20061211Vol. I Oral Argument.pdf

OJ?l-6fNAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
-------------------------------
Case No. IPC-E-06-
CASSIA GULCH WIND PARK, LLC
AND CASSIA WIND FARM, LLC,
Complainants,
vs.
Respondent.
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REPORTER'S TRANSCRIPT OF PROCEEDINGS
Tuesday, November 28, 2006
9: 32 a.
at the Commission s Hearing Room
472 West Washington Street
Boise, Idaho
VOLUME 1
Pages 1 through 100
Reported by
DEBORA ANN KREIDLER
CSR No. 274
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POST OFFICE BOX 578
BOISE, IDAHO 83701
208-336-9208
HEDRICK
COURT REPORTING
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APPEARANCES:
THE COMMISSION:
CHAIRPERSON MARSHA H. SMITH
COMMISSIONER DENNIS S. HANSEN
COMMISSIONER PAUL KJELLANDER
FOR THE PUBLIC UTILITIES COMMISSION:
SCOTT D. WOODBURY, Deputy Attorney General
OFFICE OF ATTORNEY GENERAL
472 West Washington
Boise, Idaho 83720
FOR CASSIA WIND PROJECTS:
DEAN J. MILLER, Attorney at Law
McDEVITT & MILLER
420 West Bannock Street
B 0 i s e , I da h 0 8 3 7 0 2
FOR IDAHO POWER COMPANY:
BART KLINE , Attorney at Law
LISA NORDSTROM, Attorney at Law
I DAHO POWER COMPANY1221 West Idaho
Boise, Idaho 83702
FOR PACIFICORP:
DEAN S. BROCKBANK , Senior Counsel
ROCKY MOUNTAIN POWER, A Division of Pacificorp
201 South Main , Suite 2300
Salt Lake City, Utah 84111
FOR AVISTA CORPORATION:
R. BLAIR STRONG, Attorney at Law
PAINE, HAMBLEN , COFFIN , BROOKE & MILLER , LLP717 West Sprague Avenue, Suite 1200Spokane, Washington 99201
HEDRICl( COURT REPORTING [phone]
APPEARANCES (Continued):
at Law
at Law
FOR EXERGY OF IDAHO:
PETER RICHARDSON, Attorney
MARK R. THOMPSON , Attorney
RICHARDSON & 0' LEARY515 North 27th Street
Boise, Idaho 83702
ALSO PRESENT:
RAN DY LOBB
JARED GROVER
RON ARRINGTON
BRIAN S. DICKMAN
CLINT KALICH
HEDRICl( COURT REPORTING [phone]
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All right.Let's getCHAIRPERSON SMITH:
started.
This is theGood morning,ladies and gentlemen.
time and place set for oral argument in Idaho Public
Utilities Commission case No.IPC-E-06-21.It is further
identified as Cassia Gulch Wind Park, LLC and Cassia Wind
Farm, LLC, Complainant versus Idaho Power Company,
Responden t .
Because we have visitors today from the
Foothills School,To myI will introduce the Commission.
left is President Paul Kj ellander, who s the president of
the Commission.To my r igh t is Commi s s ione r Denni s
And my name s Marsha Smi th.The three of us areHansen.
the Sta te body called the Publ i c Uti it i es Commi s s i on
that exercises jurisdiction over the regulated utilities.
ll begin with the appearances of the parties.
And we ll begin with Mr. Miller.
MR. MILLER:Thank you, Madam Chair.
My name is Dean J. Miller from the firm
McDevitt & Miller on behalf of the Cassia Wind Projects.
Let me also introduce Mr.Jared Grover , who
sea ted behind me, who I s now famil iar wi th the Commi sion.
As you recall, Mr.Grover is an Idaho citizen and owner
of agricultural land in Idaho that is no longer
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product i ve for commercia 1 purpose s,and seeks to convert
the use of the land to productive purpose to further
production of wind power electrici ty.
Seated to my left is Mr.Ron Arrington,who is
an associate chief counsel for John Deere Credit
Corporation.Mr. Arrington doesn t intend to acti vely
participate in the argument,but John Deere Credi t does
have a binding agreement with Cassia of which it applied
for financing,term insurance,and construction
management.Mr. Arrington has traveled from the company
headquarters in Iowa to be present because the outcome
this case is important to John Deere Credit,which is
financier and supporter of new energy products and the
agricultural communities that it serves throughout the
nation.
CHAIRPERSON SMITH:Kline,Mr.re happy to
see you here today.
MR.Than k you,KLINE:Madam Chairman.
happy to be here.
My name is Bart Kline,and 11 m appearing on
behalf of Idaho Power Company.With me is Lisa
Nordstrom.Miss Nordstrom is also an attorney with Idaho
Power.
CHAIRPERSON SMITH:Okay.We have one other
intervenor in this case,Mr.Richardson.
HEDRICl( COURT REPORTING [phone]
RICHARDSON:Thank you, Madam Chairman.MR.
Peter Richardson and Mark Thompson from
Richardson & 0' Leary on behalf of Exergy of Idaho.
CHAIRPERSON SMITH:Thank you.
We also have someone from Pacificorp.
MR.BROCKBANK:Yes,thank you.
Dean Brockbank representing Pacificorp.Also
with me is Brian Dickman the Idaho state manager from
Pacificorp.
CHAIRPERSON SMITH:Welcome, Mr.Brockbank.
Mr.Strong?
STRONG:Than k you, Madam Cha i r .MR.
My name is Blair Strong from the firm Paine,
Hamblen,Coffin Brooke & Miller representing Avista
Corporation.And wi th me this morning from Avista
Corporation to my right is Mr.Clint Kalich,who s the
manager of resource planning and power supply analyses
for Avista Corporation.
CHAIRPERSON SMITH:Thank you, Mr.Strong.
To my knowledge,those are all the parties that
are going to appear.
Scot t, how can I forget you?Mr. Woodbury.
MR. WOODBURY:Scot t Woodbury,deputy attorney
general for Commission staff.And to my right is Randy
Lobb,ire c tor 0 f s t a f f uti 1 i t Y co mm i s ion.
HEDRICl( COURT REPORTING [phone]
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m sure youCHAIRPERSON SMITH:Thank you.
make sure I don t overlook you again.
Do the parties have an agreed order
presentation?m assuming we ll start wi th Cassia and
end with Cassia.
That's my understanding, MadamMR. MILLER:
Chairman.I think Mr. Woodbury has talked wi th the
parties.Cassia would be followed by Exergy,I believe,
and the utili ties companies, whichever order they desire
to make their presentations,Andand the staff.
hopefully we can have a short break for Cassia to give
its concl uding thoughts.
I s your mi ke on?CHAIRPERSON SMITH:
It is.MR. MILLER:
Thank you.Please proceed.CHAIRPERSON SMITH:
Thank you, Madam Chairman.MR. MILLER:
Members of the Commission,thank you very much
for scheduling this time in your schedule to hear
presentations on what we think is an important question.
extensive pleadings in the case,And despite the lengthy,
I think the question for the Commission is really
straightforward.Should small QFsAnd it's simply this.
be required to finance upgrades to Idaho Power
integrated high voltage transmission system when those
upgrades benefit all users of that system.And the
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posi tions of the parties are also qui te clear,I think.
Cassia s position is this,that upgrade s should
be financed by Idaho Power shareholders and debt holders,
and if prudent,included in Idaho Power s rates in
general ra te proceedings.This,of course is the usual
way that utility plant is financed.The shareholders and
debt holders of the company,one way or another,advance
the money for construction as the investments
cons truct ion are then reviewed by the Commi s s ion and if
prudent and useful,are included in the company s rates.
Idaho Power s position,as I understand it,
this,that upgrades should be financed by QFs through
advances in aid of construction then included in
Idaho Power s rates as the advances are refunded to the
QFs.This puts wind developers in a position of being
bankers or financiers for the utility.
It's also important,I think,to try and start
to clarify what this case is not about.This is not
request for a subsidy.This is not a request for
preferential treatment.It's about removing a barrier to
entry that at the present time is precluding Cassia from
entering into this market.
It's also important to point out that Cassia
proposal is not novel.It's not unique.re only
requesting the utility plant be financed in the ordinary
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and usual way that it is financed.If there is some kind
of a subsidy issue in this case,it seems to me there I s
bigger problem.That's Idaho Power s proposal at least
in the sense of QFs would be subsidizing Idaho Power
Company shareholders by relieving them of investment risk
while shareholders would later receive the benefit of an
increased rate base.
So again,to emphasize,in our view,Cassia is
not requesting preferential treatment.It's not
requesting the subsidy.It's only requesting the utili ty
plant be financed in the ordinary,normal course by which
it is usually financed.
It's also important,at the start,
distinguish between two types of costs which have fine
meanings or terms of art that describe them.The first
are interconnection costs.These are the costs of the
link or the sole use facilities of the QF and the utility
at the point of connecting the QF to the transmission
system.And Cassia agrees that these costs are
appropriately directly assigned to the QFs.And in
effect the QFs pay for these to a nonrefundable
contribution.
The second set of costs are what are known
network upgrades.That is additions or modifications
the utility s load transmission system beyond the point
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at which the QF connects to the transmission system.
In our pleadings,as you probably recall, we
have used an analogy to describe these two types of
costs.The first we have referred to is the cost of the
driveway.The cost of getting from the QF to the
transmission system.The second type of group of cost
network upgrades we have compared to the highway.
So what it's issued -- what is at issue in this
case is the cost of the highway,the upgrades to the
network transmission system , not the cost of connecting
the QF from its physical location to the integrated
transmission system.
I also want to spend a moment preliminarily
remaking the point that an expeditious answer to this
question is important to Cassia.The affidavit of
Jared Grover, which we filed with the complaint,
establishes that the costs of the proposed upgrades are,
in themselves,greater than the investment Cassia will
make in its wind project itself.The annual carrying
cost of the upgrades are greater than the revenue from
the proj ect.
And also implied by the Grover affidavit is a
point that I haven t clearly made today, which is this.
That the classic reason for advancing -- for requiring
advances in aid of construction is not present in this
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The classic reason,foras I understand it,case.
requiring advances is the avoidance of speculative risk.
That is,repairs not being required to assume
speculative investment.Cassia is not a speculative
investment.
Mr.Arrington is here to make the point that
Jo h n 0 e ere C red i t is rea d y t 0 s tar t con s t r u c t ion.
there is no speculation in this project.This is a real
project,that wi th a favorable order,can move forward.
And in order to facilitate a prompt resolution
of the question,we have,for the purpose of this case
assumed certain things to be true.We have assumed that
approximately $60 million worth of network upgrades are
necessary to guard against what are known as N-
contingencies,to create adequate redundancyessentially,
in the transmission system.And we ve assumed that other
less expensive alternatives are not available.
We actually believe that,as indicated by the
pleadings,that there are other alternatives,such as
things known as special protection schemes over remedial
action schemes.But for purpose of resolving this basic
question re putting this to the side for a moment.
I must say,though,that Cassia has little
interest in a protective regulatory proceeding to resolve
those questions of whether upgrades are really necessary
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or whether less expensive alternatives exist.For
example,the case IPC 0522 aimed to determine
integration costs, has been pending for a very long time.
Cassia,frankly, has little interest in another
proceeding, because by the time the questions are
answered , the answers may be academic to Cassia.
And I'd also point out, to go to another
proceeding would ta ke the Commi s s ion into areas where
it's -- well,it would be at the outer limits of its
range of expertise.
For example,one of the proposed upgrades
said to be required is to install a 10.5 OHM and 138 kV
series reactor on the Idaho Power 138 kV transmission
line.In other words,to pull the mid point DRAM No.
kV transmission line substation and install a 230/138 kV
300 MVA transport.
So the point is,does the Commi s s ion really want
to get involved in deciding whether a one 10.5 OHM 138 kV
series reactor is really necessary or should it be a .
OHM?Should a mid point DRAM really be pulled from the
substation and is a 30 MV -- 300 MVA transformer really
required,or would something less do.A subsequent
proceeding would be a very challenging proceeding.And
one which really can be avoided.
And that we think is one of the advantages
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our proposal,it provides a sensible ea s y to admini ster
bright line division of the cost of responsibility.
avoids the necessity of more regulatory effort
litigation of very technical transmission planning
issues.
m sure the Commission is familiar with this
but let me just touch briefly on the federal context in
which this issue presents itself.Since regulation of
the transmission system is generally within the
j ur i sdict i on 0 f the Federal Energy Regula tory Commi s sion
so it is important to understand how this fits into the
federal standard.
ve pointed out that FERC is always favorable
of rolled-in treatment of transmission upgrade costs.
And instead of assigning them to the newest generator
connect following order 888 , which introduced policy
avoiding competition further proceedings were had to
open transmission to competition.The first was ordered
in 2003 , which established procedures for large
generators that is those of 20 megawatts or up.And
it -- FERC retained the policy of treatment of upgrades
of rolled-in treatment that required large generators to
advance the costs with those to be refunded through
transmission credi ts.And the refunds were included
FERC's jurisdictional labels.
