20100727final_order_no_32037.pdf

Office of the Secretary
Service Date
July 27, 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF BYPASS LIMITED PARTNERSHIP FOR
AN ORDER APPROVING A FIRM ENERGY
SALES AGREEMENT WITH IDAHO
POWER COMPANY ORDER NO. 32037
CASE NO. IPC-89-
Term Extension Letter Agreement
On June 21 , 2010, the Commission was informed by Idaho Power that it had by
Letter Agreement dated June 11 2010, agreed to extend the termination date of the Hazelton A
Firm Energy Sales Agreement from June 20 2010 to December 31 , 2010, in order to provide the
parties time to negotiate a new Power Purchase Agreement. See Attachment A. Hazelton A is a
9 MW hydroelectric project located in Jerome County, Idaho. Hazelton A is a qualifying small
power production facility (QF) under the Public Utility Regulatory Policies Act of 1978
(PURPA). The original Agreement was approved by the Commission on February 9, 1989 , in
Order No. 22326. The Agreement has a term of 20 years from the Operation Date of June 20
1989. There are no provisions in the Agreement for extension.
Idaho Power states that in early June 2010 it notified the Hazelton A project of the
pending contract expiration. At that time, the project expressed the desire to continue to sell
energy to Idaho Power under terms and conditions of the existing Agreement until December 31
2010, with the intention of executing a new agreement with Idaho Power prior to December 31
2010.
Idaho Power states that the project is current on all requirements of the Agreement
and that the energy prices within the existing Agreement are more favorable than a new PURP
agreement. The Company believes that it is reasonable to extend the term of the Agreement
under its existing terms and conditions. The energy prices in the existing Agreement are
levelized and are as follows:
Season 1
Season 2
Season 3
3.489 cents per kWh
603 cents per kWh
669 cents per kWh
ORDER NO. 32037
Staff Analysis
Commission Staff has two primary concerns with the parties' Letter Agreement to
extend the termination date. First, the contract parties did not appear to even begin discussions
about the expiring Agreement until early June. The original termination date was June 20 2010.
The Letter Agreement to extend the original contract was not signed until June II , and the
Commission did not receive notification of the Letter Agreement until June 21 , the day following
the original contract termination date. Both parties, Staff believes, share responsibility for
managing the Agreement and clearly should have acted sooner to execute a new contract. Staff
contends the Commission should not be asked to approve contract extensions after the original
agreements have expired.
Staff discusses several options for how this expired contract could be handled.
Extending the contract for an additional six months is one option, and is the preference of the
contract parties. A second option is to simply allow the Agreement to expire, and for Idaho
Power not to purchase any more energy from Hazelton A until a new contract is in place. This
option is not likely attractive to either party because it would deny Idaho Power energy at a
reasonable price and cause Hazelton A to lose all revenue from a project that is otherwise
capable of operating.
A third option is to allow the original Agreement to expire, but to require additional
energy purchases to be made by Idaho Power under its Schedule 86 non-firm tariff until a new
purchase contract is in place. Under Schedule 86, Idaho Power purchases energy from PURP A
generators on a month-to-month basis at rates equal to 85 percent of the monthly A voided
Energy Cost. Obviously, Mid-C prices, Staff notes, vary on a daily and monthly basis and
cannot be known with certainty in advance. Nevertheless, forward market prices, Staff states
are available from brokers and are a reasonable approximation of what spot market prices are
likely to be in the coming months.
Staff made a comparison between the existing rates in the Agreement and the most
recent three-month average of 85 percent of Mid-C market prices for deliveries of power in July
- December 2010. The comparison shows that the existing contract rates exceed the Mid-
prices in every month.On average, over the next six months, energy payments under the
1 Avoided Energy Cost is the weighted average of the daily on-peak and off-peak Dow Jones Mid-ColumbiaElectricity Price Index (Dow Jones Mid-C Index) prices for non-fIrm energy published in the Wall Street Journal.
ORDER NO. 32037
existing contract rates would exceed estimated Schedule 86 rates by approximately 16.5 percent.
Idaho Power (and its ratepayers) would thus appear to be financially better off to allow the
existing Agreement to expire and to continue any additional energy purchases from Hazelton A
at Schedule 86 rates until a new contract is negotiated. This option, however, Staff contends
might incent Hazelton A to quickly negotiate a new contract prior to year-end under current
published rates.
A fourth option is to negotiate a new contract immediately to replace the expired one.
Under a new 20-year levelized contract, the energy prices under present published rates would be
as follows:
Season 1
Season 2
820 cents per kWh
502 cents per kWh
919 cents per kWhSeason 3
Clearly, these rates are much higher than the rates in the expired contract.
Although Staff states it does not condone extension of expiring agreements as
common practice, the fact remains, Staff contends, that Idaho Power and ratepayers will be better
off financially by extending the expiring Agreement to December 31 , 2010, and locking in rates
for that period of time, than if a new replacement contract was signed immediately. Staff
recommends that Idaho Power be permitted to extend the existing Agreement (terms, conditions
and rates) until December 31 , 2010.Continuing the Agreement, Staff contends , will take
Hazelton A through the generation (irrigation) season and permit the reasoned consideration of
new contract terms and conditions.
COMMISSION FINDINGS
On February 9, 1989, the Commission approved a Firm Energy Sales Agreement for
the Hazelton A hydroelectric project in Jerome County. Order No. 22326. By its terms the
contract expired June 20 2010.
