20250424Respondent Brief of the IPUC.pdf

Electronically Filed
4/23/2025 5:10 PM
Idaho Supreme Court
Melanie Gagnepain,Clerk of the Court
By:Brad Thies,Clerk
IN THE SUPREME COURT OF THE STATE OF IDAHO
Supreme Court Docket No. 52508-2024
PACIFICORP DBA ROCKY MOUNTAIN )
POWER ) Public Utilities Commission No.
PAC-E-24-05
Petitioner-Appellant, )
V. )
IDAHO PUBLIC UTILITIES COMMISION )
Respondent. )
RESPONDENT'S BRIEF OF THE IDAHO PUBLIC UTILITIES COMMISSION
Appeal from Idaho Public Utilities Commission,
Commissioners Eric Anderson, John R. Hammond Jr., and Edward Lodge Presiding
Attorney for Respondent Idaho PUC Attorneys for Respondent PacifiCorp
d/b/a Rocky Mountain Power Company
RAUL R. LABRADOR
Idaho Attorney General W. Christopher Pooser, ISB #5525
Stoel Rives LLP
Adam Triplett, ISB #10221 101 S. Capitol Boulevard, Ste. 1900
Idaho Public Utilities Commission Boise, ID 83702
11331 W. Chinden Blvd. [e-mail]
Building 8, Suite 201-A
Boise, ID 83704 Dallas DeLuca,pro hac vice
[e-mail] Joseph M. Levy,pro hac vice
Markowitz Herbold PC
1455 SW Broadway, Ste. 1900
Portland, OR 97201
[e-mail]
[e-mail]

TABLE OF CONTENTS
I. STATEMENT OF THE CASE .................................................................................................. 1
A. Nature of the Case............................................................................................................ 1
B. Statement of Facts............................................................................................................ 1
1. The 2020 PacifiCorp Interjurisdictional Protocol............................................................ 1
2. Treament of Electric Utilities under the Washington Climate Commitment Act............ 2
C. Course of Proceedings...................................................................................................... 4
II. ISSUE PRESENTED ON APPEAL.......................................................................................... 8
III. STANDARD OF REVIEW...................................................................................................... 9
IV. ARGUMENT...........................................................................................................................10
A. The IPUC correctly determined that the WCCA is a "Portfolio Standard"...................10
B. Including the costs of complying with the WCCA in Idaho rates would not be fair,just,
andreasonable................................................................................................................ 16
V. CONCLUSION....................................................................................................................... 20

TABLE OF AUTHORITIES
Cases
■ Colorado Interstate Gas Co. a FERC, 324 U.S. 581 (1945) ........................................... 16
■ Darby a Pennsylvania Pub. Util. Comm'n, 150 A.2d 378 (Pa. Super. Ct. 1959)............. 14
■ Gen. Tel. Co. of The Nw. a Idaho Pub. Utilities Comm'n, 109 Idaho 942, 712 P.2d 643
(1986).................................................................................................................................I I
■ Grindstone Butte Mut. Canal Co. a Idaho Pub. Utilities Comm'n, 102 Idaho 175, 627
P.2d 804 (1981)................................................................................................................. 16
■ Idaho Power Company v Tidwell, 164 Idaho 571, 434 P.3d 175 (2018)............................ 9
■ In re Jay Hulet's Complaint Regarding Idaho Power Co. 's Irrigation Buy-Back Program,
138 Idaho 476, 65 P.3d 498 (2003)..................................................................................... 9
■ In re MCI Telecommunications Corp. Complaint, 612 N.W.2d 826 (Mich. Ct. App. 2000)
........................................................................................................................................... 14
■ In re TruConnect Commc'ns, Inc., 263 A.3d 770 (Vt. 2021)............................................ 14
■ Intermountain Gas Co. a Idaho Pub. Utilities Comm'n, 97 Idaho 113, 540 P.2d 775
(1975).................................................................................................................................I I
■ NAACP v Fed. Power Comm'n, 425 U.S. 662 (1976)..................................................... 19
■ Pandrea a Barrett, 160 Idaho 165, 369 P.3d 943 (2016) ................................................... 9
■ Rosebud Enterprises, Inc. a Idaho Pub. Utilities Comm'n, 128 Idaho 609, 917 P.2d 766
(1996).................................................................................................................................. 9
■ State v Bujak, 174 Idaho 102, 551 P.3d 771 (2024)......................................................... 14
■ Utah Power&Light Co. a Idaho Pub. Utilities Comm'n, 102 Idaho 282, 629 P.2d 678
(1981).................................................................................................................................11
Statutes
■ Idaho Code § 61-502......................................................................................................... 10
■ Idaho Code § 61-629........................................................................................................... 9
■ RCW § 19.405.050 ............................................................................................................. 4
■ RCW §§ 19.405.010, et seq. ............................................................................................... 4
■ RCW § 70A.65.005....................................................................................................... 2, 17
■ RCW § 70A.65.010(1)........................................................................................................ 3
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■ RCW § 70A.65.060................................................................................................... 2, 3, 18
■ RCW § 70A.65.070................................................................................................... 2, 3, 28
■ RCW § 70A.65.080................................................................................................... 2, 3, 18
■ RCW § 70A.65.100......................................................................................................... 3, 4
■ RCW § 70A.65.110............................................................................................................. 3
■ RCW § 70A.65.120............................................................................................................. 4
■ RCW § 70A.65.130............................................................................................................. 3
■ RCW § 70A.65.240.............................................................................................................4
■ RCW § 70A.65.250.............................................................................................................4
■ RCW § 70A.65.280.......................................................................................................................4
■ Wyo. Stat.Ann. § 33-22-103 ........................................................................................ 3, 17
■ Wyo. Stat.Ann. § 33-22-104 ........................................................................................ 3, 17
Administrative Rules
■ IDAPA 31.01.01.276......................................................................................................... 15
Constitutional Provisions
■ IDAHO CONST. art. V, § 9..................................................................................................... 9
Idaho Public Utilities Commision Orders
■ In re the Application of Rocky Mountain Power for Authority to Increase Its Retail Electric
Service Rates by Approximately$140.2 Million Per Year or 21.6 Percent and to Revise the
Energy Cost Adjustment Mechanism, WPSC Docket No. 20000-633-ER-23, Record No.
