20250326Appellant Opening Brief.pdf

RECEIVED
March 27, 2025
IDAHO PUBLIC
UTILITIES COMMISSION
IN THE SUPREME COURT OF THE STATE OF IDAHO
PACIFICORP DBA ROCKY MOUNTAIN )
POWER, )
Supreme Court Case No. 52508-2024
Petitioner-Appellant, )
Vs. )
IDAHO PUBLIC UTILITIES )
COMMISSION )
Respondent. )
APPELLANT'S OPENING BRIEF
Appeal From the Idaho Public Utilities Commission
Case No. PAC-E-24-05
Commissioners Eric Anderson, John R. Hammond Jr., and Edward Lodge presiding

r.......................................................................................................................................................................-.................................................................................................................................................................
,
Dallas DeLuca,pro hac vice I Adam Triplett
[e-mail] Deputy Attorney General
;Joseph M. Levy,pro hac vice P.O. Box 83720
[e-mail] Boise, ID 83720-0074
Markowitz Herbold PC I [e-mail]
1455 SW Broadway, Suite 1900
Portland, OR 97201 Attorneys for Respondent
W. Christopher Pooser, Bar No. 5525
[e-mail]
Stoel Rives LLP
101 S. Capitol Boulevard, Suite 1900
poise, ID 83702
;Attorneys for Petitioner-Appellant
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------=----------------------------------------------------------------------------------------------------------------------------------------------------------------

TABLE OF CONTENTS
TABLE OF AUTHORITIES...............................................................................................ii
STATEMENT OF THE CASE ........................................................................................... I
I. Nature of the case. .................................................................................................. I
11. Course of proceedings and statement of facts. .......................................................2
A. PacifiCorp's costs under the Cap and Invest Program. ......................................2
B. The 2020 Inter-Jurisdictional Cost Allocation Protocol.....................................4
C. The proceedings below.......................................................................................6
ISSUES PRESENTED ON APPEAL .................................................................................8
STANDARDOF REVIEW.................................................................................................9
ARGUMENT..................................................................................................................... 10
L The Protocol mandates recovery of Allowance costs because they are
systemcosts. ......................................................................................................... 10
A. The Commission adopted the Protocol because it is just and
reasonable. ........................................................................................................ 10
B. The Cap and Invest Program imposes system costs that are
recoverable under the Protocol. ........................................................................ I I
C. The Cap and Invest Program should not be situs-assigned. ............................. 14
1. Chehalis was not "acquired" in accordance with the Cap and
InvestProgram. ............................................................................................. 15
2. The Cap and Invest Program is not like the Clean Energy
Transformation Act. ...................................................................................... 17
3. Allowance costs are system costs even if Washington customers
don't pay for them. ........................................................................................ 19
II. It was unjust and unreasonable for the Commission to disregard the
Protocol and provide Idaho customers with the full benefits of Chehalis
without incurring the prudent costs. .....................................................................21
CONCLUSION .................................................................................................................26
i

TABLE OF AUTHORITIES
Page(s)
Cases
A.W. Brown Co. v. Idaho Power Co.,
121 Idaho 812 (1992)..................................................................................................... 9
Appalachian Power Co. v. State Tax Dep't of W. Va.,
195 W.VA. 573 (W. Va. 1995).............................................................................. 12, 13
Arizona v. New Mexico,
425 U.S. 794 (1976)..................................................................................................... 13
Bldg. Contractors Ass'n of Sw. Idaho v. Idaho Pub. Utils. Comm'n,
151 Idaho 10 (2011)....................................................................................................... 9
Duquesne Light Co. v. Barasch,
488 U.S. 299 (1989).....................................................................................................22
Fletcher v. Lone Mountain Rd. Ass'n,
165 Idaho 780 (2019)................................................................................................... 10
Hayden Pines Water Co. v. Idaho Pub. Utils. Comm'n,
122 Idaho 356 (1992)...................................................................................................24
Idaho Power Co. v. Idaho Pub. Utils. Comm'n,
99 Idaho 374 (1978)...............................................................................................21, 25
Idaho Power Co. v. New Energy Two, LLC,
156 Idaho 462 (2014)............................................................................................. 10, 20
Indus. Customers of Idaho Power v. Idaho Pub. Utils. Comm'n,
134 Idaho 285 (2000)...............................................................................................9, 25
Intermountain Gas Co. v. Idaho Pub. Utils. Comm'n,
97 Idaho 113 (1975).......................................................................................................9
ii

PacifiCorp v. Watson,
No. 3:23-CV-06155-TMC, 2024 WL 3415937 (W.D. Wash. July 15,
2024) .................................................................................................................. 8, 20, 23
Prentis v. Atl. Coast Line Co.,
211 U.S. 210 (1908)....................................................................................................... 8
In the Matter of Rocky Mountain Power's Application for Authority to
Increase Its Rates and Charges in Idaho and Approval of Proposed
Elec. Servs. Schedules and Regulations,
Case No. PAC-E-21-07, Order No. 35277 (Idaho PUC Dec. 31, 2021),
OrderNo. 35277 ....................................................................................................24, 25
In the Matter of Rocky Mountain Powers Petition for Approval of an
Extension of the 2020 Inter-Jurisdictional Allocation Protocol,
No. 35984, 2023 WL 7380690 (Idaho PUC Nov. 2, 2023)...........................................4
S.C. Pub. Serv. Auth. v. FERC,
762 F.3d 41 (D.C. Cir. 2014).......................................................................................22
Shawver v. Huckleberry Ests., L.L.C.,
140 Idaho 354 (2004)...................................................................................................20
In the Matter of the Application for Approval of the 2020 PacifiCorp Inter-
Jurisdictional Allocation Protocol,
Case No. PAC-E-19-20,Order No. 34640 (Idaho PUC April 22, 2020),
OrderNo. 34640 ......................................................................................................9, 10
In the Matter of the Application of Idaho Power Co.for Auth. to Modify Its
Rule HLine Extension Tariff Related to New Serv. Attachments &
Distribution Line Installations,
Case No. IPC-E-08-22, Order No. 30955 (Idaho PUC Nov. 30, 2009),
OrderNo. 30955 ..........................................................................................................22
In the Matter of the Application of PacifiCorp DBA Rocky Mountain Power
for Approval of Changes to Its Elec. Serv. Schedules,
Case No. PAC-E-08-07, Order No. 30783 (Idaho PUC Apr. 16, 2009),
OrderNo. 30783 .......................................................................................................... 16
iii

