20110707Answer.pdf

LoVIGER I KAUF LL
825 NE Multnomah . Suite 925
Portland, OR 97232-2150 RECEIVED
20H JUL -7 AM II: 25
office [phone]
fax [phone]
Ke E KauJKa(i.co
July 6, 2011
VI OVERNGHT DELIVRY AN ELECTRONIC MAL
Jean D. Jewell, Secreta
Idaho Public Utilties Commission
472 W Washington Street
Boise, ID 83702
Re: Case Nos. PAC-E-II-Ol, PAC-E-II-02, PAC-E-II-03, PAC-E-II-04, PAC-E-II-05
IN THE MATTER OF THE APPLICATION OF PACIFICORP DBA ROCKY
MOUNTAIN POWER FOR A DETERMINA nON REGARDING FIRM ENERGY
SALES AGREEMENTS BETWEEN ROCKY MOUNTAIN POWER AND CEDAR
CREEK WIND, LLC (RATTLESNAKE CANYON, COYOTE HILL, NORTH POINT,
STEEP RIDGE, AND FIVE PINE PROJECTS)
Dear Ms. Jewell:
Enclosed for filing in the above-captioned dockets are an original and seven (7) copies of the
ANSWER OF ROCKY MOUNTAIN POWER TO CEDAR CREEK WIND, LLC'S PETITION
FOR RECONSIDERATION.
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.
Sincerely,ß;
~enneth E. Kaufmann
cc: PAC-E-II-Ol/PAC-E-II-02/PAC-E-II-03/PAC-E-II-04/PAC-E-II-05 Service List
Enclosures
Jeffrey S. Lovinger
Kenneth E. Kaufman
Lovinger Kaufman LLP
825 NE Multnomah, Suite 925
Portland, Oregon 97232
Telephone: [phone]
Fax: [phone]
lovingertßlklaw.com
kaufmantßlklaw.com
Attorneys for Rocky Mountain Power
RECEIVED
2011 JUL - 7 AM II: 25
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 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 (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)
ANSWER OF
ROCKY MOUNTAIN POWER
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Case No. PAC-E-11-01
Case No. PAC-E-11-02
Case No. PAC-E-11-03
1
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 WID, LLC
(FIVE PINE PROJECT)
) Case No. PAC-E-11-04
)
)
)
)
)
)
)
) Case No. PAC-E-11-05
)
) ANSWER OF ROCKY
) MOUNTAIN POWER TO
) CEDAR CREEK WID,
) LLC'S PETITION FOR
) RECONSIDERATION
)
Pursuant to Idaho Administrative Rule 31.01.01.331.05, PacifiCorp, dba Rocky
Mountain Power (the "Company"), submits this Answer to the Petition for Reconsideration
of Order No. 32260 and Request for Expedited Treatment fied by Cedar Creek Wind, LLC
("Cedar Creek") on June 29, 2011. For the reasons stated herein, Rocky Mountain Power
respectfuly requests the Commission issue an order denying Cedar Creek's petition and
fuher documenting and explaining why the Commission's disapproval of the five,PURPA
power purchase agreements was proper.
I. Background
On Januar 10, 2011, the Company fied five Applications each requesting
acceptance or rejection of a 20-year Firm Energy Sales Agreement (collectively the
"Agreements") between Rocky Mountain Power and Cedar Creek for its Rattlesnake
Canyon, Coyote Hil, North Point, Steep Ridge and Five Pine wind projects. All five
qualifying facilty ("QF") projects have capacity of 1 0 aMW or less and all five Agreements
included the avoided cost prices for small qualifying facilities published by the Commission
ANSWER OF
ROCKY MOUNTAIN POWER 2
in Order No. 31025. On June 8, 2011, the Commission found, in Order No. 32260 (the "June
8 Order"), that because the Agreements were executed after the date upon which the
eligibilty cap for published avoided cost prices changed from 10 aMW to 100 k W the five
wind projects are not eligible for published avoided cost prices. The Commission
disapproved the Agreements on that basis. On June 29, 2011, Cedar Creek fied a petition
asking the Commission to reconsider its June 8 Order and to approve the Agreements as
submitted. Cedar Creek alleges, in its petition: (1) that the Commission's determination-
that a QF of more than 100 kW capacity must have a fully executed contract before the date
of the eligibîlty change in order to qualify for the published rates-violates PURP A; (2) that
the Commission was bound by prior precedent to grandfather the Agreements; and (3) that
the Commssion did not give proper notice before deviating from past precedent regarding
grandfathering. Answers to Cedar Creek's petition must be postmarked by July 6, 2011. i
As explained below, Cedar Creek's petition should be denied because the June 8
Order does not violate PURP A, the June 8 Order serves the public interest in preventing large
QFs from disaggregating and taking advantage of published avoided cost rates, and the June
8 Order fairly discloses the facts upon which the Commission relies in a maner suffcient to
demonstrate that the Commission has not acted arbitrarily. Moreover, the Commssion's
order denying Cedar Creek's petition for reconsideration can fuher ariculate and clarfy the
facts and reasons supporting its decision not to allow QFs above 100 kW to qualify for
grandfathered eligibility unless the QF and the utilty signed a power purchase agreement
before the eligibility cap was reduced effective December 14,2010.2
i IDAPA 31.01.01.331.04.
