20121127Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM: RICK STERLING
DATE: NOVEMBER 6 1 2012
RE: COMPLIANCE WITH THE INSURANCE PROVISIONS OF BIRCH
CREEK TROUT HYDRO'S PURPA CONTRACT
On November 1, 2012, Idaho Power submitted a copy of a letter it sent to Birch Creek
Trout Hydro, a PURPA Qualifying Facility, regarding the administration of compliance with the
insurance provisions of Birch Creek Trout Hydro's contract. Because Idaho Power's letter
concerns a request to deviate from the express terms of the PURPA contract, Commission
approval is required.
The PURPA Power Sales Agreement ("Agreement") between Clifton E. Jensen ("Seller")
and Idaho Power dated July 1, 1983, for the Birch Creek Hydro project, approved by the
Commission in Order No. 15746, requires the Seller to continuously carry Valued Loss of
Income ("VLI") Insurance in amounts equal to the Accumulated Capacity Overpayments. In
PURPA contracts containing levelized rates, such as this one, overpayment occurs during the
first part of the contract term because the levelized rate paid for power purchases exceeds the
estimated value of the power. In the latter years of the contract, the reverse occurs. Because this
Agreement contains levelized rates, the VU insurance requirement is intended to provide
security to Idaho Power customers for initial overpayments, and subsequent underpayments
associated with the levelized rate in the event the project permanently or partially curtails its
output prior to the end of the full term of the Agreement.
Birch Creek Hydro has requested that Idaho Power consider accepting a Certificate of
Deposit ("CD") payable to Idaho Power in lieu of providing VLI insurance. Idaho Power agreed
to consider its request as long as the CD provided liquid security available to Idaho Power that
DECISION MEMORANDUM -1- NOVEMBER 6, 2012
meets or exceeds the value of the VLI insurance. Birch Creek, in turn, provided a 5-year CD,
payable to Idaho Power, in an amount of $11,400,
Staff believes that the CD furnished by Birch Creek provides an acceptable source of
liquid security, comparable to the security that would otherwise be provided by VLI insurance.
Consequently, Staff recommends approval of the parties request to substitute a CD in lieu of VU
insurance.
COMMISSION DECISION
Does the Commission wish to approve the request of Idaho Power to accept a CD in lieu
of VLI insurance as overpayment security in its PURPA contract with Birch Creek Trout?
5t4Rick terling
Udmernos/Birch Creek, Hydro dcc memo
DECISION MEMORANDUM -2 - NOVEMBER 6, 2012