20100125final_order_no_30989.pdf

Office of the Secretary
Service Date
January 25 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF PACIFICORP DBA ROCKY MOUNTAIN
POWER FOR APPROVAL OF A POWER
PURCHASE AGREEMENT BETWEEN
ROCKY MOUNTAIN POWER AND BELL
MOUNTAIN HYDRO LLC
ORDER NO. 30989
CASE NO. PAC-09-
On December 4, 2009, PacifiCorp dba Rocky Mountain Power (PacifiCorp;
Company) filed an Application with the Idaho Public Utilities Commission (Commission)
requesting approval of a 20-year Power Purchase Agreement between PacifiCorp and Bell
Mountain Hydro, LLC (Bell Mountain) dated November 17 2009 (Agreement).
THE AGREEMENT
Bell Mountain intends to construct, own, operate and maintain a Pelton-wheel
hydroelectric generating facility (Facility) for the generation of electric power located
approximately 40 miles north of Howe, Idaho, in Butte and Lemhi Counties at a location more
particularly described as: SW 1/4 of the SW 1/4, Section 7, Township ION, Range 27E, Boise
Meridian. Bell Mountain warrants that the Facility will be a qualified small power production
facility (QF) under the applicable provisions of the Public Utility Regulatory Policies Act of
1978 (PURPA). Agreement ~ 3.2.
The facility is described as the following:
Two creeks, Bell Mountain Creek and Mahogany Creek, feed into a two-mile
canal, which Seller has recently lined, and 16 000 feet of new steel pipe.
Seller has also installed a new Pelton-wheel and a new 290 kW generator.
The water is used both for irrigation and power production. Water flow is
year-round and irrigation season is from April to October. Seller has a non-
consumptive water right to generate power. Seller has the ability to store
approximately 10 acre-feet of water in the canal (the "Pond"), which is
equivalent to about seven hours of generation at the Facility Capacity Rating.
Seller has no right to directly or indirectly regulate the flow of water to the
Facility except the cycling, or storing, of approximately 10 acre-feet of water
in the canal immediately upstream of the Facility s generating structure.
, Agreement, Exh. A.
ORDER NO. 30989
The submitted Agreement, as reflected in the Application, is the result of negotiation
and compromise. PacifiCorp will pay Bell Mountain non-Ievelized conforming energy or non-
conforming energy purchase prices for net output adjusted for the month and on-peak/off-peak
hours in accordance with Commission Order Nos. 30423 (monthly and daily price multipliers),
30480 (SAR methodology - fuel cost component), and 30744 (Conforming Energy Annual
Rates). The parties recognizing the intermittent nature of the resource have also agreed to
include a mechanical availability guarantee (MAG) and as a surrogate adopts the Company
current $5.1 O/MWh wind integration cost adjustment. Agreement ~ 5.1. In addition, the
Agreement contains provisions for delay liquidated damages (~ 2.3) to secure the established
scheduled commercial operation date of December 15 2009.
The nameplate rating of the Facility is 290 kW. Agreement, Exh. A. The estimated
annual net generation is 1 102 530 kWh. Agreement, Exh. D. Under normal and/or average
conditions, the Facility will not exceed 10 aMW in any calendar month. Should the Facility
exceed 10 aMW on a monthly basis, PacifiCorp may accept inadvertent energy at its sole
discretion, but will not purchase or pay for inadvertent energy. Agreement ~ 5.3.
The Scheduled Commercial Operation Date of the Facility is December 15, 2009.
Agreement ~ 2.2.4. Agreement ~ 2.1 provides that the Agreement will not become effective until
the Commission has approved all of the Agreement's terms and conditions and declares that all
payments PacifiCorp makes to Bell Mountain are just and reasonable and 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 proportionate share of said expenses.
On December 17 2009, the Commission issued a Notice of Application and Modified
Procedure in Case No. PAC-09-09. The deadline for filing written comments was January 8
2010. Commission Staff was the only party to file comments. Staff recommends approval of the
Agreement as submitted.
