20110722Sur-reply to Cedar Creek Reply to Answer.pdf

LOVINGER I KAUFMANN LLP RECEIVED
tnt \ JUL 22 AM 9: 45
office [phone]
fax [phone]
825 NE Multnomah . Suite 925
Portand, OR 97232-2150
Keedi E. KaufKaiiw.co
July 21,2011
VIA OVERNIGHT DELIVERY AND ELECTRONIC MAIL
Jean D. Jewell, Secretary
Idaho Public Utilties Commission
472 W Washington Street
Boise, ID 83702
Re: Case Nos. PAC-E-II-0l, PAC-E-1 1-02, PAC-E-II-03, PAC-E-1 1-04, PAC-E-1 1-05
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 WID,LLC (RATTLESNAKE CANYON, COYOTE HILL, NORTH POINT,
STEEP RIDGE, AND FIVE PINE PROJECTS)
Dear Ms. Jewell:
Enclosed for fiing in the above-captioned dockets are an original and seven (7) copies of the
SUR-REPLY OF ROCKY MOUNTAIN POWER TO CEDAR CREEK WIND, LLC'S REPLY
TO ROCKY MOUNTAIN POWER'S ANSWER.
An extra copy of this cover letter is enclosed. Please date stamp the extra copy and return it to
me in the envelope provided.
Thank you in advance for your assistance.
Sincerely, _~(~
Kenneth E. Kaufmann
cc: PAC-E-II-0l/PAC-E-l 1-02/PAC-E-II-03/PAC-E~1 1-04/PAC-E-II-05 Service List
Enclosures
Jeffrey S. Lovinger
Kenneth E. Kaufman
Lovinger Kaufian LLP
825 NE Multnomah, Suite 925
Portland, Oregon 97232
Telephone: [phone]
Fax: [phone]
lovinger($lklaw.com
kaufian($lklaw.com
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2011 JUL 22 AM 9: 45
Attorneys for Rocky Mountain Power
¡',¡¡
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 )
)
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 DETERMATION REGARDING A FIRM )
ENERGY SALES AGREEMENT BETWEEN ROCKY )
MOUNTAIN POWER AND CEDAR CREEK WIND, )LLC (NORTH POINT PROJECT) )
)
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 WID, )LLC (STEEP RIDGE PROJECT) )
)
SUR-REPLY OF ROCKY MOUNTAIN 1
POWER
Case No. PAC-E-II-0l
Case No. PAC-E-II-02
Case No. PAC-E-II-03
Case No. PAC-E-II-04
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)
)
)
)
)
)
)
)
)
Case No. Pac-E-ll-05
SUR-REPLY OF
ROCKY MOUNTAIN
POWER TO CEDAR
CREEK WIND,
LLC'S REPLY TO
ROCKY MOUNTAIN
POWER'S ANSWER
Rocky Mountain Power fies this sur-reply in response to the reply of Cedar Creek Wind,
LLC, ("Cedar Creek") fied July 12, 2011, to Rocky Mountain Power's answer. As Cedar
Creek's reply noted, the Commission need not consider its reply.! Likewise, the Commission
need not consider this sur-reply. If the Commission considers the reply, Rocky Mountain Power
respectfuly submits this sur-reply, which is limited to rebutting thee incorrect allegations in the
reply: (A) that the Commission canot provide fuher justification for the June 8 Order2 in an
order denying reconsideration; (B); that Order No. 32176 was a PURPA avoided cost rate
change; and (C) that Rocky Mountain Power unduly delayed executing the Power Puchase
Agreements.
A. The Commission may provide further justifcation for the June 8 Order in an
order denying reconsideration.
Cedar Creek argues that the Commission may not use reconsideration to provide fuher
justification, or elaborate on its original justification, in support of the June 8 Order.3 In support,
Cedar Creek cites to two federal cour opinions interpreting the Federal Administrative
i In the Matter of the Application of United Water Idaho, Inc. for Authority to Increase its Rates and Charges for
Water Service in the State of Idaho, Case No. UWI- W -04-4, Order No. 29871 (2005) (reply to answer to petition for
reconsideration fied "although the Company recognized Replies to Answers to Petitions for Reconsideration are not
specifically contemplated by the Commission's procedure rules.").
