20250916Memo in Support of Comments.pdf

RECEIVED
September 16, 2025
C. Tom Arkoosh, ISB No. 2253 IDAHO PUBLIC
Nicholas J. Erekson, ISB No. 9325 UTILITIES COMMISSION
ARKOOSH LAW OFFICES
913 W. River Street, Suite 450
P.O. Box 2900
Boise, ID 83701
Telephone: [phone]
Facsimile: [phone]
Email: tom.arkooshkarkoosh.com
nick.erekson(a,arkoo sh.com
Admin copy: erin.cecil&arkoosh.com
Attorneys for IdaHydro
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) Case No. IPC-E-25-22
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO UPDATE ITS ) MEMORANDUM IN SUPPORT OF
OPERATION AND MAINTENANCE ) COMMENTS FOR IDAHYDRO
CHARGES APPLICABLE TO SCHEDULE )
72, GENERATOR INTERCONNECTIONS )
TO PURPA QUALIFYING FACILITY )
SELLERS. )
COMES NOW the Idaho Hydroelectric Power Producers Trust, an Idaho Trust, d/b/a
IdaHydro ("IdaHydro" or the "Company"),by and through its counsel of record, C. Tom Arkoosh
and Nicholas J. Erekson of Arkoosh Law Offices, and pursuant to the Notice of Modified
Procedure, Order No. 36714, entered on August 11, 2025, hereby submits the following
Memorandum in Support of Comments for IdaHydro:
I. Summary of Memorandum in Support
Idaho Power Company's ("Idaho Power") Application begins with a premise so
fundamentally flawed that it cannot be allowed to stand: that Qualifying Facilities ("QFs")may be
saddled with system-wide "average" operation and maintenance ("O&M") charges divorced from
the actual costs Idaho Power incurs, without regard to the avoided interconnection costs that
PURPA requires be credited. However, the law, the regulations, and the underlying purpose of
PURPA all speak with one voice: a utility may recover from QFs only those interconnection costs
that are in excess of what it would have otherwise spent had it purchased power elsewhere.Nothing
more.
MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 1

Yet, Idaho Power asks this Commission to bless a methodology that does the opposite. By
smearing system averages across all QFs, Idaho Power guarantees that charges bear no
resemblance to actual incremental O&M expenses. Worse, it disclaims any obligation to account
for avoided costs, even though the very definition of"interconnection costs"requires that avoided
costs be netted out:
(7) Interconnection costs means the reasonable costs of connection, switching,
metering, transmission, distribution, safety provisions and administrative costs
incurred by the electric utility directly related to the installation and maintenance
of the physical facilities necessary to permit interconnected operations with a
qualifying facility, to the extent such costs are in excess of the corresponding costs
which the electric utility would have incurred if it had not engaged in
interconnected operations, but instead generated an equivalent amount of electric
energy itself or purchased an equivalent amount of electric energy or capacity from
other sources. Interconnection costs do not include any costs included in the
calculation of avoided costs.
18 CFR § 292.101 (emphasis added).
The result is a double recovery: Idaho reaps the benefit of avoided O&M costs, while QFs
are simultaneously charged inflated O&M assessments that also embed in those costs.
The Application is not merely a poor regulatory suggestion; it asks the Commission to
directly violate federal law. PURPA's purpose was to level the playing field, to require utilities to
interconnect with and purchase power from independent generators on fair and nondiscriminatory
terms. It was never designed to furnish utilities with a backdoor to extract phantom costs through
artifice. Idaho Power's proposal to adopt a uniform "average cost" method is such an artifice. It
treats QFs not as partners entitled to the protections of federal law, but as an unregulated revenue
stream from which to extract rents.
The Commission should recognize this Application for what it is: a frontal assault on
PURPA's cost principle. It ignores the statutory limit ("in excess"), dispenses with the regulatory
requirement to subtract avoided costs, and hides behind an opaque averaging methodology that
deliberately avoids the discipline of actual cost tracking. If approved, it would institutionalize
unlawful overcharging for years to come.
IL PURPA's Limitation on Interconnection Costs
Congress enacted PURPA to break the monopoly stranglehold that vertically integrated
utilities held over generation. At its core, PURPA requires utilities to interconnect with and
MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 2

