20110412Reply Comments.pdf

LoVIGER I KAUFMA LL
825 NE Multnomah . Suite 925
Portand, OR 97232-2150 RECE\VED office [phone]
fax [phone]
101\ APR 12 PR 3d)'Keet E. KaKauf~.co
April 8, 2011
Via Electronic Mail and Overnight Mail
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 W Washington Street
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
472 W. Washington
Boise, ID 83702-5918
Re: Case Nos. PAC-E-11-01, PAC-E-11-02, PAC-E-11-03, PAC-E-11-04, PAC-E-11-05
IN THE MATTER OF THE APPLICATION OF PACIFICORP DBA ROCKY
MOUNTAIN POWER FOR A DETERMINATION REGARDING FIRM ENERGY
SALES AGREEMENTs BETWEEN ROCKY MOUNTAIN POWER AND CEDAR
CREEK WIND, LLC
Dear Ms. Jewell:
Enclosed for fiing in the above-captioned docket are an original and seven (7) copies of
REPLY COMMENTS OF ROCKY MOUNTAIN POWER.
An extra copy of this cover letter is enclosed. Please date stamp the extra copy and retu it to
me in the envelope provided.
Than you in advance for your assistance.
~q
Kenneth E. Kaufman
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cc: PAC-E-ll-01 Service List
Enclosures
Jeffrey S. Lovinger
Kenneth E. Kaufman
Lovinger Kaufmann LLP
825 NE Multnomah, Suite 925
Portland, Oregon 97232
Telephone: [phone]
Fax: [phone]
lovinger($lklaw.com
kaufman($lklaw.com
Attorneys for Rocky Mountain Power
RECEIVED
2011 APR 12 PM 3: 09
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA ROCKY MOUNTAIN
POWER FOR A DETERMINATION
REGARDING A FIRM ENERGY SALES
AGREEMENT BETWEEN ROCKY
MOUNTAIN POWER AND CEDAR CREEK
WID, LLC (RATTLESNAKE CANYON
PROJECT
IN THE IN THE MATTER OF THE
APPLICATION OF PACIFICORP DBA ROCKY
MOUNTAIN POWER FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
ROCKY MOUNTAI POWER AND CEDAR
CREEK WIND, LLC (COYOTE HILL PROJECT
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA ROCKY MOUNTAIN
POWER FOR A DETERMINATION
REGARDING A FIRM ENERGY SALES
AGREEMENT BETWEEN ROCKY
MOUNTAIN POWER AND CEDAR CREEK
WID, LLC (NORTH POINT PROJECT)
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Case No. PAC-E-11-01
Case No. PAC-E-11-02
Case No. PAC-E-11-03
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA ROCKY MOUNTAIN
POWER FOR A DETERMINATION
REGARDING A FIRM ENERGY SALES
AGREEMENT BETWEEN ROCKY MOUNTAIN
POWER AND CEDAR CREEK WIND, LLC
(STEEP RIDGE PROJECT)
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA ROCKY MOUNTAIN
POWER FOR A DETERMINATION
REGARDING A FIRM ENERGY SALES
AGREEMENT BETWEEN ROCKY MOUNTAIN
POWER AND CEDAR CREEK WIND, LLC
(FIVE PINE PROJECT)
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Case No. PAC-E-11-04
Case No. Pac-E-11-05
REPLY COMMENTS OF
PACIFICORP DBA
ROCKY MOUNTAIN
POWER
Comes now PacifiCorp dba Rocky Mountain Power and fies these Reply Comments in
response to Reply Comments of Cedar Creek Wind.! Without recommending that the
Commission approve or disapprove the five Cedar Creek Wind power purchase agreements,
Rocky Mountain Power notes the following facts and law for the Commission's consideration.
Background
Rocky Mountain Power and Cedar Creek Wind completed negotiation of all terms of the
power purchase agreements ("PP As") for Cedar Creek Wind's five, lOaMW wind qualifying
facilities ("QFs") prior to December 14, 2010. Rocky Mountain Power is aware the Public
Utility Regulatory Policies Act of 1978 ("PURP A") does not permit a utility to delay signing a
PP A while it waits for a pending rate change to take effect and Rocky Mountain Power acted
with reasonable speed to execute the PP As given the number of documents and complexity of
1 Rocky Mountain Power's Reply Comments, as well as the Reply Comments of Cedar Creek Wind fied on AprilS,
are out of the prescribed window to comment set fort by the Commission in its February 24, 2011 Order No.
