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<title>December 2004: Idaho PUC Reviews Contract Terms For Intermittent
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<p ALIGN="left"><u><b>December 2004</b></u><font size="6"><b><br>
Idaho PUC Reviews Contract Terms For
Intermittent Generation<br>
</b></font><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>5/01/08</font><font size="2">)</font></p>
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<p align="left">The Idaho Public Utilities Commission (the “PUC”) recently
issued an order defining the parameters of power purchase agreements between
an electric utility and the developers of new wind and geothermal power
projects. U.S. Geothermal, Inc., et al. v. Idaho Power Company, Case Nos.
IPC-E-04-8 and IPC-E-04-10, Order No. 29632 (No-vember 22, 2004). The
developers claimed the utility re-quired contract terms that were contrary
to the Public Utility Regulatory Policies Act (“PURPA”), which gener-ally
requires electric utilities to purchase electricity from qualifying small
power producers at an avoided-cost rate. Among other things, the developers
objected to (1) penal-ties for failure to generate monthly output at between
90% and 110% of monthly projections (“90-110 Performance Band”), and (2) a
metered energy test for determining whether the projects would fall within
the PUC’s 10 MW maximum limit to qualify for the PUC’s published PURPA rates
– rates for larger qualifying projects are determined on a project-specific
basis. By a 2-1 vote, the PUC approved modified versions of both provisions.<br>
<br>
The PUC noted a recent increase in applications from wind and geothermal
projects seeking to qualify for PURPA rates. Unlike hydro and other
traditional qualify-ing facilities, wind and geothermal projects generate
elec-tricity on a far more intermittent basis. A wind facility’s generation
“can literally fluctuate between zero and the machine’s maximum capacity on
a minute-to-minute ba-sis” placing “significant demands on utility
transmission and distribution resources.” The geothermal project in
this case would generate electricity from cooling geothermal water – a
process that is highly efficient in the winter and less efficient in the
summer due to seasonal variations in ambient air temperatures. To generate
an annual average of 10 MW, output would range from 8 MW in the summer to 12
MW in the winter. The utility argued that the avoided cost rate for
intermittent, “non-firm” energy was less than the rate for “firm” energy
generation.<br>
<br>
With respect to the 90-110 Performance Band, the PUC reduced the financial
penalties proposed by the util-ity and increased the frequency with which
the developers could revise their projections. As approved, for months in
which output is less than 90% of projected output, the utility will purchase
that month’s output at 85% of the market rate or at the contract rate,
whichever is less. For months in which output is more than 110% of projected
output, the power in excess of 110% will be purchased at 85% of the market
rate or at the contract rate, whichever is less. The developers are required
to initially provide one year of monthly generation estimates followed by
revised estimates every three months. <br>
<br>
With respect to the determination of whether a project falls within the 10
MW maximum limit to qualify for published PURPA rates, the PUC rejected the
utility’s proposed metered energy test. Under that test, “if a [facility]
meter reads greater than 10,000 kWh per hour, then the facility is greater
than 10 MW and not entitled to published avoided cost rates.” Instead, the
PUC deter-mined that to qualify for published PURPA rates, the
developer would have to demonstrate that, “under normal or average design
conditions, the project will generate no more than 10 average megawatts in
any given month,” and maximum monthly generation qualifying for published
rates would be capped at the total number of hours in the month multiplied
by 10 MW.</p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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