20090629Vol I Oral Argument.pdf

.ORIGINAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A PETITION FILED BY AVISTA
CORPORATION FOR AN ORDER
DETERMINING THE OWNERSHIP OF THE
ENVIRONMENTAL ATTRIBUTES (RECS)
ASSOCIATED WITH (PURPAJ QUALIFYING
FACILITY UPON PURCHASE BY A UTILITY
OF THE ENERGY PRODUCED BY A
QUALIFYING FACILITY
)
) CASE
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)
)
)
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NO. AVU-E-09-04
ORAL ARGUMENT
BEFORE
.COMMISSIONER MARSHA SMITH (Presiding)
COMMISSIONER MACK REDFORD
COMMISSIONER JIM KEMPTON
PLACE:Commission Hearing Room
472 West Washington
Boise, Idaho
DATE:June 17, 2009
VOLUME I - Pages 1 - 55
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CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
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1 APPEARANCES
2
3 For the Staff:Scott Woodbury Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
Barton L. Kline, Esq.
and Donovan E. Walker, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
Daniel E. Solander, Esq.
Rocky Mountain Power
201 S. Main Street
Suite 2300
Salt Lake City, Utah 84111
Michael G. Andrea, Esq.
Avista Corporation
1411 E. Mission Ave., MSC-23
Spokane, Washington 99202
RICHARDSON & 0' LEARY
by Peter J. Richardson, Esq.
Post Office Box 7218
Boise, Idaho 83702
McDEVITT & MILLER
by Dean J. Miller, Esq.
Post Office Box 2564
Boise, Idaho 83701-2564
4
5
6 For Idaho Power:
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For Rocky Mountain Power:
For Avista Corporation:
17
For Exergy Development
Group of Idaho, Lower
Valley Energy, Inc., &
U. S. Geothermal, Inc.:
18
19 For Sagebrush Energy, LLC
& Idaho Forest Group LLC:
CSB REPORTING
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APPEARANCES
1 BOISE, IDAHO, TUESDAY, JUNE 17, 2009, 1:00 P. M..2
3
4 COMMISSIONER SMITH: Good afternoon,
5 ladies, and there are a few of us, and gentlemen. This
6 is the time and place set for an oral argument in Case
7 No. AVU-E-09-04, further identified as in the matter of
8 the petition filed by Avista Corporation for an order
9 determining the ownership of the environmental attributes
10 (RECS) associated with a qualifying facility upon
11 purchase by a utility of the energy produced by a
12 qualifying facility. We will have to check and see if.13 that wins the prize for the longest case heading.
14 I first want to explain the timing
15 constraints of the Commission which Ilm not sure why this
16 got sandwiched in today when we have all today tomorrow,
17 but we have a hearing tonight in Coeur d i Alene. We need
18 to be at the State Aeronautics on or about 4: 00 0 i clock,
19 so we only have until about 3: 45 today to do this, but
20 like I say, we have all day tomorrow if we need to go
21 over and it seems to me that there are two issues for
22 discussion today.
23 One is the issue of the motion to dismiss
24 for lack of subject matter jurisdiction and a collateral.25 attack, so does the Commission have subj ect matter
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.1 jurisdiction, is there a collateral attack; and the
2 second is a motion for stay and a motion to reject stay.
3 Is there anyone who sees the issues today differently
4 than those two? All right, seeing no comment, it i S my
5 I thought, first of all, we i 11 take appearances, then
6 we i 11 argue the motion for subj ect matter jurisdiction
7 and then second, the motion for stay, unless you would
8 like to mix them all together. It seems to me it would
9 help my thinking to keep them separated.
10 All right, so we will start on my list
11 with Avista Corporation.
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12 MR. ANDREA: Good afternoon. Michael
13 Andrea for Avista Corporation and with me today is Clint
14 Kalich.
15 MR. KALICH: Good afternoon.
16 COMMISSIONER SMITH: All right, for the
17 Commission Staff.
18 MR. WOODBURY: Scott Woodbury, Deputy
19 Attorney General.
20 COMMISSIONER SMITH: For Sagebrush Energy
21 and Idaho Forest Group.
22 MR. MILLER: Thank you, Madam Chairman.
23 Dean J. Miller of the firm McDevitt & Miller on behalf of
24 Sagebrush and Idaho Forest. I would also like to make a
25 couple of additional introductions. Mr. Ben Ellis, the
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1 vice president of Sagebrush Energy, is here as is Ross
2 Keogh, K-e-o-g-h, an analyst at Sagebrush. Also, the
3 Commission is well acquainted with Larry Crowley who is
4 acting as a consultant for Idaho Forest Group. The Idaho
5 Forest principals had intended to be here today, but late
6 yesterday got a line on a used boiler in California, so
7 flew there to see if they could acquire that, but like
8 the Sagebrush principals, they have a keen interest in
9 the outcome of today i s proceedings.
COMMISSIONER SMITH: Thank you,
11 Mr. Miller. For Rocky Mountain Power.
12 MR. SOLANDER: Thank you, Chairman.
13 Daniel Solander on behalf of Rocky Mountain Power. I
14 have with me at the table Ted Weston, our regulatory
15 affairs manager for the State of Idaho, and Bruce
16 Griswold, our director of short-term origination, should
17 be appearing by phone as well.
18 COMMISSIONER SMITH: Mr. Griswold, are you
19 on the phone?
20 MR. GRISWOLD: Yes, I am.
21 COMMISSIONER SMITH: Thank you. Idaho
22 Power Company.
23 MR. WALKER: Yes, Donovan Walker and Bart
24 Kline for Idaho Power Company.
25 COMMISSIONER SMITH: Okay. Exergy
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3 COLLOQUY
1 Development Group..2 MR. RICHARDSON: Thank you,
3 Madam Chairman. Peter Richardson of the firm Richardson
4 & 0 i Leary on behalf of Exergy Development Group.
5 COMMISSIONER SMITH: Sorenson Engineering.
6 Let the record show that no one appears representing
7 Sorenson. Schiess & Associates? Let the record reflect
8 that no one is here representing them, and going to page
9 4, Lower Valley Energy?
10 MR. RICHARDSON: Thank you,
11 Madam Chairman. Peter Richardson of the firm Richardson
12 & 0' Leary appearing on behalf of Lower Valley Energy..13 COMMISSIONER SMITH: All right. Oh, and
14 also U. S. Geothermal.
15 MR. RICHARDSON: Once again, Madam
16 Chairman, Peter Richardson of the firm Richardson &
17 0 i Leary on behalf of U. S. Geothermal.
18 COMMISSIONER SMITH: How about Twin Lakes
19 Canal Company? No one is appearing representing Twin
20 Lakes, and Idaho Wind Farms, LLC? No one is here
21 representing them. Is there anyone else on the telephone
22 besides Mr. Griswold? Okay, at least we know who i shere.
23 Mr. Richardson, I believe that this all
24 began perhaps with your filing and motion that the.25 Commission lacks subject matter jurisdiction; is that
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1 correct?.2 MR. RICHARDSON: Guilty as charged.
3 COMMISSIONER SMITH: Then you get to go
4 first.
5 MR. RICHARDSON: Thank you, Madam Chair.
6 Commissioners, I i d like to thank you for your time this
7 afternoon. I appreciate the opportunity to present our
8 legal arguments and stand for any questions you may have
9 regarding our motion to dismiss. However, before I
10 address our motion, I would like to make a couple of
11 preliminary comments. First, we filed a supplemental
12 filing in support of our motion to dismiss that contained.13 the Staff's comments in the Idaho Power cases from 2004.
14 Staff i S prior comments, I believe, are still instructive
15 and are worthy of your review. In addition, because I
16 thought it would be useful, especially since we have had
17 two new Commissioners since the 2004 cases were
18 decided
19 COMMISSIONER SMITH: Yes, and in case
20 anyone thinks I've made a gross oversight, may I please
21 introduce my fellow Commissioners, President of the
22 Commission Jim Kempton on my right, and former President
23 of the Commission Mack Redford on my right, whatever.
