20120404Oral Argument.pdf

ORIGINAL .1 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S
REVIEW OF PURPA QF CONTRACT
PROVISIONS INCLUDING THE
SURROGATE AVOIDED RESOURCE (SAR)
AND INTEGRATED RESOURCE PLANNING
(IRP) METHODOLOGIES FOR
CALCULATING PUBLISHED AVOIDED
COST RATES.
CASE NO.
GNR-E-11-03
ORAL ARGUMENT
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HEARING BEFORE
COMMISSIONER MARSHA H. SMITH (Presiding)
COMMISSIONER MACK A. REDFORD
COMMISSIONER PAUL KJELLANDER
PLACE: Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE: March 21, 2012
VOLUME I - Pages 1 - 41
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HEDRICK
COURT REPORTING
POST OFFICE BOX 578
BOISE, IDAHO 83701
208-336-9208
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APPEARANCES
For the Staff: KRISTINE A. SASSER, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83702
For Idaho Power Company: DONOVAN E. WALKER, Esq.
and JASON B. WILLIAMS, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
For Avista Corporation: MICHAEL G. ANDREA, Esq.
(via telephone) Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99202
For PacifiCorp dba Rocky DANIEL E. SOLANDER, Esq.
Mountain Power: Rocky Mountain Power
(via telephone) 201 South Main Street, Suite 2300
Salt Lake City, Utah 84111
For The Northwest and RICHARDSON & O'LEARY, PLLC
Intermountain Power by PETER J. RICHARDSON, Esq.
Producers Coalition; Post Office Box 7218
J. R. Simplot Company; Boise, Idaho 83707
Grand View Solar II;
Exergy Development Group of
Idaho, LLC;
The Board of County
Commissioners of Adams
County, Idaho; and
Clearwater Paper Corporation:
For Twin Falls Canal Company: LOUIS ZAMORA
(via telephone) Twin Falls Canal Company
Post Office Box 326
Twin Falls, Idaho 83303
For Idaho Windfarms, LLC: McDEVITT & MILLER, LLP
by DEAN J. MILLER, Esq.
420 West Bannock Street
Boise, Idaho 83702
HEDRICK COURT REPORTING APPEARANCES
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For Blue Ribbon Energy LLC: M.J. HUMPHRIES
(via telephone) Blue Ribbon Energy LLC
4515 South Ammon Road
Ammon, Idaho 83406
For Idaho Conservation BENJAMIN J. OTTO, Esq.
League: Idaho Conservation League
710 North Sixth Street
Boise, Idaho 83702
For Energy Integrity Project: TAUNA CHRISTENSEN
Energy Integrity Project
769 North 1100 East
Shelley, Idaho 83274
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HEDRICK COURT REPORTING APPEARANCES
P. 0. BOX 578, BOISE, ID 83701

1 BOISE, IDAHO, WEDNESDAY, MARCH 21, 2012, 9:30 A.M.
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3

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COMMISSIONER SMITH: Good morning, ladies and

5 gentlemen. This is the time and place set for an oral argument
6 before the Idaho Public Utilities Commission in Case No.

7 GNR-E-11-03, further identified as In the matter of the

8 Commission's review of PURPA QF contract provisions including
9 the Surrogate Avoided Resource and Integrated Resource Planning
10 methodologies for calculating published avoided cost rates.

11 My name is Marsha Smith, and I am chairing

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today's oral argument. On my right is Commissioner Mack
.

13 Redford, and on my left is Paul Kjellander. The three of us

14 are the Public Utilities Commission, and will be making the

15 Decision in this case.

16 We'll begin with appearances of the parties. ForJ

17 Idaho Power.

18 MR. WALKER: Thank you, Madam Chair. Donovan

19 Walker and Jason Williams, for Idaho Power.

20 COMMISSIONER SMITH: Avista.

21 MR. ANDREA: Good morning, Madam Chair. Mike
22 Andrea for Avista.

23 COMMISSIONER SMITH: PacifiCorp.

24 MR. SOLANDER: Good morning, Madam Chairman.
25 This is Daniel Solander on behalf of Rocky Mountain Power, and
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1 I have with me Ted Weston and various other Company personnel

2 on the phone as well.

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COMMISSIONER SMITH: Thank you.

4
For the Commission Staff.

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MS. SASSER: Good morning, Madam Chair. Kristine

6 Sasser for Commission Staff, with Rick Sterling.

7 COMMISSIONER SMITH: The Northwest and

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Intermountain Power Producers Coalition.

9 MR. RICHARDSON: Peter Richardson with the firm

10 Richardson and O'Leary, Madam Chair.

11 COMMISSIONER SMITH: And who else are you

12 representing today, Mr. Richardson?

13 MR. RICHARDSON: Madam Chair, J. R. Simplot

14 Company, Exergy Development Group, and Grand View Solar.

15 COMMISSIONER SMITH: Thank you.

16 I see Mr. Miller.

17 MR. MILLER: Thank you, Madam Chair. Dean J.

18 Miller on behalf of Idaho Windfarms, LLC.

19 COMMISSIONER SMITH: Is there anyone here
20 representing the Renewable Energy Coalition?

21 How about Interconnect Solar?

22 Or Dynamis?

23 The North Side Canal Company?

24 The Board of County Commissioners of Adams

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25 County?
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MR. RICHARDSON: Peter Richardson, Richardson and

2 O'Leary, Madam Chair.

3 COMMISSIONER SMITH: Thank you.

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For Birch Power Company?

5 Blue Ribbon Energy?

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MR. HUMPHRIES: M. J. Humphries on the phone.

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COMMISSIONER SMITH: Thank you, Mr. Humphries.

8 Renewable Northwest Project -- oh, you said that.

9 Idaho Conservation League.

10 MR. OTTO: Benjamin J. Otto on behalf of the

11 Idaho Conservation League.

12 COMMISSIONER SMITH: How about the Snake River

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13 Alliance?

14 And Clearwater Paper?

15 MR. RICHARDSON: Peter Richardson, Richardson and

16 O'Leary, Madam Chair.

17 COMMISSIONER SMITH: Thank you. Those are all

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the parties I have on my Second Amended Notice of Parties. Are

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there anyone here who believes they're already a party and I

20 haven't called you?

