APPLICATION

APPLICATION - 1
MEGAN GOICOECHEA ALLEN (ISB No. 7623)
LISA C. LANCE (ISB No. 6241)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]

Attorneys for Idaho Power Company

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR
AUTHORITY TO ESTABLISH A REVISED
MARGINAL COST-BASED ENERGY
PRICING FRAMEWORK
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CASE NO. IPC-E-26-26

APPLICATION

Idaho Power Company (“Idaho Power” or “Company”), pursuant to Idaho Code §§
61-501, -502, and -503 and Idaho Public Utilities Commission (“Commission”) Rule of
Procedure (“RP”) 52, submits this Application requesting approval of a revised marginal
cost-based energy pricing framework applicable to customers taking service under a
marginal cost-based energy rate. Idaho Power is not proposing new marginal cost-based
energy rates in this case, rather the Company is requesting approval of the proposing
pricing framework so it may be incorporated into the next annual marginal cost-based
APPLICATION - 2
energy rate update proceeding. This Application responds to the Commission’s direction
in Order No. 37125 to initiate a docket to comprehensively reevaluate the methodologies
used to determine marginal cost-based energy rates. The proposed framework will apply
to customers subject to the Single-Run method and consists of an Embedded Energy
Rate, a Marginal Premium, and, where applicable, a Forecast Variance Premium (“FVP”).
In support of this Application, Idaho Power has filed the Direct Testimony of
Jessica G. Brady, Regulatory Consultant (“Brady Testimony”). The Brady Testimony
provides background regarding the development and reevaluation of Idaho Power’s
current marginal cost-based energy pricing methodologies, discusses the Company’s
stakeholder engagement and the relationship between this proceeding and the ongoing
cost-of-service proceeding, and describes the proposed framework, including the
methodology for determining each component and the associated accounting treatment.
In further support of this Application, Idaho Power represents as follows:
I. BACKGROUND AND REGULATORY HISTORY
1. In 2021, Idaho Power filed Case No. IPC-E-21-37 seeking approval of
Schedule 20, Speculative High-Density Load. Idaho Power proposed to price energy at
marginal cost using avoided cost averages from the Company’s Integrated Resource
Plan. In Order No. 35428, the Commission approved the proposed pricing methodology
and directed Idaho Power to evaluate alternative approaches for determining marginal
cost-based energy rates using a test-year methodology.1

1 In the Matter of the Application of Idaho Power Company for Authority to Establish a New
Schedule to Serve Speculative High-Density Load Customers, Case No. IPC-E-21-37, Order No. 35428 at
7 (Jun. 15, 2022).

APPLICATION - 3
2. Following that direction, Idaho Power worked with Commission Staff
(“Staff”) to evaluate alternative methodologies and the factors that should be considered
when developing marginal cost-based energy rates. Those discussions resulted in a Staff
memorandum identifying guiding principles to be considered when developing marginal
cost-based energy rates. The Staff memorandum is provided as Exhibit No. 1 to the Brady
Testimony.
3. While those discussions were ongoing, Idaho Power negotiated an Energy
Services Agreement (“ESA”) with Lamb Weston that contemplated a two-block pricing
structure including an embedded cost pricing block and a marginal cost pricing block. In
Case No. IPC-E-23-18, Idaho Power proposed a methodology to determine the marginal
energy price that used two AURORA production cost model (“AURORA”) simulations to
estimate the incremental power supply costs associated with serving the customer. The
Commission approved the rates calculated using that methodology, referred to as the
“Two-Run Method,” and an associated annual update process in Order No. 35929.2
4. Idaho Power subsequently developed the “Single-Run Method,” which uses
hourly marginal resource costs from a single AURORA simulation to determine marginal
energy rates. The Commission approved the Single-Run Method for updating the
marginal energy price component in Schedule 20 in Order No. 36619.
5. As Idaho Power was developing the Single-Run Method, the Company was
also negotiating an ESA for Micron’s new memory manufacturing fabrication complex