17252 - Memorandum Opinion, Findings, and Order(WPSC Jan. 2, 2024) ................... 13
■ In the Matter of the Application of PacifiCorp dba Rocky Mountain Power for Approval of
Amendments to Revised Protocol Methodology, Case No. PAC-E-10-09, Order No. 32346
(IPUC Aug. 31, 2011)......................................................................................................... 1
■ In the Matter of Rocky Mountain Power's Application for Approval of$62.4 Million ECAM
Deferral, Case No. PAC-E-24-05, Order No. 36207 (May 31, 2024)........................ 1, 5, 6
■ In the Matter of Rocky Mountain Power's Application forApproval of$62.4 Million ECAM
Deferral, Case No. PAC-E-24-05, Order No. 36367 (IPUC Oct. 10, 2024) .................. 1, 6
■ In the Matter of Rocky Mountain Power's Application for Approval of the 2020 PacifiCorp
Inter-Jurisdictional Allocation Protocol, Case No. PAC-E-19-20, Order No. 34640 (IPUC
April22, 2020).............................................................................................................. 2, 15
ii

■ In the Matter of Rocky Mountain Power's Petition forApproval of an Extension of the 2020
Inter-Jurisdictional Allocation Protocol, Case No. PAC-E-23-13, Order No. 35984 (IPUC
Nov. 2, 2023)................................................................................................................. 2, 12
■ In the Matter of PacifiCorp dba Pacific power, 2024 Transition Adjustment Mechanism,
Case No. UE 420, Order No. 23-404 (OPUC Oct. 27, 2023)........................................... 13
■ Rocky Mountain Power's Application, Docket No. 24-035-01 (Utah PSC Feb 25, 2025)14
Secondary Sources
■ Ashley J. Lawson, Cong. Rsch. Serv., R45913, Electricity Portfolio Standards:
Background, Design Elements, and Policy Considerations (2020).............................11, 17
■ 73B C.J.S. Public Utilities § 127...................................................................................... 12
■ Mike Jacobs, Another Reason Energy Costs are Higher in Winter, THE EQUITATION,
https://blog.ucs.org/mike jacobs/another-reason-energy-costs-are-higher-in-winter/ ..... 18
■ Dep't of Ecology State of Wash., Cap-and-Invest auctions & market,
https:Hecology.wa.gov/Air-Climate/Climate-Commitment-Act/Cap-and-invest/Auctions-
and-market.......................................................................................................................... 3
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STATEMENT OF THE CASE
A. Nature of the Case
PacifiCorp, d/b/a/ Rocky Mountain Power Company, ("PacifiCorp") appeals from Order
Nos. 36207 and 36367 of the Idaho Public Utilities Commission ("IPUC") in Case No. PAC-E-
24-05. These orders denied PacifiCorp recovery of costs it incurred to purchase Green House Gas
allowances ("Allowances") from the State of Washington as required by the Cap and Invest
Program created by the Washington Climate Commitment Act("WCCA"). PacifiCorp asserts that
the IPUC misapplied the 2020 PacifiCorp Inter jurisdictional Allocation Protocol ("2020
Protocol") in denying recovery of these costs. PacifiCorp further argues this decision was neither
just, reasonable, nor supported by the evidence.
B. Statement of Facts
1. The 2020 PacifiCorp Inter-Jurisdictional Protocol
PacifiCorp is an electric utility that serves customers in Idaho,Washington, Oregon, Utah,
Wyoming, and California. (R. 499). PacifiCorp recovers the ownership and operating costs of its
generation and transmission facilities by charging retail rates that are established in state regulatory
proceedings. Id. Because PacifiCorp's generation and transmission facilities (along with its other
general functions) are regarded as serving all PacifiCorp customers, these costs must be
apportioned and allocated to customers in each state where rates are being set. See In the Matter
of the Application of PacifiCorp dba Rocky Mountain Power for Approval of Amendments to
Revised Protocol Methodology, Case No. PAC-E-10-09, Order No. 32346, at I (IPUC Aug. 31,
2011).
For more than two decades,PacifiCorp has sought to establish a uniform allocation method
for all the states in its service territory. Over the years, this resulted in PacifiCorp and other
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interested stakeholders developing various iterations of an inter jurisdictional protocol to allocate
costs among the states in which PacifiCorp operates. Id. The 2020 Protocol is the most recent
version of this inter jurisdictional allocation protocol, which the IPUC approved for use from
January 1, 2020, through December 31, 2025. In the Matter of Rocky Mountain Power's
Application for Approval of the 2020 PacifiCorp Inter-Jurisdictional Allocation Protocol, Case
No.PAC-E-19-20,Order No.34640(IPUC April 22,2020)(initially approving the 2020 Protocol);
In the Matter of Rocky Mountain Power's Petition for Approval of an Extension of the 2020 Inter-
Jurisdictional Allocation Protocol, Case No. PAC-E-23-13, Order No. 35984 (IPUC November 2,
2023) (extending the IPUC's approval of the 2020 Protocol through December 31, 2025).