21 MR. ZAMORA: Madam Chair, this is Louis Zamora on

22 Twin Falls Canal Company.

23 COMMISSIONER SMITH: Okay. Thank you,

24 Mr. Zamora. But, Mr. Zamora, you're not doing North Side, just

25 Twin Falls.
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MR. ZAMORA: Just Twin Falls. I believe Alan
Hansten with North Side will be calling in. And I will be only
on the phone for about an hour and a half, so -
COMMISSIONER SMITH: Okay. Thank you.
We have one preliminary matter that I know of,
and that is the Petition of the Energy Integrity Project for
leave to intervene in this case. Is there any objection to the
Petition for Intervention by the Energy Integrity Project?
Seeing none, Ms. Christensen, I see that you're
here, and you're welcome to take a spot at the table. The
Commission will grant your Petition for Intervention provided
that you're willing to comply with the schedule that's already
in place and not delay the proceedings.
MS. CHRISTENSEN: Yes. Okay.
COMMISSIONER SMITH: So you're welcome to sit in
front of the microphone just in case you need it.
Our purpose here today is to have oral argument
on a Motion for Temporary Stay that was filed by Idaho Power,
and our purpose is to determine whether Idaho Power has
established a prima facie case for emergency relief of some
nature; and whether the schedule that we have previously set
out needs, for any reason, to be changed; and what action, if
any, should the Commission take on the Motion for Stay.
If there are no other preliminary matters that
parties wish to raise, we will go to Mr. Walker for his
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1 argument.

2 MR. WALKER: Thank you, Madam Chairman,

3
Commissioners, and parties. I'd like to address two main

4 areas, first being the procedure and then, second, obviously,

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the substantive nature of Idaho Power's Request. And with

6 regard to the procedure, I just wanted to clarify that Idaho

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Power has not asked, nor does it seek, to modify or change the

8 currently-established schedule or proceedings for hearing in

9 this case that were established in Order 32388. We're well
10 under way in working our way through that schedule. What's

11 left, the main points of what are left, are Staff and

12 Intervenor testimony on May 4th, rebuttal testimony June 29th,

13 legal briefing July 20th, and a hearing scheduled for August

14 7th through 9th. And, you know, Idaho Power apologizes if
15 there was any confusion procedurally, but we have not made a
16 request to change or modify that in any manner.

17 We did set forth in our Motion a proposed or

18 suggested schedule, but that was for processing of Idaho

19 Power's Motion and its Request, and not a Request to modify the

20 currently-existing case schedule. Arguably, since we are, you

21 know -- the Commission did not follow Idaho Power's initially-

22 suggested procedure and, arguably, that's somewhat moot now as
23 we've had a public hearing and we're here today with all
24 parties to present argument on that Motion for the Commission.

.

25 So, I just wanted to make that procedural clarification right
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1 up front.

2 COMMISSIONER SMITH: Appreciate that.

3 MR. WALKER: And really, Idaho -- the nature of

4 Idaho Power's requested procedure on the Motion for immediate
5 Commission action really leads directly into the nature of

6 Idaho Power's requested relief in the case, and it's actually a

7 straightforward concept and request. Idaho Power has requested

8 a temporary stay of its obligation to enter into new contracts
9 with QF developers to ensure that Idaho Power and its customers

10 are not forced to acquire additional excessive amounts of QF
11 output at prices that exceed -- potentially exceed Idaho

12 Power's avoided cost.
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13 Now, this proceeding thus far, the record in this
14 proceeding thus far, shows that the current SAR and IRP
15 methodologies potentially result in prices that are

16 significantly in excess of Idaho Power's avoided cost; that

17 these inaccurate price signals have caused a surge of new QF

18 contract applications and approved contracts that exist on

19 Idaho Power's system; that this surge has dramatically

20 increased the amount of QF output under contract and threatens

21 to grow even more during the pendency of this case; and,

22 lastly, that all of that is potentially very harmful to

23 customers of Idaho Power.

24 Now, a stay on Idaho Power's -- a temporary stay

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25 on Idaho Power's or one of the alternative forms of relief that
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1 we have requested is necessary to protect customers and to
2 avoid further results that are potentially contrary to PURPA
3 and this Commission's implementation of PURPA in the state.

4 Now, where are we at and what has the Company
5 shown? Well, we know factually that the Company currently has
6 119 QF contracts that represent 989 megawatts of generation and

7 a contractual obligation of over $3.6 billion on customers.

8 That's what we -- that's what we currently have operating on
9 our system and approved by this Commission. That number in

10 2004 was 157 megawatts; today, it's 989.

11 "So what?" someone might say. So what? Well,

12 "so what" is what the effect that that has on customer rates.
13 The level of QF expense that was passed through to customers,

14 100 percent to customers in 2004, was approximately $40 million

15 on an annual basis. By 2009, that number had grown to

16 approximately $60 million on an annual basis. And by 2012,

17 that's predicted to double to $120 million on an annual basis.

18 From 40 million in 2004 to 120 million in 2012, that's quite a

19 substantial increase.

20 And on top of that, the showing that we've made
21 with the filing of our Motion shows there are currently looming

22 27 additional projects that are currently seeking contracts

23 with Idaho Power at current rates. Those equate to 595

24 additional megawatts and an additional contractual obligation

25 to customers of $2.7 billion over the existing 3.6 billion
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that's taken us over 20 years to acquire.
Now, Idaho Power's submissions and the
evidentiary record in this case Idaho Power feels is sufficient
in and of itself to demonstrate potential harm to customers,
and that the requested temporary relief is warranted during the
pendency of this case. And although Idaho Power feels that's
sufficient, that's not all we have. That's not all that's in
front of the Commission right now. I think a look at the QF
development that's happened on Idaho Power's system during the
pendency of this case thus far is very instructive on what it
could potentially be until the end of this docket.
In an approximate one-month period of time of
between November and December of 2010 when this proceeding
first began, Idaho Power received, executed, and filed 25
contracts with individual projects, representing 518 megawatts
of generation. Those all came in in a one-month period of time
at the very beginning of this case, and, frankly, we're all
still litigating the fallout from those cases today in multiple
jurisdictions.
And more recently, since the Commission's June
8th Order in this related proceeding -- the June 8th Order was
the Commission's Order maintaining the 100 kilowatt published
rate eligibility cap for wind and solar QFs -- since that time,
Idaho Power's negotiated, executed, and filed four contracts --
four new QF contracts with the Commission, representing

