20110126Comments.pdf

WILLIAMS. BRADBURY
ATTORNEYS AT LAW
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Janua 26,2011
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Idaho Public-Biie Commission
472 W. Washington Street
Boise, ID 83702
ATTN: Jean D. Jewell
Commission Secretar
Re: In the Matter of the Application of Rocky Mountain Power for Approval of Power
Purchase Agreements Between Rocky Mountain Power and Cedar Creek Wind
Dear Jean:
Please find enclosed the original and seven (7) copies of Comments of Cedar Creek
Wind LLC in Support of Rocky Mountain Power's Application for Approval of a Power
Purchase Agreement, together with Affdavit of Dana Zentz, in each of the following actions:
Rattlesnake Canyon
Coyote Hil
North Point
Steep Ridge
Five Pine
PAC-E-11-01
PAC-E-11-02
PAC-E-11-03
PAC-E-11-04
PAC-E-11-05
Sincerely,J(~lJ~
Ronald L. Wiliams
RLW/jr
Enclosures
1015 W. Hays Street - Boise, ID 83702
Phone: [phone] - Fax: [phone] - ww.wiamsbradbur.com
Ronald L. Wiliams, ISB No. 3034
Wiliams Bradbur, P.C.
1015 W. Hays St.
Boise ID, 83702
Telephone: [phone]
Fax: [phone]
ron(iwiliamsbradbury.com
ZOU JAN 26 Af1 II: 33
Attorneys for Cedar Creek Wind, LLC
BEFORE THE IDAHO PUBLIC UTILITES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF ROCKY MOUNTAIN POWER FOR )
APPROVAL OF POWER PURCHASE )
AGREEMENTS BETWEEN RMP AND )
CEDAR CREEK WIND LLC )
)
)
Case No. PAC-E-11-05
COMMENTS OF CEDAR CREEK
WIND LLC IN SUPPORT OF ROCKY
MOUNTAIN POWER'S APPLICATION
FOR APPROVAL OF A POWER
PURCHASE AGREEMENT
Cedar Creek Wind, LLC ("Cedar Creek" or "CCW") files these comments
in support of the Application in this case by Rocky Mountain Power ("RMP" or
"PacifiCorp") for approval of the Power Purchase Agreement ("PPA") between RMP and
Cedar Creek for the Five Pine Wind Project (the "Project"). For the reasons stated below,
Cedar Creek requests that the Commission approve the PP A.
STATEMENT OF FACT
For a full and complete statement of the facts in this case please see the
accompanying affdavit of Dana Zentz.
The electrical interconnection study process for this Project and the other four
CCW wind projects commenced in 2008 and is now at a very mature stage. Zentz
Afdavit, ~ 6. System impact studies for this Project were completed by RM in 2009, a
final facilities study report was issued by RMP in March of 20 1 0 and CCW paid in April
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 1
2010 a $100,000 deposit for RMP to commence detailed interconnection engineering and
procurement of interconnection pars. Id All other material milestones needed for
electrical interconnection, short of actual facilities constrction, have been met. In total,
Cedar Creek has paid over $475,000 to RMP for interconnection and PTP application,
along with cost studies, transmission system impact studies and for project specific
engineering and procurement. Id
Cedar Creek Wind was an unsuccessful bidder of approximately 150 MW of wind
generation in PacifiCorp's 200812009 Requests for Proposals for renewable energy.
Instead, PacifiCorp selected Wyoming based wind generation in that RFP process. As a
result, in late 2009, CCW began negotiations with RMP for the sale of power from two
78 MW wind Qualify Facilties. In early 2010 Cedar Creek asked RMP to ru its
integrated resource (IR) model to calculate the PURP A rate for two 78 MW wind
projects. In late April 2010, RMP responded with IR model results showing a first year
(2012) non-Ievelized PURPA rate of$37.01/MWh (which included the $6.50/MWh wind
integration charge). This "calculated" avoided cost rate was 35% below the 2012 non-
levelized net avoided cost rate of$57.47/MWh established by the Commission on March
16,2010 for PacifiCorp. Id, ~ 5. More importtly, the non-negotiable rate offered by
RMP to CCW was uneconomic and un-financeable for puroses of developing the Cedar
Creek wind project.
