20261015Staff Comments.pdf

RECEIVED
October 15, 2026
ERIKA K. MELANSON IDAHO PUBLIC
DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83702
[phone]
IDAHO BAR NO. 11560
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER THE IDAHO )
HYDROELECTRIC POWER PRODUCERS ) CASE NO. IPC-E-26-15
TRUST'S PETITION FOR IDAHO POWER )
COMPANY TO REDUCE ITS OPERATION )
AND MAINTENANCE CHARGES ) COMMENTS OF THE
APPLICABLE TO SCHEDULE 72, ) COMMISSION STAFF
GENERATOR INTERCONNECTIONS TO )
PURPA QUALIFYING FACILITY SELLERS )
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission
("Commission"), by and through its attorney of record, Erika K. Melanson, Deputy Attorney
General, submits the following comments.
BACKGROUND
On April 16, 2018, the Idaho Hydroelectric Power Producers Trust, d/b/a IdaHydro
("IdaHydro"), along with other organizations, initiated Case No. IPC-E-18-07 to petition the
Commission to revise Idaho Power Company's ("Company") Schedule 72 and allow Public
Utilities Regulatory Policy Act ("PURPA") qualifying facilities ("QFs") to be charged for actual
Operation and Maintenance ("O&M") costs of their interconnection facilities at the time of
occurrence. However, six months later, the petitioners withdrew the petition.
On December 28,2023,the Commission issued Order No. 36042, approving the settlement
stipulation in the Company's 2023 General Rate Case(Case No. IPC-E-23-11). The parties in the
case agreed in the settlement stipulation that Schedule 72 O&M charges will be updated in the
STAFF COMMENTS 1 OCTOBER 15, 2026

future to reflect current operating metrics and assumptions and that IdaHydro will initiate and meet
with the Company to discuss Schedule 72 O&M charges.
On May 8, 2025, the Company filed Case No. IPC-E-25-22 to update Schedule 72 O&M
charges to reflect current operating metrics and assumptions. IdaHydro was an intervenor of the
case. The Commission determined in Order No. 36894 that Case No. IPC-E-25-22 was not an
appropriate forum for a full-scale challenge to the approved methodology. However, the Order
allowed IdaHydro to open a docket to re-examine the existing methodology.
On May 19, 2026, IdaHydro petitioned the Commission in this case (i.e. Case No. IPC-E-
26-15)to update the Company's Schedule 72 O&M charges to actual costs("Petition"). IdaHydro
made five specific requests in the Petition:
Request No. 1: Open a new docket for the full re-examination of the Company's Schedule
72 O&M methodology, as contemplated in Order No. 36894.
Request No. 2: Determine that the Company may not continue to justify Schedule 72 O&M
charges solely through a system-average methodology("Average Cost Method").
Request No. 3: Require the Company to develop and maintain accounting sufficient to
identify direct-assigned actual O&M costs by facility, together with any legitimate shared
administrative or overhead costs associated with interconnection maintenance, and to justify any
allocation of such shared costs.
Request No. 4: Require that any future Schedule 72 O&M charges be tied to actual excess
interconnection costs, consistent with 18 C.F.R. § 292.101 and the principles recognized by this
Commission in Order No. 15746.
Request No. 5: Grant such other and further relief as the Commission deems just and
proper.
STAFF ANALYSIS
On September 18, 2026, all the intervening parties met to discuss and verify the scope of
issues and develop a process to resolve IdaHydro's Petition. All parties agreed that this case would
be used to address IdaHydro's issues related to the Company's Schedule 72 QF interconnection
O&M cost methodology and is not to determine whether another docket is needed to address them.
Staff s analysis of the issues in this case is based on Federal Energy Regulatory
Commission ("FERC") orders and rules under PURPA. According to the Obligation to Pay rule
STAFF COMMENTS 2 OCTOBER 15, 2026