purchase from independent producers,but only on terms that are"just and reasonable to the electric
consumer and in the public interest" and "not discriminat[ory]" to QFs. 16 U.S.C. § 824a-3(b).
That statutory command is not vague. It is specific, enforceable, and operationalized in the
Commission's regulations.
Furthermore, the regulations define "interconnection costs" with precision: the costs of
"connection, switching, metering, transmission, distribution, safety provisions and administrative
costs,"but only "to the extent such costs are in excess of the corresponding costs which the electric
utility would have incurred if it had not engaged in interconnected operations... " 18 C.F.R. §
292.101 (emphasis added). That last clause is the controlling phrase. It is the brake that keeps
utilities from treating interconnection costs as a blank check.
The import is obvious: the law requires subtraction, not addition. A utility cannot simply
tally up its system-wide costs and spread them across QFs. It must identify what it would have
spent absent the QF, identify what it actually spent with the QF, and then charge the difference if
what it spent with the QF exceeds what it would have otherwise spent.Anything else,any shortcut,
any "average" substitute, any refusal to account for avoided costs, produces charges that exceed
the lawful limit.
The principle could not be plainer. QFs cannot be used to subsidize a utility's general O&M
budget. They cannot be assessed phantom costs based on averages.And they cannot be denied the
benefit of avoided costs, which are hardwired into the statutory scheme. Idaho Power's
methodology flouts each of these guardrails.
III. Idaho Power's Application Disregards PURPA's Standard
The problem is not subtle. Idaho Power openly admits that it does not comply with
PURPA's cost principle. In response to discovery,the Company stated plainly: "Idaho Power does
not account for avoided O&M costs in its avoided cost methodology for PURPA pricing because
PURPA developments,which require additional infrastructure to be built out or maintained, do not
decrease the Company's O&M." Idaho Power Company's Response to IdaHydro's First Set of
Interrogatories and Requests for Production to Idaho Power Company, p. 10. That single sentence
is a confession of noncompliance.
The regulation could not be clearer: interconnection costs are limited to those "in excess"
of baseline utility costs. That language necessarily requires a comparison, a before-and-after
analysis in which avoided O&M is identified and subtracted. Idaho Power, by contrast, takes the
MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 3

position that avoided O&M never exists. By defining avoided cost out of existence, Idaho Power
effectively rewrites the federal rule. That is not interpretation; it is nullification.
Additionally, the Company appears to not even track actual O&M costs for QF
interconnections. Once facilities are placed into service,Idaho Power sweeps them into its general
plant accounts and ceases to distinguish them. Without data, there can be no compliance. If you
refuse to measure, you cannot possibly know whether a charge is "in excess." Idaho Power's
system is thus designed to guarantee opacity and to immunize its methodology from verification.
Instead of tracking, Idaho Power substitutes averaging. It proposes to apply flat rates
(0.90% for distribution, 0.26% for transmission) based on broad system averages. That figure has
nothing to do with any particular QF. It is not tied to actual expenses, not reconciled against
avoided O&M, and not trued up over time. It is,by design, an arbitrary toll.
This is not compliance with PURPA.It is the opposite.A methodology that ignores avoided
costs,refuses to measure actual costs,and substitutes averages is structurally incapable of meeting
the federal standard. The only thing such a system guarantees is systematic overcharging of QFs.
Idaho Power's Application is not an innocent misstep in accounting; it is a deliberate attempt to
sidestep PURPA's limitations and convert Schedule 72 into a revenue stream untethered to actual
incremental cost.
IV. Double Recovery and Overcharges
What Idaho Power seeks here is not cost recovery, it is double recovery. The utility's own
filings make this plain.
First,consider the avoided-cost framework. QFs are compensated at avoided cost precisely
because they spare the utility from incurring certain expenses, including O&M. That is the
statutory bargain: the QF receives a rate that reflects the utility's avoided expenses, and ratepayers
are kept whole.
Now consider Idaho Power's O&M charge. The Company insists that interconnections
"inherently increases" O&M. Id. On that basis, it refuses to recognize any avoided O&M
whatsoever. The result is perverse. Idaho Power pockets the benefit of avoided O&M through
reduced avoided-cost payments, while QFs are separately assessed inflated "average" O&M
charges that include those same categories of costs. The utility thus captures both sides of the
transaction: it ignores avoided O&M when setting the QF's purchase rate, and then reclaims that
same avoided O&M as a Schedule 72 charge.
MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 4

That is double dipping in its purest form. It is the regulatory equivalent of charging a
customer twice for the same meal, once at the register, and again at the table. And Idaho Power
does not deny it. When asked whether it performed any analysis to determine if it was collecting
both avoided-cost compensation and O&M charges for the same expenses,the Company's answer
was simple: "[N]o analysis was performed." Id., p. 11 (emphasis added). In other words, Idaho
Power has not even bothered to test whether it is breaking the law.
This is the predictable consequence of a methodology designed to avoid accountability.By
refusing to track actual costs, by categorically denying the existence of avoided O&M, and by
relying on averages,Idaho Power guarantees that its charges will exceed lawful bounds.The excess
is not theoretical.As IdaHydro has shown in other comments, Idaho Power's O&M charges are so
inflated that they would allow the utility to replace interconnection facilities multiple times over
their useful life, even though actual O&M expenditures are minimal.
The Commission should not mistake this for a close accounting dispute. It is a structural
violation that guarantees overcollection. And it cuts directly against PURPA's purpose. Congress
enacted PURPA to prevent utilities from using their monopoly control over interconnection to
extract rents from independent producers. Idaho Power's methodology is a textbook example of
the abuse Congress sought to stop.
V. The Averaging Method Masks Accountability
Idaho Power dresses up its proposal in the language of efficiency. The Company claims
that abandoning the 35-year de-levelized schedule in favor of a flat, "average" O&M charge will
simplify administration.That argument is a smokescreen.Averaging does not simplify; it conceals.
When a utility uses averages, precision is lost. The Commission, and QFs, are deprived of
the one fact that matters under PURPA: whether the charge reflects actual incremental costs "in
excess" of baseline utility expenditures. Instead, QFs are handed a one-size-fits-all percentage
pulled from system-wide plant balances,with no tether to what their interconnection actually costs
to maintain. The Commission is asked to take Idaho Power's word for it, while the Company
simultaneously admits it does not track the very costs it claims to recover. That is not
simplification. That is abdication.
Worse still, the averaging method erases the obvious reality that not all interconnections
are alike. A typical four-pole interconnection (the kind used for many small hydro facilities) is a
simple, proven design that costs far less to operate and maintain than the Company's broader
MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 5