2 Order No. 32260, Case No. PAC-E-11-01 et al (June 8,2011).
3 Reply of Cedar Creek Wind, LLC to Rocky Mountain Power's Answer ("Reply"), at 12 n. 33.
SUR-REPLY OF ROCKY MOUNTAIN 2
POWER
Procedure Act.4 Cedar Creek misinterprets the doctrine of post hoc rationalization. As explained
below, the two federal opinions cited by Cedar Creek address the circumstance where an agency
raises arguments for the first time on judicial review;5 they are in no way analogous to an
agency's reconsideration of its own order. Reconsideration is the appropriate place to bolster the
reasoning in the June 8 Order, should the Commission desire to do so.
Under Idaho law, the Commission may change any par of an order on reconsideration.6
As the Commission stated recently in Order No. 32212, "(r)econsideration provides an
opportty for a par to bring to the Commission's attention any question previously
determined and thereby affords the Commission with an opportity to rectify any mistae or
omission.,,7 Rocky Mountain Power's answer cited examples of the Commission doing just that
on page 11, note 248 and on page 13, note 27.9 Other examples exist of the Idaho Supreme Cour
4Id.
5 The United States Supreme Court explained the doctrine of post hoc rationalization as follows:
(W)e have declined to give deference to an agency counsel's interpretation of a statute where the
agency itself has articulated no position on the question, on the ground that "Congress has
delegated to the administrative offcial and not to appellate counsel the responsibilty for
elaborating and enforcing statutory commands." Investment Company Institute v. Camp, 401 U.S.
617,628 (1971); cf Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962) ("The
courts may not accept appellate counsel's post hoc rationalizations for agency (orders)").
Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 (1988) (emphasis added).
6 Idaho Code § 61-626(3):
If after reconsideration, including consideration of matters arising since the making of the order,
the commission shall be of the opinion that the original order or any par thereof is in any respect
unjust or unwaranted or should be changed, the commission may abrogate or change the same.
7 Order No. 32212, 2-3 (stating standard of review on reconsideration, citing Washington Water Power Co., v.
Kootenai Environmental Allance, 99 Idaho 875, 879; 591 P.2d 122, 126 (1979) ("The purpose ofan application for
rehearing is to afford an opportnity to the parties to bring to the afford the Commission an opportnity to rectify
any mistake made by it before presenting the same to this Court.")).
8 See Rosebud Enterprises, Inc. v. Idaho Pub. Uti!. Comm'n, 128 Idaho 609, 624, 917 P.2d 766, 781 (1996)
(affirming Commission decisions after considering findings of fact and reasoning in both the original Commission
order and the Commission order denying reconsideration of that original order).
9 The Commission's treatment, in Order No. 31092, of a similar claim raised in a petition for reconsideration in
GNR-E-10-01,is instrctive here. The Commission found that a finding of "good cause" was implicit in its original
order, and fuher documented that good cause explicitly in its final order denying reconsideration. See In the Matter
SUR-REPLY OF ROCKY MOUNTAIN 3
POWER
considering both the Commission's original order and the order denying reconsideration during
judicial review of Commission decisions.
10
Cedar Creek would have the Commission substitute Idaho law with the doctrine of post
hoc rationalization, a doctrine wholly inapplicable to administrative reconsideration. The two
federal cour of appeals opinions relied upon by Cedar Creek address the scope of judicial review
of administrative decisions.
1 1 First, in NW Envt'/ De! Ctr. v. BP A, the Ninth Circuit Cour of
Appeals set aside a decision by the Bonnevile Power Administration ("BP A") to effectively
abandon a fish passage center.12 BPA based its decision to do so on Congressional committee
reportsY On review, the Ninth Circuit held that the Congressional reports "had no binding legal
import.,,14 The cour found that the administrative record under review gave no explanation for
why BP A would abandon the fish passage center in the face of a mandate to not do so, beyond
the mistaken belief of BP A that statements in Congressional reports were binding.15 The cour
declined to entertain alternative "post hoc" justifications for BPA's decision that were not in the
administrative record under review but only offered for the first time on judicial review.
16
of the Adjustment of Avoided Cost Rates for New PURP A Contracts for Avista Corporation DBA Avista Utilties,
Idaho Power Co., and PacifCorp DBA Rocky Mountain Power, Case No. GNR-E-10-01, Order No. 31092, 11-14
(2011).
10 See e.g. Key Transp. v. Trans Magic Airlines Corp., 96 Idaho 110, 112 (1974) ("The commission in its order
granting Trans Magic's application and in its order denying Sun Valley Key's petition for rehearing considered the
impact of Trans Magic's proposed air carier service on the Boise to Hailey-Sun Valley route on Sun Valley Key's
operation." (emphasis added)).
ii Reply, at 12 n. 33.
12477 F.3d 668 (2007).
13 Id. at 682.
14Id.