24 Anyway, for those of you who may not be acquainted with.25 us, the three of us are the Idaho Public Utili ties
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.1 Commission and the persons who will be hearing the case
2 and making the decision in this matter, so thank you,
3 Mr. Richardson.
4 MR. RICHARDSON: Thank you, Madam Chair.
5 In light of the fact we do have two new Commissioners, I
6 thought it would be helpful to the Commission to
7 understand the context in which those cases were decided
8 where you declined to rule on REC ownership in the past,
9 and although I have filed a motion to dismiss for lack of
10 subject matter jurisdiction and I am prepared to argue
11 that motion with vigor, I would offer a suggestion to the
12 Commission as to how to resolve this dispute without.13 getting to the jurisdictional question.
14 I understand generically commissions don't
15 like to hear that they don i t have authority to act and I,
16 therefore, filed my motion to dismiss for lack of subj ect
17 matter jurisdiction with all respect and deference for
18 this Commission iS, and its otherwise broad authority,
19 ratemaking authority. My suggestion to resolve this
20 matter without getting to the question of your authority
21 over REC ownership is that you simply follow the
22 precedent you set in the prior two dockets where you were
23 asked to rule on REC ownership by finding that the
24 regulatory landscape has still not changed and,.25 therefore, there is no case or controversy before the
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.1 Commission on which you need to rule.
2 This would be an easy finding for you to
3 make, because even assuming for the sake of argument that
4 Avista is correct when it claims that circumstances have
5 changed since 2004, what with their assertions regarding
6 interest in PURPA projects and value of RECs and that
7 sort of thing, none of those changed circumstances that
8 were alleged by Avista are in any way related to the
9 regulatory landscape, but there is one regulatory
10 landscape item that has changed since 2004. That one
11 exception, and it actually argues against Avista i s claim
12 that it is entitled to REC ownership, the State Energy.13 Plan was adopted in 2007. It addressed the concept of
14 renewable portfolio standards in Idaho, also known as
15 RPS.
16 The state in its energy plan specifically
17 disavowed any desire on the part of the legislature to
18 mandate that utilities operating in Idaho have a target
19 or a requirement to acquire renewable resources. With
20 the legislature' s affirmative statement that Idaho will
21 not have an RPS, there is a statement of policy against
22 the mandated transfer of RECs to utilities. Finally, I
23 would note that if not the united at least the combined
24 legal talents of the legal departments of the three.25 largest electric utilities in Idaho have failed to point
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7 COLLOQUY
.1 you to any legal authority upon which subj ect matter
2 jurisdiction lays with this Commission.
3 They have only pointed you to the two code
4 sections that give you broad ratemaking authority over
5 utili ties, and they most decidedly do not give you any
6 ratemaking authority over private renewable energy
7 developers in the QF context. Again, I want to thank you
8 for your time this afternoon and I would be happy to
9 stand for any questions you may have now or after other
10 parties have had an opportunity to make their
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11 presentations.
12 COMMISSIONER SMITH: Do you have any
13 questions at the moment?
14 COMMISSIONER REDFORD:No.
15 COMMISSIONER KEMPTON: No.
16 COMMISSIONER SMITH: All right,
17 Mr. Miller, do you want to weigh in on this?
18 MR. MILLER: Thank you, Madam Chairman. I
19 have reviewed the pleadings and briefs from both sides on
20 the jurisdiction question and in my opinion,
21 Mr. Richardson has the better side of the argument and
22 has argued it correctly. Beyond that, I don i t have any
23 specific additions to make to Mr. Richardson i s work.
24 COMMISSIONER SMITH: I guess that takes me
25 to Mr. Andrea.
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8 COLLOQUY
1 MR. ANDREA: Thank you, Madam Chair..2 Commissioners. I, too, appreciate your time today and
3 the opportunity to address you on this matter. Before I
4 forget, I was a little bit negligent in my introductions
5 and I should introduce that in the back of the room we
6 also have Larry Laboe from Avista and also Neal Caldwell
7 and I apologize for that oversight. On the issue of the
8 subj ect matter jurisdiction which is the issue that was
9 raised by Exergy in their motion, I think that it is very
10 clear that FERC has given this issue to the states. I
11 don i t think that there i s any jurisdiction whatsoever or
12 any question whatsoever about that and FERC has said that.13 one of the things that the states can decide is to
14 transfer ownership of RECs automatically with the sale of
15 wholesale power to the utilities.
16 One of the things that I find interesting
17 about Mr. Richardson i s comments is he points to the
18 Energy Policy Act where the legislature said we i re not
19 interested in having an RPS. I would submit that that
20 makes this even more important for the Commission to hear
21 this case and to resolve this issue. Wi thout your
22 guidance on this issue, I think there i s a void that will
23 be very difficult to fill. As it stands now, the
24 Commission has had this issue come before it on two prior.25 occasions and, as Mr. Richardson correctly points out,
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9 COLLOQUY
1 the Commission declined to reach the issue of.2 jurisdiction in either one of those cases even though it
3 was raised.
4 As it i S a threshold issue, the implication
5 is clear that the Commission fel t it had subj ect matter
6 jurisdiction in those cases and entered a final Order in
7 which it expressed to decline to reach the issue of
8 ownership of RECs. Avista did point to two statutory
9 provisions that provide ample authority for this
10 Commission, section 61-501 and 61-507 of the Idaho Code.
11 As you i re ilm sure all aware, 61-501 generally grants the
12 Commission the power and jurisdiction to supervise and.13 regulate every public utility in the state. That general
14 grant of authority is sufficient and I don't think we
15 really need to go any further.
16 If, however, the Commission feels it needs
17 more specific authority, 61-507 provides that in spades.
18 With all respect, Mr. Richardson frankly just
19 misinterprets that statute and misinterprets our
20 argument. What that particular statute provides the
21 Commission is authority to regulate commodities that are
22 of a character furnished or supplied by any public
23 utility. It doesn i t matter whether it comes from a
24 public utility -- excuse me, thank you. It doesn It.25 matter if that i s furnished by a public utility or not.
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1 If it is a commodity that is a character of or -- is of a
2 character that is supplied by a public utility, that is
3 sufficient and there can be no question that RECs are in
4 fact of a character that are supplied.
5 Avista creates RECs through some of our
6 proj ects, for example, and there i s ample case law that
7 defines RECs as commodities and I point to the
8 Wheelabrator case that we cited. To the extent that any
9 further authority is necessary and, again, I don It
10 believe we even need to get past section 501, Idaho Power
11 in their brief cites to section 503 and while we didn i t
12 ci te that in our brief, I would agree with their addition
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14
of that section in their pleadings.
Finally, I would also point to section
15 61-520 which gives the Commission authority to ascertain
16 and fix just and reasonable standards, classifications,
17 regulations, practices, measurements or services to be
18 furnished, imposed, observed and followed by all
19 electrical corporations. What's significant about that
20 is to the extent that this Commission accepts
21 Mr. Richardson's argument that QFs are not a public
22 utili ty, and I i m not going to go there, but electrical
23 corporations are broader in the definition than a public
24 utili ty and Qfs certainly satisfy that definition, so
25 even if a QF is not a public utility, and I see no need
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1 to answer that question, QFs are clearly electric
2 corporations and clearly fall under that particular
3 statute which gives, again, the Commission sufficient
4 authori ty to exercise i ts authority over the issue of REC
5 ownership.
6 MR. RICHARDSON: Excuse me, could you tell
7 me that cite again, please?
8 MR. ANDREA: 61-520. The issue of whether
9 state public utilities commissions have subj ect matter
10 jurisdiction is not a new issue in the context of the
11 Uni ted States, the various states. This issue has come
12 up time and time again by other commissions in various
13 contexts and in most of those contexts I will grant that
14 there was an RPS. In some of them when the issue was
15 raised, an RPS was not present and those states have come
16 out on all different sides on the issue of who should own
17 the RECs, but what is the one common theme for all of
18 those states is my research did not reveal a single state
19 commission that found that it did not have such subject
20 matter jurisdiction over the issue.
21 A good example is the Wheelabrator case
22 that I pointed to in the Avista materials. What i s
23 significant about that is it i s clearly a distinguishable
24 case. It arose out of a contract that preexisted the
25 existence of RECs. What that contract called for was the
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1 sale of all net output from the facility period. The
2 Connecticut Commission found that it had subj ect matter
3 jurisdiction and that was affirmed all the way up the
4 chain to the Connecticut Supreme Court. The Connecticut
5 Supreme Court did not find that jurisdiction within the
6 contract. It found that jurisdiction wi thin the
7 Commission i s general enabling statutes, and I would
8 submi t to this Commission that those general enabling
9 statutes provide less specific grant of authority than
10 the statutes that I cited here today and in my materials.
