LUCY BAXLEY. PRESIDENT 

### STATE OF ALABAMA ALABAMA PUBLIC SERVICE COMMISSION P.O. BOX 304260 MONTGOMERY,ALABAMA 36130-4260

WALTER L.THOMAS. JR. TWINKLEANDRESS CAVANAUGH. ASSOCIATE COMMISSIONER TERRY L. DUNN, ASSOCIATE COMMISSIONER SECRETARY



### Alabama Power Company, Petitioner

BY THE COMMISSION: PETITION: For a certificate of convenience and necessity for the acquisition of rights and the assumption of payment obligations under a power purchase arrangement pertaining to a wind energy generating resource operated in Grant, Haskell and Finney Counties, Kansas, together with all transmission facilities and arrangements, appliances, appurtenances, equipment, acquisitions and commitments necessary for orincidentthereto. DOCKET 31859 ORDER

I. INTRODUCTION Alabama Power Company ("Alabama Power" or "Company"), acting in accordance with the provisions ofRate CNP (Certificated New Plant) and Alabama Code § 37-4-28, filed with the Commission apetition for acertificate ofconvenience and necessity ("Petition"). Bythis Petition, the Company sought to certify apurchased power arrangement ("PPA") with Buffalo Dunes Wind Project, LLC ("Buffalo Dunes") involving up to 202 MW of wind energy supplied from a wind farm being developed by Buffalo Dunes in Grant, Haskell and Finney Counties, Kansas ("Buffalo Dunes PPA"). Following proper notice, an evidentiary hearing was held at which time the Company offered evidence in support ofits petition. No opposing testimony or other evidence was offered by the intervening parties. Alabama Industrial Energy Consumers ("AlEC") did offer five jointDOCKET 31859- #2 stipulations on behalfofitselfand Alabama Powerthat set forth certain conditions proposed to be included in any order certifying the PPA. On the basis ofthe record compiled at the hearing and other available information, the Commission is ofthe opinion that the Company's Petition should be andherebyis granted. In so doing, the Commission adopts the conditionsjointlyrecommended by AlEC andthe Company.

### II. PROCEDURALBACKGROUND The Company filed its Petition with the Commission on June 5, 2012. In support, the Company submitted the testimony ofJohn B. Kelley and a copy ofthe Buffalo Dunes PPA, with the latter reflecting redactions ofcommercially sensitive and proprietary business information. A Notice ofPetition was issued by the Commission on June 8, 2012, advising interested parties of the Company's filing and prescribing a procedural schedule for any petitions to intervene and for any responsive testimony. By filing dated June 11, 2012, AlEC petitioned to intervene. The Office ofthe Attorney General subsequentlypetitioned to intervene as well. NeitherAlEC northe Office ofthe Attorney General filed responsive testimony orotherevidence. A hearing on this petition was held on August 9, 2012. Mr. Kelley appeared as a witness and his direct testimony and the PPA were entered into the record as exhibits. Counsel for AlEC andthe Office ofthe Attorney General were afforded an opportunityto conductcross-examination, and a representative of the Commission Staffasked Mr. Kelley a number ofclarifying questions. Subsequently, counsel for AlEC introduced an exhibit with five joint stipulations that had been agreed upon by AlEC and Alabama Power. The fivejoint stipulations were offered by AlEC and Alabama Power with a recommendation that they be made part of any order ofthe Commission, should it determine to grant Alabama Power's Petition and issue the requested certificate of convenience andnecessity.DOCKET 31859- #3


### III. DISCUSSION Underthe terms ofthe Buffalo Dunes PPA, the Company agrees to purchase up to 202 MW ofwind energy. The contract term is twenty (20) years, with service expected to commence on or about December 31, 2013. Along with the energy, the Company also obtains rights to all related environmental attributes (which generally include any fuel-related, emissions-related, air qualityrelated credits and offsets), at no additional cost above the energyprice. As the wind resource is located in southwestern Kansas, transmission service is required through the Southwest Power Pool and Entergy Services, Inc. balancing authority areas. Buffalo Dunes is responsible for procuring transmission rights to effectuate firm delivery ofthe resource's outputto the Southernbalancing authority area. Priorto deliveries underthe PPA, theserights will be assigned to the Company, which will then be responsible for the associated costs. In the event Buffalo Dunes were to be unable to secure the requisite transmission service, the PPA would terminate without anycostresponsibilityto the Company. As described in the Company's Petition and discussed at the hearing, the Buffalo Dunes PPA is projected to bring positive benefits to customers over its term. Specifically, the delivered price ofenergy from the wind facility is expected to be below the Company's projected avoided costs (i.e. lower than the cost the Company would otherwise incur to produce that energy from available marginal resources), with the resulting energy savings flowing directlyto the Company's customers. Staff has analyzed the PPA and its terms and conditions, and has reviewed the Company's economic analyses and supporting data in order to test the reasonableness ofthat data and the associated projections. In Staff's view, this information demonstrates that the Buffalo Dunes PPA reflects an opportunity to procure rights to a cost-effective renewable energy resource that can be expectedto yieldpositivenet benefits to customers overits term.DOCKET 31859- #4
Staff also has reviewed thejoint stipulations offered by Alabama Power and AlEC at the hearing. Thefivejoint stipulations are as follows: 1. ThePPAprovides for the following instances where, ifa specifiedcostcapis exceeded and Buffalo Dunes does not undertake to pay the excess costs, Alabama Powerhas the option to incurthe excess costs andcontinue to accept delivery ofenergy.
• Section 