At this point in the spring of2010 CCW had two choices: (i) contest before the
Commission the accuracy ofRMP's modeling of its avoided cost, or (ii) reduce the
amount of gross generation and sacrifice the economies of scale associated with two 78
MW wind projects and reconfigure into five separate PURP A projects not greater than 10
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 2
aMW, in order to qualify for Surogate Avoided Resource ("SAR") based avoided cost
rates. Cedar Creek chose the latter option, as a contested case before the Commission
challenging PacifiCorp's IR model would have been extremely expensive and involved
delay likely fatal to the Project. Id, ~~ 2-5.
Staing in early May 2010, RMP and CCW were in almost constant
communcation and then negotiations concernng PP As for the five Cedar Creek 10 aMW
wind projects. Much of the data and detail concerning the CCW projects requested by
PacifiCorp was beyond the scope considered reasonable and necessary for a PURP A
PPA, but CCW complied with all ofPacifiCorp's requests fuly, even though doing so
fuher delayed the eventual delivery of a first draft PP A from PacifiCorp. Zentz Affdavit,
~~ 14, 15 While Pacifi Corp's motive for these requests mayor may not have been to
delay the execution of the PP As, the facts of the case are that the PP As would have been
ready for execution several months before the end of2010, but for these requests.
Likewise, contract negotiations concerning ownership of renewable energy credits
fuher stalled a final PPA. Nonetheless, Cedar Creek and PacifiCorp stil came to a
meeting of the minds and agreed to final terms and conditions of a PP A for this Project
by November 29,2010. On that date, PacifiCorp transmitted to CCW a "proposed final
redline" PPA, and on that same date Cedar Creek responded "we have nothing fuher."
Id, ~ 16.
While the PP A for this Project should have been signed the first week of
December, PacifiCorp stared to slow the process down again, by failing to deliver an
executable PPA to CCW, based on a newly anounced need for additional credit, legal
and management review of this Project's PPA and the other four Cedar Creek PPAs.
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 3
Ths "new" review was focused on standard form contract language created by
PacifiCorp and on pars of those stadard agreements which had not changed materially
if at all, since negotiations began. At that time CCW argued, to no avail, that the
standard contract language was well vetted with PacifiCorp management in advance of
the completion of the negotiations in November. Id, ~ 17.
While CCW can not know why PacifiCorp inserted these new requirements at the
11 th hour of the contracting process, the fact remains that the PP A for this Project was
.
ready to execute the first week of December, 2010, and CCW was assured that
PacifiCorp was ready to execute, prior to the introduction of these new review
requirements. A final form, executable PPA for the Project was eventually delivered
from PacifiCorp to CCW on December 9,2010 with the statement from RMP that RMP
would be prepared to execute the Project's PPA on Monday, December 13,2010. Id, ~
20. Cedar Creek executed the PPA for this Project on Monday, December 13,2010 and
hand-delivered the same to PacifiCorp at its offce in Portland Oregon. PacifiCorp did not
execute this Project's PPA until December 22,2010, twenty-three days after
acknowledging that the PP A was "in final form" and ready for execution and receiving
CCW's execution of the same.
PacifiCorp acknowledges in three separate pleadings before this Commission that
this Project's PP A, and the other four like them, were mature contracts with a meeting of
the minds reached between the paries before December 14,2010. First, in its Application
for contract approval in this case, PacifiCorp states: "The five (CCW) projects. . .
complied with all PURPA's regulation including the I-mile separation requirement, and
met all Idaho rules and Commission Orders." Application of Rocky Mountain Power,
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 4
Case No.PAC-E-11-01 through 05, p.p. 5,6. PacifiCorp's Application fuher
acknowledges that this Project's PPA was prepared by PacifiCorp, was executed by
CCW on December 13, 2010, and complied with relevant Commission Order Nos.
29632,30423,31021, and 31025. Id, p. g
Furher, Bruce Griswold, in his affidavit filed on Januar 19,2010, in Case No.