15 Id. at 688.
16 Id. at 688 ("As the Supreme Court has explained, we may not accept appellate counsel's post hoc rationalizations
for agency action, and we may not supply a reasoned basis for the agency's action that the agency itself has not
given." (internal citations and quotations omitted)).
SUR-REPLY OF ROCKY MOUNTAIN 4
POWER
In Safe Air for Everyone v. EPA, cited by Cedar Creek in footnote 33 of its Reply, the
Ninth Circuit vacated the EPA's amendment to an air quality standard.17 The cour found the
EPA's reason for its decision, as contaned in the administrative record, to be "legally
unsustainable.,,18 The cour concluded that it owed no deference to two additional reasons for the
EPA decision offered for the first time on judicial review.
19
In short, careful reading of the authority cited by Cedar Creek shows that the doctrne
prohibiting post hoc rationalizations applies only to rationalizations made for the first time on
judicial review (i.e., after the administrative record is closed). Yet Cedar Creek argues that the
Commission must apply this doctrne to the Commission's reconsideration of its own orders. The
same argument was made before the Fifth Circuit Cour of Appeals in Tenneco Oil Co v. Fed
Energy Reg. Comm 'n.20 In Tennneco Oil, the Fifth Circuit rejected the argument, stating that
offering additional rationalization for a decision is one of the very fuctions of agency
rehearng?1 Thus, even under federal administrative law, the doctrine argued by Cedar Creek
would not apply. Under applicable Idaho law, the Commission clearly may use reconsideration
to provide additional rationalization in support of the June 8 Order.
B. Order No. 32176 was not a PURP A avoided cost rate change.
Cedar Creek's argument that the Commission unfairly depared from past
grandfathering criteria established in cases related to changes in the avoided cost is misplaced.22
17488 F.3d 1088 (2007).
IS Id. at 1091.
19Id. at 1999.
20571 F.2d 834, 842 (5th Cir. 1978).
21Id. (rejecting argument that agency's justification made on rehearing was "post hoc rationalization").
22 Reply, at 5-9.
SUR-REPLY OF ROCKY MOUNTAIN 5
POWER
The Commission made clear in Order No. 3217623, and in Order No. 3226024 at issue here, that
the change in eligibilty for published avoided cost rates was not a change to the avoided cost
rate required by PURP A. PURP A permits a state commission to establish avoided cost rates
administratively, by auction, or on a case-by-case basis.i5 Stadard rates (e.g. rates that are
approved by the Commission in advance and available to any QF) are required only for QFs with
capacity of 100 kW or less.26 The Commission satisfied the requirements of PURPA for QF
over 100 kW when it approved the IRP methodologies used by the IOUs to determine avoided
cost prices for qualifying facilities.27 The IRP methodology remains available to Idaho QFs
today. When the Commission elected to make published avoided cost rates available for projects
between 100 k W nameplate and 10 aMW capacity, it went beyond what PURP A requires; its
choice to do so was a policy decision committed to its sound discretion.
Because FERC delegated to states the discretion to set the eligibilty threshold for
published avoided cost rates, it makes sense that the rules for changing the eligibilty threshold
need not be identical to the rules for setting (and modifying) the avoided cost rate. Cedar Creek
improperly ignores this distinction. The legal difference between avoided cost rates and
eligibilty for standard rates and contracts was addressed by the California Public Utilities
Commission (CPUC) in the context of standard offer contracts for qualifying facilities. The
23 Order No. 32176 at 1.
24 Order No. 32260 at 9-10.
25 Federal EnergyRegulatory Comm 'no v. Mississippi, 456 U.S. 742, 750, 102 S. Ct. 2126 (1982).
2618 CFR § 292.304 (c) (1)).
27 See In the Matter of the Application of PacifCorp for Final And Interim Orders Revising its Avoided Cost Rates;
In the Matter of the Application of PacifCorp for an Order Modifing the Availabilty of Published Avoided Cost
Rates, Case No. PPL-E-93-5, Docket No. UPL-E-93-7, Order No. 25882 (1995); In the Matter of the Application of
the Washington Water Power Co. for an Order Revising Avoided Cost Rates, Case No. WWP-E-93-10, Order No.
25883 (1995); In the Matter of the Application of the Idaho Power Co. for Approval of Prices for the Purchase of
Electricity from Cogenerators and Small Power Producers Qualifing under Section 210 of the Public Utilty
Regulatory Policies Act of 1978, Case No. IPC-E-93-28, Order No. 25884 (1995). These orders adopted the IRP
methodology proposed by PacifiCorp, Avista Corp., and Idaho Power Company, respectively.