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Now, those represent levels of QF development
that some Utilities don't have on their entire systems, and
case. And that's significant in and of itself, but what's
really significant about those four new projects is that it's
very apparent from the Commission proceedings attached to each
one of those that there is uncertainty about the appropriate
methodology and the appropriateness of the avoided cost rates.
Those contracts were ultimately approved by the Commission, but
in each one, Commission Staff opposed Commission approval on
the basis that those contracts -- they believe that the
application of the IRP methodology quite specifically in those
contracts was resulting in prices that were excessive.
So, even if you don't believe Idaho Power saying
that there's a problem, that rates are excessive, that there's
a great potential for harm to customers, at the very least,
there is some uncertainty regarding the proper application of
the methodology and whether its results are proper and lawful
as an estimation of avoided cost that Idaho Power's customers
should be obligated to on a long-term basis for the next 20
years.
We've also shown in our Motion and memo that
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likelihood of risk or harm to the customers is substantial and
it's great and it's long-term. That, in and of itself,
justifies a stay as -- a temporary stay while this Commission
determines what the proper and lawful rate is.
Now, we're talking about on the one hand
potential of 27 new and additional QF projects that are
currently attempting to obligate customers to current rates,
and we're balancing that against making QF developers wait
approximately six months before the Company's required to enter
into new contractual obligations with them. I know how I see
that balance, and it's heavily in favor of protecting that
grievous and substantial harm to the customers. Whether it
materializes or not is irrelevant; it's the risk and the
potential that that exists, and looking historically at similar
situations where there have been large volumes filed in a very
rapid and short period of time.
In addition, there is no question that a stay is
in its implementation of Federal law, its implementation of
PURPA in the state of Idaho. And it's been done before in
Idaho: We've gone through a summation of cases from Colorado
and California where similar temporary stays or moratoriums or
some type of relief from the Utility's obligation to enter into
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So, to look back, Idaho Power has made at least
obligate Idaho Power customers to long-term contracts
containing these inflated rates; additionally, that there is
great harm to customers that they are overpaying -- that they
are currently overpaying for PURPA what the Company could
otherwise generate itself or acquire from another source for
less; and now that there is another wave looming -- 27
projects, 595 megawatts, $2.7 billion -- that that could seek
to obligate Idaho Power customers during the pendency of this
case where this Commission will ultimately make a Decision as
to the proper methodology and the lawful avoided cost rate that
is to obligate customers for the next 20 years.
And, finally, you know, it's important to keep in
perspective that this Request is for temporary relief during
the pendency of this case; and that the risk of harm to
customers -- the long-term risk to customers is far greater
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1 than the temporary -- potential temporary harm in not entering

2 into the contracts for the next six months. And Idaho Power

3 respectfully requests that the Commission grant its Motion that

4 it enter a temporary stay of its obligation to enter into new

5 contracts until it renders its ultimate Decision after the
6 August 7 through 9 hearing in this matter.

7 COMMISSIONER SMITH: Thank you, Mr. Walker. If I

8 might, I just had a couple of clarifying questions:

9 First of all, when you gave us your dollar

10 estimates, what length of contract term are you assuming, 20

11 years? Thirty years?

12 MR. WALKER: Those are assuming a 20-year

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13 contract.

14 COMMISSIONER SMITH: Twenty year. And when you

15 gave us the megawatts, was that the nameplate?

16 MR. WALKER: Yes, that was nameplate.

17 COMMISSIONER SMITH: I think that's all I have.

18 Do the other Commissioners have questions?

19 COMMISSIONER KJELLANDER: No.

20 COMMISSIONER REDFORD: I just had a couple of

21 clarifying questions:

22 You've indicated that there are 119 projects

23 of 989 megawatts. I think you said that those are all online.

24 They're not all online, are they?

25 MR. WALKER: No, those are all either online or
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1 with Commission-approved contracts. Currently, there is --

2 there is approximately 600 megawatts that are currently

3 operating and online.

4 COMMISSIONER REDFORD: And I think you said that
5 there was about 383 megawatts of power going to come on between

6 2012 and 2014. I think Mr. Stover said that in his testimony.

7 Is that a correct statement?

8 Where I'm getting to is what do you anticipate
9 will be the load from today until the end of this proceeding in
10 August? How many more projects will come online, do you have

11 any idea?

12 MR. WALKER: You know, I don't know between now

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13 and August right offhand. I do know that there is -- there's

14 approximately 20 -- 20 to 21 projects that are currently

15 scheduled, have a scheduled operation date by the end of

16 2012.

17 COMMISSIONER REDFORD: Okay. I don't have any

18 further questions. Thank you.

19 COMMISSIONER SMITH: Thank you, Mr. Walker.

20 Are there other parties who wish to speak in

21 favor of the Motion that's been made by Idaho Power?

22 Mr. Solander.

23 MR. SOLANDER: Yes, thank you, Madam Chairman.
As you're aware, Rocky Mountain power filed its

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25 Motion to join Idaho Power's Motion. I won't reiterate all of
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the points that Rocky Mountain Power made, which were fewer
than those that Idaho Power made, but I'll just reiterate that
Rocky Mountain Power believes it would be inequitable if the
Commission granted the stay to Idaho Power and then did not
extend that stay to Rocky Mountain Power and Avista. Rocky
Mountain Power's concerned that a situation could arise where,
if the stay was granted only to Idaho Power, then the flood of
QF developers that Mr. Walker referenced could be forced to
file applications with Rocky Mountain Power instead of Idaho
Power if the stay was only granted to Idaho Power. And the
Company has concerns that -- with both workload, less so with
the pricing, but the number of potential applications could
potentially overwhelm Rocky Mountain Power in much the same way
that Idaho Power referenced in its Motion. And so we would
just reiterate that if the stay is granted to Idaho Power, that
it be extended to Rocky Mountain Power as well.
COMMISSIONER SMITH: Any questions for
Mr. Solander?
COMMISSIONER REDFORD: Mr. Solander, this is
Commissioner Redford.
MR. SOLANDER: Yes, sir.
COMMISSIONER REDFORD: So it's just the bare
possibility that you've -- you make the assumption that if
these contracts are not going to Idaho Power, they will be
coming to Rocky Mountain Power. Is that your fear?
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1
MR. SOLANDER: I wouldn't say that it's an

2 assumption that that would happen, but it is of concern to the
3 Company that it could happen.