HEDRICl( COURT REPORTING [phone]
Following that,FERC issued order 2006 -- or
2006 with procedures with small generators that is
generators of 20 megawatts or less.And for purposes of
consistency,and because FERC felt small generators were
not likely to trigger the network upgrades,it carried
forward the same policy of requiring advances in refunds.
But importantly,it recognized the difference between
merchant plans which generated electricity and
transmitted across a utility transmission system to third
parties and the QFs, which are different.QFs,
course sell their entire product output to the host
utility.
So in recognition of that difference,FERC
decided -- and I believe all parties agree that left
States in their administration of the PURPA
implementation program free to determine the
interconnection renewables and for QFs to sell their
en tire output to the host u t il i ty and made the Commi s s ion
aware of the difference between the QFs and merchant
plants.
I know you ve had an opportuni ty to review all
the pleadings,so I'm not going to review them in detail.
But 1 e t me t r y to s umm a r i z e hat I t ink are the
advantages of our proposal.
First,ve indicated it reduces barriers to
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entry.As we ve discussed the Idaho Power proposal
likely renders the Cassia proj ect uneconomical.The
Paci f i corp comment s,perhaps unintentionally,I think
confirm this point,indicating that,by imposing
liability for network upgrades on QFs or wind generators
11 removable projects will not be built because of
imposing those sorts of costs on generators.
Secondly,our proposal does not violate
ratepayer neutrality principles or require ratepayers to
pay in excess of avoiding costs.It's important to
remember that upgrade costs and interconnections costs
are recovered separately from the QF generation rates.
Cassia s proposal does not result in generation rates in
excess of avoided costs,because interconnection costs
and upgrade costs are recovered outside of the generation
rates.
Third,Idaho Power s existing schedule tariff
schedule No.does not require QFs to finance network
upgrades.That schedule properly directly assigns the
QFs the responsibility for internet interconnection costs
focusing on what is needed to safely interconnect to the
utility grid.But it is silent regarding network
upgrades.
Third we think our proposal promotes efficiency
of investment.The utility companies have argued that
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their approach encourages efficient proj ect si te
selection.And this may be plausible on its face with
respect to projects reporting,such as gas projects that
can move from place to place, depending on costs of
interconnection.But it has little applicability to wind
projects, which must locate where the wind resource
exists.And wi th respect to the Cassia proj ect itself
Cassia has made every effort to locate itself as close as
possible to the utility grid.And as I understand it
utility transmission line passes directly over the
Cassia-selected production site.
And we think our proposal is more efficient
because,if utility can impose responsibility for the
network financing supplier -- network financing on
suppliers it has little efficiency incentive in defining
those network costs, which ultimately will be borne by
the ratepayers and utility payers.
So in efficiency terms,ours is the better
proposal.And our proposal is consistent with Idaho law
of cost causation.I know the Supreme Court cases of
home builders in Washing Water Power caused difficulty
for the Commission in terms of limitations they placed
your flexibili ty in funding,allocating certain types of
costs.But they do clearly establish the principle that
all of connectors to a system , both old and new
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contribute equally to the cost of upgrading to be
required to the system,and that allocating costs just in
moving that is an improper theory of cost causation.And
finally,a s I'as an advantage of our proposal
indicated,it avoids the necessity of further regulatory
effort in this area.
So let me just conclude this way,again,
saying Cassia is not requesting a subsidy.Cassia is not
requesting preferential treatment.This proposal is not
novel.It is not unique.Cassia s only requesting that
these facilities be financed in the ordinary and
customary way that utility investments are financed that
financing first place instance by utility
shareholders and debt holders and reviewed subsequently
by the Commission who approves usefulness,and if f ound
to pass the test,then incl uded.
There is nothing novel or unique about what
re propos ing.In ei ther Idaho Power or Cassia
proposal the ratepayers will still ultimately be
responsible for these costs,but there s no compelling
reason to saddle wind developers or any other developer
wi th the job of paying,utilities paying,or financing.
So that Cassia can proceed with all due speed to
install these projects,something tha t 's been put on hold
for a long period of time,it's important for Cassia to
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be obtain speedy resolution to this question as soon as
possible.
So that's our point of view.
CHAIRPERSON SMITH:Thank you, Mr. Miller.
Let's see if we have any questions from the
Commi s s ion.Any question for Mr. Miller , Mr. Hansen?
COMMISSIONER HANSEN:I guess I'd like to have
you clarify a couple of things you talked about,
Mr. Miller.
You said a couple of times that this is not a
request for a subsidy.But if Cassia has not acquired
the cost responsibility for upgrades and there is a need,
then aren t you really asking the subsidy to QF?Even if
QF upgrade cost responsibili ty -- I know you ve kind of
talked about it, but in the customer s eyes , would you
see that they look at this as a subsidy?
MR. MILLER:It would seem to me the customer
should not view this as a subsidy, because this
ordinary utility planning needed for the operation of the
integrated utility transmission system,which is useful
and beneficial to customers, because that's the way power
gets delivered to them.And Cassia is not causing these
costs to be incurred any more than the existing users of
the system.That is the existing users of the system
contribute just as much' to the need for these investments
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as do any new connector to the system.
So in my view,the customers should not view
this,and the Commission should not view this as Cassia
trying to load off onto somebody else the cost that it
should properly bear.
COMMISSIONER HANSEN:We 11 wouldn t this make,
though,the price of QF generation in excess of the
utilities avoided cost?
MILLER:I believe it would not,MR.
Commi s s i oner for this reason.The Commission,in the
Brown case we refer to in our pleadings,defined the
concept of ratepayer neutrality as utilities,whereas
ratepayers should not be required to pay more than the
cost that utility would incur if it generated the power
itself to avoided cost.That concept refers to the price
of generating and producing the electricity,the
generation cost.
It's always been recognized that an ancillary
cost of interconnecting the QF are independent from
outside of the QF generation rate.That's why the
company has Schedule 72 to collect the interconnection
costs,which is completely different from -- its schedule
number I forget,but has its avoided cost rates.
it's always been the case that interconnection costs are
recovered outside of the QF generation rate.So whether
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those are high or low the avoided cost rate is the same,
and QF is not required -- is not pushing -- is not
affecting avoided cost rate.
The question that hasn t been addressed before
by the Commission is what to do wi th the network upgrade
costs, which are a -- I guess you d say a subspecies of
interconnection costs,generally.So in my mind the two
things are separate questions that is , what
interconnection costs happen to exist or any specific
, whether they be high , or whether they be low , has no
effect on the voided cost rates that Idaho Power
paying to acquire the genera tion from the proj ect.
COMMISSIONER HANSEN:So are you saying that
this is why there is probably no transmission component
in the QF methodology, the determinative avoidable cost?
MR. MILLER:I think that's right.I think that
it's conce i vabl e tha t the Commi s s i on could incl ude in
avoided cost the component for transmission.But at this
time,at the present time,it does not.I think --
don t know if it would be wise or not wise to include a
component , but whatever component would be included with
respect to any specific project, that is the upgrade
costs the efficient cost for this specific project or
any project -- specific project and possible project
to pick out a cost to be represented for all of it.
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So it seems to me it would be a better policy to
keep a separation between generation rates and
interconnection costs used for the project and resolve
the interconnection costs as they are now or resolve
interconnection costs on a case-by-case basis as it
done here.
And if I could go back to your preVlOUS
question just very briefly,on the question whether the
Commission views it a subsidy,it's important to point
again,out,under ei ther Idaho s proposal or our
proposal, these costs will ultimately be customer rates.
So it just becomes a question of timing, which I think
again goes to the point that this should not be viewed
as a subsidy.
CHAIRPERSON SMITH:Commi s s i one r Kj llander?
COMMI SS lONER KJELLANDER:Than k you.
Mr. Miller, based on the last point you
mentioned about it ultimately -- regardless of which
proj ect is put together the end result is the
transmission rates end up in rates the ratepayers pick up
the tab on I guess my question is to --' and track with
if you can -- and that could be difficult.me,ll say
that up front.
MR. MILLER:ll do my best.
COMMISS lONER KJELLANDER:Wind resources -- the
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wind blows where the wind blows.You get a good strong
You try to develop that.resource.And you look at all
the extraneous costs that go with that and determine
whether it's feasible.In this instance,there s the
addition of saying there needs to be more transmission
upgrades in order for this proj ect to be viable and get
to market.
Do you disagree that those transmission upgrades
need to occur?Is that a point you re disagreeing with
at all?
MR. MILLER:Mr. Commissioner,for the purpose
of this case,we have assumed that to be true.
tried point out that think there significant
question about that,whi ch would have resol ved
the subsequent proceeding,which have little appeti te
for.But for the purpose of presenting this question to
you, we re assuming that the current condition of the
transmission system is such that it's on the verge of
falling below N-1 reliability criteria and needs to
fortified in order to meet the N-l reliability criteria.
COMMISSIONER KJELLANDER:Mr. Miller, based
the N-1 reliability criteria and wind projects you
not just this one, but others,seen,are there any wind
projects that have been proposed that you might be aware
of that could be brought out of line that would not
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require any of these expensive transmission upgrades,and
ultimately, pulled back into the pocketbooks of
ratepayers to have to pick up.
MR. MILLER:m just trying to formulate an
answer.Give me just a second.
You re taking it slightly outside of direct,
which I'm happy to do , but -- I am not aware of any other
wind projects that currently have a power purchase
agreement that are not affected.That is the point we
trying to get at is you say no to these projects because
there s some others in the pipeline that wouldn t requlre
upgrades.I think the answer to that is no.
COMMISSIONER KJELLANDER:Okay.Thank you.
CHAIRPERSON SMITH:So Mr. Miller,is your
Cassia Wind trying to get into the market?
MR. MILLER:That's precisely what we re trying
to do.
CHAIRPERSON SMITH:Or are you trying to sell
the totali ty of your output to Idaho Power Company?
MR. MILLER:I guess the more proper way to
answer the question is we view Idaho Power as the market.
And we have a contract to sell the entire output project
to Idaho Power Company.
CHAIRPERSON SMITH:So your goal is to deliver
your output to the utility?
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MR. MILLER:That is precisely what our goal is.
CHAIRPERSON SMITH:And I just want to set your
mind at ease.As a person who sat for ten years with the
WSCC and the ECC Board,I feel totally confident if we
have to get to all of those technical details to find
what's the NYSI criteria,ll be happy to do that.
MR. MILLER:I certainly didn t mean to call
into question the Commission s competence in that area.
CHAIRPERSON SMITH:Whether we want to do it is
another question.
MR. MILLER:I raised the question of do you
want to.
CHAIRPERSON SMITH:All right.
Mr. Richardson?
MR. RICHARDSON:Thank you, Madam Chairman.
think the fundamental point in this case is that we are
not buying transmission services from Idaho Power.
FERC's Orders 2003a and 2003b all address interconnection
costs for merchant plants that are selling their power
a third party.They re not controlling over this
Co mm i s s ion s act i v i tie s actions.If they were,it would
be as if we were connecting to Idaho Power s system
order to move our power to a point on say, Northwestern
Energy s system in Montana.
It is a fundamental distinction that Idaho Power
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is purchasing our output for use to serve its native load
customers.As such its native load customers should be
responsible for integrating those resources for their
To do so otherwise,I believe,unfairly discountsuse.
the avoided cost rates paid to the QF developer.I f the
avoided cost rates are set improperly,the cure is to set
accurate avoided cost rates.That is what the Commission
is actively doing right now with its wind integration
study.
The other distinction is we are talking about QF
resources which enjoy special status under PURPA in that
the federal law requi re s state commi s s ions implement ing
it to do so in a manner that actually encourages
development of QF resources.
In addition interestingly,in this situation
almost one-third of the new generation in the queue we I
talking about is Idaho Power s own hydro generation.
Furthermore,the transmission upgrades that Idaho Power
has identified are necessary to bring new resources to
Idaho Power s load center.The QF power purchase
I viewagreements,are similar to a Certificate of
Public Convenience and Necessity in that it contains an
as s urance by the Commi s s ion tha I daho Power s inve s tmen t
in the generating resource will be recoverable from the
ratepayers.
HEDRICl( COURT REPORTING [phone]
All of Idaho Power s purchase agreements have
language similar to the following.This agreement shall
become effective upon the Commission s approval of all
terms and provisions hereof without change or condition
and declaration that all payments to be made to seller
hereunder shall be allowed as prudently incurred expenses
for ratemaking purposes.
Avista and Rocky Mountain Power have similar
rate language in their agreements.The QF resource has
become a utility resource used to serve utility native
load.These resources are being used to serve the
ratepayers and the costs of the resource is deemed
equivalent to the cost of Idaho Power say bringing on
new gas-fired resource on line.
At the time the Commi s sion approved our
contracts,Idaho Power was aware of the location of our
prbj ect.And had there been any issue associated with
integration of our proj ect into Idaho Power s system,
should have been raised at the time the contract was
signed and approved,not after the fact.