SUR-REPLY OF ROCKY MOUNTAIN 6
POWER
CPUC found that PURPA does not mandate that a QF have a unilateral right to form a standard
offer agreement without action on the par of the utility because FERC delegated such matters to
the state commissions:
It is useful to recall that the Commission's decision to have standard offers at all
was one entirely within its discretion under PURP A * * * PURP A does not
require us to have standard offers at all, much less mandate that a standard offer
agreement may be formed without any action on the part of the utilty. Both of
these aspects of standard offers stem from (CPUC) policy decisions implementing
PURPA in the early 1980's. Obviously, other states that do not have standard
offers do not violate PURP A, and the continued availabilty of standard offers is
not a right to which PURPA entitles QFs?S
Under the CPUC's ruling, above, the CPUC declared that it may eliminate the availability of
standard rates and terms for QFs over 100 kW at any time, subject only to any applicable state
law notice requirement. 29 The Commission noted that the consequence of failing to act quickly
when the terms of a standard offer became too generous could be bilions of dollars in extra costs
borne by California ratepayers:
(I)n our early efforts to promote QF development, we made available standard
offers that were not contingent upon the utility's voluntar offer: standard offers
were effectuated through regulatory order of their availabilty, and the volunta
acceptance of that offer by a QF formed the agreement. This approach failed
dramatically and we suspended, without hearngs, standard offer 2 and interim
standard offer 4 for that reason. The combination of stadard offer prices and their
ready availability led to more dramatic subscription than the Commission
anticipated. Because a basic tenant of PURP A is the indifference of ratepayers of
the purchase price, relative to utility self-generation or other purchases (18 Code
of Federal Regulations (CFR) Section 292.l01(b) (6)), the Commission has
previously suspended the availability of standard offers. Unfortately, by the
time the Commission acted to suspend standard offer 2 and interim standard offer
4, many agreements the Commission chose to honor had been signed by QF
developers, and those agreements are now a significant (but not the only)
contributor to California's high rate problem and corresponding regional
28 See Application of San Diego Gas & Electric Co. (U 902-E) for an Ex Parte Order Approving Modifcations to
Uniform Standard O.fr No.1 and Standard Offer No.3, Decision No. 96-10-036, Application No. 95-11-057, 68
CPUC 2d 434, 1996 CaL. PUC Lexis 1016, *35 ("SOL Order")(emphasis added; internal pagination, footnote,
omitted).
29Id. at *36.
SUR-REPL Y OF ROCKY MOUNTAIN 7
POWER
competitive disadvantage to California business. Existing QF agreements are
expected to contribute billons of dollars to the competitive transition charge
(CTC) that must be paid by ratepayers in order to move to a more competitive
generation market. 30
The passage, above, highlights the principal risk to ratepayers that arses when a
Commission decides to make standard (published) rates available for QFs larger than 100 kW: If
the published rates are too high, the resulting development of QFs may be dramatic and far in
excess of what the Commission expected. When QF development dramatically exceeds the
Commission's expectations, there is a strong likelihood that the published rate may exceed the
utility's true avoided cost, potentially saddling the utility's customers for many years with costs
beyond those envisioned by PURPA. This risk has led the CPUC to conclude that it must have
the abilty to suspend the availability of standard offer agreements quickly-and without a
hearing; otherwise QF developers may enjoy a gold rush at the expense of the ratepayers.
The CPUC's analysis seems to achieve the right result: it allows the CPUC to permit
standard offer contracts-for the benefit of QFs-yet allows the CPUC to suspend the
availability of stadard offer contracts in the event they are not working as intended. After all, if
a Commission lacked the authority to quickly suspend standard rates when necessar to protect
the ratepayer from excessive purchases, why would it exercise its discretion to adopt stadard
rates in the first place? Only if it knows that it can tum off the spigot without delay when
necessar can the Commission justify a policy of promoting QF development by authorizing
published rates for QFs over 100 kW.
Like the CPUC, the Idaho Commission faced dramatic development of QFs greatly in
excess of what it anticipated. The Commssion faced a diffcult choice: approve the contracts
and thereby obligate Idaho electric customers to purchase power for 20 years at rates that may be
30Id. atp. *16-17.