11 I think there's no doubt that the Commission has subject
12 matter jurisdiction over this issue.
13 I think there are a couple of other points
14 just to make quickly. First, I found it interesting to
15 read the briefs of those who are arguing against subject
16 matter jurisdiction in this case because a common theme
17 and suggestion throughout those was that this Commission
18 has already answered the question and has answered it in
19 favor of the generators. That is seen largely in the
20 collateral attack arguments. If that were true, then the
21 Commission has jurisdiction. They cannot have it both
22 ways.
23 It obviously is Avista i s position that the
24 Commission has not answered that question and I think
25 that is right and I think Mr. Richardson said the same,
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1 but if this was truly a collateral attack as they argue,
2 then it would be clear that the Commission has answered
3 the question and if the Commission has answered the
4 question in a way that they would like to see it come
5 out, then that clearly shows that there is jurisdiction
6 for the Commission.
7 Finally, the last thing I i d like to touch
8 on quickly is the ripeness issue that Mr. Richardson
9 raised. We included in our materials, both in the
10 testimony that was submitted and in our answer and in our
11 petition, changed circumstances that warrant this
12 Commission to decide this issue, the reasons why it i s
13 ripe. Even though this state has not yet adopted an RPS
14 and has expressed an interest not to do so, RECs that are
15 created by projects that are located in the State of
16 Idaho have value. They have value in other states that
17 surround the State of Idaho that have RPS standards and
18 whether the proj ect is located in Idaho or is located in
19 Montana and is seeking to sell that power into Idaho, the
20 RECs make a difference.
21 It is a ripe controversial issue that
22 needs to be resolved and the parties frankly need the
23 Commission i s guidance to know where they stand on this
24 issue and how these RECs are used or are owned. Without
25 the Commission's participation in this and weighing in on
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1 the issue at this time there will be a vacuum, so, again,
2 I thank the Commission for your time and your attention
3 and I am available for questions.
4 COMMISSIONER SMITH: Are there questions?
5 COMMISSIONER REDFORD: Not at this
6 time.
7 COMMISSIONER SMITH: Mr. Walker.
8 MR. WALKER: Thank you, Commissioner.
9 Idaho Power agrees and has put forth in its briefing to
10 the Commission that the Commission does have jurisdiction
11 and it would be appropriate for them to make a decision
12 in this case and absent any specific questions, we III
13 rest on our argument made in our briefing for that
14 issue.
15 COMMISSIONER SMITH: Any questions for
16 Mr. Walker?
17 COMMISSIONER REDFORD: No.
18 COMMISSIONER SMITH: Mr. Solander.
19 MR. SOLANDER: Thank you, Madam Chairman.
20 I i 11 also try to keep my comments brief.
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22
COMMISSIONER SMITH: Is your mic on?
MR. SOLANDER: It's on. I will try to
23 keep my comments brief. I don i t want to go through our
24 brief which we filed and Ilm sure the Commission has.25 read. As we laid out in our comments, Rocky Mountain
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1 Power believes that the Commission i s jurisdiction over
2 RECs is clear. We believe that the enabling statutes
3 that Mr. Andrea went through grant the Commission
4 jurisdiction over all commodities associated or of the
5 type associated with public utili ties and in Rocky
6 Mountain Power i s view, RECs clearly are such a type.
7 Just to respond to one thing that Mr.
8 Richardson raised, we i re not asking the Commission to
9 exercise jurisdiction over QF facilities. We're asking
10 the Commission to exercise jurisdiction over RECs and
11 whether a public utility purchasing power from a QF is
12 entitled to those renewable attributes and this decision
13 we believe is squarely within the Commission i s purview
14 and affects public utili ties in Idaho and their
15 customers.
16 COMMISSIONER SMITH: Any questions?
17 COMMISSIONER REDFORD: No.
18 COMMISSIONER KEMPTON: No.
19 COMMISSIONER SMITH: All right,
20 Mr. Woodbury.
21 MR. WOODBURY: Thank you, Madam Chair.
22 Staff did not submit comments in this case. After
23 reviewing the filings of the parties believe that Exergy
24 and the utilities have adequately addressed their
25 posi tions regarding subj ect matter jurisdiction. I would
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.1 indicate, however, that I believe that the Commission on
2 the question of subject matter jurisdiction may inform
3 itself by reviewing its enabling statutes and is not
4 limited to a consideration of only the authorities cited
5 by the parties.
6 COMMISSIONER SMITH: Mr. Richardson, would
7 you care to close on the topic of subj ect matter
8 jurisdiction?
9 MR. RICHARDSON: Thank you, Madam Chair.
10 Avista i s reference to Idaho Code section 61-520 is
11 puzzling as best as I can describe it. 61-520 allows the
12 Commission to create standards for the measurement of the.13
14
quanti ty and quality of service that an electric
corporation provides, measurements and things of that
15 nature. It i S not a grant of authority of the Commission
16 to regulate utilities, per se, rate regulate, but this
17 has to do with the type of service and if we look at
18 FERC -- I mean at PURPA, the federal law specifically
19 prohibi ts any utility-type regulation of a QF.
20 QFs were created by FERC -- by PURPA and
21 in the PURPA law, there is a provision that explicitly
22 prohibi ts regulation, rate-type regulation, of utilities.
23 For Avista to assert that QFs are electrical corporations
24 under the Idaho PUC code, if it stands the illogical.25 assertion that 61-520 does that, would naturally fall
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1 under the federal preemptive argument that PURPA has
2 precluded states from regulating any aspects of a QF
3 except for the entering into the arrangement for the
4 purchase of the avoided cost of power and just the
5 suggestion that a QF is rate regulated by the state
6 commission would put a chill on the industry such that
7 you would never have another QF ever, because the last
8 thing a QF wants is to subj ect itself to the type of
9 proceedings that the IOUs have to go through whenever
10 they change their rates and federal law anticipated that
11 and closed that door to calling a QF an electrical
12 corporation under a state utility law.
13 On the collateral attack, once again,
14 Avista misconstrues our argument on the collateral attack
15 issue. We are not arguing that their application is a
16 collateral attack on the Commission i s finding that it has
17 jurisdiction over the REC, because it i S our view that you
18 didn i t make that finding. You didn i t get there because
19 you dismissed the case because that you said it wasnl t
20 ripe. You haven i t lined up all your ducks properly and
21 so this case isn i t proper to be heard; therefore, to __
22 because you did issue a final Order, but you didn i tissue
23 a final Order based upon your conclusion that you had
24 jurisdiction over the RECs. Your final Order was based
25 on the conclusion that the matter wasn i t ripe to be
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1 heard. That i s very different from a finding in the case
2 and I hear the utili ties complain that there i s going to
3 be a vacuum of some sort, we i 11 falloff a cliff,
4 something bad will happen if you disclaim jurisdiction or
5 if you accept the fact that you do not have jurisdiction
6 over the RECs.
7 There is no vacuum. There is no problem
8 in the market right now. The market is working just
9 fine, thank you. We don i t need regulation to control the
10 REC market because it i S operating just fine. If there IS
11 a dispute over a purchase price or whether a REC was
12 properly transferred or sold, the courts are readily
13 available to the parties to resolve those disputes, just
14 as they are readily available to parties when they have
15 disputes over ownership of other private property
16 interests, and as to the commodity, I mean, that is a
17 stretch to claim that a REC is a commodity of a type
18 commonly furnished by an electric utility.
19 I would ask Idaho Power, Avista and Rocky
20 Mountain to show me their tariff where theyl re selling
21 RECs to the public, because that i s the type of commodity
22 a utility sells is electricity, water, natural gas
23 pursuant to tariffs. They i re not in the business of
24 selling RECs and if they are, you i re not regulating that
25 acti vi ty. In fact, you just disavowed allowing Idaho
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1 Power to -- they had this asset, the RECs that were.2 created from their Horizon Wind proj ect. That wasn i t a
3 Commission-created REC. Idaho Power got those RECs
4 through its private activities by buying the Horizon Wind
5 and U. S. Geothermal output.
