20210427Comment(1).pdf

April 27, 2021
ONLY VIA EMAIL

Commission Secretary
Idaho Public Utilities Commission
[e-mail]
Rocky Mountain Power:
Ted Weston
[e-mail]

Emily Wegener
[e-mail]

Re: Opposition of Commercial Energy Management, Inc. (“CEM”) to the Power
Purchase Agreement proffered by Rocky Mountain Power, a division of
PacifiCorp (“PacifiCorp/RMP”) in Case No. PAC-E-21-05 (the “Case”).

Dear Idaho Public Utilities Commission;

This law firm has been retained to represent CEM and to provide public comment on
CEM’s behalf to the Idaho Public Utilities Commission (the “Commission”) in this Case. In the
Case, PacifiCorp/RMP seeks approval of a Power Purchase Agreement, dated February 26, 2021
(the “Agreement”), between PacifiCorp/RMP and CEM. However, CEM asks the Commission to
reject the Agreement submitted by PacifiCorp/RMP because of the process PacifiCorp/RMP has
gone through to obtain CEM’s acquiescence to the Agreement and the inclusion of a 90/110
provision concept throughout the Agreement.
First, as noted in PacifiCorp/RMP’s application in this Case, PacifiCorp/RMP first
contracted with CEM in an agreement dated November 21, 1991. (Application of Rocky Mountain
Power (“Application”), ¶ 6). At that time, years in advance, the parties understood that the
agreement would expire on May 31, 2020. (Agreement, ¶ 6). Since August 2019, CEM has been
reaching out to PacifiCorp/RMP to try and negotiate a new power purchase agreement to take
effect after the prior agreement expired. (See, e.g., Letter from Maher Wissa, President of CEM,
to the Commission in Case No. PAC-E-20-09, received January 27, 2021 (which is incorporated
herein by reference)). Yet, PacifiCorp/RMP would not engage with CEM for weeks and months
at a time. This tactical decision by PacifiCorp/RMP has the potential to cost CEM a great deal,
since the Commission’s published rates of June 1, 2019 (which would have been applicable to any
agreement had PacifiCorp/RMP timely engaged in discussions with CEM) are much higher than
those subsequently published by the Commission and incorporated into the Agreement.1

1 For example, the 2019 rates would have required $56.35/MWh for 2021, whereas the more recent rates—included
in the Agreement—require $51.11/MWh for 2021. (See Agreement, Ex. K).

Commission Secretary
Idaho Public Utilities Commission
April 27, 2021
Page 2 of 3

Perhaps to avoid these costs and believing that PacifiCorp/RMP could secure a better deal
later, PacifiCorp/RMP delayed a new power purchase agreement, and secured an extension
(amendment) of the prior agreement through March 1, 2021. While PacifiCorp/RMP has framed
these delays in terms of being able to “provide [CEM] additional time to meet the current
transmission interconnection requirements,” (Application, ¶ 7), the fact was that the
interconnection issues were not timely raised and had they been discussed in 2019, CEM could
have addressed those matters prior to the expiration of the prior agreement.
Even with the extension in hand, PacifiCorp/RMP still delayed its efforts in negotiating the
new Agreement—despite CEM’s efforts to negotiate with RMP, and while CEM paid
PacifiCorp/RMP to address the interconnection issues—until the last minute. CEM had numerous
objections to terms of the contract, but those were all ignored by PacifiCorp/RMP.
PacifiCorp/RMP dictated terms that CEM had to either accept or (to its ruin) reject. Given those
circumstances and with the extension expiring on March 1, 2021, the new Agreement was only
signed on February 26, 2021, just three days before the extension ended.
The Commission and its review in this Case is the only opportunity for CEM to be heard,
because of the delays in discussions that PacifiCorp/RMP has caused for its advantage, the obvious
disparity in bargaining power between PacifiCorp/RMP and CEM, and PacifiCorp/RMP’s
demonstrable willingness to use its size and power to ignore any attempts at negotiation.
Accordingly, CEM asks that the Commission send a message that large buyers cannot steamroll
small sellers by rejecting the Agreement and sending PacifiCorp/RMP back to the drawing board
to actually work with CEM to arrive at a new power purchase agreement.
The second point CEM would submit for the Commission’s consideration is the most
egregious of the contractual provisions included in the Agreement that were forced on CEM over
its objections: the 90/110 provisions. Specifically, the 90/110 provisions are embodied in the
Agreement, including Sections 4.9 and 5.1, together with the definitions of “Conforming Energy”,
“Confirming Energy Purchase Price”, “Non-Conforming Energy”, and “Non-Conforming Energy
Purchase Price”, as well as Exhibit K in the Agreement. CEM’s prior 1991 agreement with
PacifiCorp/RMP did not include this concept at all, and CEM objected vigorously to its inclusion
in the current Agreement. However, as described above, those objections were ignored by
PacifiCorp/RMP, which offered only a take-it-or-leave-it choice upon CEM. The issues
underlying the 90/110 concept were not discussed.
Obviously, the 90/110 concept favors the buyer, but—to CEM’s knowledge—the issue has
never been assessed from the seller’s perspective. Frankly, any matter outside the narrow
definition of Force Majeure (see Agreement, § 14.1) can cause CEM to incur devastating liabilities
to RMP. The rationale for the 90/110 concept is to economically incentivize a seller’s reliability
and predictability. While those bases specifically favor buyers and take a buyer’s concerns and

Commission Secretary
Idaho Public Utilities Commission
April 27, 2021
Page 3 of 3

market issues into account, nothing has addressed a seller’s concerns or market issues. While
worded as an economic incentive, it is actually a penalty, requiring payment of a mandated rate
when production is within 10% of predictions, but providing for drastic reductions in price when
power production is more than 10% off from the predictions. There is no corresponding “upside”
for sellers—there is no added premium paid when production matches predictions, just the
regulated rate is paid. In short, the 90/110 approach creates a regime for buyers to penalize
unreliability without creating any corresponding or resulting advantage for sellers (other than
having the ordinary rates as published by the Commission). For these reasons, and others, CEM
objected to the inclusion of the 90/110 concept in the Agreement; but those objections were
ignored and CEM was left with little choice but to take what PacifiCorp/RMP decided to offer in
the Agreement.
The Commission cannot allow PacifiCorp/RMP to game the system to its advantage
without consequence. PacifiCorp/RMP has timed the Commission’s process to its advantage and
CEM’s injury. PacifiCorp/RMP has used its behemoth size and market dominance to give CEM
no choice but to agree with PacifiCorp/RMP’s proposed terms. For all these reasons, CEM asks
that the Commission reject the Agreement submitted by PacifiCorp/RMP in this Case, and send
the parties back for true negotiations that can arrive at a power production agreement that is fair to
both PacifiCorp/RMP and CEM.

Cordially,

D. Andrew Rawlings, Esq.
HOLDEN, KIDWELL, HAHN & CRAPO, P.L.L.C.

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