Alongside the RFP process, federal law requires utilities to buy power from small generating projects at a fixed rate, and Idaho Power had asked for the suspension because of the high number of wind proposals it was receiving. "Our desire was to have a controlled entry into bringing wind onto our system," says Dennis Lopez, Idaho Power. "That's what the whole RFP process was going to do."
A problem arose in that small wind projects in Idaho qualify for a rate, set by the IPUC, of $60/MWh under the provisions of the federal government's Public Utility Regulatory Policies Act (PURPA). "PURPA requires you to offer to buy from qualified facilities," Lopez says.
The ongoing concern was that RFP projects that failed to win a bid could be converted to a project that qualifies under PURPA. "What happened was these big developers would come in and set up a 10 MW project, then set up another under a new name a few miles down the road," says Gene Fadness from the IPUC. "In one case, there were seven projects from the same guy."
In August, the IPUC reduced the size of wind projects that qualify for the rate paid to small power producers for non firm power by regulated utilities from 10 MW to 100 kW. But the commission also put in some grandfathering mechanisms to protect projects already under way.
Timeout
"Our 2004 integrated resource plan (IRP) called for 350 MW of wind by 2013," says Lopez. "But we feared the impacts of what that much wind would do to our system and how it would fit into our mix and costs. In reality, we ended up with a large number of projects coming through PURPA. We had to ask the IPUC to give us some relief and suspend things until we could evaluate where we were. We needed a timeout."
Idaho Power currently produces about 60% of its power with hydro, while thermal generation accounts for 30-35%. "We purchase the rest," Lopez says. "We're in a situation where we're still looking for solutions and trying to balance our options with a fair price to our customers."
The wind RFP, originally issued in January 2004, is now seeking 100 MW of wind instead of the 200 MW the utility asked for the first time around. Before it was suspended, the utility had developed a short-list of bidders and it has now contacted them to ask them to re-evaluate and fine-tune their bids. "In the initial process, we were looking for that power to come online in 2006, but that could change as part of the fine-tuning process," says Lopez.
Contract approval
Meanwhile, a 20-year sales agreement between Idaho Power and a Montana wind farm was approved by the IPUC in October. The contract calls for the utility to buy up to 10 MW average of wind for nine months of the year from Arrow Rock Wind Generating Project, located 100 miles northwest of Billings. Arrow Rock can produce up to 19.5 MW, but under normal conditions the project will not exceed 10 MW, the maximum size a "grandfathered" firm project can be to qualify for the small power producers rate.
"Wind producers were not happy when we reduced the size of the projects," says Fadness. "But we tried to come up with some middle ground to satisfy all parties."
Idaho Power, the IPUC and others are involved in a series of workshops to deal with economic and operational issues related to bringing future wind developments onto the company's system. "I can't say if any of this will deter people from producing wind," Lopez says. "But I can say that wind is a very hot subject in Idaho and we simply want the time to explore its impacts. Part of our problem is that we need more experience with wind. What do you do when the wind stops blowing? We need the answer to that and a lot of other basic questions."
