Blue Mountain files against PacifiCorp over terminated wind project PPA

The Utah Public Service Commission has given PacifiCorp d/b/a Rocky Mountain Power until Dec. 29 to respond to a Nov. 23 complaint from Greenbriar Capital Corp. d/b/a Blue Mountain Power Partners LLC over what Blue Mountain said was the wrongful termination by Rocky Mountain Power of a Power Purchase Agreement for an 80-MW wind project.

The PPA was executed by and between Blue Mountain and PacifiCorp dated July 2013, with that PPA approved by the Public Service Commission in October 2013.

Under the Public Utility Regulatory Policies Act (PURPA), Federal Energy Regulatory Commission rules implementing PURPA and Utah code PacifiCorp has an obligation to purchase electricity made available to it by a qualifying facility (QF) in the state of Utah at the rates and under the terms and conditions established by the state commission. Blue Mountain, under that program, worked out the 2013 PPA. Under the terms of the PPA, Blue Mountain was to construct, own, operate and maintain a 80-MW wind power QF project located near Monticello, San Juan County, Utah, and PacifiCorp would purchase all of the power output generated by the project.

The PPA defines the “Scheduled Commercial Operation Date” for the project as “November 30, 2015, subject to extension due to an event of Force Majeure….”  If Blue Mountain failed to meet the Scheduled Commercial Operation Date, then under the PPA, it would be required to pay liquidated damages for up to six months, at which time, if commercial operation has still not occurred, the PPA could be terminated by PacifiCorp The PPA also requires the posting of security in the event that Blue Mountain cannot demonstrate that it meets the credit standards set forth in the PPA within 30 days after the approval of the PPA by the Utah Public Service Commission under generally accepted standards of it providing final and non-appealable approval.

In order to timely complete the project, Blue Mountain knew it needed to have fully accomplished each of the following at least 18 to 24 months prior to the completion deadline for the wind farm:

  • obtain approval by the PSC of a PPA that is not subject to challenge;
  • complete all wind studies showing a satisfactory wind resource;
  • secure all of the land rights needed for the site, making sure that there are no underlying encumbrances on the land;
  • finalize all transmission and interconnection rights and contracts;
  • complete all environmental surveys showing no harm to wildlife or habitat that cannot be mitigated;
  • obtain, to the extent required, all required licenses and permits from the local, state and federal governmental agencies; and
  • secure all financing, including tax equity financing for the project.

Blue Mountain said it believed that the deadlines set forth in the PPA for completion of the project were tight, but reasonable. Further, Blue Mountain was strongly motivated to make these deadlines because, at the time it executed the PPA with PacifiCorp, all wind projects that commenced construction prior to Dec. 31, 2013, qualified for the federal production tax credits (PTC) if such projects were completed on or before Dec. 31, 2015. 

Blue Mountain found it prudent and reasonable to wait until the PPA was approved by the PSC (and such approval was non-appealable) before starting the most significant development tasks on the project, including the purchases of the wind turbines. However, in an abundance of caution, after signing the PPA with PacifiCorp and before its approval by the PSC, Blue Mountain accelerated its financial efforts to complete all of the required development tasks it could to construct the wind farm. Thus, while Blue Mountain had performed some work to develop the project site for its wind farm prior to the execution of the PPA, Blue Mountain began working in earnest on the construction of the project site after it and PacifiCorp signed the PPA.

Blue Mountain’s investment in on-site construction costs included building roads and constructing eight concrete turbine foundations during the fall of 2013 to ensure that the project met the “commencement of construction” requirements then in effect in order to qualify for the federal PTC available for wind energy production.

A project delay came about after the PPA was challenged in court. Blue Mountain said in its Nov. 23 complaint that it is entitled to a PSC order declaring that:

  • the approval of the PPA by the PSC became final on Nov. 21, 2014, when the Utah Supreme Court wrote its final opinion on the petition challenging the PPA;
  • PacifiCorp failed to comply with the terms of the PPA when it denied a legitimate claim for an event of Force Majeure resulting from the legal challenges to the PPA;
  • PacifiCorp further delayed Blue Mountain’s performance under the PPA to complete the project by the deadlines by representing to Blue Mountain that it wished to purchase the project;
  • because of the Force Majeure event and PacifiCorp’s representation that it desired to purchase the project, PacifiCorp’s demand for a Security Deposit from Blue Mountain in April 2015 was not timely and was unreasonable given the delays in the project caused by the actions of PacifiCorp;
  • PacifiCorp prevented Blue Mountain from exercising its rights relating to dispute resolution under the PPA by making its untimely request for a Security Deposit;
  • PacifiCorp’s termination of the PPA due to Blue Mountain’s failure to provide the Security Deposit at the time requested by PacifiCorp was improper and violated the terms of the PPA and required the approval of the PSC.

Project contact information is: Greenbriar Capital Corp. d/b/a Blue Mountain Power Partners LLC, 9 Landport, Newport Beach, California 92660, (949)-903-5906, westernwind@shaw.ca, jciachurski@greenbriarcapitalcorp.com.

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.