With one notable exception, Staff states that the terms and conditions in the
Agreement are similar to other recent PURP A contracts approved by the Commission and are in
conformance with prior Commission Orders. PacifiCorp will pay Bell Mountain non-Ievelized
conforming energy or non-conforming energy purchase prices for net output adjusted for the
month and on-peak/off-peak hours in accordance with Commission Order Nos. 30423 (monthly
ORDER NO. 30989
and daily price multipliers), 30480 (SAR methodology - fuel cost component), and 30744
(conforming energy annual rates).
The exception referred to by Staff relates to the inclusion of an integration discount in
the rates to be paid to Bell Mountain by PacifiCorp, and to the corresponding requirement for a
Mechanical Availability Guarantee (MAG). Requirements for an integration discount and a
MAG are normally reserved for wind generation projects, and are designed to account for the
costs associated with the intermittency of the generation. Bell Mountain s project in this case is
a hydro facility. The contract parties propose use of the wind integration adjustment as a
surrogate for hydro.
The Bell Mountain facility is a small hydro project that uses irrigation water for
power production. Water flow is year-round and the irrigation season runs from April to
October. The source of water is two small mountain streams that apparently have poor historical
streamflow records. Bell Mountain has the ability to store approximately 10 acre feet of water in
an upstream pond, which is equivalent to about 7 hours of generation at the facility capacity
rating. Nevertheless, the project's owner is not confident that he has the ability to predict
streamflows accurately enough to satisfy the 90/110 percent performance band rule. Reference
Commission Order No. 29632. Under the performance band concept, the QF is required to make
monthly production estimates. Energy produced below 90% or above 110% of the monthly
forecasted production is priced at a discount equal to 85% of the market or contract price
whichever is less.
Recognizing the intermittent nature of the resource, the parties have agreed as a
surrogate to the 90/110 requirement to include a 90% MAG and adopt the Company s current
$5.10/MW wind integration cost adjustment. Agreement ~ 5.1. Staff notes that the 90% MAG
requirement in the Agreement is higher than the 85% MAG requirement for wind projects. Staff
believes, however, that the deviation from prior Orders is justifiable in this case because of the
very small size of the project (290 kW), and because the contract rates and terms are the result of
negotiation and compromise.
Staff notes that the integration discount used by the parties in this case was developed
based on the effects of integrating intermittent wind generation, not based on the effects of
intermittent hydro generation. While some of the costs for intermittent wind integration may be
ORDER NO. 30989
similar to intermittent hydro generation, Staff notes that no study has been done to analyze hydro
specifically.
COMMISSION FINDINGS
The Commission has reviewed the filings of record in Case No. P AC-09-
including the underlying agreement and filed comments and recommendations of Commission
Staff. We continue to find it reasonable to process the Company s Application under Modified
Procedure. IDAPA 31.01.01.204.
PacifiCorp has presented a Power Purchase Agreement with Bell Mountain Hydro
LLC for Commission consideration and approval. The Agreement is for a 290 kW hydro
generating facility located in Butte and Lemhi Counties, Idaho. As represented and pursuant to
agreement, under normal and/or average conditions the project will not exceed 10 aMW on a
monthly basis. We thus find the project is qualified to receive the published avoided cost rates
approved by the Commission.
The Commission finds that the Agreement submitted in this case contains acceptable
contract provisions and includes the non-Ievelized published rates approved by the Commission
in Order No. 30480. We find the integration cost and Mechanical Availability Guarantee
contract provisions (Agreement ~ 5.1) to be the result of negotiation and in the context ofthis QF
project to be acceptable. We find it reasonable that the submitted Agreement be approved
without further notice or procedure. We further find it reasonable to allow payments made under
the Agreement as prudently incurred expenses for ratemaking purposes.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Rocky
Mountain Power, an electric utility, 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 NO. 30989
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission approves the November 17, 2009 Power Purchase
Agreement between PacifiCorp dba Rocky Mountain Power and Bell Mountain Hydro LLC.
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.
- ft'-
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this :26
day of January 2010.
~/~~
JI . KEMPT SID
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~~ tlt.Je D. Jewell
Commission Secretary
bls/O:PAC-09-09 sw2
ORDER NO. 30989