### 10.4-ExceedingBuyer'sAdditional Charges Cap.
• Section 10.6

- Termination of Agreement Due to Exceeding Seller's Additional Charges Cap. Prior to the exercise of either option, Alabama Power will make a submission to the Commission Staffthat includes the economicjustification for the exercise ofthe option and any otherinformationreasonably necessary for Staffto assess the decision. Absent written notice of disapproval within seven (7) business days of the submission (or within such otherperiod agreed to by Staffand AlabamaPower), Staffshall be deemed to have concurredin the exercise ofthe optionby AlabamaPower. 2. Proceeds received by Alabama Power pursuant to the PPA, and consistent with other applicable rates, related to the sale to third parties of energy will be credited against Rate ECR, subject to the right of the Commission to review, at its option or upon recommendation by Alabama Power, whether revenues Alabama Power receives from any such sales should be credited to other rate mechanisms as the Commission determines wouldbe in thepublic interest. 3. Proceeds received by Alabama Power pursuant to the PPA, and consistent with other applicable rates, related to the sale to third parties oftransmission rights orRECs will be credited against Rate CNP-B, subject to the right ofthe Commission to review, at itsDOCKET 31859

-#5 option or upon recommendation by AlabamaPower, whether revenues AlabamaPower receives from any such sales should be credited to other rate mechanisms as the Commission determines wouldbe in the public interest. 4. The PPA certified by the Commission may not be materially altered or amended without priornotice and approval ofsuch alteration oramendment by the Commission,
as providedunderapplicable laws andregulations. 5. In the event the PPA is terminated for any reason, the authority conferred by the order of the Commission granting the certificate of public convenience and necessity shall, from that pointforward, be deemed cancelled without the needfor further action by the Commission. Staff supports the adoption ofthese stipulations, as does the Commission. Notably, these stipulations are consistent with stipulations that we approved as part ofa certificateofconvenience and necessity sought by the Company in Docket No. 31653, also for a wind PPA. Those stipulations, which like these had been jointly proposed by AlEC and Alabama Power, were supported by Staff as being within the authority of the Commission and not otherwise unduly injecting Staff or the Commission into the managerial decisions of Alabama Power. 1 For these reasons, and given the facts and circumstances presented by this proceeding as well as Staff's support for the adoption ofthe stipulations, the Commission finds the stipulations offered here to be appropriate for inclusion in the certificatepertainingto the BuffaloDunes PPA.

1The review procedure described in the first stipulation (and as supported by Alabama Power) represents a vehicle whereby the Company will communicate the economicjustification to Stafffor its consideration and feedback, after consultation with the Commission. Accordingly, any "noticeofdisapproval" underthis process will, by law, be issued by the Commission, and absent such notice, the Company's proposed exercise ofthe subject contractual option will be deemed approved pursuantto this Order.DOCKET 31859

-#6


### IV. FINDINGSAND CONCLUSIONS In review of the foregoing, and after consideration of the recommendation by Staff, the materials ofrecord and other information available to the Commission, the Commission 

### FINDS that it is in the interest ofthe Companyand the public served by it that a certificate ofconvenience and necessity be issued for the Buffalo Dunes PPA, conditioned upon the five stipulations recited above. 

### IT IS, THEREFORE, ORDERED BY 

### THE COMMISSION, that the June 5, 2012 Petition ofAlabamaPowerbe andherebyis granted. 

### IT IS FURTHER ORDERED BY 

### THE COMMISSION, that with the issuance of this certificate ofconvenience and necessity to Alabama Powerpertaining to the Buffalo Dunes PPA, the Commission does hereby grant and convey upon Petitioner, Alabama Power Company, its
successors and assigns, all ofthe rights, power and authority, which under the laws ofthe State of Alabama, the Commission is authorized to confer for the purposes of acquiring the rights and assuming the payment obligations under the described Buffalo Dunes PPA, together with all transmission facilities and arrangements, appliances, appurtenances, equipment, acquisitions and commitmentsnecessaryfor orincidentthereto. 

### ITIS FURTHERORDERED BY

### THE COMMISSION, that the Company is authorized to recover all costs related to energy purchased and to credit all revenues it receives forenergy sold to third parties under the terms ofthe PPA through Rate ECR (Energy Cost Recovery), subject to the right of the Commission to review, at its option or upon recommendation by the Company, whether revenues the Company receives from any such sales should be credited to other rate mechanisms as the Commission determines wouldbein the public interest.DOCKET 31859- #7


### IT IS FURTHERORDEREDBY THE COMMISSION, that the Companyis authorized to recover all other costs and to credit all other revenues it receives, including those derived from the resale of transmission rights and sale of renewable energy credits to third parties under the terms ofPPA, in accordance with the provisions ofPartB ofRate CNP and other applicable rates, subject to the right of the Commission to review, at its option or upon recommendation by the Company, whether revenues the Company receives from any such resales or sales should be creditedto otherrate mechanisms as the Commission determines wouldbe in thepublic interest. 

### IT IS FURTHER ORDEREDBY THE COMMISSION,thatjurisdiction in this cause is hereby retained for any further order ororders that this Commission may findjust and reasonable underthecircumstances. 

### IT IS FURTHER ORDERED BY THE COMMISSION, that this Order shall be effective as ofthe date hereof. 

### DONE at Montgomery, Alabama, this 

## -111 

# /1- day ofSeptember, 2012. ALABAMAPUBLIC SERVICECOMMISSION



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