Utah Power&Light Co. v. Idaho Pub. Utils. Comm'n,
102 Idaho 282 (1981).....................................................................................................9
Utah Power& Light Co. v. Idaho Pub. Utils. Comm'n,
105 Idaho 822 (1983).............................................................................................21, 23
Utah Power&Light Co. v. Pfbst,
286 U.S. 165 (1932)..................................................................................................... 13
Statutes and Regulations
I.C. § 61-315...................................................................................................................... 23
I.C. § 61-502..................................................................................................................9, 24
I.C. § 61-503 ........................................................................................................................2
RCW 19.405.010 et seq..................................................................................... 8, 17, 18, 19
RCW 70A.65.010 et seq. .......................................................................3, 11, 13, 17, 18, 21
WAC § 173-446-600 et seq. .................................................................................... 3, 17, 21
Wyo. Stat. § 39-22-103.................................................................................................. 6, 13
Other Authorities
WEBSTER'S NEW INT'L DICTIONARY (3d ed. 2002).......................................................... 12
iv

STATEMENT OF THE CASE
I. Nature of the case.
This is an appeal from a rate-setting order of defendant-respondent Idaho
Public Utility Commission (the "Commission"). At issue is the Commission's
decision not to allow plaintiff-appellant PacifiCorp d/b/a Rocky Mountain Power
("PacifiCorp") to recover legally mandated costs in its rates.
Through its natural gas plant in Chehalis, Washington ("Chehalis"), PacifiCorp
provides electricity to Idaho customers. Without Chehalis, PacifiCorp's customers in
Idaho would see their electricity costs increase by millions of dollars in the aggregate.
The benefits of lower-cost power from Chehalis are not cost-free, though. Like all
utilities, PacifiCorp's power is subject to numerous taxes and costs that it must pay in
order to provide customers with electricity. That is the unavoidable cost of
generation.
In 2021, Washington passed the Climate Commitment Act. Among other
things, this law mandated that PacifiCorp incur costs for its Chehalis generation. In
short, PacifiCorp must purchase an "Allowance" from Washington for each ton of
greenhouse gases Chehalis emits, and because emissions are tied to generation, that
ties the costs of the Climate Commitment Act to the amount of generation. In other
words, there is a cost per megawatt of electricity produced. PacifiCorp complied with
the Climate Commitment Act and paid what was required, rather than violate the law
and incur significant financial penalties. Even with these Allowance costs, Idaho
customers still received millions of dollars in benefits from Chehalis generation
1

compared to paying higher prices for generation from other sources. Therefore,
PacifiCorp asked the Commission for permission to recover a proportional amount of
these legally required costs from Idaho customers. The Commission did not allow
PacifiCorp to do so, and this appeal followed.
II. Course of proceedings and statement of facts.
A. PacifiCorp's costs under the Cap and Invest Program.
PacifiCorp is an Oregon corporation that supplies electric services to customers
throughout a six-state service territory, including Idaho. (R., p. 19.)1 In Idaho,
PacifiCorp is a public utility that provides services as Rocky Mountain Power. (Id.)
The Commission regulates electric utilities in Idaho and determines what rates they
are allowed to charge Idaho customers to recover costs that the utilities incur to
provide electric service.
In April 2024, PacifiCorp (through Rocky Mountain Power) submitted an
application to the Commission requesting authority to increase its retail electric
service rates to recover costs incurred to provide electric service to its customers in
Idaho. (R., pp. 18-30.) This application process is routine, as PacifiCorp must
receive approval for any rate increase needed to recover the costs of providing service
to Idaho customers. I.C. §§ 61-502, 61-503.
Among other things, PacifiCorp's application sought to increase its rates to
account for prudently incurred expenses for generation from Chehalis that provides
1 Appellant's citations to the record provide page numbers in the redacted
record.
2

electric services to PacifiCorp customers in Idaho. In particular, PacifiCorp sought to
recover costs incurred as a result of a "Cap and Invest Program" created by
Washington's Climate Commitment Act. Rev. Code of Wash. ("RCW") 70A.65.005
et seq.
The Cap and Invest Program requires certain entities to acquire greenhouse gas
allowances ("Allowances") for their emissions of greenhouse gases, such as carbon
dioxide generated from the combustion of natural gas used to generate electricity.
RCW 70A.65.070; see also R., p. 179. This legal requirement applies to electricity-
generating facilities with annual emissions that equal or exceed 25,000 metric tons of
carbon dioxide equivalent. RCW 70A.65.080(1)(b). For PacifiCorp, this means that
its Chehalis plant is a covered facility that requires PacifiCorp to acquire Allowances
issued by the State of Washington for Chehalis emissions. (R., p. 180.) PacifiCorp
purchases Allowances from the State of Washington Department of Ecology at a price
that is set at an auction, as modified by statute. RCW 70A.65.140-160 (setting price
parameters and modifications). As with generation taxes, these Allowance costs scale
with the amount of generation from Chehalis.
Failure to purchase Allowances can result in penalties ranging from $10,000 to
$50,000 per day. RCW 70A.65.200(2)-(5); see also Wash. Admin. Code ("WAC")
§ 173.446.610(2)-(6). The decision to operate Chehalis without purchasing
Allowances, then, would have risked significant financial penalties.
The generation from Chehalis lowers the costs reflected in rates to serve Idaho
customers, even when Allowances are accounted for. Put simply, if Chehalis did not
3