6 Idaho Power owned those RECs by virtue of
7 its contract with those private entities. You didn i t
8 rule on that transaction. Now, they had that asset in
9 their quiver, if you will, and they said we want to
10 retire it and you wisely said no, that asset was created
11 wi th ratepayer dollars, so you have to sell that asset
12 and refund those dollars back to the ratepayers, but the
13 creation and ownership of those RECs .was not governed by.14 you, it was governed by the private transaction between
15 Idaho Power and Horizon Wind, so there is no vacuum.
16 The market is working very fine and we
17 don i t think that your stepping in and muddying the
18 waters, because, frankly, that i s what would happen if you
19 issued a ruling that the utilities owned the RECs, but I
20 don't want to get to the substance, I want to stay on
21 lack of subj ect matter jurisdiction, so that i s my
22 response, Madam Chair.
23 COMMISSIONER SMITH: Any questions,
24 Commissioner Redford?.25 COMMISSIONER REDFORD: Yes, I have a
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1 couple of questions, Mr. Richardson, and anyone else that
2 wants to respond. When does the ripeness, when does this
3 issue become ripe, if at all?
4 MR. RICHARDSON: Madam Chair, Commissioner
5 Redford, in my view it doesn i t become ripe until the
6 State of Idaho enacts a law or policy directing the
7 ownership of the RECs to a certain party. Right now in
8 Idaho there is no such -- there is absolutely no policy
9 on ownership of RECs anywhere and this Commission has
10 the -- the Idaho Supreme Court said in Idaho Power versus
11 Idaho Public Utilities Commission, unless there is a
12 statute giving you authority over a subject matter, you
13 donlt have it.
14 COMMISSIONER REDFORD:I have one other
15 question. Well, why don i t you go ahead for Avista.
MR. ANDREA: Thank you, Commissioner
17 Redford. I would like to respond to that just really
18 briefly. I think a good place to look for an answer to
19 your question is back to the Order that you issued in the
20 Idaho Power case, Order No. 29480. It pretty much set
21 out the standard for ripeness and what it says is,
22 "Declaratory rulings are appropriate regarding the
23 applicability of any statutory provision or any rule or
24 order of this Commission. A declaratory ruling
25 contemplates the resolution of prospective problems. The
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1 rights sought to be protected by a declaratory judgment
2 may invoke remedial or preventive relief; it may relate
3 to a right that is only yet in dispute or a status
4 undisturbed but threatened or endangered; but in either
5 event it must involve actual and existing facts," and I
6 would submit that this is ripe under that standard.
7 If nothing else, this hearing and the
8 interest that this proceeding has drawn and the arguments
9 that it has drawn has shown that there is a clear and
10 present controversy on this issue right now. Thank
11 you.
12 MR. RICHARDSON: Madam Chair?
13 COMMISSIONER SMITH: Mr. Richardson.
14 MR. RICHARDSON: Madam Chair, Commissioner
15 Redford, I think it would be helpful if counsel for
16 Avista read the entire quote. If you read on, it goes on
17 to say, "We find that none of the predicates are present
18 in this case." Then you said, "We note also that the
19 State of Idaho has not created a green tag program, has
20 not established a trading mark for green tags, nor does
21 it require a renewable portfolio standard"; so you have
22 to read the whole quote to understand the context. Thank
23 you, Madam Chair.
.24
25
COMMISSIONER REDFORD:Unless anyone else
has a comment, I have one other question. Let i s make the
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1 assumption that the Commission finds there is subject
2 matter jurisdiction, do you have any comment on whether a
3 declaratory judgment request is appropriate, is an
4 appropriate pleading for an issue that there is a clear
,
5 controversy and there are probably some facts which need
6 to be elicited before we can make a decision and if there
7 are such facts available, doesn i t that throw it out of
8 the declaratory judgment procedural realm?
9 MR. RICHARDSON: Madam Chair, Commissioner
10 Redford, if this Commission determines that it has
11 subj ect matter jurisdiction, I think the -- you still
12 don i t have a hook upon which to hang a finding that the
13 RECs need to be transferred to the utilities. I think
14 you still need to find a state law or policy requiring
15 that that private property be taken from the QF and given
16 to the utility. I don i t think you have any legal
17 authori ty to make that call even if you do determine that
18 you do have subj ect matter jurisdiction.
19 COMMISSIONER REDFORD:Well, I guess my
20 question is, is a declaratory action the appropriate
21 pleading to bring this matter to our attention or would
22 another pleading be more appropriate, such as a complaint
23 or a request for relief or am I just wrong?
24 MR. RICHARDSON: Madam Chair? I think a
25 declaratory judgment in that situation would probably be
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1 appropriate.
2 COMMISSIONER REDFORD: Do you have any
3 comments on that issue for Avista?
4 MR. ANDREA: I don i t think I have anything
5 more to add. I i d agree with Mr. Richardson on this point
6 that I think a declaratory judgment proceeding is
7 appropriate. You know, the alternative, I guess, would
8 be to have a complaint proceeding which I think would be
9 almost inevitable if we don i t deal with this here, but I
10 don't see any reason why a declaratory judgment
11 proceeding isn i t appropriate.
12 COMMISSIONER REDFORD:Thank you.
13 Anybody else want to chime in? Okay, thank you,
14 Madam Chairman.
15 COMMISSIONER SMITH: Commissioner Kempton,
16 did you have any questions?
17 COMMISSIONER KEMPTON: I had one question,
18 Madam Chairman, for Mr. Richardson and anybody else that
19 might want to respond to it, but in Case No. IPC-E-04-02
20 and Order No. 29480 which is the case reference to the
21 2004 decisions previously on jurisdictional authorities,
22 the context, the language and much of the writing in this
23 particular Order seems to presume as a condition of
24 discussion the fact that the initial possession of the QF.25 RECs reside with the QF. It i S specifically related in
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1 terms of the first right of purchase that was requested
2 by Idaho Power and the rej ection of that by the
3 Commission and it i S also indicated in language related to
4 a comparison of the rights of a utility; in other words,
5 that discussion if it i s going to be discussed in terms of
6 a taking, it has to presume an initial possession and
7 ownership in order to even discuss the taking and it was
8 discussed in that way, so despite the fact that the
9 Commission said that it wasn't ripe for a declaratory
10 judgment, the very discussion in the Order presumes that
11 kind of an authority in my mind; is that not correct?
12 MR. RICHARDSON: Madam Chair, Commissioner
13 Kempton, that i s not our position. I don i t believe -- I
14 don i t recall the Commission discussing taking private
15 property without just compensation in the Order. I
16 recall that discussion in the Staff i s comments, but I
17 could be wrong. I don i t have the entirety of that Order
18 sitting right in front of me, but it i S our view that
19 certainly, the presumption of the parties in that case,
20 Idaho Power and the J. R. Simplot Company, the
21 fundamental assumption going into it was that the RECs
22 belonged to the QF; otherwise, the case wouldn't have
23 been filed in the first place if it was understood that
24 the RECs followed the electrons to the utility, so to
25 answer your fundamental question, yes, the parties, and
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1 I'm assuming the Commission did, too, just assumed that
2 the RECs belonged to the QF going into both of those
3 cases.
4 COMMISSIONER KEMPTON: And you i re correct,
5 it was a Staff comment that was prior to the time that
6 the Commission actually made its Order, the language in
7 the Order.
8 MR. RICHARDSON: Right.
9 COMMISSIONER SMITH: Mr. Miller, would
10 like to weigh in on that?
11 MR. MILLER: Thank you, Madam Chairman. I
12 believe in my opinion Commissioner Kempton is completely
13 correct in the assessment he i s just provided us and that
14 the recognition by the Commission in those cases was that
15 under current. law, the RECs are the property of the
16 generator. The Commission decided it was not time to
17 make a decision on whether that law ought to change, but
18 that the current law was clear and just to emphasize that
19 point, in Order No. 29840, the Commission said, "While
20 this Commission will not permit the company in its
21 contracting practice to condition QF contracts on
22 inclusion of such a right-of-first refusal term, neither
23 do we preclude the parties from voluntarily negotiating
24 the sale and purchase of such a green tag should it be
25 perceived to have value."
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1 The only conceivable construction of that
2 language is a Commission recognition that in the first
3 instance the renewable energy creditor the environmental
4 attribute was the property of the generator and the
5 Commission, as I said, declined for other reasons to get
6 into the question of whether that law should be changed,
7 but that was the recognition of laws that existed at the
8 time and exist now and that forms the basis which I will
9 touch on in a moment in connection with the request for a
10 stay and that is that the current law is clear and that
11 in order for Avista to prevail, it has to convince the
12 Commission to, in effect, change the law. I i 11 get into
13 that later, but I wanted to follow up on Commissioner
14 Kempton i s observation because I believe it i S correct.
15 COMMISSIONER KEMPTON: No more
16 questions.