2 In the Matter of Idaho Power Company’s Application for Approval of a Special Contract Under
Tariff Schedule 34 to Provide Electric Service to Lamb Weston, Inc., Case No. IPC-E-23-18, Order No.
35929 at 5 (Sep. 21, 2023).
APPLICATION - 4
("Micron FAB"). As a result, Idaho Power proposed the Single-Run Method as the basis
for determining Micron FAB's marginal cost-based energy rate in Case No. IPC-E-24-44.
6. Table 1 identifies the schedules under which marginal cost-based energy
pricing currently applies or is proposed to apply, the associated customer where
applicable, the approved or proposed methodology, and the applicable case number. No
customer currently takes service under Schedule 20.
Table 1 – Customers Taking Service Under Marginal Cost-Based Energy Rates

Schedule Customer Method Case No.
Schedule 20 No customers currently
taking service Single-Run IPC-E-21-37
Schedule 33 Brisbie LLC Avoided Cost Averages IPC-E-21-42
Schedule 34 Lamb Weston Two-Run IPC-E-23-18
Schedule 28 Micron FAB Single-Run IPC-E-24-44
Schedule 35 Chobani (proposed) Single-Run IPC-E-26-19

7. The proposed framework will apply to customers subject to the
Commission-approved Single-Run Method, including any future customers taking service
under Schedule 20, Micron FAB under Schedule 28, and Chobani under proposed
Schedule 35. Because the Avoided Cost Average and Two-Run methods are only
applicable to Brisbie LLC and Lamb Weston, respectively, and because those
methodologies are prescribed within their respective ESAs, the Company’s application in
this matter does not address changes to those methodologies.
8. Under the existing framework, energy sales associated with customers
taking service under marginal cost-based energy rates are excluded from forecast sales
used to calculate Power Cost Adjustment (“PCA”) rates, while revenues collected through
the marginal cost-based energy rate are included in the PCA as an offset to net power
APPLICATION - 5
supply expense (“NPSE”). Those customers therefore do not participate directly in the
PCA or its true-up of forecast and actual power supply costs.
Events Leading to Reevaluation
9. In the IPC-E-24-44 proceeding seeking approval of the Micron FAB ESA,
the Idaho Irrigation Pumpers Association (“IIPA”) raised questions regarding whether the
proposed Single-Run Method fully captures all costs associated with serving large loads.
In particular, IIPA raised concerns regarding the treatment of long-run energy costs,
including power purchase agreement (“PPA”) costs, and the fact that the existing
framework relies on a forecast with no true-up component.3
10. In Order No. 37039 issued in Case No. IPC-E-24-44, the Commission, in
pertinent part, directed Idaho Power to “identify all incremental costs associated with
planning for and serving the Micron ESA and any future large load so those costs may be
correctly allocated…”.4
11. Separately, in preparing its 2026 annual marginal cost update in Case No.
IPC-E-26-08, Idaho Power observed that both Commission-approved methodologies
produced marginal cost-based energy rates below the embedded power supply cost rates
forecast for the 2026–2027 PCA test year. As a result of that outcome, Idaho Power
recommended maintaining the then-current rates while the broader pricing framework
was evaluated.

3 In the Matter of Idaho Power Company' s Application for Approval of Special Contract and Tariff
Schedule 28 to Provide Electric Service to Micron Idaho Semiconductor Manufacturing (Triton) LLC, Case
No. IPC-E-24-44, Kaufman Surrebuttal Testimony at 18–22 (Aug. 15, 2025).
4 Id., Order No. 37039 at 15 (May 8, 2026).
APPLICATION - 6
12. In Order No. 37125 issued in Case No. IPC-E-26-08, the Commission found
that Idaho Power had correctly applied the approved methodologies and directed Idaho
Power to initiate a separate proceeding to comprehensively reevaluate the methodologies
used to determine marginal cost rates. The Commission directed Idaho Power to examine
the circumstances under which marginal cost-based rates may fall below embedded
power supply costs, evaluate whether those results appropriately reflect the costs
associated with serving new load, and determine whether modifications to the framework
were warranted. This Application responds to that direction.5
II. COMPLIANCE WITH ORDER NO. 37125
13. Idaho Power evaluated why the marginal cost-based rates calculated in
Case No. IPC-E-26-08 were below embedded power supply costs and determined that
the result occurred because marginal and embedded rates measure different aspects of
the Company’s power supply costs.
14. Marginal energy costs measure the change in power supply costs
associated with serving additional load under forecast system conditions. Embedded
power supply costs reflect the average cost of the Company’s entire power supply
portfolio. If the resources or market purchases used to serve additional load cost less
than the portfolio average, the marginal cost may be below the embedded cost even
though the additional load increases total system costs.
15. Idaho Power concluded that marginal cost estimates remain useful for
identifying power supply impacts associated with serving additional load but do not, by