2 Washington Water Power Co., v. Kootenai Environmental Allance, 99 Idaho 875, 879; 591 P.2d 122, 126
(1979) ("The purpose of an application for rehearing is to afford an opportnity to the paries to bring to the
ANSWER OF
ROCKY MOUNTAIN POWER 3
II. Idaho Law Regarding Formation of a Legally Enforceable PURP A Obligation
FERC regulations implementing PURPA give a QF the right to sell net output to the
utility at a price determined at the time of delivery or at the time the QF establishes a legally
enforceable obligation to sell its output to the utilty.3 FERC explained, when it adopted this
regulation, that the term "legally enforceable obligation" recognizes that, in order to prevent
a utility from frstrating the intent of PURP A by refusing to sign a power purchase
agreement, a QF must have a path to create a buy-sell obligation between itself and the utilty
without the utility's execution of a contract.4 FERC, however, left it to each state to
determine the specific parameters of individual QF power purchase agreements, including the
date at which a legally enforceable obligation is incured under state law.5
Under long-stading Idaho law, as anounced by the Commission and affirmed by
the Idaho Supreme Cour, there are two paths by which a QF may establish a legally
enforceable obligation under PURP A. The first path is for the utilty and the QF to execute a
power purchase agreement and to obtain approval of that agreement by the Commission.6
On this path, the contract becomes effective and a legally enforceable obligation arises-
thereby fixing the avoided cost rate-when the Commission approves the executed contract.
attention of the Commission in an orderly manner any question theretofore determined in the matter and thereby
afford the Commission an opportunity to rectify any mistake made by it before presenting the same to this
Cour."); Washington Water Power v. Idaho Pub. Uti/. Comm'n, 101 Idaho 567, 575, 617 P.2d 1242, 1250
(1980) ("Not only must the Commission make and enter proper findings of fact, but it must set fort its
reasoning in a rational manner.").
3 18 C.F.R. § 292.304(d)(2); Rosebud Enterprises, Inc. v. Idaho Pub. Util. Comm'n, 128 Idaho 609, 613, 917
P.2d 766, 770 (1996).
4 Small Power Production and Cogeneration Facilties; Regulations Implementing Section 210 of the Public
Utility Regulatory Policies Act of 1978,45 Fed. Reg. 12214, 12224, FERC Order No. 69 (Feb. 25 1980).
5 Rosebud, 128 Idaho at 623-24, 917 P.2d at 780-81 (citing West Penn Power Co., 71 FERC ir 61,153 (1995)).
6 Earth Power Resources, Inc. v. The Washington Water Power Co., Case No. WWP-E-96-6, Order No. 27231
(1997) ("Since its initial implementation of PURP A in 1980, the Commission has required that signed contracts
be submitted for review, approval and lock-in of effective rates. A lock-in of rates does not occur until the
Commission approves a contract to provide power. 18 C.F .R. § 292.304( d).").
ANSWER OF
ROCKY MOUNTAIN POWER 4
If, however, the rate applicable to the proposed power purchase agreement has changed prior
to the date the Commission grants its approval, the Commission may, in its discretion,
determine that the QF should receive grandfathered rate treatment and have access to the
rates that were in effect just prior to the rate change.? In Rosebud, the Idaho Supreme Cour
found that "( c )onferment of grandfathered status on qualifying facilities is essentially an
IPUC finding that a legally enforceable obligation to sell power existed by a given date.
Such a finding is within the discretion of the state regulatory agency."s The Agreements
between Rocky Mountain Power and Cedar Creek recognize the essential role of
Commission approval. The Agreements provide:
This Agreement shall become effective after execution by both Paries and
afer approval by the Commission ("Effective Date"); provided, however, this
Agreement shall not become effective until the Commission has determined,
pursuant 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 wil allow PacifiCorp to
recover in rates in Idaho in the event other jursdictions deny recovery of their
proportionate share of said expenses.
Cedar Creek Agreements, Section 2.1 (emphasis in original).
7 See Rosebud, 128 Idaho at 620, 917 P.2d at 777 (noting that QF "is not entitled to a lock-in ofan avoided cost
rate until it has entered into a legally enforceable and IPUC approved obligation for delivery or energy and
capacity..." and acknowledging the IPUC's "grandfathered treatment" of QFs that have executed a contract or
fied a complaint but not obtained Commission approval before the rate changed); see also In the Matter of the
Application of Idaho Power Company for New Cogeneration/Small Power Production Purchase Rates, Order
No. 19850 (1985) (IPUC states that QFs that fie a meritorious complaint prior to rate change wil enjoy
grandfathered status and wil be entitled to old rates if the complaint is subsequently approved by the
Commission); see also Application of San Diego & Electric Company (U 902-E) for an Ex Parte Order
Approving Modifcations to Uniform Standard Offer NO.1 and Standard Offer No.3, 68 CPUC 2nd 434; 1996
CaL. PUC LEXIS 1016, *45-47 (1996) (California utilty commission has no obligation to use the same
grandfathering criteria, or any grandfathering criteria, for each change to published avoided cost rates); see also
Public Service Company of New Hampshire, 131 FERC ir 61,027, irir 23-24 (2010) (FERC recognizes
distinction between grandfathering and the establishment of a legally enforceable obligation and concludes that
a QF may have a grandfathered right to require a utiity to purchase its net output even if the QF has not fully
established a legally enforceable obligation prior to the date FERC grants the utilty's request to be relieved of
the PURP A buy-sell obligation).
