20110324Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
RECEIVFn
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201! HAR 2(, PM 3: 12
1'-/1L ¡ ,_
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
WIND, 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
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
WIND, LLC (NORTH POINT PROJECT)
STAFF COMMENTS
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) CASE NO. PAC-E-ll-Ol
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) CASE NO. PAC-E-ll-02
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) CASE NO. PAC-E-ll-03
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MARCH 24, 2011
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
MOUNT AIN POWER AND CEDAR CREEK
WIND, LLC (FIVE PINE PROJECT)
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) CASE NO. PAC-E-ll-04
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) CASE NO. PAC-E-ll-05
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) COMMENTS OF THE
) COMMISSION STAFF
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COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Applications and Notice of Modified Procedure issued in Order No. 32192 on February 24,2011,
in Case Nos. PAC-E-II-0l, -02, -03, -04, and -OS, submits the following comments.
BACKGROUND
On January 10,2011, PacifiCorp dba Rocky Mountain Power (Company) fied
Applications requesting acceptance or rejection of five 20-year Firm Energy Sales Agreements
(Agreements) between Rocky Mountain Power and Cedar Creek Wind, LLC for its Rattlesnake
Canyon, Coyote Hil, North Point, Steep Ridge and Five Pine wind projects. All five projects
(Facilities) are located near Bingham County, Idaho. The projects wil all be "Qualifying
Facilities" (QFs) under the applicable provisions of the Public Utility Regulatory Policies Act of
1978 (PURPA).
On December 22,2010, Rocky Mountain Power and each of the five wind projects entered
into their respective Agreements. Under the terms of the Agreements, the wind projects each agree
to sell electric energy to Rocky Mountain Power for a 20-year term using the curent non-Ievelized
published avoided cost rates as currently established by the Commission in Order No. 31025 for
energy deliveries of less than 10 aMW. Applications at 8-9. The nameplate rating of Rattlesnake
Canyon, Coyote Hil and North Point is 27.6 MW each. The nameplate rating of Steep Ridge and
Five Pine is 25.2 MW each. Under normal and/or average conditions, each Facilty will not
STAFF COMMENTS 2 MARCH 24, 2011
exceed 10 aMW on a monthly basis. Rocky Mountain Power warrants that the Agreements
comport with the terms and conditions of the various Commission Orders applicable to PURP A
agreements for wind resources. Order Nos. 30415, 30488, 30738 and 31025.
Each Facility has selected October 1, 2012, as its Scheduled Commercial Operation Date.
Applications at 9. Rocky Mountain Power asserts that various requirements have been placed
upon the Facilities in order for Rocky Mountain Power to accept the Facilities' energy deliveries.
Rocky Mountain Power states that it wil monitor the Facilities' compliance with initial and
ongoing requirements through the term of the Agreements. Rocky Mountain Power asserts that it
has advised each Facility of the Facility's responsibility to work with Rocky Mountain Power's
transmission unit to ensure that suffcient time and resources wil be available for delivery to
construct the interconnection facilities, and transmission upgrades if required, in time to allow each
Facility to achieve its October 1,2012, Scheduled Commercial Operation Date.
Rocky Mountain Power asserts that each Facility has been advised that delays in the
interconnection or transmission process do not constitute excusable delays and if a Facilty fails to
achieve its Scheduled Commercial Operation Date delay damages wil be assessed. ¡d. at 11. The
Applications further maintain that each Facility has acknowledged and accepted the risk inherent
in proceeding with its Agreement without knowledge of the requirements of interconnection and
possible transmission upgrades. ¡d. The parties have each agreed to delay liquidated damages and
security provisions. Agreement irir 2.5.1, 11.1.2. Rocky Mountain Power states that each Facilty
has also been made aware of and accepted the provisions in each Agreement regarding curtailment
or disconnection of its Facility should certain operating conditions develop on Rocky Mountain
Power's system. Agreement ir 6.3.
