20100930Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 1895
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
WINDLAND, INC.
v.
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) CASE NO. PAC-E-IO-05
)
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) COMMENTS OF THE
) COMMISSION STAFF
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COMPLAINANT,
PACIFICORP DBA ROCKY MOUNTAIN
POWER,
DEFENDANT.
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA ROCKY MOUNTAIN
POWER FOR APPROVAL OF POWER
PURCHASE AGREEMENTS BETWEEN
PACIFICORP AND POWER COUNTY WIND
NORTH LLC AND POWER COUNTY WIND
SOUTHLLC
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Complaint (and Contingent Motion to Dismiss), Notice of Application, Notice of Modified
Procedure and Notice ofComment/rotest Deadline issued on September 2, 2010 submits the
following comments.
STAFF COMMENTS 1 SEPTEMBER 30,2010
BACKGROUND
On April 6, 2010, Windland, Inc. (Windland) fied a complaint with the Idaho Public
Utilties Commission (Commission) against PacifiCorp dba Rocky Mountain Power. Windland
claimed entitlement to and requested that PacifiCorp be required to execute two standard PURP A
Power Purchase Agreements for Windland's Power County Wind Park North and Power County
Wind Park South small power generation projects at the published PURP A avoided cost rates in
effect prior to March 12,2009, i.e., the higher grandfathered rates of Order No. 30744.
On April 28, 2010, a Summons was issued by the Commission directing PacifiCorp to file
an answer within 21 days. On April 29, 2010, PacifiCorp fied an answer with the Commission
requesting a Commission determination that Windland's Power County wind projects are not
entitled to grandfathered rates.
POWER PURCHASE AGREEMENTS
(and Contingent Motion to Dismiss Complaint, Application ~ 3)
On August 20, 2010, PacifiCorp fied. an Application with the Commission requesting
approval of two Power Purchase Agreements (PPAs; Agreements) entered into between PacifiCorp
dba Rocky Mountain Power and Power County Wind Park North LLC and Power County Wind
Park South LLC (the "LLCs") dated August 18,2010 (the LLCs). In addition to the two PPAs,
Rocky Mountain Power, Windland, and the LLCs entered into a Settlement and Release Agreement
("Settlement Agreement"). By its terms, the Settlement Agreement operates as a full and complete
general release of Rocky Mountain Power by Windland and the LLCs from any and all claims,
demands, actions, suits, and causes of action arising out of, or in any way related to the subject
matter of Windland's complaint in Case No. PAC-E-l 0-05 filed on or about April 6, 2010 with
regard to the Power County Wind Park North project and the Power County Wind Park South
project.
The total nameplate capacity for each of the two small power wind generation facilties
(QFs) is 21.78 MW. Agreements, Recital A. Average monthly output for each facilty wil be
below 10 aMW. Agreements, Exh. D. The estimated average annual net output of each facilty is
67,311,441 kWh (North) and 60,523,733 kWh (South). Agreements, Recital D. The QFs have
elected December 31, 201 1 as the scheduled commercial operation date for their facilties.
STAFF COMMENTS 2 SEPTEMBER 30, 2010
STAFF ANALYSIS
With only two exceptions, the terms and conditions in the two Agreements are identical to
the terms and conditions in other recently approved PURP A contracts. Those two exceptions are;
1) the rates in the Agreements, and 2) the amount of delay security required in the event the projects
do not come online as scheduled. These two exceptions were the primary reasons for the initial
complaint fied in this case.
Windland and the LLCs have waived their claims to grandfathered rights to the higher
avoided cost rates contained in Order No. 30744. Application, ~ 7. The Power Purchase
Agreements contain the curent, lower non-levelized published avoided cost rates established in
Order NO.3 1 025. Staff estimates that over the 20-year life of the Agreements, the difference
between the higher rates of Order No. 30744 and the lower rates of Order NO.3 1025 is
approximately $17.3 milion for the two Agreements combined. The $6.50/MWh wind integration
charge approved by the Commission for PacifiCorp (Order No. 31021) and all other applicable
interconnection charges and monthly O&M charges under the generation interconnection agreement
with PacifiCorp Transmission will also be assessed to the LLCs. Agreements, Section 5.1.