The 2020 Protocol describes policies, procedures, and methods for allocating costs and
assigning benefits associated with components of PaciflCorp's regulated utility service. Although
the 2020 Protocol lays out an extensive process of cost allocation, it is not a rigidly applied cost
recovery mechanism. (R. 501). Indeed, the 2020 Protocol expressly states that it "is not intended
to and will not prejudge . . . the extent to which any particular cost may be reflected in rates." (R.
501). Nor does the 2020 Protocol derogate the IPUC's independent duty and authority to fix fair,
just, and reasonable rates, stating that it is not "intended to abrogate any Commission's right or
obligation to . . . determine fair,just and reasonable rates," or "consider the effect of changes in
laws, regulations, or circumstances on inter jurisdictional allocation policies and procedures"
when doing so. Id.
2. Treament of Electric Utilities under the Washington Climate Commitment Act
In 2021, the State of Washington enacted the WCCA, which instituted a Cap and Invest
Program to reduce greenhouse gas emissions in the state. See RCW §§ 70A.65.005, 70A.65.060
to 70A.65.080. Under this program, the Washington Department of Ecology ("WDE") sets a
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declining greenhouse gas emissions cap for"Covered Entities,"defined as entities emitting at least
25,000 metric tons of carbon dioxide equivalent annually. RCW §§ 70A.65.060 to 70A.65.080.
The WDE enforces this cap by requiring Covered Entities to obtain "compliance instruments,"
including Allowances that authorize the emission of one metric ton of carbon dioxide equivalent.
RCW § 70A.65.010(1) (defining "Allowance). To ensure that emissions reduction goals are met,
the WDE auctions off fewer Allowances each year. RCW § 70A.65.070. PacifiCorp must obtain
allowances to cover the emissions from its natural gas-fired generation facility in Chehalis,
Washington ("Chehalis") produced while operating it to generate electricity. (R. 234). Generally,
Covered Entities purchase Allowances through auctions the WDE holds. See RCW § 70A.65.100.
The first such auction was held on February 28, 2023. Dep't of Ecology State of Wash., Cap-and-
Invest auctions & market, https:Hecology.wa.gov/Air-Climate/Climate-Commitment-Act/Cap-
and-invest/Auctions-and-market (last accessed April 19, 2025).
To avoid imposing the cost of the Cap and Invest Program upon its own residents,
Washington distributes Allowances for free to certain Covered Entities, including investor-owned
electric utilities like PacifiCorp. RCW §§ 70A.65.110 to 70A.65.130. However, the WDE
distributes these free allowances to electric utilities only to cover emissions from generating
electricity for customers in Washington. RCW §§ 70A.65.110 to 70A.65.130. Because only a
portion of the electricity Chehalis generates is assigned to Washington customers, PacifiCorp had
to purchase Allowances to cover the emissions for electricity exported to other states, including
Idaho. Thus, unlike generally applicable generation taxes (such as the Wyoming Wind Tax) that
'See Wyo. Stat.Ann. § 33-22-103, -104 (imposing a tax of$1.00 on every megawatt hour of wind
energy generated in Wyoming).
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impact all PacifiCorp customers,the WCCA discriminates against the residents of other states and
shields PacifiCorp's Washington customers from the impact of the Cap and Invest Program.
The reason why Washington exempted electric utilities from the obligation to obtain
allowances for emissions produced to generate electricity distributed in-state is readily apparent.
In 2019, the state enacted the Clean Energy Transformation Act ("CETA"), codified at RCW §§
19.405.010 et seq., which mandates that electric utilities must serve Washington residents with
entirely non-carbon-emitting energy sources by the year 2045. Notably, this is the same year in
which the allocation of free allowances under the WCCA ceases. See RCW § 19.405.050 &
70A.65.120(2)(d). Washington has asserted that the purpose of imposing the costs of the Cap and
Invest Program solely on electricity exported out of state is to avoid charging its residents twice
for the transition to non-carbon-emitting energy.See(R.235)(quoting testimony from the Director
of the WDE describing the purpose of issuing free Allowances). However, the unstated upshot of
this is that Washington currently receives the double benefit of its PacifiCorp customers bearing
only nominal costs of CETA compliance(about$336,219 in 2023)while collecting millions(about
$42 million in 2023) from PacifiCorp, or its non-Washington customers,to fund other Washington
climate initiatives by selling Allowances.2 (R. 461).
C. Course of Proceedings
On April 1, 2024, PacifiCorp filed an annual application with the IPUC for a rate
adjustment under the Energy Cost Adjustment Mechanism (`SCAM") to recover net power costs
incurred to provide electric service to customers in Idaho. (R. 19-26).The ECAM is a process that
allows PacifiCorp to recover or refund the difference between actual power cost (e.g., the actual
amount spent for fuels to generate electricity or to purchase wholesale electricity, etc.) and
2 Funds collected from the sale of Allowances in 2023 were deposited into various accounts for use in Washington
climate programs.See RCW§70A.65.100(7)(c),70A.65.240,70A.65.250&70A.65.280.
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forecasted power cost that is included in base rates. PacifiCorp sought to recover through the
ECAM various costs it incurred, including about $2.3 million in costs incurred for obtaining
Allowances to comply with the Cap and Invest Program. (R. 234)
On May 31, 2024, the IPUC issued Order No. 36207, which authorized PacifiCorp to
recover all the costs identified in its ECAM filing except those it incurred to obtain Allowances
under the Cap and Invest Program. (R. 224-37). The IPUC concluded that "allowing recovery of
costs incurred to comply with the [Cap and Invest Program] from Idaho customers would violate
the 2020 Protocol."(R. 234). In reaching this conclusion,the IPUC rejected PacifiCorp's assertion
"that the costs it incurred to comply with the [Cap and Invest Program] are like other taxes imposed
on the Company, like the Wyoming Wind Tax."Id.