By their own terms, the Agreements wil not become effective until the Commission has
approved all of the terms and conditions and declares that all payments made by Rocky Mountain
Power to the Facilities for purchases of energy "are just and reasonable, in the public interest, and
that the costs incurred by (Rocky Mountain Power) for purchases of capacity and energy from
(Cedar Creek) are legitimate expenses, all of which the Commission wil allow (Rocky Mountain
Power) to recover in rates in Idaho in the event other jurisdictions deny recovery oftheir
proportionate share of said expenses." Agreement ir 2.1.
Rocky Mountain Power's Applications specifically note the Joint Petition it filed with the
Commission on November 5,2010, requesting an immediate reduction in the published avoided
cost rate eligibilty cap from 10 aMW to 100 kW. Applications at 3. The Company states that it is
STAFF COMMENTS 3 MARCH 24, 2011
aware of and in compliance with its ongoing obligation under federal law, FERC regulations, and
Commission Orders to enter into power purchase agreements with PURP A QFs. ¡d. at 4.
However, the Company goes on to express its concern that approval of the Agreements wil cause
a significant increase in power supply costs and higher rates for customers because published rates
are higher than IRP-based rates and higher than prices that could be obtained in competitive RFP
processes for comparable resources. The Company contends that the avoided cost price difference
between the SAR-methodology (published rates) compared to the IRP-methodology wil result in
the Company collectively paying an additional $10 milion per year for the power from the five
projects. ¡d. at 6.
PacifiCorp points out that under the Revised Protocol agreement
1 , "Costs associated with
any New QF Contract, which exceeds the costs PacifiCorp would have otherwise incurred
acquiring Comparable Resources, wil be assigned on a situs basis to the State approving such
contract." Therefore, if the Commission approves the Agreements, the Company states that it
intends to request that the $10 milion anual incremental expense associated with these five
contracts be situs assigned to Idaho ratepayers. This would be in addition to Idaho's allocation of
the cost that would have otherwise been paid under the IRP methodology. ¡d. at 7. To put a $10
milion annual incremental expense in perspective, PacifiCorp's annual Idaho jurisdictional
revenue requirement approved in Case No. PAC-E-1O-07 is $216 milion.
STAFF ANALYSIS
All five of the Agreements submitted for approval are nearly identical except for the
names of the facilities and the LLCs under which each is being developed. All five of the projects
are also proposed to be built in the same general vicinity as shown on the map included as
Attachment A.
The five facilities collectively are expected to generate 375,503 MWhs anually. Under
the non-levelized rates in the Agreements, Staff estimates the annual energy payments by
PacifiCorp for the expected generation will be approximately $23.6 milion in 2013 increasing to
approximately $45.2 milion in 2031, or a cumulative total of $685.4 milion over the 20-year term
of the Agreements. The collective net present value of the energy payments over the life of the
Agreements wil be approximately $265.2 milion.
i The Revised Protocol is an agreement between each of the state jurisdictions in which PacifiCorp serves regarding
allocation of costs between jurisdictions.
STAFF COMMENTS 4 MARCH 24, 2011
With the exception of rates, all of the other terms and conditions included in the
Agreements are consistent with recent Commission Orders. There are no disputes between the
paries over any terms and conditions.
Temporary Lowering of the Eligibilty Cap for Published Rates
On November 5, 2010, Idaho Power Company, Avista Corporation, and PacifiCorp dba
Rocky Mountain Power (Utilties) fied a Joint Petition requesting that the Commission initiate an
investigation to address various avoided cost issues related to PURP A. While the investigation is
underway, the Petitioners also requested that the Commission "lower the published avoided cost
rate eligibilty cap from 10 aMW to 100 kW (to) be effective immediately. . . .". Petition at 7. On
December 3, 2010, the Commission issued Order No. 32131, Notice of Joint Petition, Notice of
Intervention Deadline, and Notice of Oral Argument. In the Order, the Commission declined to
immediately reduce the published avoided cost rate eligibility cap, but did establish a schedule for
processing the Utilties' request to reduce the eligibility cap via Modified Procedure and to
schedule an oral argument. In paricular, the Commission stated its desire to receive comments
regarding the following:
(1) the advisability of reducing the published avoided cost eligibility cap;
(2) if the eligibility cap is reduced, the appropriateness of exempting non-wind QF projects
from the reduced eligibility cap; and
(3) the consequences of dividing larger wind projects into 10 aMW projects to utilze the
published rate.