Frankly,Commi s s ioners we feel sandbagged.
Idaho Power offered us a contract for the purchase of our
output,which we signed and you approved.Even if the
Commission determines that new QFs should bear the costs
of upgrading the highway,as Mr. Miller so happily
HEDRICl( COURT REPORTING [phone]
analogized,the contracts that have been signed by
Idaho Power and approved by you should be grandfa thered.
You shouldn t change the rules after the fact.
FERC QF rules provide interconnection costs must
be limited to those interconnection costs that would not
have occurred but for the QFs connecting to the utility.
Recovery of integration costs are limited,according to
FERC rules,to the extent such costs are in excess
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 or purchased an equivalent
amount of electric energy or capacity from other
sources. "Quoting from CFR 292.101(d)7.
Because Idaho Power will need to upgrade this
system in order to integrate its own hydro proj ect,the
but for test has simply not been met.That is,
Idaho Power s own upgrade will serve as the straw
breaking the camel's back.
The issue facing the Commission today is not
new.The Rocky Mountain Area Transmission Study,
sponsored by the Western Governor s Association,which
thi s Commi s s ion ha s been involved in,stated the problem
thus.
And I'll read from the Rocky Mountain Area
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Transmission Studies sponsored by the Western Governor
Association,chapter 4 page 1 the Problem Statement.
Investment in new transmission infrastructure in the
west has lagged behind the growth in both demand and new
generation.There have been very few new bulk power
transmission infrastructure additions in the western
interconnection in over a decade.With low gas prices
throughout the 1990s, most additional generation has been
gas-fired,located close to load,requiring little
additional transmission capacity.Regulatory
uncertainty,arising from questions about recovering the
cost of transmission investments and the impact of FERC' s
push toward open access to the transmission system is a
maj or
" -- "
is another maj or reason for the lack of recent
transmission investment.Prior to the advent of
transmission open access,entities responsible for
serving native loads planned generation and transmission
investments in tandem with the expectation that such
investments,since they were devoted serving native load
customers would provide the least cost means to serve
customers,and be recovered through the retail rates paid
by those customers.
Historically,state regulators,who have
exclusive authority to set retail rates,have allowed 100
percent of the cost of transmission investments for
HEDRICl( COURT REPORTING [phone]
state-jurisdictional transmission owners to be included
in the cost of service for native load customers.
The lack of transmission investment to enable
consumers access to lower cost coal and wind resources
an increasing concerns,because without transmission
investment,the region will,by default,become
increasingly reliant on natural gas-fired resources
located close to load,with the attendant exposure
high and volatile natural gas prices.
And boy,does that sound familiar.
Indeed,Idaho Power has acknowledged in this
case that its transmission system is inadequate.As we
pointed out in our comments,quote -- Idaho Power
comments in this proceeding acknowledged the real issue
facing the company.Cassia and Exergy suggested,as an
alternative to the transmission system upgrades,certain
wind generators could be tripped off the system in the
event of an actual N-l contingency as part of a remedial
action scheme.In response,Idaho Power states,Idaho
Power does not agree that the deferring transmission
system upgrades by the use of generating shedding schemes
is a prudent long-term approach to the problem of
inadequate transmission passage.
Idaho Power did not argue that the proposal
shed generation would not work.Rather it argue s tha
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it does not believe it would be a long-term solution to
the real problem to Idaho Power s system, which
inadequate capaci ty.
Finally,I d like to focus on the discriminatory
nature of Idaho Power s proposed charges.The process is
sort of like the old saying the straw that breaks the
camel's back.For instance,approximately one year ago
my client constructed a 10 megawatt generating
resource -- wind generating resource in the Twin Falls
and connected it to Idaho Power s system.area
client paid nothing for transmission facili ty upgrades.
Today my client is being asked to pay for transmission
system upgrades for the construction of additional
generating resources in the same general area.The only
difference between the two proj ects is when the request
for interconnection is made.So in Idaho Power s brief,
they talked about QFs,quote,paying their share " of
transmission system improvements.It is hard to know how
that share is determined if one QF share is zero and the
next QF share is hundreds of thousands of dollars.Other
than accident of timing,the two proj ects are identical.
The facts of this case are remarkably similar to
the facts presented to the Idaho Supreme Court in
Building Contractors of Southwest Idaho versus Idaho
Public Utilities Commission.That case prohibited the
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different treatment of old and new customers based solely
on the time they connect.The court not ed tha t,quote,
each new customer that has come into the system at any
time has contributed to the need for new facilities," end
quote.
The prohibition against discriminatory treatment
of similarly situated QF developers will be violated
unl es s the Commi s s ion adopt s the pol i cy pos it ion of f ered
by Cassia Wind.
Further supporting the contention that new
resources are coming into the Twin Falls area is the RMAT
study,which I just quoted.What the policy object is of
the Western Governor s Association in the Rocky Mountain
Area Transmission Study is to upgrade the bridget to
midpoint line -- midpoint is the Twin Falls area -- in
order to bring an additional 1,300 megawatt of resources
into the midpoint area.Of course, bringing
300 megawatts into midpoint is pointless without
upgrades from midpoint to Idaho Power s load center.
frustrates the policy of the Western Governor
Association RMAT study.
So as a matter of policy,the region is
encouraging new transmission construction to acquire
resources,not just QF resources in the Twin Falls area,
but resources region-wide.And as a result,we would
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conclude by as king the Commi s s ion respectfully,to adopt
the Cassia Proposal.
Thank you.
CHAIRPERSON SMITH:Thank you , Mr.Ri chards on.
Que st ions f rom the Commi s s ion for
Mr. Richardson?
Nor I.
Mr.Kline?
MR.KLINE:Thank you , Miss Chairman.
Before I make my remarks,I would 1 i ke to hand
out -- I guess I'll call it a visual aid -- to be a part
of my presentation.And what's being handed out,just so
re clear,is a copy,one page out of Idaho Power
Company s Schedule 72 , which is the tariff schedule that
Idaho Power uses to -- for the interconnection of QF
facilities to the current system.And one portion of
it's highlighted.
This is of course, part of the company I
tariff and is on file wi th the Commission.It really
isn t an exhibit.I think you can take official notice
of the document.And it is just used for illustrative
purposes in this oral argument.
Let me begin by giving you a brief summary what
m going to address in these comments.The company
wr i t ten ini t i al comment s iden t i f i ed seven s igni f i cant
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policy issues that have been raised by Cassia
complaint.Don t panic.I don t intend to address all
seven of those policy issues, because I think there
one issue,and I think it's a legal issue that is
dispositive of this case.And that issue is the effect
of the adoption of Cassia s proposal on avoided cost
rates.
m also going to take a few minutes to talk
about several of the points that Cassia and Exergy made
in their comments.And I'll also address some of the
comments that were made during the course of oral
argumen t .
Idaho Power believes
CHAIRPERSON SMITH:Excuse me, Mr. Kline.
Commissioner Kjellander?
COMMISSIONER KJELLANDER:Kline,Mr.as you were
handing this out,I was trying to look at it and listen
at the same time.And multitasking is not my gift.This
is Schedule 72 related to interconnections in the
contracts that are signed by Cassia and other QFs.
this language specifically referenced in those contracts?
MR.KLINE:Schedule 72 is referenced in the
contracts, because it is the tariff that governs
interconnections between QFs and Idaho Power.Yes,the
contracts that are signed by Cassia and others do
HEDRICl( COURT REPORTING [phone]
reference Schedule 72.
COMMI SS lONER KJELLANDER:Well,then if I'm to
see this correctly,it says that "the company reserves
the right to collect additional costs from the seller for
any additional company equipment, modifications or
upgrades. "Why,then,couldn t you go back on all the
old contracts,even the ones that were referenced by
Mr. Richardson that are even up on line,and say,okay,
now we ve determined this is a piece of the puzzle; we
think you need to pay a share of that?
At what point,I guess, are the contracts valid,
done,signed and over with in terms of the terms of those
contracts.
MR.KLINE:What we have always done for, QF
contracts is at the -- it's kind of a two-step process.
QF developers always want to have contract first thing.
And they may have no idea what the actual interconnection
costs are going to be at the time they sign those
contracts.So we sign the contracts.They go out and
get their financing.They then come to us and they work
through the interconnection process.And at that point
in time,they find out what it's going to cost to
interconnect them.And they pay the money -- and if they
decide to move forward they pay the money and move
forward wi th their proj ects.
HEDRICl( COURT REPORTING [phone]
I guess I think there would probably be a
surplus in equity if we now try to go back and say, well
you signed up,the project is moving forward,you paid
all the interconnections costs that we asked you to pay,
and now we want you to pay some more.I think that there
would be both legal and certainly policy concerns wi
regard to that.
COMMI S S lONER KJELLANDER:Isn t that what we
have today in front of us wi th Cassia s case?Tha ti
been before us,they ve signed a contract,they I re moving
forward,and now there are additional transmission costs
that are being thrown on the table that weren t there
when they signed the contract?
MR.KLINE:No.Those costs were there at the
time they signed the contract.They simply hadn t gone
through the steps that are necessary to identify what
those costs are.
What has occurred here is you ve got a group
projects that have all decided that they want
interj ect their power onto Idaho Power Company system
the Twin Falls area.The fact of the matter is,if 200
300 megawatts of QF power is injected into the system
that location there will be portions of Idaho Power
Company s transmission system that will be overloaded,
that will become unsafe.And that safety and their
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reliability will be degraded.
So that's the situation we find ourselves in.
And frankly, which way that this unfolds is because
that's how the QF developers want to move forward wi
their proj ects.They want the contracts,then they ll go
see if they could put together a proj ect.
COMMISSIONER KJELLANDER:Okay.Than ks .
MR.KLINE:Idaho Power again , believes the
core issue in this case is whether adoption of Cassia
proposal to exempt QFs from paying the cost of system
improvements that are required by their interconnection
would violate Public Utility Regulatory Policy Act to
require its PURPA requirement.I f the Commi s s ion were to
determine that adoption of Cassia s proposal would,
fact,violate PURPA proposal -- PURPA principles and
violate PURPA,then as a matter of the law the
Commission must rej ect Cassia s proposal.
Now,m not going to go into all of the PURPA
regulations and decisions that determine how avoided
costs are computed.This Commission s very familiar wi
all of those provisions,and they re laid out in the
briefs of the parties.
After 25 years of dealing with PURPA and with
setting avoided cost rates,m personally convinced that
the essence of PURPA avoided cost rates is the customer
HEDRICl( COURT REPORTING [phone]
neutrali ty standard.It's kind of the golden rule of
PURPA.And Mr. Miller referred to that in his comments.
simply stated,And the customer neutrality standard,
that customers should be economically indifferent whether
Idaho Power Company buys energy from a QF, whether
buys energy from its own generation resources,or if it
buys it on the wholesale market.And so long
customers are indifferent as to those various purchase
arrangements,then avoided costs are probably set pretty
well.They re probably accurate.And it's a very simple
test.And I think what you have to do in this proceeding
lS you have to apply that test to what Cassia
proposing.
Now it is Idaho Power Company s position that
adoption of Cassia s proposal would violate the customer
neutrali ty standard.And the reason that it would is
when you look at what Cassia s proposing,number one,
Cassia s proposing that Idaho Power pay to Cassia and
other QFs the full avoided cost purchase price that this
Commi s s ion ha s approved.In addition,Cassia is
requesting that customers absorb the cost of the system
upgrades that are needed to be constructed in order
accommoda te and integrate the re sources that Cas s ia and
other QFs interconnected in the Twin Falls area.
So when you add those two costs together , they
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exceed the avoided cos t ra te s tha t thi s Commi s s ion has
approved for Idaho Power and the other utilities in this
In my mind that is a violation of PURPA.room.That is
a violation of the customer neutrality standard.
Now Cassia argues in its brief and to you today
that avoided costs of generation should be separated from
the costs of interconnection.You don t have to look
both of them.And if you just look at generation then
the violation of PURPA goes away.
The fallacy of that position I believe,can
best be illustrated by a small example.Let's use this
hypothetical.Let's assume,in very near future,Idaho
Power Company determines that a new surrogate avoided
resource,which is what we use in Idaho to determine the
avoided cost,needs to be established,and we need to
update our avoided cost rates.And the new surrogate
avoided resource is a coal plant located in western
Wyoming.
Now what Idaho Power would do in this avoided
cost case is it would compute the capi tal costs and the
fuel costs of building and operating the generation
facili ty in western Wyoming.
Now the other thing,that if you ve got
surrogate avoided resource located in western Wyoming,
you re going to have to integrate that resource wi
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Idaho Power Company s transmission system.You have to
get it so that they work together safely and reliably.
