20260811Final_order_No_37125.pdf

Office of the Secretary
Service Date
August 11,2026
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER ) CASE NO. IPC-E-26-08
COMPANY'S APPLICATION FOR ITS )
ANNUAL UPDATE TO MARGINAL PRICING )
USED IN CERTAIN SCHEDULES ) ORDER NO. 37125
On April 1, 2026, Idaho Power Company ("Company") applied ("Application") to the
Idaho Public Utilities Commission("Commission")requesting acknowledgement that the updated
marginal cost calculations provided in the Application were correctly quantified, a finding that the
Company complied with Order No. 36619 by meeting with Commission Staff("Staff')in advance
of this Application, and authorization to maintain the currently in-effect marginal energy price
components of Schedule 20, Speculative High-Density Load ("Schedule 20") and Schedule 34,
Lamb Weston Special Contract("Schedule 34").
On April 17, 2026, the Commission issued a Notice of Application and Notice of
Intervention Deadline, setting a deadline for interested parties to file a petition to intervene. Order
No. 37007. Intervention was granted to Idaho Irrigation Pumpers Association, Inc. ("IIPA") and
Micron Technology, Inc. ("Micron"). Order Nos. 36999 and 37055.
On June 8, 2026, the Commission issued a Notice of Modified Procedure, establishing
deadlines for public comments and for the Company to file reply comments. Order No. 37061.No
public comments were received.
Based on our review of the record, the Commission now issues this Final Order
acknowledging that the updated marginal cost calculations provided in the Application were
correctly quantified, finding that the Company complied with Order No. 36619 by meeting with
Staff in advance of this Application, authorizing the Company to maintain currently in-effect
marginal energy price components of Schedule 20 and Schedule 34, and directing the Company to
open a separate docket to reevaluate the methodology for determining marginal cost rates.
THE APPLICATION
The Company calculated updated marginal energy prices using two Commission-approved
methodologies—the Two Run Method and the Single Run Method—with results provided in
Attachment 3 to the Application.Application at 11-12.As directed in Case Nos. IPC-E-23-18 and
ORDER NO. 37125 1

IPC-E-25-17, the Company implemented the Two Run Method by conducting two AURORA
model simulations: a base case reflecting expected system conditions and a second scenario
incorporating an incremental 15 megawatts ("MW")of load.Id. at 12.The marginal cost of energy
was then derived by calculating the difference in total system costs between these two simulations
and expressing that difference on a per-MW-hour basis. Id.
The Company applied the Commission approved Single Run Method by performing a
single AURORA simulation for the test year. Id. This simulation incorporated the Company's
projected system load, excluding load already priced under the Single Run Method, and included
an additional 100 MW to approximate marginal conditions.Id. The Company represented that, at
present,this methodology is applied solely to Schedule 28,Micron Semiconductor Manufacturing
("Micron FAB") (IPC-E-24-44), as there are no active customers under Schedule 20.Id.
Upon evaluating the outcomes of both methodologies, the Company stated that the
resulting marginal cost-based energy rates were lower than the embedded power supply cost rates
projected for the 2026-2027 Power Cost Adjustment ("PCA") test year. Id. The Company argued
that without mitigation, customers billed under marginal cost-based rates would, on average, pay
less than customers charged under embedded cost-based rates. Id. The Company believed that the
observed disparity raised concerns that current methodologies may not fully capture all relevant
incremental costs, particularly long-run marginal costs such as those associated with power
purchase agreements.Id. at 12-13.
The Company recommended that the Commission direct the Company to maintain the
currently effective marginal cost-based energy rates for Schedules 20 and 34 as a mitigation
measure. Id. Alternatively, should the Commission determine that updated rates should be
implemented based on the approved methodologies and supporting analysis in Attachment 3, the
Company indicated that it would file revised tariff sheets reflecting those updated rates in a
subsequent compliance filing.
STAFF COMMENTS
Staff verified that the Company correctly calculated the updated marginal cost rates using
the Commission-approved methodology and confirmed that the resulting marginal cost energy
rates were lower than the corresponding embedded cost rate. Staff Comments at 2. Although the
Company's calculations were accurate,it proposed to continue using last year's marginal cost rates
because the updated rates produced an unexpected result that was inconsistent with the principle
ORDER NO. 37125 2

