20230831Final_Order_No_35908.pdf

ORDER NO. 35908 1
Office of the Secretary
Service Date
August 31, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
AMERICAN FALLS RESERVOIR
DISTRICT NO. 2
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CASE NO. IPC-E-23-19

ORDER NO. 35908

On May 11, 2023, Idaho Power Company (“Company”) applied (“Application”) to the
Idaho Public Utilities Commission (“Commission”) for approval or rejection of an energy sales
agreement (“ESA”) with American Falls Reservoir District No. 2 (“Seller”) for the energy
generated by the Dietrich Drop Hydro Project (“Facility”). The Facility is a qualifying facility
(“QF”) under the Public Utility Regulatory Policies Act of 1978 (“PURPA”). The Company
requested that this matter be processed by Modified Procedure with a final order being published
before the expiration of the current contract on August 31, 2023.
On May 15, 2023, Sorenson Engineering, Inc., (“Sorenson”) and Idaho Hydroelectric
Power Producers Trust (“IdaHydro”) (collectively “Commenters”) jointly filed a public comment
(“Public Comment No. 1”) supporting a new annual period for determining seasonal hydro
deliveries (“Proposed Calendar”).
On June 14, 2023, the Commission issued a Notice of Application and Notice of Modified
Procedure establishing public comment and Company reply deadlines. Order No. 35815. Staff
filed comments and the Company filed a reply.
On July 28, 2023, after the reply deadline set forth in Order No. 35815 passed, the
Company filed a Motion and Supplemental Comments after being informed by the Seller that the
Facility’s Maximum Capacity Amount was higher than originally listed. On August 10, 2023, the
Commission issued a Notice of Supplemental Comment Deadlines. Order No. 35887. Staff and
the Commenters filed supplemental comments to which the Company replied. The Company’s
supplemental reply also included a proposed Replacement Second Amendment to the ESA
(“Updated ESA”).
With this Order, we approve the proposed Updated ESA, as filed.

