20120206Legal Brief.pdf

KRSTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
TELEPHONE: [phone]
E-MAIL: kris.sasser($puc.daho.gov
IDAHO BAR NO. 6618
RECEIVED
2812 FEB -6 PH 3= 32
!DAHO PU8U(j
UTILITIES CO~-M\~!SS¡ON
STREET MAILING ADDRESS:
472 WEST WASHINGTON STREET
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR A ) SUPREME COURT
DETERMINATION REGARDING THE FIRM ) DOCKET NO. 39151-2011
ENERGY SALES AGREEMENT FOR THE )
SALE AND PURCHASE OF ELECTRIC )
ENERGY BETWEEN IDAHO POWER ) IPUC CASE NOS. IPC-E-10-61
COMPANY AND GROUSE CREEK WIND) IPC-E-10-62
PARK, LLC (10-61) AND GROUSE CREEK )
WIND PARK II, LLC (10-62). )
)
GROUSE CREEK WIND PARK, LLC AND )
GROUSE CREEK WIND PARK II, LLC, )
)
Petitioners/Appellants, ) STAFF LEGAL BRIEF
)~ )
)
IDAHO PUBLIC UTILITIES COMMISSION, )
)
Respondent, Respondent on Appeal, )
)and )
)
IDAHO POWER COMPANY, )
)
Respondent-IntervenorlRespondent )on Appeal. )
)
STAFF LEGAL BRIEF 1
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Scheduling and Notice of Oral Argument issued on Januar 5, 2012 (Order No. 32430), submits
the following legal brief.
BACKGROUND
On December 28, 2010, Idaho Power and Grouse Creek executed two Power
Purchase Agreements. Under the terms of the Agreements, each wind project agrees to sell
electric energy to Idaho Power for a 20-year term using the non-Ievelized published avoided cost
rates as contained in Order No. 31025. The nameplate rating of each project is 21 MW. Both
projects are located near Lynn, Utah. On December 29, 2010, Idaho Power fied two
Applications with the Commission requesting acceptance or rejection of the Agreements. The
Commission processed the cases through the use of Modified Procedure.
On June 8, 2011, the Commission issued a consolidated final Order disapproving the
two Agreements. The Commission found that the Agreements were not fully executed prior to
December 14, 2010 - the date that the Commission lowered eligibility for the published avoided
cost rates from 10 aMW to 100 kW. Specifically, "on the date the two Agreements became
effective, published avoided cost rates were available only to wind and solar projects with a
design capacity of 100 kW or less." Order No. 32257 at 9. On June 29, 2011, the projects
timely filed a Joint Petition for Reconsideration alleging that the Commission's final Order was
arbitrar and capricious, not in conformity with controllng federal or Idaho state case law, and a
violation of the rulemaking requirements of the Idaho Administrative Procedures Act.
On July 27, 2011, the Commission issued a Final Order on Reconsideration affirming
its prior decision to not approve the two Agreements entered into between the Grouse Creek
projects and Idaho Power pursuant to the federal Public Utility Regulatory Policies Act of 1978
(PURPA). Order No. 32299. Based upon the express terms of the Agreements, the Commission
found that the PPAs were not effective prior to December 14,2010. Because each of the PPAs
requested published avoided cost rates but the projects were in excess of 100 kW, the
Commission found that the published rates were no longer available to the projects.
On September 7, 2011, the Grouse Creek projects appealed the Commission's Order
to the Idaho Supreme Cour. On October 4, 2011, the Federal Energy Regulatory Commission
STAFF LEGAL BRIEF 2
(FERC) issued an Order in a similar case that the IPUC's decision to not approve the PPAs was
inconsistent with PURPA and FERC's regulations implementing PURPA. Notice of Intent Not
to Act and Declaratory Order (Cedar Creek), 137 FERC ~ 61,006 (Oct. 4, 2011). On November
3, 2011, the Grouse Creek projects, the Idaho Public Utilities Commission and Idaho Power
Company (collectively "the Parties") filed a Stipulated Motion to Suspend Appeal and Remand
to the Administrative Agency with the Idaho Supreme Cour. Idaho Code § 61-624 provides that
the Commission "may at any time, upon notice to the public utilty affected, and after
opportunity to be heard. . ., rescind, alter or amend any order or decision made by it." The
Paries maintained that there "is good cause for the Cour to grant this Motion in order for the
Paries to consider a recent decision issued by the Federal Energy Regulatory Commission
("FERC") regarding the subject matter of the appeaL." Motion at 2. The Cour granted the
Parties' Motion on November 22,2011.
