20060208notice_of_modified_procedure.pdf

Office of the Secretary
Service Date
February 8, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
ACIFICORP FOR APPROVAL OF A POWER
PURCHASE AGREEMENT FOR THE SALE
AND PURCHASE OF ELECTRIC ENERGY BETWEEN P ACIFICORP AND SCHWENDIMAN WIND LLC
CASE NO. P AC-O5-
NOTICE OF JOINT MOTION
FOR APPROVAL OF AMENDED
POWER PURCHASE
AGREEMENT
NOTICE OF MODIFIED
PROCEDURE
NOTICE OF
COMMENT/PROTEST
DEADLINE
On August 15, 2005, PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application for approval of a Power Purchase Agreement (Agreement) for
the sale and purchase of electric energy between PacifiCorp and Schwendiman Wind LLC
(Schwendiman). On October 4, 2005 , the Commission in Order No. 29880 rejected the filed
Application because the Agreement did not include a "90/110 percent performance band " a
provision that defines the minimum degree of predictability required for published rate
eligibility. In its Order the Commission found that the 90/110 performance band established in
Order No. 29632 or a similarly rigorous requirement is necessary to assure that PacifiCorp
customers will receive the generation product they are paying for. Based on the established
record, the Commission found the Agreement's "mechanical availability guarantee" (MAG) to
be an unacceptable substitute for the 90/110 performance band and one that failed to sufficiently
protect ratepayers from overpaying. An agreement without such a provision, the Commission
found, is neither reasonable nor in the public interest. The Commission provided the parties 14
days to submit an amended Agreement containing a 90/110 performance band. Pursuant to
subsequent filings the deadline for filing an amended Agreement was continued.
Amended Agreement
YOU ARE HEREBY NOTIFIED that on January 27, 2006, PacifiCorp and
Schwendiman filed a Joint Motion with the Commission requesting approval of a 20-year
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NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENTIPROTEST DEADLINE
amended Power Purchase Agreement (Amended Agreement) dated January 27, 2006.
Schwendiman proposes to design, construct, install, own, operate and maintain a wind generating
facility with a nameplate capacity of 20 MW to be located in Bonneville County, Idaho.
Pursuant to the Amended Agreement Schwendiman will sell and PacifiCorp will purchase
approximately 7.15 aMW of electric energy generated by the Schwendiman wind facility, a
qualified small power production facility (QF) under the Public Utility Regulatory Policies Act
of 1978 (PURP A).
Amended Agreement Paragraph 2.1 conditions the Amended Agreement's
effectiveness upon a Commission determination that the prices to be paid for energy and capacity
are just and reasonable, in the public interest, and that the costs incurred by PacifiCorp for
purchasing capacity and energy from Schwendiman are legitimate expenses, all of which the
Commission will allow PacifiCorp to recover in rates in Idaho in the event other jurisdictions
deny recovery of their proportional share of said expenses.
operation date is scheduled to occur by July 31 , 2007.
Schwendiman s commercial
Delivery of Energy and Capacity
Pursuant to Amended Agreement, PacifiCorp will purchase the net output of 7.15
aMW from the eight 2.5 MW Clipper wind generators comprising the QF. In accordance with
Section 4 of the Amended Agreement Schwendiman will be required to achieve an actual
monthly capacity factor within 10% of its forecasted monthly capacity factor (bandwidth). In the
event Schwendiman is outside the bandwidth, then it will receive the energy-only price (capacity
component removed) for all non-conforming energy delivered during that month.
Under Paragraphs 2.3 and 10.4 of the Amended Agreement Schwendiman will
reimburse PacifiCorp s costs for obtaining replacement power if Schwendiman misses the
scheduled commercial operation date of the plant (up to 120 days), or PacifiCorp terminates the
Agreement in the event of a seller default (up to 12 months). The replacement power price is the
average of the Mid-and Palo Verde firm market price over the defined period of
reimbursement. Schwendiman would be responsible for the positive difference, if any, between
the contract price and the replacement power price for the volume of replacement energy.
Schwendiman will not be compensated for delivering more than 10 aMW in any
given month. As described in Paragraph 5.4 of the Amended Agreement, if the facility delivers
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more than 10 aMW on a monthly basis, PacifiCorp will accept the energy but will not purchase
or pay for the portion delivered in excess of 10 aMW.
Purchase Price
The contract purchase price to be paid Schwendiman for its wind generation are
Idaho s published non-Ievelized avoided cost rates, as currently established by the Commission
in Order No. 29646 for QFs that deliver less than 10 aMW on a monthly basis. The
Schwendiman facility is expected to have net generation of approximately 62 700 MW hours
annually. Thus, PacifiCorp s average annual energy purchase obligation over the term of the
Amended Agreement will be approximately $4 million, with a total nominal cost of $72.
million. All applicable interconnection charges and monthly operation and maintenance charges
under the generation interconnection agreement with PacifiCorp transmission will be assessed to
Schwendiman.
Changes to Original Agreement
As reflected in the Joint Motion description of changes to the original Agreement, the
Amended Agreement contemplates an estimated annual sale and purchase of 62 723 088 kW
hours compared to the 54 882 702 kW hours contemplated in the original Agreement. The
difference arises because Schwendiman proposes to add an additional turbine to the facility
thereby increasing its nameplate capacity from 17.5 MW to 20.0 MW.