4 COMMISSIONER REDFORD: Well as you're aware, this
5 proceeding is because of the harm and injury that may befall

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Idaho Power. Have you filed anything or any documents which

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demonstrate that, in fact, Rocky Mountain Power is presently

8 suffering from some of the things that Idaho Power complains

9 of?

10 MR. SOLANDER: No, sir, and that's not Rocky

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Mountain Power's contention. We don't believe that the Company

12 is in the exact same situation as Idaho Power.

13 COMMISSIONER REDFORD: Well since this is a
14 proceeding where we're talking about injury and harm and so on

15 and there's no harm presently befalling Rocky Mountain Power,
16 how could we possibly continue or grant the stay to apply to

17 Rocky Mountain Power? Are you just throwing that up against

18 the wall and hoping it will stick? Is that what you're saying?

19 MR. SOLANDER: I wouldn't phrase it that way,

20 sir, but I would say that we believe that there's a reasonable
21 possibility that the Company could be -- could face a

22 significant number of QF applications should the stay be

23 granted only to Idaho Power.

24 COMMISSIONER REDFORD: So that's just a bare

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1 Affidavits that set forth the harm that's going to befall?

2 MR. SOLANDER: Well, I admit that it is somewhat

3 speculative at this point. We certainly couldn't provide

4 testimony stating that that's a certainty that it could happen,

5 and that's why we didn't file any Affidavit stating as such.

6 COMMISSIONER REDFORD: Okay. Thank you very

7 much, Mr. Solander.

8 MR. SOLANDER: Thank you.

9 COMMISSIONER SMITH: Mr. Andrea, did you want to

10 get into this?

11 MR. ANDREA: Madam Chair, as you are aware, we

12 have not filed anything.

13 COMMISSIONER SMITH: You can say, "No." That's
EU an acceptable response.

15 MR. ANDREA: And that is -- we're not taking any

16 position on it.

17 COMMISSIONER SMITH: Thank you. Are there any

18 other parties which wish to speak in favor of Idaho Power's

19 Motion?

20 MS. CHRISTENSEN: Yes.

21 COMMISSIONER SMITH: Ms. Christensen.

WM MS. CHRISTENSEN: On behalf of Energy --

23 COMMISSIONER SMITH: Yeah, if you're new to the

24 hearing room, you need to push the little "touch." Your red

25 light comes on and --

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MS. CHRISTENSEN: All right. Thanks.

2 On behalf of Energy Integrity Project, we support

3 Idaho Power's Request.

4 COMMISSIONER SMITH: Thank you. That concludes

5 your statement?

6 MS. CHRISTENSEN: Yes.

7 COMMISSIONER SMITH: Okay.

8 MS. SASSER: Madam Chair.

9 COMMISSIONER SMITH: Ms. Sasser.

10 MS. SASSER: Thank you, Madam Chair.

11 While Staff takes no position on the Idaho

12 Power's Motion for Stay, we believe that all the other parties
13 will provide adequate evidence and arguments in that regard for

14 the Commission to make a well-informed Decision, Staff does

15 support Idaho Power's position that the schedule in the generic
16 docket remain the same as the noticed schedule that the

17 Commission issued on November 2nd. We believe that discovery

18 in that case is a very time-consuming and extensive project
19 because of the nature of the analysis regarding the
20 methodologies, and that rushing the generic docket will not
21 allow the parties to adequately present evidence and arguments

22 in order to assist the Commission in making a well-informed

23 Decision about those PURPA methodologies.

24 COMMISSIONER SMITH: Okay. Thank you,

25 Ms. Sasser.
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1]
1 All right. Mr. Richardson, I presume you have
2 something to say.
3 MR. RICHARDSON: Thank you, Madam Chair.
4 First, I need to address Rocky Mountain Power's
5 me-too filing. Rocky Mountain Power makes the unfathomable
6 assertion based on conjecture and speculation that it's going
7 to suffer the same problems as Idaho Power. It doesn't even
8 rise to the level of an assumption, it's just what could
9 happen, and I seriously doubt that that's basis for this
10 Commission to make such a wide-ranging, sweeping Decision to
11 exempt Rocky Mountain Power from PURPA.
In addition, I would note that Rocky Mountain
Power didn't even jump through the minimal hoops that Idaho
Power did in terms of notifying potentially-affected entities
of its thought of its me-too filing. At least Idaho Power gave
the courtesy to the parties by calling them and telling them
that these emergency proceedings were happening. This hearing
is held on less -- well, one day's notice and I would note that
not all parties responded when you asked for appearances, and
that may be the result of the fact that we had one day's
notice. A lot of people had to change a lot of schedules to be
here today on such short notice. So I would suggest that Rocky
Mountain Power's filing should be rejected outright.
In response to Idaho Power's Motion, I don't
think you have any option but to deny Idaho Power's Motion
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1 summarily and from the Bench today. The Power Company has made
2 a Request based on a legal theory that can only be described as
3 wishful thinking at best, or unscrupulous and deceitful at

4 worst. In either case, whether Idaho Power's misleading legal
5 argument was intentional or simply negligent, the result is the
6 same: You really have no choice but to deny the Motion today.

7 Idaho Power has presented you with a Motion to

8 throw out due process by acting on its Motion without our
9 ability to respond to hundreds of pages of technical testimony.
10 They are asking you to deny our opportunity to be heard and to

11 do so without a scintilla of legal authority to do so. In

12 fact, I believe, and I am sorry to have to say so, that Idaho

.