GNR-E-1-04, states: "Because Rocky Mountain Power and Cedar Creek Wind LLC
reached agreement on all terms oftheir power purchase agreements including price prior
to December 14, 2010, Rocky Mountain Power executed final power purchase
agreements and, on Januar 10,2010, filed them with the Commission." Case No. GNR-
E-10-4, Griswold, B., (Di), p. 5.1
As a final acknowledgement that this PP A was agreed to and effectively entered
into by PacifiCorp and CCW prior to December 14,2010, PacifiCorp states in its Joint
Utilty Docket Reply Comments of Januar 19,2011 that: "If Rocky Mountain Power
and the QF (under 10 aMW) both executed the power purchase agreement or reached
agreement on all final terms of a PP A prior to December 14, 2010, Rocky Mountain
Power will pay Seller the published avoided cost prices." Reply Comments of RMP, pp
5-6. A footnote immediately following specifically references Cedar Creek: "An example
is the Cedar Creek Wind LLC QF development consisting of five separate and distinct
facilities each sized 10 aMW or less. . . . (wherein) . .. Rocky Mountain Power and Cedar
Creek finished negotiations of all terms prior to December 14,2010." Id, Fn. 10.
1 matters contained in parenthesis are omitted
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 5
STATEMENT OF LAW
In the Notice of Joint Petition, Order No. 321312, the Commission ordered that the
Commission's decision regarding whether or not to reduce the published avoided cost
eligibility cap would become effective on December 14,2010. PacifiCorp, in its
Application in this case, asks the Commission for an Order "accepting or rejecting" this
Project's PPA between Cedar Creek and RMP. However, RMP provides no gudance to
the Commission or evidence to support either of the two recommendations and instead
uses the Application to continue 'pleading its case' in the Joint Utilties Docket for a
reduction in the published avoided cost rate eligibilty cap.3 Unfortunately, the
Application is virtally void of any representations or proof as to whether this Project's
PPA was "ripe" before December 14,2010. Consequently, Cedar Creek is compelled to
explain and document the facts that warant approval of this Project's PPA. To that effect
please refer to the accompanying affdavit of Dana Zentz and attchments thereto.
It is clear from the record, as supplemented by this filing, as well as excerpts of
the record from the Joint Utilties Docket, that ths Project's PPA should be approved by
the Commission and that CCW is entitled to the rates, terms and conditions contained
therein and that existed before December 14,2010. Specifically, Cedar Creek is entitled
to a contract with rates established by this Commission on March 16,2010 in Order No.
31025, for a PURP A QF wind project that contracts with PacifiCorp and does not
generate in excess of 10 aMW in any given month, in compliance with IPUC order No.
2 See, Joint Petition of Idaho Power Company, Avista Utilties and Paeifeorp, GNR-E-l0-04.
3 Id.
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 6
30497.4 This entitlement is due to Cedar Creek and PacifiCorp having resolved and
agreed to all material outstanding contract issues prior to December 14,2010. As
discussed below, both the Idaho Supreme Cour and the Commission have previously
reviewed the question of maturity needed for a QF project to be entitled to vintage rates
or terms applicable before a certin date.
The Supreme Court first stated that a project must be "a QF" and "ready wiling
and able to sign a contract" with a utility in order to be entitled to standardized PURP A
rates. Empire Lumber Co. v. Wash. Water Power Co., 114 Idaho 191, 755 P.2d 1229,
1232 (1987). The Cour in a later case also approved of the Commission's establishment
of a more detailed set of requirements for QF contracts seeking vintage QF rates where it
agreed with the Commission that: "The QF must be able to exhbit that is has laid a
proper foundation entitling it to contract consideration" and that a "CSPP (QF) is not
entitled to contract rates until it is ready, willng and able to sign a contract." A. W Brown
Co., Inc., v. Idaho Power Company, 121 Idaho 812,817; 828 P.2d 841 (1992). The Cour
in A. W Brown Co. went on to fuher affrm the Commission's decision that the "ready,
wiling and able" stadard of "substantive negotiation" wil "entail making a
comprehensive binding offer showing with reasonable specificity, design and size
characterizes and indicating a willngness to rely on proposed contract terms and proceed
thereunder." Id
Two recent QF contract approvals by the Commission continue a long line of
decisions wherein the Commission reviews the relevant facts and circumstaces to
determine whether a QF is entitled to vintage rates or terms. Some of the factors recently
4 Case No. PAC-E-07-07: In the Matter ofthe Petition of Rocky Mountain Power for an Order Revising
Certin Obligations to Enter Into Contracts to Puchase Energy Generated by Wind-Powered Small Power
Generation Qualifying Facilities.