8 Rosebud, 128 Idaho at 624,917 P.2d at 781.
ANSWER OF
ROCKY MOUNTAIN POWER 5
Alternatively, a QF may incur a legally enforceable obligation under Idaho's
implementation of PURP A by filing a meritorious complaint. This is the second path. In
order for a complaint to be "meritorious," the complainant must allege and prove: (l) that the
project was substantially matue to the extent that would justify finding that the developer
was ready, willng, and able to sign a contract; and (2) that the developer had actively
negotiated for a contract which, but for the reluctance of the utility, would have been
executed.9
In sum, a legally enforceable obligation is not established in Idaho until either: (l) the
Commission approves a power purchase agreement that has been executed by the utilty and
the QF; or (2) the QF fies a complaint alleging that but for the utilty's inappropriate refusal
to execute an agreement the QF would have obtained a power purchase agreement and the
Commission has approved the relief request (i.e., the complaint must prove to be
meritorious).
The concept of grandfathering is distinct from the concept of the establishment of a
legally enforceable obligation.
10 Where a QF and a utility execute a power purchase
agreement before a change in published avoided cost rates but the Commission does not
approve the agreement until afer the rate change, then the legally enforceable obligation
does notarise until after the rate change. However, the Commission has typically applied the
concept of grandfathering to conclude that the QF is entitled to the old rates because the
9 Earth Power Resources, Inc., Order No. 27231; Rosebud, 128 Idaho at 624, 917 P.2d at 781; A. W. Brown Co.,
Inc. v. Idaho Power Co., 121 Idaho 812, 814, 828 P.2d 841, 843 (1992).
10 See note 7, supra.
ANSWER OF
ROCKY MOUNTAIN POWER 6
paries executed the contraçt (or the QF fied a meritorious complaint) before the rate change
took effect. 1 1
III. Argument
A. Commission's ruling is proper under Idaho law.
1. Commission's Order properly applied the controlling legal standard for
determining when a legally enforceable obligation arises under Idaho law.
There is no dispute that Cedar Creek has not fied a complaint; therefore Cedar Creek's
legally enforceable obligation must exist, if at all, via the first path described in Section II,
supra.12 Under the approach explained in Earth Power, and recognied as valid in Rosebud
and A. W. Brown, Cedar Creek did not perfect entitlement to published rates on December 13,
2010, when it tendered the signed Agreements to Rocky Mountain Power. Those
Agreements-under Idaho law and under Section 2.l-do not become effective until
approved by the Commission.13 Under the grandfathering criteria anounced in the June 8
Order, the Commission looked to see whether the QF qualified for grandfathered rate
treatment prior to the date of the change of the eligibility cap. The Commission concluded
that Cedar Creek was ineligible for grandfathered treatment because the date of execution
11 The Commission generally has required that, in order for a legally enforceable obligation that is based on a
meritorious complaint to enjoy grandfathered rate treatment, the complaint must be fied prior to the date of the
rate change. See In the Matter of the Application of Idaho Power Co. for Approval of a Firm Energy Sales
Agreement with Yellowstone Power, Inc. for the Sale and Purchase of Electric Energy, Case No. IPC-E-I0-22,
Order No. 32104,2 (2010). However, the Commission has allowed grandfathered rate treatment in some cases
where a legally enforcable obligation was established by a meritorious complaint that was fied after the rate
change when the complaint was fied very shortly after the rate change or a delay in fiing was the result of the
utilty's bad faith acts. See e.g., Blind Canyon Aquaranch, Inc. v. Idaho Power Co., Case No. IPC-E-94-1,
Order No. 25802 (1994).
12 The fact that the Commission did not address the second path to establishing a legally enforceable obligation
in its June 8 Order does not make its reasoning defective, paricularly because the Commission is discussing
grandfathering criteria. However, in any order responding to Cedar Creek's petition for reconsideration, the
Commission might note that Cedar Creek has not fied a complaint. In fact, Cedar Creek has never alleged that
PacifiCorp wrongly delayed signing the Agreements.
13 Earth Power, Order No. 27231; Cedar Creek Agreements, Section 2.1.
ANSWER OF
ROCKY MOUNTAIN POWER 7
was after the date of the change In eligibilty cap.
14 The Commission's findings are
consistent with Idaho law.
2. Commission was not obligated to follow prior grandfathering criteria.
The Commssion has discretion whether to allow grandfathering. If the Commission
elects to allow grandfathering, it has discretion regarding the circumstaces or prerequisites
that must be satisfied before the Commission will allow a QF that establishes a legally
enforceable obligation after a rate change to enjoy the ability to reach back and obtain
grandfathered rate treatment. Contrary to Cedar Creek's assertions in its petition, the
Commission may modify grandfathering criteria if the facts support a change and the
Commission makes a reasoned decision to change grandfathering criteria. 15 The
Commission is not rigidly bound by principles of stare decisis to follow prior precedent so
long as a record is developed and suffcient findings supported by the evidence show that its
action is not arbitrar and capricious.
