20210112Final_Order_No_34887.pdf

ORDER NO. 34887 1

Office of the Secretary
Service Date
January 12, 2021
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF ROCKY MOUNTAIN
POWER’S APPLICATION FOR
APPROVAL OR REJECTION OF A
POWER PURCHASE AGREEMENT
BETWEEN PACIFICORP AND FALL
RIVER ELECTRIC COOPERATIVE, INC.
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CASE NO. PAC-E-20-10

ORDER NO. 34887

On June 9, 2020, Rocky Mountain Power (“Company”), a division of PacifiCorp,
applied for consideration of a Power Purchase Agreement (“Agreement”) with Fall River Electric
Cooperative, Inc. (“Fall River”) for energy output generated by the Felt Hydro Facility1
(“Facility”), a small hydro facility in Teton County, Idaho. The Facility is a qualifying facility
(“QF”) under the Public Utility Regulatory Policies Act of 1978 (“PURPA”) and has a nameplate
capacity of 7.45 megawatts.
On July 2, 2020, the Commission issued a Notice of Application and Notice of
Modified Procedure establishing an August 17, 2020 comment deadline and August 24, 2020 reply
comment deadline. See Order No. 34717.
On August 17, 2020, Staff filed initial comments and asked the Commission to amend
the comment deadline to allow additional time to analyze the data and finalize its position on
capacity payments through supplemental comments.
At the August 18, 2020 Decision Meeting, Staff asked the Commission to vacate the
comment deadlines established in Order No. 34717 and establish new comment deadlines to allow
for public comments on October 1, 2020 and reply comments on October 15, 2020.
On August 24, 2020, the Company filed reply comments indicating its willingness to
work with Staff and Fall River to develop solutions resolving the outstanding issues from Staff’s
comments.
On August 25, 2020, the Commission issued a Notice of Amended Comment Deadlines
establishing an October 1, 2020 public comment deadline and October 15, 2020 reply deadline.
See Order No. 34760.

1 The Felt Hydro Facility was previously known as CDM Hydro.
ORDER NO. 34887 2

On September 22, 2020, pursuant to the Commission’s Rules of Procedure 272—
IDAPA 31.01.01.272—Staff emailed the Commission Secretary and parties notice that settlement
discussions had begun, and the parties intended to work towards settlement.
At the Commission’s September 29, 2020 Decision Meeting, Staff asked the
Commission to vacate the comment deadlines established in Order No. 34760 and recommended
establishing a new comment deadline of October 22, 2020 to allow time for the public and parties
to file comments on the stipulation. The Company and Fall River indicated they did not oppose
amending the comment deadlines as proposed by Staff.
On October 6, 2020, the Commission issued Order No. 34806 establishing an October
22, 2020 comment deadline.
On October 13, 2020, Staff filed a stipulation (“Stipulation”) signed by Staff, the
Company, and Fall River (collectively the “Parties” or individually as “Party”).
On October 22, 2020, Staff and Fall River filed comments supporting the Stipulation.
No other comments were received.
Having reviewed the record, the Commission now issues this final Order approving the
Stipulation.
THE APPLICATION
The Facility has been delivering energy to the Company under a PURPA contract dated
December 4, 1984. The existing PURPA contract expires at midnight on March 31, 2021.
The Facility has a nameplate capacity of 7.45 megawatts. The Agreement contains non-
seasonal hydro avoided cost rates based on the surrogate avoided resource (“SAR”) cost
methodology for a 20-year term. The Agreement also contains capacity payments for the entire
term with no sufficiency period.
The Company requested the Commission declare all payments for purchase of energy
under the Agreement be allowed as legitimate expenses for ratemaking purposes, all of which the
Commission will allow the Company to recover in Idaho if other jurisdictions deny recovery for
their proportionate shares.
THE STIPULATION
The Parties stipulated to resolve all issues mentioned in Staff’s August 17, 2020
comments. The Stipulation provides terms to amend the Agreement submitted with the Company’s
Application (“Amended Agreement”). The Stipulation addressed these issues: (1) limitations to
ORDER NO. 34887 3