serve Idaho customers in 2023, those customers would have saved $3.2 million in
costs, but would also have seen an increase of$7.9 million in costs. (R., pp. 229-30.)
Together, this means that the total benefit that Idaho customers receive from Chehalis
generation in 2023—even when Allowance costs are included—is approximately $4.7
million (i.e., $7.9 million minus $3.2 million). (See id.)
B. The 2020 Inter-Jurisdictional Cost Allocation Protocol.
PacifiCorp sought to recover Allowance costs associated with the Cap and
Invest Program under the 2020 Inter-Jurisdictional Cost Allocation Protocol (the
"Protocol" or "2020 Protocol"). The Protocol is an agreement between PacifiCorp,
state utility regulatory commissions, state agencies, customers, consumer advocates,
conservation organizations, and various other interested parties from the six states
where PacifiCorp provides service: California, Idaho, Oregon, Utah, Washington, and
Wyoming (collectively called the "Member States"). (R., pp. 274-408.) The
Protocol, which the Commission implemented in a 2020 order, specifies how costs
and benefits for"Resources" will be allocated among customers in Member States.
(R., pp. 284-90.)
In pertinent part, a "Resource" under the Protocol is "a Company-owned
generating unit, plant, [or] mine[.]" (R., p. 348, L. 155.) For the period at issue in
this case, the Protocol covers "interim period resources," which are Resources "in
commercial operation, or with a contract delivery date, during the Interim Period"
which is January 1, 2020, through December 31, 2025. (R., p. 345, L. 90-91; see also
R., p. 282, L. 94 (defining the period through December 31, 2023)); In the Matter of
4

Rocky Mountain Powers Petition for Approval of an Extension of the 2020 Inter-
Jurisdictional Allocation Protocol, No. 35984, 2023 WL 7380690, at *3 (Idaho PUC
Nov. 2, 2023) (extending Protocol through December 31, 2025). There are two types
of interim period Resources: system Resources and state Resources. (R., pp. 284-85,
L. 152-59.)
The costs of system Resources are paid by customers across Member States.
(R., p. 349, L. 168-69.) The "substantial majority" of PacifiCorp's Resources,
including the Chehalis plant, are system Resources. (R., p. 285, L. 156-157.) When a
cost is associated with a system Resource, it is a system cost. Under the Protocol, the
Commission agreed that generation-related dispatch costs2 and generation/fuel-related
taxes are system costs. (R., p. 287, L. 217-18; R., p. 288, L. 232.) Put another way, if
PacifiCorp incurs a generation cost, which includes generation taxes or other related
state-imposed fees and costs such as for operating permits and state unemployment
insurance premiums for employees, the cost is allocated to customers across the
Member States. (R., p. 286, L. 180-89; R., pp. 287-88, L. 215-35.) For example,
Wyoming's wind generation tax is a system cost that has been recognized by the
Commission. (R., p. 177.) This is a tax Wyoming imposes on every megawatt hour
of electricity produced from wind resources within Wyoming, which is then paid by
2 "Dispatch" costs are costs that are incurred to produce a unit of electricity.
This includes costs like fuel (which includes taxes on the fuel), variable operations
and maintenance costs, and environmental costs tied to emissions that result from the
production of each unit of electricity.
5

Idaho customers and customers across the other Member States who benefit from this
wind generation. Wyo. Stat. § 39-22-103; (see also R., pp. 57-58, L. 18-2).
In contrast to system Resources, costs associated with state Resources are not
allocated across all Member States but are instead allocated on a situs basis (i.e., to
the customers within that state). (R., pp. 285-86, L. 161-79.) The Protocol specifies
that "[c]osts and benefits" of state-specific initiatives will be situs-assigned, so that
customers within a state will bear all costs for the initiative, and also receive all of the
benefits. (R., pp. 285-86, L. 173-79.) State-specific initiatives include "incentive
programs, net-metering tariffs, feed-in tariffs, capacity standard programs, solar
subscription programs, electric vehicle programs, and the acquisition of renewable
energy certificates." (Id.) Classic examples of a state-specific (situs assigned) costs
are local municipal franchise fees, utility poles, and distribution lines. (See R., p. 287,
L. 203-04 (distribution costs are allocated to the state where they are located)); see
also R., pp. 288, L. 228-29 ("[f]ranchise taxes" are situs-assigned).) For example,
utility poles in Portland, Oregon are state-specific costs under the Protocol because
they benefit only in-state customers, and so those costs are borne only by Oregon
customers, not by Idaho customers. (See R., p. 287, L. 203-04; R., p. 287-88, L. 215-
35.)
C. The proceedings below.
After PacifiCorp filed its application for a general rate increase, two parties
intervened in the proceedings: P4 Production, LLC (an affiliate of Bayer Corporation)
and PacifiCorp Idaho Industrial Consumers (PIIC). On May 31, 2024, after receiving
6

briefing from PacifiCorp, the Commission staff, and the intervenors, and receiving
public comments, the Commission issued Order No. 36207 on PacifiCorp's
application. In this Order, the Commission concluded that PacifiCorp could not
recover Allowance costs. (R., pp. 179-82.) The Commission held that, despite the
similar Wyoming Wind Tax being a system cost that Idaho customers pay for, the
Cap and Invest Program is a renewable portfolio standard. (R., p. 180.) A renewable
portfolio standard is a law that requires PacifiCorp to "acquire" particular Resources
or "acquire" Resources in a prescribed manner. (R., p. 347, L. 138-40 (defining
"Portfolio Standard").) In other words, a renewable portfolio standard would require
PacifiCorp to acquire a certain portion of energy to meet customer needs from
renewable resources (e.g., wind or solar).
Based on this determination, the Commission concluded that Allowance costs
could not be recovered from customers in Idaho, even though Idaho customers
continue to receive lower cost power from Chehalis, reducing their monthly bills. (R.,
p. 180.) The Commission did not conclude that procuring the Allowances was
imprudent or that Chehalis generation did not provide a net benefit to Idaho
customers. Nor did the Commission conclude that PacifiCorp should have incurred
penalties for failing to purchase Allowances, or that PacifiCorp should cease
operating Chehalis for the benefit of Idaho customers.
The Commission then denied PacifiCorp's motion for reconsideration in Order
No. 36367. (R., p. 412.) The Commission held that, even if the Protocol required
Allowance cost recovery, the Protocol should not be followed because it would not be
7

