registered Professional Engineer licensed in the State of ldaho, which Certification of Ongoing
O&M shall be in the form specified in Appendix F. Seller's failure to supply the required certi-
ficate will be an event of default. Such a default may be cured by Seller providing the required
certificate or by posting liquid security in accordance with paragraph 21 .5 in an amount equal
to twenty percent l20o/ol of the accumulated overpayment liability specified for that year in
Appendix D.
21.4.4 Maintenance Escrow - During the full term of this Agreement, Seller
shatt maintain and fund the maintenance escrow account described in paragraph 4.1.8 and
Commission Order No 2'1690. lf at any time Seller fails to maintain or fully fund that
maintenance escrow account, such a failure will be an event of default, Such default may be
cured by reinstating the required reserve fund or by Seller posting liquid security in accordance
with paragraph 21.5 in an amount equal to twenty percent l20o/ol of the accumulated
overpayment liability specified for that year in Appendix D.
21.4.5 Securitv lnterests - During the full term of this Agreement. Seller shall
maintain compliance with all of the requirements of ldaho Power's security interests described
in paragraph 4.1.9 of this Agreement and Commission Order No 21690. Seller's failure to
comply with those requirements, will be an event of default and in addition to any other
remedies available under this Agreement, Commission Order No 21690, and the security
interests, Seller will be required by ldaho Power to post liquid security in accordance with
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paragraph 21.5 in an amount equal to thirty-five percent (35%l of the accumulated
overpayment liability specified for that year in Appendix D. Seller recognizes that in
accordance with Commission Order No 21690, an event of default under either or both of
paragraphs 21.4.3 or21.4.4 constitutes an event of default under paragraph21.4.5 and in
that event the obligation to post liquid security under paragraphs 21.4.3 through 21.4.5 is
cumulative.
21.4.6 Licenses and Permits - During the full term of this Agreement, Seller
shall maintain compliance with atl permits and licenses described in paragraph 4.1.1 of the
Agreement. ln addition, Seller will supply ldaho Power with copies of any new or additiona!
permits or licenses Seller is required to obtain during the term of this Agreement including, but
not limited to, the Application for Permit to appropriate water within a reasonable time after
their issuance. At least every fifth Contract Year, Seller will update the documentation
described in paragraph 4.1 .1. lf at any time Seller fails to maintain compliance with the
permits and licenses described in paragraph 4,1 ,1 or to maintain its water rights, or to provide
the documentation required by this paragraph, such failure will be a default.
(a) ln the case of non-compliance with the required governmental permits,
an event of default will be a material breach and may onlv be cured by Seller submitting to
ldaho Power evidence of compliance from the permitting agency.
(b) ln the case of non-compliance with Seller's obligation to secure and
maintain adequate water rights, an event of default may be cured by Seller reacquiring the
required water rights or by posting liquid security in accordance with paragraph 21 .5 in an
amount equal to one hundred percent (100.0%) of the accumulated overpayment liability
specified for that year in Appendix D.
21,5 Liouid Securitv - lf, pursuanttothisAgreementorCommissionOrderNo 21690,
Seller becomes obligated to post liquid security, such obligation may be satisfied by (1) Seller's
depositing cash in an escrow to be held and managed by a bank or savings & loan association located
and in good standing in the State of ldaho. The escrow holder and the escrow instructions will be
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acceptable to both ldaho Power and Seller. Payment of all taxes on the amounts deposited in the
escrow will be thE obligation-of the Sellerr -The liquid-security-escrow-account will be-maintained-
separately from the maintenance reserye account described in paragraph 4.1.8; or (2) Providing tiquid
security in the form of irrevocable standby letter(s) of credit, book entry certificate(s) of deposit or
other cash equivalents acceptable to ldaho Power. The banks, issuing the letters of credit and other
cash eguivalents will be located and in good standing in the Sete of ldaho. Failure to maintain and
provide the tiquid security required by this Agreement and Commission Order Nos 21690 and 21800
shall be an event of default
21.6 Fg.uitable Remedies - lf as described in paragraph 21.3, Seller permanently
curtails all or part of its deliveries of Net Firm Energy to ldaho Power and (11 within three (31 years
after said curtaitment Ssller or its successors or assigns sells or delivers or attarnpts to sell or deliver
said curtailed capacity or energy to any entity other than ldaho Power without ldaho Power's prior
written consent, such sale or delivery or attempt sale or delivery shall be a breach of this Agreement;
or l2l it, within three (3) years after such permanent cuftailment Seller or its successors or assigns
atternpts to require ldaho Power to purchase said permanently curtailed Net Firm Energy at a rate that
exceeds the ratEs contained in this Agreement, such attempt will be a breach of this Agreement. The
remedy at law for the above described breaches shall be inadequate and ldaho Power shall bE entitlsd
to injunctive relief and specific performance of this Agreement. The provisions of this paragraph 21 .6
shall survive any termination of this Agreement (other than an optional termination under paragraph
5.2! for the periods provided for in this paragraph.
21.7 Befund of Lumo Sum Reoavment - lf Seller has made a lump sum repayment
as required by paragraph 21.3 and;
{1} Within three (3) years of said payment Seller becomes capable of resuming
production of the cuftailed Net Firm Energy and offers to resume sales to ldaho Power at the
rates, terrns and conditions contained in this Agreement for the number of Contract Years that
were remaining under this Agreement at the time of the permanent curtailment; then
l2l ldaho Power will resume its purchases from the Facility and will refund
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a portion of the lump sum repayment amount as follows:
_.(a) ----lf"sales'resume-within one tll year of the paym€nt of'tho-lump'sum--- --
repayment amount, ldaho Power will refund 90% of the lump sum repayment amount;
(bl lf sales resume within two (2) years of the payment of the lump sum
repayment amount, ldaho Power will refund 85% of the lump sum repayment amount;
(c) lf sales resume within three (3) years of the payrnent of the lump sum
repaYment amount, ldaho Power will refund 85% of the lump sum rspayment smount.
ARTICLE XXll: GOVERNMENTAL AUTHORIZ.ATION
This Agreement is subiect to the jurisdiction of those governmental agencies having
control over either Party of this Agreament.
ARTICLE XXlll: COMMISSION ORDER
This Agreement shall become finally effective upon the Commission's approval of all
tenns and provisions hereof without change or condition and declaration that all payments to b6 made
to Seller hereunder shall be allowed as prudently incurred expenses for ratemaking purposes.
ARTICLE XXIV: SUCCESSORS AND ASSIGNS
This Agreement and all of the terms and provisions hereof shall be binding upon and
inure to the benefit of the respestive successors and assigns of the Parties hersto, except that no
transfer by merger or otherwise nor any assignment hereof by Seller shall become effeetive without
the written conssnt of ldaho Power being first obtained. Such consent shall not be unreasonably
withheld. This anicle shall not prevent a financing entity with recorded or secured rights from
exercising all rights and remedies available to it under law or contract. ldaho Power shall have the right
to be notified by the financing entity that it is exercising such rights or remedies.
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ARTICLE XXV: MODIFICATION
No.modification-to this-Agreement-shall'be-valid-unless-itis-in-writing-and signed by-
both Parties and subsequently approved by the Commission.
ARTICLE XXVI: TAXES
26.1 Each Party shall pay before delinquency all taxes and other governmental
charges which if faited to be paid when due could resuh in a lien upon the facility or lnterconnestion
FacilitiBs.
ARTICLE XXVII: NOTICES
All written notices under this Agreement shall be directed as follows, and shal! be
considered delivered when deposited in the U S Mail, first-class postage prepbid, as follows:
To Seller:President
Contractor's Power Group, lnc.
Box 820
Twin Falls, lD 83303-0820
To ldaho Power:Vice President, Power Supply
ldaho Power Company
POBoxT0
Boise, ldaho 83707
ARTICLE XXVtll: ADDITIONAL TEBMS AND CONDITIONS
This Agreement includes the following appendices, which are attached hereto and
included by reference:
Appendix A
Appendix B
Appendix C
Appendix D
Appendix E
Appendix F
- Standards for lnterconnection and Metering- Special Facilities, Point of Delivery,
Metering, and Operation Date- Schedule of Required Licenses and Permits- Lump Sum Refund Payment- Operating lnstructions for Plants over 750 kW- Engineer's Certifications
-33-
ARTICLE XXIX. ENTIRE AGREEMENT
- .-.-This Agreement-con$hutes-fie entireagreement-of-the-Parties concerning the-subject
matter hereof and supersedes all prior or cont€mporaneous oral or wrltt€n agreements between the
Parties conceming the Bubiect matter hereof.
lN WTNESS VVI'IEREOF, The Parties hereto have caused this Agreementto be executed
in their respective names on the dates set forth below:
IDAHO POWER COMPANY CONTRACTOR'S POWER GROUP, INC.
By
Power
Dated 4sr/=D 2 17
"Setler'
-- 7' /
'ldaho Powero
-34-
/b&'o^, o, .-G^.f,'t , 1993, before me, the undersisned, a
Notary Public, personally ippeared Jan E Pagf,wood, personally known, who beino duly sworn, did say
that he is the Vice President, Power Supplflof the corporation that exscuted the within instrument
and acknowtedged to me Srat such corporition executed the same as the free act and deed of said
corporation.
lN WITNESS WHEREOF, I have heraunto set my hand and affixed my official seal, the day
and year in this cenificate first above written.