capacity payments for generation of electricity from the Facility to amounts it has historically
generated at Powerhouse #2, while withholding capacity payments for any incremental generation
until January 1, 2028;2 (2) determination of the appropriate contract rate used to compare against
85% of the Non-Firm Market Price for payment of non-conforming energy; (3) application of the
proper discount to the firm market price used by the Company to convert it to a Non-Firm Market
Price for determination of rates for non-conforming energy; and (4) correct Exhibit K of the
Agreement, changing the term “Mid-C-85” to “PV-85” to reflect the use of the Palo Verde Hub
for determining the firm market price.
The Parties further agreed:
1. That from April 1, 2021, the date sales are to commence under the Amended
Agreement, through December 31, 2027 the Company will pay Fall River for the
avoided cost of capacity and the avoided cost of energy for energy generated by the
Facility in each hour up to the capacity payment limit of 5,100 kilowatt-hours
(“kWh”) and the Company will pay Fall River the avoided cost of energy only for
energy delivered hourly exceeding 5,100 kWhs.

2. The Company will pay Fall River for the avoided cost of capacity and the avoided
cost of energy for all generation from the Facility beginning January 1, 2028
through the end of the 20-year term of the Amended Agreement.3

3. Energy and capacity rates in the Amended Agreement will be calculated based on
the published rates approved by the Commission in Order No. 34350, effective June
1, 2019 to May 31, 2020.

4. For purposes of determining which rate to pay for non-conforming energy (if any)
delivered in each month subject to the 90/110 firmness requirements, the Parties
agree to determine whether to use 85% of the Non-Firm Market Price or the
Conforming Energy Purchase Price by calculating a Weighted-Average
Conforming Energy Purchase Price for the Conforming Energy Purchase Price. The
Parties further agree that the “Weighted-Average Conforming Energy Purchase
Price” will be calculated by taking the revenue that would have been earned by the
Facility in each month as if all energy was Conforming Energy divided by the total
energy generated by the Facility for that month. (See Attachment A, for examples
of the calculation of the “Weighted-Average Conforming Energy Purchase Price”).

5. For the special case when the 85% of the Non-Firm Market Price is lower than the
Weighted-Average Conforming Energy Purchase Price and Fall River’s generation
for a given month exceeds the 110% threshold for purposes of the 90/110 firmness

2 See Order No. 33917 which describes the Company’s next capacity deficiency date for SAR-based avoided cost
calculations.
3 QFs in Idaho with published rate contracts currently start receiving capacity payments for the entire year during the
year when the capacity deficiency date occurs.
ORDER NO. 34887 4

requirements, the rate that will be applied for all generation from the Facility during
the month will use a weighted-average rate between the Weighted-Average
Conforming Energy Purchase Price and 85% of the Non-Firm Market Price
weighted by the amount of generation below and above the 110% upper threshold,
respectively. (See Attachment A, Scenario 5, for example of payment calculations).

6. The monthly Palo Verde firm market price will be discounted by 82.4% to arrive
at the Non-Firm Market Price for purposes of 90/110 firmness requirements.

The Parties agreed that upon the Commission’s final order, the Company would file an
Amended Agreement with the terms agreed to in the Stipulation incorporated for Staff’s
verification.4
The Parties could not agree that each specific component of the Stipulation was just
and reasonable in isolation. But all Parties agreed the Stipulation achieves a just and reasonable
result and is in the public interest.
The Parties agreed that no part of the Stipulation or the formulae or methods used to
develop the same or a Commission order approving the same would be argued or considered as
precedential in any future case except regarding issues expressly called-out and resolved by the
Stipulation. The Stipulation does not resolve or provide any inferences regarding—and the Parties
are free to take any position on—any issues not specifically called-out in the Stipulation. Nothing
in the Stipulation shall be construed to modify or supersede existing settlement agreements entered
by or among the Parties to the Stipulation.
The Parties also agreed that if any person challenged the approval of the Stipulation or
requested rehearing or reconsideration of any order issued by the Commission approving the
Stipulation, each Party would use its best efforts to support the Stipulation. If any person sought
judicial review of a Commission order approving the Stipulation, no Party would oppose the
Stipulation in that proceeding.
THE COMMENTS
Staff filed initial comments on August 17, 2020 and final comments supporting the
Stipulation on October 22, 2020. The Company filed reply comments on August 24, 2020. Fall
River filed comments supporting the Stipulation on October 22, 2020.