just or reasonable to allow recovery because Washington customers do not pay for
Allowance costs. (R., p. 422.) Specifically, Washington gives no-cost Allowances to
generators that provide electricity to Washington customers, because those customers
are subject to the Clean Energy Transformation Act ("CETA")—a state-specific
initiative whose costs are allocated to Washington customers alone. See PacifiCorp v.
Watson, No. 3:23-CV-06155-TMC, 2024 WL 3415937, at *8 (W.D. Wash. July 15,
2024), appeal docketed PacifiCorp v. Sixkiller, No. 24-4803 (9th Cir. Aug. 6, 2024).
Because of these no-cost Allowances, the Commission concluded that PacifiCorp
cannot recover legally mandated Allowance costs from Idaho customers, meaning that
Idaho customers receive the benefits of Chehalis without paying the costs.
ISSUES PRESENTED ON APPEAL
1. Whether the Commission erroneously concluded that the Cap and Invest
Program is a renewable portfolio standard, rather than a system Resource.
2. Whether it is unjust and unreasonable to prevent PacifiCorp from recovering
Allowance costs that it is legally required to incur and that benefit Idaho
customers.3
3 PacifiCorp is preserving its Fourteenth Amendment claim pending exhaustion
of these state claims. See Prentis v. Ad. Coast Line Co., 211 U.S. 210, 230 (1908)
("If the rate should be affirmed by the supreme court of appeals and the railroads still
should regard it as confiscatory, it will be understood from what we have said that
they will be at liberty then to renew their application to the circuit court, without fear
of being met by a plea of res judicata.").
8

STANDARD OF REVIEW
"The Commission has the authority to determine charges that are just and
reasonable." Bldg. Contractors Ass'n of Sw. Idaho v. Idaho Pub. Utils. Comm'n, 151
Idaho 10, 16 (2011); see also I.C. § 61-502. To this end, the Commission has both
"the power and the duty to set rates of return within a broad zone of reasonableness."
Utah Power& Light Co. v. Idaho Pub. Utils. Comm'n, 102 Idaho 282, 285 (1981)
(quotation marks omitted, citation omitted).
In reviewing decisions by the Commission, this Court considers whether the
Commission "abused or exceeded its authority." Intermountain Gas Co. v. Idaho
Pub. Utils. Comm'n, 97 Idaho 113, 127 (1975). On questions of law, this Court
considers "whether the Commission has regularly pursued its authority and whether
the constitutional rights of the appellant have been violated." Indus. Customers of
Idaho Power v. Idaho Pub. Utils. Comm'n, 134 Idaho 285, 288 (2000). On questions
of fact, this Court will affirm findings that are "supported by substantial, competent
evidence[.]" A.W. Brown Co. v. Idaho Power Co., 121 Idaho 812, 815 (1992)
(citation omitted).
The Commission's interpretation of the Protocol is reviewed for legal error.
The Protocol is a contract adopted by the Commission in a prior order. See In the
Matter of the Application for Approval of the 2020 PacifiCorp Inter-Jurisdictional
Allocation Protocol, Case No. PAC-E-19-20,Order No. 34640 (Idaho PUC April 22,
9

2020).4 "This Court freely reviews questions of law and contract interpretation."
Fletcher v. Lone Mountain Rd. Ass'n, 165 Idaho 780, 784 (2019) (citation omitted).
This means that, generally, "contract interpretation is for the courts, not the
Commission"—unless the parties grant the Commission authority to interpret the
contract. Idaho Power Co. v. New Energy Two, LLC, 156 Idaho 462, 463 (2014)
(citation omitted). Because the Commission was not granted authority to interpret the
Protocol, its meaning is a question for the courts.
ARGUMENT
I. The Protocol mandates recovery of Allowance costs because they are
system costs.
A. The Commission adopted the Protocol because it is just and
reasonable.
There is no dispute that the Protocol governs here. When reaching its decision
below, the Commission attempted to apply the Protocol, but incorrectly concluded
that allowing PacifiCorp to recover Cap and Invest costs "would violate the 2020
Protocol." (R., p. 180; see also R., pp. 418-22.) This is because the Commission
mistakenly concluded that the Cap and Invest Program constitutes a "Portfolio
Standard" under the Protocol, and therefore its costs should be situs-assigned. (R., p.
419.)
The Protocol sets out a just and reasonable framework for cost-recovery. In
adopting the Protocol in Order No. 34640, Idaho PUC Case No. PAC-E-19-20, the
4 Order No. 34640 is available at https:Hlf-
puc.idaho.gov/WebLink/DocView.aspx?id=80765.
10

Commission stated that "the 2020 Protocol offers a methodology that fairly and
reasonably allocates the Company's system costs to the jurisdictions during the
Interim Period." Order No. 34640 at.4. For this reason, the Commission concluded
that the Protocol "is in the public interest." Id. And the Commission recognized that
the Protocol reflected"evolving state policies on carbon based electricity and the
decision to either retire or continue operating coal generation assets." Id. The
Commission therefore concluded that the Protocol was just and reasonable while also
recognizing that it controlled in cases where states had different policies on carbon-
based electricity. Thus, because the Cap and Invest Program imposes system costs
under the Protocol for the reasons explained below, it is just and reasonable for
PacifiCorp to recover those costs (and unjust and unreasonable for PacifiCorp not to
recover those costs).5
B. The Cap and Invest Program imposes system costs that are
recoverable under the Protocol.
Allowance costs are recoverable from Member States under the Protocol.
Under the Climate Commitment Act, PacifiCorp must obtain an Allowance for every
"metric ton of carbon dioxide equivalent" that Chehalis emits. RCW 70A.65.010(1).
This means that, for energy allocated to Idaho from the Chehalis plant, there is an
incremental dollar-per-megawatt hour ($/MWh) cost based on the Allowance price.
5 The Commission held in the alternative that it would be unjust and
unreasonable to allow PacifiCorp to recover Cap and Invest costs even if the Protocol
governed. That erroneous determination is discussed in the following section.
11