16 In 2005, the Commission adopted one set of
grandfathering criteria when it lowered the eligibilty theshold for published rates from 10
MW to 100 kW.17 Because the grandfathering criteria are discretionar, and may be
14 June 8 Order at 9.
15 In the Matter of the Petition of Idaho Power Co. for an Order Temporarily Suspending Idaho Power's
PUPRA Obligation to Enter into Contracts to Purchase Energy Generated by Wind-powered Small Power
Production Facilties, Case No. IPC-E-05-22, Order No. 29872,9-11 (2005); see Application of San Diego Gas
& Electric Co., 68 CPUC 2d 434, 1996 CaL. PUC LEXIS 1016, *46. The CPUC set forth criteria for
grandfathering QFs that did not have fully executed agreements prior to the chosen date, but noted that its
criteria might have been different had the factual circumstances varied. Id.
16 Rosebud, 128 Idaho at 618, 917 P.2d at 775 ("Because regulatory bodies perform legislative as well as
judicial functions in their proceedings, they are not so rigorously bound by the doctrine of stare decisis that they
must decide all future cases in the same way as they have decided similar cases in the past. ") (citing
Intermountain Gas Co., 97 Idaho at 119,540 P.2d at 781).
17 In the Matter of the Petition of Idaho Power Co. for an Order Temporarily Suspending Idaho Power's
PUPRA Obligation to Enter into Contracts to Purchase Energy Generated by Wind-powered Small Power
Production Facilties, Case No. IPC-E-05-22, Order Nos. 29839, 29851, and 29872 (2005). The Commission
offered grandfathered treatment to those who, as of the applicable deadline, had (i) submitted to the utilty a
signed power purchase agreement or a completed application for interconnection study and (ii) demonstrted
"other indicía of substantial progress and project matuity" such as (1) a wind study demonstrating a víable site
ANSWER OF
ROCKY MOUNTAIN POWER
8
eliminated entirely, it is debatable whether the Commission need provide any rationale for
using different criteria in 2011 than it used in 2005. Neverteless, the Commission may
ariculate several substantial reasons why it opted to invoke a bright line requirement of an
executed power purchase agreement for grandfathered treatment regarding the December 14,
2011 change in eligibility cap.
One reason to change the criteria is administrative efficiency. In 2005, nine
qualifying facilties sought grandfathered treatment after the Commission changed the
eligibility cap for published avoided cost prices. is Each of these cases required a
determination of whether the qualifying facility qualified under the subjective grandfathering
test. A bright line test of an executed power purchase agreement prior to the relevant date,
by comparson, requires little or no fuer investigation to determine whether a QF
qualifies-thereby saving substantial Commission resources.
for the project, (2) a signed contract for wind turbines, (3) aranged financing for the project, and/or (4) related
progress on the facilty permitting and licensing path." Order No. 29839, 10.
18 See In the Matter of the Application of Idaho Power Co. for Approval of a Power Purchase Agreement with
Idaho Winds, LLC, Case No. IPC-E-06-36, Order No. 30253 (2007); In the Matter of the Application of Idaho
Power Co. for Approval of a Firm Sales Agreement for the Sale and Purchase of Electric Energy Between
Idaho Power Co. and Bennett Creek Wind Farm, LLC, Case No. IPC-E-06-35, Order No. 30245 (2007); In the
Matter of the Application of Idaho Power Co. for Approval of a Firm Sales Agreement for the Sale and
Purchase of Electric Energy Between Idaho Power Co. and Hot Springs Wind Farm, LLC, Case No. IPC-06,
Order No. 30246 (2007); In the Matter of the Application of Idaho Power Co. for Approval of a Firm Sales
Agreement for the Sale and Purchase of Electric Energy Between Idaho Power Co. and Magic Wind Park, LLC,
Case No. IPC-E-06-26, Order No. 30206 (2006); In the Matter of the Application of Idaho Power Co. for
Approval of a Firm Sales Agreement for the Sale and Purchase of Electric Energy Between Idaho Power Co.
and Milner Dam Company Wind Park, LLC, Case No. IPC-E-05-30, Order No. 29948 (2006); In the Matter of
the Application of Idaho Power Co. for Approval of a Firm Sales Agreement for the Sale and Purchase of
Electric Energy Between Idaho Power Co. and Lava Beds Wind Park, LLC, Case No. IPC-E-05-31, Order No.
29949 (2006); In the Matter of the Application of Idaho Power Co. for Approval of a Firm Sales Agreement for
the Sale and Purchase of Electric Energy Between Idaho Power Co. and Notch Butte Wind Park, LLC, Case
No. IPC-E-05-32, Order No. 29950 (2006); In the Matter of the Application of Idaho Power Co. for Approval of
a Firm Sales Agreement for the Sale and Purchase of Electric Energy Between Idaho Power Co. and Salmon
Falls Wind Park, LLC, Case No. IPC-E-05-33, Order No. 29951 (2006); In the Matter of the Application of
Idaho Power Co. for Approval of a Firm Sales Agreement for the Sale and Purchase of Electric Energy
Between Idaho Power Co. and Arrow Rock Wind, Inc., Case No. IPC-E-06-24, Order No. 29886 (2005).
