20060424_1525.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:APRIL 4, 2006
SUBJECT:CASE NO. IPC-06-3 (Idaho Power)
FIRM ENERGY SALES AGREEMENT - J. R. SIMPLOT COMPANY
On February 10, 2006, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting approval of a
Firm Energy Sales Agreement between Idaho Power and lR. Simplot Company (Simplot) dated
February 8, 2006 (Agreement).
Simplot currently owns, operates and maintains an 18.75 MW cogeneration facility
(Project) at its industrial site near Pocatello, Idaho. The facility is located in the South 1/2 of
Section 7, Township 6 South, Range 34 East, Boise Meridian, Power County, Idaho. The Project
is a qualified cogeneration facility under the applicable provisions of the Public Utility
Regulatory Policies Act of 1978 (PURPA). As reflected in the Company s Application, the
Simplot Project is currently interconnected to Idaho Power and is selling energy to Idaho Power
as a qualifying facility (QF) in accordance with a Firm Energy Sales Agreement dated June 18
2004 and an approved effective date of March 1 , 2004. Reference Case No. IPC-04-, Order
No. 29577.
The existing Firm Energy Sales Agreement is a one-year agreement which permits
automatic renewals of one year on March 1 of each year. The Agreement also specifies that
with appropriate notice, either party may terminate the Agreement effective March 1. Simplot
has timely requested to terminate the existing Firm Energy Sales Agreement for this Project and
enter into a new Firm Energy Sales Agreement for its Pocatello facility. Idaho Power contends
that the terms of the new Agreement conform to the terms and conditions of Commission Order
DECISION MEMORANDUM
No. 29632 (Us. Geothermal et al. v. Idaho Power) and Commission avoided cost Order No.
29646 (Case No. IPC-04-25) for energy deliveries of less than 10 aMW.
Under the terms of the submitted Agreement, Simplot has elected to contract with
Idaho Power for a seven-year term. The Agreement contains non-Ievelized published avoided
cost rates established by the Commission in Order No. 29646 (December 1 , 2004) for energy
deliveries less than 10 aMW for a contract year beginning February 8, 2006.
As reflected in Agreement ~ 1.13 and specified in Item B-3 of the Agreement
Appendix B, the maximum capacity of the cogeneration facility is 12 MW. As defined in
Agreement ~ 1.9 and as described further in ~ 4., Simplot will be required to provide data on
the facility that Idaho Power will use to determine whether, under normal and/or average
conditions, the facility will not exceed 10 aMW on a monthly basis. Idaho Power has reviewed
the historical generation data for the Simplot facility. As reflected in Agreement ~ 7., should
the Simplot facility exceed 10 aMW on a monthly basis, Idaho Power will accept any energy
(Inadvertent Energy) that does not exceed the maximum capacity amounts; however, Idaho
Power will not purchase or pay for this Inadvertent Energy.
Agreement ~ 25 provides that the Agreement will not become effective until the
Commission has approved without change all the Agreement terms and conditions and declared
that all payments to Simplot that Idaho Power makes for purchases of energy will be allowed as
prudently incurred expenses for ratemaking purposes.
On March 3, 2006 , the Commission issued Notices of Application and Modified
Procedure in Case No. IPC-06-3. The deadline for filing written comments was March 24
2006.Comments were received from Commission Staff and a Caldwell customer of the
Company. The customer sees no reason that Idaho Power can t buy Simplot's power as long as
the utility doesn t come back next week and request a rate increase. Commission Staff
recommends that the Agreement be approved.
Staff notes that there are two primary differences between the submitted Agreement
and the one it replaces. First, under the terms of the submitted Agreement, Simplot has elected
to contract with Idaho Power for a seven-year term. This eliminates the automatic annual
renewals that occurred under the prior Agreement. Staff notes that because the prior Agreement
was renewed automatically at the prevailing avoided cost rates during each renewal year, the
DECISION MEMORANDUM
submitted Agreement contains the same rates as it would have contained under the prIor
Agreement. The second primary difference revises the definition of the 10 MW threshold for
eligibility for published avoided cost rates. Under the prior Agreement, Simplot was limited to
generating no more than 10 000 kWh per hour. Under the submitted Agreement, Simplot is
limited to generating no more than 10 aMW per month. This revised generation limit is
consistent with the definition of the 10 MW threshold established in the US Geothermal case
(Order No. 29632).
COMMISSION DECISION
Idaho Power requests approval of a February 8, 2006 seven-year Firm Energy Sales
Agreement between Idaho Power and J.R. Simp lot Company for an effective date of February 8
2006. Commission Staff contends that the Agreement comports with Commission approved
rates and Orders and recommends that the Agreement be approved. Does the Commission find it
reasonable to approve the Agreement with an effective date of February 8, 2006?
Scott Woodbury
bls/M:IPC-O6-03 sw2
DECISION MEMORANDUM