32192. Rocky Mountain Power therefore requests that the Commission either strike both Replies or accept both
Replies.
REPLY COMMENTS OF
ROCKY MOUNTAIN POWER
2
review of the multiple transactions requested by Cedar Creek Wind. It is important to note that
the Company's contract review and execution procedure must comply with Sarbanes Oxley
("SOX") regulatory requirements. Begining when the PPA is in near-final form, various
functions in the Company review the draft PP A and make a preliminar determination of what is
needed for final review and approvaL. From these reviews, the Company determines if there are
any major issues that need to be addressed with the QFs and what follow-up information is
needed for final approvaL. Once the parties agree to a final draft, the final draft then undergoes a
detailed review and sign-off by management, merchant transmission, accounting, financial
reporting (FAS 133, Fin 46, etc.), credit, legal, biling, and delegation of signing authority by the
appropriate Company executive for execution of the agreement. As ths final. review requires the
involvement of several fuctions across the Company and detailed scrutiny of the final PP A
draft, the typical time for this final review and execution phase is 5 to 10 business days. Seldom
does ths review result in any material changes to the draft PP A. Rather, the final review process
confirms that the contract complies with the Company's SOX requirements, documents that all
PP A requirements were met, and moves the PP A to execution. Each executed contract is
documented for validation and signed-off by the varous fuctions and a copy of the PP A and
documentation is retained for compliance auditing puroses.
The Company commenced internal review of a near-final draft of the Coyote Creek PP A
on November 15, 2010, and continued the internal review process in parallel with the paries'
ongoing negotiations of the near-final draf and a related transmission agreement. After those
negotiations finished, Cedar Creek Wind signed and delivered original copies of all five PPA
agreements without exhibits to Rocky Mountain Power's Portland office late on the afternoon of
December 13, 2010. Cedar Creek Wind did not deliver final conformed exhbits for each PPA
REPLY COMMENTS OF
ROCKY MOUNTAIN POWER 3
until December 14, 2010. Once Rocky Mountain Power received the conformed exhibits from
Cedar Creek Wind, the Company verified every page of each PP A (including exhbits),
documented the review, obtained internal approvals, executed the originals, and made copies
before returng a complete set of executed originals to Cedar Creek Wind. Durng the review,
the Company identified discrepancies in several of the PP A exhibits which were corrected and
confirmed by Cedar Creek Wind on December 16, 2010. These discrepancies included;
incorrect project names in Exhibit D for Five Pine, North Point, Rattlesnake Canyon and Steep
Ridge, incorrect QF number for Rattlesnake Canyon, and changes by Cedar Creek Wind to the
Five Pine and Nort Point PPA exhibits that were incorrectly made on the Coyote Hil exhibits.
The Company also pedormed additional legal and technical analysis to confirm that the five
projects did not violate the I-mile rule codified at 18 C.F.R. §292.204, and that the addendum to
the PP As allocating comingled line losses and station service comported with PURP A and
transmission system interconnection requirements. The Company completed final review and
executive approval was received December 22, 2010. The Company executed the five PPAs on
December 22, 2010 and delivered copies of the signatue page to Cedar Creek Wind that same
day with a fully conformed original for each PP A following by maiL.
The Company completed review and execution or all five PP As in 7 business days--well
,/
withn the typical range of time that the Company has completed final reviews with other QF
projects. It is unlikely that Rocky Mountain Power could have completed its review in a timelier
maner and in no event could the Company have been diligent and stil executed the contracts
prior to December 14, having received signed PP As with no conformed exhibits from Cedar
Creek Wind at the end of the business day on December 13,2010.
