Attch55_IPCE019_O.N.28678.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY AND ASTARIS LLC FOR APPROVAL OF A LETTER AGREEMENT AMENDING THE ELECTRIC SERVICE AGREEMENT BETWEEN THE PARTIES )
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) CASE NO. IPC-E-01-9

NOTICE OF APPLICATION

NOTICE OF MODIFIED
PROCEDURE

EXPEDITED DEADLINE FOR COMMENTS

ORDER NO. 28678
On March 16, 2001, Idaho Power Company filed an Application requesting Commission approval of a Letter Agreement amending the Electric Service Agreement (“ESA”) between the Company and Astaris LLC (fka FMC). The ESA dated December 30, 1997 requires Idaho Power to supply electric power to Astaris’ phosphate manufacturing facility in Pocatello, Idaho. Astaris also purchases electric power for its Pocatello facility under the terms and conditions set forth in the ESA. As a result of Astaris’ strategic business decision to switch to a different manufacturing process that uses significantly less electric energy, Idaho Power and Astaris mutually desire to amend the ESA.
THE APPLICATION AND LETTER AGREEMENT
The ESA currently provides that Idaho Power furnish Astaris with two large blocks of power. The first block is for 120,000 kilowatts (“kW”) per hour and is a “take or pay” block (i.e., Astaris must pay for the power whether it uses it or not). The second block is for 130,000 kW per hour to be supplied by Idaho Power at Astaris’ request. Order No. 27463 at 4-5; ESA ¶ 4.2.1.
In the Letter Agreement the parties propose to reduce the first block to “no more than 70,000 kW’s of energy per hour.” LA at ¶ 4. However, Astaris shall continue to pay for 120,000 kW of energy per hour. Id. The difference – 50,000 kW or 50 MW – will be made available to Idaho Power for twenty-four (24) months beginning April 1, 2001 and ending March 31, 2003. Idaho Power will pay Astaris for the 50 MW at projected market rates minus a 14.5% discount. The total buy-back amount for the 50 MW of power is approximately $140 million over the two years, or about 15.9¢ per kWh. See LA, Schedule A.
Because the underlying value of the transaction described in the Letter Agreement is subject to rapid price changes that are occurring in the wholesale power markets and because there is considerable risk in not being able to close all aspects of the transaction, Idaho Power requests that the Commission process its Application on an expedited basis using Modified Procedure. See, IDAPA 31.01.01.201-.204. Accordingly, the Company requests that the Commission shorten the comment period as prescribed for Modified Procedure to seven (7) days. Furthermore, Idaho Power states that it will be necessary for it to purchase a derivative as insurance against rate volatility for the period of time that this matter is pending on Modified Procedure because it will not know if the Application is to be authorized as it requests.
Idaho Power requests that the Commission issue an Order finding that the payments it makes for buying back power from Astaris be treated as a purchased power expense for purposes of Idaho Power’s Power Cost Adjustment (“PCA”); or alternatively, authorize the Company to sell the 50 MW of reduced load “off-system as a non-operating transaction.” Application at 2. Idaho Power also requests that the costs of the derivative be recovered through the Company’s PCA mechanism.
DISCUSSION
This Application represents another energy conservation proposal from Idaho Power. In the Application and the Letter Agreement, the parties propose to amend the existing two-block service agreement. Idaho Power would buy back 50 MW of power that Astaris would no longer need because of its decision to change its manufacturing process. Under the Letter Agreement, Astaris accelerates its conversion process and is compensated for surrendering its contractual right to 50 MW of power. In turn, Idaho Power is able to obtain 50 MW of power at a discount from projected market rates. As exhibited by yesterday’s rolling blackouts in California, there remains considerable uncertainty and volatility in the regional power markets. Prior to yesterday’s jump in market prices, Idaho Power calculated the savings of this proposal to be approximately $21 million.
After reviewing Idaho Power’s Application and the attached Letter Agreement, the Commission preliminarily finds that approval of the Application is in the public interest. The agreement will allow the 50 MW of reduced load to be made available to serve all Idaho Power system customers. In addition, the anticipated costs of the Astaris proposal appear to be comparable to the Idaho Power irrigation buy-back program approved in Order No. 28676.
We are also persuaded that the Commission must move expeditiously to review the Application. The parties contemplate that the terms contained in the Letter Agreement will become effective on or before April 1, 2001. Consequently, we find there is good cause to process this Application under Modified Procedure on less than 21 days’ notice.
Based upon our initial findings, the Commission will accept written comments regarding two specific issues: 1) whether the payments made by Idaho Power to Astaris for purchases of energy should be treated as a purchase power expense and then flowed through Idaho Power’s PCA mechanism; and 2) how the costs of the derivative should be treated. Written comments addressing these issues must be received by the Commission on or before Noon MST, March 27, 2001.
NOTICE OF MODIFIED PROCEDURE
YOU ARE HEREBY NOTIFIED that the Commission has reviewed the filings of record in Case No. IPC-E-01-9. The Commission has preliminarily determined that the public interest may not require a hearing to consider the issues presented and that the issues raised by the Application may be processed under Modified Procedure, i.e., by written submission rather than by hearing. IDAPA 31.01.01.201-.204.
YOU ARE FURTHER NOTIFIED that the Application with its exhibits, have been filed with the Commission and are available for public inspection during regular business hours at the Commission offices.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held pursuant to the Commission's jurisdiction under Title 61 of the Idaho Code and that the Commission may enter any final Order consistent with its authority under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be conducted pursuant to the Commission's Rules of Procedure, IDAPA 31.01.01.000 et seq.
NOTICE OF EXPEDITED COMMENT PERIOD
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on the two issues which the Commission has requested comments on may file written comments in support or opposition to be received by the Commission no later than Noon MST, March 27, 2001. The comment must contain a statement of reasons supporting the comment. Persons desiring a hearing must specifically request a hearing in their written comments.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are received within the deadline, the Commission will consider the matter on its merits and enter its Order without a formal hearing. If comments or protests are filed within the deadline, the Commission will consider them and in its discretion may set the matter for hearing or may decide the matter and issue its Order on the basis of the written positions before it. IDAPA 31.01.01.204.
YOU ARE FURTHER NOTIFIED that written comments concerning Case No. IPC-E-01-9 should be submitted to the Commission, Idaho Power and Astaris at the addresses reflected below:

