20231127Final_Order_No_36011.pdf

ORDER NO. 36011 1
Office of the Secretary
Service Date
November 27, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY TO ACQUIRE
RESOURCES TO BE ONLINE IN BOTH 2024
AND 2025 AND FOR APPROVAL OF AN
ENERGY STORAGE AGREEMENT WITH
KUNA BESS LLC
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CASE NO. IPC-E-23-20

ORDER NO. 36011

On May 26, 2023, Idaho Power Company (“Company”), filed an application
(“Application”) with the Idaho Public Utilities Commission (“Commission”) requesting an order:
(1) granting the Company a Certificate of Public Convenience and Necessity (“CPCN”) to acquire
a total of 101 megawatts (“MW”) of new dispatchable energy storage to meet identified capacity
deficiencies in both 2024 and 2025; (2) approving the 20-year Energy Storage Agreement (“ESA”)
between Kuna BESS LLC (“Kuna BESS” or “Seller”) and the Company for 150 MW of
dispatchable energy storage capacity; and (3) acknowledging the lease accounting necessary to
facilitate the transaction, and that the resulting expenses associated with the ESA are prudently
incurred for ratemaking purposes. The Company asserted that approval of the Application was
necessary “to position the Company to meet its obligation to provide safe, reliable service to its
customers.” Application at 2.
The Company represented that several converging factors, including limited third-party
transmission capacity, load growth, and a decline in the peak serving effectiveness of certain
supply-side and demand-side resources have caused the Company to rapidly move to a near-term
capacity deficiency starting in 2023. Id. at 5. The Company stated that these dynamic
circumstances led the Company to file a request for a CPCN to acquire resources to be online in
2023, as well as a CPCN to acquire resources to be online in 2024, and the Company expected to
acquire additional resources each year thereafter through 2027. Id.
The Company represented that it must acquire additional dispatchable resources to meet
identified capacity deficits on its system to comply with its continuing obligation to serve
customers. Id. at 3. The Company stated that the proposed acquisition represented a cost-effective
ORDER NO. 36011 2
means of providing adequate and reliable service to the customers in the Company’s certificated
service territory. Id.
The Company represented that it conducted a competitive solicitation through a Request
for Proposals (“RFP”) seeking to acquire energy and capacity to help meet the Company’s
previously identified capacity needs of 85 MW to be online by June of 2024, and an incremental
115 MW in 2025. Id. at 6.
The Company represented that the RFP process resulted in the selection of a 150 MW
energy storage project, consisting of a 20-year ESA for a 150 MW battery storage facility, 77 MW
of Company-owned battery storage to meet the 2025 capacity deficiency, and an additional 24
MW of Company-owned battery storage for the 2024 capacity need. Id.
The Company represented that the ESA acts as a type of lease through which Kuna BESS
will develop, design, construct, own, and operate the battery storage system in accordance with
the terms of the Agreement. Id. at 7. The Company stated that it would supply the charging energy
for the system and have the exclusive right to dispatch and use the charging and discharging energy
in exchange for a monthly payment. Id.
The ESA has a Scheduled Commercial Operation Date of June 1, 2025, prior to the
Company’s projected capacity deficit in July of 2025. Id. at 7-8. The ESA also provides for a
Guaranteed Commercial Operation Date, which is 180 days after the Scheduled Commercial
Operation Date. Id. at 8. The ESA also requires Kuna BESS to post and maintain Credit Support
which secures payment of the Termination Payment for an Event of Default by Seller, Delay
Damages for Seller’s failure to achieve Commercial Operation Date by the Expected Commercial
Operation Date, and any other Seller liabilities under the ESA. Id.
The Company represented that the 77 MW battery storage facility will be located at the
Happy Valley station, and that the Company can address the 2024 capacity deficiency
economically and efficiently by adding 24 MW of battery storage at the Hemingway substation.
Id. at 9-10. The Company stated that it intends on executing a Battery Energy Supply Agreement
for the 24 MW battery storage with Powin Energy Corporation. Id.
The Company represented that it is not requesting binding ratemaking treatment for the
101 MW of battery storage in this case, and that the Company will make a future filing to address
the cost recovery associated with these projects. Id. at 11-12.
ORDER NO. 36011 3
The Company represented that with respect to the ESA, under Generally Accepted
Accounting Principles (“GAAP”), any contract that provides the right to control an identified asset
over a period of time is considered a capital lease. Id. at 12. The Company requested that the
Commission acknowledge that the lease accounting is necessary to facilitate the transaction, and
that the Commission find that the expenses associated with the ESA are prudently incurred
expenses for ratemaking treatment. Id. The Company stated that it will address any regulatory
accounting necessary and required under GAAP in a later proceeding closer to commencement of
operation of the battery storage facility. Id.