Accordingly, the Allowance cost under the Cap and Invest Program is directly tied to
Chehalis' energy generation.
These costs are fully recoverable under the Protocol as system costs, including
as "generation-related dispatch costs" or"generation . . . taxes[.]" (R., p. 287, L. 217-
18; R., p. 288, L. 232.) A "cost" is "the amount or equivalent paid or given or
charged or engaged to be paid or given for anything bought or taken in barter or for
service rendered." Cost, WEBSTER'S NEW INT'L DICTIONARY 515 (3d ed. 2002).
And a "tax" is a "pecuniary charge imposed by legislative or other public authority
upon persons or property for public purposes." Tax, id. at 2345. Because PacifiCorp
is forced to purchase Allowances to emit carbon dioxide equivalent from Chehalis—
and is thus forced to pay the State of Washington to generate energy from Chehalis—
Allowances are plainly a"generation-related dispatch cost[]" or"generation . . .
taxes" under the Protocol. (R., p. 287, L. 217-18; R., p. 288, L. 232.) Indeed, like
any other tax, the Climate Commitment Act expressly specifies that the Allowance
funds are used for public purposes, like "direct and meaningful benefits to vulnerable
populations." RCW 70A.65.230(a).
Idaho customers receive an enormous benefit from Chehalis, even with the
Allowance costs. If Idaho customers had not received Chehalis generation in 2023,
and had thus avoided Allowance costs, they would have had to pay approximately
$4.7 million more in energy costs. (See R., pp. 229-30.) These benefits to Idaho
customers demonstrate that Chehalis is a system Resource. In contrast, a state-
specific initiative generates benefits only for that state, which is why the Protocol
12

specifies that "[c]osts and benefits" of Resources acquired in accordance with state-
specific initiatives will be situs-assigned. (R., p. 285, L. 173-75 (emphasis added).)
But a Resource like Chehalis generates significant benefits for out-of-state customers,
so the Protocol specifies that those customers must bear both the cost and benefits of
its operation. The Commission's decision allows Idaho customers to receive all of
Chehalis' benefits without incurring all of the costs, which cannot be squared with the
Protocol's instructions to allocate costs and benefits together. (Compare id., with R.,
p. 180.)
Allowance costs are no different than the costs imposed by the Wyoming Wind
Tax, which the Commission recognized "is system allocated" under the Protocol. (R.,
p. 177.) Wyoming imposes this tax "on the production of any electricity produced
from wind resources for sale or trade," and requires that it "be paid by the person
producing such electricity." Wyo. Stat. § 39-22-103. In other words, this is a tax
levied "on each megawatt hour of electricity produced from wind resources[.]" Id.
The Cap and Invest Program is functionally identical to the Wyoming Wind
Tax. Each is limited in scope, with Wyoming limited to wind energy and the Cap and
Invest Program limited to carbon dioxide equivalent. (Compare RCW 70A.65.010(1),
with Wyo. Stat. § 39-22-103.) Both are based on the amount of energy produced, as
is the norm for generation taxes. See, e.g., Utah Power & Light Co. v. Pfost, 286 U.S.
165, 175 (1932) (Maine corporation);Appalachian Power Co. v. State Tax Dep't of
W. Va., 195 W.VA. 573, 580 (W. Va. 1995) (West Virginia);Arizona v. New Mexico,
425 U.S. 794, 795 (1976) (New Mexico). And each generates revenue for the state
13

imposing the generation tax. This is like any other tax or cost imposed by a state on a
utility—such as corporate income taxes paid to Idaho or local property taxes paid by
PacifiCorp. These costs and taxes are included in the rates that non-Idaho customers
pay for receiving a benefit from system Resources in Idaho.
Allowance costs are higher than the Wyoming Wind Tax on a megawatt hour
basis, but this is immaterial to the status as a system cost because the Protocol does
not differentiate between low costs and high costs for purposes of classification.
Rather, the Protocol provides that all generation costs or taxes are system costs,
meaning that they must be allocated to Idaho customers, no matter the amount. (See
R., p. 287, L. 217-18; R., p. 288, L. 232.)6 Thus, like the Wyoming Wind Tax,
Allowance costs should be system-allocated under the Protocol.
C. The Cap and Invest Program should not be situs-assigned.
The Commission concluded that the Climate Commitment Act is akin to a
renewable portfolio standard, and for that reason, the costs should be situs-assigned to
Washington. (R., pp. 418-21.) In making this determination, the Commission
decided that PacifiCorp had somehow "reacquired" Chehalis as a "Resource" under
the Cap and Invest Program, thus making the Cap and Invest Program a "renewable
6 Hypothetically, if the Wyoming legislature exempted certain customers from
the Wind Tax, PacifiCorp would still need to incur these costs to provide power to its
Idaho customers. However, this does not mean that PacifiCorp should cease
operating these facilities that provide a benefit to Idaho customers. The fact that one
set of customers is exempt is an issue of intrastate discrimination that is properly
before the federal courts, and until a resolution is reached through that legal process,
the Company had to prudently incur the costs to provide service for Idaho customers.
14

portfolio standard." (R., p. 421.) This comparison to a renewable portfolio standard
is wrong; PacifiCorp did not "reacquire" Chehalis. Allowance costs should not be
situs-assigned.
1. Chehalis was not "acquired" in accordance with the Cap and
Invest Program.
The Protocol sets out just three narrow categories in which a "Resource"—i.e.,
among other things, "a Company-owned generating unit, plant, [or] mine," (R., p.
348)'—qualifies as a state Resource and therefore has its costs situs-assigned. If a
Resource does not fit within these three narrow categories, it is a system Resource.
(See R., p. 285, L. 156-57.) Two of these categories are relevant here. First are
"Portfolio Standards," which are laws that require PacifiCorp to "acquire" particular
Resources or Resources in a prescribed manner. (R., p. 347, L. 138-40; see also R., p.
285, L. 168-72.) Second are state-specific initiatives, for which the Protocol specifies
that "[c]osts and benefits associated with Interim Period Resources acquired in
accordance with a State-specific initiative will be allocated and assigned on a situs
basis to the State adopting the initiative." (R., p. 285, L. 173-75 (emphasis added).)
Accordingly, under both of these narrow exceptions to the system resource
classification, for a cost to be situs-assigned, it must be associated with a Resource
"acquired" in accordance with the portfolio standard or state-specific initiative.
' The full definition of"Resource" is "a Company-owned generating unit,
plant, mine, long-term Wholesale Contract, Short-Term Purchase and Sale, Non-firm
Purchase and Sale, or [Qualifying Facility] contract." (R., p. 348, L. 155-56.)
15

