20111221reconsideration_order_on_remand_no_32419.pdf

Offce of the Secretar
Service Date
December 21,2011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
PACIFICORP DBA ROCKY MOUNTAIN )
POWER FOR A DETERMINATION )
REGARING A FIRM ENERGY SALES )
AGREEMENT BETWEEN ROCKY )
MOUNTAIN POWER AND CEDAR CREEK )
WIND, LLC (RATTLESNAKE CANYON )
PROJECT (11-01), COYOTE HILL PROJECT )
(11-02), NORTH POINT PROJECT (11-03), )
STEEP RIDGE PROJECT (11-04), AND FIVE )
PINE PROJECT (11-05)). )
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CEDAR CREEK WIND, LLC,
Petitioner/Appellant,
v.
IDAHO PUBLIC UTILITIES COMMISSION,
Respondent, Respondent on Appeal,
and
PACIFICORP DBA ROCKY MOUNTAIN
POWER,
Respondent.
SUPREME COURT
DOCKET NO. 39134-2011
IPUC CASE NOS. PAC-E-11-01
PAC-E-11-02
PAC-E-11-03
PAC-E-11-04
PAC-E-11-05
PUC ORDER NO. 32419
On July 27, 2011, the Commission issued Final Order on Reconsideration No. 32302
affirming its prior decision to not approve five Power Purchase Agreements (PP As or
Agreements) entered into between Cedar Creek Wind and PacifiCorp dba Rocky Mountain
Power pursuant to the federal Public Utility Regulatory Policies Act of 1978 (PURP A). Based
upon the expressed terms of the five Agreements, the Commission found that the PP As were not
effective prior to December 14, 2010 - the date on which the eligibility for PURP A published
avoided cost rates in Idaho changed from 10 average megawatts (aMW) to 100 kilowatts (kW)
for wind and solar qualifying facilties (QFs). Order No. 32260. Because each of the PPAs
ORDER NO. 32419 1
requested published avoided cost rates but the projects were in excess of 100 kW, the
Commission found that the published rate was no longer available to the projects.
On August 5, 2011, Cedar Creek fied a Petition with the Federal Energy Regulatory
Commission (FERC) claiming that the Commission's Order No. 32302 was inconsistent with
FERC's regulations implementing PURPA. While its Petition to FERC was pending, Cedar
Creek, on August 31, 2011, also appealed the Commission's Order to the Idaho Supreme Cour.
On October 4, 2011, FERC issued an Order concluding that the Commission's Order was
inconsistent with PURPA and FERC's PURPA regulations.
On October 24, 2011, the Commission and Cedar Creek filed a Stipulated Motion
with the Idaho Supreme Cour that the appeal be temporarily suspended and the matter remanded
to the Commission.
1 Suspending the appeal would allow the Commission to reconsider its Order
No. 32302 in light of the FERC Order and provide the paries with an opportunity to discuss the
possibilty of resolving the dispute. I.A.R. 13.3. On November 9, 2011, the Cour issued an
Order suspending the appeal and remanding the matter to the Commission for fuher review.
On remand, the Commission invited settlement of the entire dispute and authorized the
Commission Staff to paricipate in the settlement negotiations. Order No. 32386 citng Rules
352 and 353. Cedar Creek, Rocky Mountain and Staff (collectively the "Paries") convened four
settlement conferences. On December 15, 2011, the Paries fied a Motion to approve a
"Stipulation of Settlement and Request for Approval of Power Purchase Agreements"
("Settlement Stipulation") that proposed to settle all the disputed issues.
Having reviewed the underlying administrative record, the FERC Order and the
Settlement Stipulation, the Commission issues this final Reconsideration Order on Remand. As
explained in greater detail below, the Commission approves the Settlement Stipulation and
approves the three modified PPAs. Accordingly, the Commission amends and clarfies its prior
Order No. 32302 to be consistent with this Order. Idaho Code § 61-624.
i When the Stipulated Motion was fied, Rocky Mountain had not yet been granted intervention by the Cour.
Neverteless, Rocky Mountain supported the suspension and remand.