that marginal cost rates should generally exceed embedded cost rates. Id. Staff agreed with the
recommendation of maintaining last year's marginal cost rates and believed that the current
approved methodology likely contains flaws that warrant further review. Id. Accordingly, Staff
recommended that the Commission direct the Company to open a new docket to reevaluate the
methodology for calculating marginal cost rates, with the timing coordinated alongside the cost-
of-service/New Large Load methodology case (Case No. IPC-E-26-07). Id. Staff also
recommended extending last year's marginal cost rates until a revised methodology is approved
and new rates can be calculated.Id.
Staff noted that while embedded cost rates are typically lower than marginal cost rates
because they reflect average system costs rather than the cost of the marginal resource,the forecast
for the April 2026 through March 2027 test year shows the opposite relationship, reinforcing the
need to reevaluate the current methodology. Id. at 2-3.
Table No. 1: Comparison of Forecasted Marginal Cost Rates and Forecasted Embedded
Cost Rates
Forecasted Marginal Cost Rates Forecasted Embedded Cost Rate
($/MWh) ($/MWh)
Single-Run Two-Run
31.63 32.83 38.85
Id. at 3.
Staff reviewed the Company's forecasted marginal cost rates, which were produced using
the AURORA model, and compared them to the forecasted embedded cost rate developed through
the Company's Operating Plan.Id.Although both forecasting methods rely on generally consistent
assumptions, including projected hydro conditions and natural gas prices, Staff noted that the two
models respond differently to those inputs. Id. Specifically, marginal cost rates are more sensitive
to natural gas prices, while embedded cost rates are more influenced by hydro generation. Id. For
the April 2026 through March 2027 test year, forecasts of below-normal hydro generation and low
natural gas prices contributed to higher embedded cost rates and lower marginal cost rates. Id.
However, Staff believed that these factors do not fully explain why embedded cost rates exceed
marginal cost rates, suggesting that broader issues, such as inflation, significant capital
investments, or potential flaws in the current methodology, may be contributing to the unexpected
outcome. Id. at 3-4.As a result, Staff recommended a comprehensive review of the marginal cost
ORDER NO. 37125 3

methodology in a separate docket, with coordination alongside the ongoing cost-of-service/New
Large Load methodology case (Case No. IPC-E-26-07).Id. at 4.
Staff verified that the updated marginal cost rates in the Company's Application were
calculated correctly under the currently approved methodology and recommended that the
Commission acknowledge the accuracy of those calculations. Id. Nevertheless, because of the
concerns surrounding the existing methodology, Staff did not recommend approving the updated
rates.Id. In addition, Staff believed that the Company complied with Order No. 36619 by working
with Staff to evaluate methods for validating marginal cost forecasts before this annual update.Id.
During that process, the Company explained that actual marginal cost rates cannot be directly
observed because doing so would require tracking hourly, counterfactual system data that it does
not currently collect. Id. at 5. To provide a reasonable level of validation, the Company instead
compared its forecasted marginal cost rates against four proxy measures: 1) Day-Ahead Mid-C
Price, 2) Hourly Energy Load Aggregation Point (`SLAP") Price, 3)Actual Gas Dispatch Rate,
and 4)AURORA Backcast Price. Id. Staff believed the proxy measures offered limited but useful
support for assessing the reasonableness of the forecasts in the absence of directly measurable
marginal cost data.Id.
Table No. 2: Forecasted Marginal Cost Rates vs. Proxy Marginal Cost Rates
Forecasted Marginal Proxy Marginal Cost Rates
Cost Rates $/MWh $/MWh
AURORA AURORA Day- Hourly Gas AURORA AURORA
Two-Run Single-Run Ahead ELAP Dispatch Backcast Backcast
(4.1.2025- (4.1.2025- Mid-C Price Rate Single-Run Single-Run
3.31.2026) 3.31.2026) Price (4.1.2025- (1.1.2025- (1.1.2025- (4.1.2025-
(4.1.2025- 3.24.2026) 12.31.2025) 12.31.2025) 3.31.2026)
3.25.2026
42.64 40.84 35.68 29.55 33.76 30.86 29.71
Id.
Staff's review of the Company's validation analysis found that the forecasted marginal cost
rates were consistently higher than all four proxy measures used for comparison.Id. The Company
attributed this difference primarily to the gas price assumptions used in the models,explaining that
forecasted marginal cost rates rely on forward market gas prices from trading hubs such as Sumas,
Stanfield, and the Rockies, while the backcast uses actual gas procurement costs across all
procurement hubs. Id. Based on these findings and the broader concerns with the current
methodology, Staff recommended that the Commission direct the Company to open a new docket
ORDER NO. 37125 4

