20050118_1065.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:JANUARY 11,2005
SUBJECT:CASE NO. IPC-05-1 (Idaho Power)
FIRM ENERGY SALES AGREEMENT S. GEOTHERMAL
On January 5, 2005 , Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting approval of a
Firm Energy Sales Agreement (Agreement) between Idaho Power and U.S. Geothermal, Inc.
dated December 29 2004. Under the Agreement, U.S. Geothermal would sell and Idaho Power
would purchase electric energy generated by the Raft River Geothermal Power Plant located near
Malta, Idaho. U.S. Geothermal proposes to design, construct, install own and maintain a
geothermal generating facility producing 10 average megawatts on a monthly basis. The project
will be a qualifying facility (QF) under the applicable provisions of the Public Utility Regulatory
Policies Act of 1978 (PURP A).
As represented by Idaho Power, the Agreement with U.S. Geothermal comports with
the terms and conditions of Commission Order No. 29632 (Case No. IPC-04-, U.
Geothermal vs. Idaho Power) and avoided cost Order No. 29646. The contract is for a 20 year
term and contains the published non-Ievelized avoided cost rates set forth in Order No. 29646.
The following is a summary of certain provisions within the Agreement that comport
with the Commission s Order No. 29632:
1. Regulatory Out Clause - This clause has been removed from the
Agreement.
2. 10 MW Threshold - As specified in Commission Order No. 29632 this
threshold is measured based upon 10 average monthly megawatts.
DECISION MEMORANDUM
Initial Capacity Determination - As specified in Commission Order No.
29632, to be eligible for the published avoided cost rates, a facility must
. .
demonstrate that under normal or average design conditions the
project will generate at no more than 10 aMW in any given month.
Paragraph 1.7 and paragraph 4.13 of this Agreement define and
specify how this requirement will be met. Idaho Power and U.
Geothermal have agreed that U.S. Geothermal will supply Idaho
Power a certificate from a professional engineer certifying that
the facility s design and operating protocols will limit generation
at this facility to no more than 10 aMW in any given month.
Inadvertent Energy - As specified in Commission Order No. 29632, once
a project has qualified for published avoided cost rates "
. . .
we also find it
reasonable to cap the maximum monthly generation that qualifies for
published rates at the total number of hours in a month multiplied by
MW.
Paragraph 1.5 and 7.3 of this Agreement define and specify the
calculation used to measure energy in excess of 1 0 aMW and
provide that Idaho Power will accept but will not pay for any
energy produced in excess of 10 aMW.
3. 90%/110% Performance Band.
Energy Payment - As specified in Commission Order No. 29632, energy
deliveries outside of this performance band are purchased at a rate equal
to 85% of the market price or the contract rate, whichever is less.
Paragraph 1.21 of this Agreement defines energy outside of this
performance band to be "surplus energy" which is (1) all energy
over 1 I 00/0 of the facility estimated generation amounts
(paragraph 6.2) or (2) all of the current month's energy if the
facility s monthly generation is less than 90% of the facility
estimated generation amounts (paragraph 6.2) or (3) all energy
delivered prior to the operation date of the facility.
Forced Outage - As specified in Commission Order No. 29632, the
Forced Outage minimum outage has been revised to 48 hours and is
applicable to individual generation units at the facility. Paragraph 14.
and paragraph 6.2.4 of the Agreement specify the process, details and
calculations for factoring forced outages into the computation of purchase
obligations.
Revising Generation Estimates - As specified in Commission Order No.
29632, the facility will initially provide Idaho Power monthly generation
DECISION MEMORANDUM
estimates for the first year of the Agreement and, beginning in the ninth
month and every three months thereafter, the facility will provide Idaho
Power with an additional three months of forward generation estimates.
In addition, beginning with the end of the third month the facility may
revise previously provided generation estimates beginning with the fourth
month out from that point in time. . .. Paragraph 6.2 of the Agreement
specifies the process and procedures to address revisions to generation
estimates.
The Raft River Geothermal facility will interconnect with the Raft River Rural
Electric Cooperative (Coop) electrical system and will wheel its energy to Idaho Power over
Coop and/or BP A transmission facilities. Therefore, the facility will contract with Coop and
BP A for all interconnection and transmission requirements. Metering and telemeter equipment
will be installed at the facility to accurately measure and communicate the facility s energy
deliveries to Idaho Power. All applicable charges and monthly operation and maintenance
charges under Schedule 72 for this: metering and telemetering will be assessed to U.
Geothermal.
As reflected in Section 24 of the Agreement, the Agreement will not become
effective until the Commission has approved all of the Agreement's terms and conditions and
declare that all payments Idaho Power makes to U.S. Geothermal for purchases of energy will be
allowed as prudently incurred expenses for ratemaking purposes. The proposed effective date of
the Agreement is December 29 2004.
Staff Analysis
Staff has reviewed the rates contained in the Agreement and finds that they comport
with Order No. 29646, the most recent Commission Order establishing avoided cost rates. Staff
further agrees with the representation of Idaho Power that the Agreement terms and conditions
comport with the Commission s Order No. 29632 in U.S. Geothermal Complaint Case No. IPC-
04-8. As the contract terms have been litigated and the non-Ievelized rates comport with
Commission published rates, Staff recommends that the submitted Agreement be approved
without further notice or procedure.
Commission Decision
The geothermal small power proj ect and contract terms under consideration were the
subject of the recent complaint proceeding in Case No. IPC-04-8. The contract terms and
DECISION MEMORANDUM
conditions comport with the Commission final Order No. 29632 and non-Ievelized rates
established in Order No. 29646.
Does the Commission agree that it is appropriate to approve the Idaho Power/U.
Geothermal Firm Energy Sales Agreement without further notice or procedure?
Scott Woodbury
bls/M:IPCEO501 sw
DECISION MEMORANDUM