20080623_2273.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
CO MMISSI 0 NER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
LEG AL
FROM:SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
DATE:JUNE 18, 2008
SUBJECT:CASE NO. IPC-08-13 (Idaho Power)
CAP ACITY /ENERGY PURCHASE AGREEMENT WITH PPL
ENERGYPLUS, LLC REQUEST FOR ACCOUNTING ORDER AND PCA
RECOVERY APPROVAL
On June 16, 2008 , Idaho Power Company (Idaho Power; Company) filed an
Application with the Commission for an Order approving a firm wholesale Power Purchase
Agreement (Agreement) between Idaho Power and PPL EnergyPlus, LLC (Energy Plus). The
Company requests accounting treatment that will allow Idaho Power to include the expenses
associated with the purchase of capacity and energy from EnergyPlus in the Company s Power
Cost Adjustment (PCA). Included in the Company s filing in this case is the prefiled direct
testimony of Karl Bokenkamp, General Manager of Power Supply Operations.
The EnergyPlus Agreement replaces an Idaho PowerlPPL Montana contract that will
expire at the end of August 2009. Reference Order No. 29286, Case No. IPC-03-08. In the
spring of 2008 , the Company issued a Request for Proposals (RFP) to replace the expiring
contract. EnergyPlus was the successful bidder. EnergyPlus is the marketing arm of PPL
Montana. As a result, it has access to the generating resources owned and operated by PPL
Montana.
Contracting with EnergyPlus is advantageous, the Company contends, because
existing constraints on the west side ofIdaho Power s system made power purchases on the east
side of the Company s system preferable. The principal provisions of the Power Purchase
Agreement with EnergyPlus call for a firm power purchase for the heavy load hours, six days a
week (Monday through Saturday), 16 hours a day (6 x 16) in the months of June, July and
DECISION MEMORANDUM
August (except for NERC holidays). These are the time periods identified in the Company
2006 IRP as critical peak hours. The term of the Agreement is two years, June 1 through August
31 of each year beginning in 2010 and ending in 2011. The quantity of energy purchased is 83
MW per hour. The price to be paid for this energy is $92.25 per MWh. After adjusting for
losses, Idaho Power will actually receive approximately 80 MW per hour under the PP
The Company contends that the energy costs of $92.25/MWh are competitive and
favorable when compared to alternative resource options. The Company s heavy load forward
price curves for Mid-Columbia (Mid-C) are slightly above the PP A contract price. The limited
duration of the PPA reduces the risk by dovetailing with the Company s ongoing efforts to
develop energy efficiency programs that target the Company s summer peak loads and with the
Company s planned acquisition of new base load resources in 2012 through its current request
for proposals. Cost comparisons are detailed in the Company s prefiled testimony. To give the
Commission an idea of current market prices, in accordance with the Company s risk
management policy, Idaho Power states it has already purchased heavy load energy for August
2008 at prices between $110 and $120 per MWh.
As consideration for EnergyPlus s agreement to hold the price in the PPA firm to
allow time for Commission review and approval, Idaho Power has paid EnergyPlus a deposit in
the amount of $100 000 that is refundable if the Application is approved by the Commission no
later than August 4, 2008. If the Commission does not approve the Agreement by that deadline
the Company will forfeit the deposit and either party may terminate the Agreement.
In addition to power costs under the Agreement, Idaho Power states it will purchase
firm monthly transmission service across Northwestern Energy s transmission system to the
Jefferson point of delivery. At current rates under Northwestern Energy s open access
transmission tariff (OATT), the maximum charge for monthly firm transmission service is $3.42
per k W of reserved capacity per month. Losses are charged at four percent. After consideration
of losses and transmission costs , Idaho Power will incur a total cost of approximately $101 per
MWh under the PP
. Idaho Power proposes that costs associated with acquiring firm monthly transmission
servIce from Northwestern Energy s transmission system be booked in Book Account 565
Transmission of Electricity by Others. These monthly transmission costs will not flow through
the Company s Power Cost Adjustment (PCA). Idaho PoW,er proposes that the cost for power
DECISION MEMORANDUM
acquired through the EnergyPlus Agreement be booked in FERC Account 555, Purchased
Power, and that the costs upon contract approval flow through the Company s PCA. Until the
costs of the contract are included in a general revenue proceeding, any contract costs associated
with the Agreement will be considered deviation from the base and, therefore, only 90% of the
Idaho jurisdictional costs will be borne by customers.
Idaho Power requests that its Application be processed under Modified Procedure, by
written submission rather than by hearing. Reference Commission Rules of Procedure IDAP A
31.01.01.201-204.
Idaho Power requests that the Commission issue an Order approving the Power
Purchase Agreement between Idaho Power and EnergyPlus and approving Idaho Power
requested accounting treatment for inclusion of the power purchase expenses associated with the
EnergyPlus Agreement in the Company s Power Cost Adjustment.
COMMISSION DECISION
Idaho Power requests that the Commission approve its Power Purchase Agreement
with PPL EnergyPlus, LLC and authorize recovery of power purchases under the Agreement in
its PCA. The Company requests that its Application be given expedited consideration and be
processed pursuant to Modified Procedure. If approval is not obtained prior to August 4, 2008
Idaho Power states that it will forfeit a deposit in the amount of $100 000. Staff agrees with the
Company proposed procedure and recommends that the Application be processed pursuant to
Modified Procedure with a comment deadline of July 2008. Does the Commission agree?
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Scott D. Woodbury
Deputy Attorney General
bls/M:IPC-O8-13 sw
DECISION MEMORANDUM