Idaho Power Company cleared for 22MW geothermal contract

May 25, 2010

Regulators in Idaho have given the green light to a power purchase agreement for one of the state’s utilities to buy electricity from a geothermal power project in Oregon.

The Idaho Public Utilities Commission approved the deal between the Idaho Power Company and US Geothermal subsidiary USG Oregon LLC.

The agreement will see USG providing power from the Neal Hot Springs Unit No. 1, which is being developed 12 miles northwest of Vail, Oregon, and is expected to produce 22 megawatts of power by late 2012.

Idaho Power Company, which has its head office in Boise, Idaho, will also receive the rights to renewable energy credits generated by the geothermal project over the 25-year term of the agreement.

The PPA is the second between the two companies.

Price

The Commission said the deal would see US Geothermal selling its power at a price of $96 per megawatt-hour (MWh), rising by 6% each year early on in the contract, and by 1.33% toward the end of the agreement.

On average during the 25 years of the agreement, the average price for power would be $117.65 per MWh.

The price of the energy was “higher than most sales agreements”, Idaho Power had said in its submission to the Commission, but said the benefits to customers with that price included the right to renewable energy credits and the right to ownership of possible future site development.

Idaho Power also has the right to curtail its use of the energy output from the project when needed, and has the option to extend the terms of its contract.

Process

The utility had some difficulty sourcing geothermal power for its portfolio, a request for proposals attracting two bids that were later withdrawn and a third that was “too speculative”. As a result, Idaho Power actively pursued negotiations with developers of five potential geothermal sites in its service area.

While a competitive bid process would have been the preferred method for sourcing energy purchases, the Commission accepted that when not available, the utility could engage in negotiations directly with a single provider.

Interested parties now have until June 10 to comment on the contract.