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 7
noted by the Commission as determinative, when taken together, include: (i) whether a
QF developer is materially down the path of facility interconnection with the utilty, (ii)
whether the developer obtained QF status from the FERC, (iii) whether the paries had
exchanged contract drafts and project specific information, and (iv) whether the paries
reached a meeting of the minds as to the material contract terms and conditions. Order
No. 321045; See also Order No. 320686 In both of these instaces - Yellowstone Power
and Grand View Solar - the Commission approved contracts that were executed
substantially after March 16,2010, but contained the higher vintage PUR.A avoided cost
rate applicable to pre-March 16, 2010 contracts. 7 In both of these cases it was Idaho
Power's assertion that it and the developer "had resolved all material outstanding contract
issues prior to March 16,2010." Order No. 32068, p. 2. The Commission also found in
Grand View Solar the representations of Idaho Power "that all outstading contract issues
had been resolved prior to March 16, 2010" to be a convincing and accurate portayal. of
the paries having come to a meeting of the minds. Id at p. 5.
The affidavit of Dana Zentz similarly demonstrates that "all outstading contract
issues" were resolved between PacifiCorp and Cedar Creek prior to December 14,2010.
PacifiCorp is in agreement with this statement of fact; although it could not apparently
admit so directly in this case and instead made such statements in the Joint Utilties
Docket.
5 Case No. IPC-E-IO-22; In the Matter of the Application ofIdaho Power Company for Approval ofa Fir
Energy Sales Agreement with Yellowstone Power Inc.6 Case No. IPC-E- 10-19; In the Matter ofthe Application ofIdaho Power Company for Approval of a Fir
Energy Sales Agreement with Grand View Solar PV 1.7 The contract between Yellowstone Power Inc. and Idaho Power was dated July 28, 1020, more than four
months after the change in rates. Idaho Power and Grand View Solar executed their contract on June 8,
2010, not quite three months after the change in rates.
Cedar Creek Wind, LLC Comments in Support of PP A Approval Page 8
PacifiCorp's Application to Commission for approval or rejection of this Project's
PP A presents the Commission three policy reasons favoring the latter: (i) that the five
CCW projects are a significant par (e.g., 30%) of the inundation of Idaho wind power
onto PacifiCorp8; (ii) that the five CCW projects will create system instabilty or
uneliability9, and (iii) the cost of energy from CCW is in excess ofRMP's avoided cost
and wil have adverse impacts on RMP's retail rates in Idaho.10 None of these reasons
are relevant to the Commission's determination in this case. Nor are the statements in
PacifiCorp's Application accurate.
From 2005 to date, only eight wind contracts between developers and PacifiCorp
(including the five CCW PPAs) have been submitted to this Commission for approval.
None of these eight have yet commenced construction and none are yet delivering energy
to RMP. Whether or not an additional two or three hundred MW of wind capacity is
about to be contracted for by PacifiCorp, subject to pre or post December 14,2010 rates,
terms and conditions is simply a matter of speculation. Furhermore, a PacifiCorp system
perspective must also be kept in mind. Energy needed by PacifiCorp in 2011 is projected
to be slightly over 61 milion MWhs.11 IfPacifiCorp were to absorb an additional 350
MW s of Idaho based wind nameplate generation into its system, it would amount to
approximately 3.5 percent ofPacifiCorp's projected 2011 coincident system peak. More
relevant, energy provided by 350 MWs of nameplate wind would equal approximately
1.5% ofPacifiCorp's projected energy needed in 2011.
