Attch11_IPCE0115_StaffComments.doc

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
472 WEST WASHINGTON STREET
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 1895

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AN ORDER ACKNOWLEDGING THE TERMINATION OF DELIVERIES OF POWER FROM EMMETT POWER COMPANY AND FOR AN ACCOUNTING ORDER AUTHORIZING IDAHO POWER TO INCLUDE LIQUIDATED DAMAGES PAYMENTS RECEIVED FROM EMMETT POWER COMPANY IN THE POWER COST ADJUSTMENT RATE.
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CASE NO. IPC-E01-15

COMMENTS OF THE COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of Application, Notice of Modified Procedure, and Notice of Comment/Protest Deadline issued on May 23, 2001, submits the following comments.
On May 4, 2001, Idaho Power Company (Idaho Power; Company) filed an Application in Case No. IPC-E-01-15 for an Order acknowledging the termination of delivery of power from Emmett Power Company and for an accounting order authorizing Idaho Power to include liquidated damage payments in the true-up portion of the Company’s Power Cost Adjustment (PCA).
Emmett Power Company (Emmett) has advised Idaho Power that it will terminate delivery of power to the Company under the Amended Firm Energy Sales Agreement dated January 12, 1984 (the Agreement). The termination is due to the impending closure of the Boise Cascade wood products operations in Emmett, Idaho. The Agreement calls for damages in the amount of $4,037,600 to be paid to the Company in the event of a failure to deliver power. The Company recommends the funds be flowed through to customers using the existing PCA mechanism.

STAFF ANALYSIS
Staff has reviewed the Agreement and concurs that Idaho Power must accept termination of the Agreement with liquidated damages. The $4,037,600 is the amount Emmett Power must pay to cease delivery of energy in the sixteenth year of the twenty-year contract. Staff verified that the damages to be paid to Idaho Power have been calculated correctly.
In its filing, the Company has termed the payment to be a benefit to customers. However, the loss of 72,100 MWh per year may cost more to replace in the future than it costs under the Agreement even with the one-time payment of liquidated damages. At a possible price of $130 per MWh, the total cost of replacement power would be $9,373,000 for one year.
The Company proposes to flow the $4,037,600 through the PCA as a credit against actual PURPA Qualifying Facility purchased power expense in the true-up calculation. The effect of this treatment would be to reduce costs that customers would otherwise be required to pay for replacement power. There is no sharing between the Company and customers in the PURPA section of the true-up calculation.

STAFF RECOMENDATION
Staff recommends the Company’s Application be approved as filed. As previously discussed, the continuation of the contract would have been more beneficial to customers but that is not an option available to the Company. The best available accounting option is the one proposed by the Company. The Company-proposed treatment of the liquidated damage revenue is consistent with the PCA treatment of PURPA contract costs. The PCA passes 100 % of these cost differences through to customers.

DATED at Boise, Idaho, this day of June 2001.

______________________________
Scott Woodbury
Deputy Attorney General

Technical Staff: Keith Hessing
Alden Holm

SW:umisc/comments/ipce01.15swkhah
The Agreement required Emmett Power Company to deliver Annual Net Energy for a term of twenty years commencing in 1985.
Emmett Power will cease operations because the required wood waste from the shut-down Boise Cascade operation is no longer available. The Company maintains it is not cost-efficient to bring wood waste in from another area to run the plant at the prices contained in the Agreement.
Independent price quote as of May 31, 2001 for the period of July 1, 2001 through June 30, 2002.

STAFF COMMENTS 3 JUNE 8, 2001