ANSWER OF
ROCKY MOUNTAIN POWER 9
Another reason is the risk of utility customer overcharge presented by the recent
deluge of large QF wind projects disaggregating to tae advantage of published avoided cost
rates. The Commission was investigating the phenomenon of large wind projects
disaggregating into 10 aMW projects in Docket No. GNR-E-1O-04 durng the period Rocky
Mountain Power and Cedar Creek were negotiating their Agreements.19 In GNR-E-11-0l,
the Commission noted that it was "concerned that large QF projects were disaggregating into
smaller QF projects in order to be eligible for published avoided cost rates that may not be
just and reasonable to the utility customers or in the public interest.,,2o Upon completion of
the investigation, the Commission concluded that reduction of the cap down to 100 kW for
wind projects was necessar to protect the utility customer:
(W)e emphasize that PURP A and our published rate strctue were never
intended to promote large scale wind and solar development to the detriment
of utilty customers. * * * If we allow the curent trend to continue, customers
may be forced to pay for resources at an inflated rate and, potentially, before
the energy is actually needed by the utility to serve its customers. This is
clearly not in the public interest.21
The danger the Commission spoke of in hypothetical terms, above, has squarely manifested
itself. Between December 16,2010 and January 10,2011 Rocky Mountain Power and Idaho
Power Company ("Idaho Power") together fied with the Commission seventeen published
avoided cost power purchase agreements comprising 443.4 Megawatts of disaggregated wind
qualifying facilities, all of which were executed after the reduced eligibility cap took effect. 22
19 See In the Matter of the Joint Petiton of Idaho Power Company, Avista Corporation, and Pacifcorp dba
Rocky Mountain Power to Address Avoided Cost Issues and to Adjust the Published Avoided Cost Rate
Eligibilty Cap, Case No. GNR-E-I0-04; Order No. 32131 (2010).
20 In the Matter of the Commission's Investigation into Dissagregation and an Appropriate Published Avoided
Cost Rate Eligibilty Cap Structure for PURPA Qualifing Facilties, Case No. GNR-E-ll-Ol, Order No.
32262,4(2011).
21Id. at 8.
22 See In the Matter of the Application of Idaho Power Co. for a Determination regarding a Firm Energy Sales
Agreement Between Idaho Power and..., Case Nos. IPC-E-I0-51 to -55, Order No. 32254 (2011) (disapproving
ANSWER OF
ROCKY MOUNTAIN POWER
10
The resulting har to utilty customers if the Commission approved all of the power
purchase agreements between Rocky Mountain Power or Idaho Power, on the one hand, and
disaggregated large wind projects, on the other,23 provides a compellng basis for
Commission to require, as a prerequisite to grandfathered eligibility treatment, that the QF
and the utility execute the power purchase agreements prior to December 14, 2010.
In sum, there are compellng legitimate reasons why the Commission depared from
the 2005 grandfathering criteria adopted in Order No. 29839. To the extent the Commission
did not ariculate those reasons in its June 8 Order, it may do so now and cure any such
defect.24
Idaho Power's power purchase agreements with Alpha Wind LLC (29.9 MW), Bravo Wind LLC (29.9 MW),
Charlie Wind, LLC (29.9 MW), Delta Wind, LLC (29.9 MW), and Echo Wind (27.6 MW)); see also In the
Matter of the Application of Idaho Power Co. for a Determination regarding a Firm Energy Sales ,Agreement
Between Idaho Power and..., Case Nos. IPC-E-I0-56 to -58, Order No. 32255 (2011) (disapproving Idaho
Power's power purchase agreements with Murphy Flat Mesa, LLC (25 MW), Murhy Flat Energy, LLC (25
MW), and Murphy Flat Wind, LLC (25 MW)); see also In the Matter of the Application of Idaho Power Co.for
a Determination regarding a Firm Energy Sales Agreement Between Idaho Power and..., Case Nos. IPC-E-I0-
59 and -60, Order No. 32256 (2011) (disapproving Idaho Power's power purchase agreements with Rainbow
Ranch Wind, LLC (23 MW) and Rainbow West Wind, LLC (23 MW)); see also In the Matter of the
Application of Idaho Power Co. for a Determination regarding a Firm Energy Sales Agreement Between Idaho
Power and..., Case Nos. IPC-E-I0-61 and -62, Order No. 32257 (2011) (disapproving Idaho Power's power
purchase agreements with Grouse Creek Wind Park, LLC (21 MW) and Grouse Creek Wind Park II, LLC (21
MW); Order No. 32260 (disapproving Rocky Mountain Power's power purchase agreements for Cedar Creek
Wind's Rattlesnake Canyon Project (27.6 MW), Coyote Hil Project (27.6 MW), North Point Project (27.6
MW), Steep Ridge Project (25.2 MW), and Five Pine Project (25.2 MW)).
23 Cedar Creek admitted that its five projects were disaggregated from two, 78 MW wind projects. Comments of
Cedar Creek Wind in Support of Rocky Mountain Power's Application for Approval of a Power Purchase
Agreement, Case Nos. PAC-E-II-0l; PAC-E-II-02, PAC-E-II-03; PAC-E-II-04, PAC-E-II-05, 2-3 (Januar
28,2011).
24 See Rosebud, 128 Idaho at 624,917 P.2d at 781 (affrming Commission decisions after consideríng findings
of fact and reasoning in both the original Commission order and the Commission order denying reconsideration
of that original order).
ANSWER OF
ROCKY MOUNTAIN POWER 11
B. None of Cedar Creek's arguments demonstrate that Commission's June 8
Order is legally flawed.
1. Cedar Creek's argument that the Commission grants the utilty unilateral
power to frustrate a power purchase agreement is misplaced.
As explained in Section II, supra, a QF developer can establish a legally enforceable
obligation under Idaho law either through an executed agreement approved by the
Commission or though a meritorious complaint ultimately approved by the Commission.
