East Idaho Wind Project Gains Approval

The Idaho Public Utilities Commission has approved a 20-year, $72.7 million purchase power agreement between PacifiCorp (Utah Power) and developers of the Schwendiman Wind LLC wind project 11 miles northeast of Idaho Falls. The agreement includes certain stipulations that some consider a penalty for wind power developers.

This latest, approved sales agreement is amended from an earlier agreement rejected by the commission. The commission ruled the original agreement did not include performance provisions required in similar wind projects across the state to ensure that customers receive the electrical generation for which they are paying. Performance provisions are included in the amended agreement. Utah Power will buy the net output of 7.15 average megawatts (MW) from the project’s eight 2.5 MW wind generators. The agreement requires that output from the project fall within 10 percent of its forecasted monthly capacity. If output is less than 90 percent or more than 110 percent of projections, Schwendiman will be paid only an energy rate with the capacity component reduced. The capacity component accounts for about one-third the total energy rate. If the project generates more than 10 average MW on a monthly basis, PacifiCorp will accept the excess energy but will not pay for the surplus portion. Commissioner Marsha Smith issued a separate concurring opinion, agreeing with the commission majority that the amended purchase power agreement (PPA) is the result of negotiation and an amicable settlement. However, Commissioner Smith has consistently opposed the use of the 90-percent/110-percent performance band. “I believe the banding requirements operate as a penalty, not an incentive,” Smith said. “I would have approved the Schwendiman Agreement originally submitted in this case.” The performance band provisions submitted by Schwendiman and PacifiCorp are different than provisions in other wind contracts with regulated utilities. Idaho Power submitted comments expressing concern that the Schwendiman provisions could impact existing or future agreements between Idaho Power and its wind developers. The commission said that is not the case: “Our decision in this case sets no precedent for our future regulation of such agreements and is intended to provide no basis for the amending of existing contracts.” The agreement also requires Schwendiman to reimburse Utah Power’s costs for replacement power for up to 120 days if it fails to meet its operation date of July 31, 2007 and for up to 12 months if Utah Power is forced to terminate the agreement in the event of a seller default. Wind projects in Idaho are new to the mix of renewable projects that qualify for commission-set rates under the federal Public Utility Regulatory Policies Act (PURPA). Because wind output is considered less predictable and intermittent than other energy sources, wind developers and the commission have been grappling with the value that should be attached to wind generation. Intermittent, or non-firm, wind can be more costly to ratepayers when the projected output falls short and the utility must find replacement or back-up power. Because the published rate that utilities must pay small-power producers is recovered from ratepayers, the commission’s role is to ensure customers receive full value for their rates.
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