ORDER NO. 32419 2
BACKGROUND
A. Eligibility Cap Case
Prior to the filing of the five Cedar Creek PP As, A vista Corporation, Idaho Power
Company, and Rocky Mountain (collectively "the Utilties") petitioned the Commission on
November 5, 2010, to initiate a generic investigation to address various PURPA issues. The
Utilties also requested that while the investigation was underway, the Commission
"immediately" reduce the eligibilty cap or ceilng for the "published" avoided cost rate from 10
aMW per month to 100 kW per month. Order Nos. 32212 and 32302? The Commission issued
a Notice and Order opening a separate investigation (GNR-E-I0-04), solicited initial and reply
comments, and convened an oral arguent to address the proposed reduction in the eligibilty
cap. Order No. 32131 at 6-7.
The Commission subsequently found that the Utilties had made a convincing case to
temporarily "reduce the eligibilty cap for published avoided cost rates from 10 aMW to 100 kW
for wind and solar (OFsl only while the Commission further investigates" other PURP A issues.
Order No. 32176 at 9 (emphasis original). Consistent with its prior Notice, the Commission
ordered that the eligibilty cap for the published rate be reduced from 10 aMW to 100 kW for
wind and solar projects effective December 14, 2010. Order Nos. 32176, 32212, 32302. No
pary, including Cedar Creek, appealed the Commission's decision to reduce the eligibilty cap.
Order No. 32302 at 5, 14-15.
B. The Five Original Agreements
The procedural history of this consolidated case is complex and lengthy, but the
pertinent points are summarzed here. On December 22, 2010, Rocky Mountain Power and
Cedar Creek executed five separate PPAs for five wind QF projects.3 Under the terms of each
Agreement, each project agreed to sell energy to Rocky Mountain for a 20-year term using the
published avoided cost rate set by the Commission. Taken together, the five projects had a
2 Pursuant to FERC's PURA regulations, state commissions must "publish" an avoided cost rate for small QFs
with the design capacity of 100 kW or less. 18 C.F.R. § 292.304(c)(1). However, PURPA regulations also declare
that state commissions "may" set standards or published rates at a hi,er capacity amount. 18 C.F.R. §
292.304(c)(1-2). In Februar 2008, the Commission established the eligibilty cap for published avoided cost rates
for each of the three utilties at 10 aMW. Order No. 30488 at 17.
3 Because of the similarity between each of the five Agreements, the Commission found it reasonable and
appropriate to consolidate the cases and issue a consolidated Order. Order No. 32260 at n.1.
ORDER NO. 32419 3
nameplate capacity of 133.4 MW.4 Under normal and/or average conditions, each wind project
was to have sold its output of not more than 10 aMW per month to Rocky Mountain at the
published rate. The projects all selected October 1, 2012 as the scheduled commercial operation
date (COD). Order No. 32302 at 3.
On January 10, 2011, Rocky Mountain fied the Applications requesting that the
Commission issue an Order "accepting or rejecting" the five Cedar Creek PPAs. On February
24, 2011, the Commission issued a consolidated Notice of Application and Notice of Modified
Procedure for the five Applications. Cedar Creek and Commission Staff fied timely comments
in response to the Notice of Modified Procedure. Rocky Mountain and Cedar Creek both filed
reply comments.
In its final Order No. 32260 issued June 8, 2011, the Commission declared that "the
primary issue to be determined in these (Cedar Creek) cases is whether the Agreements were
executed before the eligibilty cap for published rates was lowered to 100 kW on December l4,
2010." Order No. 32260 at 9. The Commission found that the five PPAs were not fully-
executed (i.e., signed by both paries) prior to December 14, 20l0. Relying on the actual terms
\
of the PPAs, the Commission found that each PPA stated that "the 'Effective Date' of (each)
Agreement is 'after execution by both Paries and after approval by the Commission.'" Id citing
PPA irir 1.13, 2.1. (emphasis added).5 Because the Commission had previously reduced the
eligibilty cap for the published avoided cost rate from 10 aMW to 100 kW, the five PPAs
"contained an essential term that was no longer available to the Projects." Order No. 32302 at 2.
Cedar Creek timely fied a Joint Petition for Reconsideration of the Commission's
final Order No. 32260. On reconsideration, Cedar Creek argued that the Commission's Order
was erroneous because a "legally enforceable obligation" existed between Cedar Creek and
Rocky Mountain prior to the reduction in the eligibilty cap on December 14,2010. As a result,
Cedar Creek maintained that it was entitled to published avoided cost rates and urged the
Commission to "expeditiously approve the Agreements as submitted." Order No. 32302 at 2.
4 The Applications for Rattlesnake Canyon, Coyote Hil and North Point indicated that each of these projects would
have a maximum nameplate capacity of 27.6 MW, while Steep Ridge and Five Pine would each have a maximum
nameplate capacity of25.3 MW.