Only the first path requires the assent of the utilty. If a utility is obstrcting the negotiation
process, the QF developer may fie a complaint. If the Commission finds that the complaint
is meritorious-that the QF would have had an executed agreement but for the dilatory
tactics of the utilty-it wil declare the QF's entitlement to a legally enforceable obligation.
Cedar Creek's argument that Idaho law does not permit a legally enforceable obligation
without the consent of the utility is incorret.
2. Cedar Creek's argument that June 8 Order violated notice requirements is
misplaced.
Cedar Creek argues that the Commission retroactively applied the grandfathering
criteria established in the June 8 Order in violation of (1) the 30-day notice required for rate
changes in Idaho Code § 61-307; (2) notice requirements in the Administrative Procedure
Act ("APA") in Idaho Code § 61-5201; and (3) due process.z5
As the Commission noted in its June 8 Order, published rates established in 2010 in
Order No. 31025 have not changed. Therefore it is doubtful that Idaho Code § 61-307,
which on its face applies to "rates", applies to a change in the eligibility cap. To the extent
§ 61-307 does apply, the Commission has "good cause" for waiving the notice requirement:
If the Commission were compelled to wait 30 days prior to giving effect to its anounced
25 Cedar Creek Petition at 10-12.
ANSWER OF
ROCKY MOUNTAIN POWER
12
change in the eligibility cap, it might be unable to prevent substatial har to Idaho utilty
customers in the form of overpriced power purchase agreements.26 The Commission did not
make this finding explicitly in the June 8 Order, but may do so now as par of its order
denying reconsideration without prejudice to Cedar Creek.27
Cedar Creek's argument regarding the APA is groundless because the APA was not
applicable to the December 14, 2010 reduction in eligibility.2s Lastly, as the Commission
noted recently, QFs without an executed agreement approved by the Commission or a
meritorious complaint do not have rights to certain published rates protected by due
process.29
Cedar Creek had ample notice that it might become ineligible for published rates
effective December 14, 2010. The November 5, 2010 Joint Petition fied by Idaho Power,
26 The fact that Idaho Power fied ten executed power purchase agreements with disaggregated wind projects on
December 16, 201Q-just two days after the change in the eligibilty cap-ilustrates the compellng need for
the Commission to have the freedom to act more quickly than 30 days when circumstances so warant. See note
22, supra.
27 The Commission's treatment, in Order No. 31092, of a similar claim raised in a petition for reconsideration in
GNR-E-I0-0l, is instrctive here. The Commission found that a finding of "good cause" was implicit in its
original order, and furter documented that good cause explicitly in its final order denying reconsideration.
Order No. 31092,11-14.
28 A.W. Brown Co. v. Idaho Power Co., 121 Idaho 812, 819 (1992) ("(W)hen the Commission is engaged in a
legislative fuction, such as (PURPA) rate-setting, it need not act pursuant to the APA (and specifically Idaho
Code § 61-5201) but need only fulfill the notice requirements imposed on it by the public utilty regulation
statutes. ")
29 Order No. 31092, 12. The Idaho Supreme Cour has held that a QF developer's due process rights do not
attach to a paricular avoided cost rate until the developer has established a legally enforceable obligation to sell
its output to a utilty at the rate in question. Rosebud Enterprises, Inc. v. Idaho Pub. Util. Comm 'n, 131 Idaho 1,
12 (1997) ("Rosebud Il'). In most relevant par of Rosebud II states:
Rosebud contends that IPUC's 1994 orders gave it a propert interest in the form of a legally
enforceable obligation it was required to have to be entitled to the 1994 rates. Because
Rosebud never made a legally enforceable obligation, as discussed above, it never had a
reasonable expectation that IPUC could not change the methodology for determining avoided
cost rates. Cf Smith v. Meridian Joint Sch. Dist. No.2, 128 Idaho 714, 722-723, 918 P.2d
583, 591-92 (1996) (requiring more than a mere hope or expectation of continued
employment to constitute a propert interest). Therefore, it never had a propert interest in the
1994 rates, and due process never attached to IPUC's consideration ofthe change of the 1994
rates.
RosebudII, 131 Idaho at 7; see also Order No. 31092,12.
ANSWER OF
ROCKY MOUNTAIN POWER
13
Avista, and Rocky Mountain Power-the petition that launched the Commission's
investigation into whether the eligibilty cap should be lowered to 100 kW-asked the
Commission to lower the eligibility cap to 100 kW "effective immediately." The
Commission's December 3 order stated that published rate eligibilty might change effective
December 14. In the December 3 order, the Commission did not suggest that QFs without an
executed agreement might be given grandfathered eligibilty. It is not uneasonable that QFs
should assume that, unless and until the Commission anounces grandfathering criteria, there
will be no such criteria.