COMMISSION SECRETARY JOHN R. GALE, V.P., REGULATORY AFFAIRS
IDAHO PUBLIC UTILITIES COMMISSION LARRY RIPLEY, SENIOR ATTORNEY
PO BOX 83720 IDAHO POWER COMPANY
BOISE, IDAHO 83720-0074 PO BOX 70
BOISE, IDAHO 83707-0070
Street Address for Express Mail: FAX: [phone]

472 W WASHINGTON ST CONLEY E. WARD
BOISE, IDAHO 83702-5983 MICHAEL C. CREAMER
GIVENS PURSLEY LLP
FAX: [phone] N. 6TH STREET, SUITE 200
E-Mail: www.puc.state.id.us BOISE, IDAHO 83702
FAX: [phone]
E-Mail: [e-mail]

All comments should contain the case caption and case number shown on the first page of this document. To facilitate the submission of expedited written comments, such comments may be submitted by hand-delivery, overnight delivery, facsimile, or electronic mail to the Commission and the Applicants at the addresses set out above.
O R D E R
IT IS HEREBY ORDERED that this case shall be processed by Modified Procedure in accordance with the Commission Rules of Procedure, IDAPA 31.01.01.201-.204.
IT IS FURTHER ORDERED that the Commission approves paragraphs 1, 2, 3, and 5 of the Letter Agreement. Paragraphs 4 and 7 of the Letter Agreement will be addressed in the Commission’s final Order in this matter.
IT IS FURTHER ORDERED that any person desiring to state a position on Idaho Power’s request to buy-back power from Astaris and recover those costs and benefits through the Company’s PCA may file written comments. In addition, interested persons are invited to comment on whether the cost of the derivative should be included in the PCA. Written comments must be received by the Commission no later than Noon MST on March 27, 2001.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of March 2001.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

O:ipce019_jh
Astaris has decided to change the base material used in its manufacturing process from elemental phosphorus to purified phosphoric acid.

The 15.9¢ proposed buy-back payment is offset by Idaho Power’s continued recovery of the energy charge for the entire 120,000 kW per hour in the first block.

NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
EXPEDITED DEADLINE FOR COMMENTS
ORDER NO. 28678 -1-

Office of the Secretary
Service Date
March 20, 2001