4 The Parties anticipated the filing would occur by November 13, 2020 and suggested that date for the compliance
filing. Because the final order will not be issued until after November 13, 2020, this date is infeasible.
ORDER NO. 34887 5

1. Staff Comments
Staff’s initial comments (August 17, 2020) focused on three issues Staff argued needed
to be addressed before Staff could make a recommendation regarding the Company’s Application:
(1) the appropriate mechanism to allow capacity payments for output from Powerhouse #2, while
not providing capacity payments to Powerhouse #1 when the generation for both powerhouses—
the Facility’s total output—is only measured through a single meter; (2) the use of incorrect non-
firm market rates for generation outside of the 90/110 performance band; and (3) how to determine
payments when monthly generation falls outside of the 90/110 band, given that Fall River could
be paid two rates during the month.
Staff discussed that the Company’s proposal for capacity payments was inconsistent
with the Facility’s configuration.5 Because Powerhouse #1 had not contributed capacity for almost
14 years, Staff believed Powerhouse #1 should be treated as a new project without capacity
payments until the Company’s first deficit year in 2028.
Just before the comment deadline Staff learned that the Facility had no way to separate
the generation output from Powerhouse #1 and Powerhouse #2 because there was a single point of
metering for both powerhouses. Because of the inability to separately meter the output from each
powerhouse, Staff argued an alternative solution needed to be developed that would ensure
capacity payments for the output of Powerhouse #2, but not Powerhouse #1.
Staff also reviewed the contract provisions related to the 90/110 rule and believed the
firm market price should be converted to a Non-Firm Market Price, using an 82.4% discount.
When the Facility produces energy outside of the 90/110 performance band for a
given month, the total energy delivered in that month is priced at the lesser of 85%
of the market price or the contract price. However, given the need for two sets of
contract rates, one set for each powerhouse until the Company is capacity deficient,
a method is needed to ensure that the contract rate that is compared against the
market rate if Fall River falls outside of the 90/110 band is appropriate and
reasonable. If the Commission allows additional time for discovery and analysis,
Staff believes it will be able to find an alternative that is appropriate for purposes
of the 90/110 rule and will include its recommendations in its supplemental
comments.

5 Staff discovered, by reviewing Federal Energy Regulatory Commission Form 556, that Powerhouse #1 had not been
in operation since 2006. Fall River indicated there are plans for Powerhouse #1 to be operational at or before the
effective date of the new contract on April 1, 2021.