STATE OF IDAHO I
lss
-County-of.Ada ----- - l- --
(NOTARIAL SEALI
a
Residing at Boise, ldaho
STATE OF
County of
1993, before me, the undersigned, a
J J , personally known, who being duly sworn,did
say that he is the Prpsident of the corporation that executed the within instrumant, and acknowledged
to mo that he sxecutd tho samB as the free act and deed.
' lN WTTNESS WHEREOF. I hava hereunto set my hand and affixed my official seal, the day
and year in this certificate first abovB written.
(NOTARIAL SEALI ry Public
Residlng at:
ss
on tns&, / Qaav ot
Notary Public, personally appeared
-35-
APPENDIX A
STANDARDS FOR INTERCONNECTION AND METERING
A-1 GENERAL PROVTS|ONq
A-1.1 lt is the policy of ldaho Power to permit Seller to operato its Facility in parallel with ldaho
Power's electric system, whenever this can be done without adverse effect to ldaho Power's
equipment pErsonnel or other customers.
A-1.2 These guidelines contain the minimum metering, interconneetion, protection, operation, and
communications requirements for the safe and effective parallel operation of Seller's Facility with ldaho
Power's system, Although these guidelines are established to provide a uniform approach for
evaluating Selle/s generation proiects, each interconnection must be examined by ldaho Power indivi-
dually. ldaho Power and the Seller will be guided by this document, which is a part of the Firm Energy
Sales Agreement, in planning an interconnection between tdaho Power's system and the Seller.
A-1.3 ldaho Power may provide limited technical assistance for Seller, but witl not perform any
engineering, construction or repair work on power production equipment.
A.2 GENERAL DESIGN CONSIDERATIONS
A-2.1 All Seller generators largar than twenty (2O) kVA shall be three-phase generators connected
to three-phase circuits. Generators twenty (20) kVA and smaller may be either three-phase or single-
phase, as approved by ldaho Power.
Dus to physical lirnitations within ldaho Power's transmission and distribution systems,
induction machine sizes will be limited to confine voltage flicker within acceptable limits. Each
generation site is unique and ldaho Power will determine the appropriateness of any proposed machine
type for the site and interconnection.
A-2.2 Except in certain instances to be determined by ldaho Power, Seller's generator(sl shall be
isolated from ldaho Power's system by a transformer. Transformer type and connection will be
-36-
specified by ldaho Power. The Seller may be required to limit the fault current contribution to ldaho
Eqwe(s system by generator-impedence,.neutral grounding.-transformer-connections or othermeans..
A-2.3 ldaho Power will not assume any responsibility for protection of the Seller's generator or of any
other portion of tha Seller's electrical equipment. The Seller is fulty responsible for proteeting its
equipment from faults or disturbances on tdaho Power's system. For example, most transmission and
distribution line circuit breakers on ldaho Power's system will reclose automatically after they have
attempted to clear a fautt. The reclose time delays and system impedances arg available from ldaho
Power and should be considered very carefully by the Seller to determine if damage to the Seller's
facility is possible. Dead line and synchronism check systerns can be installed, at Seller's expsnse,
that will minimize the possibility of a line reclosing into a generator while it is still connected to thg
system.
A-2,4 Ssller is hereby notified that certain conditions on ldaho Power's system may cause negative
sequence curents to flow in the seller's generator. lt is the sole responsibilhy of the seller to proteet
its equipment from excessive negative sequence currents, reverse power flow, and single phasing.
A.3 METERING ANq TELEMETRY REOUIREMENTS
A-3.1 Unless otherwise agreed by the Parties, metering will be provided for recording nst output of
the Facility and will be separate from any metering of Seller's load. Metering required will be
determined by ldaho Power on a case-by-case basis, but will generally follow the guidelines below:
A-3.1 .1 Caoaciw Under 750 kW - Two kWh/demand meters; one measuring powerflow
into Seller's facilities and one measuring power flow into ldaho Power's system;
A-3.1 .2 Caoacity 9I750 kW to a999 kW - A bi-directional, electronic meter instattation
with load profiling and communication port capability witl be installed, and connected to the
project voice communications circuit supplied by the developer with a first priorW given to
ldaho Power's use of said communication circuit. An electro-mechanicat kWh backup meter
will also be installed. Additionally, if a project is interconnected with ldaho Power's
transmission systsm, all necessary telelnetry and communication equipment and a dedicated
voice quality unconditioned data line may be installed to provide continuous instantaneous
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telemetering of net generation to ldaho Power's Designated Dispatch Facility;
A-3; 1 :3'-- *' - Canaciw' of'5000' kW'and-Above:A bl-directional,-electronicmeterinstallation"* -
with load profiling and communication poft capability willbe installed, and connectEd to a voice
communications circuit supplied by the developer with a first priority given to ldaho Power's
use of said communication circuit. An eleetro-mechanica! kWh backup meter will also be
installed. ln addition, all necessary telemetry and communication equipment and a dedicated
voice quality unconditioned data line will be installed to provide continuous instantangoug
telemetering of net generation to ldaho Power's Designated Dispatch Facility.
A-4 FACILITY PROTECTION
A-4.1 The Seller has full responsibility for the maintenance of its generating equipment and the
equipment protecting the Facility. lf, in the opinion of ldaho Power, the Seller has failed to provide
proper maintenance of the Facility or its protection equipment, and this failure could adversely impact
ldaho Power or other ldaho Power customers, ldaho Power can require the Seller to cease parallel
operafion.
A.5 SYNCHRONOUS GENERATORS
A-5.1 ldaho Power or the Seller may specify a governor. lf a governor is used, the governor
charagteristics shall be capable of adjustment to at least five percent (5%) speed droop. The initial
droop setting will be five percent (5%1. ldaho Power may specify changes in the setting within the
ftve percent (5%) capability.
A-5.2 A check interlock for synchronizing of the Seller's generaror{sl is required.
A-5.3 Synchronous generators shall be capable of operating continuously at maximum pow6r output
within five percent (5%) of rated voltage and anywhere within a power factor range of from ninety
percont (90%) lagging to ninety-fivs percent (95%) leading.
Unless otherwise approved by ldaho Power, synchronous generators shall be eguipped with
an excitation system and voltage regulator that are capable of automaticalty controlling generator
voltage over the full range of generator power and reactive capability. ln some cases, depending upon
systsm requirements, one or more of the following control methods may be required, as specified in
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Appendix B:
_1-L- -_._epqw,elfastqrlgS_Ulatsll]0ay.b.9_rCqulred_aCJgll_a-s-_a-veltassles.u_lelgri___-_
2l a programmable controller capable of varying the reac-tive output based upon a preset
timE schedule;
3) a remote signal provided by ldaho Power to adjust the voltage or power factor regulator
settings. ldaho Power will provide this remote signal from within ldaho Power's
system and transmit the signal to the Facility at the Seller's expenss, as specified in
B-t 1 of Appendix B.
The generator excitation system shall have over and under excitation limiter equipment which
will permit voltaga regulator action to control the reactive output within the range of the generator's
capability,
The reactive capability of the Facility shall be operated as specified by ldaho Power, within the
generator reactive capability, to regulate either the interconnection voltage or Facility output power
factor or both. ldaho Power will provide the desired voltage, power fastors, and schedules required
by thE Seller to set voltage regulators, pow6r factor regulators and programmed or remote signal
controllers. ldaho Power may change these desired values from time to time as system requirements
change.
lf the Facility is not operated to control reactive output in the manner specified and after
notification, or the Seller does not make necessary corrections within a reasonable time, a default will
be declared pursuant to Article XXl.
A-5.4 Due to thE ability of large synchronous generators to influence ldaho Power's system,
protectivo and control relaying in addition to the usual voltage frequency, and fault relaying will be
specified by ldaho Power. This will consist of generator relaying for phase-to-phase and three-phase
fault detection. ldaho Power will specify the relay type and determine settings. This relay will be
tested annually by ldaho Power and the actual cost of this testing will be paid by the Seller.
A-6 TNpUqION GENERATORS
A-6.1 Overvoltage can become a serious problem when an induction generator and a portion of the
-?o-
transmission or distribution facilities are isolated from the system. Overvoltage relaying shall be
provkled that-willopen-the-generator breaker in the-event'trat'the voltagg reaches predetermined limits.
consistent with ths overvohage capabitity of the generator and the system. Undervoltage protection
may also be required. On larger units, underfrequency and overfrequency relaying may both be
required.
4-6.2 lnduction generators require reagtive support to operate. The supplemental reactive required
is that amount required to correct the Facility to unity pow6r factor. The reactive may be supplied by
either ldaho Power's system or from capacitive correction at the Facitity or both. ldaho Power will
charge the Seller {as specified in Appendix B} for reactive that is provided from ldaho Power's system.
At some Facilities, because of system considerations, it may not be practical to provide all of
the reactive eompensation at the Faciliry. ln these instances, ldaho Power shatl specify the power
factor and compensation necessary at the Facility.
The Seller will have the option to furnash the reactive compensation that is required at the
Facility. lf the Seller furnishes the reactive compensation, the FaciliW must be op€rated at a power
factor that is within five percent (5%) of the specified power factor. The Selter must also design the
Facility to avoid possible overvoltage that can occur under ceftain conditions when capacitors are
applied to the generator terminals.
A-7 pC Tg& CONVERTERS
A-7,1 Direct curent generators may be operated in parallel with ldaho Power's system through a
synchronous inverter. The inverter installation will be designed such that an ldaho Power system
interruption will resuh in the immediate removal of the inverter power flow to ldaho Power. Harmonics
and/or spurious frequencies generated by the Seller's generator-inverter combinations must be limited
to avoid causing any reduction in quality of electric service to ldaho Power's customers.
