20081201min.doc

IDAHO PUBLIC UTILITIES COMMISSION

MINUTES OF DECISION MEETING

December 1, 2008 – 1:30 P.M.

In attendance were Commissioners Mack Redford and Jim Kempton. Commissioner Marsha Smith was absent and excused.

Commissioner Redford called the meeting to order. The first order of business was approval of MINUTES FROM PREVIOUS MEETING on November 24, 2008. The minutes were approved by vote.

The second order of business was approval of the CONSENT AGENDA. Commissioner Redford stated that he had questions regarding item 3 so it would be considered separately.

Items 2, 4 and 5 were approved by vote.

Regarding item 3, Commissioner Redford stated he thought it would be difficult to separate the two issues regarding changes to the program and cost recovery. He said he was perplexed as to why intervenors would agree to substantive changes if they don’t know what the costs are going to be.

Donovan Walker, attorney for Idaho Power, replied that the cost of the program is currently funded through the Energy Efficiency Rider. He said he couldn’t speak for the irrigators, but Idaho Power believes the current funding level in the rider won’t be sufficient going forward to fund the changes in the new program, so the Company has suggested looking at some alternatives, such as running it through the PCA or some other alternative. He said they realized that issue hadn’t been discussed with the signatories as being part of the Stipulation and as Staff pointed out, there might be other interested parties who also want to join in the discussion to consider alternative funding mechanisms. He said for these reasons, the Company thought it would be appropriate to carve that issue out and issue a Notice of Intervention to get those parties to the table and have some further process and discussions regarding alternatives to the rider. Mr. Walker stated that after discussions with Staff, the Company felt it is appropriate to at least separate out the portion that all parties were in agreement on so that the Company could start some of the preliminary implementation, such as marketing and talking to the equipment vendor about the dispatchable options, but then consider separately this additional issue that was not part of the Stipulation.

Commissioner Kempton asked if Staff is concerned about making the costs associated with one class of users—the irrigation users—apply to all classes through the PCA.

Randy Lobb replied that Staff is concerned. He said Staff has signed the Stipulation regarding the specifics of the irrigation program, which is a demand reduction, load shifting, interruptible program, much like PacifiCorp's program, with the cost allocation issues very similar to PacifiCorp’s. He said the issues are the type of program—i.e. is it a traditional demand-side management program, the cost of which should be recovered through the tariff rider, or should it be recovered through base rates and allocated on a demand energy basis to various customer classes. He stated the specifics of the irrigation program have been well discussed and are appropriate and should be approved, but Staff did not want to delay implementation while trying to figure out how the cost is going to be recovered. He said there isn’t a dispute about what it’s going to cost but rather how it’s going to be recovered and who pays, so Staff wants further discussion on that issue.

Commissioner Kempton asked if there will be additional cost to the irrigators themselves as a result of the cost consideration and if everything being considered is related to either the PCA or to some other cost mechanism such as the energy efficiency rider. Mr. Lobb confirmed that the three alternatives are essentially base rate recovery where costs are allocated to the irrigation class and other classes, similar to the allocation of a generating plant. He said this program is much like a peaking resource in that the company can dispatch the irrigation load. He stated that irrigators may in fact pay more, and direct assignment to the irrigation class for this program could be one alternative. He added it has been an issue in the PacifiCorp case as to whether it should be directly assigned to the irrigation class, or spread among all classes on a system-wide basis. He said all of these issues are subject to discussion.

Commissioner Kempton asked if counsel to the Idaho Irrigation Pumpers understands that and what their reaction might be if the Commission agrees to the Stipulation. Mr. Lobb replied that the cost allocation issue was not specifically discussed as part of the development of the Stipulation but he thought the irrigation representatives would be a party to any discussion we have on cost allocations.

Commissioner Kempton asked about PacifiCorp’s equivalent of the peak rewards program and if it is handled as part of the energy efficiency rider. Mr. Lobb replied that the payments to the irrigators are included in base rates and the cost of those credit payments are allocated like all other costs to the customer classes within Idaho. He said one of the discussions Staff has had is if this is a resource that is available to the system, then should those costs be allocated across all jurisdictions, including Oregon, Washington and Utah, but the other parties to the multi-state process are opposed to the allocation of those costs. He said they are looking at assigning the irrigation program costs to Idaho but the question then becomes if it’s not appropriate on a jurisdictional basis, is it appropriate on a cross-customer class basis within Idaho, or should it be directly assigned to the irrigation class. He stated that Staff is still grappling with that issue and hasn’t come to a conclusion yet, but is leaning toward an across-the-class allocation.

Commissioner Kempton stated that he had made a decision to go ahead and bifurcate based on the preceding discussion and the criticality of the timing issue to move this forward, and based also on the fact that we are talking about dispatchable power in a demand response environment, and the fact that the Commission did not hear from the irrigators, although they should have known when they agreed to the Stipulation and should have seen the order that the Commission signed as well as the request from Idaho Power for consideration of bifurcation. He noted his decision was also made on the basis that there may be added costs to the irrigators as a result of this program. He added that he approves of the bifurcation but wanted his concerns listed on the record.

Commissioner Redford stated he also agreed with the bifurcation. He commented that the cost will be a known cost and it seemed to him that putting known and fixed costs into the mix would dilute the very reason we have the PCA. He said he feared that if we keep adding to the PCA then it kind of gets out of control, and if you have a defined cost, it ought to be grappled with by a method of repayment absent the PCA, unless there is no other place for it.

Mr. Lobb said in informal discussions prior to the motion from the Company, Staff expressed the same kind of concern—i.e. is the PCA the appropriate mechanism for cost recovery—so that will certainly be part of the discussion. Commissioner Redford said he didn’t think the PCA was designed to be a catch-all for costs we don’t know where to put otherwise.

There was no further discussion and Commissioner Redford adjourned the meeting.

DATED this ______ day of December, 2008.

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COMMISSION SECRETARY

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