ORDER NO. 34887 6

Staff also recommended that the term “Mid-C-85” in Exhibit K be changed to “PV-85”
to reflect the use of the Palo Verde Hub.
In Staff’s supplemental comments filed in support of the Stipulation (October 22,
2020), Staff iterated its belief that the Stipulation represented a fair, just, and reasonable solution
to the issues identified in the proceeding and that it was in the public interest. Staff supported the
Stipulation as resolving all issues identified in Staff’s initial (August 17, 2020) comments.
Staff supported the Parties’ agreement to limit capacity payments for hourly generation
of electricity from the Facility to 5,100 kWhs until January 1, 2028.6
Staff paid considerable attention to determination of the “contract rate used to compare
against 85% of the Non-Firm Market Price for payment of non-conforming energy before January
1, 2028.” Staff supported using a Weighted-Average Conforming Energy Purchase Price as the
contract price to compare against 85% of the Non-Firm Market Price for payment of non-
conforming energy for purposes of the 90/110 rule until January 1, 2028.7 Staff noted that a
combination of four contract prices could be applied each hour in a month made up of on and off-
peak prices, and prices with and without capacity payments, depending on hourly generation
amounts.8
Staff discussed the specific situation when actual generation in any month is above
110% of the estimated amount, and when the Weighted-Average Conforming Energy Purchase
Price is higher than 85% of the Non-Firm Market Price. Staff stated:
The Stipulation requires the Amended Agreement to reflect use of the average of
the Weighted-Average Conforming Energy Purchase Price and 85% of the Non-
Firm Market Price weighted by the amount of generation below and above 110%
of the estimated amount, respectively, to calculate payments. Effectively, the
generation amount below 110% of the estimated amount is paid at the Weighted-
Average Conforming Energy Purchase Price, and the generation amount above the
110% of the estimated amount is paid at the lower of 85% of the Non-Firm Market
Price and the contract price.

6 5,100 kWh is the maximum amount that Powerhouse #2 has been able to historically generate in any given hour
even though it has a nameplate capacity of 5,500 kWh.
7 The Weighted-Average Conforming Energy Purchase Price is an average contract price weighted by the generation
amount in each hour and is calculated by taking the total revenue that would have been earned by the QF in each
month as if all energy was conforming energy divided by the total energy generated by the QF for that month.
8 If the Weighted-Average Conforming Energy Purchase Price is less than 85% of the Non-Firm Market Price,
regardless if the amount of energy is above or below the 90/110 band, the on and off-peak, and with and without
capacity payment contract pricing structure can be applied for each hour in the month as if all energy is conforming.
If 85% of the Non-Firm Market Price is less than the Weighted-Average Conforming Energy Purchase Price, then
85% of the Non-Firm Market Price can be used to calculate payments for generation amounts for all hours in the
month.
ORDER NO. 34887 7

2. Company Comments
The Company filed reply comments to Staff’s initial (August 17, 2020) comments. The
Company accepted Staff’s recommendation to use 82.4% as the discount rate to convert firm
market prices to the Non-Firm Market Price in the Agreement and to correct Exhibit K by replacing
Mid-C-85 with PV-85.
The Company also indicated its willingness to work with Staff and Fall River to
develop a metering solution acceptable to all Parties and to file an Amended Agreement
incorporating modifications based on Staff’s comments.
3. Fall River Comments
Fall River filed comments supporting the Stipulation. Fall River discussed the historical
operation of the Facility (before Powerhouse #1 went offline in 2006). Fall River also noted that
the Parties’ Stipulation would not require alterations to metering or billing systems or cause any
Party to incur additional cost or delay to reconfigure the existing system.
Fall River reiterated its belief that the Facility (both Powerhouse #1 and Powerhouse
#2) should be eligible for capacity payments for all electrical output based on Commission
precedent. However, Fall River acknowledged the extended period Powerhouse #1 has been
offline and indicated its willingness to compromise was predicated on the Parties’ ability to agree
to cost-effectively implement Staff’s proposal. Fall River noted that that the Facility has generated
more electrical output during the years since Powerhouse #1 has been out of service.
Fall River discussed other issues the Parties agreed to resolve. Notably, Fall River
mentioned the replacement of the market price for non-conforming energy with a reduced value
to the market price used to approximate the Non-Firm Market Price. Fall River suggested these
modifications and the changes to capacity payments reduce the amount Fall River is paid for its
output.
Although Fall River agreed to the terms and supported the Stipulation, it noted its right,
if the Commission rejects the Stipulation, to present its position for approval of the originally filed
Agreement with capacity payments for all output generated at the Facility.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-502 and 61-
503. The Commission is empowered to investigate rates, charges, rules, regulations, practices, and
ORDER NO. 34887 8