transmission and distribution network. As engineer Ted Sorenson comments, these four-pole
interconnects are reliable,stable,and often run 20 to 30 years without significant O&M. Comments
of Ted Sorenson for IdaHydro, 19. To charge those facilities the same "average"percentage as if
they were complex, system-wide generation facilities is not just inaccurate; it is punitive. It forces
QFs with low-cost interconnections to subsidize the Company's larger system expenses, in direct
contravention of PURPA's mandate. As IdaHydro has documented, Idaho Power's current
methodology collects enough revenue to replace interconnection facilities multiple times over
within their useful lives.Averaging only perpetuates and masks that over-collection.
The timing compounds the distortion. The original de-levelized schedule was tied to
35-year PURPA contracts.Today, contracts are shorter: 2 to 20 years in many cases.The averaging
method papers over this reality, applying long-run percentages to short-run obligations, with no
reconciliation at the end of term. In practice, this means QFs pay inflated charges with no
mechanism for true-up or refund.
Averaging also insulates Idaho Power from scrutiny. A flat percentage cannot be audited
against actual O&M because the Company does not track actual O&M. This creates a closed loop:
the Company charges what it pleases, calls it an "average," and declares itself in compliance.
PURPA's safeguards vanish into the arithmetic of a formula.
The Commission should not be misled by claims of administrative ease. "Simplification"
in this context means only one thing: simplification of overcharging. The Commission's duty is
not to make Idaho Power's accounting easier. It is to uphold Idaho and federal law. And federal
law requires costs to be measured, avoided costs to be subtracted, and QFs to be charged only for
the excess.Averaging accomplishes none of these things.
VI. Requested Commission Action
Idaho Power has asked this Commission to approve a tariff that (1) ignores the statutory
requirement to subtract avoided interconnection costs, (2) refuses to measure actual incremental
costs, and(3) substitutes arbitrary averages as a shield against scrutiny.
The Commission should not make that mistake.The law is clear.Interconnection costs may
be charged to QFs only to the extent they are"in excess"of what the utility would otherwise incur
upon purchase of power elsewhere. That means costs must be measured. Avoided costs must be
identified and netted out.And charges must be based on actual incremental expenses,not averages,
not guesses, not accounting tricks.
MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 6

The Commission's job is not to accommodate the Company's accounting preferences, but
to enforce the law. If this Commission is to fulfill its duty, it must reject Idaho Power's attempt to
transform Schedule 72 into a slush fund. PURPA was designed to prevent precisely this kind of
monopoly abuse.
Accordingly, IdaHydro respectfully requests that the Commission:
1. Reject Idaho Power's Application in its current form. The proposal is unlawful on its
face and cannot be squared with PURPA's requirements.
2. Order that any future Schedule 72 charges be based on actual incremental O&M costs
in excess of what Idaho Power would pay for O&M costs on interconnection for
energy/capacity from a third party.
3. Require explicit subtraction of avoided interconnects costs in accordance with
18 C.F.R. § 292.101.
4. Forbid the use of system-wide averages as a substitute for actual cost data.
VII.Alternative Request for Hearing
If the Commission is unwilling, based on the comments submitted, to provide the relief
requested by IdaHydro above, IdaHydro respectfully requests that the Commission set this matter
for a full evidentiary hearing.The issues raised here, including whether Idaho Power may lawfully
assess O&M charges without tracking actual incremental costs, and whether its methodology
improperly ignores avoided O&M,are fact-intensive and may not be able to be adequately resolved
on the written record alone.
A hearing may be necessary to allow the parties to present evidence, examine witnesses,
and build a complete factual record on which the Commission can base its decision. The proposed
averaging methodology represents a significant departure from PURPA's requirements, and its
adoption would have long-lasting consequences for both QFs, Idaho Power, and Idaho Power's
ratepayers.
Accordingly, IdaHydro requests that the Commission deny the Application as filed and, in
the alternative, set this matter for hearing to fully develop the record.
DATED this 16th day of September 2025. ARKOOSH LAW OFFICES
Nicholas J. Erekson
Attorneys for IdaHydro
MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 7

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 16th day of September 2025, I served a true and correct
copy of the foregoing document(s) upon the following person(s), in the manner indicated:
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MEMORANDUM IN SUPPORT OF COMMENTS FOR IDAHYDRO—Page 9