for Interconnection Costs, "[e]ach qualifying facility shall be obligated to pay any interconnection
costs which the State regulatory authority...may assess against the qualifying facility on a
nondiscriminatory basis with respect to other customers with similar load characteristics." Title
18 C.F.R. § 292.306. Thus, QFs have the obligation to pay their O&M interconnection costs and
it is proper for the Commission, as the state regulatory authority to determine how O&M
interconnection costs should be paid.
Staff focused on a limited set of issues in this case with the primary question being whether
the current Average Cost Method used to determine Schedule 72 rates is fair,just, and reasonable
and whether IdaHydro's proposed method("Actual Cost Method") is a reasonable alternative. To
answer these questions, Staff needed to first answer two other questions: (1)whether the published
avoided costs determined by the Surrogate Avoided Resource ("SAR") model include the O&M
interconnection cost of the surrogate resource to make it valid to charge QFs for the full O&M cost
of their interconnection; and (2) whether the currently approved Average Cost Method is
reasonably based on actual cost representative of the Company's system. Staff analyzed the first
question only with respect to the SAR avoided cost published rates since published rates primarily
fell to Staff during their development.
As a result of Staff s examination, Staff concludes the following:
1. The avoided cost rates in the SAR model include the interconnection O&M cost of the
surrogate, and therefore charging QFs the full O&M cost to maintain their
interconnection is needed to ensure the Company's customers are not harmed.
2. The currently approved Average Cost Method is based on the Company's actual O&M
cost of its transmission and distribution system and can reasonably be expected to
capture the expected actual O&M cost of a QF interconnection.
3. The Average Cost Method used to charge QFs is fair,just, and reasonable. However,
Staff also believes that the Actual Cost Method proposed by IdahoHydro could also be
used to recover the O&M costs of a QF interconnection as long as the method is
implemented to hold the Company's customers harmless.
OFs Should Pay the Full O&M Cost of Their Interconnection
Staff believes that since interconnection O&M costs are included in published avoided cost
rates, QFs using these rates should be required to pay the full O&M costs of their interconnection.
STAFF COMMENTS 3 OCTOBER 15, 2026

Given that Staff believes they are included, Staff s conclusion is based on two additional factors:
(1) QFs should only pay the excess cost, which is the difference between the full O&M cost of its
interconnection and the O&M cost of the interconnection of the surrogate resource, and(2) for the
Company to recover the full O&M cost of the QF interconnection necessary to hold customers
harmless, the QF needs to pay the excess cost while crediting the Company for the amount of
benefits they receive through the avoided cost rate so that the ultimate result is that QFs only pay
the excess cost.
First, Staff believes the interconnection O&M cost of the surrogate, a Combined Cycle
Combustion Turbine ("CCCT"), is included in the SAR model through the fixed and variable
O&M included in published avoided cost rates. The values of the fixed and variable O&M costs
in the SAR model were based on the January 23, 2009, planning assumptions of the Northwest
Power and Conservation Council's Sixth Power Plan ("Plan").1
According to the Plan, the fixed O&M cost of a CCCT was $14 per kilowatt per year, and
the variable O&M cost of the CCCT is $1.70 per megawatt hour. Appendix I of the Plan at 87.
Furthermore, the Plan states that the early construction cost was 42% of the total plant cost and
includes costs of final engineering, equipment order, site preparation, interconnection,
infrastructure construction, and foundations. Id. [Emphasis added]
For the remaining two factors regarding excess costs discussed earlier, the first step is to
calculate the amount of the excess based on Title 18 C.F.R. §292.101(b)(7),where interconnection
excess costs include:
...installation and maintenance of the physical facilities necessary to permit
interconnected operation 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...
The second step is to calculate the amount charged to the QF by taking into account the
amount of interconnection O&M cost included in avoided cost rates ensuring adherence to
PURPA's neutrality principle. The principle ensures that a utility's customers should be
financially indifferent as to whether the utility builds a plant and generates electricity itself or
1 Not all the January 23,2009,planning assumptions of the Plan were adopted as the final,official assumptions in
the Plan,but the fixed and variable O&M planning assumptions were adopted. These values were originally in 2006
dollars,which were subsequently converted to values in 2008 dollars based on a 2%inflation rate to be used in the
SAR model.
STAFF COMMENTS 4 OCTOBER 15, 2026