The Amended Agreement omits provisions related to guaranteed mechanical
availability. Consequently, provisions related to seller s minimum availability obligations in
Sections 4 and 5 of the original Agreement have been deleted, as have the defined terms
Availability,
" "
Cut-in Speed
" "
Minimum Availability Obligation
" "
Output Shortfall " and
Sufficient Wind.
The Amended Agreement adds the term "Non-Conforming Energy" to describe
energy delivered in excess or deficit of the seller s monthly delivery obligation. As required by
Order No. 29880 the Amended Agreement requires seller to deliver between 90% and 110% of
its scheduled delivery on a monthly basis and provides that seller receive the energy only price
for all Non-Conforming Energy. These provisions are added to Sections 4 and 5 of the Amended
Agreement.
The Amended Agreement measures monthly performance using a Monthly Capacity
Factor. The Monthly Capacity Factor is subject to adjustment for periods of excusable non-
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delivery, using a process purportedly analogous to the adjustment process contained in
Commission approved Power Purchase Agreements filed by Idaho Power Company.
In Section 6.4, the Amended Agreement clarifies the formula for calculating
PacifiCorp s liquidated damages in the event oftermination due to seller s default.
The Amended Agreement revises the construction milestones in Section 2.2
postponing the Scheduled Commercial Operation Date from July 15, 2006 in the original
Agreement to July 31 , 2007 in the Amended Agreement. The cap on seller s potential liability
for daily delay damages, to be assessed in the event of unexcused delay in Commercial
Operation, has been extended from 90 days to 120 days.
In Order No. 29880 (pp. 11 , 12), the Commission stated that an acceptable published
avoided cost Power Purchase Contract should: (I) measure QF production on a monthly basis;
(2) differentiate the price paid for energy based on its reliability and predictability; and (3)
provide a similarly rigorous and reasonable equivalent to the 90/110 performance band
established in Order No. 29632. PacifiCorp and Schwendiman contend that the Amended
Agreement addresses all three of these concerns.
Grandfathering Treatment
In Order No. 29880, the Commission found that the "grandfathering" provisions set forth
in Order No. 29839 did not apply to the Application in Case No. P AC-05-9 because the
original Agreement was signed and dated July 19, 2005 - well before the August 4, 2005
effective date that reduced eligibility for PURPA contract rates from 10 aMW to 100 kW.
PacifiCorp and Schwendiman assert that the Amended Agreement should be accorded similar
grandfathering treatment because the Schwendiman project was sufficiently mature at the time of
Order No. 29839 and thus entitled to published rates. Additionally, the contract parties contend
that the Amended Agreement, which was negotiated to meet the Commission s objections to the
original Agreement, may properly be viewed as an extension of the original Agreement and it
should therefore be subject to the same rules as the original Agreement.
YOU ARE FURTHER NOTIFIED that the Commission has reviewed the filings of
record in Case No. PAC-05-9 including its prior Order No. 29880 and the January 27, 2006
Joint Motion filed by PacifiCorp and Schwendiman requesting approval of an amended Power
Purchase Agreement. The Commission has preliminarily found that the public interest in this
matter may not require a technical hearing to consider the issues presented and that issues raised
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by the Company s filing may be processed under Modified Procedure, i., by written
submission rather than by hearing. Reference Commission Rules of Procedure IDAP A
31.01.01.201-204.
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or
protests with respect to the Joint Motion of PacifiCorp and Schwendiman for approval of an
amended Power Purchase Agreement and the use of Modified Procedure in Case No. P AC-05-
9 is Wednesday, March 8,2006.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the deadline, the Commission may consider the matter on its merits and may
enter its Order without a formal hearing. If comments or protests are filed within the deadline
the Commission will consider them and in its discretion may set the matter for hearing or may
decide the matter and issue its Order based on the written positions before it. Reference IDAP
31.01.01.204.
YOU ARE FURTHER NOTIFIED that written comments concerning Case No. P AC-
05-9 should be mailed to the Commission and the Company at the addresses reflected below.
Street Address for Express Mail:
Lisa Nordstrom
Dean Brockbank
PacifiCorp
825 NE Multnomah, Suite 1800
Portland, OR 97232
E-mail: lisa.nordstrom~pacificorp.com
dean. brockbank~pacificorp.com
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
472 W. Washington Street
Boise, ID 83702-5983 Bruce Griswold, Manager, Origination
PacifiCorp
825 NE Multnomah, Suite 1800
Portland, OR 97232
E-mail: bruce.griswold~pacificorp.com
Schwendiman Wind:
Dean J. Miller, Esq.
McDevitt & Miller LLP
PO Box 2564
Boise, ID 83701
E-mail ioe~mcdevitt-miller.com
NOTICE OF JOINT MOTION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENTIPROTEST DEADLINE
All comments should contain the case caption and case number shown on the first page of this
document. Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.idaho.gov. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to PacifiCorp and Schwendiman at the e-mail
addresses listed above.
YOU ARE FURTHER NOTIFIED that the Application, Joint Motion and other
filings in Case No. P AC-05-9 may be viewed at www.puc.idaho.gov by clicking on "File
Room" and "Electric Cases " or can be viewed during regular business hours at the Idaho Public
Utilities Commission, 472 W. Washington Street, Boise, Idaho and at the Idaho offices of
PacifiCorp dba Utah Power & Light Company.
DATED at Boise, Idaho this +k..day of February 2006.
Je D. Jewell
ission Secretary
bls/N:PAC-05-
NOTICE OF JOINT MOTION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENTIPROTEST DEADLINE