PacifiCorp did not acquire any Resources in accordance with the Cap and
Invest Program, nor was there any requirement under the Cap and Invest Program to
do so. The Commission recognized that Chehalis was acquired years before the
Climate Commitment Act was enacted. (R., p. 180.) Chehalis was introduced into
Idaho rates in a 2008 rate case, which is the same year Chehalis was acquired by
PacifiCorp. In the Matter of the Application of PacifiCorp DBA Rocky Mountain
Power for Approval of Changes to Its Elec. Serv. Schedules, Case No. PAC-E-08-07,
Order No. 30783 (Idaho PUC Apr. 16, 2009).8 So, Chehalis could not have been
acquired in accordance with the Cap and Invest Program (which was signed into law
13 years later).
On this point, the Commission incorrectly reasoned that PacifiCorp "lost the
right to lawfully operate Chehalis to generate electricity without obtaining
allowances," and therefore "acquired" a Resource under the Protocol when it
"reacquired this right by obtaining" allowances. (R., p. 421.) In reality, there is no
provision of the Cap and Invest Program that strips a company of its right to lawfully
operate a utility without Allowances. Regulated entities must demonstrate
compliance with the law, and failure to comply with the law can result in penalties,
s Order No. 30783 is available at https://lf-
puc.idaho.gov/WebLink/DocView.aspx?dbid=0&id=77647; errata available at
https://lf-puc.idaho.gov/WebLink/DocView.aspx?id=77648. See also State of
Washington Energy Facility Site Evaluation Council, "Chehalis Generation Facility,"
available at https://www.efsec.wa.gov/energy-facilities/chehalis-generation-facility
(last visited March 25, 2025).
16

ranging from $10,000 to $50,000 per day. RCW 70A.65.200(2)-(5); see also WAC
§§ 173.446.610(2)-(6). But there is no penalty—in statute or administrative rule—
that would prohibit power generators from operating if they do not obtain
Allowances.
Indeed, although PacifiCorp is compelled to obtain Allowances for emissions
generated each specific calendar year starting in 2023 (or otherwise face penalties),
PacifiCorp can continue to generate before acquiring Allowances because the Climate
Commitment Act allows covered entities to wait until November 1 of the following
year to have and report Allowances for 30 percent of the emissions of the prior year.
WAC § 173-446-600(3). Covered entities are given until November 1, 2027, to
obtain and report Allowances for the other 70 percent of its emissions for calendar
years 2023 through 2026. WAC § 173-446-600(4). Accordingly, there was no basis
for the Commission's conclusion that PacifiCorp lost the right to lawfully operate
Chehalis and reacquired the Chehalis plant. PacifiCorp acquired Chehalis almost two
decades ago, long before the Cap and Invest Program took effect. Chehalis therefore
does not constitute a Resource "acquired" in accordance with a portfolio standard or
state-specific initiative.
2. The Cap and Invest Program is not like the Clean Energy
Transformation Act.
The Commission also drew an erroneous analogy between the Cap and Invest
Program and Washington's Clean Energy Transformation Act ("CETA"). (R., p. 181;
R., pp. 419-20.) Unlike the Cap and Invest Program, CETA is an actual "Portfolio
17

Standard" that requires PacifiCorp to acquire particular types of resources to serve
Washington customers. Specifically, under CETA, electric utilities must eliminate
coal-fired resources from its electricity allocation by December 31, 2025, and must
make all retail sales of electricity to Washington customers greenhouse gas neutral by
January 1, 2030, and then generate all power from renewable or zero-carbon resources
by 2045. RCW 19.405.030(1)(a), 19.405.040(1).
This means that, to continue serving the same electricity requirements in
Washington, PacifiCorp must acquire non-coal, CETA-compliant energy to replace
the coal generation by December 31, 2025, and to make all other sales greenhouse gas
neutral by 2030. Acquiring "a particular type of Resource" as required by CETA
neatly fits the definition of"Portfolio Standard" in the Protocol. (R., p. 347, L. 138-
40.) Incremental costs incurred because of CETA's requirements (i.e., costs that
would not have been incurred otherwise) are assigned to Washington customers alone
because CETA is a state-specific initiative that requires companies to acquire specific
Resources. See RCW 19.405.040(1).
Unlike CETA—which requires Resource acquisition—the Cap and Invest
Program requires only that PacifiCorp pay the equivalent of a tax for each metric ton
of carbon dioxide equivalent emitted from Chehalis. This is a generally applicable
requirement on all generators in Washington with annual emissions that equal or
exceed 25,000 metric tons of carbon dioxide equivalent. RCW 70A.65.080(1)(b). In
this way, the Cap and Invest Program operates like any other common generation tax.
The only connection between the Cap and Invest Program and CETA are that the no-
18