Now,if I daho Power came to the Commi s s ion then
with its new case and said,our new SAR is a coal plant
in western Wyoming,and weheres the generation cost,
want you to ignore the cost of integrating that plant
onto our system I want you to ignore the transmission
upgrades and transmission expenses that are going
occur as a result of using this surrogate avoided
if we were to do that,the QF developmentresource,
community would rise up in anger,because they would
and rightfully so,part of the costs,argue part of the
Idaho Power s avoided costs,based on this surrogate
avoided resource would be the transmission expense
associated with that plant.They re intertwined.
What Cassia wants you to do is to pretend
this situation that all you have to look at
generation.Integration costs don t count.And I
think -- I think it's incorrect if Idaho Power were
propose that you ignore transmission costs in determining
avoided costs.And I think it's also incorrect for
Cassia to argue that you ignore interconnection and
transmission costs in determining whether or not the
rates paid to Cassia are consistent with PURPA
requirements.
HEDRICl( COURT REPORTING [phone]
Now when you have a situation like we have here
where the sum of the avoided cost rates,the generation
rates,if you want to use the nomenclature that
Mr. Miller described,where the sum of those costs and
the sum of the interconnection costs exceed avoided
there s two things the Commission can do.costs,First
of all you could reduce the purchase prices of the
genera tion co s t s to accommodate the fact that the re are
other costs,interconnection costs the customers are
going to have to bear.
That's kind of a tricky way to do it,because I
don t know how you allocate them to capaci ty costs and
energy costs over a 20-year period.So we haven t done
that in Idaho.That's not traditionally what we have
done.
The other way that we have addressed that issue
as we have said the QF developers will pay those costs.
And as long as they pay those costs,yes they should
receive the full avoided cost generation portion.And if
they pay the interconnection costs the customers are
neutral,ratepayer neutrality or customer neutrality
standard hasn t been violated,and everything s great.
And tha t 's how we ve been doing it.This is the first
time that that basic process and procedure has been
challenged to my knowledge.
HEDRICl( COURT REPORTING [phone]
Now Cassia argues that Idaho Power cannot
assess system upgrade costs because Idaho Power
Schedule 72 doesn t deal wi th network upgrades, doesn
talk about additions to the backbone of utility
transmission systems.And that simply isn t correct.
Schedule 72 very definitely includes language that would
cover the kinds of network upgrades that we re talking
about here.
And in that regard,I would now ask you to take
a look at the Schedule 72 handout that I just gave you.
And I'm not going to go through the whole Schedule 72 and
line out how each provision of Schedule 72 works
together, but describe the fact that what Schedule
does is require that QFs pay the costs that are necessary
to allow them to safely interconnect to Idaho Power
Company s system.I think if you look at the highlighted
language,that's kind of a summary of all of the other
provisions that work together in Schedule 72.
So when Cassia says that Schedule 72 doesn
cover the kind of upgrades we re talking about here,
that's simply not correct.I honestly don t know how
many ways Schedule 72 can say it.It says it at mul tiple
points.And certainly at no point in Schedule 72 does it
say we re going to draw a line and say it's only on the
distribution side of the point of delivery.Clearly
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doesn I t go there.
Now --
COMMISSIONER KJELLANDER:Mr. Kline,I guess on
that point, back to the question you were moving towards
earlier I think you said once the contract is put
together the way the contract's scheme is designed,it'
then up to the QF to go out and determine what those
costs are.
How would Cassia have known to even look at the
transmission site when it appears that none of the
previous QF contracts that decided to go forward had any
of those costs built into it?
How would they have known to go out and try to
factor that in wi thout guidance from the company early
on?
MR.KLINE:Well, they got guidance from the
As soon as the Cassia -- and this goes back,company.
some degree,Commissioner Kj ellander,to the standards of
conduct FERC requirements as to how we now run our
business.They no longer can talk to the folks at
Idaho Power in the power supply division to talk about
transmission.They need to go to Idaho Power s delivery
And there,the delivery group has a very formalgroup.
process, which they get the basic information from Cassia
a s to her e a re the pro j e c t 's 1 cat ed,and what its size
HEDRICl( COURT REPORTING [phone]
is,and what its generation characteristics are.And
there s a whole process whereby the company then studies
that particular application and makes determination as to
what it's going to cost to add that proj ect to Idaho
Power Company s system.
This isn t new.This is how we I ve done it from
the beginning.This is how any merchant generator
this is how any QF generator has always operated with
Idaho Power.The only difference is that the power
supply folks could be involved at an early stage.Now
they can That's the only difference.The basic
process hasn t changed.Just kind of who talks to the
developer has changed.
Cassia understood this.All of these developers
understand that.They ve got to talk to Idaho Power
Company s delivery system in order to come up with cost
of the interconnection.
d like to talk about a couple of things that
came up in the comments filed by Cassia.One of them has
to do with the comparability requirements.In Idaho
Power Company s comments,we expressed some concern that
acceptance of Cassia s proposal would,in fact,put QFs
in a preferential position as compared to other users of
the wholesale transmission system.In other words,
Cassia s proposal is adopted and there is no requirement
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that there be any upfront funding of system upgrades,
that's different than the standard that we re required to
apply to other users of the transmission system, merchant
generators folks who wanted to do wholesale transactions
across the system.
Our concern is that FERC would look at the fact
that QFs had received this preferential treatment and
could,in fact, make determination that Idaho Power was
required to fund system upgrades for all merchant users.
Now Cassia kind of brushes this aside in its
c 0 mm e n t s an d say s, well,FERC wouldn t do that.If they
did,Idaho Power would have really good defenses because
the Idaho Commission ordered the power company to do
that.
Frankly,I really can t share Cassia s rather
cavalier attitude on that.I think it's a legitimate
concern.And I hope the Commission will give it careful
consideration.
A couple of other things that I think we need
to -- I need to address that came up as a part of
Mr. Miller s comments.First of all there s discussion
about how these transmission upgrades would benefit all
and as a result all users ought to pay.users,This is
a recurring theme.
Let's be clear here.Idaho Power Company would
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not instruct these transmission upgrades to serve its
native load.The only reason that these construction
these upgrades would need to be constructed is because of
the addition of the generation in the Twin Falls area.
No other reason.Load growth does not require the
construction of these facili ties.The only reason
the y ' re be ing deve loped it is to accommoda t e the
generation in that area.
Richardson in hi s comment Mr.talked about an
inadequate transmission system.the fact of theWell,
matter is a transmission system is perfectly adequate to
serve Idaho Power Company s residential loads,its native
loads.It's not inadequate as it now stands.The only
reason that these construction -- this construction would
be required wou ld be to accommoda te the genera tion.
Mr.Miller also made a big distinction between
interconnection costs and network upgrades.And these
are -- these are defining terms that FERC has created
primarily during the course of the 2003 proceedings
before FERC.And there are distinctions,and there are
definitions -- they are definitions that FERC has
created.
But the fact of the matter is if there s 200
megawatts QF generation and other generation of the Idaho
Power system in the Twin Falls area,network upgrades are
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going to have to be constructed.It's a cause and
effect.
And so to say, well , you define these one way
and we ll pay for those,and you define these another
and we won t pay for those,the fact of the matterway,
is,there s no difference.from an electrical standpoint,
The requirement comes as a result of the addition of the
generation.
In conclusion,I daho Power urge s the Commi s s ion
not to adopt Cassia s proposal.Tha t is the company
position,that that will shift cost and the risk of
transmission improvements to Idaho Power Company
customers.We believe that would be in violation of
PURPA.I also believe it's a bad policy.
m kind of intrigued by the approach that the
Avista described in its comments in this cases.I 1 i ke
their approach,the idea, that first thing that the
Commi s s ion should allow the part ie s to do is see if we
can negotiate a way of addressing the transmission cost
issues.Apparently, Avista did so wi th the QF developer
up in its service terri tory.We were in the process
doing that proposal , and we presented to the various QF
- developers in the Twin Falls area.And I think that
the right way to go.And we hope that once this
concluded, we ll be able to go back to the negotiation
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table wi th fol ks and work out some kind of arrangement.
I think there are some hopeful signs that we might be
able to do that.
But if,in fact, we are unable to do that in
individual negotiations,then I do think it is proper for
this Commission to determine that QF developers should
pay the costs that they caused the company to incur in
order to interconnect their projects and to maintain
customer neutrali ty.
And now if you have any questions,ll be mo
than happy to attempt to answer them.
CHAIRPERSON SMITH:I think there are going to
be questions, but before we get there,could we take
10-minute break?
MR.KLINE:Sure.
(Break taken from 10:45 to 11:04.
CHAIRPERSON SMITH:re back on the record
wi th questions for Mr. Kline.
I had my 0 w n 1 i s t, but Co mm i s s ion e r jell and e r ?
COMMISSIONER KJELLANDER:Thank you,
Commissioner Smi th.Let me see if I can find it.
Kline,I guess this is generally along theMr.
lines of a question that earlier I'd asked of Mr. Miller
about wind resources,and if there were any other
resources identified within your transmission grid today
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that could be constructed that wouldn t require those
transmission upgrades.
in part,And I guess I want to connect that,
the IRP' s that have been circulated,those that have been
accepted for filing,and those that we ll be looking
down the road.Those IRP' s call for certain amount
wind to be bought on line.And I'm wonder ing to wha
extent transmissions costs have been factored into those
IRP' s.
m assuming that there are some transmission
costs that are a piece of that.And I guess I'd like to
hear your thoughts on that.
MR.KLINE:Sure.
And of course,please let me give you the
caveats that I'm not a transmission engineer.And also,
again the standards of conduct do not allow our
FERC's standards of conduct do not allow our transmission
people to talk specifically about transmission costs
associated wi th particular generation proj ects.
But I do know that there are some wind
generation projects where,if there are system upgrades
required,they are substantially less than what we
talking about here.Beyond that,I really don t know.
it's society-specific.But there are places on ourmean
system where you could inject generation,could
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construct -- inj ect generation that wouldn t require
substantial investments -- system upgrade investments.
Now,as far as the integrated resource plan and
the RFP' s that come out of -- or request for proposals
that come out of integrated resource plans,absol utely
the cost of transmission and the cost of transmission
upgrades would be a part of the analysis that we would do
as to whether or not a particular resource should
pursued and brought to thi s Commi s s ion for author i ty to
move forward to construction.
I think you know ve got an RFP going right
now for a wind resource.And depending on how that turns
out,we may be coming to you with a request for approval
of that contract.
COMMISSIONER KJELLANDER:And Mr.Kline,I guess
maybe a follow-up,based on a point that Mr.Richardson
was making earlier in reference to his projects,where
contract's already been signed and a project built,and
now a few months later right next to it here comes
another one same size, basically a rubber stamp,same
t yp e 0 f pro j e c t ,but now there s these addi tional
transmispion costs.
When did it become apparent to the utility that
these transmission costs should be included?What was
the driving factor there?
HEDRICl( COURT REPORTING [phone]
MR.KLINE:Well,certainly -- this is not just
a problem in si ting resources.We have the same problem
with,for example Rule You know,you have a situation
where there is capacity on the system available at the
time developer A comes.And he can attach to the system
and there is no cost that the utility would incur
interconnect that facility.
And I think that's the si tuation that was
faced -- Mr. Richardson was tal king about.At the time,
that developer came and said, here s where I want to hook
there was adequate capacity for that project.up,The
next time -- and you never know whether there s going to
be another one that's going to come into the same
location,same area,and whether or not there will be
capacity at that time.But to some extent,that's just
the fact of being an electric utility.
I hope that's responsive.ll follow up
it's not.
COMMISSIONER KJELLANDER:Let me move on to
another question.And I think it was raised by one
the individuals who made oral arguments today that,you
know, they have these contracts that have been signed,
and now new costs emerge.And Mr. Richardson
suggested -- I believe it was him -- that if,in fact,
the Commi s s i on thought tha t the se t ransmi s s ion co s t s
HEDRICl( COURT REPORTING [phone]
ought to be included, that they should be included
future contract scenarios, and that the existing
contracts ought to be grandfathered in.
What are your general thoughts in relationship
to that specific concept?
MR.KLINE:Well, unfortunately,of course,
grandfathering what we now have in the Twin Falls area,
you d be looking at the $ 60 million investment that we
think ought to be at least initially funded by the folks
who are causing the investment to be made.And I'm not
sure -- the other problem you have with,you know future
contracts being subj ected to this,you just don ' t k~ow
where development is going to occur and how much.
And again the standards of conduct -- standards
of conduct don t let us go out and say there are this
many people that are going to develop in this area,and
this is what their size is and here s another cluster.
That -- whatever information we disclose has to go out on
that oasis.And it's just made communication with
respect to system constraints,et cetera, much more
difficult.There might have been a time when we could
some of that.But it I S more difficult now.
COMMI SS lONER KJELLANDER:Thanks.
CHAIRPERSON SMITH:Commi s s i oner Hansen?
COMMISSIONER HANSEN:Well,just maybe a little
HEDRICl( COURT REPORTING [phone]
bi t of a follow-up on those questions.