REPLY COMMENTS OF
ROCKY MOUNTAIN POWER
4
At the time Rocky Mountain Power executed the agreements, there was uncertainty about
the correct avoided cost rate for all small Idaho QFs over ioOkW. On November 5, 2010, Rocky
Mountain Power, Idaho Power Company, and Avista Corporation jointly petitioned the
Commission to immediately reduce the eligibility cap for published avoided cost rates from
lOaMW to 100kW? The Commission, on December 3, 2010, issued Order No. 32131, in which
it declined to immediately reduce the 10aMW eligibility cap, but simultaeously anounced its
intent to review the eligibility cap at a Januar 27, 2011 hearng and to apply the outcome of that
process effective December 14, 2010.3 Order No. 32131 gave Rocky Mountain Power and
Cedar Creek Wind notice that the eligibility status of the Cedar Creek Wind QFs might change,
effective December 14, 2010.4 However the parties did not know, and could not know, the post-
December 14 status of those projects until the Commission's final decision (Order No. 32176),
issued Februar 7, 2011.5 Under those circumstaces, Rocky Mountain Power did what it
believed it was obligated to do-it executed the five agreements (the "December 22 PPAs") with
the terms and conditions the paries agreed to prior to December 14, 2010, and with the
published avoided cost rates in effect on December 22, 2010. Rocky Mountain Power did not
know, on December 22 or at any time thereafter, whether the Commission would approve the
PP As as executed.
2 Joint Petition to Address Avoided Cost Issues and Joint Motion to adjust the Published Avoided Cost Rate
Eligibilty Cap, Case No. GNR-E-I0-04, (Nov. 5, 2010).
3 In the Matter of the Joint Petition of Idaho Power Company, Avista Corporation, and PacifCorp d/b/a Rocky
Mountain Power to Address Avoided Cost Issues and Adjust the Published Avoided Cost Rate Eligibilty Cap, Case
No. GNR-E-I0-04, Order No. 32121 (2010).4 Id.
5 On December 22, 2010, it was not yet clear whether the Commission would decide to reduce the eligibilty cap for
published avoided cost rates effective December 14,2010, and it was therefore not clear on December 22, 2010, that
Cedar Creek Wind's QF development-a large development which had been disaggregated into five QFs under
1OaMW-would not qualifY for published avoided cost rates after December 14,2010.
REPLY COMMNTS OF
ROCKY MOUNTAIN POWER
5
Discussion
Cedar Creek Wind argues, in its Reply Comments (page 4), that it is entitled to approval
of its contracts because the paries "had a meeting of the minds" prior to December 14, 2010.
However, under their terms, the December 22 PP As are not effective until approved by the
Commission. Section 2.1 of each of PP A provides:
This Agreement shall become effective after execution by both Parties and after
approval by the Commission ("Effective Date"); provided, however, this
Agreement shall not become effective until the Commission has determined,
pursuat to a final and non-appealable order, that the prices to be paid for energy
and capacity are just and reasonable, in the public interest, and that the costs
incured by PacifiCorp for purchases of capacity and energy from Seller 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
proportionate share of said expenses.
Per the language above, the December 22 PP As canot become effective until the Commission
finds that: (1) the prices to be paid for energy and capacity are just and reasonable; (2) the
contract is in the public interest; and (3) costs incured by the Company for purchases of capacity
and energy from Seller are legitimate expenses, all of which the Commission wil allow the
Company to recover in rates in Idaho in the event other jursdictions deny recovery of their
proportionate share of said expenses.
On previous occasions where QFs sought grandfathered rate treatment the Commission
has, without exception known to the Company, made the above findings and approved
grandfathered rates where the paries fully executed a PP A prior to the date of a rate change.
The Commission also authorizes grandfathered treatment where the paries did not fully execute
the PP A and the QF fies a meritorious complaint prior to the rate change alleging that the
utility's foot dragging prevented full execution of a PPA before the rate change. These two
recognized fact patterns embody what Rocky Mountain Power has referred to before the
Commission as the "bright line" rule for grandfathered rate treatment anounced by the
REPLY COMMENTS OF
ROCKY MOUNTAIN POWER
6
Commission and affirmed by the Idaho Supreme Cour in the 1990s.6 Under the bright line rule,
Cedar Creek Wind could have assured itself of obtaining the pre-December 14, 2010 published
avoided cost rates if it had either obtained fully executed PP As by December 14 or filed a
meritorious complaint by December 14 alleging that Rocky Mountain Power improperly refused
to execute PP As. Cedar Creek Wind did neither and Cedar Creek Wind therefore is not entitled
to the certin relief of the bright line rule.