13 Power is misleading this Commission as to its legal authority

14 to act on its Motion.
Idaho Power opens its Motion by saying that their

16 filings establish a prima facie proof that Idaho Power's

17 avoided cost rates are not accurate. That's at page 2 of their

18 Motion. The consequence of such a showing means, according to

19 Idaho Power, that the Commission has the authority to grant

20 immediate interim rate relief. And I'll quote from Idaho

21 Power's Motion at page 3.

22 Quote: Idaho Power is entitled to the requested

23 relief under the Idaho Supreme Court's reasoning in Empire
24 Lumber Company v Washington Water Power that the Commission has

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a Utility makes a prima facie showing that rates are
inaccurate.
They go on to state, quote: Idaho Power's
Memorandum in Support of Idaho Power's Company's Motion for a
Temporary Stay of its Obligation to Enter Into New Purchase
Power Agreements with QFs, inclusive of the Affidavit of
Randy Allphin and the direct testimony previously submitted by
Idaho Power in this case, inarguably makes a prima facie
showing. To the extent Idaho Code 61-307 applies to relief
granted by the Commission for good cause shown, the Commission
may waive the Notice requirement in that Statute.
Then -- end of quote.
Then, in their Memorandum in Support, which is
frankly more a summary of their testimony and their
recommendations than a legal memorandum, they return to this
fundamental theme that a prima facie showing that rates are
inaccurate is grounds for immediate relief. But for some
reason, they don't get to this fundamental point until the
second to the last page of their 30-page Memorandum.
On page 28 of their Memorandum, Idaho Power
states, and I quote: The Idaho Supreme Court recognizes that
the Commission has authority to grant immediate interim relief
expeditiously when avoided costs are excessive.
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Again, a citation to Empire Lumber Company v
Washington Water Power.
Continuing the quote: The Court stated that a
prima facie showing by the Utility that rates are inaccurate is
sufficient grounds for immediate interim rate relief. End of
quote.
Phrases like "the Idaho Supreme Court
recognizes," "the Court stated," and "the Idaho Supreme Court's
reasoning" all cite you to and rely on an Idaho Supreme Court
case called Empire Lumber Company v Washington Water Power. On
its face, that seems compelling. Here, according to Idaho
Power Company, we have the Supreme Court of the State of Idaho
saying that it only takes a prima facie showing for you to
suspend avoided cost rates. But let's take a moment and
understand what prima facie means: Prima facie showing, prima
facie case, prima facie proof. What does it mean and what's
its legal import?
Idaho Power does not bother to define the term or
its legal significance in any of its pleadings other than to
simply say that a prima facie showing means, according to the
Idaho Supreme Court's Empire Lumber Decision, that you have the
authority to suspend avoided cost rates based only on a prima
facie showing.
Well, what is a prima facie showing? Prima fade
showing consistently, in all legal context, means that a
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litigating party is said to have made a prima facie case when
aware of where a prima facie case is sufficient to trigger a
Decision is in a secret grand jury deliberation where the
prosecution must make a prima facie case to show that there's
sufficient evidence to issue an indictment, thus sparking the
defendant's ability to respond. That is the exact opposite of
Idaho Power's assertion. Idaho Power's Pleadings say that only
something akin to a Motion for a Judgment on the Pleadings,
which has a very different standard; that is, once a case is
submitted, you decide the case based on the assumption that all
of the arguments from the opposing party are true, and despite
that assumption, the opposing party still can't prevail. Of
course, to make that assumption, the opposing party has to
overcome -- has to have the opportunity to make its case.
Idaho Power's assertion that based only on a
prima facie showing, the bar for which is understandably low,
you can make a substantive Decision and refuse to abide by the
Federal Statute known as PURPA, which brings me back to my
opening remarks about Idaho Power's misleading legal argument,
it goes way beyond the meaning of a prima facie case and how
that showing just gets the ball rolling in a contested case.
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1 Idaho Power's Motion and Memorandum both assert that the Idaho
2 Supreme Court has ruled that only on a showing of a prima facie
3 case that this Commission can suspend avoided cost rates.

4 The citation -- and this is important, because

5 it's foundational to Idaho Power's legal argument -- the
6 citation is to Empire Lumber Company v Washington Water Power

7 Company, 114 Idaho -- that's a reference to the volume in the

8 Idaho Reports -- 191 -- that's a reference to the page that the

9 Opinion begins on -- comma, 233. That's a citation to the

10 specific point in the Decision of the Idaho Supreme Court that

11 is relied on for the authority that you can suspend avoided

12 cost rates based on a prima facie showing. That Opinion, which

13 begins on page 191, actually ends on page 194, the Opinion is

14 three pages long.

15 Beginning on the bottom of page 194 and
16 proceeding through page 244 is the 50-page dissent of Justice

17 Bistline. Idaho Power cites you to Justice Bistline's dissent

18 as the Opinion of the Idaho Supreme Court for the assertion

19 that the Idaho Supreme Court recognizes, quote, the Court

20 stated; and the Idaho Supreme Court's reasoning. Nothing could
21 be further from the truth. The Idaho Supreme Court does not

22 speak through dissenting Opinions.

23 The fact that Idaho Power has made a prima facie

24 case -- and it certainly has, we will definitely concede that

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The import is for the parties opposing their case and their
opportunity to have the ability to respond. That is what the
Commission originally set out to do by establishing a schedule
to prosecute this case with the opportunity to engage in
discovery, file testimony, cross-examine witnesses, file legal
memorandum, be apprised of proceedings on more than 24 hours'
notice. The fact that Idaho Power has made a prima facie case
is nothing more than a routine event initiating a proceeding.
It is not a legal basis for this Commission to unilaterally
grant the Power Company the ability to simply use it to get its
way without any opposing party having the opportunity to
respond.
However, if this Commission believes Idaho
Power's assertion that the bar is so low that all it takes to
obtain unilateral action by the Commission is the making of a
prima facie case, we are prepared today to call Dr. Reading to
the stand this morning, have him sworn in, and he will make a
prima fade case on the record that Idaho Power's avoided cost
rates are accurate and, in fact, may be too low. We should, at
a minimum, have that opportunity if the new standard for
Commission action is the mere making of a prima facie case.
Thank you, Commissioner. I'd stand for
questions.
COMMISSIONER SMITH: So, Mr. Richardson, I
actually -- I do have just a question, I guess:
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1 I think I agree with your view of the law, that

2 the Idaho Public Utilities Commission has no authority to

3 relieve a Utility of its obligation under Federal law to

4 purchase power. But I also know that one of our biggest

5 responsibilities is to ensure that the rates reflect the

6 Utility's avoided cost accurately, because if they don't, one
7 way or the other somebody gets hurt, and especially if they are

8 too high, then it's the customers that are being asked to

9 shoulder a responsibility that they shouldn't be asked to

10 shoulder.

11 So given that scenario, what is the Commission's

12 tool that it can use when it believes that there are serious

.