17 MR. ANDREA: May I address the issue?
18 COMMISSIONER SMITH: Certainly.
19 MR. ANDREA: Thank you, Madam Chair and
20 Commissioner Kempton, to your question. I would
21 challenge Mr. Miller and Mr. Richardson to point to any
22 law that at that time or now gives the RECs to the
23 generator. There simply is not. In that prior
24 proceeding, the assumption may have been, and I was not.25 part of that proceeding, the assumption may have been
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27 COLLOQUY
.1 that the generator owned the REC, but there i s no basis
2 for that assumption. Times were much different at that
3 point. RECs were almost valueless.
4 The premise that that whole proceeding was
5 based on as, Commissioner Kempton, you appropriately
6 mentioned was that Idaho Power was asking for an entirely
7 different relief. They were asking for a right of first
8 refusal, but that assumption is nothing more than that.
9 It's an assumption. It does not establish clear law as
10 to who owns the RECs. That question this Commission has
11 not addressed and it remains an open question at this
12 point..13 Wi th regard to the question of a taking,
14 that issue has also been repeatedly addressed by other
15 jurisdictions and that argument has also been repeatedly
16 rej ected and I don i t want to take a lot of time to talk
17 about that because it i S not squarely before the
18 Commission under these particular motions, but to the
19 extent there's a concern about that, I think it has been
20 answered and I think it has appropriately been rej ected
21 in the past by other forums.
22 Finally, about the language that
23 Mr. Miller points to in the ruling, again, a different
24 form of relief was asked for in that particular.25 proceeding and it was talking about having a right of
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1 first refusal and that language merely follows from that
2 request for relief. To the extent that it goes on to
3 talk about recovering, it is talking about cost recovery,
4 not ownership, and there are jurisdictions that have
5 parsed those. It is clear FERC has said that RECs are
6 not part of the PURPA cost, so to parse that and say you
7 can i t recover the value of RECs as a PURPA cost is
8 absolutely consistent with that FERC precedent and says
9 absolutely nothing about ownership. Thank you again for
10 your attention.
11 MR. RICHARDSON: Madam Chair?
12 COMMISSIONER SMITH: Mr. Richardson.
13 MR. RICHARDSON: I believe I i ve been
14 challenged, Madam Chair.
15 COMMISSIONER SMITH: I i m sure you can i t
16 let it go.
17 MR. RICHARDSON: I can It. There is no law
18 identifying the ownership of RECs, absolutely right,
19 there is no such law. A QF creates them, QF owns them,
20 fundamental. It i S an illogical challenge. Referring to
21 other jurisdictions i treatments of the takings argument
22 and the like is also off point. For example, other
23 states have different enabling statutes for their
24 commissions. Colorado i s commission is considered quasi
25 legislati ve pursuant to the constitution. The Utah
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.
1 Supreme Court has interpreted the PUC laws in Utah
2 extremely liberally giving the Utah Commission great
3 lati tude. In Connecticut the RECs followed the electrons
4 because they were going pursuant to a state PURPA law
5 that mandated special treatment for renewable contracts
6 through the PUC process.
7 Every state is very different and we can i t
8 say every state therefore Idaho because then we get into
9 a lot of mischief about using the unique situation legal,
10 poli tical, social in one state and applying it to here
11 arbi trarily. We have a clear line of authorities that
12 the Idaho Commission has fairly prescribed in its
13 jurisdiction. It i S not entitled to reach beyond those
14 prescribed boundaries wi thin reason. The RECs are
15 created and therefore owned by their creators until
16 they're sold. If I grow a garden and create tomatoes, I
17 own the tomatoes I grow. It i S no different, except the
18 overlay of the FERC requirement, the PURPA law has an
19 intersection that i s unique between QFs and electric
20 utilities, but FERC wanted to keep that intersection very
21 strictly prescribed so that the QFs are not regulated and
22 the utili ties are required to buy the electrons only
23 according to FERC and the FERC order can i t confer
24 jurisdiction on you. They were explicit that PURPA law
25 only requires utili ties to buy the power at the avoided
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.
.
20
21
1 cost rate and Avista, the interesting thing about
2 Avista i S application is that they're saying that because
3 they don't get the RECs, the avoided cost rate is too
4 high.
5 COMMISSIONER SMITH: Well, that brings me
6 to my questions.
7 MR. RICHARDSON: Good.
8 COMMISSIONER SMITH: Because I appreciated
9 the fact that you were trying to think out of the box and
10 resolve without getting to the issue of jurisdiction, but
11 it occurred to me when I read the materials that you
12 would agree that the Public Utili ties Commission has
13 authori ty to set PURPA rates.
14 MR. RICHARDSON: Absolutely.
15 COMMISSIONER SMITH: Okay; so we could
16 address this in PURPA rates. We could have a PURPA rate
17 with RECs and a PURPA rate without RECs.
18 MR. RICHARDSON: I i m not sure I agree with
19 that because, Madam Chair --
COMMISSIONER SMITH: What a surprise.
MR. RICHARDSON: because the definition
22 of the avoided cost in federal law says it i s the cost to
23 the utility but for purchasing the electricity from the
24 QF and the utility --.25 COMMISSIONER SMITH: Well, it's actually
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.
1 the cost the utility has avoided by not constructing its
2 own resources, if I remember correctly; would you agree
3 with that?
4 MR. RICHARDSON: I would, Madam Chair.
5 COMMISSIONER SMITH: Okay, but what the
6 Commission has done is gone out and figured out some
7 surrogate avoided resource and it used to be a coal plant
8 and for some contracts that are still going on and were
9 executed a long time ago, it i s still a coal plant, but
10 for some contracts it i s the new SAR with a gas plant.
11 Well, a wind facility is neither a coal plant nor a gas
12 plant, so maybe it needs its own avoided cost rate that
13 reflects the attributes of the wind proj ect so that we i re
14 accurately measuring the cost the utility has avoided by
15 not building a wind plant. Would that be a better thing,
16 then we just avoid all this jurisdictional stuff by
17 saying we need a new PURPA case to determine the avoided
18 cost of a wind facility based on the surrogate avoided
19 resource of a wind facility?
20
21
22
MR. RICHARDSON: Madam Chair.
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: You wouldn i t solve the
23 problem. You could have a surrogate avoided resource be
24 whatever you wanted it to be. It could be wind, it could.25 be geothermal, it could be whatever.
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32 COLLOQUY
.
.
1 COMMISSIONER SMITH: Right.
2 MR. RICHARDSON: So you have a utility
3 wi th a SAR based on wind.
4 COMMISSIONER SMITH: Right.
5 MR. RICHARDSON: And that SAR would be
6 based on the cost of building the wind proj ect.
7 COMMISSIONER SMITH: For the utility.
8 MR. RICHARDSON: For the utility.
9 COMMISSIONER SMITH: And in that case,
10 they would own the RECs.
11 MR. RICHARDSON: If they built the
12 proj ect, they would own the RECs.
13 COMMISSIONER SMITH: Yes.
14 MR. RICHARDSON: But if I as a QF then say
15 I want to sell my renewable energy to you or my
16 cogenerated energy to you --
17 COMMISSIONER SMITH: But I don't want to
18 give you the RECs.
19 MR. RICHARDSON: -- and I don i t want to
20 give you the RECs --
21 COMMISSIONER SMITH: That i s a different
22 price if the utility buil t it and owned the RECs if the
23 RECs have value.
24.25
MR. RICHARDSON: Which they have no need
to have RECs in Idaho.
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.1 COMMISSIONER SMITH: Well, you know,
2 that i s kind of disingenuous because all of our utili ties
3 are mul ti-state entities, so while Idaho may not have
4 passed a -- what do you call it?
5 MR. KLINE: Renewable portfolio standard.
6 COMMISSIONER SMITH: Thank you -- a
7 renewable portfolio standard, the fact is that the
8 enti ties we regulate have state requirements in their
9 other states to comply with those and try as hard as we
10 can, we can i t isolate our ratepayers from that impact
11 entirely, so I think we have to be realistic in
12 recognizing that while we havenlt done it, other people.13
14
have and it i s going to affect us.