Instead, the IPUC determined that "the WCCA is more akin to [a Renewable Portfolio
Standard] as it is designed to reduce the use of fossil fuel generation" to serve customers. Id. The
IPUC noted that the 2020 Protocol defines a "Portfolio Standard" as "a law or regulation that
requires [the Company] to acquire . . . [r]esources in a prescribed manner."Id. The IPUC reasoned
that, despite owning"the Chehalis generating facility before the WCCA was enacted, [PacifiCorp]
lost the right to operate it to generate electricity to serve customers outside of Washington State
without purchasing allowances when the legislation became effective." Id. The IPUC then
concluded that PacifiCorp "did not acquire that right again until after it obtained allowances as
prescribed by the Washington State legislature," and the costs of resource procurement standards
like this should be allocated to Washington under the 2020 Protocol.Id.
To further buttress its decision, the IPUC cited characteristics of the Cap and Invest
Program that distinguished it from a tax. For example, the IPUC observed that the price of the
Allowances is determined in an auction—not directly by the Washington legislature. (R. 235). The
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IPUC also noted that the WCCA is linked with CETA, another Washington climate initiative. Id.
It reasoned that because Washington will cease issuing free Allowances for the Cap and Invest
Program the same year CETA mandates the end of fossil-fuel generation to provide electricity
Washington residents, the two Acts combine to implement a single integrated Washington
initiative. The IPUC concluded that part of the reason it approved the 2020 Protocol was to isolate
the costs of such state-specific policies and allocate them to customers in the states that created
them. (R. 235).
On June 21, 2024, PacifiCorp petitioned for reconsideration of Order No. 36207, arguing
that the IPUC misinterpreted the 2020 Protocol and that disallowing recovery of the cost of
Allowances for the Cap and Invest Program violated ratemaking principles and the Dormant
Commerce Clause. (R. 249-66)
On October 18, 2024,the IPUC issued Order No. 36367, denying PacifiCorp's petition for
reconsideration. (R. 633-46). In addition to reiterating the interpretation of the 2020 Protocol it
applied to initially disallow recovery of the cost of Allowances for the Cap and Invest Program,
the IPUC invoked Section 1 of the 2020 Protocol,which expressly states that the IPUC retains the
authority to "determine fair,just, and reasonable rates" and to "consider the effect of changes in
laws, regulations, or circumstances on inter jurisdictional allocation policies when determining
fair,just and reasonable rates." (R. 642).Analogizing to the 2020 Protocol's allocation of certain
artificially inflated Qualified Facility power purchases agreements to the state that approved them,
the IPUC concluded that the amount the WCCA artificially inflated PacifiCorp's costs should be
assigned to Washington. (R. 643). The IPUC further reasoned that "requiring Idaho ratepayers to
bear the cost of a unilateral Washington policy decision that is not equally applied to its own
s The 2020 Protocol defines a"Qualified Facility"as"small power production or cogeneration facilities developed
under the Public Utility Regulatory Policies Act of 1978 (PURPA)and related State laws and regulations."(R. 569)
6

residents is not fair,just, and reasonable."Id. Accordingly, the IPUC denied PacifiCorp's petition
for reconsideration. (R. 645). PacifiCorp timely appealed to the Idaho Supreme Court from the
order denying its petition for reconsideration.
7

I. ISSUE PRESENTED ON APPEAL
1. Whether PacifiCorp has failed to show that the IPUC did not regularly pursue its authority
to disallow recovery of the cost of Allowances to comply with the WCCA.
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II. STANDARD OF REVIEW
The Idaho Constitution confers appellate jurisdiction upon this Court to review orders of
the IPUC, but grants the Idaho legislature authority to establish the conditions, scope, and
procedure for such appeals. IDAHO CONST. art. V, § 9. Exercising that constitutional prerogative,
the Idaho legislature limited this Court's review of IPUC orders to determining only whether the
IPUC "regularly pursued its authority."Idaho Code § 61-629.Accordingly, factual findings by the
Commission must be affirmed unless it appears that the clear weight of the evidence is against the
conclusion or there is strong and persuasive evidence that the IPUC abused its discretion.Rosebud
Enterprises, Inc. a Idaho Pub. Utilities Comm'n, 128 Idaho 609, 618, 917 P.2d 766, 775 (1996).
Review of the IPUC's legal conclusions is limited to determining whether the IPUC regularly
pursued its authority. In re Jay Hulet's Complaint Regarding Idaho Power Co. 's Irrigation Buy-
Back Program, 138 Idaho 476, 478, 65 P.3d 498, 500 (2003).4
a The Commission acknowledges that this Court added to the well-established standard of review applicable to
Commission orders in Idaho Power Company v Tidwell by indicating that the Court applies the same standard of
review as the Commission when reviewing decisions to grant or deny petitions for reconsideration. 164 Idaho 571,
575,434 P.3d 175, 179 (2018). To support applying this standard of review,the Court cited Pandrea a Barrett, 160
Idaho 165, 369 P.3d 943 (2016). However, Pandrea was an appeal from a partition action in a district court and
provides no support or useful guidance on the proper standard of review for Commission orders, including those
denying a petition for reconsideration.Moreover,this Court applying the same standard as the Commission effectively
results in de novo review, expanding the scope of review on appeal beyond that established under Idaho Code § 61-
629 and in violation of Article V, section 9 of the Idaho Constitution.Accordingly,the expansion of the standard of
review established in Tidwell should be disavowed.