Section 11.1 of the PPAs provides for Delay Security of $25 multiplied by the Maximum
Facilities' Delivery Rate measured in kilowatts. This results in Delay Security of $544,500 under
each PP A. Other recent PURP A agreements have required delay security in an amount of $45 per
kW of capacity. For each of these Agreements, the difference between the $25 per kW and the $45
per kW of Delay Security is $435,600. Delay Security is intended to create a source of liquid funds
which the utilty can draw upon in the event damages are incurred if the project does not meet its
scheduled online date. Pursuant to Section 1 1.1.4 one-quarer of the Delay Security amount is to be
refunded to the QFs as each of four milestones are achieved. The approach to Delay Security has
been agreed to by the paries in compromise of Wind land's pending complaint in Case No. PAC-E-
10-05 and is not intended to establish any precedent.
The Commission has not previously mandated. a specific amount of Delay Security to be
included in PURP A contracts. As discussed above, Delay Security creates a source of liquid fuds
that can be drawn upon in the event delay damages are incurred. However, if the Project failed to
meet its scheduled online date and PacifiCorp was forced to go to the market to acquire replacement
power, Staff believes the prospect that PacifiCorp wil incur actual delay damages is reduced
because market prices are curently low and are forecasted to remain relatively low for at least the
next year or more. At least in the short term, the chances appear good that PacifiCorp could acquire
STAFF COMMENTS 3 SEPTEMBER 30, 2010
replacement power at lower cost than if the Project met its scheduled online date. Consequently, a
lower Delay Securty requirement does not seem uneasonable.
Under the terms of the Settlement, Windland and the LLCs have agreed to accept the lower
avoided costs of Order No. 31025, and PacifiCorp has agreed to require a lower amount of Delay
Security. As discussed above, the difference in rates between Order Nos. 30744 and 31025 over the
lives of the Agreements far exceeds the difference in Delay Security. Perhaps it could be argued
that Windland and the LLCs are not entitled to either the higher grandfathered rates or the lower
security amount. Nevertheless, resolution of the complaint over these issues through continued
proceedings before the Commission could occupy several more months and delay the projects long
enough that potential tax incentives are no longer available, making the projects no longer cost
effective. Because the parties have negotiated and reached mutual agreement on these two issues,
Staff does not believe that the Commission should stand in the way of the Agreements.
However, notwithstanding Staffs recommendation for approval of the Agreements, Staff
does not believe that a Delay Security requirement of $25 per kW should become stadard for
future PURP A contracts. Staffs recommendation for approval of the Agreements is based on the
facts of this specific case, and is conditioned upon approval of both the lower rates of Order No.
31025 and the $25 per k W delay security requirement.
STAFF RECOMMENDATION
Staff recommends that the Commission approve all the Agreements' terms and conditions
and declare that all payments that PacifiCorp makes to the LLCs for purchases of energy from the
Power County wind parks will be allowed as prudently incured expenses for ratemaking purposes.
Respectfully submitted this 3D 1Â day of September 2010.
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Scott Woodbur
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentstpaceIO.5swrps comments
STAFF COMMENTS 4 SEPTEMBER 30, 2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 30TH DAY OF SEPTEMBER 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-1O-05, BY MAILING A COpy THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
JEFFREY S LOVINGER
KENNETH E KAUFMANN
LOVINGER KAUFMANN LLP
825 NE MUL TNOMAH STE 925
PORTLAND OR 97232
E-MAIL: lovingerêlklaw.com
Kaufmanêlklaw.com
TED WESTON
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: ted.westonêpacificorp.com
daniel.solanderêpacificorp.com
PETER J RICHARDSON
GREGORY MADAMS
RICHARDSON & O'LEARY
PO BOX 7218
BOISE ID 83702
E-MAIL: peterêrichardsonandoleary.com
gregêrichardsonandoleary.com
J:~SECRETARY ~-
CERTIFICATE OF SERVICE