purchases it from a QF. American Paper Institute, Inc. v. American Electric Power Service Corp.
(461 U.S. 402, 1983). It is useful to illustrate how the two factors lead to Staff s conclusion,using
some simple hypothetical scenarios as illustrated in the Table No. 1 below.
Table No. 1: Excess Cost Calculation Scenarios
Step 1 Step 2
Scenario (a)O&M Cost (b)O&M Cost (c) (d)Avoided (e)Amount Charged
of QF of Surrogate Excess Interconnection O&M to QF for O&M
Interconnection Interconnection O&M Cost Included in Avoided Interconnection
Cost Cost Rates
1 $10 $7 $3 $7 $10
2 $3 $7 $(4) $7 $3
3 $10 $7 $3 $0 $3
According to the first factor shown as Step 1 in Table No. 1,the QF should pay the"excess"
O&M cost [column(c)], which is the amount of the QF's full interconnection O&M cost [column
(a)] minus the interconnection O&M cost of the surrogate resource [column (b)]. In Step 2, the
amount charged to the QF [column (e)] should be the sum of the excess O&M cost of its
interconnection [column (c)] and the interconnection O&M cost of the surrogate resource the QF
is compensated through their avoided cost rates [column (d)]. By crediting the Company for
compensation the QF is receiving through their avoided cost rates for interconnection O&M
[column (d)], QFs pay the excess costs in compliance with Title 18 C.F.R. § 292.101(b)(7), and
customers remain indifferent under the PURPA's neutrality principle.
As can be seen from Scenarios 1 and 2, as long as the interconnection O&M cost of the
surrogate resource is included in avoided cost rates [column(d)],the QF should be charged for the
full O&M cost for their interconnection shown in [column (a)], since [column (a)] and [column
(e)]will always be equal. However,if the O&M cost of the surrogate is not included in the avoided
cost rate, as illustrated by Scenario 3, then the QF should only be charged for the excess cost,
instead of its full O&M cost. Since the interconnection O&M cost of the surrogate resource is
included in published rates, Staff believes the QF should be charged for the full O&M cost of their
interconnection.
STAFF COMMENTS 5 OCTOBER 15, 2026

Approved Average Cost Method Is Based on Actual Cost
Staff believes that the currently approved Average Cost Method used by Schedule 72 is
based on the Company's actual O&M cost of its transmission and distribution system and can
reasonably be expected to reflect the expected actual O&M cost of a QF interconnection over its
full life.
The Average Cost Method is based on two assumptions: (1) that a QF interconnection
O&M cost is linearly correlated to the original investment cost of its interconnection, and(2) that
this correlation ratio is equivalent to the correlation ratio between system distribution or
transmission O&M cost relative to the original investment cost of these assets. To determine the
applicable rates for each type of interconnection(transmission or distribution),the current method
divides the total system distribution-related or transmission-related O&M expenses by the
corresponding original system distribution or transmission investment cost. To calculate each
QF's monthly charge, the rate is multiplied by the QF's original interconnection investment cost,
as the billing determinant. Petition at 5; Schedule 72 at 13.
The data used to calculate the system ratios for distribution interconnections and for
transmission interconnections is based on the Company's actual costs included in the Company's
2024 FERC Form 1. Riley Maloney, DI, (Exhibit No. 1 - Case No. IPC-E-25-22). In addition,
each QF's original interconnection investment cost is based on the actual original investment cost.
Because the data used to determine the rates and billing determinant is based on actual costs, Staff
believes the current Schedule 72 method is a reasonable approach to ensure that the actual O&M
costs of a QF interconnection will be recovered over the life of the interconnection.
Average Cost Method vs Actual Cost Method
For reasons stated above, Staff believes that the currently approved Average Cost Method
used by Schedule 72 is fair,just, and reasonable. Because the method is based on average costs,
the Company will likely recover interconnection O&M costs from QFs as a whole, holding
customers harmless. Furthermore, it is reasonable to assume that a new interconnection will incur
less O&M costs at the beginning of its life and more towards the end of its life. By using the
current approach, the recovery of O&M cost will automatically be spread across the useful life of
the interconnection. This feature is supported by Title 18 C.F.R. § 292.306, which states "[e]ach
State regulatory authority...shall determine the manner for payments of interconnection costs,
STAFF COMMENTS 6 OCTOBER 15, 2026