I guess I'm kind of curious, when a QF gets an
approval from Idaho Power on a generation contract, are
they aware,then,that they need to go down the hall and
meet with Idaho Power s transmission special group and
find out whether or not they have -- are going to have
any transmission upgrade costs?Are they aware of that?
MR. KLINE:They re aware of that long before
they get a contract.When they first come in and talk
Idaho Power Company about getting a contract,one of the
things that Randy often tells them is you re also golng
to have to go talk to the delivery folks about the cost
of interconnecting your proj ect.You should go do that
right now.And some of them do.Some of them go and
immediate 1 Y tal k to the genera t ion - - to the del i very
folks.A lot of them don
COMMISSIONER HANSEN:So would you say,
Mr.Richardson s case, where he said he had a QF that
they had no transmission upgrade cost,thatcame on
could you verify that they probably went down the hall to
your special department there,transmission department,
and they did a quick analysis for them and said, no,
there won t be any cost?
MR.KLINE:Yeah, there is -- I'm sorry.
COMMISSIONER HANSEN:Excuse me.Go ahead.
HEDRICl( COURT REPORTING [phone]
m sorry.
KLINE:There are certainly places on ourMR.
system where it's fairly easy for the delivery folks to
yes,if you put 10 megawatts at this location in oursay,
system,it does not appear that there will be a
significant problem,and it will get interconnected.
They can do that pretty quickly.And they do.
COMMISSIONER HANSEN:Are you aware,over the
past few years,of any QF that's ever -- that you
negotiated wi th that have not been aware or have not gone
to your special transmission department -- I forget what
you referred to it as.
KLINE:Delivery group.MR.
COMMISSIONER HANSEN:And inquired about whether
there was going to be transmission upgrade costs?
KLINE:They ul timately have to go there.MR.
It's just the sequence of when they do it.There are
some developers who go get the contract first,and then
go decide to see what it will cost to interconnect.
Ultimately,they all have to go there if they re going to
be interconnected.
COMMISSIONER HANSEN:But you wouldn t -- you
not aware of anyone,any QF that didn I t realize they
needed to go and check that out?
KLINE:I can t imagine that that's theMR.
HEDRICl( COURT REPORTING [phone]
case.No,m not aware of that.
COMMISSIONER HANSEN:That's all I have.
CHAIRPERSON SMITH:ll just acknowledge up
front, Mr.Kline,m having difficulty with
understanding the argument.So let me start from the
beginning.
Are you making the distinction between the costs
Initially, whenof the interconnection and the upgrade?
Mr. Miller started his argument, he said we re talking
about these kinds of costs, not these kinds,cause we
believe that interconnection of the project to the system
is the responsibility of the developer,but the upgrade
of the overall transmission system is not.
So do you make that distinction when you
thinking about this?
KLINE:I know that there is a -- that theMR.
has made a definitional distinctionFERC,at least,
between those two processes.
CHAIRPERSON SMITH:Are you ma king tha
di s tinct ion in your advocacy to the Commi s s ion?
KLINE:From the standpoint of customerMR.
m not sure there is a difference.In otherexpense,
I think customers are going to have -- ifwords,
customers have to bear the expense of system upgrades,
is driven by the interconnection of the QF not sure
HEDRICl( COURT REPORTING [phone]
there s any difference to the customer.They see the
dollars whether they come from interconnection or whether
they come from the system upgrades.
CHAIRPERSON SMITH:m really confused now.
MR. KLINE:m sorry.
CHAIRPERSON SMITH:Okay.Well,let me go to
your golden rule.
KLINE:Okay.MR.
CHAIRPERSON SMITH:Customer neutrality.
for example, we miraculously had new resources Insay,
the Powder River Basin and you wanted to buy off of the
market a wholesale market purchase from those resources,
and there s not enough transmission.Who pays for that?
MR. KLINE:If the transmission belongs to
someone else, we would pay -- if there was no
transmission and new construction, new transmission had
to be constructed,is that the hypothetical?
CHAIRPERSON SMITH:That's fine.Go wi th that.
KLINE:Okay.Depending on who constructsMR.
it,they would charge --
CHAIRPERSON SMITH:No, no,You want tono.
make a wholesale purchase from this resource.
KLINE:Okay.MR.
CHAIRPERSON SMITH:How do you get the
transmission?
HEDRICl( COURT REPORTING [phone]
MR.KLINE:If we had -- if you could buy
from somebody else, we d pay them a FERC-approved rate
for that transmission.
CHAIRPERSON SMITH:Off of their oats
(phonetic) ?
MR. KLINE:Right.If we had to build the
transmission to bring it to us then Idaho Power Company
shareholders would finance the cost of that transmission
and the cost of that transmission would ultimately be
recovered over a 30-year period from the customers.
CHAIRPERSON SMITH:Okay.So say the company
needed to build,or decided it needed to build a
I don t know is its name Yvander Andrewsresource.
(phonetic) ?And it needed transmission.How do you get
the transmission for that?
MR.KLINE:Okay.It would be constructed.How
would we get it?
CHAIRPERSON SMITH:Yeah.So then,it would be
the same thing?
MR.KLINE:It would be the same thing.
CHAI RPERSON SMITH:QF?How -- you need
transmission to accept the energy from a QF project where
you have a contract.How do you get that transmission?
MR.KLINE:You construct the transmission
facilities and you -- the -- if the QF was the one that
HEDRICl( COURT REPORTING [phone]
required that the transmission be constructed
CHAIRPERSON SMITH:Well,you needed the
power -- I'm trying to figure out how neutrality happens.
If I wanted to be neutral , wouldn I say,then
that the shareholders lent the expense and it gets paid
back over the life -- whatever the life that's assigned.
MR.KLINE:If those costs were covered in the
avoided cost rates, there s a couple of ways you can
do it.
CHAIRPERSON SMITH:Okay.This is my problem.
It's getting too mixed up here.
All right.So let's talk about avoided cost
rates.When you gave your example of how we have our
surrogate resource and we go through ordeal,sort of,
hearings to set the rate called the avoided cost rate
couldn t tell if you were trying to make the point that,
when you set the avoided cost rate the transmission is
included already in that , or if you were trying to make
the point that it's not.I couldn t --
MR.KLINE:m sorry,it should be included.
certainly know that the QF developers have always argued
that the cost of the surrogate avoided resource should
include transmission expense.And I think they should.
CHAIRPERSON SMITH:I f the surrogate avoided
resource already includes the transmission expense, why
HEDRICl( COURT REPORTING [phone]
would we ask them to pay again?
MR.If it did, we wouldnKLINE:In this
particular instance
CHAI RPERSON SMITH:So are you telling me that
the rate we ve set doesn t include that?
MR.KLINE:That's correct.
CHAIRPERSON SMITH:okay.
MR.KLINE:Correct.Surrogate avoided resource
does not contain transmission expense.
CHAIRPERSON SMITH:All right.l daho Powe r
files with us an integrated resource plan,which in my
mind,kind of projects what you think your future loads
might be,and is a plan with a stack of resources of how
you re going to get power to the customers who need it.
Is that concept that I repeated correct?
MR.KLINE:I believe it is.
CHAIRPERSON SMITH:Okay.So didn t Idaho
Power s IRP include wind?
MR.KLINE:It does.
CHAIRPERSON SMITH:And
--
but I don t know how
much.200 megawatts?
MR.KLINE:I don t either m sorry.
CHAIRPERSON SMITH:And so isn t this in your
stack of how you re planning to meet your vote?
MR.KLINE:It is.
HEDRICl( COURT REPORTING [phone]
CHAIRPERSON SMITH:So acquiring these -- the
output of these projects is something that you planned
for.And you told us you were planning for cause you
needed the energy.
MR.KLINE:Yes.
CHAIRPERSON SMITH:And are these wind projects
in the 2006 IRP that was just filed?
MR.They are.They are included for theKLINE:
ones that the contracts have been signed.They are
included as a resource that is already in the stack.
CHAIRPERSON SMITH:Okay.
KLINE:Wha t we re coming to you in the I RPMR.
with is here is additional wind that we think could
cost-effective.But we won t know that until we have
gone out, done the request for proposal,and brought this
to you for your review and approval.
CHAIRPERSON SMITH:I thinkSo also,in your
2006 IRP,in your stack is the plant that I think is
Yvander Andrews.
MR.KLINE:Correct.
CHAIRPERSON SMITH:So --
MR. KLINE:It's my understanding that Yvander
Andrews is in -- is not assumed to be there a resource.
It's not an incremental resource.
CHAIRPERSON SMITH:Exactly.And how did you
HEDRICl( COURT REPORTING [phone]
what assumptions were made with regard to the
transmission?Do you have any idea?
MR.KLINE:I don
CHAIRPERSON SMITH:Now , with regard to the
preferential position for the QFs and the company
concern that it might have some exposure there,I thought
I understood that FERC had addressed this in its orders
for a distinguishing between merchant plants and QFs.
Is your understanding different from that?
MR.KLINE:No.There s no question that the
FERC has said that the cost of interconnection for QFs
for resources in which all of the power that's delivered
to the -- will be delivered to the utility is within the
purview of the state commissions.My concern is that if
i n f act, Q F s, per t his Co mm i s s ion s 0 r d e r ,don t have to
make any contributions to system upgrades when wholesale
merchants are required to make that contribution there
is a FERC comparabili ty concern.And perhaps the
Commission s order saying this is the way we want to do
it will be a sufficient defense.I don t --I hope so.
m hopeful that's how it turns out.
CHAIRPERSON SMITH:Do you see any difference
all between a QF proj ect selling all of its energy to the
utility and a merchant who is building in order to sell
somewhere else and be in the market?
HEDRICl( COURT REPORTING [phone]
I don t see -- in my mind,I thinkMR. KLINE:
I hope FERC sees it the same way.they re the same.
So I guess the only otherCHAIRPERSON SMITH:
question I have, with regard to your statement about the
folks who cause the investment to be made should pay it,
if the power is called for in the companyyou know
integrated resource plan , then could you logically
conclude that the customers that need the energy are the
ones that are causing the investment?
I guess I see a difference between MR. KLINE:
resource that's included in the integrated resource plan
that we bring to this Commission and we say this ' is
resource that we want a certificate for and we ve got the
cost of the generation and we ve got the cost of
interconnecting that facility and we want you to give us
an order authorizing us to move forward with the
construction of that plant and to place the costs of that
I think that's different than whenplant into our rates,
the QF comes to the utili ty and says,you will buy my
you will buy it at this location.power,
This Commission doesn t review that.There is
no chance for this Commission to say,you know,that'
not the best place to put it,or that's not the best
price to do it,and you have an opportuni ty to review
I think there s a difference.And I think whenthat.
HEDRICl( COURT REPORTING [phone]
the QF has the ability to tender the power to the utility
and it's a take-it-or-leave-it basis,that this
C 0 mm i s s ion has no a b i 1 i t Y to r e vie w t hat de cis ion,
think that's different.
CHAIRPERSON SMITH:Okay.Thank you.
Any other?
Okay.Next we will go to Pacificorp.
BROCKBANK:Thank you, Madam Chair andMR.
Commissioners.
I first want to thank the Commission.
recognize that this is first and foremost a dispute
between Cassia Wind and Idaho Power.We appreciate the
Commission s recognition this has broad ramifications and
can affect all the utilities in this state.
appreciate the ability to be here and participate.
Cassia Wind started off by saying what their
proposal was not.And I would like to start off by
saying,from my perspective, what our proposal is not as
well.And it is not an anti-wind proposal.It is not
something that we don t like wind; we want to thwart wind
at any term.It is a matter of fundamental fairness and
a matter of being consistent wi th the laws.
I want to point out,to back up what I said, as
the Commi s s ion knows, Mid-Amer i can Energy recent 1 y
purchased Pacificorp.And as one of those transaction
HEDRICl( COURT REPORTING [phone]
commi tmen t s, Mid-Amer i can Energy s commi t ted to put on
line 1400 megawatts of renewable resources in the next
several years,and 400 megawatts of wind power by the end
And wi thin the last year,Pacificorp has eitherof 2007.
purchased from QFs or purchased wind proj ects totalling
So this is not about not likingover 400 megawatts.
wind.Pacificorp recognizes the importance that
balanced portfolio plays.
This isNow, back to what Cassia Wind said.
not -- they said this is not a subsidy for them.And
years ago, while discussing a fun little feathered
friend, my father taught me that,if it looks like a
subsidy,if it smells like a subsidy,if it acts like a
subsidy,or it's veryit probably is either a subsidy,
similar.We believe that this is right on a subsidy
benefi ting QF developers at the expense of , A
and non-QF developers.ratepayers,
We also believe that the appropriate forum -- if
it is state policy ' to encourage the development of
renewable resources or wind resources,the appropriate
forum for that,for some kind of a subsidy or for some
kind of a tax incentive is the legislature,not the
Commission.
Utilities are very good at implementing policy,
but we don t make policy.We do whatever you tell us.