cost allowances are limited to entities subject to CETA. But the mere reference to
CETA in the Cap and Invest Program is not like a drop of red dye in a glass of water,
coloring the entire glass with a single drip. The citation to CETA does not, under any
provision of the Protocol, turn what is clearly a system cost (the Cap and Invest
generation costs or taxes) for a system Resource (Chehalis) into a situs-assigned cost
and situs Resource.
Even if the Commission was correct that Chehalis was a Resource acquired in
accordance with a renewable portfolio standard (which it wasn't), the Commission's
ruling cannot be squared with the Protocol. The Protocol requires that both "[c]osts
and benefits" be situs-assigned—meaning that Idaho customers should not receive
any of the benefits of Chehalis if they do not incur all of the costs. (R., pp. 285-86, L.
173-79.) But the Commission disregarded the mechanics of Protocol and required
that the benefits of Chehalis be reflected in Idaho rates, while simultaneously ensuring
that Idaho customers do not bear the costs. This cannot be reconciled with the
requirements of the Protocol.
3. Allowance costs are system costs even if Washington
customers don't pay for them.
It is immaterial that Washington customers do not pay for Allowance costs.
PacifiCorp is only seeking to recover the Allowance costs for the electricity allocated
to serve Idaho customers, and those are the same costs that would be allocated to
Idaho customers regardless of what Washington customers pay or do not pay. This is
not to say that PacifiCorp agrees that the Cap and Invest Program scheme is
19

constitutional. PacifiCorp filed a suit in federal court challenging this aspect of the
Cap and Invest Program because it violates the dormant Commerce Clause. See
PacifiCorp, 2024 WL 3415937. The district court ruled that the Cap and Invest
Program does not violate the Commerce Clause. Id. at *7-12. PacifiCorp appealed
that decision. This litigation is ongoing, but even if it is successful, it will not
eliminate already-incurred Cap and Invest Program costs that Idaho customers must
pay because those are costs directly tied to the benefits—power from Chehalis—that
Idaho customers receive.
In any event, whether Washington customers pay for Allowance costs does not
alter the fact that they are system costs. The Protocol unambiguously classifies
generation costs and taxes as system costs—whether or not those costs or taxes are
paid by customers in other states. (R., p. 287, L. 217-18; R., p. 288, L. 232.) By
relying on Washington customers' exemption from Allowance costs as relevant to the
classification, the Commission impermissibly disregarded the plain words of the
Protocol and added text that does not exist. In Idaho, "[f]reedom of contract is a
fundamental concept underlying the law of contracts and is an essential element of the
free enterprise system." Idaho Power Co., 156 Idaho at 463-64 (quotation marks and
citation omitted). Accordingly, "[c]ourts do not possess the roving power to rewrite
contracts in order to make them more equitable." Shawver v. Huckleberry Ests.,
L.L.C., 140 Idaho 354, 362, (2004) (quotation marks and citation omitted). Per the
plain terms of the Protocol, Allowances are system costs whether or not Washington
customers pay for them.
20

II. It was unjust and unreasonable for the Commission to disregard the
Protocol and provide Idaho customers with the full benefits of Chehalis
without incurring the prudent costs.
The Commission next concluded that, if the Protocol allows recovery of
Allowance costs, then the Protocol is unjust and unreasonable. (R., pp. 421-22.)
This decision is erroneous. It is just and reasonable to allow PacifiCorp to recover
Allowance costs from Idaho customers, and the Commission's decision otherwise is
not supported by the evidence. See Idaho Power Co. v. Idaho Pub. Utils. Comm'n, 99
Idaho 374, 381 (1978).
To provide Idaho customers with the benefit of Chehalis, PacifiCorp was
required to incur Allowance costs. The Commission never found—and no parry has
argued—that these Allowance costs were imprudently incurred. See Utah Power &
Light Co. v. Idaho Pub. Utils. Comm'n, 105 Idaho 822, 826 (1983) (discussing a
utility's "right to collect a return on necessary and prudent investments"). Indeed,
there are only two ways that PacifiCorp could have avoided the Cap and Invest costs:
(1) stop operating Chehalis, or (2) pay penalties and operate Chehalis without
purchasing Allowances. Shutting down Chehalis operations would have increased
overall costs for Idaho customers by roughly $4.7 million. See supra at II.B. And
operating Chehalis without purchasing Allowances would subject PacifiCorp to
substantial penalties. RCW 70A.65.200(2)-(5); see also WAC § 173.446.610(2)-(6).
Unsurprisingly, then, no party is arguing that PacifiCorp should have taken one of
these alternative courses of action. The most prudent path was the one that
21

PacifiCorp took—operating Chehalis for the benefit of Idaho customers and
purchasing the necessary Allowances to do so.
The costs that Idaho customers pay should reflect the "benefits drawn by that
party." S.C. Pub. Serv. 4uth. v. FERC, 762 F.3d 41, 87-88 (D.C. Cir. 2014). Indeed,
this principle of"cost causation" has been recognized by the Commission as a
"fundamental ratemaking principle,"whereby "utility costs should be paid by those
entities that cause the utility to incur the costs." In the Matter of the Application of
Idaho Power Co.for Auth. to Modify Its Rule H Line Extension Tariff Related to New
Serv. Attachments & Distribution Line Installations, Case No. IPC-E-08-22, Order
No. 30955 at 13 (Idaho PUC Nov. 30, 2009).9 The Commission has even suggested
that this cost causation principle is necessary to set just and reasonable rates. Id. This
dovetails with the constitutional limits on state regulatory commissions, which are
prohibited from setting confiscatory rates that amount to an unconstitutional taking.
See Duquesne Light Co. v. Barasch, 488 U.S. 299, 307-08 (1989).
In concluding that it would be unjust and unreasonable to allow PacifiCorp to
recover Allowance costs, the Commission focused primarily on the fact that
Washington customers do not pay for Allowance costs. (R., p. 422.) But
PacifiCorp's recovery of Allowance costs turns on whether those costs are "necessary
and prudent," not on the manner in which a state legislature designed those costs. See
9 Order No. 30955 is available at https:Hlf-
puc.idaho.gov/WebLink/DocView.aspx?dbid=0&id=61251.
22