13 issues with the rates that it has established during the
14 pendency of the proceeding which was being held to sort out
15 whether we're even using the right methodology, the right
16 numbers, and whether the rates actually do reflect the

17 Utility's avoided cost?

18 MR. RICHARDSON: Thank you, Madam Chair. I
19 believe the Commission has an ongoing obligation to assure that

20 the avoided cost rates are accurate. I think that this
21 Commission had notice from Idaho Power of that fact many years

22 ago when Idaho Power missed the target by asserting that

23 there's too much wind or there's too much solar, as Opposed to

24 saying, Our avoided cost rates need to be readjusted.

25 I think at that point, perhaps the Commission
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could have said, Well, you're focusing on the wrong problem.
If the problem is that you're getting too much wind, maybe your
avoided cost rates are too high.
But complicating that is the fact that
simultaneously, Idaho Power was asking you to guarantee,
essentially, based on a new Idaho Code Statute, return on their
investment of a very expensive new gas plant that I believe is
probably unnecessary. But it's tough duty being a
State-sanctioned monopoly where you only get a return for your
shareholders when you build new plant. There's a dichotomy
there that is difficult to reconcile.
COMMISSIONER SMITH: Well, I'm not going to
debate Langley here; that's not the purpose of today.
MR. RICHARDSON: I understand, Madam Chairman.
COMMISSIONER SMITH: So you think that we missed
the boat and we can't retrieve it now.
MR. RICHARDSON: Madam Chair, I think we're on
the right track given the current schedule that Staff endorsed
and we also endorse, that the current schedule is appropriate.
I don't think the sky is falling. I don't think
Idaho Power has made a prima fade showing that the ratepayers
are going to be harmed. They use these big numbers about
20-year contracts, but those are in the abstract. There's
nothing to compare them to. There's no context for these
numbers. There's not a showing that there's going to be
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1 irreparable harm to the ratepayers.

2 COMMISSIONER SMITH: Thank you. I think we will
3 hear from the other parties before we undertake to determine

4 whether we want to take you up on your offer of Dr. Reading.

5 MR. RICHARDSON: Thank you, Madam Chair.
6 COMMISSIONER SMITH: Any questions?

7 COMMISSIONER REDFORD: The only questions that I

8 have are there's an ongoing proceeding and there's a Motion in

9 this case, and the Motion in the case is to stay the avoided

10 cost during the pendency of the proceeding. Do you think that
11 there is any similarity between the Idaho Rules of Civil

12 Procedure Request for Preliminary Injunction and this
.

13 proceeding here today as it relates to, as you've talked about,
14 prima fade case or irreparable damage or harm? Do you think
15 there is any similarity to that, the expedited proceeding where
16 you have a temporary retraining order or a preliminary

17 injunction?

18 MR. RICHARDSON: Madam Chair, Commissioner
19 Redford, I must confirm to some infirmities in terms of the

20 Idaho Rules of Civil Procedure. My entire legal practice has
21 been before this Commission. But my understanding is that you
22 have to have a showing of irreparable harm or some imminent

23 danger.

24 And Commissioner Smith used the word "emergency"
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1 very careful not to use that word in any of their Pleadings.

2 don't think that they've asserted that there's an emergency,

3 and I don't think there is. I don't think the Company has

4 shown any kind of irreparable harm.
5 Like I said with Commissioner Smith, they threw
6 out these big numbers but they don't put them in context so you

7 can understand what they mean. A billion dollars over 20 years

8 to Idaho Power, what does that mean in terms of ratepayers and
9 the alternatives, because these projects that come online --

10 the wind projects, the solar projects, the dairy digester

11 projects, the cogenerator projects -- all come online with zero

12 fuel volatility risk. Idaho Power's Langley Gulch plant is

Q
13 coming online with unlimited fuel volatility risk to the

14 ratepayers.

15 We can make a showing -- and Dr. Reading is
16 prepared to do that -- that the QF projects are a better

17 bargain for the ratepayers than Idaho Power-built projects.
18 One of the fundamental purposes of PURPA was to allow for free
19 market to compete with the State-sanctioned monopoly for

20 building projects, and that's exactly what we want to do.

21 And I think, frankly, that this Commission should
22 be congratulated on its successful implementation of PURPA.

23 Because it's working so well, you're obviating the need for the

24 Power Company to build new plants. I think that's a success

25 story.
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COMMISSIONER REDFORD: Well, you have --
And moving on after I
testimony on a preliminary injunction.
It seems like, comparably, we're at the
preliminary injunction stage right now. Notwithstanding the
fact that you complained that there is very little time for you
to mount much of a challenge, the fact does remain that there
Affidavits, whereby it sets forth, as you call, a prima facie
case, I call where it has or has not established that the
irreparable injury or harm may occur.
So I'm not really persuaded that, one, that
Dr. Reading needs to testify, or am I persuaded that the
procedure that you complain about is flawed. The fact that you
have complained about it certainly doesn't diminish from Idaho
Power's testimony in its Affidavits that it is, in fact,
irreparably harmed and damaged and will be irreparably harmed
and damaged in the future. And a preliminary injunction, of
course, can be brought during the pendency of a case, or it can
be brought by itself.
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1 Another thing that I would like to ask you about

2 is there were other cases -- I believe there was a Colorado
3 case and maybe a California case where you -- where a stay
Elm was granted, and you have stated, well, that inasmuch as it's a

5 Colorado and/or California, we don't have to and we shouldn't
6 accept that as precedent. I find that a little difficult to

7 swallow.

8 I guess I'm making a statement more than I am

9 asking questions, so I'll stop right now. Thank you.

10 COMMISSIONER SMITH: Thank you, Commissioner
11 Redford. And Commissioners making statements is a long-honored
12 tradition, as many who may have been in this room when
I
13 Commissioner Swisher was here would have reason to remember.

14 Mr. Miller, did you wish to make a comment?

15 MR. MILLER: Madam Chairman, if ,I might, I might

16 defer to Mr. Otto, who has a, I think, more direct position on

17 the Stay Motion; and after that, I could comment on my issue,

18 which is kind of a second-tier issue.

19 COMMISSIONER SMITH: Okay. Mr. Otto.

20 MR. OTTO: Well, I feel like I'm stepping into

21 large shoes.

22 MR. MILLER: You are.

23 MR. OTTO: Better not put you down.

24 I'm going to cover three points, and I think
25 Commissioner Redford raised an important point: The
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1 standard -- I think there is some analogy to the standards for

2 preliminary injunction. I think that's really what's happened,
3 what the request could more accurately be styled as, a

4 preliminary injunction. In that case, there is -- and --

5 excuse me.