to reevaluate the methodology for determining marginal cost rates, coordinated with the ongoing
cost-of-service/New Large Load methodology case (Case No. IPC-E-26-07). Id. at 6. Staff also
recommended extending last year's marginal cost rates until a revised methodology is approved,
while acknowledging that the updated marginal cost rates were correctly calculated under the
existing methodology and that the Company has complied with the requirements of Order No.
36619.Id.
MICRON COMMENTS
Micron supported the Company's requested relief and agreed that the case should proceed
under Modified Procedure without a hearing, arguing that the proceeding was narrow in scope and
limited to the annual update of marginal energy prices rather than changes to the underlying pricing
methodology. Micron Comments at 1-2. Micron noted that the Company was not proposing any
modifications to the approved methodology and was instead requesting that the Commission
maintain the currently effective marginal cost-based energy rates that were previously approved.
Id. at 2. Consistent with discussions during the Micron FAB Special Contract proceeding (Case
No. IPC-E-24-44), Micron maintained that any review or revision of the marginal energy pricing
methodology should occur in a separate, standalone docket where stakeholders can conduct a
comprehensive evaluation. Id. at 3. Accordingly, Micron urged the Commission to continue
processing this annual update without a hearing and defer any methodology issues to a future
proceeding dedicated to that purpose.Id. at 4.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over the Company's Filing and the issues in this case
under Title 61 of the Idaho Code including, Idaho Code §§ 61-501, -502, and -503. The
Commission is empowered to investigate rates, charges,rules,regulations,practices, and contracts
of all public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provisions of law, and to fix the same by order.Idaho Code
§§ 61-501, -502, and-503.
The Commission has reviewed the Company's Application, including all submitted
materials, Staff Comments, and the Company's Reply Comments. Based on our review of the
record, we find it fair,just, and reasonable to acknowledge that the Company correctly calculated
the updated marginal cost energy rates using the Commission-approved Two Run Method and
Single Run Method. The record demonstrates, and Staff verified, that the Company accurately
ORDER NO. 37125 5

applied the currently approved methodologies in developing the updated marginal cost rates.
Accordingly, we find that the calculations contained in the Application are correct under the
Commission's existing approved methodology.
We also find that the Company complied with the requirements of Order No. 36619. As
directed by that Order, the Company worked with Staff to evaluate methods for validating its
marginal cost forecasts before filing this annual update. We find that these efforts satisfy the
requirements established in Order No. 36619.
Although the calculations were correctly performed, the resulting marginal cost rates are
lower than the corresponding forecasted embedded cost rates. As Staff explained, this outcome is
inconsistent with the general expectation that marginal cost rates should exceed embedded cost
rates because marginal costs reflect the cost of serving incremental load rather than average system
costs. While the record suggests that forecast assumptions regarding hydro conditions and natural
gas prices contributed to this outcome,those factors alone do not adequately explain the disparity.
The record instead raises legitimate questions regarding whether the current methodology fully
captures all relevant incremental costs or otherwise warrants refinement.
Given these concerns,we find that it is not appropriate at this time to implement the newly
calculated marginal cost rates. Rather,we find it reasonable to direct the Company to maintain the
currently effective marginal cost-based energy rates for Schedules 20 and 34 until the Commission
has had an opportunity to more fully evaluate the methodology used to produce those rates.
Accordingly, we direct the Company to open a separate docket to comprehensively
reevaluate the methodology used to determine marginal cost rates. We agree with Staff that this
review should be coordinated, where appropriate, with the ongoing cost-of-service/New Large
Load methodology proceeding in Case No. IPC-E-26-07. However,the purpose of the new docket
should not be limited to considering potential methodological revisions. Rather,the docket should
first develop a thorough understanding of how and why the existing Commission-approved
methodology produced the results observed in this case. That review should examine the
interaction of the methodology's underlying assumptions, modeling inputs, and design, identify
the factors that caused the calculated marginal cost rates to fall below embedded cost rates, and
evaluate whether those results accurately reflect the incremental cost of serving new load.
After developing that understanding, the parties should evaluate whether modifications to
the methodology are appropriate and, if so, what changes would ensure that future marginal cost
ORDER NO. 37125 6

calculations accurately reflect the costs they are intended to measure while remaining consistent
with sound ratemaking principles. The Commission expects the proceeding to provide a complete
record explaining both the performance of the current methodology under present system
conditions and any recommended changes for future application.
For these reasons,we acknowledge that the Company's updated marginal cost calculations
were correctly performed under the currently approved methodology, find that the Company
complied with Order No. 36619, direct the Company to maintain the currently effective marginal
cost-based energy rates for Schedules 20 and 34 pending further Commission action, and direct
the Company to initiate a separate docket to reevaluate the methodology for determining marginal
cost rates consistent with this Order.
ORDER
IT IS HEREBY ORDERED that the Company shall maintain the currently effective
marginal cost-based energy rates for Schedules 20 and 34.
IT IS FURTHER ORDERED that the Company shall initiate a separate docket to
reevaluate the methodology for determining marginal cost rates consistent with this Order
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within 21 days of the service date of this Order regarding any matter decided in
this Order.Within 7 days after any person has petitioned for reconsideration, any other person may
cross-petition for reconsideration.Idaho Code § 61-626.
ORDER NO. 37125 7

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 1 Ith day of
August, 2026.
G
EDWARD LODGE, PR IDENT
J R. HAMMOND JR., COMMISSIONER
DAYN HA IE, COMMISSIONER
ATTEST:
Yia anchez
Commission Secretary
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