Cedar Creek's contention that the bright line rule in the June 8 Order was a change
from prior orders does not stand up to examination. The orders that Cedar Creek relies on
are themselves specific exceptions to the bright line grandfathering rule; in each of those
proceedings the Commission justified the exception to the bright line rule in detaiL. Cedar
Creek points to orders wherein the Commission granted power purchase agreements at
grandfathered rates on a case-by-case basis.3D Cedar Creek also points to the grandfathering
criteria used by the Commission when it temporarly reduced eligibility of wind QFs for
published avoided cost rates in 2005 in IPC-E-05-22.31 In 2005, the Commission temporarly
reduced eligibilty while it investigated the integration cost of intermittent wind projects. In
that proceeding, the Commssion did not provide prior notice of the effective date of
reduction in eligibilty or prior notice of the grandfathering criteria (or even prior notice that
it would issue generic grandfathering criteria). Indeed, several paries challenged the
grandfathering criteria as a depare from past Commission precedent. The Commission
30 Cedar Creek Petition at 17.
31 Id. at 6-7.
ANSWER OF
ROCKY MOUNTAIN POWER 14
justified the depare on thoroughly reasoned analysis of equities at the time.32 It is ironic
that Cedar Creek points to IPC-E-05-22-itself an aberration from the bright line
gradfathering rule-as the source of binding Commssion precedent.
In sum, theCommission's past practice has been to make exceptions to the bright line
rule on a case-by-case basis. In the 2005 case when the Commission allowed generic
grandfathering criteria, it did so without advance notice of what those criteria would be. The
Commission has not established a regular practice of granting grandfathering for changes to
the eligibilty cap. In any event, the November 5,2010 Joint Petition and the Commission's
December 3, 2010 notice gave Cedar Creek fair notice that it might become ineligible for
published avoided cost rates as of December 14, 2010.
3. Cedar Creek's factual argument that only administrative work remained
after December 13 is wrong.
In its petition, Cedar Creek states "it is undisputed that when Cedar Creek executed
the Agreements and delivered them to Rocky Mountain Power on December 13, 1010, the
only remaining task was for Rocky Mountain Power to complete its administrative
processing.,,33 This statement is misleading to the extent it implies that any contract existed
prior to December 22, 2010. As explained in the Reply Comments of Rocky Mountain
Power,34 Rocky Mountain Power undertook a number of internal reviews of the Agreements
between the time it received them and the time it executed them. Par of the review is to
confrm that the terms negotiated by PacifiCorp's Merchant fuction and set forth in the
32 Order No. 29872, 9-11 (2005) (change to elibilty based on "need to invetigate the integration costs" and
"recognition of the significant increase in the number of PUR A wind projects" balanced against "reasonable
expectations of the wind QFs" and "considerable time, effort and energy expended by some QFs" and "QFs
who relied on utilty representations regarding the effect of interconnection study applications").
33 Cedar Creek Petition at 13.
34 Case No. PAC-E-II-0l, 3-4 (April 12, 2011)
ANSWER OF
ROCKY MOUNTAIN POWER 15
proposed agreement conform to the Commission's requirements and to the Company's
standards as of the time of execution of the Agreements. While this review seldom results in
substantive changes to the power purchase agreement, in the event either the Commission's
standard terms or the Company's standards changed durng the course of negotiations and the
draft negotiated by Rocky Mountain Power and Cedar Creek Wind did not conform, Rocky
Mountain Power reserves the right to renegotiate those portions of the Agreements. In short,
there is no contract until Rocky Mountain Power has completed its internal review, and
signified its acceptace by executing the Agreements.
35
4. Idaho law is not contrary to PURPA.
The Idaho formulation of when a QF can establish a legally enforceable obligation
satisfies PURP A because it prevents the utility from frstrating QF development by refusing
to enter into a power purchase agreement. PURPA does not, contrar to Cedar Creek's
assertion,36 require that the legally enforceable obligation arse when the QF expresses intent
to be bound.37 Rather, it is up to the state to determine when such obligation occurs. In
35 PacifiCorp's draft contracts all contain the following notice on the cover page, making clear to the QF that it
cannot rely on the prices in the contract until the contract has been executed by PacifiCorp and approved by the
Commission. The draft disclaimer reads:
THIS WORKG DRAFT DOES NOT CONSTITUTE A BINDING OFFER, SHALL NOT
FORM TH BASIS FOR AN AGREEMENT BY ESTOPPEL OR OTHERWISE, AND IS
CONDITIONED UPON EACH PARTY'S RECEIPT OF ALL REQUIRED MANAGEMENT
APPROVALS (INCLUDING FINAL CREDIT AND LEGAL APPROVAL) AND ALL
REGULATORY APPROVALS. ANY ACTIONS TAKEN BY A PARTY IN RELIANCE ON
THE TERMS SET FORTH IN THIS WORKING DRAFT OR ON STATEMENTS MADE
DURG NEGOTIATIONS PURSUANT TO THIS WORKING DRAFT SHALL BE AT THAT
PARTY'S OWN RISK. UNTIL THIS AGREEMENT IS NEGOTIATED, APPROVED BY
MANAGEMENT, SIGNED, DELIVERED AND APPROVED BY ALL REQUIRD
REGULATORY BODIES, NO PARTY SHALL HAVE ANY OTHER LEGAL OBLIGATIONS,
EXPRESSED OR IMPLIED, OR ARISING IN ANY OTHER MANNER UNDER THS
WORKG DRAFT OR IN THE COURSE OF NEGOTIATIONS.
36 Cedar Creek Petition at 14.
37 In cases where the Commission has found a complaint to be meritorious, it has grandfatheredthe date of the
legally enforceable obligation to the date when the QF made such an expression. See e.g. Earth Power, Order
No. 27231.