The Paries engaged in settlement discussions on December 9, 2011, and December
22, 2011. During the second settlement conference, the Parties concluded that a briefing
schedule would be the most productive means to move the case forward. The Paries proposed,
and the Commission adopted, a briefing schedule and set a date for oral argument. Order No.
32430.
ARGUMENT
The Agreements entered into between Idaho Power and the Grouse Creek projects
contained express terms regarding the effective date. Each Agreement states that the "Effective
Date" is the "date stated in the opening paragraph of this . . . Agreement representing the date
upon which this (Agreement) was fully executed by both Paries." Agreements ~ 1.11. The
opening paragraph is dated "this 28 day of December, 2010." Agreements at 1. In reading the
express terms of the Agreements, the Commission determined that the projects were not entitled
to published avoided cost rates because, at the time the Agreements became effective, published
rates were available only to wind and solar projects with a design capacity of 100 kW or less.
Order No. 32257 at 9.
PURPA § 292.304(d)(2) "permits a qualifying facilty to enter into a contract or other
legally enforceable obligation to provide energy or capacity over a specified term." In the Cedar
Creek case, FERC states that:
STAFF LEGAL BRIEF 3
(w)hile this may be done through a contract, if the electric utilty refuses to
sign a contract, the QF may seek state regulatory authority assistace to
enforce the PURP A-imposed obligation on the electric utility to purchase
from the QF, and a non-contractual, but stil legally enforceable, obligation
wil be created pursuant to the state's implementation of PURPA.
Accordingly, a QF, by committing itself to sell to an electric utility, also
commits the electric utility to buy from the QF; these commitments result
either in contracts or in non-contractual, but binding, legally enforceable
obligations.
137 FERC ~ 61,006 at p. 13. FERC concluded that this Commission's prior Order "makes a
fully-executed contract a condition precedent to the creation of a legally enforceable obligation."
Id Despite FERC's conclusions to the contrar, this Commission did not determine whether or
when a legally enforceable obligation may have arisen. In its previous Orders, the Commission
relied only on the express terms in each Agreement - terms each pary agreed to. However, the
Commission asked that the Idaho Supreme Cour remand the case back to the Commission so
that a determination of whether and when a legally enforceable obligation arose could be
examined. That is the issue curently before the Commission.
Grouse Creek asserts that it has been engaged in negotiations with Idaho Power for
purchase of its output since early 2010. Grouse Creek Comments at 3. In April 2010, the
projects requested that Idaho Power provide them with a PURP A contract for a single, 65 MW
project. Id at 11. In a June 25, 2010, letter to Idaho Power, the projects indicated that, due to
federal permitting issues, the projects intended to reduce the overall footprint and "wished to
discuss power sales contracts for two single 10 aMW projects, instead of the large 65 MW
project." Id at 13. On July 14,2010, the projects submitted a formal request for two 10 aMW
PURP A contracts to Idaho Power. Id The projects sent an e-mail on August 17, 2010,
clarifying that they were formally requesting two PURP A contracts. Id at 14. On October 1,
2010, the projects sent a letter to Idaho Power expressing their intent to obligate themselves to
two power purchase agreements. Id The October 1 letter also questioned the legality of what
the projects considered an excessive delay liquidated damages security provision. Id at 15.
