California PUC to decide on Liberty Utilities deal for 50-MW Luning solar project

Up for review at the Jan. 14 meeting of the California Public Utilities Commission is a proposed decision that would approve an all party settlement agreement entered into by Liberty Utilities (CalPeco Electric) LLC (Liberty Utilities) and the Office of Ratepayer Advocates (ORA) related to new solar capacity in Nevada.

Subject to the terms of the agreement, the commission would authorize Liberty Utilities to enter into a project purchase and sale agreement to acquire, operate, and maintain the Luning solar project, after its development and construction by a third party. Combined, the purchase and sale agreement and the settlement agreement include terms and conditions to ensure reasonable cost for Liberty Utilities’ customers. The developer of the 50-MW Luning solar project seeks to achieve commercial operation by Dec. 31, 2016, in order to qualify for a 30% federal investment tax credit in 2016.

An experienced developer will build the Luning project in Nevada, where it has received all necessary environmental and other approvals required to construct the poject. The commission would approve Liberty Utilities’ purchase of the completed and operational facility through a tax equity structure whereby it initially obtains a majority co-ownership interest in a development company holding the asset, as well as both the option and incentive to acquire the residual interest from its tax equity partner (e.g., a financial institution) after approximately five years, thus obtaining 100% direct ownership of the solar facility.

During the five-year interim tax equity period, Liberty Utilities would be authorized to enter into a power purchase agreement to purchase the renewable power generated at Luning and to recover its operating expenses from the revenue of the purchased power.

Liberty Utilities provides electricity to approximately 49,000 customers in portions of seven counties around the Lake Tahoe area, very near the state line with Nevada. Since January 2011, Liberty Utilities has purchased nearly all of the conventional and renewable energy it delivers to its customers through a “full requirements” power purchase agreement (PPA) with Sierra Pacific Power d/b/a NV Energy. Liberty Utilities is part of the NV Energy Balancing Authority Area, and not a part of the California Independent System Operator Balancing Authority Area.

Liberty Utilities has received all of its energy pursuant to the terms of a requirements contract with NV Energy that was set to expire in December 2015. In April 2015, Liberty Utilities filed an application for authorization to take steps and execute agreements to acquire, own, and operate two solar energy projects, and to receive commission approval for ratemaking procedures for Liberty Utilities to recover the related costs.

Minden project had to drop out due to permitting delays

Liberty Utilities conducted a competitive solicitation process to identify solar project sites in Nevada and developers that could timely and reliably deliver the most competitively priced renewable energy to its customers. The process resulted in two proposed projects: the Luning Project (40 MW); and the Minden Project (20 MW).

Liberty Utilities and NV Energy made a new agreement to become effective on Jan. 1, 2016 (called the “2016 NV Energy Services Agreement”) which maintains NV Energy’s obligation to continue to serve the full requirements of Liberty Utilities’ electric loads, but permits Liberty Utilities to obtain solar energy from these two projects at a lower price than NV Energy charges for Renewable Portfolio Standard (RPS) qualified renewable energy under the agreement. The new agreement was conditionally approved by the California commission on Dec. 17, 2015.

Liberty Utilities said that the U.S. Bureau of Land Management (BLM) conducted the environmental analysis of the proposed Luning Project necessary to support a Right of Way (ROW) grant, including preparation of an Environmental Assessment (EA). On July 13, 2015, BLM approved a ROW grant for the project. On Nov. 30, 2015, BLM approved a Plan of Development (POD) which specifies how the project should be built, operated, and maintained. On Dec. 2, 2015, BLM issued a Notice to Proceed (NTP) to the project developer, which authorizes the developer to begin construction of the project in accordance with the POD.  

One key difference from the original application is the exclusion of the Minden Project. The developers of the 20-MW Minden Project have not been able to secure the necessary permits to ensure that the project would be placed in service by Dec. 31, 2016. Therefore, Liberty Utilities has dropped its requests related to that project, but revised its agreement with NV Energy and the developer of the Luning Project to increase the capacity from the originally planned 40 MW to 50 MW.

The Luning Project is to be developed and constructed by Invenergy Solar Development LLC, which develops, owns, and operates generation and energy storage facilities across North America and Europe.

During the tax equity period, Liberty Utilities will have all the operating and safety responsibility for the Luning facility pursuant to an agreement yet to be executed with the developer. The financing structure proposed by Liberty Utilities anticipates that Liberty Utilities will enter into a PPA with SPDC to purchase 100% of the solar power generated during the tax equity period and thereafter, but with permission to terminate as early as five years after commencement. In addition to other transaction-related terms, the PPA will establish the purchase price for the solar energy based on the costs derived from the competitive, arms-length RFP solicitation process from which the Luning project was selected. Liberty Utilities stated that the estimated purchase price will be several dollars less per MWh than the specified cost of RPS-qualified renewable energy supplied through the NV Energy Services Agreement.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.