A,-8 SWTTCHINSREOUIREMENTS
A-8.1 ldaho Power reserves the right to open and secure by lock any disconnecting device without
prior notice to Seller for any of the following reasonsl
A-8.1.1 System emergency;
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A-8.1 .2 lnspection of the Seller's Faciliry protective equipment reveals a condition which
might adversely impact ldaho Power or ldaho Power's
A-8.1 .3 Seller's generating equipment interferes with ldaho Power's customers, or with
ldaho Powe/s system.
A-8.2 Setler shall maintain a written record of att operating (opening and closingf by Seller of the
Seller's interconnection with ldaho Power. Each operation will be recorded by the date, hour and
minute and will include the generator kWh reading at the time of ths operation. This record will be
maintained on a monthly basis and the original will be mailed to tdaho Power on the first business day
of the following month. ldaho Power will provide the forms necessary for filing this monthly switching
rsport.
A-9 FENERAT]ON SCHEpULTNG ANp. B,EpORT|NG
A-9 GENERATTON SCHEDULTNG ANq BEPORTING
A-9.1 For Proiects unde.( 750 kW
A-9.1.1 Each time th6 Seller either opens or closes the Facility's interconnection with ldaho Power,
the dat6, time, and kWh readlng of the generator(s) will be recorded on the Monthly Power Production
and Switching Report (Form CAD-A-1) provided by ldaho Power. This record will be maintained on a
monthly basis.
A-9.1 .2 Wthin the 24-hour period following 12:00 noon on the last day of each month, the Soller
will read the meter(sl which record Facility generation (Facility Output), Station Use lLocal Service),
and Auxiliary Service (if any) and enter those readings on the same Monthly Power Production and
Switching Repon designated in paragraph A-9.1.1 above.
A-9.1.3 The written record of the end-of-month meter readings on the Monthly Power Production
and Switching Report, subject to subsequent review and correction by ldaho Power, will be the basis
of payment for energy purchased by ldaho Power from the Seller. An adjustment in the kWhs
delivered will be made to compensate for the Losses in 8-6.
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A-9.1.4 At the end of each month, the Monthly Power Production and Switching Report will be
mailed to: "-
ldaho Power Company
Operations and Joint Facilities Accounting
POBoxT0
Boise, ldaho 83707
A-9.1.5 Payment to ths Seller will be made no later than thirty {30) days following receipt of tho
Monthly Power Production and Switching Report by ldaho Power.
A-9.2 For Proiects 750 kW and Laroer
A-9.2.1 ln addition to the requirements of paragraph A-9.1.1 through A-9.1.5, Projects larger than
750 kW must meet the requirements of Appendix E.
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APPENDIX B
SPECIAL FAC]LITIES, POINT OF DELIVERY, METERING,
AND OPERATION DATE
PROJECT NO 31615154
MILE 28 HYDRO PROJECT
&I DESCRIPT]ON OF FACILITY
Tha Seller's Facitity is described as Lffjljiffi.#ifr.,{#$senerators with nameplate ratinss of 750 kW
each, 480 Volt, three phase, 60 hertz, driven by Kaplan turbines.
8.2 LOCATION OF FACILIW
The Facility is located in the SW Ouarter of Section 7, Township I South, Range 20 East, Boise
Meridian, Jerome County, tdaho,
8.3 SCHEDULED OPERATION DATE
Seller has selected May 15, 1994, as the Scheduled Operation Date and April 15, 1994, as the
First Energy Date. ln making these selections, Seller recognizes that to allow for an adequate
testing of the Facility's degree of completion and reliability, it must achieve its First Energy Date
at least thirty (30) days prior to the Operation Date. ldaho Power, based on the information
supplied by the Seller, will schedule its construction so that all Special Facilities, Disconnection
Equipment and Metering Equipment will be completed in time so as not to delay Seller achieving
the First Energy Date. However, if Seller fails to pay the costs specified in B-11 below at th€
time specified therein, or materially changes the specifications or design of the Facility or Seller-
furnished lnterconnection Facilities from what was previously provided to ldaho Power, ldaho
Power may be required to reschedule its construction of these facilities which could adversely
impact Seller's ability to achieve its scheduled specified First Energy Date.
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8.4 FAILURE TO ACHIEVE OPERATION DATE
' lf Seller has- not 'achieved the-Operation- Date-'within-eleven-{1-1}-monthsrcfthe-Scheduled -'- ----- - --
Operation Date, such failure shall be deemed to be an event of defautt pursuant to Afticle XXt.
B-5 POINT OF DELIVERY
The Point of Delivery of energy from ths Seller to ldaho Power will be where the Seller's 35 kV,
three phase distribution line interconnec-ts with ldaho Power's fused disconnects located
approximately 3 miles south west of ths project site ln the SW ll4 oi Seaion 29, Township 8
South, Range 20 East, Boise Meridian, Jerome County, ldaho.
8.6 LOSSES
Until modified by mutual agreement, Losses shall be set at 2.OO% of the metered energy
delivered. When Seller has supplied ldaho Power with data needed to properly anatyze the
Losses associated with thE Facility, ldaho Power and Seller will review that data and re-sot the
loss factor for the Facility. lf the Parties are unable to agree, they will submit the dispute to the
Commission for resolution. Any adjustment will be retroactive to fie First Energy Date.
8.7 METERING AND TELEMETRY
The Metering Equipment will be on the 480 Volt side of the Seller's step-up transformer. ldaho
Power provided Metering Equipment will consist of: current and potential transformers, a meter
enclosure, meter test blocks, an electronic bidirectional meter for measuring net generation, and
all meter wiring. Seller provided metering equipment will consist of all conduit and junction
boxes from the metering transformers to the meter enclosure. Seller will install all Seller
provided material as well as the metering transformers and the enclosure. Seller will arrange for
and make available at Seller's cost a telephone circuit dedicated to ldaho Power's use
terminating in an RJ-l 1 receptacle at the meter enclosure. The meter will register kilowatt-hours
and kilowatts of demand. ldaho Power provided meter equipment will be owned and maintained
by ldaho Power, with total cost of purchase, installation, operation, and maintenance, including
administrative cost to be reimbursed to ldaho Power by the Seller.
8.8 SPECIAL FACILITIES
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B-9
ldaho Power will provide a fused disconnect with pole and other necessary materials at the point
of delivery and the upgrade of two 34.5 kV capacitor bank control circuits. The total cost of
these facilities will be reimbursed to ldaho Power by the Seller.
REACTIVE POWER
Totat reactive power required to be supplied by ldaho Power to the Seller is 808 KVAR, based
on information provided by the Seller. ldaho Power will install and maintain facilities on its
system so as to meet this requirement with total cost of installation to be reimbursed to ldaho
Power by the Seller.
DISCONN ECTION EOUIPMENT
Disconnection Equipment is required to insure that the Saller's Facility will be disconnectgd from
ldaho Power's system in the event of a disturbance on either ldaho Power's system or the
Seller's Facility. This equipmsnt is for the protectlon of ldaho Power's equipment only and will
be located at the Seller's Facility. ldaho Power will supply the disconnection equipment which
consists of three l5 kVA transformers with fused disconnects, a 34.5 kV recloser with control
enclosure containing relays and associated logic, 34.5 kV main disconnects, poles, conductor,
anesters, batteries and other miscellaneous hardware. The Seller will provided approximately
50 feet of three phase 35 kV primary underground cabte and a 34.5/19.9 kV grounded wye to
4801277 V grounded wye padmounted transformer. Seller will install all Seller supplied
equipment, control wire and conduit necessary for the operation of the disconnection equipment.
ldaho Power will supply details for the disconnection panel and will test the equipment prior to
operation of the Facility. Sellor will provide drawings of their interconnection wiring for
engineering approval before installation. The total cost of the disconnection equipment.
connection and testing will be reimbursed to ldaho Power by the Seller.
COSTS
The cost of Special Facilities is $5,000. The cost of the metering equipment is $6,129. The
cost of reactive power supplied is $6,787. The cost of the disconnecting equipment is
$47,680. The total cost to be paid by the Seller is $65.596. This represents the amount that
B-10
811
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B-1 2
will be charged by ldaho Power if the Seller makes the payment on or before September 6,
1 993;-lf-the-Seller-doas'not make this payment'by'the' sp€cilled datc,-the-costs-wlll-be subjEct
to update. ldaho Power will not schedule construction or order materials which are not
ordinarily maintained in ldaho Power's inventory until payment has been made. ln addition to
the installation and construction charges above, during tha term of this Agreement, Seller will
pay ldaho Power the operation and maintenance charge specified in Schedule 72
INTERCONNECTIONS TO NON-UTILITY GENERATION or its successor schedules(sl. The total
cost shown above is an estimate calc'ulated on tha basis of average costs, When the actual
total cost is determined, ldaho Power will adjust the total cost amount to reflect the astual total
cost incurred by ldaho Power. Beginning with the month of this adjustment, the operation and
maintenance charges will also be adjusted. Whan the actual total cost is known, within sixty
(60) days ldaho Power will refund any overpayment or Seller will remit any underpayment,
SALVAGE
No later than sifi 16O) days after the termination or expiration of this Agreement, ldaho Power
will prepare and forward to Seller an estimate of the remaining value of those ldaho Power
furnished lnterconnection Facilities described in this Appendix, less the cost of removal and
transfer to ldaho Power's nBarest warehouse, if the lnterconnection Facilities will be removed.
lf Seller elects not to obtain ownership of the lnterconnection Facilities but instead wishes that
ldaho Power reimburse the Seller for said Facilities the Seller may invoice ldaho Power for the
net salvage value as estimated by ldaho Power and ldaho Power shall pay such amount to Seller
within thirty (30) days after receipt of the invoice. Seller shall have the right to offset the
invoice amount against any present or future payments due ldaho Power.