SUR-REPLY OF ROCKY MOUNTAIN 8
POWER
too high, or disapprove the contracts and jeopardize the economic health of developers who
expended large sums in reliance on their eligibility for the published avoided cost rates. The
Commission decided to lower the eligibility cap 1 1 days afer providing formal notice-29 days
after Idaho Power, Avista, and Rocky Mountain Power fied their petition seeking immediate
relief.It decided, furter, that only those QFs that had fully executed power purchase
agreements with a utilty prior to the effective date of the eligibility cap change are eligible under
the old eligibility cap.
Under the CPUC analysis, above, the Commission's determination did not violate
PURPA because the establishment of standard rates for QFs above 100 kW, and the
administration thereof, is committed to the Commission's discretion. Furhermore, the
Commission has the discretion under PURP A to determine when a legally enforceable obligation
arises. Under both legal frameworks, the result reached by the Commission was proper. Cedar
Creek may feel like this is a harsh result, but it would also be harsh for the Commission to
conclude that Rocky Mountain Power's Idaho customers must bear the cost of published rates
when the Commission has determined that those rates may be too high and were never intended
for large projects that disaggregate in order to become eligible. The Commission gave notice of
the change in eligibilty criteria and ariculated good reasons for the change, and for the
grandfathering criteria it adopted. This is all it was required to do, and its determination was
proper.
c. Rocky Mountain Power did not cause undue delay in executing the Power
Purchase Agreements.
Rocky Mountain Power categorically rejects Cedar Creek's insinuation, on page 9, note
24 of its Reply, that Rocky Mountain Power caused undue delay in executing the Power
Purchase Agreements (PPAs). Rocky Mountain Power does not believe the issue is relevant to
SUR-REPLY OF ROCKY MOUNTAIN 9
POWER
this proceeding, but is prepared to vigorously defend its due dilgence and negotiation of the
Cedar Creek PP As if necessar. Rocky Mountain Power is confident that the record of
negotiations in its entirety will show that its actions were thorough, diligent and timely,
paricularly given that Cedar Creek was simultaneously requesting PP As for five contiguous
projects totaling 133 MW of capacity. Rocky Mountain Power raised the issue in page 7 of its
answer solely for the purose of noting that Cedar Creek has not fied a complaint.
iv. CONCLUSION
For the reasons above, Rocky Mountain Power respectfully requests that the Cedar
Creek's petition for reconsideration be denied.
DATED this 21 st day of July 2011.
Jeffrey S. Lovinger, B 960147
Kenneth E. Kaufian, OSB 982672
Lovinger Kaufman LLP
Attorneys for Rocky Mountain Power
SUR-REPLY OF ROCKY MOUNTAIN 10
POWER
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that, on the 21st day of July, 2011, a tre and correct copy of the
foregoing SUR-REPLY OF ROCKY MOUNTAIN POWER TO CEDAR CREEK WIND,
LLC'S REPLY TO ROCKY MOUNTAIN POWER'S ANSWER was served in the maner
shown to:
Jean Jewell Ted Weston
Commission Secretar Rocky Mountain Power
Idaho Public Utilties Commission 201 South Main Street, Suite 2300
472 W Washington Salt Lake City, UT 841 1 1
Boise, ID 83702 ted. weston($pacificorp.com
secretar($puc.idaho.gov (First Class Mail and Electronic Mail)
(Overnight Delivery and Electronic Mail)
Daniel E. Solander Ronald L. Wiliams
Rocky Mountain Power Wiliams Bradbur, PC
201 South Main Street, Suite 2300 1015 W Hays St
Salt Lake City, UT 84111 Boise, ID 83702
daniel.solander($acificorp.com ron($wiliamsbradbur.com
(First Class Mail and Electronic Mail)(First Class Mail and Electronic Mail)
Data Request Response Center Krstine Sasser
PacifiCorp Idaho Public Utilities Commission
825 NE Multnomah, Suite 2000 PO Box 83720
Portland, OR 97232 Boise, ID 83720-0074
datarequest($pacificorp.com kristine.sasser($puc.idaho. gov
(Electronic Mail)(First Class Mail and Electronic Mail)
Lar F. Eisenstat Michael R. Engleman
Dickstein Shapiro LLP Dickstein Shapiro LLP
1825 Eye Street, NW 1825 Eye Street, NW
Washington, DC 20006-5403 Washington, DC 20006-5403
eisenstat1~dicksteinshapiro.com engleman~dicksteinshapiro.com
(First Class rvail and Electronic Mail)(First Class Mail and Electronic Mail)
DATED this 21 st day of July, 2011.
LOVINGER KAUFMANN LLP
ߣt.lí ~
Kenneth E. Kaufi , OSB 982672
Attorney for Rocky Mountain Power