which may include reimbursement over a reasonable period of time." However, there will likely
be some QFs that will pay more than the average and some that will pay less. This is an artifact
of an average rate methodology similar to what occurs when retail rates are determined for a
customer class, which results in some amount of intra-class subsidies.
However, Staff is not opposed to the Petitioner's Actual Cost Method on a facility-by-
facility basis, if implemented to ensure that customers are not harmed. First, to hold customers
harmless, Staff believes an Actual Cost Method would require two billing components, including
variable charges for actual O&M costs as they occur, and ongoing fixed charges for O&M
overhead costs such as management and maintenance labor, replacement equipment inventory
costs, and any other ongoing costs the Company incurs to maintain its system at a high level of
reliability. Second, Staff understands that the Company does not track costs necessary to
implement an Actual Cost Method on a facility-by-facility basis and would require modifications
to existing business processes, work-order practices, and system configurations to implement the
method. Response to Staff Production Request No. 4. Staff does not believe customers should
pay the cost of these types of enhancements, and therefore Staff recommends that those costs be
amortized and included in an ongoing overhead rate. Finally, Staff is concerned whether every
QF is able to pay its actual O&M costs if a major repair is required, which could fall back on
customers. Under the currently approved Average Cost Method, Staff believes this risk can be
mitigated as discussed earlier.
STAFF RECOMMENDATION
Staff recommends that the Commission maintain the currently approved Average Cost
Method used by the current Schedule 72. However, if the Commission orders the Company to
implement an Actual Cost Method on a facility-by-facility basis, Staff recommends: (1)in addition
to QF's paying actual costs as they occur, that an on-going fixed-cost rate be developed to capture
overhead-related costs, (2) that the Company's implementation costs be recovered from QFs, and
(3)that methods to mitigate a risk of QFs' inability to pay be developed.
STAFF COMMENTS 7 OCTOBER 15, 2026

Respectfully submitted this 15th day of October 2026.
Erika K. Melanson
Deputy Attorney General
Technical Staff. Yao Yin
I:\Utility\UMISC\COMMENTS\IPC-E-26-15 Comments.docx
STAFF COMMENTS 8 OCTOBER 15, 2026

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 151h DAY OF OCTOBER 2026,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-26-15, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
Attorneys for Petitioner,Idaho Hydroelectric
Power Producers Trust(IdaHydro)
Tom Arkoosh
Nicholas Erekson
Arkoosh Law Offices
913 W. River Street, Suite 450
P.O. Box 2900
Boise, ID 83701
EMAIL:
tom.arkoosh(&,,arkoosh.com
nick.ereks on&akoosh.com
erin.cecil(d),,arkoo sh.com
Intervenor
Idaho Power Company
Donovan E. Walker Tim Tatum
Lisa C. Lance Riley Maloney
Idaho Power Company Connie Aschenbrenner
P.O. Box 70 Idaho Power Company
Boise, ID 83707 P.O. Box 70
EMAIL: Boise, ID 83707
dwalker&idahopower.com EMAIL:
llance(d),idahopower.com ttatum(a),idahopower.com
dockets&idahopower.com rmaloney&idahopower.com
caschenbrenner(d),idahopower.com
PATRICIA JORDA9, SECRETARY
CERTIFICATE OF SERVICE