HEDRICl( COURT REPORTING [phone]
We do whatever the legislature tells us.And certainly,
hat eve r the Co mm i s s ion tell s us to do, we will
implement,But weand we will implement it very well.
believe that this is more an appropriate question for the
legislature,if that is the idea here of facilitating the
development of these proj ects.
m going to gloss over some of the arguments
But I justbecause they ve been made by Idaho Power.
want to re-emphasize that our position is that the
fundamental purpose of PURPA is to maintain the ratepayer
And we believe that, by requiringneutrali ty standard.
it is athe ratepayers to pay for these system upgrades,
violation of the FERC rules that state that utilities
cannot pay more than the avoided costs for its purchases
from qualifying facilities.If utility incurs costs by
purchasing from a QF that are in excess of the costs that
a utili ty and its ratepayers would incur by virt ue of
obtaining that resource from another source,the QF must
pay for those costs according to the FERC rules.
Pacificorp follows the FERC interconnection
process and the QF -- and the including the queuing
process for all transmission interconnection requests,
even though it's only required to do so for -- as has
been discussed earlier for the non-QF interconnections.
We believe that this uniform approach , which -- with all
HEDRICl( COURT REPORTING [phone]
interconnection -- interconnection requests ensures
nondiscriminatory access to the grid.
We also believe that it promotes a safe and
re 1 iable t ransmi ss ion system because it treat s all
parties equally -- all parties wishing to interconnect
equally.We also feel strongly that QFs should be
required to adhere to these -- or these processes or
similar processes,otherwise,they have an unfair
advantage.
I believe -- let I s see here.Cassia Wind stated
that,referring to some of Pacificorp s comments,as well
referencing the 11 wind projects,that by adhering or
accepting Cassia Wind's proposal that would reduce
barriers to entry.And he mentioned that it was, maybe,
an unintended consequence of Pacificorp mentioning that
all 11 proj ects,none of them actually came to frui tion.
On the contrary,that's precisely the point we
were trying to make.This is a very costly process.And
the point that we re trying to make is who should bear
This -- the role of this proceeding todaythose costs.
is not to address whether there are barriers to entry or
not barriers to entry.The purpose is to allocate the
costs where they rightfully belong.
We believe that by accepting Cassia s proposal,
wha t the Commi s s ion would be doing would be favor ing
HEDRICl( COURT REPORTING [phone]
discriminating against one class of developer in favor of
another class of developer.Independent power producers
that are not QFs that are required to follow the FERC
process would not -- would have to pay for the system
upgrade costs where the QFs would not,if developers are
not responsible for this type of interconnection costs.
We also want to point out the issue of the
siting issue.We add res sed i t in 0 u r c 0 mm e n t s .And it'
important to mention here as well that if the qualifying
facilities have carte blanche,essentially,to have the
ratepayers pay for the system upgrade costs,they will
have no incentive to site appropriately where the
location would be closer to a transmission facility or it
would be able to minimize the transmission costs.
I have been involved in -- and I think it'
analogous,one of the number one issues that developers
look at in siting,for example,a cogeneration or
gas-fired plant.Pacificorp has recently built two
combined cycle gas-fired plants in Utah in the last
couple of years.And if you re not near a transmission
if it doesn t make sense from a transmissionsystem,
perspecti ve,you don t build there,because the costs
bringing up the system so that it is close -- or that the
project can be absorbed onto the transmission system,the
costs are prohibitive.
HEDRICl( COURT REPORTING [phone]
retail customers whichAs a consequence,
shoulder the increase in costs for these transmission
infrastructure and utilities resources that would
normally be utilized in system planning and investment
would be diverted to enable siting and suboptimal
locations from a system perspecti ve.
And I just want to reiterate the example that we
made in our comments, ,that it was approximately -- it was
over $500 million in system upgrades for five wind
projects that had approached the company and made formal
interconnection requests.And none of those projects
ever went forward because of these costs.It is a
fundamental policy decision as to whether -- if the state
wants to have its ratepayers pay for these costs,
believe that the legislature should say so.
I want to just point out Cassia Wind has John
Deere here with it.And Pacificorp has entered into a
20 megawatt contract with a qualifying facility in Utah
last July,and John Deere actually filed testimony on
behalf of this proj ect.And for whatever reason
don t fully understand why,but John Deere and this
qualifying facili ty have parted ways.And from what we
understand,John Deere is no longer involved with this
project.The reason the project is stating for the
departure,a t 1 e a s t in 1 e g i s 1 a t i v e co mm i t tee h ear i n g s
HEDRICl( COURT REPORTING [phone]
the Utah legislature,on the question of whether the
State of Utah should enact tax credits for its renewable
resources,this QF said that John Deere left because Utah
is not a wind-friendly state,and it doesn t have any
kind of tax incentives for wind developers.
Again it accentuates -- the issue here is not
whether one state or another is a wind-friendly state.
It accentuates the point where should this subsidy
question be tackled,at the Co mm i s ion,on the shoulders
of the ratepayers or at the legislature.And we believe
it should be tackled at the legislature.
I want to just -- I want to -- this theme has
come up from several of the questions and to Mr. Kline
relating to when these costs are made known to the QF,
these costs of upgrades and such.
I believe it was Mr. Miller tha t said we should
not saddle the wind developers or any other developers
with these types of costs.The fact is,the other
developers,non-QF developers are saddled wi th those
That's just the way the FERC rules work.costs.They
are saddled with them.I think what he probably meant to
say is we should not saddle QF developers with these
types of costs.
Exergy said that "we feel sandbagged.We feel
sandbagged.My goodness.Let me explain a little bit of
HEDRICl( COURT REPORTING [phone]
how that works.I want to echo Mr.Kline s comments to
the T on how -- what my experience is in dealing with QF
developers and the process of leading up to a
interconnection request and getting a power purchase
particularly with wind developers.agreement And they
are focused like a laser on getting the power purchase
agreement,because without the power purchase agreement,
they can t get financing.And I don t faul t them for
that.That is the focus,get a power purchase agreement.
You can take that agreement,and it's 1 i ke a
negotiable instrument.You can go out and get financing
with it.What happens in our experience,is consistent
with Idaho Power is that they focus so much -- and I'
generalizing here.I recognize that there are nuances
and there are exceptions,et cetera.
But what happens
--
and it's not just the wind
developers,but it's other QFs as well
--
is they will
take a PPA and then as an afterthought,they ll say,
huh,ve got interconnection process we ve got to
adhere to as well.
And I wan t to r em i n d the Co mm i s s ion as Idaho
Power did,the utility is governed by a standard of
conduct.The merchant function cannot address
transmission issues while negotiating a power purchase
agreement.
HEDRICl( COURT REPORTING [phone]
In Pacificorp s power purchase agreements,
specify,we call out,look transmission -- you need to
take care of your transmission issues with the
transmission function.And what happens
--
and our
experience has shown this as well
--
is that they
underestimate,frequently,the time that is required for
the transmission function and sometimes the expense
well.
So to say that all of the transmission issues
should be addressed up front,and the costs of
transmission should be addressed up front when
negotiating the power purchase agreement,the QF is in
the driver s seat when it comes to making its formal
interconnection request.
And just one or two more comments.
Mr.Richardson also lamented about how -- the sad state
of the western power grid.I would just submi t to the
Commi s s ion that a QF doc ket is probably not the mos
appropriate way to fix the western power grid.There are
other forms that are meant to -- that would be more
appropriate in a bilateral power purchase agreement,or a
one contract,one proj ect becoming on line.
Lastly,I want to just point out something that
Cassia Wind stated.They stated under the Idaho Power
Refund Proposal,or under Cassia I s proposal ratepayers
HEDRICl( COURT REPORTING [phone]
will ultimately pay for the upgrade costs.Pacificorp
recognizes Idaho Power s attempt to come to some kind of
a compromise.And in doing so,they talked about the
refund proposal.Pacificorp is opposed to even that.
Pacificorp believes ratepayers wouldunder our proposal
not shoulder the system upgrade costs.That would be
cost that the QFs would be required to shoulder just like
any other independent power producer is required to do
that.
Pacificorp requests that the Commission not
adopt Cassia s proposal because it violates the ratepayer
neutrali ty standard.It unfairly favors one kind of
proj ect over another.And frankly,these kinds of
incentive or subsidy decisions are more appropriately
made at the legislature rather than before this
Commi s s ion.
And I'd be happy to answer any questions if the
commi s s ioner s have any.
Thank you.
CHAIRPERSON SMITH:Questions from the
Commi s s lon?
COMMISSIONER HANSEN:No.
COMMISSIONER KJELLANDER:No.
CHAIRPERSON SMITH:Nor I.
MR.BROCKBANK:Thank you.
HEDRICl( COURT REPORTING [phone]
CHAI RPERSON SMITH:Mr.Strong?
STRONG:Thank you, Madam Chair.MR.
As the attorney for Pacificorp just indicated,
lot of my talking points have already been covered by
others.So I'm going to confine myself to two or three
points, perhaps,of interest.
Numbe r one,d like us to focus,if you will
for a moment on larger than 10 megawatt facilities that
are not entitled to the published avoided cost rates and
have to go through some negotiation process with the
utility.
With Avista,that process would focus around and
evolve out of the IRP planning process.And in that
consideration of overall IRP costs,there would not just
be generation the re would be as sociated t ransmi s s ion
costs as well as generation.And that would be used as a
basis for determining a negotiated rate, probably, with a
larger project,using the published rates as a starting
point.
Now , what is different about the published
avoided cost rates?The published avoided cost rates
reflect surrogate generating resource, which is the
combined cycle combustion turbine,and which was alluded
to before in the history of determining avoided costs.
When a coal plant was the surrogate resource,it was the
HEDRICl( COURT REPORTING [phone]
Powder River coal plant.And there was a transmission
component associated with that plant and built into that
rate.
When this Commission transitioned to a combined
cycle combustion turbine the transmission costs did not
show up,and presumably,because combined cycle plants
could be located -- were not geographically limited to
particular location,such as Powder River,but could be
located more optimally within the utilities system.
The combined cycle is still the least cost
choice of this Commission for published rates.It'
close to being the least cost resource in Avista ' s IRP
and -- although,it changes,depending upon how gas
prices are estimated to escalate or de-escalate in the
future.
What that means is that the transmission
component assumes -- well,the absence of the
transmission component assumes that the CCCT is being
located optimally within the resource system of
Avista Corporation with respect to load.If a generating
resource is being located not optimally within the
utility system,then that generates additional
transmission costs.Those are not appropriate to pass on
to the customer not so lon g as t his Co mm i s s ion i s us in g
the combined cycle combustion turbine as its surrogate
HEDRICl( COURT REPORTING [phone]
resource.
It is,perhaps,an issue of theoretical
cons i s tency with the mode 1 which thi s Commi s s ion ha
adopted for determining its published avoided cost,which
is part of the issue here,and how you go about
determining ratepayer indifference.And indeed,there is
some connection with reali ty,because the studyI think,
Richardson alluded to suggested that one reasonthat Mr.
transmission upgrades had not occurred in the region is
because utilities had gone to a combined cycle combustion
turbine mode.And that assumes that there are relatively
few transmissions costs.
Now,the difficulty in sort of making this
transition from a CCCT model for the published avoided
rates and IRP model for the nonpublished rates is that
the IRP model is sort of an integrated method for
analyzing utility costs.And we have,with the published
avoided cost rates,if you will,kind of a,for lack of a
disintegrated model,because it doesnbetter word,
integrate in transmission costs.
And the question the Commission has is what are
you going to do with those transmission costs?Who I
going to pay those transmission costs?The problem
Avista is having dealing with this issue is that even
transmission acquisitions themselves are evaluated using
HEDRICl( COURT REPORTING [phone]
an IRP methodology.And when the utility is determining
whether it's going to purchase or require transmission to
a particular resource area,it's going to evaluate that
investment decision against other generational
alternatives.Is it cheaper to build the generation
here,or is it
--
or is it cheaper to
--
with a
particular generating resource,which can be located at
location A -- or is it cheaper to build a longer
transmission system and bring in the resource at a more
distant location.
Avista Corporation,like the other utilities,
does have wind in its IRP stack.But the wind is priced
assuming that transmission would be required to bring
to the load centers,because,frankly,a lot of the wind
generation is remote from Avista service area.So if you
were to look at the price that Avista would realistically
pay for a wind project,that's going to be quite a bit
lower than the published avoided cost rates.
But it's the combination of the transmission and
the resource cost which will be evaluated in the IRP.
Absent a methodology which allows the utility and Youth
Commi s s ion to sort 0 f in teg rate the se ind cos t s into the
surrogate avoided resource methodology,the issue is who
picks up those extra transmission costs.And wha t we
have heard today is that it should not be the customer.
HEDRICl( COURT REPORTING [phone]
Now this takes us back to what Avista ' s
or ig inal recommendations were in its publ i shed comment s,
w h i c h was t hat
- -
I' 11 s u mm a r i z e t h em ,if I ma in two
points.Point one is that one size does not necessarily
fit all.And we are recommending the Commis s ion not
adopt a procedure or a process,in the context of this
case,which would bind all the utili ties.