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1
APPENDIX C
SCHEDULE OF REOUIRED LICENSES AND PERMITS
Evidencc of compliancs wittr Part I of tho Federal Power Ast. Acceptable evidence of
compllance wlll be an Order from FERC: (t I issuine a valid License for dre Facilhy, or (21 validly
elompdng fie Facility from Licenslng.
Approved Application for Permit to appropriate wabr for power productlon purposes lssued by
$e ldaho Department of Watsr Resourcas.
Evidencc of compliance with Subpart B of 18 CR i292.207.(al.
2
3
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APPENDIX D
. LUMP.SUM REFUND PAYMENT FOR PERMANENT-CURT.A{LMENT--.
OF PORTION OR ALL OF ANNUAL NET ENERGY AMOUNT
UNDER 3s.YEAR CONTRACT
DOTIARS PER ANNUAL MEGAWATT HOUR
Contract Year
of Curtailment
Commencemsnt
Faciliw.Qggration Date
1 994
1
2
3
4
5
6
7
8I
32
67
105
125
146
167
189
211
233
255
277
29s
320
341
362
382
401
419
435
449
461
470
476
478
476
469
456
435
408
371
323
265
192
105
10
11
12
13
18
14
15
16
17
19
20
22
23
24
25
26
27
28
29
30
31
oo
34
35
32
21
52
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APPENDIX E
OPERATING INSTRUCTTONS FOR PLANTS OVER 750 KW
1. Prior 19 initial start-qo gg least one day in advance gg Proiect shatl:
A.Provide ldaho Power's Systern Scheduling at the Boise Bench System Dispatcting
Center with an estimate of the hourly generation that is expected to be produced
during the first scheduled test day. The phone number for System Scheduling is listed
below.
Notify the Division Substation Supervisor of project start up plans. The phone number
is listed below.
The kWh metEr should be read and entered on the Monthly Power Production and
Switching Report (Form No: Cogen CAD-A-1).
Before 10:00 a.m. on sach normal work day, gftgf $ginitial start-up, the project wlll report
to the system scheduling office the previous day's actual generation based upon midnight to
midnight meter readings and the estimate of generation planned for the following day or
days. The phone number to report the actual generation and scheduling estimate is listed
below. Note that tho System Scheduling number is answered only between the hours of 8
a.m. to 5 p.m, Mountain Time, on weekdays and that generation estimates must be providad
for waelend days and holidays.
Each time the generator breaker is closed or opened (including testing and normal operation),
ldaho Power's system dispatchers must be notified by phone as soon as possibla. Prompt
reporting is very irnpoftant. The Designated Dispatch Facility is manned 24 hours a day,7
days a week, and the phone number is listed below.
ln eddition to promptly notifuing the system dispatchers, the record of each breaker opening
and closing must be entered on the Monthly Power Production and Switching Report
mentioned in 1-C above.
B.
c.
2.
3,
4.
5. For questions or problem concerning:
Power Schedulino:
Svstem Disoatchino:
Meterino: Meter Engineer - Boise
or
Division Metering Supervisor
Payette
Boise
Twin Falls
Pocatello
[phone]
[phone]
[phone]
[phone]
l2o8l322-2029
[phone]
t2o8t 236-7?71
-49
SuFsredons Division Substatlon Supervisor
--Payetp- (20gl 6/*2-628z.*--------Boloa l20gl322-20B4
Twln Falls (2081 736.3237Pocgtello lz08/- 23e-7774
Eillioq:Operations and Joint
Facilities Accountlng - Boige
Conqqqts: CustomerGeneradon. Boise
12081 383-2593
|.2A8, 383-2427
6. Tol! frcs numbere for Operating Reporting:
System Schedullng
System Dlsparching
1-80G356-4328
1-80G'348-4328
-5G,
3Emm"
Re:
An IDACOFP Company
August l,2019
Ted Sorcnson
Mile 28 Hydro Project
C/O Wood Hydro LLC
1032 Grand View Drive
Ivins, UT 84738
208-589-6908
ted@.tsorenson.net
E-mail and U.S. Certified Mail to Ted Sorenson
Mile 28 Hydro Generation Facility
Notification of Lump Sum Repayment Amount for Contract Year25 (June 2018 to May 2019)
Dear Mr. Sorenson,
Mile28 Hvdm Firm Enerw Sales Aer€ement
Idaho Power and the Contractor's Power Group, Inc. ("Sellef') executed a Firm Enerry Sales Agreement
("Agreement") on August 13, 1993, This Agreement has changed ownership several times and most recently was
sold to the Big Wood Canal Company which leases the Mile 28 Hydro Generation Facility ("Facility") to Wood
Hydro LLC. The Facility is an Idaho Power designated network resouroe and the levelized energy rate was based
on expected enerry deliveries to ldaho Power from the Facility. The Facility is required to deliver all of its Net
Enerry to ldaho Power in accordance with this Agreement for 35 Contract Years beginning with the Operation
Date of June 1,1994 through May 31,2029.
Annual Review and Notilicetions
Idaho Power performs annual reviews of all enerry sales contracts to make sure they are in compliance and the
facilities are performing according to their conEacts. It came to Idaho Power's attention during a rccent review
that the Facility has not generated any power for the last 9 months (November 2018 through July 2019) and
continues to remain oflline. Idaho Power was not notified by the Facility at any time in the past 9 months that this
designated network resounoe was going to be taken offline for an extended period of time and during the summer
peak months.
Recent Discussions
On July 31,2019, Miohael Darrington (Idaho Power) and Jerry Jardine (ldaho Power) called Ted Sorenson
(Wood Hydro LLC) and discussed the status of the Facility. Mr. Sorenson reported that beginning with the winter
of 2018, several repairs and replacements were started and some of the repairs and replacements were continuing
with an expected completion date in mid-August 2019. Idaho Power explained that because the Agreement is a
levelized rate confiact, Idaho Power is required to implement paragraph 21.3 of the Agreement for Lump Sum
Repayment Amounts should the Facility fail to deliver the Annual Net Energy Amount agred to by the Seller and
defined in paragraph 6.3.
EXHIBIT B
Pagc t of2
P O Box 70 Boise, Idaho 83707 l22l W ldaho St Boise, Idaho 83702
Lumo Sum Refund Reoavment Amount Calculrtion
Annual Net Energiv Amount
Paragraph 6.3 of the Agreement specifies the Annual Net Enerry Amount for this Facility shall be
5,798,590 kwh.
Failure to Deliver the Annual Net Energy Amount
Paragraph 21.3 of the Agreement specifies if the Facility fails to deliverNet Enerry as stated in Article
6.3 (Annual Net Energy Amount of 5,79E,590 kWh), a Lump Sum Repayment Amount ("Repa5rment
Amount") shall be calculated and payable to Idaho Power.
Calculation
The last completed Conhact Year (6llf20l E to 5/312019) is Contract Year 25. [n accordance with
Paragraph 21.3, the calculation of the Repayment Amount as of the end of Contract Year 25 is as follows:
The Annual Net Enerry Amount of 5,798,590 kWh minus actual Net Enerry delivered during Contract
Year25 of3,355,049kWh,thedifferencedividedby l,000toconverttoMWHandmultipliedbythe
Appendix D Lump Sum Repayment amount for the 25h Contract Year of $476 per annual MWH =
$ 1,1 63,1 25.
Provision for a Pertial Refund of the Reravment Amount
Paragraph 21.7 of the Agreement allows for Idaho Power to refund between 85% and 90% of the Repayment
Amount to the Seller provided that the Facility r€turns to full production within three years of the Repayment
Amount paid to Idaho Power by the Seller. The Facility must demonstrate that they will be able to achieve the
Annual Net Enerry Amount of 5,798,590 kWh for a Contract Year and must accomplish this before the end of the
three-year period to qualifr for the partial refund. Assuming that the Facility will resume sales in 2019, the partial
refirnd to the Seller would be 90Yo of $1,163,125 = $1,046,812 and the remaining balance of $l 16,312 would be
paid by the Seller to ldaho Power and is not refundable.
Reneyment Amount Securitv rnd Pevments
The Repayment Amount of $1,163,125 is now due to Idaho Power. However, Mr. Sorenson provided
documentation about the Facility rcpairs and replacements after the July 3 I , 201 9 phone call and has
demonstrated that the Facility is being prepared to return to service and is expected to continue to deliver the
required Annual Net Energy Amount to Idaho Power for the remaining term of the Agreement. Because of these
assurances, Idaho Power is willing to accept a letter of credit" subject to Idaho Power's review and credit
requirements, as securiSr for $1,046,812. This letterof credit is due within 30 days of the date on this letter. This
security shall be held in place for the next three Contract Years but may be released earlier by ldaho Power when
the Facility returns to full generation, can demonstrate that it will achieve the Annual Net Enerry Amount for the
next Contract Year and provided that the Facility is generating before the end of the three-year period defined in
paragraph 2L7. Beginning with the August 2019 Net Enerry Payment for the Facility, the I0% balance of
$l 16,312 wilt be netted against the Facility's monthly Net Energy payments until the balance is zero. The Seller
also has the option of making a non-refundable payment of $l16,312 in cash to ldaho Power instead of netting the
monthly energy payments with the balance of the Repayment Amount due.