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III. ARGUMENT
PacifiCorp contends that the IPUC erred by concluding that the WCCA is a Portfolio
Standard under the 2020 Protocol. PacifiCorp further argues that it is unjust and unreasonable to
disallow recovery of the costs of Allowances that PacifiCorp is legally required to incur and that
benefit Idaho customers. Neither argument has merit.
PacifiCorp's first argument fails because the IPUC properly allocated the costs of Cap and
Invest Allowances under the 2020 Protocol.Under the 2020 Protocol,the state adopting a Portfolio
Standard is allocated the additional costs of power plants, like Chehalis, acquired to meet that
standard. (R. 506). The WCCA is a Portfolio Standard because it prescribes a process PacifiCorp
must follow to lawfully operate Chehalis to generate electricity. Specifically, PacifiCorp must
obtain Allowances to cover the greenhouse gases Chehalis emits to lawfully operate it.Although
PacifiCorp will receive the Allowances necessary to serve Washington customers for free from the
WDE, it must obtain Allowances to serve Idaho customers by other means.
PacifiCorp has also failed to show that the IPUC erred in concluding that allowing recovery
of the costs of Cap and Invest Program Allowances would not result in fair,just, and reasonable
rates. Both the IPUC and PacifiCorp agree that the state of Washington's distribution of no-cost
allowances only for its residents is unduly discriminatory. The IPUC did not err in concluding that
requiring PacifiCorp's Idaho customers to bear the cost of a patently discriminatory Washington
policy that provides no benefit to Idaho customers would not be fair,just,and reasonable.For these
reasons, this Court should affirm the IPUC's orders denying PacifiCorp recovery of costs it
incurred to obtain Allowances to comply with the Cap and Invest Program.
A. The IPUC correctly determined that the WCCA is a "Portfolio Standard"
The IPUC is charged with ensuring that the rates of public utilities are just, reasonable,
lawful, and non-discriminatory. See Idaho Code § 61-502 (authorizing the IPUC to investigate and
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fix rates); Utah Power&Light Co. a Idaho Pub. Utilities Comm'n, 102 Idaho 282, 284, 629 P.2d
678, 680(1981). Setting just and reasonable rates is a legislative function that requires a balancing
of investor and consumer interests. Intermountain Gas Co. a Idaho Pub. Utilities Comm'n, 97
Idaho 113, 126, 540 P.2d 775, 788 (1975). The IPUC has broad discretion in performing its rate
making function. Gen. Tel. Co. of The Nw. a Idaho Pub. Utilities Comm'n, 109 Idaho 942, 944,
712 P.2d 643, 645 (1986).
The IPUC determined that allocating the cost of Allowances to comply with the Cap and
Invest Program to Idaho customers would violate the 2020 Protocol because the WCCA is a
"Portfolio Standard." (R. 234).A portfolio standard is a government policy intended to change the
energy sources used to generate electricity. See Ashley J. Lawson, Cong. Rsch. Serv., R45913,
Electricity Portfolio Standards:Background, Design Elements, and Policy Considerations (2020).
A law requiring utilities to procure electricity from renewable sources, like windmills, would be a
"renewable portfolio standard."Id. at 1. Because such policies can artificially and unnecessarily
inflate the cost for providing electric service by forcing utilities to obtain new or different power
sources,the 2020 Protocol allocates any such artificially inflated costs to the state that adopted the
policy. (R. 506). Indeed, the principle that artificially inflated costs should be allocated to their
source is implicitly applied in various provisions of the 2020 Protocol. See(R. 506)(allocating the
additional costs from Portfolio Standards to the state that adopted the standard); (R. 643)
(allocating costs for certain Qualified Facility power purchase agreements that exceed the
forecasted reasonable energy price to the state that approved the agreement). Stated differently,the
2020 Protocol acknowledges that it is fair,just, and reasonable to allocate artificially inflated costs
to their source.
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Section 3.1.2.1 of the 2020 Protocol addresses the allocation of costs associated with
compliance with a Portfolio Standard. Under Section 3.1.2.1, the extra costs of"Interim Period
Resources"5 that PacifiCorp "acquired" to satisfy a state's "Portfolio Standard" are allocated to
that state,rather than shared across all areas PacifiCorp serves. (R. 506).The 2020 Protocol defines
a "Portfolio Standard" as "a law or regulation that requires PacifiCorp acquire . . . . Resources in
a prescribed manner." (R. 568). A "Resource" is, among other things, a PacifiCorp-owned
"generating unit" or"plant." (R. 569). It is undisputed that Chehalis is a Resource under the 2020
Protocol, and Allowances to comply with the Cap and Invest Program are not. (R. 641). As the
IPUC correctly recognized,the WCCA establishes a procedure PacifiCorp must follow to lawfully
operate greenhouse gas producing generation units, like Chehalis.
PacifiCorp asserts that the WCCA is not a Portfolio Standard because it did not require
PacifiCorp to acquire a Resource.According to PacifiCorp, it did not acquire Chehalis to comply
with the WCCA because it already owned the facility. Despite any superficial appeal, however,
PacifiCorp's interpretation conflicts with the underlying purpose and intent of the 2020 Protocol.
The 2020 Protocol does not define what it means to"acquire"a Resource.When construing
this term,however,it is important to remember that the 2020 Protocol is a method of cost allocation
for rate making. A public utility cannot recover costs incurred for an asset that is not used and
useful in providing utility service. 73B C.J.S. Public Utilities § 127 (recognizing that a public
utility's recovery of assets that are not used and useful may be disallowed). Thus, bare ownership
of an asset is insufficient by itself to justify the recovery of its associated costs. Because allocating
5 An Interim Period Resource is a"Resource in commercial operation,or with a contract delivery date,as applicable
during the Interim Period." (R. 566).A"Resource" is a PacifiCorp-owned"generating unit, plant, mine, long-term
Wholesale Contract, Short-Term Purchase and Sale, Non-firm purchase and Sale, or QF contract." (R. 569). The
"Interim Period"originally referred the original term of the 2020 Protocol,January 1,2020,to December 31,2023.