8 Application ofRMP, ~ 6.
9 Id.,~ 8.
10 Id., ~~ 6-8.
11 See PacifCorp 2011 IRP Public Meeting Handout, October 5, 2010, p. 16,
athtt://www.pacificorp.comlcontent/dampacificorp/ docÆnergy Sources/Integrated Resource Plan2011
IRP/PacifiCorp 20111RP PIM4 10-05-10.pdf
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 9
Nor do the five CCW wind projects adversely impact RMP's "electrical system
and reliability" in eastern Idaho. PacifiCorp has been very clear that CCW wil pay, and
CCW has agreed to pay, for all electrical system impacts related to the projects. Cedar
Creek has also paid for all RMP studies that have, in great detail, determined the extent to
which CCW wil pay RMP for any and all reliability impacts on the electrical system.
Finally, as inappropriate as it is in this case, the arguent that the SAR calculated
avoided cost rate is significantly above an IR calculated rate is simply a wrong and
misleading comparison. As discussed in the Zentz affidavit12, the PacifiCorp IR model
appears heavily biased against independent wind projects, in that it produces a first year
average rate of$37.05/MWh. Instead, that IR modeled rate should be compared to the
recent Idaho Power IR modeled rate for Rockland Wind Project, or to the $/kWh incured
by PacifiCorp in developing 480 MW of Company owned wind generation in Wyoming
or in acquiring an additional 400 MW of independently owned Wyoming wind. While
confidential, Wyoming wind purchase or development costs can be reviewed by the
Commission in the most recent PacifiCorp Idaho ratecase.13 All wil show costs/kWh
significantly greater than $37.05/MWh.
SUMMARY
Prior to December 14, 2010 Cedar Creek had fully perfected its right for a less
than 10 aMW SAR avoided cost PPA with PacifiCorp for this Project. Significant
milestone compliance events are sumarzed as follows: (1) By May of2010 CCW and
RMP had reached a mature point in studying and understanding the interconnection and
transmission system impacts caused by the Project and CCW had paid PaciCorp in
12 ~ 6.
13 IPUC Case No. PAC-E-1O-07
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 10
excess of $475,000 for such studies. (2) Qualifying Facility status was perfected with the
FERC for this Project on June 23, 2010. (3) PacifiCorp provided the first draft PPA to
CCW in July, 2010 and multiple drafts were exchanged between the paries over the
course of the next several months. (4) In September CCW presented PacifiCorp with
detailed Project specific notebooks with equipment specifications, wind data, site layout,
electrical diagrams, etc. and which were acknowledged by RMP as being "complete." (5)
On November 29,2010 Cedar Creek and RMP had reached full agreement as to the
"final" rates, terms and conditions of a PP A for this Project, with "nothing fuher" to
negotiate, add or discuss. (6) PacifiCorp prepared the final draft of this PPA for execution
by the paries and Cedar Creek signed and delivered the PPA to PacifiCorp on December
13,2010.
For the reasons stated above and in accordance with previous decisions, Cedar
Creek respectfully asks that the Commission approve the PP A for the Five Pine Wind
Project.
Dated this 26th day of Janua, 2011.
Respectfully submitted,
,
ßaM L UM!,Ronald L. Wiliams
Wiliams Bradbur, P.C.
1015 W. Hays St.
Boise ID, 83702
Telephone: [phone]
ron(iwillamsbradbury.com
of Attorneys for Cedar Creek Wind
Cedar Creek Wind, LLC Comments in Support of PPA Approval Page 11
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 26th day of January, 2011, I caused to be served a
tre and correct copy of the foregoing document upon the following individuals in the
manner indicated below:
Ted Weston
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, UT 84111
E-Mail: ted.weston~pacificorp.com
D Hand Delivery
D US Mail (postage prepaid)
D Facsimile Transmission
D Federal Express
~ Electronic Transmission
Daniel E. Solander
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, UT 84111
E-Mail: daniei.solander~pacificorp.com
D Hand Delivery
D US Mail (postage prepaid)
D Facsimile Transmission
D Federal Express
~ Electronic Transmission
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OR 97232
D Hand Delivery
D US Mail (postage prepaid)
D Facsimile Transmission
D Federal Express
~ Electronic Transmission
~J1 Li;JÀRonald L. Wiliams
Cedar Creek Wind, LLC Comments in Support ofPPA Approval Page 12