On June 21 , 2010, Idaho Power submitted a Letter Agreement whereby the Hazelton
A contract parties propose to extend the Agreement (terms, conditions, and rates) to December
2010. It is the parties' stated intention to negotiate a new contract.
After reviewing the underlying Agreement, the contract rates, the currently effective
published rates and the Company s non-firm tariff Schedule 86 rates, Staff concludes that the
Company and its customers will benefit by a lock-in of the contract rates to the end of year 2010.
ORDER NO. 32037
The Commission has reviewed the filings of record, has considered Staff s analysis and concurs
in its conclusion. We find it reasonable to approve an extension of the Hazelton A contract
termination date approved in Order No. 22326 to December 31 , 2010.
We note that we have previously apprised Idaho Power of its obligation to monitor
and administer its PURP A contracts for QF performance. The Commission expects as part of its
monitoring, that a purchasing utility initiate discussions with the QF regarding the contract
termination date sufficiently in advance of the impending termination to allow for the negotiation
of a replacement contract if that is the parties' intent. It is certainly unacceptable practice, as in
this case, to file with the Commission for a requested rate extension after the date of contract
termination. We expect the Company hereafter to conform its contract administration practice so
as to enable sufficient time for regulatory processing of the Company s application.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power, an electric
utility, and the issues raised in this matter pursuant to the authority and power granted it under
Title 61 of the Idaho Code and the Public Utility Regulatory Policies Act of 1978 (PURPA).
The Commission has authority under PURP A and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed-term obligations for the purchase of energy from qualified facilities
(QFs) and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby approve an extension of the termination
date of the Hazelton A Firm Energy Sales Agreement from June 20, 2010 to December 31 , 2010.
Reference February 9, 1989, Order No. 22326.
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. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
ORDER NO. 32037
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;;27 ~
day of July 2010.
JI . KEMPTON, P SIDENT
L1~
MARSHA H. SMITH, COMMISSIONER
MACK A. REDFO
ATTEST:
~ fif~
je D. Jewell
Commission Secretary
bls/O:1PC-89-2 sw
ORDER NO. 32037
IDAHO
POUVER ~
An IDACORP company
June 17 , 2010
RECEIVED
2010 JUH 2 I AM 8:. 13
UTI ~~E
~O to ~\~SION
Randy C. Allphin
Senior Energy Contract Coordinator
Tel: [phone]
rallphin~idahopower. com
Jean Jewell
Conunission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ill 83720-0074
RE:Hazelton A, Proj ect Number 31715128
Dear Ms. Jewell:
Attached is a copy of a signed letter extending the termination date of the Hazelton A Firm
Energy Sales Agreement dated January 18, 1989 (Agreement) to December 31 , 2010. A copy has
also been provided to Rick Sterling and Scott Woodbury. Please me this copy with the original
Agreement.
This Agreement was approved in Commission Order 22326 on February 9, 1989. The
Agreement has a Term of 20 years from the Operation Date of June 20, 1990. The current energy
prices within the Agreement are:
Season 1
Season 2
Season 3
3.489 cents per kWh
603 cents per kWh
669 cents per kWh
The attached letter agreement provides that the current Agreement be extended, including these
energy prices unti1 December 31, 201 O.
In early June 2010, Idaho Power notified the project of the pending contract tennination.
that time the project expressed the desire to continue to sell energy to Idaho Power under the existing
agreement unti1 December 31, 2010, with the intention of executing a new agreement with
Idaho Power for energy sales prior to December 31 2010.
Page 1 of2
POBox 70 Boise, Idaho 83707 1221 W Idaho St. Boise Idaho 83702 ATTACHMENT
ORDER NO. 32037
CASE NO. IPC-89-
Jean Jewell Page 2 June 17 2010
The project is current on all requirements within the Agreement and the energy prices within
the existing agreement are more favorable then a new PURP A agreement. Idaho Power agreed it was
reasonable to extend the term of the Agreement. In this letter agreement Idaho Power advises the
project that a copy of this letter will be filed with the Conunission and if the Commission requires
additional information or processes, the project will be notified of these requirements.
Please contact me if you have any questions or if you require any additional infonnation.
Sincerely,
i? ~.cuer-'
Randy C Allpllln
Idaho Power Company
RCAlcs
Attachment
cc:Rick Sterling (IPUC)
Scott Woodbury (IPUe)
Donavan Walker (IPe)
Page 2 of2
POBox 70 Boise, Idaho 83707 1221 W Idaho S1. Boise, Idaho 83702
IDAHO
POWER
An IDACDRP Company
June 11 2010
SE Hazelton A, L.
C/O Enel North America Attn: Victor A Engel
One Tech Drive, Suite 220
Auldover, 01810
Randy C. AUphin
Senior Energy Contract Coordinator
Tel: [phone]
rallphin(a1idahQDOwer.com
Re:HazeltonA, Project Number: 31715128
Finn Energy Sales Agreement - Term Extension Letter Agreement
The Firm Energy Sales Agreement (Agreement) for tbe above-referenced project dated January 18, 1988, is dueto expire on June 20, 20 I O. Idaho Power and Enel North America have discussed and agree to extend the temof the existing Agreement to December 31 , 2010 with no changes to the existing terms and conditions.
If you concur with extending the contract term as described above, please sign this letter in the designated spacebelow and return to Idaho Power Company. Upon receipt of this signed document, I will file a copy with theIdaho Public Utilities Cormnission (IPUC), return a copy to you for your records and retain a copy for Idaho
Power records.
In filing the copy with the IPUe I will include a cover letter advising them of our agreement to extend and ask
that if they require any additional information or processes to notify Idaho Power.
Sincerely,
12 f.
~JtdY C. Allphin
Idaho Power Company
Agreed, Understood and Accepted
Signature
~orth
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Date
O. Box 70 (B3707)
1221 W. Idaho St.
Boise. ID B3702