(R. 503). The IPUC subsequently extended the end date of Interim Period to December 31, 2025. In the Matter of
Rocky Mountain Power's Petition for Approval of an Extension of the 2020 Inter-Jurisdictional Allocation Protocol,
Case No.PAC-E-23-13,Order No.35984(IPUC Nov.2,2023).
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the costs of an asset that is not used and useful for recoverin rates would be inappropriate,the term
"acquire" as used in the 2020 Protocol cannot include Resources the Company cannot lawfully
use. Accordingly, the IPUC did not err when it concluded that PacifiCorp "has not acquired a
Resource under the 2020 Protocol if it does not have the right to lawfully employ the Resource to
provide electrical service to customers. . . ." (R. 642). After enactment of the WCCA, Chehalis
could not lawfully operate and produce electricity unless PacifiCorp obtained Allowances to cover
the facility's greenhouse gas emissions. The IPUC correctly determined that, once PacifiCorp was
required to obtain Allowances, it acquired Chehalis within the context of the 2020 Protocol by
obtaining Allowances.
The IPUC's interpretation of the 2020 Protocol aligns with the decisions of other state
regulators. The Wyoming Public Service Commission("WPSC") determined that the WCCA was
effectively "akin to a renewable portfolio standard" properly allocated to Washington under the
2020 Protocol. See In re the Application of Rocky Mountain Power for Authority to Increase Its
Retail Electric Service Rates by Approximately $140.2 Million Per Year or 21.6 Percent and to
Revise the Energy Cost Adjustment Mechanism,WPSC Docket No.20000-633-ER-23,Record No.
17252 - Memorandum Opinion, Findings, and Order, at¶211 (WPSC Jan. 2, 2024).6 The WPSC
also distinguished the Cap and Invest Program from a generation tax, reasoning that unlike a tax
"the rate of GHG allowances is not set by the Washington Legislature" and "Washington
consumers do not pay for GHG allowances."Id.; (R. 228) (discussing the rationale supporting the
WPSC's denial of PacifiCorp's request to recover from Wyoming customers the cost of
Allowances to comply with the Cap and Invest Program).The Oregon Public Utilities Commission
("OPUC") denied PacifiCorp recovery of Cap and Invest Allowances in its 2024 Transition
6 This order is publicly accessible through a docket search at the following URL: https:Hdms.wyo.gov/(S(tnbjcd4ga
ovg4gxhlmclvfzb))/external/publicus ers.aspx
13

Adjustment Mechanism filing for similar reasons. See In the Matter of PacifiCorp dba Pacific
power, 2024 Transition Adjustment Mechanism, Case No. UE 420, Order No. 23-404, at 6-10
(OPUC Oct. 27, 2023).7 Recently, the Utah Public Service Commission likewise determined that
Washington should bear the costs of its Cap and Invest Program. Rocky Mountain Power's
Application, Docket No. 24-035-01 (Utah PSC Feb 25, 2025) available at
https:llpscdocs.utah.govlelectricl24docsl24035011338453240350lo2-25-2025.pdf (last accessed
April 21, 2025).
The 2020 Protocol is not a settlement allocating presently existing costs. Rather, the 2020
Protocol proposes an agreed upon method for allocating future costs throughout its duration. This
makes the 2020 Protocol more akin to a proposed order stating general commission policy toward
PacifiCorp's costs than a settlement in a contested case. Viewed thusly, the IPUC adopted a
proposed order when it approved the 2020 Protocol. When reviewing such an order, this Court
should accord the IPUC no less deference than a district court receives when interpreting one of
its own orders. Cf. State a Bujak, 174 Idaho 102, 551 P.3d 771, 776 (2024) ("A trial court's
interpretation of its orders will be given deference, but only to the extent that the interpretation is
reasonable."). This is especially true as the IPUC is particularly well-equipped to interpret its own
orders. See Darby a Pennsylvania Pub. Util. Comm'n, 150 A.2d 378, 379 (Pa. Super. Ct. 1959).
This accords with judicial treatment of orders from public utility regulators in other jurisdictions.
In re MCI Telecommunications Corp. Complaint, 612 N.W.2d 826, 833 (Mich. Ct. App. 2000)
(observing that Michigan courts will affirm the Michigan Public Service Commission's
interpretation of its own orders as long as they are reasonable and supported by the record); see
also In re TruConnect Commc'ns, Inc., 263 A.3d 770, 775 (Vt. 2021) (reviewing a Vermont Public
7 This order is publicly accessible through a docket search at the following URL: https://www.oregon.gov/puc/
eDockets/Page s/default.aspx
14

Utilities Commission order with "deference to the Commission's informed judgment and
expertise").
Even if the 2020 Protocol does not constitute an IPUC order,this Court should still accord
deference to the IPUC's interpretation of it. Despite arising from discussions between various
independent entities, the 2020 Protocol differs from a mere private contract or settlement
agreement in district court litigation.$Indeed,the 2020 Protocol expressly recognizes that it needed
approval from the IPUC to be used in rate making proceedings in this state. (R. 499); see also
IDAPA 31.01.01.276 (stating that the IPUC will independently review settlements to determine
whether they are just, fair, reasonable, in the public interest, and accord with law and regulatory
policy).Agreements that need approval from a regulatory body lose their status as private contracts
and gain a public interest gloss. See Scenic Am., Inc. v United States Dept of Transportation, 836
F.3d 42, 56 (D.C. Cir. 2016) (quoting Cajun Electric Power Cooperative, Inc. a FERC, 924 F.2d
1132, 1135(D.C. Cir 1991)).To ensure that such agreements do not conflict with the public interest
throughout their duration, the IPUC must draw upon its view of the public interest when
interpreting them. Thus,this Court should defer to the IPUC interpretation of the 2020 Protocol to
avoid supplanting the IPUC's conception of the public interest with its own.