5 In the Matter of Idaho Power Company's Application for its Annual Update to Marginal Pricing
Used in Certain Schedules, Case No. IPC-E-26-08, Order No. 37125 at 5-6 (Aug. 11, 2026).
APPLICATION - 7
themselves, provide a complete pricing framework. Idaho Power therefore developed a
framework designed to ensure that affected customers pay their allocable share of
embedded power supply costs, pay incremental costs identified above the embedded
cost baseline, and, where applicable, assume responsibility for material forecast-related
risks associated with their service.
III. STAKEHOLDER ENGAGEMENT AND RELATIONSHIP TO
COST-OF-SERVICE PROCEEDING
16. In developing its proposal, Idaho Power met with Staff, Micron, and IIPA to
discuss the existing marginal cost-based energy pricing framework, concerns raised in
prior proceedings, and potential approaches for addressing those concerns. These
discussions provided stakeholders an opportunity to share their perspectives and allowed
Idaho Power to consider that input in developing the proposal presented in this case.
17. This proceeding addresses the pricing and recovery of power supply costs
for customers taking service under a marginal cost-based energy rate, including costs
and revenues accounted for through the PCA. Because the proposal concerns power
supply costs recovered through the PCA, Idaho Power believes those issues are most
appropriately evaluated separately from the broader cost-of-service methodologies under
review in Case No. IPC-E-26-07. Addressing the matters separately allows the
Commission to consider the proposed pricing framework without predetermining cost-
allocation issues being evaluated in that proceeding.
IV. PROPOSED MARGINAL COST-BASED ENERGY PRICING FRAMEWORK
18. Idaho Power proposes a framework consisting of three components: (1) an
Embedded Energy Rate, (2) a Marginal Premium, and (3) where applicable, a Forecast
APPLICATION - 8
Variance Premium. Each component addresses a distinct power supply cost or forecast-
related risk.
Embedded Energy Rate
19. For PCA purposes, customers taking service under the proposed
framework would be combined into a single group referred to as the “Marginal Cost
Customer Group.” The group would be allocated a share of forecast NPSE based on its
percentage of total billed sales, together with the group’s applicable prior-period over- or
under-collection determined through the PCA true-up.
20. The Company would determine the group’s PCA true-up by allocating actual
NPSE to the group based on its percentage of total billed sales and separately tracking
revenues collected from the group through the Embedded Energy Rate. The difference
between allocated actual NPSE and collected Embedded Energy Rate revenues would
determine the group’s over- or under-collection for incorporation in the subsequent year’s
Embedded Energy Rate.
21. The Embedded Energy Rate would establish the group’s allocable share of
portfolio-level power supply costs, including costs of non-dispatchable resources such as
PURPA6 contracts and other PPA expenses. It would also allow the group to participate
in the PCA true-up rather than paying solely on the basis of forecast costs.
Marginal Premium
22. After establishing the Embedded Energy Rate, Idaho Power would evaluate
whether the marginal power supply cost of serving additional load exceeds the embedded

6 Public Utility and Regulatory Policy Act of 1978.
APPLICATION - 9
power supply cost already assigned to the Marginal Cost Customer Group. Positive
differences would form the basis of the Marginal Premium.
23. Idaho Power would determine the Marginal Premium through an hourly
comparison. The Company would convert embedded power supply costs into hourly rates
using the hourly cost shape produced by AURORA and compare each hourly embedded
rate to the corresponding hourly marginal cost rate produced under the Commission-
approved Single-Run Method. A positive difference would be identified as an incremental
cost. No Marginal Premium would be identified for an hour when the marginal rate is equal
to or below the embedded rate. Positive hourly differences would be aggregated by
month.
24. Idaho Power proposes monthly Embedded Energy Rates and Marginal
Premiums, each applied to a customer’s actual energy usage during the corresponding
billing month.
PCA Accounting Treatment
25. Under the proposed framework, the Marginal Cost Customer Group would
be allocated a share of forecast and actual NPSE and would participate in the PCA true-
up through the Embedded Energy Rate. Revenues collected through the Marginal
Premium would be included in the PCA as an offset to NPSE for all customers.
26. Exhibit No. 2 to the Brady Testimony provides a step-by-step illustration of
the Embedded Energy Rate and Marginal Premium calculations and their treatment within
the PCA using illustrative assumptions and data.