But number two,re recommending a process
that allows the utility to deal with the generator
determining how those transmission costs should be
allocated.And let the utility,using an IRP-type
methodology,determine what the least cost method is for
integrating the QF into the utility resource system and
one that meets the gold standard of retaining ratepayer
neutrality.
And we gave the example -- although it's not,
perhaps,the best example,but it's the only one we have
at this point.We haven t had the same numbers of
proj ects in our service terri tory that the other
utilities have.The most recent negotiated rate which
was submi tted to this Commission and approved by this
Commission involved a co-gen plant located in Montana
where the output was delivered to a delivery point in
Idaho and,therefore,the project qualified for Idaho
rates.
HEDRICl( COURT REPORTING [phone]
But the line which the proj ect proposed to
deliver into frankly,probably did not have the degree
of reliability that the utility would like to have to
integrate that sort of generation into its resource
center -- or its load center,rather.And by process of
negotiation,the utility was able to include in the
negotiated arrangements alternative transmission
and alternative delivery points,arrangements,which,
the context of all the other variables,solved the
transmission issue from Avista ' s standpoint,and did not
require us to bring to the Commission the issue of who
was going to pay to upgrade if that was required,that
Avista line of which is in north Idaho.That seems,
us,to be a far more productive and helpful route to take
in dealing wi th these issues.
Now I recognize the downside of that approach
is that it leaves open the possibility of more disputes
and more contentious issues,and the possibility that
developer would not be pleased with what Avista was
proposing to them.But it also leaves open the
pos s ibi 1 i t Y all uded to in Exergy ' s comment s about
dispatch processes,contract schemes and so forth, which
might alleviate transmission constraints.
m open to any questions you have.
CHAIRPERSON SMITH:Let's see if there are any.
HEDRICl( COURT REPORTING [phone]
Commissioner Hansen?
COMMISSIONER HANSEN:I don t have any.
COMMISSIONER KJELLANDER:No.
CHAIRPERSON SMITH:Nor I.
Mr. Woodbury?
MR. WOODBURY:Thank you, Madam Chair,
Commissioners.
Being able to speak last provides me an
opportunity,I guess,to summarize the points that
think are relevant,and certainly to present staff'
position.
Cassia is a perfect QF with the
Commission-approved firm energy sales agreement.Idaho
Power is,under PURPA and FERC rules 292.293 (a) ,required
to purchase.This was a mandatory obligation that they
were faced with.The purchase rate is the utilities
avoided cost or incremental cost,the cost to the utility
of electric energy or capacity, which , but for the
purchase from the QF utility, would generate or purchase
from another source.
PURPA prohibits any rule requiring a utility to
purchase energy from a QF at a rate that exceeds the
incremental cost to the electric utility of alternative
electric energy.The rates per purchases are to be just
and reasonable to the electric consumer and in the public
HEDRICl( COURT REPORTING [phone]
interests.
The principle of customer neutrality.It is
undisputed that under current avoided cost methodology
for published avoided cost rates,the rate does not
include a transmission component.Published avoided cost
rate is not based on the company s integrated resource
plan.It is based on a surrogate avoided resource,
combined cycle combustion turbine assumed to be located
in the company s load area.It is worth noting that the
Idaho Power s proposal to build such a plant was
abandoned.That was the Middleton plant.
It should also be acknowledged that -- with two
examples,that the proposed company generation
projects -- proposed company generation projects include
both plant costs and transmission costs.And I ci te the
Yvander Andrews plant and the proposed Shoshone Falls
upgrade.It should also be acknowledged that marked
purchases include a transmission or wheeling component.
No party challenge s the Commi s s ion
jurisdiction to determine a threshold issue presented by
Cassia.FERC itself in the western Massachusetts case,
acknowledges the Commission s jurisdiction in this type
of matter.FERC states,when a utility purchases a QF'
total output,the relevant state authority,this
Commission,exercises jurisdiction over the
HEDRICl( COURT REPORTING [phone]
interconnection and the allocation of interconnection
under PURPA and FERC rule 292.303(c)costs.Idaho Power
is required to interconnect a QF.That also is a
mandatory obligation.
The threshold issue presented in this case is
whether a QF requesting interconnection has
responsibility to share in the costs of a consequential,
required and related upgrade in transmission facilities
to meet Western Energy Coordinating Council reliability
standards and N-l contingency plan and condi tions.
The que st ion be f ore the Commi s s ion is is thi s --
the responsibility zero or greater than zero.The
underlying transmission study is not at issue.Idaho
Power s contention that but for the request of Cassia and
others in the transmission queue,no upgrade to meet N-
transmission or contingency planning conditions would be
And no cost would be incurred is not at issue.required.
It is Cassia s contention that QFs have
not the highway.responsibility only for the driveway,
is inconsistent with costThis position,staff contends,
causation principles and could result in inefficient and
costly expansion of the transmission system,a upgrade
estimated in this instance to be approximately
$60 million.
Who is to bear this risk if not Cassia and
HEDRICl( COURT REPORTING [phone]
other cost-causers?Cassia suggests that the cost should
be rolled into Idaho Power plan s rates and recovered
from rates and charges from native load and other
transmission customers.Cassia s proposal,if adopted
could establish an affirmative obligation to upgrade
transmission facilities at the request of QFs situated
areas geographically remote from load centers,shifting
large costs to consumers with little offsetting benefit.
Thi s Commi s s ion doe s not di rect the company when
and where to make transmission investment.we,Yet,
we adopt Cas s ia 's recommenda ti on,would provide that
power to a QF.
Exergy states that it lS important to note that
we are talking about transmission system upgrades and not
the costs of interconnection.FERC addresses
interconnection costs in 292.306,speaking of obligation
and the second section on reimbursement.to pay,FERC
defines interconnection costs in 292.101 (b) 7
definition that includes transmission and reliability
costs.
Exergy admits that interconnection costs are the
responsibility of the generator requesting the
interconnection.Unclear as to whether Exergy disputes
the Commission s jurisdiction over the transmission
upgrade cost allocation issue.If that is Exergy
HEDRICl( COURT REPORTING [phone]
position,which is rather straightforward,then its
argument has obscured it.
If it is Exergy s and Cassia s contention that
FERC's federal power act transmission cost allocation
policy must or should be followed by states,then why
carve out an exception for state commission jurisdiction
and authori ty.The delegation of authority would be
meaningless.Why not continue to assert its powers of
total federal resumption.Instead,just asNo.
individual states were allowed to fashion different
avoided cost methodologies,it must be allowed -- it must
be to allow states to fashion equitable cost recovery
methods.
Cassia seeks to limit its cost responsibility to
the driveway,refusing to accept responsibility for the
direct resul ts of its interconnect requests and the
related compromise of N-1 contingency transmission
planning conditions.But for the request of Cassia and
others,this $60 million transmission upgrade cost would
not be incurred.
Staff does not believe that Cassia has no
responsibili ty to share in this cost.Nor do we believe
that the responsibility of the company and its customers
is zero.This is not a voluntary purchase.Is this a
cost that ratepayers must absorb?If this is a subsidy,
HEDRICl( COURT REPORTING [phone]
then ratepayer neutrality is compromised.
Staff believes Cassia s responsibili ty is
greater than zero.It is in the public interest
--
is it
in the public interest to add renewable generation to
diversify a utility s resource mix?Certainly.Question
is at what cost.Certainly there must be a limi t.
This case,it's been indicated is not nove
would disagree.I would say this is a case of first
impression.It is not that there isn t an established
precedent to not assign highway upgrade costs to QFs.
Ra ther that the requirement of upgrade has not presented
itself.
Thank you.
CHAIRPERSON SMITH:Any questions for
Mr. Woodbury?
COMMISSIONER HANSEN:No.
COMMI S S lONER KJELLANDER:No.
CHAIRPERSON SMITH:Okay.It's my intention to
continue until we finish.
Mr.Ri chardson , do you have any repl y comment s
you d like to make?
MR. RI CHARDSON:Thank you, Madam Chairman.
do.
Referencing Mr. Kline s golden rule analogy and
Mr.Brockbank's fundamental purpose of PURPA is to
HEDRICl( COURT REPORTING [phone]
maintain ratepayer neutrality standard.That is not the
purpose.Pull out any federal discussion discussing
PURPA.Boiler plate introduction reads something like
this.In an act of PURPA , Congress sought to overcome
traditional electric utilities reluctance to purchase
power from nonelectric generation facilities and remove
the financial burden from state and regulation on
nonfacili ties.The fundamental purpose of PURPA is to
ensure development of QFs.
One of the purposes of PURPA is neutrality.
Let's not put the cart before the horse.Relative to
resource location resource location is dictated by the
resource.The hydroelectric utilities should know that
better than anyone.Shoshone Falls will be located
Shoshone Falls.Milner Dam will be located at Milner
Dam.Both of those are facilities Idaho has passed
upgrade and are located in the Twin Falls area.They
the cause of the upgrade, not us.
This is also the first time that Idaho Power has
ever asked for us to pay for transmission upgrades.The
generation interconnection system impact study report is
dated June 8th 2006.And it's a report for up to
305 megawatts of new generation.re not asking for
305 megawatts of generation to be put on Idaho Power
system.It's gotten back to that straw that breaks the
HEDRICl( COURT REPORTING [phone]
camel's back,the discriminatory comment who s at faul
I think Commi s s i oner Kj llande r 's que st ion
earlier about should we go back and require everyone to
Pursuant to Schedule 72 every single QF shouldpay.
Well,you can t go back and undo what's done,butpay.
it certainly highlights the point that selecting some and
requiring them to pay while not requiring others to pay
is discriminatory.It is true the current avoided cost
rates do not include transmission costs.They used to
back 25 years ago when we implemented PURPA wi th the
Powder River Basin coal-powered fire plants,that KH
transmission rate.
So if transmission cost rates were included
the avoided cost rates,the avoided cost rates would be
higher.As toAnd I think that's an important point.
the FERC compatibility requirements,I think everyone in
the room agrees that we re not talking about merchant
plants and tha t thi s Commi s s ion has the excl us i ve and
sole jurisdiction to answer the issue posed by Cassia.
And if you ll bear with me,I have an analogy.
When I'm the last person to get on the airplane and I'
bumped because the airplane is full the airline doesn
you re out of luck.They seek volunteers say,
economically decide who gets that last seat.And then
they socialize the cost of whoever volunteers to be
HEDRICl( COURT REPORTING [phone]
bumped.That's sort of like what we re asking the
Commission to do here.
And as far as the Western Governor s Association
policy on gas-fired CT' s located at load center I think
the reason I was citing that to the Commission is it
indicates a policy direction that the Western Area
Governor s would like to see transmission development go.
It's not necessarily to direct this Commission
deciding on contract issue.But the policy direction
landed on by the Western Governor s Association is that
we need more transmission.And doing something to
discourage the development of more transmission as a
matter of policy should be discouraged.
And finally,relative to Avista ' s saying let us
work it out wi th the utility -- wi th the QFs,I think
what we need is a standard,a bright lighting standard.
The case Mr.Strong referred to,I represented the QF
And we had to bring a complaintdeveloper in that case.
before you to make
--
to get negotiations off square one.
So I don t think relying,on wha t thenecessarily,
federal courts have called the traditional electric
utilities reluctance is enough for you to fulfill your
obligation to actually encourage development of QFs.
Thank you.
Richardson.Than k you,CHAIRPERSON SMITH:Mr.
HEDRICl( COURT REPORTING [phone]
Questions for Mr. Richardson?
COMMISSIONER HANSEN:No.
COMMISSIONER KJELLANDER:No.
CHAIRPERSON SMITH:Mr. Woodbury,I did have a
question for you,and I forgot to ask this.So let me go
back.
It seemed to me that your suggestion that the
Commi s s ion needs to f ashi on the se equi table cost
allocation methods doesn t acknowledge the time
sensitivity that was previously brought from the
Cassia Wind people.
So can you see that being a lengthy process?
you see that as something you just create out of our
heads based on our extreme expertise in these matters?
MR. WOODBURY:I recognize that,the time issues
for Cassia.This is -- it's not related to threshold
issue.And I'm not aware of how this can best be
addressed.And I think that an early meeting of
interested parties could, perhaps,determine whether or
not there is -- an interim solution is viable or whether
there is out of pop- -- say,a reasonable method for
of allocation.I agree with Mr. Miller that sometimes
these things are protracted, but I don t think that
reason itself is a reason to adopt their recommendation
and not address what is otherwise a hard question.
HEDRICl( COURT REPORTING [phone]
CHAI RPERSON SMI TH:Thank you.
COMMI S S lONER KJELLAN DER:I have a question for
Richardson.Mr.
Mr.Richardson,in your comments -- and maybe
misinterpreted what you said.d just like to make sure
that I'm clear on it.