Certain distinctive aspects of the 2020 Protocol further counsel in favor of judicial
deference to the IPUC's interpretations of it. First, the 2020 Protocol addresses the allocation of
costs and assignment of benefits. Cost allocation is a matter peculiarly within the IPUC's area of
expertise. It is "not a matter for the slide rule" as it requires an exercise of judgment based on a
8 The 2020 Protocol was developed through discussions between PacifiCorp and interested stakeholders—including
staff members of various state commissions, State regulatory agencies, and conservation organizations. The final
agreement resulting from these discussions received IPUC approval in April 2020.In the Matter of Rocky Mountain
Powers Application for Approval of the 2020 PacifiCorp Inter-Jurisdictional Allocation Protocol, Order No. 34640,
2020 WL 2044234,at*3 (Apr.22,2020).
15

multitude of facts. Colorado Interstate Gas Co. v FERC, 324 U.S. 581, 589 (1945). The IPUC's
technical knowledge and expertise enhance its understanding of the 2020 Protocol, the factual
issues it addresses, and how it serves the public interest. Accordingly, the IPUC's interpretations
of the 2020 Protocol should receive judicial respect and deference. See Grindstone Butte Mut.
Canal Co. a Idaho Pub. Utilities Comm'n, 102 Idaho 175, 182, 627 P.2d 804, 811 (1981). Because
the IPUC's interpretation of the 2020 Protocol is reasonable, it should be affirmed.
B. Including the costs of complying with the WCCA in Idaho rates would not be fair, lust,
and reasonable
Even if the WCCA were not a Portfolio Standard, PacifiCorp would not be entitled to
recover the costs of Allowances for the Cap and Invest Program because the IPUC properly
determined that permitting that would not be fair,just,and reasonable.The 2020 Protocol expressly
allows the IPUC to deviate from its general cost-allocation provisions. Specifically, the 2020
Protocol provides that "[t]he proposed cost allocation of a particular expense . . . is not intended
to and will not prejudge . . . the extent to which any particular cost may be reflected in rates." (R.
501). Furthermore,the 2020 Protocol acknowledges that nothing within it"is intended to abrogate
any Commission's right or obligation to . . . determine fair,just and reasonable rates,"or"consider
the effect of changes in laws, regulations, or circumstances on inter jurisdictional allocation
policies and procedures"when doing so. (R. 501).
Citing the above-described provisions, the IPUC denied PacifiCorp recovery of Cap and
Invest Program Allowance costs on reconsideration because it would not be fair, just, and
reasonable to allow those costs to be recovered. (R. 626). To support its decision, the IPUC noted
that the 2020 Protocol itself allocated certain artificially inflated costs to the state that generated
the inflation, implicitly acknowledging that it is just to allocate artificially inflated costs to their
source. Specifically, Section 4.4.2.1 of the 2020 Protocol assigns costs for recent Qualified Facility
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power purchase agreements that exceed the forecasted reasonable energy price to the state that
approved the agreement. (R. 643).
Additionally, the IPUC reasoned that requiring PacifiCorp's Idaho customers "to bear the
cost of a unilateral Washington policy"that does not apply to Washington residents is not just and
reasonable. This discriminatory feature of the Cap and Invest Program distinguishes it from the
flat tax imposed on electricity produced from wind resources in Wyoming. See Wyo. Stat.Ann. §
33-22-103, -104 (imposing a tax of$1.00 on every megawatt hour of wind energy generated in
Wyoming). Unlike Washington's implementation of the Cap and Invest Program, Wyoming has
not shielded its residents from the impacts of this tax.Accordingly,the costs of the Wyoming Wind
Tax are allocated across PacifiCorp's system because they impact all of PacifiCorp's customers
indiscriminately. Although this distinction alone is sufficient to support the IPUC's decision to
treat the Wyoming Wind Tax differently than the WCCA, there are other salient distinctions.
The findings and statement of legislative intent contained in the Cap and Invest Program
clarify that the program is not primarily designed to be a revenue-generating mechanism to fund
government services. See RCW § 70A.65.005. Indeed, if there were any remaining doubt, the
requirement for WDE to set yearly decreasing allowance budgets to meet emission limits clarifies
that the true purpose of the Cap and Invest Program is to cut greenhouse gas emissions, leading to
changes in the energy sources used to produce electricity. See RCW § 70A.65.070.
This is essentially the same purpose as a portfolio standard. See Lawson, Electricity
Portfolio Standards: Background, Design Elements, and Policy Considerations, at 1. As
previously stated, the additional costs of acquiring a Resource due to a Portfolio Standard are
allocated to the state that adopted it. (R. 506). Indeed, had the WCCA simply required a certain
amount of non-greenhouse gas emitting generation as CETA does, the WCCA would clearly be a
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Portfolio Standard under the 2020 Protocol. The WCCA takes a route to accomplish essentially
the same result that was not expressly contemplated when the 2020 Protocol was approved.
However, the IPUC approved the 2020 Protocol to isolate the costs of such policies and allocate
them to customers in the states that created them. (R. 234). If the 2020 Protocol does not
accomplish this, that justifies departing from it.