The Company represented that in 2013, the Commission directed the Company to follow
the RFP guidelines applicable to its Oregon service territory, which were later codified into the
administrative rules of the Public Utility Commission of Oregon (“OPUC Resource Procurement
Rules”). Id. at 13-14. The Company stated that coincident to filing this Application, the Company
filed an exception request with the OPUC and is currently compliant with the OPUC resource
acquisition process. Id.
The Company represented that it intends to finance the 101 MW of energy storage with a
combination of available cash and operating cash flow; available facilities and borrowing and debt
issuances; and potential future equity issuances by IDACORP. Id. at 14-15.
STAFF COMMENTS
Staff’s review focused on: (1) the capacity deficiency in 2024 and 2025; (2) the RFP
process: (3) the turn-key costs of the 24 MW of Battery Energy Storage System (“BESS”) capacity;
(4) the turn-key costs of the 77 MW of BESS capacity; and (5) the 20-year ESA.
Based on its review, Staff believed that the additional capacity deficiency in 2024 that
drove the need for the 24 MW BESS is justified, and that the capacity deficiency in 2025 that
drove the need for the 77 MW BESS and the 150 MW ESA is justified. Staff believed that the
proposed projects, without the overbuilds, are the least-cost, least-risk projects among all the final
shortlisted projects to meet the 2024 and 2025 capacity deficits. Staff based its conclusions on the
Long-term Capacity Expansion Model (“LTCE”) analysis conducted by the Company.
However, Staff believed that due to the issues associated with the resource selection
process, the bid pool could have been larger and there could have been additional final shortlisted
projects with lower costs, and Staff recommended a soft cap for the 24 MW BESS and the 77 MW
BESS projects, without the capacity and the cost of the overbuilds, as specified in Paragraph 1 and
ORDER NO. 36011 4
Paragraph 2 of Staff’s Confidential Attachment A, respectively, and that the 150 MW ESA be
capped at the contract price established in the Application unless the Company presents evidence
that any additional costs are justified when the Company seeks cost recovery.
With respect to the 150 MW ESA, Staff reviewed the terms and provisions, which included
a review of the contract price, liquidated damages clauses, and Section 19.3. Based on its review,
Staff believed that Section 19.3 of the ESA should be updated to reflect the need for Commission
approval before any modification becomes valid. With respect to the account treatment of the 150
MW ESA, Staff agreed that the appropriate way to account for Kuna BESS is as a capital lease,
and Staff agreed to address regulatory accounting related to the ESA at a later date closer to the
commencement date.
Ultimately, Staff recommended:
1. Approval of the CPCN to acquire 24 MW and 77 MW of BESS capacity to meet
the 2024 and 2025 capacity deficiencies, respectively;
2. Setting a soft cap for the turn-key costs of the 24 MW and 77 MW BESS projects
at the amounts specified in Paragraph 1 and 2, respectively, of Confidential
Attachment A, unless the Company presents sufficient evidence that amounts over
the cap are justified when the Company seeks cost recovery;
3. The additional overbuild capacity of 5.8 MW for the 24 MW BESS and the 17.25
MW for the 77 MW BESS be subject to a full prudence review if the Company
seeks recovery and after the overbuild capacity becomes used and useful;
4. Declaration that the expenses associated with the ESA, as proposed, are prudently
incurred for ratemaking purposes;
5. The Company seek a prudence determination of incremental expenses outside of
the contracted prices in the ESA as listed in Exhibit No. 6 of Hackett’s Direct
Testimony, if any, when the project becomes operational;
6. Approval of the ESA, conditioned on the Parties updating Section 19.3 of the ESA
to reflect the significance of Commission approval;
7. Acknowledgement that lease accounting is necessary to facilitate the transaction of
the ESA; and
8. The Company address the issues Staff identified in the resource selection process
in future RFPs, regardless of whether the Company files an exception with the
Oregon Public Utilities Commission (“OPUC”).
COMPANY REPLY COMMENTS
The Company replied that the Commission should adopt Staff’s recommendation to grant
the company a CPCN, declare that the expenses associated with the ESA are prudent, and
acknowledge that lease accounting is necessary to facilitate the ESA.
ORDER NO. 36011 5
The Company represented that it completed a robust and competitive RFP process for
identifying the lease-cost, least-risk resource acquisitions, and the Company indicated that as it
gains experience with the development and insurance of RFPs, future RFPs will be refined and
become more robust to ensure a continued competitive resource acquisition process.
With respect to the BESS, the Company stated that the overbuild associated with the BESS
will be used, useful, and provide benefits to customers as soon as it is placed in service.