You reference some other Idaho Power projects,
believe,in the Twin Falls area that you seem to think
are the real drivers for the transmission upgrade.
that what you were saying is that you re being asked to
subsidize those specific transmission upgrade projects,
hydro facilities being upgraded?Is that what you were
saying?
MR.RICHARDSON:Mr.President,it's kind of
like color-coded kilowatts of power guided upgrades.
Shoshone came on line and these transmission requirements
are going to be required.If we come on line,these
transmission upgrades are going to be required.If we
don t come on line,if Idaho Power is successful and says
re obligated to pay for these upgrades,Cassia Wind I
going away,and most of Exergy ' s proj ects are going away.
And the ratepayers will still pay for these upgrades
because the Milner Dam and Shoshone Falls upgrades are --
FERC is realizing,seeing obligations that Idaho Power
has no choice but to do or else risk losing the license.
HEDRICl( COURT REPORTING [phone]
COMMISS lONER KJELLANDER:So Mr.Richardson
these upgrades,then,for the hydro facilities,are you
saying that there wouldn t need -- let's say that your
projects didn I t exist today,that they came on after
Milner Dam and the other facility were relicensed,and
the upgrades for those proj ects had occurred.Then let'
in the timing,that your proj ect showed up.say,
Would there not need to be any kind of
transmission upgrades for the wind projects,let's say,
15 years down the road if they were to show up?
MR.RICHARDSON:I can t answer that question
without being an electrical transmission engineer.
know that my client connected to Idaho Power system in
the area a year ago wi th no transmission charges.And
now this year we re asked to pay transmission charges.
It's very uneven and it's very unpredictable.And that'
why I said who determines transmission costs per
integrated resource.And the Twin Falls area,frankly,
is not a remote part of Idaho Power s system.It'
probably the second largest load sync on their system.
It's not like we re building these wind proj ects in
Timbuktu.
COMMISSIONER KJELLANDER:So -- and I'm not
trying to put words in your mouth.What you re telling
me is you can t tell me today that some upgrades
HEDRICl( COURT REPORTING [phone]
transmission for wind wouldn t still be required,
wouldn I t still be necessary?
MR.RICHARDSON:That's true.But I can tell
you today that transmission upgrades will be required for
accommoda ted Idaho Power s hydro upgrades.
COMMISSIONER KJELLANDER:Okay.Thank you.
CHAIRPERSON SMITH:Mr. Miller?
MR. MILLER:Thank you, Madam Chairman.I '11 be
very brief and just touch on a couple of points that I
think might bear re-emphasizing.
First, with respect to the staff point that they
somehow believe that staff's -- or that Cassia
responsibility is not zero, but that Idaho Power
responsibility is not zero,or ratepayer s responsibility
i s not z e ro e i the r, Co mm i s s ion e r S m i t h as ked a
significant question of what would be involved in the
terms -- in terms of time in trying to go further wi
that point.And I have previously indicated John Deere
lack of appeti te for further efforts along those lines.
But even more fundamentally,and I don t mean
this in any way critical to staff , but our case was filed
in early September.It's been pending for 90 days,
least.If staff had some proposal more than some
intuitive notion that the costs are not zero and should
somehow in some magical way, be allocated one certainly
HEDRICl( COURT REPORTING [phone]
thinks that proposal could have been made before today.
And would not need embark upon some new drawnout
procedure figure out exactly what proposal that might
be.So we re not keen about going down that path.
A second important point that I think the
Commission should keep in mind is there s been discussion
about the difference in treatment between QFs and
merchants,and somehow that our proposal creates
unfair advantage for merchant plants.And in
consequence,some of the utilities seem to be saying that
upgrade costs should be directly allocated to the QFs as
a contribution not as an advance wi th refunds.
It's important to note that,in the FERC
context,the QF plans advance transmission upgrade costs,
but they are refunded through transmission credits
against the transmission rate that the merchant would pay
for the transmission service.So under the FERC
approach,those costs are advanced,but then refunded,
and end up in rate base.A proposal to require QFs to
contribute those plant costs without refund would have
the opposite effect.It would discriminate against QFs.
So the question really is do you require a QF
advance the cost subj ect to some refund mechanism or --
and then include it in rates or do you require the
utility to finance it in the normal way,include it
HEDRICl( COURT REPORTING [phone]
rates when it's shown to be prudent and useful?So I do
think it's important for the Commission to bear clearly
in mind how the system works at FERC.
I was intere ted in Commi s s ioner Kj e llander '
questions wi th respect to old contracts and new
And ,I think you hinted at what is acontracts.
fundamental problem here of how do you really go about
trying to directly assign these costs,if that's what you
want to try and do.And I think experience has shown
that efforts at direct assignment or somehow direct
assignment of cost have just not been very success.
is for this reason that,if Idaho Power builds a
substation in Meridian to serve new growth in Meridian
the Co mm i s s ion doe s not ass i g n th e co s t 0 f t hat
substation to the residents of Meridian or to the people
who are wi thin a geographic facili ty region around the
substation.
Ratepayers in Pocatello pay rates that cover the
cost of that new subdivision.It's for this reason that
Idaho Power objected very strenuously in its last rate
case to the irrigator s proposal to assign the costs of
new growth to the residential class,because that's where
growth was occurring,everybody recognized you can t do
that.You really have to use a policy of rolled-
pricing,if you conclude that an investment is necessary
HEDRICl( COURT REPORTING [phone]
for utility system.
And that I s why I say our proposal doesn t ask
for anything new.It doesn t ask for anything novel.
asks for the standard rate-making treatment of utility
investments.It's not asking you to set social policy.
It's not as king you to set a subsidy.Itl s not asking
you to set preferential treatment.It's asking you to
use the Commission s rate-making approvals to fund and
recover investments in utility property.
The re was one ques t ion that Commi s s ione r Hans en
had that I thought I would try and just provide some
addi tional information wi th respect to.You inquired
about the sequence wi th which -- in which QFs become
acquainted wi th their interconnection obligations.
Here s exactly how it worked in our case.In May of
2005,Cassia filed an interconnection application with
the company.I n J u n e 0 f 2 0 0 5,it requested a purchase
power agreement from the company.In January , 06,the
Commission recalls a hearing here.A purchase power
agreement was finally approved.On April 6th of this
Cassia finally received a transmission systemyear,
impact study,which for the first time identified the
costs that are now sought to be off-loaded onto Cassia.
Cassia always knew it would have the direct
interconnection costs of the facilities between its plant
HEDRICl( COURT REPORTING [phone]
and the transmission grid,and always looked for a way to
site its plant to minimize those costs.Those costs can
be in some rough way known.I mean,it's obvious,closer
you are, the less they are.Further away they are,the
greater they are.But you can t really know the highway
costs until the -- as in our case, much later, the
transmission system impact study was completed.
I think we would urge you to reject the Avista
bargaining proposal.The existing system,as I
understand it,has considerable latitude for discussions
between the developer and the utility.And everybody
knows that negotiating with the utility is like
negotiating with the KGB.
MR.KLINE:Everybody knows that.
MR. MILLER:Everybody knows that.
So let me conclude wi th just two points.And
ll conclude as I began.re not asking for a
subsidy.re not asking for special treatment.
asking that you follow traditional rate-making practice
to -- for the financing of these utility investments,
which,according to the company, will be used to useful
service to the public, not just used in useful service to
Jared Grover.They will be used for usefulness
allegedly used in usefulness to the -- in service to all
end users of the transmission system.There s a
HEDRICl( COURT REPORTING [phone]
traditional way to finance them.We urge you to follow
that traditional way of financing them.
We very much appreciate your attention and
obvious preparation for this hearing and for extending
into the lunch hour.And I think the record is complete.
Everything you need to know to make the decision you know
You re not going to know any more any time afternow.
right now.
CHAIRPERSON SMITH:That's distressful.
COMMISSIONER KJELLANDER:Isn t it?
MR. MILLER:Given the urgency from Cassia
perspective,we would request an expedited consideration,
and perhaps a preliminary order announcing your decision
with a more complete explanation of your decision to
follow.
So again,on behalf of the Cassia project,thank
you very much for your time.
CHAIRPERSON SMITH:Any questions for
Mr. Miller?
COMMISSIONER HANSEN:Just one follow-up.
CHAIRPERSON SMITH:Commi s s ione r Hans en?
COMMISSIONER HANSEN:Mr. Miller,just I would
follow up on the one comment you made.And that would
be, was Cassia aware that the transmission cost study was
being done by Idaho Power even though you -- it took
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quite some time before you received it?
And were you aware that it could include some
transmission costs -- upgrade costs?
MR. MILLER:We were --
I guess there s twoCOMMISSIONERHANSEN:
questions there.
MR.MILLER:Right.Right.
I think I'll be correct when I explain this.
m not,ll be corrected,and I can correct you.
Cassia always knew that there would have to be
studies to determine both the costs of the direct
connection between its plant and the transmission system,
and that Idaho Power would be studying the effects upon
the transmission system.It never knew that it would be
asked to pay for those.It never knew that it would come
to the point that the upgrade costs would be directly
assigned to the QF.
Is that --
MR.GROVER:No transmission costs have ever
been assigned to QF before.
COMMISSIONER HANSEN:A follow-up on that,then.
How did you interpret this Schedule 72,on which
Idaho Power s highlighted, that that could be -- how did
you interpret that,then,if you didn I t think there was
going to be any costs?
HEDRICl( COURT REPORTING [phone]
MR. MILLER:I can answer that question.But I
need to find my comments.
Well, while I'm looking for that,ll start by
saying,this highlighted phrase comes late to the game.
It's the first time Idaho Power has pointed to this
phrase,this highlighted phrase, as a source of authority
to charge for upgrade costs.And if you wanted to take
the time to look more fully at the tariff, which I have
jus t s t umb 1 e d a c r 0 s s ,the relevant portions, we took the
language of Schedule 72 at its face,which defines
interconnection costs as the facilities which are
reasonably required by prudent electrical practices
interconnect and to allow delivery of energy from the
seller s generation facility to the company s system.
We did not understand interconnection cost to
include also the cost of delivering the energy from that
point of delivery to the utilities load.Nobody had ever
interpreted the schedule that way before.And a t the end
of the day,I guess I end up being slightly confused,
Commi s s ioner Smi th was,as to exactly what Idaho Power
position is.
In its pleadings and comments,it says its
position is these investments should be advanced subject
to refund.But if it's arguing that these investments
should be under Schedule 72, then it's arguing they
HEDRICl( COURT REPORTING [phone]
should be contributed without refund.So on the one
hand,Idaho Powe r seems to be admi t t ing tha t Schedule
doesn t apply, because these are nonrefundable costs.
the other hand,it seems to argue that, well, maybe
doesn t apply.
COMMISSIONER HANSEN:Well,just one last
question.And that is,on the -- on their highlighted
you have a copy of this highlighted portion?
MR. MILLER:I do.
COMMISSIONER HANSEN:The very last line there,
how would you interpret that,generation facilities to
the company s system
MR. MILLER:Well,couple of points.First,
you ll notice that this phrase -- this sentence occurs in
the paragraph enti tled Payment for Interconnection
Facilities,whereas there are other paragraphs that more
clearly define what interconnection facilities are.
It would be very hard to catch from this hidden
sentence an intention -- a hidden intention that network
upgrade costs somehow go into the definition of
interconnection costs,which are otherwise defined
delivery to the company s system.
So I just think it's very difficult,if you read
the tariff as a whole, to go to the definition pf
interconnection facili ties, which is qui te clear,and as
HEDRICl( COURT REPORTING [phone]
it refers to the costs of connecting to the system
one section,and then go to a section on payment and
conclude that it somehow changes the defini tion of
interconnection costs in the defining sections.
COMMISSIONER HANSEN:Tha t 'all have.
Thank you everyone for your
think this
CHAIRPERSON SMITH:
time and your comments today.
iff i cuI t cas e for the Co mm i s ion.And we will do our
very best to try and get an answer as speedily
possible.But I would say I don t think we re going to
shortcut our deliberations in order to meet time frames.
So we ll take the time we need,and we ll hope it's soon
enough.
wi th that, unless there s nothing else to come
bef ore the Commi s s ion, we will cons ider thi s record to be
closed.And the Commission will deliberate as speedily
as possible and notify the parties as soon as possible of
what our decision is.
Thank you all.Appreciated your help.
(Proceedings concluded at 12:29 p.
HEDRICl( COURT REPORTING [phone]
100
R E P 0 R T E R'
Debora Ann Kreidler , a Notary Public in and
for the State of Idaho, do hereby certify:
That said proceedings were taken down by me
shorthand at the time and place therein named and
thereafter reduced into typewriting under my direction
and that the foregoing transcript contains a full , true,
and verbatim record of the said proceedings.
I further certify that I have no interest in the
event of the action.
WITNESS my hand and seal December 2006.
~~ ~~~
NOTARY PUBLIC in and for the State of Idaho;
residing at Boise, Idaho.
My commission expires September
CSR No. 274
2012
HEDRICl( COURT REPORTING [phone]