5 The Commission also observed that the opening paragraph of each Agreement states that the Agreement is
"entered into this 22nd day of December 2010." ¡d.
ORDER NO. 32419 4
On reconsideration, the Commission affirmed its prior decision that the five PP As all
contained express language that the effective date of each Agreement is when both paries signed
the PPAs - December 22,2010. The Commission noted that it was undisputed that Cedar Creek
signed the PPAs on December 13,2010, and Rocky Mountain signed on December 22,2010. Id
Agreements irir 1.13,2.1, Order No. 32302 at 4,6, 8. Given the agreed upon effective date, the
Commission affirmed that each Agreement did not become effective until after execution by
both Paries. Order No. 32302 at 9. The Commission also found that it is not in the public
interest to allow paries with contracts executed on or after December 14, 2010, to avail
themselves of an eligibilty cap, and thus published rates, that are no longer applicable. Order
No. 32302 at 12, 16.
D. The FERC Case and the Appeal
On August 5, 2011, Cedar Creek fied a Petition with FERC requesting that the
federal agency bring an enforcement action against the Commission pursuant to 16 U.S.C. §
824a-3(h)(2) or, in the alternative, to make certain findings related to the Commission's decision.
Cedar Creek claimed that the Commission's Order is inconsistent with FERC's regulations
implementing PURPA. On October 4, 2011, FERC issued an Order declining to bring an
enforcement action against the Commission. However, FERC determined that the Commission's
Order was inconsistent with PURPA and FERC's implementing regulations. Notice of Intent not
to Act and Declaratory Order, 137 FERC ir 61,006 (Oct. 4, 2011). In paricular, FERC
constred the Commission's final Order No. 32260 as "limiting the creation of a legally
enforceable obligation only to QFs that have (PPAs) . . . signed by both parties to the
agreement." Id at ir 26. FERC interpreted the Commission's Order as requiring a fully-executed
contract as a condition precedent to the creation of a legally enforceable obligation between the
paries. Id at irir 30, 35. Although this Commission has a long line of cases to the contrar,
FERC concluded that the Commission did not recognize that "a legally enforceable obligation
may be incurred before the formal memorialization of a contract to writing." Id at ir 36.
FERC did not rule whether Cedar Creek had pedected a legally enforceable
obligation for the five projects. Id at irir 38 (whether there is a "legally enforceable obligation. .
. is not before us."); 39. Given the issuance of the FERC Order and Cedar Creek's appeal to the
Idaho Supreme Cour, Cedar Creek and the Commission filed a Stipulated Motion for the appeal
to be temporarily suspended and the matter remanded to the Commission.
ORDER NO. 32419 5
THE SETTLEMENT STIPULATION
Cedar Creek, Rocky Mountain and Staff (collectively the "Paries") convened four
settlement conferences on October 20 and 27, November 16, and December 1,2011. As a result
of these settlement discussions, the Paries on December 15,2011, fied a Motion to Approve the
Settlement Stipulation and Request for Approval of Power Purchase Agreements (the
"Settlement Stipulation"). The Paries disclosed that they have resolved all disputes between and
among themselves.
The Paries requested that the Commission modify its Order on Reconsideration No.
32302 and approve thee of the five original PPAs as amended in the Settlement Stipulation.
More specifically, the Paries requested that the Commission approve the amendments to the
North Point project (Case No. PAC-E-II-03); the Five Pine project (Case No.PAC-E-II-05);
and the Coyote Hil project (Case No. PAC-E-II-02) (together, the "Agreements"). In addition,
Cedar Creek and Rocky Mountain agreed to withdraw the remaining two Applications and
accompanying PP As. Stipulation at § 2.6
The Paries agreed that Cedar Creek had established a legally enforceable obligation
under PURPA no later than December 13,2010. Stipulation at §§ 1,4. Because such obligation
arose prior to December 14,2010, the Parties agree that the suriving PPAs should be approved
by the Commission at the avoided cost rates contained in the Original Agreements. Id at § 5.
Thus, Cedar Creek and Rocky Mountain are restored to their relative positions under the original
PPAs. The three suriving PPAs wil have a combined nameplate capacity not to exceed 133.4
MW and Rocky Mountain shall not be required to purchase more than 438,000 MWh (i.e.,
approximately 50 aMW) of output in any given calendar year. Id at § 7; PPAs at 1.30, 1.43, 4.1.