On November 1, 2010, Idaho Power provided draft standard power purchase
agreements to the projects and clarfied Idaho Power's position regarding the delay liquidated
damages. Id at 16. On December 2, 2010, the projects sent a letter and versions of PURPA
contracts to Idaho Power containing project specifics - including acceptance of Idaho Power's
STAFF LEGAL BRIEF 4
terms regarding delay liquidated damages. Id at 17. "Idaho Power confirmed receipt on
December 7, 2010." Id at 18. On December 9, 2010, the projects requested bye-mail that the
"First Energy Date" and "Commercial Operation Date" in the Agreements be modified. Id. at
18. On December 15,2010, Idaho Power confirmed the updated on-line dates, and on December
16 Idaho Power provided the projects with executable power purchase agreements. Id at 19.
In Cedar Creek, FERC states that "a legally enforceable obligation may be incurred
before the formal memorialization of a contract to writing." 137 FERC ~ 61,006 at 15.
However, the simple act of a QF requesting a PURP A contract from a utilty canot reasonably
be interpreted as a commitment by the QF to sell electricity to the utilty from which it requests a
draft contract. Something in fuherance of the QFs intent and abilty to provide electricity is
required.!
Based on a reasonable interpretation of the facts in this case, and the actions of both
the projects and Idaho Power, Staff believes that a legally enforceable obligation was incured no
later than December 9, 2010 - the date upon which the projects modified their on-line dates. At
that point in time, the projects had returned contracts to Idaho Power and agreed to all of the
standard terms, including the delay liquidated damages provision. Negotiations had taen place
since early 2010 and the projects had taken sufficient action to show that they had committed
themselves to sell electricity to Idaho Power. Entitlement to published avoided cost rates
changed for wind and solar projects on December 14, 2010. Because a legally enforceable
obligation was created no later than December 9,2010, the Grouse Creek projects are entitled to
the published avoided cost rate in effect before December 14, 2010.
CONCLUSION
Extensive negotiations occurred between Idaho Power and the Grouse Creek projects
during the course of 2010. The projects began with a single 65 MW project and disputed Idaho
Power's delay liquidated damages provision. In July 2010, the projects submitted a formal
request for two 10 aMW published avoided cost rate PURP A contracts. By the first week of
December 2010, the facts show that the projects had accepted Idaho Power's delay liquidated
damages provision in the agreements. On December 9, 2010, the projects changed their First
Energy Date and Commercial Operation Date from December 2012 and June 2013 to June 2013
i In Cedar Creek, FERC observed that "Extensive negotiations between the paries are persuasive and point to the
reasonable conclusion that (the QF) did commit itself to sell electricity to (the utilty)." 137 FERC ~ 61,006 at 17.)
STAFF LEGAL BRIEF 5
and December 2013, respectively. Since December 9, 2010, all material terms to the
Agreements have remained intact. Based on these facts, a legally enforceable obligation
attached no later than December 9,2010. At that time, QF projects with a design capacity of 10
aMW and smaller were entitled to Idaho's published avoided cost rates. Consequently, Grouse
Creek Wind Park and Grouse Creek Wind Park II are entitled to published avoided cost PURP A
contracts at published rates that were in effect on December 9,2010. Order No. 31025.
Respectfully submitted this 6th day of Februar 2012.
~~,)~44.u )
Kristine A. Sasser
Deputy Attorney General
for Commission Staff
O:Supreme Court Cases:IPCElO61 - 62 Appeal: Staff Legal BrieCks
STAFF LEGAL BRIEF 6
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 6th DA Y OF FEBRUARY 2012,
SERVED THE FOREGOING STAFF LEGAL BRIEF, IN SUPREME COURT DOCKET
NO. 39134-2011, IPUC CASE NOS. IPC-E-10-61 AND IPC-E-1O-62 BY E-MAILING A
COPY THEREOF TO THE FOLLOWING:
DONOVAN E. WALKER
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(fidahopower.com
PETER J RICHARDSON
GREG ADAMS
RICHARDSON & O'LEARY PLLC
515 N. 27TH STREET
BOISE ID 83702
E-MAIL: peter(frichardsonandolear.com
greg(frichardsonandoleary.com
~h-~~
SECRETARY