Moreover, the costs of an Allowance for the Cap and Invest Program are not directly tied
to generation like the Wyoming Wind Tax.Although a metric ton of greenhouse gas emissions will
correlate with some amount of electric generation, the ratio of carbon emissions to electricity
generated will vary throughout the year. Natural gas-fired generators, like Chehalis, run more
efficiently in the winter. Mike Jacobs, Another Reason Energy Costs are Higher in Winter, THE
EQUITATION, https://blog.ucs.org/mike jacobs/another-reason-energy-costs-are-higher-in-winter/
(last accessed April 20, 2025). Stated differently, a single Allowance will correlate to a greater
amount of electricity in the winter than in the summer. This differs from a generation tax, like the
Wyoming Wind Tax, that directly taxes the generation of electricity.
Furthermore, the Cap and Invest Program applies to more than just the generation of
electricity. Any entity that exceeds the 25,000 metric ton threshold of greenhouse gas emissions
(like natural gas utilities, railroads, or even landfills) may need to obtain Allowances. RCW §§
70A.65.060 to 70A.65.080. At least some of these entities will obtain their required Allowances
through the WDE auctions. This means entities not involved in producing or delivering electricity
will also compete for Allowances, pushing prices even higher.
The patent discrimination in the Cap and Invest Program described above creates a
separate, equally important basis for disallowing recovery Allowances from Idaho customers.All
parties to this appeal agree that Washington's application of the Cap and Invest Program is
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unconstitutional. In its opening brief, PacifiCorp acknowledges that it is challenging the
constitutionality of the Cap and Invest Program in federal court, arguing that it violates the
Dormant Commerce Clause of the United States Constitution. (App.'s Br. at 20). In short,
PacifiCorp is essentially seeking to recover costs it believes arise from an unconstitutional
application of Washington law.
The purpose of rate regulation is to protect ratepayers from unnecessary costs,particularly
when those costs arise from unlawful activity. See NAACP a Fed. Power Comm'n, 425 U.S. 662
(1976).Although PacifiCorp has not engaged in any illegal activity,its request to recover the costs
of obtaining Cap and Invest Allowances arises exclusively from Washington's constitutionally
dubious application of the Cap and Invest Program. Moreover, nothing in the record indicates the
costs associated with obtaining Cap and Invest Allowances were necessary to serve Idaho
customers for any reason other than Washington's unilateral decision to shield Washington electric
customers from the impact of the Cap and Invest Program. Thus, because the costs PacifiCorp
incurred to obtain Cap and Invest Allowances were the result of unlawful activity that
unnecessarily increased the cost to serve Idaho customers, the IPUC did not err by disallowing
recovery of them from Idaho ratepayers.
PacifiCorp contends that it would have cost its Idaho customers about $4.7 million more
in energy costs to serve them without Chehalis. (App's Br. at 21). However, IPUC Staff disputed
this amount, arguing that it overstated the cost of removing generation from Chehalis from Idaho
rates. According to IPUC Staff's calculations, removing Chehalis from Idaho rates would have
cost about $2.6 million. (R. 463). This is just slightly more than the approximately $2.3 million
cost PacifiCorp incurred to obtain Allowances for the Cap and Invest Program.
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In concluding its brief, PacifiCorp asserts that if it is unable to recover Allowance costs
from Idaho customers, this will create an unrecoverable loss. This assertion is one better raised to
the Washington Utilities and Transportation Commission ("WUTC") and the Washington
legislature. The IPUC's decision to disallow recovery of the Cap and Invest Allowances does not
create a loss for PacifiCorp. Unlike the IPUC order to employ an outside accountant at issue in
Hayden Pines Water Co. a Idaho Public Utilities Comm'n, 834 P.2d 873 (1992),which PacifiCorp
cites to support its argument, the IPUC did not direct PacifiCorp to take any specific action that
caused it to incur the cost of obtaining Allowances. It was Washington's unilateral policy decision
to enact the WCCA that obligated PacifiCorp to incur the cost of obtaining Cap and Invest
Allowances. Moreover, the IPUC has not denied PacifiCorp recovery of the costs it incurred to
obtain Allowances and seek recovery. Rather, the IPUC—like every other state utility commission
to address this issue—determined that those costs are properly allocated to Washington. If the
WUTC disallows recovery of the costs a patently discriminatory Washington law imposed on
PacifiCorp, the Washington legislature will have effectively reduced PacifiCorp's rate of return—
not the IPUC.
IV. CONCLUSION
PacifiCorp has not shown that the Idaho Public Utilities Commission did not regularly
pursue its authority in disallowing recovery of the costs to obtain Cap and Invest Allowances.
Accordingly, the IPUC respectfully requests that this Court affirm the orders denying recovery of
those costs.
Respectfully submitted this 23rd day of April, 2025.
ca'all
ADAM TRIPLE FT, ISB # 10221
Deputy Idaho Attorney General
Attorney for Respondent Idaho
Public Utilities Commission
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 23rd day ofApril,2025, served the foregoing Respondent
Brief of the Idaho Public Utilities Commission, in Supreme Court Docket No. 52508-2024, by
forwarding a copy thereof, to the following, via the manner indicated:
Attorneys for Appellant
Pacificorp d/b/a Rocky Mountain
Power Company
❑U.S. Mail, postage prepaid
W. Christopher Pooser, ISB #5525 Stoel Rives LLP ❑personal Delivery
101 S. Capitol Boulevard, Ste. 1900 ®iCourt
Boise, ID 83702 ❑E-Mail
[e-mail]
Dallas DeLuca,pro hac vice
Joseph M. Levy,pro hac vice ❑U.S. Mail, postage prepaid
Markowitz Herbold PC
1455 SW Broadway, Ste. 1900 El Personal Delivery
Portland, OR 97201 ❑X iCourt
❑E-Mail
[e-mail]
[e-mail]
Adam Triplett
Deputy Attorney General
21