In its Order, the Commission went on to state "Finally, it is our intent that our decision
regarding the 'Joint Motion' to reduce the published avoided cost eligibilty cap shall become
effective on December 14,2010." Reference Order No. 32131 at 5-6, emphasis added. By stating
its intent, paries were given clear, unambiguous, advance notice that the eligibilty cap may be
reduced.
Written comments were submitted by the parties on December 22, 2010, written reply
comments were submitted on January 19,2011, and Oral Argument was heard on January 27,
2011. On Februar 7, 2011, the Commission issued Order No. 32176 which temporarily reduced
the eligibility cap for published avoided cost rates from 10 aMW to 100 kW for wind and solar
QFs only. In accordance with its stated intent in Order No. 32131, Order No. 32176 confirmed
STAFF COMMENTS 5 MARCH 24, 2011
that the reduction in the eligibility cap would be effective December 14,2010. Reference Order
No. 32176 at 11-12.
The Applications state that the Agreements were signed by Cedar Creek on
December 13, 2011 and that they were subsequently signed by Rocky Mountain Power on
December 22,2010. Each of the five Agreements presented for Commission approval is clearly
dated December 22, 2010. The Agreements were fied with the Commission on Januar 10, 2011.
The Agreements contain rates from Order No. 31025, the published rates currently in effect.
As a result of Order No. 32176, wind and solar QF contracts executed on or after
December 14, 2010 must be for facilities 100 k W or smaller in order to be eligible for published
rates. Because the effective date of each of the Agreements is not prior to December 14, 2010, the
date on which the lowered eligibility cap became effective, and because the size of each proposed
wind project clearly exceeds 100 kW, the current eligibility cap for wind and solar facilities to
obtain a published rate contract, Staff considers the rates contained in the Agreements to be in
violation of Commission Order No. 32176. Consequently, Staff recommends denial of each of the
five Agreements.
Staff acknowledges the comments submitted by Cedar Creek Wind, LLC in support of the
Agreements, as well as the affidavit of Dana Zentz, an offcer in an affiliate company to Cedar
Creek Wind, LLC. The comments and affidavit allege that Cedar Creek and PacifiCorp had
reached full agreement as to the "final" rates, terms and conditions of a PP A for the Project on
November 29,2010, and that Cedar Creek signed and delivered copies of the Agreements to
PacifiCorp on December 13,2010. Nevertheless, the effective date of each Agreement is shown as
December 22, 2010 on page one of each Agreement, clearly after the December 14, 2010 effective
date of Order No. 32176. Staff views the December 14,2010 effective date of Order No. 32176 as
absolute, and believes that any contract submitted with an effective date on or after that date
should be rejected.
In order for the rates in the Agreements to comply with Commission Orders, Staff believes
that they would have to be determined using the IRP methodology. Staff suggests that the
Commission deny approval of the Agreements without prejudice and permit revised Agreements to
be submitted containing rates computed under the prescribed IRP methodology. Alternatively,the
Agreements could be voluntarily withdrawn, then held pending the outcome of the initial phase of
Case No. GNR-E-I1-01 in which the Commission is considering alternative solutions to the
STAFF COMMENTS 6 MARCH 24, 2011
problems posed by disaggregation aside from simply lowering the eligibility cap from 10 aMW to
100 kW.
STAFF RECOMMENDATION
Staff recommends that the Commission not approve any of the five Agreements.
Respectfully submitted this 2 i.i: day of March 2011.
tit;;'17 11. ~AI A~Kri me A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentslpacell.O i _02_03 _04_ 05ksrps comments
STAFF COMMENTS 7 MARCH 24, 2011
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF MARCH 2011,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. PAC-E-I1-01_02_03_04_05, BY MAILING A COpy THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
TED WESTON
ID REG AFFAIRS MGR
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: ted.weston(ipacificorp.com
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: danieL.solander(ipacificorp.com
DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
datarequest(ipacificorp.com
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
1015 W HAYS ST
BOISE ID 83702
L~~SECRETARY
CERTIFICATE OF SERVICE