The North Point PPA will be modified to have an 80 MW nameplate capacity, while the Five
Pine and Coyote Hil PPAs wil have a total nameplate capacity not to exceed 53.4 MW.
Stipulation, Exh. A, B, C.
Both the North Point and Five Pine PPAs provide that these PP As may be assigned to
Ridgeline at its Meadow Creek site. Id at § 21.2. Because the Meadow Creek facilty already
has its transmission interconnection with PacifiCorp, assignment to Ridgeline would allow the
scheduled commercial operation date (COD) for both facilties to be December 31, 2012.
6 The two Applications and PPAs to be withdrawn are: the Steep Ridge project (Case No. PAC-E-11-04) and the
Rattlesnake Canyon project (Case No. PAC-E-1 1-01) (together, the "Withdrawn Agreements"). Stipulation at 2.
ORDER NO. 32419 6
Utilzing the Meadow Creek facilty would allow Cedar Creek/idgeline to obtain Treasur
grants and other tax incentives before they are set to expire on December 31, 2012. Any
assignment of North Point and Five Pine to Ridgeline must occur within 90 days of the effective
date of the PPAs as modified, approximately on or before March 31, 2012. Exh. A, B, C § 21.2.7
The Coyote Hil project is contemplated at the original Cedar Creek site.
In addition, the PP As fuer provide that Cedar Creek and Rocky Mountain shall
share the "Environmental Attributes" (including but not limited to renewable energy credits
(RECs) and Green Tags) attibuted to the suriving PPAs. More specifically, Cedar Creek shall
be entitled to the environmental attributes for the first 10 years of operation, while Rocky
Mountain shall be entitled to the environmenta attibutes for the last 10 years of the 20-year
Agreements. Exh. A, B, Cat §§ 1.17, 1.26,4.6.
The Paries assert that the settlement of their dispute including the modifications of
the suriving PPAs represents a fair, just and reasonable resolution of the disputed claims, and
are consistent with applicable law and regulatory policies. Stipulation at §§ 1,6, 12. The Paries
fuher maintain that the settlement represents a negotiated compromise between the Parties and
is in the public interest. The Paries agree that the Settlement Stipulation "resolves all issues
raised by any pary in the captioned (Commission) dockets, in the FERC Proceeding, and in
Cedar Creek's appeal to the Idaho Supreme Cour. If the Commission adopts the Settlement
Stipulation, each waives, releases and discharges the other Paries from any and all causes of
action, suits, claims, demands, and liabilty whatsoever in law or equity." Id. at § 17. The
Paries urge the Commission to approve this Settlement Stipulation and the PP As in their entirety
and they stad ready to support the Stipulation. Id at § 13.
COMMISSION FINDINGS
At the outset, we commend the Paries for their dilgence and efforts at resolving the
underlying disputes. Consistent with our authority under Idaho Code § 61-624 and Rules 352
and 353, we invited settlement of all of the disputes arising from our Order Nos. 32260 and
32302. Order No. 32386 at 2.
7 Although the Ridgeline/Meadow Creek transmission line is already completed, this line may have capacity
limitations. Consequently, the PPAs allow for a combination of generation sizes at the Five Pine and Coyote Hil
projects so long as the total generation for all the projects not exceed 438,000 MWh. This purchase cap shall be
tred-up anually. Stipulation at § 7.
ORDER NO. 32419 7
Rule 356 provides that the Commission is not bound by the Paries' Settlement
Agreement. IDAPA 31.01.01.356. The Commission wil "independently review any settlement
proposed to it to determine whether the settlement is just, fair and reasonable, in the public
interest or otherwise in accordance with law or regulatory policy." Id The Commission may
accept, reject, or modify settlement provisions. Moreover, proponents of settlements on appeal
carr the burden of showing that the settlement is reasonable and in the public interest. Rule
355. When a settlement of an appeal - such as this case - calls for Commission action, the
Commssion wil prescribe an appropriate procedure to examine a proposed settlement. In this
case, the Paries to the appeal have asked the Commission to amend Reconsideration Order No.
32302 issued July 27, 2011, and approve three modified PPAs. Idaho Code § 61-624 provides
that the Commission "may at any time, upon notice to the public utilty affected, . . . rescind,
alter or amend any order or decision made by it."
After having reviewed the record in this case, the FERC Order, the Stipulation of
Settlement and Request for Approval of Power Purchase Agreements, and the modified PP As,
we find the record is comprehensive and fuher proceedings are not necessary. Rule 354. Based
upon our review of the entire record and the paricular facts of this case, we find that the
Settlement is fair, just and reasonable, and in the public interest. As noted by the Paries, the
Stipulation represents a reasonable compromise of the positions held by the Paries.