6 In that case, Idaho Power's Motion kind of lays

7 out some of those factors. It's a likelihood of harm.

8 There's -- well, it's a substantial likelihood on success of

9 the merits, substantial threat of irreparable harm or injury,

10 the balance of harms, and that granting an injunction is in the

11 public interest. Idaho Power's Memorandum addresses several of

12 those factors, but I don't think that they meet the burden that

13 those -- that that verbiage carries.

14 Speaking to the success on the merits, Idaho

15 Power has laid out their case, but a lot of that is built on
16 computer models and a lot of different inputs, both what those

17 computer models then spit out what the avoided cost would be

18 for the Utility and what the rate should be for the QF. That's

19 not uncontestable facts. For this Commission to rule for that

20 to be true, you'd have to accept the model is accurate, we

21 think all the inputs are accurate, and we think all the outputs

22 are accurate, based on one party's filing the testimony so far.
23 As we've seen with the amount of Discovery Requests that have

24 come in, a lot of questions to be raised whether the models are

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1 are accurate. I don't think there's a substantial likelihood

2 of success or a substantial likelihood of harm.

3 Speaking to the second point -- well, actually,

4 one follow-up to that is that Idaho Power has changed their

5 facts even up to March 16th when they filed an Affidavit of
6 Karl Bokenkamp that corrected some of their testimony and came

7 out with a new corrected exhibit that changed some of the

8 numbers around. It seems that they don't even say that their

9 own facts are uncontested in their filings when they're

10 changing them just four days ago.

11 And I think that Staff's comment just right here

12 in this case kind of supports this idea as well. S
13 The discovery is complicated, it's lengthy.

14 That's why we need to have a long process, and we support the

15 continued schedule that's set out. If the facts were as clear

16 and as uncontestable as Idaho Power argues, the discovery

17 wouldn't be that hard and we could move quickly to get an
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answer.
As far as a likelihood of harm, Idaho Power's new
standard for the likelihood of every project coming online came
out of nowhere. When you look at their integrated resource
planning process, they don't look -- they look at signed
contracts and even then are very nervous that those signed
contracts are going to come online. That's why they have
liquidated damages clauses. But now we have a standard of
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1 serious inquiries that are beyond a phone call with no showing

2 that those serious inquiries are likely to all come online in a
3 short amount of time, and they're also likely to be at the

4 rates that their computer models show.
5 What we've seen for a long time in Idaho is that
6 even all the signed contracts don't all come online, and that's
7 not even considering all the inquiries that are made that maybe

8 even get into the negotiation stage but then don't end up in a

9 signed contract because of a lot of different factors that go

10 into entering a power purchase agreement. It's not just a

11 price. There's interconnections, there's how you deal with

12 renewable energy credits, there's timing, there's whether the

S
13 project can even get financing even with a great power purchase

14 agreement. A lot of factors go into whether something is

15 likely to come online or not, but just a serious inquiry is not

16 a standard for likelihood.

17 But the other part of the harm beyond the

18 contract's coming online is what price is the Utility avoiding,
19 what would have happened otherwise. Again, there's not a big

20 showing of likelihood that the QF contracts or the pricing is
21 going to exceed what is going to be the price 15 years from now

22 for electricity. PURPA regulations state that the avoided

23 cost, if it's based on a contract term and laid out over a

24 20-year time, can exceed the avoided cost at the time of

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25 delivery. The point is to look at the avoided cost at price
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1 for the QF in year 15 and the avoided cost in year 15. So
2 those are all very complex things to understand, but they speak

3 to whether there is a likelihood of harm, and we haven't had

4
the opportunity to establish that that avoided cost 15 years

5 from now is true or not.

6 But, finally, the idea of the public interest.

7 The public has an interest in continuing PURPA development.

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Those projects are creating jobs in local communities, they're

9 contributing tax revenues to local communities. PURPA itself

10 sets a goal of deferring capacity additions and reducing fossil

11 fuel usage. That's at 18 CFR 304(e) (3).

12 The public also has an interest in reducing air

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13 pollution, which most of these PURPA projects will do.

14 So I just raise those to say that there are
15 I countervailing public interests to just the costs.

16 And to conclude, Commissioner Smith, you asked

17 for what's the Utility -- what's your tool for protecting

18 ratepayers from -- making sure that the costs re accurate.

19 You have a great tool: It's having contracts put before you

20 and approving them or not. What we've seen throughout this
21 process is QF developers have come in, negotiated a contract
22 with the Utility. They have come before the Commission,
23 parties have weighed in with their comments, and you've made a

24 Decision about whether those are to be approved or not. That's

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25 the tool that you have to protect ratepayers.
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1 And I think in this case, using the new IRP
2 methodology since it depends on the characteristics of

3
individual projects -- it might be very different for wind or

4 solar or waste to energy or canal drop hydro -- that it's

5 appropriate to look at a contract-by-contract basis as opposed
6 to a broad brush whether the rates or the contracts are

7 accurate or not. Again, there's a lot of individual

8 characteristics for contracts that could be in the public

9
interest or not, depending on that specific contract.

10 And you have your terrific tool before you to
11 make that Decision right now. You can look at the contracts

12 and you can decide whether they're in the public interest or

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13 not. PURPA authorizes you to do so. But I believe that's the

14 best tool you have before you.

15 And with that, I'll close my comments.

16 COMMISSIONER SMITH: Thank you, Mr. Otto.

17 Mr. Miller, did you have anything you wanted to

18 add?

19 MR. MILLER: Thank you, Madam Chairman. I don't
20 mean to distract your attention from the main issue today, but

21 I might take just a moment to reintroduce Idaho Windfarms.

22 Idaho Wind Farms has developed two PURPA projects

23 in Idaho. The first is the Bennett Creek complex, which the

24 Commission approved in 2006, and that project is online and

25 generating electrical power. The second is the Cold Springs
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1 project, or complex, which the Commission approved in 2010, and

2 that project is under construction and every indication is that

3 it will meet its scheduled operation date.

4 Idaho Wind does not intend future PURPA

5 development in Idaho at least as far as it can see into the
6 future, so we cannot really claim a direct interest in the

7 outcome of the Stay Motion. There is though one issue in the

B case about which Idaho Wind is very concerned, which I will

9 just identify for you and not attempt to argue, and that is in

10 the testimony of Company Witness Park, there is a proposal for

11 a new form of curtailment of QF projects based on economic

12 considerations and to apply that new form of curtailment to

S
13 existing contracts. So Idaho Wind is very concerned about the

14 potential impairment of its existing Agreements.