ORDER NO. 35908 2
BACKGROUND
The Company stated that the Facility is located in Lincoln County, Idaho. The Seller has
been delivering energy from the Facility to the Company under a firm energy sales agreement
since July 17, 1987 (“1987 FESA”). The Company’s Application stated that the Facility had a
4,770 kilowatt (“kW”) nameplate capacity.
THE APPLICATION
The proposed ESA has a 20-year term with non-levelized, seasonal hydro published
avoided cost rates as set in Order No. 35422. Under the proposed ESA, the Seller would receive
capacity payments for the entire 20-year term. The Company stated that the Facility produces at
least 55% of its annual generation in June, July, and August (“Summer Months”). The Seller
informed the Company that it would like the annual period for determining seasonal hydro changed
so that each year’s period would start on June 1, and end on May 31 of the following year
(“Proposed Calendar”) instead of beginning January 1 and ending on December 31. The Company
had no objection with the Seller’s Proposed Calendar
The proposed ESA would adopt a “five-day advanced notice for adjusting Estimated Net
Energy Amounts for purposes of complying with 90/110 firmness requirements.” Application at
8. The Company stated that, in compliance with Order Nos. 35705 and 35767, the proposed ESA
has revised language under Article XXIII relating to Modifications of the Facility. The Company
also requested that the Commission approve the ESA and declare that all payments for the purchase
of energy under the ESA are designated as prudently incurred expenses for ratemaking purposes.
INITIAL COMMENTS
a. Staff’s Comments
Staff reviewed the proposed ESA and recommended that all payments for purchases of
energy be deemed prudently incurred for ratemaking purposes. Staff also suggested that the Parties
update Article XXIII relating to modifications of the ESA. Staff did not oppose the adopting of
the Proposed Calendar but recommended that the Parties update the language in the proposed ESA
to conform with the Proposed Calendar.
While the original 1987 FESA did not contain rates with capacity payments, Staff noted
that the Facility has added capacity since that time. In reviewing the operation of this Facility since
the mid-1980s, Staff determined that the Facility should be eligible to receive immediate capacity
payments upon the issuance of a Commission order.
ORDER NO. 35908 3
Staff reviewed Article XXIII related to modification. Staff believed that the ESA included
the appropriate language relating to Facility Modification from Order Nos. 35767 and 45750.
However, Staff believed that the ESA did not include a necessary provision regarding
modifications to the ESA itself; Staff believed the agreement needed additional provisions within
Article XXIII stating that the ESA itself cannot be modified unless there is an agreement that has
been signed by the Parties and approved by the Commission.
As noted previously, Staff did not oppose the Parties’ request to adjust the measuring year
for seasonal hydro rates. Staff noted that the Proposed Calendar would allow a QF to utilize not
only September and October—but also provide increased flexibility by more effectively using
April and May—to adjust its generation output and to ensure that it produced at least 55% of its
generation in the Summer Months.
Staff did not oppose the proposed timeframe because: 1) the current January 1 to December
31 calendar appears to have been chosen simply because the end of the traditional calendar year
was convenient for evaluating compliance; 2) the impacts of implementing the Proposed Calendar
would be minimal from a resource and operational planning perspective; 3) the reason for the
seasonal hydro premium is to serve the Company’s greatest need in the Summer Months and the
Proposed Calendar decreases the likelihood that the Company will be obligated to purchase
unnecessary QF power; 4) the administrative burden of switching to the Proposed Calendar is not
significant as the Company’s system that measures whether the QF has produced 55% of its power
in the Summer Months can adjust for different timeframes; and 5) the Company’s accounting
systems can be easily adjusted to accurately measure the necessary data relative to the Proposed
Calendar.
For those reasons, Staff did not oppose the Proposed Calendar. However, Staff
recommended that the Parties update the language of the ESA to accurately reflect 1) the
Commission’s requirements for modifying the ESA; and 2) the Parties’ Proposed Calendar for
determining seasonal hydro.
b. Sorenson’s and IdaHydro’s Comments
The Commenters supported the Commission approving the Proposed Calendar. The
Commenters noted their respective interests in the case and then focused on the Commission’s
treatment of canal drops. They cited Order No. 32737 in explaining that canal drops have higher
rates because they provide power at the times of greatest need—peak days and peak hours.
ORDER NO. 35908 4
The Commenters noted that to qualify as a canal drop the facility in question must deliver
55% of its power in the Summer Months; however, the calendar year for evaluating this ratio
begins on January 1 and ends December 31. Order No. 32802. The Commenters argued that,
because a QF does not receive the accounting for August until well into September, there is a
period when the seller faces a dilemma of limiting its output in September or risking its canal drop
premium. Thus, the seller who is unwilling to risk its canal drop premium has pressure to
needlessly generate under its allowable potential in September. The Commenters provided an
example where “one canal drop QF produced one day’s too much energy in the month of
September prior to receiving the August report, which reduced the 55% to 54.15% production in
June, July, and August.” Public Comment No. 1 at 3. The Commenters stated that this cost the
seller $71,036.26—or an approximate 20% drop in the income generated by that QF.
The Commenters also noted that a QF would better know if it had the flexibility to not
produce at the end of August if that generation could be undesirable to the utility. The Commenters
argued that adopting the Proposed Calendar would thus provide sellers with greater foresight and
flexibility to ensure that 55% of their generation occurred in the Summer Months.
c. The Company’s Reply
The Company noted Staff’s recommendation regarding the Facility’s eligibility for
capacity payments as well as Staff’s non-opposition to the Proposed Calendar. The Company
agreed with Staff’s recommendations for the ESA. Accordingly, Attachment 1 to the Company’s
reply included the Company’s First Amendment to the ESA with revisions to Article XXIII
regarding modifications to the ESA; Attachment 1 also corrected the dates in the proposed ESA to
correspond with the Proposed Calendar for determining the measuring timeframe for qualifying
seasonal hydro.
THE COMPANY’S MOTION
The Company stated that, shortly after its submission of its initial reply comments, the
Seller informed it that the correct Maximum Capacity Amount of the Facility exceeded the
Maximum Capacity Amount listed in the Application and proposed ESA. The originally proposed
ESA listed the Maximum Capacity Amount at 4,770 kW. However, the Seller stated that the
correct Maximum Capacity Amount is 5,050 kW. The Company also provided a proposed Second
Amendment to the ESA with a listed Maximum Capacity Amount of 5,050 kW. The Company
ORDER NO. 35908 5
also reiterated its request that the Final Order in this case be published before the 1987 FESA
expires on August 31, 2023.
SUPPLEMENTAL COMMENTS
a. Staff’s Supplemental Comments
Staff recommended that the Commission allow the Company to choose one of the
following two options: 1) approve the Company’s supplemental request and order the Company
to update Appendices E and F so that the proposed ESA was consistent in stating that the Facility
had a Maximum Capacity Amount of 5,050 kW; or 2) approve a Maximum Capacity Amount of
4,770 kW—as was listed in the 1987 FESA—and ensure that the Second Amendment to the ESA
accurately reflects this approved Maximum Capacity Amount.
b. Sorenson’s and IdaHydro’s Supplemental Comments
The Commenters supported the Company’s proposal to update the agreement to reflect a
new listed Maximum Capacity Amount for the Facility. The Commenters noted that this would
avoid the negative consequences of producing unapproved excess power or unnecessarily limiting
the Facility’s output of renewable energy.
c. The Company’s Supplemental Reply Comments
The Company preferred to set the Facility’s Maximum Capacity Amount at 5,050 kW. The
Company also filed an Updated ESA which corrected Appendices E and F to reflect the proposed
Maximum Capacity Amount of 5,050 kW, consistent with Staff’s first proposed option.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-502 and 61-
503. The Commission is empowered to investigate rates, charges, rules, regulations, practices, and
contracts of public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provision of law, and to fix the same by order. Idaho Code
§§ 61-502 and 61-503. The Commission also has authority under PURPA and Federal Energy
Regulatory Commission (“FERC”) regulations to set avoided cost rates, to order electric utilities
to enter fixed-term obligations for the purchase of energy from QFs, and to implement FERC rules.
The Commission may enter any final order consistent with its authority under Title 61 and PURPA.
The Commission has reviewed the record, including the Application, the Updated ESA,
and the various comments submitted in this case. The proposed modifications to the proposed ESA
are reasonable and can be supported by clear articulable arguments. The Proposed Calendar is
ORDER NO. 35908 6
reasonable in that it gives the Seller more flexibility in maximizing its capacity outside of the
Summer Months without risking its seasonal hydro premium. Likewise, approving the Company’s
proposed Updated ESA so that the Facility’s Maximum Capacity Amount is listed at 5,050 kW is
reasonable as it allows the Company to utilize the Facility’s full potential in meeting its load
obligations. The Commission holds that the proposed Updated ESA is approved, as filed.
ORDER
IT IS HEREBY ORDERED that the proposed Updated ESA is approved, as filed, effective
September 1, 2023.
IT IS FURTHER ORDERED that all payments for purchases of energy under the Updated
ESA between the Company and the Seller be allowed as prudently incurred expenses for
ratemaking purposes.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this order about any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. Idaho Code § 61-626.
DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this 31st day of
August 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary
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