contracts of public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provision of law, and to fix the same by order. Idaho Code §§
61-502 and 61-503. In addition, the Commission has authority under PURPA and Federal Energy
Regulatory Commission (“FERC”) regulations to set avoided costs, to order electric utilities to
enter fixed-term obligations for the purchase of energy from QFs, and to implement FERC rules.
The Commission may enter any final order consistent with its authority under Title 61 and PURPA.
The Commission considers settlement stipulations under Rules 271-277. IDAPA
31.01.01.271-277. When a settlement is presented to the Commission, the Commission will
prescribe the procedures appropriate to the nature of the settlement to consider it. IDAPA
31.01.01.274. Further, proponents of a settlement must show that the settlement is reasonable, in
the public interest, or otherwise in accordance with law or regulatory policy. IDAPA
31.01.01.275. Finally, the Commission is not bound by settlement agreements. Instead, the
Commission “will 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.” IDAPA 31.01.01.276.
The Commission has reviewed the record, including the Stipulation, the Agreement,
and the comments of Staff, the Company, and Fall River. Based on our review, we find it
reasonable to approve the Stipulation, which provides terms for the Amended Agreement that Fall
River and the Company will submit within seven (7) days after issuance of this Order.
This matter presents a unique situation the Commission has not directly addressed
before: how to treat capacity payments in a contract renewal when a portion of a Facility has not
been operational for an extended period. In Order No. 32697, we determined that it is reasonable
“for the utilities to only begin payments for capacity at such time that the utility becomes capacity
deficient.” We further explained that “if a QF project is being paid for capacity at the end of the
contract term and the parties are seeking renewal/extension of the contract, the renewal/extension
would include immediate payment of capacity.” It is axiomatic that an existing QF’s capacity
would not be considered surplus power because its capacity has already been included in the
utility’s load and resource balance. See Order No. 34512.
Here, the two generators in Powerhouse #1 were not operational through multiple
capacity deficiency periods, while the two generators at Powerhouse #2 were operational the entire
contract period. The single point of metering further complicates the options. We agree with the
ORDER NO. 34887 9

outcome the Parties negotiated. The Stipulation represents a reasonable solution for this unique
situation. Due to the extended period Powerhouse #1 has been offline, we find it would be
inappropriate for Fall River to receive immediate capacity payments for the energy generated at
Powerhouse #1. This conclusion is consistent with our prior findings that capacity payments for
the renewal/extension of energy sales agreements are conditioned upon consistent and continuous
operation of the facility at the time of the renewal/extension. (See e.g. Order Nos. 32697, 33357,
and 34692).
Consistent with our existing practices and the Inter-Jurisdictional Allocation Protocol
(“Protocol”), we find that the Company’s payments for purchases of energy and capacity under
the Amended Agreement are prudently incurred expenses for ratemaking purposes as it pertains to
Idaho’s jurisdictional share.9 As outlined in the Protocol, expenses denied by other jurisdictions
would require specific filing requirements and determination of reasonableness before such
expenses could be recovered from the Company’s Idaho customers.
ORDER
IT IS HEREBY ORDERED that the Stipulation is Approved.
IT IS FURTHER ORDERED that, consistent with our existing practices and the
Protocol, all payments made by the Company for purchases of energy and capacity under the
Amended Agreement are allowed as prudently incurred expenses for ratemaking purposes as it
pertains to Idaho’s jurisdictional share.
IT IS FURTHER ORDERED that the Company or Fall River shall file the Amended
Agreement within seven (7) days of the service date of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order regarding any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
///