APPLICATION - 10
Forecast Variance Premium
27. The Embedded Energy Rate and Marginal Premium are designed to
recover forecasted power supply costs associated with serving the Marginal Cost
Customer Group. However, Idaho Power's power supply planning and risk management
activities rely on forecasted customer usage. When actual usage differs materially from
forecast, the Company may incur costs or face risks that are not fully addressed through
the Embedded Energy Rate and Marginal Premium alone.
28. Idaho Power proposes the FVP to address costs or risks associated with
material differences between forecast and actual usage. The FVP would apply when a
customer’s actual monthly usage is less than 90 percent or greater than 110 percent of
forecast monthly usage. No FVP would apply while actual usage remains within that
bandwidth. If usage falls outside the bandwidth, the applicable FVP rate would be applied
to the customer’s entire variance from forecast.
29. When actual usage exceeds 110 percent of forecast, the FVP rate would
be based on the absolute value of the difference between the hedge-based natural gas
price used to develop forecast power supply costs and the actual natural gas price for the
same month. The absolute value reflects the assignment of forecast-related price risk
associated with usage that was not included in the Company’s planned hedged position.
The difference would be converted to a generation-level energy rate using the AURORA-
implied monthly heat rate, adjusted for losses, and applied to the customer’s total usage
variance above forecast.
30. When actual usage is less than 90 percent of forecast, an FVP rate would
apply only when the hedge-based natural gas price exceeds the actual natural gas price
APPLICATION - 11
for the same month. The difference would be converted to a generation-level energy rate
using the AURORA-implied monthly heat rate, adjusted for losses, and applied to the
customer’s total usage variance below forecast. If the hedge-based price is equal to or
less than the actual price, the FVP rate would be zero.
31. Idaho Power proposes to apply the FVP only to customers with a maximum
contract demand of at least 50 megawatts. In evaluating a threshold, Idaho Power sought
to focus the FVP on customers whose forecast deviations have the greatest potential to
create material costs or risks that could otherwise be borne by other customers, while
balancing the administrative impacts of implementing the mechanism.
32. Each January, Idaho Power would request an updated monthly energy
forecast from each customer subject to the FVP. The customer would be required to
provide the forecast by February 15, or the immediately preceding business day if
February 15 falls on a non-business day. If the customer does not provide an updated
forecast by the deadline, Idaho Power would use the customer’s most recent monthly
energy forecast.
33. For purposes of developing and applying the proposed rates, Idaho Power
would use 14 months of the customer’s monthly forecast. The April-through-March
forecast would be incorporated into the system load forecast used to develop forecast
NPSE through the PCA and to determine the Marginal Premium. The June-through-May
forecast would establish the monthly usage amounts against which actual usage would
be compared for purposes of the FVP.
34. FVP revenues would be included in the PCA as an offset to NPSE,
consistent with the treatment of Marginal Premium revenues.
APPLICATION - 12
35. Exhibit No. 3 to the Brady Testimony includes separate illustrations of the
FVP calculation for above-forecast and below-forecast usage.
V. IMPLEMENTATION OF PROPOSED FRAMEWORK
36. Idaho Power is not requesting approval of new marginal cost-based energy
rates in this proceeding. Rather, the Company seeks approval of the proposed pricing
framework and associated methodologies so they may be incorporated into the next
annual marginal cost-based energy rate update proceeding.
37. Customers currently taking service under a marginal cost-based energy
rate will continue to be billed under the rates presently in effect until new rates are
approved through the annual update process.
38. Idaho Power believes implementation through the next annual update
proceeding will provide customers sufficient notice and visibility regarding how the
approved framework will be used to develop future rates. This approach also allows Idaho
Power time to obtain and incorporate the information necessary to calculate rates under
the new framework before it is implemented. Accordingly, Idaho Power requests that the
Commission issue an order in this proceeding no later than February 26, 2027, so the
approved methodologies may be incorporated into the Company's next annual marginal
cost-based energy rate update proceeding.
VI. ANNUAL UPDATE PROCESS
39. Idaho Power proposes to continue to update the rates through an annual
marginal cost-based energy rate proceeding. The annual update would establish the
Embedded Energy Rate and Marginal Premium for the applicable rate period, as well as
the forecast inputs and other parameters necessary to calculate and implement the FVP.
APPLICATION - 13
40. The rates would be developed using inputs for an April-through-March test
year and would become effective June 1 of each year, subject to Commission approval.
41. While the Company has historically filed its annual update to the marginal
cost-based energy prices on April 1st, moving forward Idaho Power proposes to file the
annual update no later than five business days after filing its annual PCA application. This
timing would allow the Company to use consistent information in the two proceedings
while minimizing the time between the filings.
42. Each year, Idaho Power would calculate the proposed rates in accordance
with the Commission-approved methodologies and submit them to the Commission for
review and approval.
VII. SUPPORTING TESTIMONY AND EXHIBITS
43. The Direct Testimony of Jessica G. Brady and Exhibit Nos. 1, 2, and 3 are
filed concurrently in support of this Application. Exhibit No. 1 is the Staff memorandum
identifying guiding principles for marginal cost-based pricing. Exhibit No. 2 provides
illustrative calculations and accounting treatment for the Embedded Energy Rate and
Marginal Premium. Exhibit No. 3 provides illustrative calculations and accounting
treatment for the FVP.
VIII. MODIFIED PROCEDURE
44. Idaho Power believes that a technical hearing is not necessary to consider
the issues presented herein and respectfully requests that this Application be processed
under Modified Procedure, i.e., by written submissions rather than by hearing. RP 201,
et seq. If, however, the Commission determines that a technical hearing is required, the
APPLICATION - 14
Company stands ready to present and support the Brady Testimony and this Application
at such hearing.
IX. COMMUNICATIONS AND SERVICE OF PLEADINGS
45. Communications and service of pleadings with reference to this Application
should be sent to the following:
Megan Goicoechea Allen
Lisa C. Lance
Regulatory Dockets
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
[e-mail]
[e-mail]
[e-mail]
Connie Aschenbrenner
Timothy E. Tatum
Jessi Brady
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
[e-mail]
[e-mail]
[e-mail]

