A handful of Idaho wind energy developers will have to negotiate how much they’ll be paid for the energy they produce after state regulators decided they’ll offer special rates to only the smallest producers.
The Idaho Public Utilities Commission on Wednesday announced it won’t reinstate for now a larger cap on the Public Utility Regulatory Policies Act rates that created a favorable climate for the development of wind energy in Idaho.
The state is required to determine and publish the special rate for projects that develop up to 100 kilowatts. During the state’s wind industry infancy, the PUC opted to extend the rate to projects that produce up to 10 megawatts – 100 times the mandated cap – through Dec. 14, 2010.
The rate is based on the price of natural gas, and pays qualifying wind and solar producers based on the cost a purchasing utility – Idaho Power, Areva and Rocky Mountain Power in the Gem State – avoids by not having to generate or buy power from elsewhere.
Idaho’s regulated electric utilities petitioned the PUC last November to reduce the energy cap it offered, claiming that large Idaho wind projects were breaking themselves into smaller 10 MW projects in order to take advantage of PURPA rates that were higher than what they could negotiate with the utilities. With hydropower currently meeting many energy needs due to plentiful precipitation, the utilities claimed the increased cap forced them into buying power they don’t need at rates that aren’t reasonable for their customers.
In Idaho, 17 projects with contracts executed after the Dec. 14, 2010, deadline will only be eligible for the PURPA rates on 100 kW they produce. Now, those projects will have to negotiate rates with Idaho Power to determine their feasibility.
The Northwest and Intermountain Power Producers Coalition argued that the 10 MW cap has worked “remarkably well for Idaho” and called its loss “unfortunate.”
But the proposed Cotterel project near Burley represents the type of development the utilities railed against. Shell-owned Cotterel WindEnergy Center initially responded to a 2009 Idaho Power bid request as one large 150 MW project, according to the PUC. But after an agreement wasn’t reached, it was divided into five 10 MW projects, for which Cotterel submitted five PURPA contracts scheduled to start in 2014.
Under the 10 MW cap, the projects’ projected earnings stretched to $716.4 million over 20 years.
“From the commission’s perspective, a thorough review is appropriate and necessary prior to signing agreements that obligate ratepayers to payments in excess of $70 million over the 20-year term of these agreements,” the commission stated in a written release.
The PUC will examine the methodology used to calculate the avoided-cost rates for utilities, stating in a written release, “it is more appropriate to first establish the just and reasonable avoided-cost rates before we implement procedures for obtaining the rate.”
PUC spokesman Gene Fadness said the commission is open to extending the rate to larger producers again in the future.
What it means locally
The Idaho Public Utilities Commission’s decision not to extend PURPA rate eligibility to the first 10 megawatts produced by wind and solar projects could change how a handful of south-central Idaho developments move forward. Instead of operating on earnings projections noted below, they’ll have to negotiate rates with Idaho Power Co.
Location: Near Burley
Proposed by: Shell-owned Cotterel WindEnergy Center
Operation date: Oct. 31, 2014
Projected PURPA earnings: $716.4 million over 20 years
Location: Near Declo
Proposed by: Jackson of American Wind
Operation date: Dec. 31, 2012
Projected PURPA earnings: $208.8 million over 20 years
Location: South of City of Rocks National Reserve
Proposed by: Wasatch Wind Intermountain
Operation date: 2014
Projected PURPA earnings: $236.4 million over 20 years
Source: Idaho Public Utilities Commission
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