MR. RICHARDSON: Absolutely, Madam Chair,
15 and it i S worth pointing out that the largest electric
16 utility you regulate, its other jurisdiction the
17 commission has ruled on REC ownership and it has ruled
18 that the Qf RECs belong to the developer, not to the
19 utility even in the face of a state RPS.
20 COMMISSIONER SMITH: Well, but Ilm trying
21 to think outside the box here just like you did and say
22 if I don't want to get to this jurisdictional issue, how
23 else can I fix it. It looks to me like we fix it in the
24 PURPA rate, so if you have a response to that..25 MR. ANDREA: Madam Chair, I think you hit
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.
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1 on several things very squarely and correctly. I think
2 one potential way to solve this problem would be to have
3 a wind SAR. The problem with that, I believe, is one of
4 timing. Developing a wind SAR will take some time. In
5 the meantime, we have renewed interest in development of
6 QF proj ects in part because of the stimulus money that i s
7 available and we i re going to see that do nothing but
8 increase and so during this period of time while we i re
9 trying to develop a wind SAR, if that is how the
10 Commission chooses to solve this issue, that makes the
11 request for a stay all the more important.
12 COMMISSIONER SMITH: We i re going to get to
13 the request for a stay in a minute.
14 MR. ANDREA: Right, but I'm just pointing
15 out the problem with doing that and the reason why maybe
16 we still need to address the issue here, at least as a
17 stop gap measure until such time as we can do a SAR. The
18 other really great quick thing I i d like to hit on is your
19 question about the PURPA rate hits the preemption
20 argument that Mr. Richardson said pretty squarely and I
21 do not disagree that the FERC regulations say that QFs
22 are not subj ect to certain types of state regulation, but
23 RECs are not one of those things that are exempted and
24 your authority to regulate that is not preempted by that
25 exemption, so anyway, again, thank you.
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.
.
1 COMMISSIONER SMITH: Okay, Commissioner
2 Kempton.
3 COMMISSIONER KEMPTON: Madam Chair, to
4 follow up on Commissioner Smith i s discussion, brief
5 discussion, on trying to move away from the issue of
6 jurisdictional authority in solving the fundamental
7 problems that we have in other parts of the Avista
8 filing, when FERC discussed PURPA prior to the time that
9 they made their issue or decided their issue, their
10 ruling on who under what circumstances the disposition of
11 ownership in the RECs would take place, they spoke in
12 terms of PURPA only in terms of the energy and the
13 capacity of the QF; is that correct, Mr. Richardson?
14 MR. RICHARDSON: That i s correct,
15 Commissioner Kempton.
16 COMMISSIONER KEMPTON: And would you say
17 that that i s the case today?
18 MR. RICHARDSON: Yes, Commissioner
19 Kempton.
20 COMMISSIONER KEMPTON: What would you say
21 that the relative percentage of capacity is to energy in
22 a wind farm?
23 MR. RICHARDSON: Commissioner Kempton, the
24 average typical wind farm has a capacity factor of 32 to
25 34, 35 percent if it's a really good one.
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1 COMMISSIONER KEMPTON: That would be.2 nameplate as a variable resource. What would you assume
3 that the capacity addition to the purchasing utility
4 would be?
5 MR. RICHARDSON: Commissioner Kempton,
6 typically a utility integrating wind into its system,
7 sometimes they assign no capacity value to them.
8 Sometimes they assign a modicum of capacity value,
9 certainly not 33 percent of the nameplate.
10 COMMISSIONER KEMPTON: Okay, in
11 conj unction with that, then, if a PURPA contract is sold
12 to a utility and currently we do that as the surrogate.13 resource is a combined cycle combustion turbine using
14 natural gas which is a carbon emitting resource, so in
15 the process of purchasing the PURPA wind, customers of
16 the utility that consume in the near future, whether it i s
17 a cap and trade system or a tax, are going to have to
18 come to grips with the additional costs of the fact that
19 that surrogate resource is emitting carbon emissions and
20 at the same time they acquire that simply because, they
21 acquire that responsibility simply because, theylve taken
22 on a renewable resource in terms of the PURPA proj ect
23 which in this case is wind, so that i s an additional cost
24 to the ratepayers based on the fact that you have.25 conducted a purchase of QF power, energy and capacity,
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37 COLLOQUY
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.
.
1 wi thout consideration of additional impacts to the
2 utili ty if they purchase that based on the requirement
3 that exists and that is that you only consider the energy
4 and capacity costs in making a decision, the avoided
5 cost, of where that cost in the PURPA purchase transforms
6 to the utility ratepayer.
7 I can refine that down to less words, I
8 think. Let me try it this way: If we go about business
9 as usual and a PURPA contract is competed against the
10 utility's ability to purchase the same product, it would
11 be a one-to-one comparison of all of the benefits that go
12 wi th the acquisition of that resource, and I think we'll
13 probably get into that a little bit later, but when they
14 do it on the basis of wind competing against a carbon
15 emitting resource, ultimately the cost to the utility
16 increases to the ratepayer. Would you agree with that or
17 not agree with that?
18 MR. RICHARDSON: Commissioner Kempton, the
19 surrogate avoided resource is a fiction. It doesn i t
20 actually emit any carbon, it doesn i t exist. It i S a
21 construct for the Commission to estimate what the
22 utili ty i S next avoided resource is going to be, so in
23 that context, Ilm not sure I would agree with you, but I
24 would agree with you to the extent that a utility is
25 emitting carbon and if there is a carbon cap and trade or
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38 COLLOQUY
.1 something like that, the utilities are going to incur
2 expenses, and I would suggest to you that in a federal
3 carbon cap and trade legislation or a federal renewable
4 portfolio standard legislation that this issue will be
5 solved.
6 I do not anticipate the federal government
7 passing a law requiring utilities to cap and trade
8 wi thout addressing ownership of RECs in a QF context. I
9 think that's going to come down the road and that i s why
10 you have other states that have RPS i s, they have
11 addressed it, and most of them, Oregon the exception,
12 have said the RECs follow the -- the green tags follow.13 the electrons, so I think the federal cap and trade,
14 whatever that is ultimately going to look like, is
15 probably going to solve the problem, but if it does or
16 doesn It, the fear or the concern or the hope for a
17 federal cap and trade program shouldn i t be obstructing
18 what we do here today.
19 COMMISSIONER KEMPTON: Thank you, Madam
20 Chairman, Mr. Richardson. I'll probably address this
21 later when I think the question is more appropriate and
22 follows more logically in the context of what we will be
23 discussing. Right now it jumps further ahead than I
24 should have probably gone just to get away from the.25 jurisdictional issues, so I i 11 redefine the questions
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.
.13
14
1 when we get further into the discussions today.
2 MR. RICHARDSON: Thank you.
3 COMMISSIONER SMITH: If there is no
4 further comment on the issue of subject matter
5 jurisdiction, we i 11 move to the issue of a stay. I
6 think, Mr. Miller, this is your issue.
7 MR. MILLER: I believe it is,
8 Madam Chairman, thank you. Madam Chairman, members of
9 the Commission, I think the briefing that you have
10 received is quite adequate and quite thorough and in this
11 oral presentation I don i t intend to review that in
12 detail. I i 11 just say by way of introduction that in my
opinion the existing status of REC ownership is clear.
Secondly, that Avista iS entitlement to its
15 requested relief is not clear and is not free from doubt
16 and none of the utili ties have demonstrated the existence
17 of immediate irreparable injury that would warrant the
18 requested stay and I i 11 be happy to answer questions on
19 any of those points if you want.
20 I would like, though, to take just a
21 moment and place this case in a slightly larger context
22 which begins in the year 2005 when the Commission in Case
23 Idaho Power 05-22 reduced the rate eligibility for
24 published rates from 10 average megawatts to 10.25 kilowatts, effectively imposing a moratorium on PURPA
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.1 development in Idaho. That hiatus was originally
2 expected to last nine months in order to resolve the
3 issue of wind integration costs. In fact, the moratorium
4 lasted until November of 2008 when the parties filed a
5 stipulation resolving integration and other issues, and
6 in that period of time, several other issues were
7 addressed in various proceedings or contexts.
8 You'll recall the 91-10 versus meg issue.
9 You'll recall the gas forecast method issue. You III
10 recall the non-fuel variables issues, and the stipulation
11 filed in November of 2008 resolved all of those issues.