ANSWER OF
ROCKY MOUNTAIN POWER
16
Idaho, a legally enforceable obligation does not arise until the Commssion approves an
executed agreement or finds that the QF is substantially matue and would have had an
agreement but for the obstruction by the utility. This formulation is much less of a check on
the QF's ability to create a legally enforceable obligation than was the Texas Public Utility
Commission ("Texas Commission") formulation upheld in Power Resources Group, Inc. v
Pub. Uti!. Comm. ofTexas.38
In Power Resources, a QF developer challenged the Texas Commission's rue that a
legally enforceable obligation could not be established until a QF is withn 90 days of
delivering power. The plaintiff developer argued that this "90-day rule" violated a QF's
PURP A right to establish a legally enforceable obligation pursuant to 18 C.F.R. § 292.304( d)
because a new QF canot be financed and constrcted in 90 days. In essence, the Texas 90-
day rule means that a developer must construct a QF before it can establish a legally
enforceable obligation. The United States Cour of Appeals for the Fifth Circuit rejected the
QF developer's arguments and held that the 90-day rule was within the state's broad
discretion to determine when a legally enforceable obligation is formed under PURPA. The
cour reasoned that neither PURPA nor 18 C.F.R. § 292.304(d) give QFs the right to create a
legally enforceable obligation "at any time."39 Furer, the cour noted that, if FERC had
determined that States must allow a QF to lock in rates with a legally enforceable obligation
prior to constrction of a facilty, it could have said so in its rules.4o
In requirng Commission approval of a power purchase agreement or of a complaint
before a QF can establish a legally enforceable obligation, the Idaho Commission has
38422 F.3d 231 (5th Cir. 2005).
39422 F.3d at 238-39.
4°Id. at 239.
ANSWER OF
ROCKY MOUNTAIN POWER
17
imposed less limiting constraints on a QF's than the constraints imposed by the Texas
Commission and approved by the Fift Circuit. Unlike in Texas, a QF developer in Idaho
can establish a legally enforceable obligation well in advance of constrction of the QF-the
developer simply needs to obtain the Idaho Commission's approval of a power purchase
agreement or a meritorious complaint.
IV. Conclusion
In Order No. 32262, the Commission found that wind developers disaggregating their
large projects into 10 aMW projects in order to quaify for published avoided cost rates
theatened to inflate prices of utility customers in a way that was contrar to the public
interest.41 The Commission properly took this threat into account when it adopted a bright
line requirement that a QF must have an e ecuted agreement prior to the change in eligibilty
cap in order to receive grandfathered treat ent. To the extent the Commission did not note
the circumstances justifying its change in grandfathering criteria in its June 8 Order, it may
supplement its findings now. Neither Id 0 Code § 61-307, nor the APA, nor due process,
impose heightened notice requirements 0 the Commission's change in the eligibilty cap.
Nonetheless, the Commission had good cause to act as it did, and may wish to fuer
document such for the record. Finally, the notice Cedar Creek received that the change in
eligibility cap would be effective as of December 14,2011, fairly appraised Cedar Creek that
it could not assume it would receive grandfathered treatment. For the reasons above, Rocky
Mountain Power respectfully requests that Cedar Creek's petition for reconsideration be
denied.
41 Order No. 32262 is discussed on page 10, supra. The Commission may take offcial notice of its own orders
without affording the paries an opportnity to respond. IDAP A 31.01.01.263.1.
ANSWER OF
ROCKY MOUNTAIN POWER
18
DATED this 6th day of July 2011.
ANSWER OF
ROCKY MOUNTAIN POWER
Je-t. ~SB 960147
Kenneth E. Kaufmann, OSB 982672
Lovinger Kaufman LLP
Attorneys for Rocky Mountain Power
19
CERTICATE OF SERVICE
I HEREBY CERTIFY that, on the 6th day of July, 2011, a true and correct copy ofthe
foregoing Answer a/Rocky Mountain Power to Cedar Creek Wind, LLC's Petition/or
Reconsideration was served in the maner shown to:
Jean Jewell
Commission Secretar
Idaho Public Utilties Commission
472 W Washington
Boise, ID 83702
secretary(ßpuc.idaho.gov
(Overnight Delivery and Electronic Mail)
Daniel E. Solander
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, UT 84111
danel.solander(ßpacificorp.com
(First Class Mail and Electronic Mail)
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OR 97232
datareguest(ßpacificorp.com
(Electronic Mail)
Lar F. Eisenstat
Dickstein Shapiro LLP
1825 Eye Street, NW
Washington, DC 20006-5403
eisenstat1~dicksteinshapiro.com
(First Class Mail and Electronic Mail)
Ted Weston
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, UT 84111
ted. weston(ßpacificorp.com
(First Class Mail and Electronic Mail)
Ronald L. Wiliams
Wiliams Bradbur, PC
1015 W Hays St
Boise, ID 83702
ron(gwillamsbradbur.com
(First Class Mail and Electronic Mail)
Krstine Sasser
Idaho Public Utilities Commission
PO Box 83720
. Boise, ID 83720-0074
krstine.sasser(ßpuc.idaho.gov
(First Class Mail and Electronic Mail)
Michael R. Engleman
Dickstein Shapiro LLP
1825 Eye Street, NW
Washington, DC 20006-5403
engleman~dicksteinshapiro.com
(First Class Mail and Electronic Mail)
DATED this 6th day of July, 2011.
LOVINGER KAUFMANN LLP
-1~-
Kenneth E. Kaufman, OSB 982672
Attorney for Rocky Mountain Power