X. REQUEST FOR RELIEF
46. As discussed in greater detail above, Idaho Power respectfully requests that
the Commission issue an order: (1) finding that the Company complied with Order No.
37125; and (2) approving the proposed revised marginal cost-based energy pricing
framework described in the Brady Testimony, including:
i. The establishment of the Marginal Cost Customer Group for PCA
purposes and the associated PCA accounting treatment, including
allocation of forecast and actual NPSE to the Marginal Cost Customer
Group, calculation and recovery of the group's PCA true-up through the
Embedded Energy Rate, and inclusion of Marginal Premium and
Forecast Variance Premium revenues as offsets to NPSE;
APPLICATION - 15
ii. A monthly Embedded Energy Rate that assigns the group its allocable
share of embedded power supply costs and incorporates the group’s
PCA true-up;
iii. A monthly Marginal Premium based on positive hourly differences
between marginal and embedded power supply costs;
iv. An FVP applicable to customers with a maximum contract demand of at
least 50 megawatts when actual usage falls outside the 90 percent to
110 percent forecast bandwidth, with the applicable FVP rate applied to
the customer’s total variance from forecast;
v. Authorization to file the annual marginal cost-based energy rate update
no later than five business days after Idaho Power files its annual PCA
application; and
vi. Issuance of an order no later than February 26, 2027, so the approved
methodologies may be incorporated into Idaho Power's next annual
marginal cost-based energy rate update proceeding.
DATED at Boise, Idaho, this 11th day of September 2026.

________________________________
MEGAN GOICOECHEA ALLEN
Attorney for Idaho Power Company