12 The stipulation was signed for Avista by David Meyer who.13 is the vice president and general counsel and for Rocky
14 Mountain by Mark Moench, I think I pronounced that
15 correctly, Moench, who is the senior vice president and
16 general counsel, so that stipulation was approved at the
17 highest levels of these utili ties, and the intent of the
18 stipulation was to resolve the outstanding issues and end
19 regulatory uncertainty and to restart PURPA
20 implementation in Idaho, and based on that stipulation,
21 the Commission issued Order 30744 in March of this year
22 accepting the stipulation.
23 Now, during that whole long period of
24 uncertainty, I can say with confidence that not once did.25 any utility raise the issue of REC ownership as something
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41 COLLOQUY
.
.
1 that needed to be decided before restarting the PURPA
2 implementation in Idaho, although they clearly could have
3 and they clearly raised a number of other issues. Now,
4 less than 60 days after the issuance of Order No. 30744,
5 Avista files this petition again seeking to stay its
6 PURPA obligation.
7 There are no circumstances arising since
8 Order No. 30744 that did not exist before Order No.
9 30744, which if this was such a concern to the utilities
10 could have been raised then before the Commission decided
11 to restart PURPA in Idaho. Our legal briefing, I think,
12 shows that the utili ties are not entitled to a stay when
13 the law of preliminary injunction is applied, and when
14 this petition is considered in this larger context,
15 nei ther the law nor good policy should allow PURPA
16 implementation to be stalled once again. That's my point
17 of view.
18 COMMISSIONER SMITH: Thank you very much,
19 Mr. Miller. Mr. Richardson, do you care to weigh in on
20 the issue of stay?
21 MR. RICHARDSON: Madam Chair, we did not
22 brief the issue, but I would note I think it i S pretty
23 apparent that there i s great uncertainty surrounding
24 whether or not Avista is going to be successful on the.25 meri ts and I would echo Mr. Miller i s observations and you
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.1 can draw what inferences you want from it, but we did go
2 through that long moratorium period where we were trying
3 to resolve all the issues, get the moratorium closed and
4 then bingo, we get another application for a stay and
5 it's not inconsequential that all three utili ties are in
6 here jumping on.
7 COMMISSIONER SMITH: Okay, for Avista.
8 MR. ANDREA: Thank you, Madam Chair. I
9 also do not want to belabor the motion to stay, so I will
10 keep very brief with just a couple of quick points. The
11 first is that the Idaho Rules of Civil Procedure do not
12 apply which is why you i 11 notice in our answer we said.13
14
assuming arguendo and then took it from there. This
Commission has the discretion to grant a stay and
15 moreover, while the Idaho Rules of Civil Procedure may be
16 instructi ve, they don i t translate very well into this
17 circumstance.
18 Avista acts on behalf of its ratepayers
19 and we try to act in the best interests of our ratepayers
20 and the largest irreparable inj ury is to them as opposed
21 to Avista directly, although we certainly are inj ured as
22 well, and in addition to just the substantial impact that
23 we raised in all of our pleadings to our ratepayers, we
24 also noted the difficulty that it may present for the.25 Company to go through an RFP process and actually get
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1 competi ti ve bids to self-build if that was the option, so
2 again, I don i t want to belabor the issue.
3 As far as it being an extended period of
4 time, it certainly would not be our intent to draw out
5 this process for the stay to be in place any longer than
6 possible or necessary, but we do need to get through the
7 process and we need a stay so that we don i t enter into
8 20-year contracts now and have everybody rushing for the
9 door to get in before the door mayor may not slam shut
10 and that i s exactly what we i re going to have is
11 everybody -- you know, the analogy would be the race to
12 the courthouse or whatever, you know, analogy you want to
13 draw, so we do request and respectfully ask that the
14 Commission grant a stay while we work through this
15 process. Thank you.
16 COMMISSIONER SMITH: Anyone wish to weigh
17 in on the stay? Mr. Woodbury.
18 MR. WOODBURY: Thank you, Madam Chair.
19 Avista in this proceeding has explicitly reflected in its
20 answer to motions does not challenge the published PURPA
21 rate. The rate, therefore, in Staff i s opinion remains
22 presumptively reasonable and is available, should be
23 available, to eligible QFs. As the Commission did not
24 allow Idaho Power to condition purchases on the QF grant.25 to the utility of right of first refusal, the Commission
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1 should not stay the availability of contracts pending the
2 Commission i S decision on RECs. As framed by Avista, I
3 believe that Staff believes the stay is inappropriate.
4 COMMISSIONER SMITH: Mr. Solander.
5 MR. SOLANDER: Madam Chairman, in our
6 brief, we attached to it the affidavit from Mr. Bruce
7 Griswold who is our director of short-term origination.
8 Rocky Mountain Power, as described in Mr. Griswold IS
9 affidavi t, will suffer as Avista laid out financial
10 consequences if the stay is not entered into and
11 Mr. Griswold is available if the Commission has specific
12 questions regarding the impact and also regarding the
13 number of PURPA contracts that Rocky Mountain Power is
14 currently negotiating.
15 COMMISSIONER SMITH: Mr. Walker.
16 MR. WALKER: Nothing further. We i 11 stand
17 on what we have filed.
18
19 from the Commission?
COMMISSIONER SMITH: Do we have questions
20 COMMISSIONER REDFORD:Yes,
21 Madam Chairman, and anyone can answer this. It seems to
22 me that one could look about the stay as being an
23 opportunity to improve its bargaining position with the
24 upcoming PURPA contracts and I haven't heard a clear
25 reason for the stay. A stay is usually granted until
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.1 some other event takes place and if it i s the negotiation
2 between the company and the PURPA providers, I don i t see
3 the reason for the stay. You know, one would like to say
4 that this is a controversy without a solution, but,
5 obviously, you can i t do that. You also might say that
6 this is simply a contract issue and so I i d like to have
7 just a little bit more response as to what the purpose of
8 the stay is and how long will it last.
9 MR. ANDREA: Commissioner Redford, I i 11
10 try and answer your question. The stay would only last,
11 kind of looking backwards would only last, until such
12 time as we resolve this proceeding one way or the other..13 For Avista, I will tell you that it is not Avista IS
14 intent to use a stay to leverage our bargaining position.
15 That said, as it currently stands, the issue of who owns
16 the RECs when the energy is purchased by a utility is not
17 answered and my fear in the absence of a stay is that the
18 contracts that we will have to negotiate will end up
19 before this Commission.
20 The stay will allow us to hold those
21 constant, allow the ownership of RECs under those
22 contracts to be subj ect to the determination of this
23 Commission in this proceeding and will not create
24 addi tional unnecessary litigation. Now, it i s likely that.25 those proceedings would probably be consolidated with
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1 this one, but that would certainly be your discretion,.2 but that i s the purpose of the stay is as we are working
3 through this process and as I understand, it i s going to
4 be -- the plan is for a fairly quick process, to not
5 create additional litigation over the issue of RECs as
6 we're trying to negotiate through contracts. Thank
7 you.
8 COMMISSIONER REDFORD: Thank you. Oh,
9 Mr. Miller, Ilm sorry.
10 MR. MILLER: Thank you, Commissioner
11 Redford. Just to follow up on this point, in my
12 experience no matter what else you say about utili ties,.13 utili ties are rational in a way that they react to
14 incentives. Now, if a stay is ordered, the utility
15 despi te what it says has no incentive to proceed to a
16 speedy conclusion despite its assurances otherwise. If a
17 stay is rej ected, the utility has an incentive to get
18 this case resolved if as you believe there are problems
19 on the horizon that need to be addressed, and in this
20 connection as we pointed out in our pleadings, Avista
21 anyway is facing one PURPA wind project now. All the
22 other PURPA proj ects that have been offered to it are
23 biomass cogeneration.
24 Avista i s entire case is built on a.25 contention that the internal financial aspects of wind
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1 projects are such that the current rates plus RECs
2 overcompensate that proj ect. The requested stay would
3 affect every renewable resource in Idaho, so it's just
4 beyond something to think that Avista i s obligation to
5 continue to negotiate contracts should be stayed.