P O Box 70 Boise, Idaho 83707
Page 2 of2
l22l W ldaho St. Boise, Idaho 83702
A"? wooDHYDRo
1032 Grandview Drive
Ivins, UT 84738
Office (435) 429-L878
Fax [phone]
ted @tsorenson. net
August 7,2019
Jerry Jardine
Idaho Power Company
1221 W Idaho Street
Boise, lD 83702
Re: Mile 28 Hydro Generation Facility
Dear Jerry,
We are in receipt of your letter dated August I regarding the Mile 28 Project and the repairs we
have been performing there that have taken longer than anticipated. While we acknowledge that Idaho
Power has not received the deliveries it expected from the project this summer, we have read through the
Firm Enerry Sales Agreement and do not read the provisions you set out in your letter as requiring a
Lump Sum Repayment.
You highlight Section 21.3 as providing for a Lump Sum Repayment in an amount that is then
calculated in the letter. However, Section 21.3 provides for such repayment where the Seller
"permanently curtails" its long-term average deliveries. There is no permanent curtailment in this
circumstance. We are working very hard to make repairs at the facility to improve its functionality. We
are rebuilding the switchgear to prevent the types of trips that have happened in the past, improving the
trash rake system to deal with the extremely high volume of weeds and debris at the facility, and are
winterizing the facility to take advantage of available recharge water. We anticipated that these repairs
would be complete during the winter months when the project does not typically produce. As
unfortunately sometimes happens, these repairs have taken much longer than planned, despite our diligent
efforts. We appreciate Idaho Power's concerns and we want to do our best to find a solution that is
agreeable. As mentioned above, we anticipate the project being able to make up this lost production once
we finish our repairs and can take advantage of recharge water. We believe that these repairs will be
complete within the next two to three weeks.
We appreciate your time and consideration and look forward to finding an agreeable solution.
We would also like to extend an invitation to your team to come visit the facility once it is complete so
that you can see the results ofour efforts.
Sincerely
Ted S Sorenson, Manager
Wood Hydro LLC
EXHIBIT C
sEm.
Re:
AnIO COQPCompany
August 14,2019
Ted Sorenson
Mile 28 Hydro Project
C/O Wood Hydro LLC
1032 Grand View Drive
Ivins, UT 8473t
208-589-6908
[e-mail]
E-mail and U.S. Certified Mail to Ted Sorenson
Mile 28 Hydro Generation Facility
Second Notice of Lump Sum Repayment Amount for Conhact Year 25 (June 2018 to May 2019)
Dear Mr. Sorenson,
Idaho Power received your letter dated August7,20l9 (*WH Lefter") regarding the Mile 28 Hydro failure to
achieve the Annual Net Firm Enerry amount for Contact Year 25. Attached is the Idaho Power Letter dated
August 1,2019 ("PC [,etter') for reference.
In your WH Letter, you rcquested drat we find an agrteable solution. However, Idaho Power is required to
enforce the terms of the Agreement and we cannot sgree to different terms which will harm the ldaho Power
customers while benefiting the Facility. Your WH l.etter also refercnced only two words ("permanently curtails")
from a sentence in Paragraph 21.3 of the Agreement and you stated that the Facility's ongoing curtailment, which
has lasted for 9 months, has caused the Facility to miss the Annual Net Enerry Amount for Contract Year 25 by
42Yo and the Facility has yet to deliver any enerry to ldaho Power for Contract Yeal.26, is "not a perman€nt
curtailmenf'. The complete sentence in paragraph 21.3 that you refercnced reads, "If, at any time prior to the end
of the term of the Agreement Seller permanently curtails in whole or in part its long-term average deliveries of
the Annual Net Firm Energy amount specified in paragraph 6.3, Seller shall pay to ldaho Power. as reasonable
liquidated damages arisinc out of this permanent curtailment of Annual Net Firm Energy deliveries, the
appropriate lump sum repayment amount specified in Appendix D, multiplied by. . . . . ..curtailment. Paragraph
21.7, Refund of Lump Sum Refund, goes on to explain that if, within 3 years, the Seller becomes capable of
resuming production ofthe curtailed Net Firm Energy and offers to r€sume sales to Idaho Power, then Idaho
Power will refund up to 90% of the Repayment Amount provided the curtailment is resolved during that 3-year
period. It is clear from paragraph2l,7, that the Agreement recognizes the Facility may resolve the cause of the
curtailment to their Net Firm Enerry deliveries, which would apply to your circumstance if ttre Facility starts
delivering the Annual Net Enerry Amount again, and permits ldaho Power to refund up to 90olo of the lump sum
repayment that the Seller paid to ldaho Power provided the curtailment is resolved during that 3-year period.
Paragraph 21,7 also allows ldaho Power to to keep either l0lo or llYo of the Repayment Amount provided the
curtailment is resolved during that 3-year period. If the curtailment is not resolved within 3 years, then Idaho
Power shall keep 100% of the Repayment Amount.
summarizing from the IPC Letter: EXHIBIT D
P O Box 70 Boise, Idaho 83707
Page I of2
l22l W ldaho St. Boise, Idaho 83702
l. The Project has not deliveled any enerry to ldaho Power during the last 9 months (November 2018 to
July 2019). As of August 14,2019,the Project is still not delivering enerry to Idaho Power.2. Paragraph 6.3 of the Agreement states that the Annual Net Firm Enerry amount shall be 5,79E,590 kWh.3. The Facility delivered 3,355,049 kWh in Conhact Year 25.4. The Facility failed to achieve the Annual Net Firm Enerry amount for Contract Year25. The Facility has
yet to deliver any energy for Contact Year26.5. Paragraph 21.3 of the Agreement requires the Seller to pay the appropriate lump sum repaymcnt amount
specified in Appendix D multiplied by the difference in megawatt-hourc between the Annual Net Firm
Energy amount and the Contract Year 25 Annual Net Enerry amount.6. Paragraph 21.7 of 0re Agreernent recognizes that the Facility may rcsolve the cause of the Net Enerry
Amount cuftailment within a 3-year period and permits Idaho Power to refund a portion of the lump sum
repayment that the Seller paid to Idaho Power (up to 90%) pncvided the curtailment is resolved during
that 3-year period.
7. The Idaho Power customerc were harmed because the Facility failed to deliver the required Annual Net
Firm Enerry amount for a levelized rate contract which is why tre Agreement requires Idaho Power to
keep a portion of the lump sum repayment, even if the Facility returns to service and starts delivering
enerry to Idaho Power within a 3-year period of the curtailment.
Idaho Power is required by contact to seek the Repayment Amount security and payments as described in the last
paragraph of the IPC ktter. As stated in the IPC Letter, please provide the security for 90o/o of the Repayment
Amount ($1,046,812) no later than September 3, 2019. Beginning with the August 20t 9 Net Enerry Payment for
the Facility, the l0% balance of $l 16,312 will be netted ngainst the Facility's monthly Net Energy payments until
the balance is zero. If the curtailment is not resolved within I year of the start of the curtailmen! then ldaho
Power is entitled to another 5% of the Repayment Amount. If the curtailment is not rcsolved within 3 years, then
Idaho Power is entitled to 100% of the Repayment Amount.
s
Enerry
J
P O Box 70 Boise, Idaho E3707
Page2of2
l22l W ldaho St. Boisc, Idaho 83702
Ak wou'HYDRt)
1032 Grandview Drive
Ivins, UT 84738
Office(a35) 429-1878
Fax [phone]
-t-ed @J.!.o.ren90nus_t
August 7,2019
Jerry Jardinc
Idaho Power Company
l22l W Idaho Street
Boise, ID 83?02
Re; Mile 28 Hydro Generation Facility
Dear Jerry,
We are in receipt of your letter dated August I regarding the Mile 2E Project and the repairs we
have been performing there that have taken longer than anticipated. While we acknowledge that Idaho
Power has not received the deliveries it expected from the project this summer, we have read th"rough the
Firm Enerry Sales Agreement and do nol read the provisions you set out in your letter as requiring a
Lump Sum Repayment.
You highlight Section 21.3 as providing for a Lump Sum Repayment in an amount that is then
calculated in the letter. However, Section 2l .3 provides for such repayment where the Seller
"permanently curtails" its long-term average deliveries. There is no permanent curtailment in this
circumstance. We are working very hard to make repairs at the facility lo improve its functionality. We
are rebuilding the switchgear to prevent the types of trips that have happened in the past, improving the
trash rake system to deal with the extremely high volume of weeds and debris at the facility, and are
winterizing the facility to take advantagc of available recharge water. We anticipated that these repairs
would be complete during the winter months when the project does not typically produce. As
unfortunately sometimes happens, these repairs have taken much longer than planned, despite our diligent
efforts. We appreciate ldaho Power's concerns and we want to do our best to find a solution that is
agreeable. As mentioned above, we anticipate the project being able to make up this lost production once
we finish our repairs and can take advantage of recharge water. We believe that these repairs will be
complete within the next two to threc weeks.
We appreciate your time and consideration and look forward to finding an agreeable solution.
We would also like to extend an invitation to your team to come visit the facility once it is complete so
that you can see the results ofour efforts.
Sincerely,
4ffi-
Ted S Sorenson, Manager
Wood Hydro LLC
3EHM.