In our initial decision, this Commission made a determination about whether to
approve the Agreements based on the express terms contained within each Agreement. In our
past experience, when a QF wants a determination that there is a legally enforceable obligation,
it files a complaint against a utility that it alleges has failed to negotiate. This is the first time the
Commission has reviewed the facts of this case for evidence regarding the existence of a legally
enforceable obligation outside the express terms of the original five Agreements entered into by
Rocky Mountain and Cedar Creek.
There are several reasons supporting our determination that the settlement is fair and
reasonable to Cedar Creek, Rocky Mountain, and ratepayers. First, the Stipulation returns Cedar
Creek and Rocky Mountain to their respective positions prior to the issuance of our Orders
disapproving the PPAs. Based upon the Paries' assertions in the Settlement Stipulation and our
review of the record, we find that the record reveals that Cedar Creek had pedected a legally
enforceable obligation no later than December 13,2010. As such, Cedar Creek was entitled to
ORDER NO. 32419 8
the published avoided cost rates available to 10 aMW QFs in effect as of December 13, 2010.
The thee modified PP As equate to the original five PP As.
Second, PacifiCorp and ratepayers are protected under the settlement and the three
modified PP As by being obligated to purchase no more than the total equivalent of 50 aMW of
net output as originally contemplated under the five PP As. Assignment also allows the COD
date to advance, thereby providing benefit to Cedar Creek.
Third, ratepayers and Rocky Mountain are fuher advantaged because the modified
PP As recognize that the environmental attributes produced by the three modified projects will be
equally apportioned between Rocky Mountain and Cedar Creek. Under the PP As, Cedar Creek
will be entitled to the environmental attibutes for the first 10 years of the Agreements and
Rocky Mountain will be entitled to the environmental attributes for the last 10 years of the
Agreements. This is an improvement over the original PP As because the assignment of the
environmental attributes or RECs was not clearly delineated in the original Agreements.
Moreover, subsequent revenues derived from the environmental attributes wil offset Rocky
Mountain's purchase of the output from the suriving PPAs over the last 10 years of the
Agreements.
Finally, we find that resolution of this matter wil avoid uncertinty and conserve
resources (both time and money). This is beneficial to Cedar Creek, Rocky Mountain and
ratepayers. The settlement avoids the likelihood of litigation in multiple forus and represents a
significant benefit to all Paries. Here the settlement brings the dispute to a reasonable
conclusion and benefits Cedar Creek, Rocky Mountain and ratepayers. Rules 354-355; Aguirre
v. Hamlin, 80 Idaho 176,327 P.2d 349 (1958).
ORDER
IT IS HEREBY ORDERED that the Motion for Approval of the Stipulation of
Settlement and Request for Approval of Power Purchase Agreements fied by the Paries is
granted. In addition, we approve the three modified Agreements identified in Exhibit A (North
Point), Exhibit B (Five Pine), and Exhibit C (Coyote Hil).
IT IS FURTHER ORDERED that Rocky Mountain Power's request to withdraw the
Steep Ridge Application and Agreement (Case No. PAC-E-II-04) and the Rattlesnake Canyon
Application and Agreement (Case No. PAC-E-II-0l) is granted.
ORDER NO. 32419 9
IT is FURTHER ORDERED that Order No. 32302 issued July 27,2011, is amended
consistent with the findings and discussions set out in this Order pursuant to Idaho Code § 61-
624.
THIS IS A FINAL RECONSIDERATION ORDER ON REMAND. Any pary
aggrieved by this Order may appeal to the Supreme Cour of Idaho as provided by the Public
Utilties Law and the Idaho Appellate Rules. See Idaho Code § 61-627.
DONE by Order of the Idaho Public Utilties Commission at Boise, Idaho this ;)/ s1'
day of December 2011.
Jí~PA liLîA~PRESIDENT
~r,\¿W
MACK A REDFORD, COMMISSIONER
~J: dfi
ARSHA H. SMITH, COMMISSIONER
ATTEST:
&.~ acVJv(/UJS
Barbara Barows
Assistat Commissioii Secretary
bls/O:PAC-E-II-Ol_PAC-E-11-02_PAC-E-11-03_PAC-E-11-04_PAC-E-II-05_dh3
ORDER NO. 32419 10