6 COMMISSIONER REDFORD: Thank you.
7 MR. RICHARDSON: Madam Chair, if I may.
8 COMMISSIONER SMITH: Mr. Richardson.
9 MR. RICHARDSON: Commissioner Redford, I'm
10 not sure how long the stay would last. I agree with
11 Mr. Miller that it creates incentive to drag things out,
12 but I will tell you that a stay creates uncertainty in
13 the market place. It creates uncertainty. It casts
14 frankly a cloud over the State of Idaho as a place for
15 QFs and renewable energy developers to do business. I
16 can i t tell you how many times I i ve been called by people
17 saying what i s going on in Idaho, we i d like to do business
18 there, but the regulatory climate is too uncertain.
19
20 did you have anything further?
COMMISSIONER SMITH: Commissioner Kempton,
21 COMMISSIONER KEMPTON: Madam Chairman,
22 Mr. Miller, would you mind explaining why you felt it was
23 appropriate to address the last avoided cost adjustment
24 which was Order No. 30744? Ilm not exactly sure I got
25 the connection in your reference to that other than the
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15
1 fact that the utilities did not contest the proposal
2 based on the Council's draft fuel costs that came into
3 play in December.
4 MR. MILLER: Well, thank you,
5 Commissioner. Perhaps I sort of collapsed a couple of
6 things into one, but it i S my recollection that at the end
7 of 2008, the Commission had two cases before it. One was
8 to approve the settlement stipulation and the other was
9 to approve the new avoided cost rates and the two were
10 decided simultaneously as if they were one, so when I was
11 speaking about Order 30744, I was really trying to
12 describe that whole proceeding that was resolved and
13 that, as a consequence, at least start at PURPA. Did
14 that respond to your question?
COMMISSIONER KEMPTON: It does. It raises
16 a couple of questions at the same time. One of them was
17 in a point, Staff made the point that we were following a
18 methodology that was accepted previously and that this
19 was an adjustment based on a draft forecast by the
20 Council that came in in December and that if there were
21 changes to that that, you know, if there were changes to
22 those prices by the time the Council issued its final
23 fixed power plant, which probably should not be too long
24 in the future, that those fuel costs as they affected the
25 avoided cost would be reexamined and so that could be one
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.1 element that would come up in the not too far distant
2 future; isnlt that correct?
3 MR. MILLER: I believe that is correct.
4 COMMISSIONER KEMPTON: And the second is
5 that the Commission made a point in that Order 30744 that
6 should any party believe that a prima facie case can be
7 made that the existing SAR methodology no longer produces
8 reasonable avoided cost rates, a petition could be filed
9 by such party proposing a change, which I would assume
10 would have some relevance to the discussion on whether
11 there should be a stay in consideration of the RECs as
12 adverse to a filing on a petition for reconsideration of.13 avoided cost methodology simply because a large part of
14 Avista i S testimony seemed to deal with the conflict
15 between what the utility could purchase the same kind of
16 a QF resource for in comparison with what the QF could
17 have with all of the federal incentives that went with
18 that contract, so I guess the question is, is it
19 appropriate in considering the stay separate from the REC
20 that's established by Avista to consider a stay in
21 consideration of the avoided cost methodologies as they
22 relate to competi ti ve contracts either through purchasing
23 the power by the utility or the utility acquiring the
24 same amount of power, but doing it through its own.25 construction, development and acquisition, do any of
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.1 those factors weigh into this same consideration?
2 MR. MILLER: Commissioner, let me just say
3 a few things and see if it addresses what your concern
4 is. First, as you note, the Commission noted that
5 parties are free at any time to file cases to change
6 existing methodologies. Those could be filed any time
7 and the Commission was just observing what is the fact.
8 Here Ilm speaking somewhat from recollection, but it i S my
9 recollection that there have been PURPA avoided cost
10 rates where the current rates have not been stayed, that
11 is, the Commission goes about the process of deciding
12 what the new rates should be, but the current rates are.13 not stayed.
14 Whether there should be a stay in
15 connection with a new PURPA avoided cost rate I think
16 would be dependent on the record that was developed in
17 that new case and the possibility that there might be a
18 new case, which is only a possibility since it doesn't
19 currently exist, is not a reason for adopting a stay in
20 this case, in my opinion, and if I could just circle back
21 to Commissioner Smith i s point that maybe the solution
22 here is a new avoided cost. It i S an interesting
23 question, but it i S not the question that we i re trying to
24 answer today and I think there are a lot of questions.25 that would have to be thought through before fully
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1 deciding that was the right answer, is a wind proj ect
2 really the next incremental resource that Avista or any
3 other utility would acquire; would it be possible to
4 without running into discrimination problems have
5 different rates for different types of proj ects. I just
6 raise those at this point to show that there are some
7 questions that would have to be thought through before
8 fully concluding that that is the answer to this
9 quandary.
10 COMMISSIONER KEMPTON: And I think that
11 answers my question because the issue of how far we would
12 shift the original filings in this case to discuss the
13 solution of jurisdictional authority by means other than
14 a direct examination question became relevant, I think,
15 when the Chair brought that issue up and based on your
16 presentation, your discussion just then, that i s all the
17 other questions that I have.
18 COMMISSIONER SMITH: Thank you, and I
19 appreciate your thoughts, Mr. Miller, but it really
20 wouldnlt be much of a stretch, would it, for the
21 Commission to declare that the avoided cost rate it sets
22 should include everything the utility would have had it
23 built the resource on its own?
.24
25
MR. MILLER: Madam Chairman, it i S not a
question I have thought about and would think about.
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1.COMMISSIONER SMITH: And I don't expect an
2 instantaneous answer.
3 MR. MILLER: Pardon?
4 COMMISSIONER SMITH: I said I don i t expect
5 an instantaneous answer, but it seems to me that is the
6 purpose of the avoided cost rate is to reflect -- the
7 whole purpose is to encourage non-utility ownership of
8 alternative resources, but in doing so to keep ratepayers
9 neutral because we don i t want them to pay any more than
10 they would have to pay had the utility developed it
11 itself, so the whole thing is keyed around what did the
12 utili ty avoid and what rate is that..13 MR. MILLER: It i S an interesting question.
14 I guess a couple of initial reactions on that. I think
15 it i s clear that the Commission i s current understanding is
16 that the PURPA rate compensates for capacity and energy.
17 It does not carry with it anything else. The Commission
18 was clear in the Idaho Power/Simplot case that costs
19 associated with environmental attributes if they were
20 purchased by the utility would be evaluated for prudence
21 separately just as any other purchase was, so I donlt
22 think currently the Commission i s understanding is that
23 avoided cost rates are designed to compensate everything
24 that the utility gets and again, I think it would require.25 some careful thought before the Commission should jump to
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17
1 that conclusion.
2 COMMISSIONER SMITH: I think that's a good
3 point. Have you ever known the Commission to be wrong in
4 the past?
5 MR. MILLER: Well, I recall my old, one of
6 my old colleagues who I described as often wrong but
7 never in doubt.
8 COMMISSIONER SMITH: Anyone else? Is
9 there anyone else who wishes to comment on the dialogue
10 that has taken place between Commissioner Kempton and I
11 or Mr. Miller or Commissioner Redford and anybody else?
12 Yes, Mr. Andrea.
13 MR. ANDREA: Thank you, Madam Chair. I
14 don i t have any additional comments, but I do want to
15 thank the Commission again for your attention and your
16 thoughtful questions and appreciate your time today.
COMMISSIONER SMITH: It went much faster
18 than I expected. You guys must not be getting paid by
19 the hour. If there i s nothing more to come before the
20 Commission, we will consider this and issue an Order on
21 these two issues with regard to subj ect matter
22 jurisdiction and the stay just as quickly as we can, and
23 we appreciate all of your thoughtful and courteous
24 participation in today i s case and we i re adj ourned.
25 (The oral argument adjourned at 2: 30 p.m.)
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18
19
20
21
22
23
24.25
1 AUTHENTICATION
2
3
4 This is to certify that the foregoing oral
5 argument held in the matter of the application of a
6 peti tion filed by Avista Corporation for an order
7 determining the ownership of the environmental attributes
8 (RECs) associated with (PURPAJ qualifying facility upon
9 purchase by a utility of the energy produced by a
10 qualifying facility, commencing at 1: 00 p.m., on
11 Wednesday, June 17, 2009, at the Commission Hearing Room,
12 472 West Washington, Boise, Idaho, is a true and correct
13 transcript of said oral argument and the original thereof
14 for the file of the Commission.
15
16
17
CONSTANCE S. BUCY
Certified Shorthand Report r
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