Re:
An toAooRP company
August 1,2019
Ted Sorcnson
Mile 28 Hydro Project
C/O Wood Hydro LLC
1032 Grand View Drive
Ivins, UT E473E
208-5E9-690t
[e-mail]
E-mail and U.S. Certilied Mail to Ted Sorenson
Mile 28 Hydro Generation Facility
Notification of [,ump Sum Repayment Amount for Contract Year2l (June 2018 to May 2019)
Dear Mr, Sorenson,
Mlle 2t Hvdro Flrm Encrf,y Salca Asrecment
Idaho Powcr and the Conhactor's Power Group, Inc. ('seller') executed a Firm Enerry Sales Agrecmcnt
('Agreement") on August 13, 1993. This Agreemcnt has changed ownership several times and most recently was
sold to the Big Wood Canal Company which leases the Mile 2t Hydro Generation Facility ("Facility") to Wood
Hydro LLC. The Facility is an Idaho Power designated network ncsouroc and the levelized enerry rate was based
on expocted energy deliveries to Idaho Power from the Facility. The Facility is requircd to deliver all of its Net
Enerry to ldaho Powcr in accordance wi0r this Agrcment for 35 Contract Years beginning with thc Operation
Date of June 1,1994 through May 31,2029.
Annuel Rcview rld Nolilicrtiong
Idaho Power performs annual rcviews of all energy sales contracts to make sure they are in complianoe and the
facilities are performing according to their contacts. It came to ldaho Power's attontion during a rccent rcview
that the Facility has not generated any power for the last 9 months (November 2018 through July 2019) and
continues to remain offlinc. Idaho Power was not notified by the Facility at any time in the past 9 months that this
designated nctwork t€source was going to be taken offline for an extended period of time and during the summer
peak months.
Rccent Dlrcussionr
On July 31, 2019, Michael Danington (Idaho Power) and Jerry Jardine (ldaho Power) called Ted Sorenson
(Wood Hydro LLC) and discussed the status of the Facility. Mr. Sorenson reported that beginning with the winter
of 201 t, several repairs and replacemenb were strrted and some of the repaio and replacements were continuing
with an expected completion date in mid-August 2019, Idaho Power explained that because the Agrcement is a
levelized rate contsact, Idaho Power is required to implemcnt paragraph 21.3 of the Agreement for Lump Sum
Repayment Amounts should the Faoility fail to dcliver the Annual Na Energr Amount agreed to by the Seller and
defincd in paragraph 6,3.
P O Rox 70 lloisc, Idaho 8370?
Pagc t of2
l22l W ldaho St Boise, ldaho E3702
Annuat Net linerqy Amount
Paragraph 6.3 of the Agreement spccifies the Annual Net Energy Amount for this Facility shalt be
5,79E,590 kwh.
F'ailure to Deliver thc Annul Net llnergy Amount
Paragraph 21.3 of the Agreement specifies if the Facility fails to delivcr Net Energy as stated in Article
6.3 (Annual Net Ene1ry Amount of 5,79E,590 kWh), a Lump Sum Repayment Amount (',Ropayment
Amount') shall be calculated and payable to ldaho power.
Calculation
The last completed Contact Year (il1t2018 to 5/312019) is Conhact ycar 25. In accordance with
Paragraph 2l.3,lhe calculation of thc Repayment Amountas of the end of Contract yqr25 is as follows:
The Annual Nct Energy Amount of 5,79t,590 kWh minus actual Net Energy delivered during Contract
Year 25 of 3,355,049 kWh, the differcnce dividcd by 1,000 to conveft to MWH and multiplied by the
Appendix D Lump Sum Repayment amount for the 25h Contract Year of $476 per annual MWII:
$ 1 ,1 63,1 25.
Prcvlslon for r Partid Rafirnd of the Rooavment Amount
Paragraph2l.ToftheAgreementallowsforldahopoweriorcfundbetween ESYoandg0/ooftheRepayment
Amount to the Seller provided that the Facility returns to fult produotion widrin three years of the RepaymentAmount paid to ldaho Power by the Sellet. The Facility must demonstrate 6rat they *itt Ue able to achiive theAnnual Net Enerry Amount of 5,79t,590 kWh for a Contract Ycar and must accomplish this before the end of ttre
three-year period to qualify for the partial refund. Assuming that the Faoility will resume sales in 2019, the partial
refund to the Seller would be 90% of $1,163,125 = S1,046,812 and thc remaining balance of $l 16,312 wouid bepaid by the Seller to ldaho Power and is not refundable.
Rcorvment Amount Sccurity and Pavmenlg
The Repayment Amount of S1,163,125 is now due to Idaho Power. However, Mr. Sorrnson provided
documentation about the Facility repairs and replacements after the July 3 l, 2019 phone call and has
demonstrated that ore Facility is being prepared to ncturn to service and is expected to continue to deliver the
required Annual Nct Energt Amount to ldaho Power for the rcmaining term of the Agrcanent, Because of these
allsurances, ldaho Power is willing to accept a letter of crcdit, subjoot to ldaho Poweris rcview and credit
requirements, as security for $1,046,812. This letter of crodit is due within 30 days of tho date on this letter. This
security shall bc held in place for the next three Contract Yoars but may be released earlier by Idaho Power whcn
the Facility returns to full generation, can demonstrate that at will aohieve the Annual Net Enlrgy Amount for thencxt Contract Year and provided that the Facility is generating beforc the end of the three-yearftriod defined inq{agrapl 21.7. Beginning with the August 2019 N€t Energy Payment forthe Facility, the l0% balance of$l 16,312 will be netted against the Faoility's monthly NetEnerg paymcnts until th; bahnce is zero. The Seller
also has the option of making a non-refundable payment of $ I 16,3 12 in cash to ldaho Power instead of netting themonthly enerry payments with the balance of the Repaymenl Amount due.
s
Page2of 2
P O Box 70 Boise, l&ho 83707 l22l W ldaho St. Boisc, tdaho t3702
WOODHYDRO
1032 Grandview Drive
Ivins, UT 84738
Office (435) 429-L878
Fax (2OB) 522-8223
ted @tsorenson . net
October 8, 2019
Jerry Jardine
Idaho Power Cornpany
l22l tt/ Idaho Street
Boise, lD 83702
Re: Mile 28 H1tflv6 Generaliotr Fucilitst
Dear Jerry,
As you knorv. the Mile 28 Hydro facilitl' (the ''Facility") generated over 571,000 krvh in August
of this year after it was offline for a feu' months to enable important repairs such as rebuilding the
srvitchgear. improving the trash racks. and rvinterizing the syslem. Per your letler dated August l, 2019,
Idalro Porver alleges that the deliveries for the l:acility rvere "permanently cuftailed," and thus a [.ump
Strrn Iiepayrnent was required for the facility. We responded by letter dated August7,2019, and disputed
that there was any such permanent curtailnrent for the l;acility. By email dated August 15, 2019, Ted S.
Sorenson agreed to provide the security requested in the August I , 2019 letter, but did so under protest in
order to focus on putting the Facility back online in as timely a manner as possible.
We have now become aware that in addition to recciving the l-etter of Credit, ldaho Power
intends to offset power generation revenue by $ I 16,3 I 2, which is the amount it clairns in the Augttst I ,
2019 letter is the non-refundable portion of the l,unrp Sum Repayment. We reiterate that there was rlo
permanent cuflailment here. Historically, the l;acility has not generated in the winter months, yet ldaho
Potver has included these months in its assessnrenl both of its argunrent that a permanent curtailmenl
exists and in calculating the Lump Sum Repal,rnent. We have been unable to find specific language in
the Energy Sales Agreernent specifoing hou' one is to detennine that a permanent curtailment has
occuned. We think it is unreasonable to conclude that lack of generation for such a short period of time
is sulficient to both conclude that a pernranent curtailment exists and that such repayment is necessary.
Further, in addition to the security provided in the Lctler of Credit, the rvinterization of the Facility rvill
ensure that the Facility rvill make up for any lost gencratiorr from the summer months during its
operations this u'inter.
We appreciate your attention in this nratter and are happy to answer any questions that you may
have.
Sincerely,
Ted S Sorenson, P.E.
Manager, Wood Hydro LLC
EXHIBIT E
ARKOOSH C. Tom Arkoosh
tom. arkoosh@arkoosh. coml.A\\' oF-r-tcus
-
March 17,2020
Donavan Walker
Idaho Power Company
PO Box 70
Boise, ID 83707
DWalker@Idahopower. com
Re: Mile 28 Original Energt Sales Agreement
Dear Donovan:
There is ongoing dispute of contact interpretation between Idaho Power Company
("Idaho Power") and Wood Hydro, LLC, ("Wood"), the successor in interest to the Mile 28
Hydro Generation Facility ("Project") Firm Energy Sales Agreement of August 23,1993
("Agreement"). Enclosed you will find correspondence between the parties that adequately
describes the background of this dispute.
In summary, because the project was "off line" from April to mid-August,20l9,Idaho
Power staffseeks to assess Wood $116,312.00 based upon a calculation explained by Idaho
Power staffas the difference between the Annual Net Energy Amount estimation and the actual
Net Energy Delivered times the Lurnp Sum Repayment amount from Appendix D of the
Agreement for permanent curtailment in the 25fr year.
The difficulty with the assessment is that there has never been a permanent curtailment of
the Annual Net Energy Amount by reason of not producing energy from April to mid-August.
