State regulators have approved a $2.17 million agreement between Idaho Power Co. and Idaho Winds LLC that would allow a wind project near Glenns Ferry to interconnect with Idaho Power’s transmission system without requiring a larger, more costly upgrade to the system.

The 21-MW Sawtooth Wind project six miles northwest of Glenns Ferry is scheduled to be in operation by Dec. 31, 2012, but will require substantial upgrades to Idaho Power’s transmission system. Construction of the upgrades is expected to be completed by July 22, 2011.

The agreement, approved by the Idaho Public Utilities Commission, is that 25 percent of upgrade costs will be paid by Idaho Power and included in customer base rates and 25 percent will be paid by Idaho Winds. The remaining 50 percent will be advanced by Idaho Winds, but subject to refund by Idaho Power over 10 years if the project meets its output requirements. That 50 percent of the upgrade cost will be included in customer rates over time as refunds are made.

The agreement also includes “redispatch,” provisions included in agreements with other wind projects in the same area. Those provisions allow Idaho Power to direct Sawtooth Wind to forcibly reduce its generation output in the event of outages on specified transmission lines. Those provisions prevent Idaho Power from having to make even more costly upgrades to its transmission system.

Both Idaho Power and commission staff agreed that the chances of such outages during peak-use times on Idaho Power’s system are unlikely because wind projects are not expected to be generating at or near capacity during extremely hot times of the year when transmission congestion usually occurs. Idaho Power believes the need for redispatch provisions will be relieved after 2015 if the proposed Gateway West transmission project is built.