Utah Power& Light Co., 105 Idaho at 826 (discussing a utility's "right to collect a
return on necessary and prudent investments"). Whether Washington customers pay
for Allowance costs does not change the fact that PacifiCorp was legally required to
pay for Allowances, and that Idaho customers received a significant benefit from
Chehalis generation (even after paying for Allowances).
The Commission also suggested that it would constitute "rate discrimination"
to allow PacifiCorp to recover Allowance costs. (R., p. 422.) As the Commission
recognized, the statute prohibiting rate discrimination (I.C. § 61-315) is "not directly
applicable in this case," (R., p. 422), because that statute prohibits utilities from
imposing discriminatory rates. But nobody disputes that PacifiCorp is required by
law to acquire Allowances. Nor does anybody dispute that PacifiCorp's requested
Idaho rates to include Allowance costs (as well as rates in other states) are intended to
recover costs associated with Chehalis, and that the costs are distributed
proportionally and not in a discriminatory manner. PacifiCorp, under Washington
law, therefore has no choice but to incur Allowance costs to provide Chehalis's
benefits to customers, and so PacifiCorp is not imposing discriminatory rates on any
customers when it seeks cost recovery from the same customers who benefit Chehalis
power.
Regardless of what Washington customers are charged, this does not mean it is
just and reasonable for Idaho customers to fail to pay their fair share.10 PacifiCorp
io Washington's decision to provide no-cost Allowances is currently before the
Ninth Circuit, and not at issue here. See PacifiCorp v. Watson, No. 3:23-CV-06155-
23

must receive authorization for all charges. I.C. § 61-502. If PacifiCorp is not able to
recover Allowance costs from Idaho customers, this will "create a loss [PacifiCorp]
will never be able to recoup." Hayden Pines Water Co. v. Idaho Pub. Utils. Comm'n,
122 Idaho 356, 360 (1992). It cannot simply raise costs elsewhere to compensate for
the Allowances. Thus, if the Commission's decision stands, PacifiCorp will be forced
to incur an unrecoverable cost in order to provide Idaho customers with a benefit
worth millions of dollars. That is an unsustainable result for any utility doing
business in Idaho, and it cannot be squared with the Commission's obligation to
impose just and reasonable rates. See id. (concluding that it was unjust and
unreasonable to force a party to hire an accountant without considering the cost of the
accountant).
The Commission's decision effectively reduces PacifiCorp's rate of return
below a rate that was already deemed just and reasonable by the Commission. At the
time of the Commission's decision, PacifiCorp had an authorized rate of return
established by the Commission. See In the Matter of Rocky Mountain Power's
Application for Authority to Increase Its Rates and Charges in Idaho and Approval of
Proposed Elec. Servs. Schedules and Regulations, Case No. PAC-E-21-07, Order No.
TMC, 2024 WL 3415937, at *8 (W.D. Wash. July 15, 2024), appeal docketed
PacifiCorp v. Sixkiller, No. 24-4803 (9th Cir. Aug. 6, 2024). The result of that
litigation has no bearing on whether it is just and reasonable for Idaho customers to
pay the costs for the benefits they receive.
24

35277 at 8 (Idaho PUC Dec. 31, 2021)." By disallowing PacifiCorp from recovering
Cap and Invest costs, the Commission's Order effectively guarantees that
PacifiCorp's rate of return will be lower than the authorized rate because this results
in higher costs with no corresponding revenue.
This Court has previously set aside Commission rulings as unjust and
unreasonable when the ruling resulted in a lower rate of return than that which was
deemed to be just and reasonable. See Idaho Power Co., 99 Idaho at 381. In Idaho
Power, the Commission determined that an 8.23 percent rate of return was just and
reasonable. Id. Yet, the Commission's calculation of base rates actually produced a
rate of return of 8.09 percent, which was lower than the return it had deemed just and
reasonable. Id. This Court concluded that the evidence could not support the
Commission's determination in such a case. Like in Idaho Power, the evidence does
not support the Commission's decision here to effectively lower PacifiCorp's rate of
return.
In sum, the evidence demonstrates that Idaho customers receive millions of
dollars in benefits from Chehalis generation, and the Commission never found that
PacifiCorp was imprudent in incurring Allowance costs. The Commission's decision
therefore grants Idaho customers a cost-free benefit, and forces PacifiCorp to incur
11 Order No. 35277 is available at https://lf-
puc.idaho.gov/WebLink/DocView.aspx?dbid=0&id=81207.
25

costs that it prudently incurred, thereby lowering its effective rate of return. This is
unjust and unreasonable.
CONCLUSION
For the reasons above, this Court should vacate Order Nos. 36207 and 36367
to the extent they disallowed recovery of costs incurred by PacifiCorp to comply with
the Cap and Invest Program, and remand to the Commission with instructions to allow
PacifiCorp to recover these costs.
DATED: March 26, 2025 STOEL RIVES LLP
/s/ W. Christopher Pooser
W. Christopher Pooser, Bar No. 5525
[e-mail]
MARKOWITZ HERBOLD PC
Dallas DeLuca,pro hac vice
[e-mail]
Joseph M. Levy,pro hac vice
[e-mail]
Attorneys for Petitioner-Appellant
2257619.6
26

CERTIFICATE OF SERVICE
I hereby certify that on March 26, 2025, I caused to be served, via email, a true
and correct copy of APPELLANT'S OPENING BRIEF in Docket No. 52508-2024 to
the following:
Commission Staff
Adam Triplett
Deputy Attorney General
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg No. 8
Suite 201 A
Boise, ID 83720-0074
[e-mail]
Bayer Corporation
Thomas J. Budge Brian C. Collins
Racine, Olson PLLP Greg Meyer
201 E. Center Brubaker & Associates
Pocatello, ID 83204-1391 16690 Swingley Ridge Rd., #140
[e-mail] Chesterfield, MO 63017
[e-mail]
[e-mail]
PacifiCorp Idaho Industrial Customers
Ronald L. Williams Bradley Mullins
Brandon Helgeson MW Analytics
Hawley Troxell Ennis & Hawley LLP Teitotie 2, Suite 208
PO Box 1617 Oulunsalo Finland, FI 90460
Boise, ID 83701 [e-mail]
[e-mail]
[e-mail]
Val Steiner Kyle Williams
Itafos Conda LLC BYU Idaho
val.steiner itafos.com [e-mail]
Idaho Attorney General
Raul R. Labrador
Idaho Attorney General
Office of Attorney General
P.O. Box 83720
Boise, ID 83720-0010
[e-mail]
ls/ W. Christopher Pooser
W. CHRISTOPHER POOSER
27