With respect to the soft cap, the Company did not believe that a soft cap is necessary, and
the Company represented that its evaluation of the proposals received as part of the 2022 RFP
considered the costs associated with overbuilds and the resulting selection of the 77 MW and 24
MW BESS were the least-cost resources, of which the entire BESS will be used and useful when
placed in service. However, the Company stated that if the Commission found it necessary to
implement a soft cap, then the soft cap should apply only to those costs associated with the
nameplate capacity of the 24 MW and 77 MW BESS.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over the Company’s Application and the issues in this
case under Title 61 of the Idaho Code including Idaho Code §§ 61-301 through 303. The
Commission is empowered to investigate rates, charges, rules, regulations, practices, and contracts
of all public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provisions of law, and to fix the same by order. Idaho Code
§§ 61-501 through 503.
1. Necessity of the CPCN
Public utilities shall “furnish, provide and maintain such service, instrumentalities,
equipment and facilities as shall promote the health, safety, comfort and convenience of its patrons,
employees and the public, and as shall be in all respects adequate, efficient, just and reasonable.”
Idaho Code § 61-302.
Before constructing “a line, plant, or system,” a public utility providing electrical service
must obtain a CPCN from the Commission establishing that the “public convenience and
necessity” requires it. Idaho Code § 61-526. Pursuant to Idaho Commission Rule of Procedure
112, existing utilities applying for the issuance a CPCN under Idaho Code § 61-526 must submit
any relevant data including: (1) a Statement and Explanation; (2) a Description of Construction or
ORDER NO. 36011 6
Expansion; (3) a Map; (4) a Financial Statement and Construction Timelines; and (5) Cost
Estimates and Revenue Requirements.
Having reviewed the Application, the record, the comments of the parties, and all submitted
materials, the Commission finds that the Company has satisfied the requirements for a CPCN to
acquire 101 MW of new dispatchable energy storage to meet an identified capacity deficiency in
2024 and 2025. Idaho Code § 61-526; Rule 112.
2. 20-year ESA with Kuna BESS
The Commission finds it fair, just, and reasonable to approve the 20-year, 150 MW, ESA
with Kuna BESS subject to Staff’s identified update to Section 19.3. The Commission also finds
that proposed expenses associated with the ESA are prudently incurred for ratemaking purposes.
However, any incremental expenses beyond the contracted prices in the ESA shall be subject to a
prudence determination when the Company seeks recovery. Further, the Commission
acknowledges the lease accounting necessary to facilitate the transaction.
3. Soft Cap and Future Recovery
Having reviewed the Application, the record, the comments of the parties, and all submitted
materials, the Commission finds that it is fair, just, and reasonable to establish a soft cap for each
project’s turn-key cost as specified in Paragraphs 1 and 2 of Confidential Attachment A to Staff’s
comments. The Company may recover above the soft cap for each project if the Company presents
sufficient justification for its resource costs when the Company seeks recovery. However, the soft
cap amounts, or any amounts under the soft caps, are not guaranteed for recovery as all resource
costs are subject to review during recovery proceedings. The additional overbuild capacity shall
be subject to a full prudence review when the Company seeks recovery.
While the Company represents that it will fully support and justify all resource costs as
part of a future proceeding, the Commission emphasizes the importance of selecting the least-cost,
least-risk resources to meet the Company’s capacity needs, and the importance of conducting and
maintaining thorough and competitive RFPs regardless of the Company’s shifting capacity needs.
ORDER
IT IS HEREBY ORDERED that the Company’s Application for a Certificate of Public
Convenience and Necessity for the acquisition of 101 MW of new dispatchable energy storage to
meet an identified capacity deficiency in 2024 and 2025 is granted.
ORDER NO. 36011 7
IT IS FURTHER ORDERED that the Commission establishes a soft cap for each project’s
turn-key cost in the amounts specified in Paragraphs 1 and 2 of Confidential Attachment A to
Staff’s comments. The additional overbuild capacity shall be subject to a full prudence review
when the Company seeks recovery.
IT IS FURTHER ORDERED that the 20-year, 150 MW, ESA with Kuna BESS is approved
with Staff’s identified update to Section 19.3, and the Company shall submit a compliance filing
with the update. The proposed expenses associated with the ESA are prudently incurred for
ratemaking purposes, and the Commission acknowledges the lease accounting necessary to
facilitate the transaction. Any incremental expenses beyond the contracted prices shall be subject
to a later prudence review when the Company seeks recovery.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon this Order regarding any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. Idaho Code §§ 61-626
and 62-619.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this 27th day of
November 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER
ATTEST:

Monica Barrios-Sanchez
Interim Commission Secretary
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