15 So my interest here today is only with respect to

16 the second issue identified in Order 32495, which is to ensure

17 that any adjustment to the schedule in this case does not

18 interfere with Idaho Wind's ability to fully oppose this new

19 curtailment scheme. From the comments of the parties, it

20 sounds as if there is some consensus that the current schedule

21 should stay in place, and Idaho Wind would support adherence to

22 the current schedule.

23 That's all I had.

24 COMMISSIONER SMITH: Thank you, Mr. Miller.
S
25 I forgot to ask: Were there questions for
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1 Mr. Otto or Mr. Miller?

2 COMMISSIONER REDFORD: No.

3 COMMISSIONER KJELLANDER: Maybe just one.

4 Mr. Miller, we heard Mr. Otto, as he stepped into

5 your shoes, talk about jobs related to wind, and then you came

6 on and told us there are several projects you've been involved

7 with that are actually -- one's online, one coming online. How
8 many actual permanent full-time jobs are there in a project

9 like that, and what size of project is the first one you

10 referenced that was I believe approved in 2006 and is online
low today? Just curious.

12 MR. MILLER: Mr. Commissioner, I have some vague

S
13 recollection of information that would be responsive to your

14 question. I recall in the Bennett Creek filing there was

15 information with respect to that. If it would be permissible,

16 I might suggest that the outcome of your -- to your question --

17 or, the answer to your question may not be completely

18 dispositive of the Stay Motion, and I'd be happy to submit a

19 writing that was more fully responsive.

20 COMMISSIONER KJELLANDER: Perhaps once we've

21 concluded this, a simple phone call would work. Thank you.

22 MR. RICHARDSON: Madam Chair, Peter Richardson

23 here.

24 COMMISSIONER SMITH: Yes.
S
25 MR. RICHARDSON: If I may dovetail on that, I'm
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not authorized to say that these jobs are in jeopardy, but I am
authorized to say that the jobs are made more secure by the
fact that 1,500 people are employed in Lewiston. Their jobs
are more secure because Clearwater Paper is able to cogenerate
and sell its power under PURPA to Avista.
Hundreds of jobs in Pocatello are made more
secure because the Simplot Company is able to cogenerate and
sell its power to Idaho Power.
Scores of jobs are more secure at the Tamarack
Mill in New Meadows because that facility is able to sell its
power under PURPA to Idaho Power.
And I know that the dairy digester AgPower Jerome
has just a little, little, tiny three-megawatt project where
they have three full-time permanent employees to monitor that
facility 24 hours a day.
So the number of jobs depends on a lot of things,
including the nature of the cogenerator or the small power
producer.
COMMISSIONER KJELLANDER: Mr. Richardson, would
you also say that affordable rates, the kind of affordable
rates that keep the lights on in every building and industry
across the state, also help secure quite a few jobs as well?
MR. RICHARDSON: Absolutely, Mr. Commissioner.
COMMISSIONER KJELLANDER: Thank you.
COMMISSIONER SMITH: All right. Mr. Humphries on
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HEDRICK COURT REPORTING ARGUMENT
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1 the phone, did you have a desire to make a comment?

2 MR. HUMPHRIES: No. Thank you for your -- thank

3 you, but no.

4 COMMISSIONER SMITH: Okay. Mr. Zamora?

5 MR. ZAMORA: Twin Falls Canal Company is not

6 going to take any position on the stay at this time.

7 COMMISSIONER SMITH: Thank you. Let me see. Are

8
there other I guess I better say "attorneys" or

9
"representatives" on the phone of parties in this case who wish

10
to take a position on the Motion that's before us?

11 Hearing none, I suggest we take about a

12 seven-minute break, and then we'll come back and hear from

13 Mr. Walker.

14 (Recess.)

15 MR. WALKER: Madam Chair, maybe ,I can speed that

16 up and say that I don't have any further remarks, unless

17 there's questions for me.

18 COMMISSIONER SMITH: Okay, then let's just take a

19 break.

20 (Recess.)

21 COMMISSIONER SMITH: Thank you, all. I know we

22 took more than seven minutes. The Commission, since Mr. Walker

23 said he had no further comments, did take the opportunity to

24 discuss what it heard here this morning and the filings of the
~ -,I 25 parties.
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1 The Commission declines to grant the stay that's

2 requested by Idaho Power Company; however, a majority of the
3 Commission does find that the methodologies previously approved
4 and utilized and as applied by Idaho Power Company no longer

5 produce rates that reflect Idaho Power's avoided costs, and are
6 not just and reasonable nor in the public interest. Effective

7 today and continuing until the conclusion of this case,

8 contracts for all projects over 100 kW entered into and
9 presented to the Commission for approval shall be individually

10 assessed with regard to all terms contained therein.

11 The scheduling that we previously outlined does

12 not change; that remains the same.
.

13 With that, if there is nothing further to come

14 before us, we will conclude today's oral argument, we will
15 acknowledge that parties were inconvenienced and had to change

16 their schedules, and we apologize, but we think that this was a

17 very important issue that needed to be heard quickly.

18 So we thank you all for your time and efforts,

19 and we are adjourned, and we'll be on our schedule as outlined

20 previously.

21 We're adjourned. Thank you.

22 (The hearing adjourned at 11:10 a.m.)
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HEDRICK COURT REPORTING ARGUMENT
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AUTHENTICATION
This is to certify that the foregoing is a
true and correct transcript to the best of my ability of the
proceedings held in the matter of the Commission's review of
PURPA QF contract provisions including the Surrogate Avoided
Resource (SAR) and Integrated Resource Planning (IRP)
methodologies for calculating published avoided cost rates,
Case No. GNR-E-11-03, commencing on Wednesday, March 21, 2012,
at the Commission Hearing Room, 472 West Washington, Boise,
Idaho, and the original thereof for the file of the Commission.
~ W-U Q /DJ 4Jd-- WENDY J. MURRA , N ta y Public
in and for the
SJan,
e of Idaho,
residing at Me Idaho.
My Commission expires 2-872014.
Idaho CSR No. 475
tall
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HEDRICK COURT REPORTING AUTHENTICATION
P. 0. BOX 578, BOISE, ID 83701