Cedar Creek Wind requires an exception to the bright line rue to allow its QFs to qualify
for pre-December 14 published avoided cost rates. There is recent Commssion precedent for
granting grandfathered rate treatment in circumstaces where the seller failed the bright line test.
In 2010, Idaho Power Company requested, and the Commission granted, grandfathered rate
treatment to both the Grand View Solar and the Yellowstone Power Inc. QFs.7 The Commission
noted that there was a meeting of the minds prior to the rate change but also based its grant of
grandfathered rate treatment on other, equitable, reasons. In Grand View Solar, the Commission
found that "but for consideration by the Company of a non-PURPA contract for the project, a
contract would have been signed prior to March 16, 2010.,,8 In Yellowstone, the Commission
found that a "combination of factors, coupled with evidence of an agreement prior to March 16,
2010, make it clear that approval of the Agreement' s grandfathered avoided cost rate is in the
6 A. W.Bown CO., Inc. v. Idaho Power Co., 121 Idaho 812, 816, 828 P.2d 841 (1992); See, also, In the Matter of the
Application of Idaho Power Company for Approval of a Firm Sales Agreement with Yellowstone Power, Inc. for the
Sale and Purchase of Electric Energy, Case No. IPC-E-I0-22, Comments of the Commisson Staff, at 3 (2010).
7 See, In the Matter of the Application of Idaho Power Company for Approval of a Firm Energy Sales Agreement
with Grand View Solar PV 1, LLC for the Sale and Purchase of Electric Energy, Case No. IPC-E-1O-19, Order No.
32068 (2010); In the Matter of the Application of Idaho Power Company for Approval of a Firm Sales Agreement
with Yellowstone Power, Inc.for the Sale and Purchase of Electric Energy, Case No. IPC-E-I0-22, Order No. 32104
(2010).
8 Order No. 32068, at 5.
REPLY COMMENTS OF
ROCKY MOUNTAIN POWER 7
public interest.,,9 These cases may be factually distinguished from Cedar Creek Wind QFs,
based on the "other factors" unique to the Cedar Creek Wind projects. Whereas, Grand View
and Yellowstone are both single QFs with capacity less than 10 aMW, the five Cedar Creek QFs
are, in substance, a single 133 MW project, disaggregated into 10 aMW projects, apparently for
the purose of qualifying for that to which it otherwise is not entitled-the published avoided
cost rate. The policy implications of grandfathering Cedar Creek Wind PP As are not the same as
the implications for grandfathering either Grand View or Yellowstone.
Conclusion
Rocky Mountain Power concurs with Cedar Creek Wind's statement (on page 3 of its
Reply) that the two parties reached agreement on all terms oftheIr December 22 power purchase
agreements prior to December 14, 2010. This fact alone does not, however, compel the
Commission to approve those contracts.
Dated this 8th day of April, 2011.
Respectfully Submitted,:£&Kenneth Kaufmann
Lovinger Kaufmann, LLP
Of Attorneys for Rocky Mountain Power
9 Order No. 32104, at 12.
REPLY COMMNTS OF
ROCKY MOUNTAIN POWER
8
CERTIFICATE OF SERVICE
I herby certify that I have this 8th Day of April, 2011, served the foregoing Reply
Comments of PacifiCorp, d/b/a Rocky Mountain Power, in Case No. PAC-E-ll-
01_02_03_04_05, by electronic and overnight mail, to the following:
Jean Jewell
Commission Secretar
Idaho Public Utilities Commission
472 W. Washington
PO Box 83720
Boise, ID 83720-0074
jean.jeweii~pucrãlidaho.gov
sccretary(Q,puc.idaho. gov
Daniel Solander
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, UT, 84111
E-Mail: daniel.solanderræpacificorp.com
Ted Weston
ID REG Affairs MGR
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, UT, 84111
E-Mail: ted.westonræpacificorp.com
Ronald L. Wiliams
Wiliams Bradbur PC
1015 W. Hays St
Boise, ID 83702
E-Mail: ron~wiliamsbradbur.com
U~
Jeffery S. Lovinger, OSB 960147
Kenneth E. Kaufman OSB 982672
Lovinger Kaufman LLP
Attorneys for Rocky Mountain Power
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