Before reviewing the actual wording of the conffact, please recall the context in which
Idaho Power advocated before the Idaho Public Utilities Commission for the adoption of the
90/l l0 performance band to create reliability in deliveries. As to the Agreement, and
agreements like it, entered before the age of the 90/l l0 performance band, Idaho Power wrote:
The Commission Should Consider the Distinction Between Firm and Non-
Firm QF Energy In Light Of Current Conditions
In seeking leave to file a post-hearing brief, counsel for U.S. Geothermal
indicated that it was his intention to use the post-hearing brief to address the
Commission's prior orders that define the terms 'non-firm' and 'firm' in the
802 West Bannock Street, Suite LP 103, P.O. Box 2900, Boise, ID 83701 | Tel: [phone] | Fax: [phone]
EXHIBIT F
Page - 2
March 17,2020
context of energy purchased from QFs. Idaho Power does not believe there is any
dispute as to how the Commission has traditionally used those terms. In Order
No. 15746 in Case No. P-300-12, The Commission noted that, 'under
Section 292.304(d) of the FERC rules, a small power producer has the option
of selling power to a utility either on an 'as-available' basis or 'pursuant'
to a legally enforceable obligation.' In Order No. 15746 and subsequently
in Order No. 18190 issued in 1983 in Case No. U-1006-200, the Commission
defined the 'as-available sale' to correspond to non-firm energy and the
'pursuant to a legally enforceable obligation' to correspond to frm energy.
As the Commission noted in Order No. 18618 issued in Case No.
U-1006-216, 'The Company is correct, therefore, when it asserts that Order
Nos. 18190 and 18358 distinguish between firm and non-firm energy prices and
that it is the 'quality of the energy produced' by the co-generator or small power
producer that determines its price.' (OrderNo. 18618, p.3.)
ln OrderNo. 18618, the Commission also stated:
"...energy is considered firm if it is provided by the seller pursuant to a
legally enforceable obligation to deliver and if it is of sufficient reliability
that it can serve to defer or avoid construction of the company's own
plants. Hydro projects -- both those of the company and those of small
power producers --- have always been assumed to meet this definition."
(OrderNo. 18618, p.9).
As Idaho Power noted in its direct testimony in this case, using the defrnition of
firm energy established in the early 1980's, a QF is only obligated to sign a
contract and provide an estimate of what it thinks it will generate each month over
the twenty (20) to thirty-five (35) year term of its agreement to be entitled to
receive firm energy prices. As Mr. Gale noted, in today's world, the actual
firmness of the energy deliveries under these 1980's vintage contracts more
closely resemble non-firm energy deliveries than firm energy deliveries. In the
Film Energy Sales Agreements ('FESA's') without the 9UYollllo/o band
provision, QF developers provide an estimate of what they expect to generate
each month, but there is no requirement, nor is there any economic incentive, for
QF developers to provide accurate estimates or to actually deliver energy in the
monthly amounts they estimate they will provide in the Firm Energy Sales
Agreement. The actual amount of energy delivered by QF's under these
agreements can fluctuate between 0 MW and 10 MW, hour-to-hour, day-to-day,
month-to-month, either because the project has lost its motive force or the
developer has chosen to reduce generation for some other reason. With the
exception of the five new QF conhacts which include the 90%l l0% band, Idaho
Powers QF contracts do not require QF's to provide the higher value firm energy
Idaho Power's customers are paying for. Post-Hearing Brief, Page 4, Cases Nos.
IPC-E-04-08 and 10.
Page - 3
March 17,2020
The language of Idaho Power's Post Hearing Brief relevant here to the operation of the
Agreement deserves emphasis: there is no requirement ... for QF developers to provide
accurate estimates, or to actually deliver energy in the monthly amounts they estimate they
will provide in the Firm Energy Sales Agreement.
***
With the exception of the five new QF contracts which include the90Yoll07o bandr ldaho
Powers QF contracts do not require QF's to provide the higher value lirm energy Idaho
Power's customers are paying for.
The Post Hearing Brief does not support Idaho Power's argument about liquidated
damages. The language of the Agreement does not support the conclusion that the failure of the
Project to deliver power between April and mid-August authorizes Idaho Power to withhold
monies from Wood.
Idaho Power relies upon this language from section 21.3 of the Agreement:
If, at any time prior to the end of the term of the Agreement, Seller permanently
curtails in whole or in part its long-term deliveries of the Annual Net Firm Energy
amount specified in paragraph 6.3, Seller shall pay to ldaho Power, as reasonable
liquidated damages arising out of this permanent curtailment of the Annual Net
Firm Energy deliveries, the appropriate lump sum repayment amount specified in
Appendix D, multiplied by the difference in megawatt-hours between the Annual
Ned Firm Energy amount specified in paragraph 6.3 and the reduced Annual Net
Firm Energy amount after the pennanent curtailment.
Please note that "Annual Net Firm Energy," is defined in section l.l of the Agreement as
"[t]he amount of Net Firm Energy Seller estimates it will deliver to Idaho Power at the Point of
Delivery during each Contract Year." [Emphasis added.] Nowhere in the claim letters of Idaho
Power does ldaho Power assert that Wood seeks to change the Annual Net Firm Energy
estimates found at section 6.2 of the Agreement.
Further, not only has Wood not changed the estimates of the Annual Net Firm Energy
deliveries but has done absolutely nothing permanent or long-term concerning deliveries from
the Project.
The language of Idaho Power's Post Hearing Brief and the representations ldaho Power
made to the Idaho Public Commission make clear that section 21.3 does not allow the attempted
assessment unless and until Wood permanently changes the estimates in the Agreement. Other
provisions indicate section 21.3 is the section addressing the estimates and changes in those
estimates, but not the actual deliveries. Section 21.3 itself provides that interest begins only 60
days after a Seller receives "notice of Seller's permanent reduction of the Annual Net Firm
Energy Amount." Read in context, this sentence makes clear that the permanent reduction must
be a permanent reduction of the estimate.
Page - 4
March 17,2020
It is also important to note that in addressing available adjustments to the Agreement,
Idaho Power may adjust the estimates in the contract, the Annual Net Firm Energy Amount,
based on actual performance, again confirming that section 23.1 addresses the estimate, and not
the actual delivered energy, because it is inconceivable that Idaho Power can adjust the amount
of actual energy delivered.
Further, the liquidated damages clause found in section 23.1 appears unenforceable.
"In determining the validity of liquidated damage clauses, we have adhered to the
rule set forth in the Restatement of Contracts section 339 (1932);
'An agreement, made in advance of breach, fixing the damages therefor, is not
enforceable as a contract and does not affect the damages recoverable for the
breach, unless(a) The amount so fixed is a reasonable forecast of just compensation for the
harm that is caused by the breach, and(b) The harm that is caused by the breach is one that is incapable or very
difficult of accurate estimation."'
Young Electric Co. v. Capps, supra [94 Idaho] at 521,492P.2d at 60; Graves v. Cupic,75 Idaho
451, 457, 272 P .2d t020, 1023-24 (t954).
Repeatedly and historically, Idaho Power has claimed that it has available to it market
electicity less expensive than PURPA power prices as found in the Agreement. Also, energy
sales upon transparent markets making any damage claim easily to calculate.
Finally, Idaho Power will over time receive the energy claimed to be deficient addressed
in the claim letters, contradicting the assertion that Idaho Power customers will be harmed. In
fact, as more particularly described in the attached correspondence, the repairs and upgrades at
the facility will make the facility more reliable, providing additional benefit to Idaho Power
customers. The facility has been online and operating reliably since August.
For the forgoing reasons, we request confirmation that Wood will not be assessed
as proposed in the accompanying claim letters and promptly be reimbursed for funds withheld
from its power generation payments.
Sincerely,
ARKOOSH LAW OFFICES
CTA"/sf
Cclclient
Enclosures
C. Tom Arkoosh
ai Oa/:OarD (cilFl
OO}IOVAN EWALKERtrrdCoqmddrrdlrrlEdrhoowrrrqn
April 15,2020
C. Torn Arkoosh
Arkoosh Lar,v ffices
8O2 W. Bannock Stneet, Suite LP 103
P.O. Box 2900
Boise, lD 83701
VIA ELECTROilIC XAIL: [e-mail]
Re: Mile 2E l'tydro
Dear Torn:
I write in rcsponse to your lefler dated March 17, 2o,z0, which referen@$ an
'ongcing dispute of oont[rlad [sicl interpretation between ldaho Porrer Company
('tctaho Powefl and Wood Hy<lro. LLC, (l/tood')'regarding a PURPA QF Firm Energy
Sales Agreement dabd August 23, 1993 ('Agreemenf) br the Mile 28 hyclro project.
The bulk of your letter quotes and disosseo IPUC orders and ldaho Povrrer
testimony mainty from the 1980's which frankly I have a hard fime seoing as relenant or
understanding the point you are trying to malte. The particular Agreement, and the
terms ard conditions thereof betrreen Mile 28 and ldaho Porer are sfaight-brward and
clear. Granted the terrninology as a bit diffiantt to work through, but such is the case with
every PURPA QF conuact I have ever en@untered. This particular vintage of PURPA
QF oonhad has many prwisions that are no longer employed in such conbads by the
IPUC. Honrever, this does not in and of itsetf make such contract provbbns inrnalid
even thongh tlre ooncepts and provisions are no longer required or utilized in mandatory
QF purchases by l<laho Porer.