9 The 2020 Inter-Jurisdictional Allocation Protocol was authorized by Order No. 34640.
ORDER NO. 34887 10

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 12th
day of January 2021.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\PAC-E-20-10\Orders\PACE2010_final_dh.docx
Rates On-Peak Off Peak
Below cap - Energy + Capacity ($/kWh)100 90
Above cap - Energy ($/kWh) 50 40
Hourly Capacity Payment Eligibility Cap (kWh) = 10
Example Month: Assumes only 10 hours in the month.Energy Energy below Energy above Rate below Rate above
Hour generated (kWh)cap (kWh)cap (kWh)cap ($/kWh)cap ($/kWh)
1 9 9 0 100 50
2 8 8 0 100 50
3 9 9 0 100 50
4 9 9 0 90 40
5 10 10 0 90 40
6 12 10 2 90 40
7 9 9 0 90 40
8 8 8 0 100 50
9 12 10 2 100 50
10 10 10 0 100 50
Total 96 92 4
Scenario :Scenario 1
Scenario Description:All Energy is
Conforming Energy
90/110 Forecast:kWh 100
90% of Forecast:kWh 90
110% of Forcast:kWh 110
85% of Non-firm Market Rate:$/kWh
Weighted-Average Conforming Energy Purchase Price:$/kWh
Hour Payment ($)Rate ($/kWh)Payment ($)Rate ($/kWh)Payment ($)Rate ($/kWh)Payment ($)Rate ($/kWh)Payment ($)
1 900.00 93.75 843.75 70.00 630.00 93.75 843.75 91.77 825.94
2 800.00 93.75 750.00 70.00 560.00 93.75 750.00 91.77 734.17
3 900.00 93.75 843.75 70.00 630.00 93.75 843.75 91.77 825.94
4 810.00 93.75 843.75 70.00 630.00 93.75 843.75 91.77 825.94
5 900.00 93.75 937.50 70.00 700.00 93.75 937.50 91.77 917.71
6 980.00 93.75 1,125.00 70.00 840.00 93.75 1,125.00 91.77 1,101.25
7 810.00 93.75 843.75 70.00 630.00 93.75 843.75 91.77 825.94
8 800.00 93.75 750.00 70.00 560.00 93.75 750.00 91.77 734.17
9 1,100.00 93.75 1,125.00 70.00 840.00 93.75 1,125.00 91.77 1,101.25
10 1,000.00 93.75 937.50 70.00 700.00 93.75 937.50 91.77 917.71
Total Revenue for Month:9,000.00 9,000.00 6,720.00 9,000.00 8,810.00
PAC-E-20-10
ATTACMENT A
ORDER NO. 34887
Case No. PAC-E-20-10 - Example illustrating calculations of payments for
conforming and non-conforming energy.
Note: Data and rates are contrived for illustration purposes.
Low Load Hours
Hi Load Hours
95
Scenario 2 Scenario 3 Scenario 4
Hi Load Hours
93.75 93.75 93.75 93.75
121 121 88 88
95 70 70
110 110 80 80
99 99 72 72
Scenario 5
Energy is below 90% threshold.
Contract Rate is lower than
Market Rate.
Note: Revenue calculated using
the Weighted-Average
Conforming Energy Purchase
Price is the same as using
Scenario 1 rates for conforming
energy .
Energy is below 90%
threshold.
Market Rate is lower than
Contract Rate.
Note: Market rate is used for
all generation in the month.
Energy is above 110%
threshold.
Contract Rate is lower than
Market Rate.
Note: Revenue calculated
using the Weighted-Average
Conforming Energy Purchase
Price is the same as using
Scenario 1 rates for
conforming energy .
Energy is above 110%
threshold.
Market Rate is lower than
Contract Rate.
Note: Rate is weighted by
generation, using contract rate
and generation below 110%
threshold and market rate and
generation above 110%
threshold.
Mike Louis:
Weighted-Average Conforming
Energy Purchase Price = total
month revenue as if all energy is
conforming / total energy
generated during month
Weighted-Average Conforming
Energy Purchase Price=$9000 / 96
kWh = $93.75/kWh
Mike Louis:
Rate for Scenario 5 =
((generation less than or equal
to 110% of 90/110 forecast x
Weighted-Average Conforming
Energy Purchase Price) +
(generation greater than 110%
of 90/110 forecast x 85% of
Non-firm Market Rate))/Total
Energy Generated
Rate for Scenario 5 = ((88 kWh
x $93.75/kWh) + (96 kWh - 88
kWh) x ($70/kWh)) / 96 kWh =
$91.77/kWh