This type of Firm Energy Sabs Agreement in general terms, trorks as follows:
ldaho Povver will punchase and Scller will sell all of the Net Firm Energy and Surplus
Energy producad by the Seller (Section 6.1); the project provides, as part of the
oontraci. its rnonthly genera0on amounts, estirnated bas€d on lorqrterm historical water
Itot records and lor4r-term average energy production esUrnates (Secton 6.2); tne
Annual Net Firm Energy amount is sum of the project's monthly estimates, in this
instance 5.798.590 kWh, (Section 6.3): the proiec{ is paid a bce payment (Sedion
7.1.1) and an adjustable paynrcnt (Sec'tion 7.1-2) for iB Net Firm Energy; the proFcl
mu.st deliver up to its furnual Net Firm Energy amount frorn Sedion 6.3 r be subject to
a scfredule of Lump Sum Refund Payrnent (Section 21.3: Appen<lix D).
F!E{oIrpgy4-
EXHIBIT G ','r'1 !/ r!ar-, \t ll ! ' .1.nt. ;rr,:[
U0,'. ltl I I rtl ,
C. Tom Arkoosh
April 15,2020
P4e2of4
This is a tlrye of levelized pymenUprice conhact whereby the base poyrnent is alwelizeUfixed pnce spread over the entire 3$year conlract term. Consequenfly, aswith any lewlizsd price contrad compared to a non{evelized and escalated- ratecontrad, there is an'overpaymenf to the prclject in the earty years that is ofbet by an"underpayment' in the ulter yearc. To make sure tfrat a proied doee rpt lust gerrcrate
and take payrnents during the more lucrative'overpayment" early years, anO tnen fail togenerate or undergenerate in the later years when customers are being repaid for the"overpayment in the 'underpayrnent" years, the IPUC set up certain mechanisnrs tomake sure custorErs w?re not left holding the bag in the otter years of the confact.These mechanisnrs indurde sucfr things as additbnal searrity, ar6 in this case theprovisions bund in Section 21.3 "Seller Permanent Curtailment". Appendix D 'Lump
Sum Repayment br Permanent Curtailment of Portion or All of Annual Net EnergyAmount Under 35i-Year C,onbacf, and 21.7'Refunct of Lump Sum Repayment,. rneii
sections sf the contract, Sedion 21.3, Sec{im 21.7, Sedion 6.3, and Appendix D, whenread and mnsiderecl together in the conte!il of the four corners of this contrad are dear
and tell us exacty what happens whcn the proiec{ fails to deliver its Annual Net Firm
Energy amount specifu in Seciion 6.3_
As pointed out by both l<laho Porer and by you in your leter, the relevant portion
of Section 21.3, Seller Permanent Curtailnrent. states as bllows:
lf, at any time prircr to the end qf the term of the Agreement,
Seller permanenUy curtails in wfrole or in part iE -long-term
average deliveries of the Annual Net Firm Energy amwnt
specificd in paragraph G.3, Seller stnll pay b ldaho power,
as reasonabh lkluidated damages arisirg out of thisperrnanent curtailment of furnual Net Firm Energy deliwries,
the appropriate lump sum repayment amount specified in
Appendix D, multiplied by the difference in megawatt-hours
betw'een the Annual Net Firm Enengy anpunt specified inparagraph 6.3 and the reduced Annual Net Firm Energy
amount after the perrnanent curtailment.
Section 6.3, fuinual Net Firm Eneqgy Amor.rnt. states. The Annual Net Firm
Energy arnoJnt shatl be 5,79E.590 kWh and shall be the sum of the hree (3) Seasonal
Net Firm Energy amounts Seller specified above." Sections 6.2 and 6.4 refierence hofvthe Net Firm Energy Amouns the Selter has estimaed are based upon anticipated andhistorical Qng-term average weter flor/,rs, long-term aveftlge energy prodrdion
estirnates, Seller's watgr right filings and the water records supporung th&i projectect
water flolvs. Section 6.4 states. The parties have reviewed these intir:ipat'eO waterflors ... and have agreed that, for purposes of this Agreemont, the projected watertlows used to calculate the Annual Net Firm Energy lmount in paragraph 6.3 arereasonable ard sll8ll constitute the water flows available to the Facility under'average'
water condi$ons"'
C. Tom Arkoosh
April 15.2020
Page 3 of4
Here, the proie<l hact Zero doliwries to ldaho Porver durirg the moottrs ofNovember 2018, Deoember 2018, Janrrary 2019. February 2019, March 2019, April2019, ilay 2019, June 2019, and July 2019. confact yeai 2s ran fnom June 1, edrgt!.qgn May 31, 419, _The_prolecf had a total Net Firm Energy detivered duringConfact Ye€r 25 of only 3.355,049 kwh, s'hicfi is short of the rsquired delivery of tr;Annual Net Firm Enagry tuirount from Section 6.3 of 5,798,590 kl/yh. tt is important to
note that these oontract mecfranisms aM mefrics furrtion on an annuat basis, and once
Con&ac't Year 25 came and went with a substantial shortiall of deliverod Net Firm
Energy, ttrere was no rmy to 'maks-up'the shorsalt by orreraeneratirg in a differenttime perio<!. There uras a permanent curtailnrent of the pajed's Anntnl tr.let Firm
Energy delivedes for Conhact Year 25. The prciect also had curtaitment of Net FirmEnerry deli'reries during Contract Year 26, in that a of August 14, 2019. there had
beefl Zero deliveries to ldaho Porer. l-lowever, this curtailment in Confiact year 26 didnot becorne a pernanent curtailment inroking the provisbrs of Sec*ion 21.3 andAppendix D becawe subsequent to August 14, 2019, and prior to the expiration ofContract Year 26, the prcjetr met its requirenrent to deliver the 5,798,590 klttr nnnual
Net Firm Energy amount fiom S€ctficn 6.3.
Bccause the-project failed to deliver its Annual Net Firm Energy amount fom
F"tbn 6.3 during Contact Year 25, and thus permanen$y ortailed its innual deliverybr that year, the lump sum repaymer( arnount specifiei for Contract year 25 from
fOOenOix D is applied to the difference in Net Firm Energry delivered and the turnual NetFirm Energy arnount - whicfr in this case is $1.046,812. Flrrrre\rer. the conhad
anticipates that a permanent curtailnrent of Annual Net Firm Energry deliverbs rnay notcontinue for the entire remainirg duration of the 3lyear confact brm, and thus
contains the provisions in Section 21.7, Refund of Lump Sum Repayment. which states,
lf Seller has made a lump sum repayment as required byparagraph 21.3 ancl:
(1) Within thrce (3) years of sai<J payment Selter becomes
capable of resuming production of the curtailed Net Firm
Energy and orfiers to resume sates to lctaho power at therates, tsnrs and conditions oontained in this Agneement for
ttrc number of contsad Years that were remaining under this
Agreement at he time of the permanent ctrtailment; then
(2) ldaho Porter will resunre hts purcfrases ftom the Facility
and will refilnd a portion of the tump sum n payment as
bllows:
(a) if sales ne$rme within one (i) year of the paynrcnt
qf the lump sum repayrnent ernount, ldaho power will
refund 90% of the lump sum repayment amount;
C. Tom fukoogh
April 15,2020
Page 4 of4
Consequenuy, because the project resurned genenation in Conhact Year 26 tro meet theAnnual Net Firm Energry atnounl ldaho Power fqwent its entitement to the actlal
collection of the $'1,046,912 lump sum repaynrent amount br the pennanent curtailmentof Contrad Year 25 tutnual Net Firm Enelgy amotrnt, and applied tfre g0% refund
upfnont - thus merely applying the 10% balance of S116,312 - whicfi you arc now
contesting.
Mr. Janline's letters are quite dear and run thrrrugh the relevant portions of theAgreement as wdl as the iailure of the projecl tro generate iE Annual Net Firm Energy
amot nt in Conffact Year 25. ldaho Poryer stands by its previously sent letters anddaims with regard to ttrc project's failurc b generate and rlect rts Annual Net FirmEnergy amount reguirement. As previously referenced aborre this is a conuactmechanism that accompanies the levelized naturc of the pafnents in this vintage of
PURPA QF con0act as a protection for a.rstomers in the nature of the 'orrerpaynent' ofa levelhed rate in the early years and the -underpayment" in the later !€ars - ard part ofthe assurance ttat projects do not simfly take the more lucrative early year'orrerpaynrents' and then under-generate and/or abandon projects ln - tfre
fu nderpaymenf later years.
ldaho Pon/er understands that the lack of project generation may haw predatedWood Hydro's inrmlvement and recognizes that Mr. Sorenson was able to makenecessaly impovements !o the projrfi once he took it over to enabte it to hopefu[ycontinue to generate and meet the reguirements of its Agreement. Horever. 6triprovisions of the contract are dear in that the prcject pennanenUy ctrrtailed its AnnualNet Firm Energy arnount for C"onbact year 25 - and is also quite clear in the applicatbn
of the Lump Sum Refund Payment for the shorfall in Contract year 25. Ttre propa canpay frg remaining batane of gli6.31z. 10% Lump Sum Refund payment, or haveldaho Power continue to net thb amo.rnt against the Facility's monttrty Net Erergypayrnents untilthe balance is zero. Please let us knouy how you would tikCto proceed. -
Sincerely,
2 t/d!/4_
(b) if sales resu,ne within t\lro (2) ylears of the
paynnnt of tle lump sum repayment amount, ldaho
Pourcr will refund 85% of the lump sum repayrnent
anpunt:
(c) if sales resume within three (3) years of the
payment of the lump sum repayment amount, ldaho
Power will refund 85% of the lump sum repayment
amount.
Donovan E. Walker