20080208Oral Argument.pdf

ORIGINAL.BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
----------------------------------x Case No. IPC-E-07-13
EXERGY DEVELOPMENT GROUP OF
IDAHO, LLC,
Petitioner,
vs.
I DAHO POWER COMPANY,
Respondent.
----------------------------------x
ORA ARGUMENT
Friday, January 18, 2008.10:00 a.m.
at the Public Utilities Commission Hearing Room
472 West Washington Street
Boise, Idaho
Reported by
DEBORA ANN KREIDLER
CSR No. 754
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POST OFFICE BOX 578
BOISE, IDAHO 83701
208-336-9208.HEDRICK
COURT REPORTING
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APPEARANCES:
IDAHO PUBLIC UTILITIES COMMISSION:
CHAI RMAN JIM KEMPTON
COMMISSIONER MACK A. REDFORD
COMMISSIONER MARSHA H. SMITH
FOR THE PETIT lONER:
PETER RICHÀRDSON, Attorney at Law
RICHARDSON & 0 LLEARY515 North 27th Street
Boise, Idaho 83702
[phone]peter~ r ichardsonandoleary. com
,
FOR THE DEFENDANT:
BARTON L. KLINE, Attorney at Law
IDAHO POWER
1221 West Idaho Street
Boise, Idaho 83702
[phone]
bkline~idahopower. com
FOR THE STAFF:
SCOTT D. WOODBURY, Deputy Attorney General
OFFICE OF ATTORNEY GENERAL
472 West Washington
Boise, Idaho 83720
[phone]
scott. woodbury~puc. idaho. gov
ALSO PRESENT:
Rick Sterling, Engineer
Idaho Publ ic Ut i li ties Commi s s ion
David Angell,Idaho Power
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CHAIRMAN KEMPTON:Well, this isn't a very rowdy
bunch.I expected to call the room to order, but there's
nothing going on.
This is Friday, January 18th, 2008.Location is
the Idaho Publ ic Ut i lit ies Commi s s ion hear ing room,
Boise, Idaho.Commission's now convened for the purpose
of hearing oral argument.
I guess I better turn the mike on.
Scheduled by notice on January 24th, 2008,
produced under case No.IPC-E-07-13 entitled Exergy
Development Group of Idaho, LLC versus Idaho Power
Company.Petitioner in the case is Exergy.And
respondent is Idaho Power Company.
For matter of appearances, will the attorneys
please present themselves, peti tioner first?
MR. RICHARDSON:Than k you, Mr. Cha i rman .
This is Peter Richardson of Richardson & 0' Leary
appearing on behalf of Exergy Development Group, Idaho.
MR. KLINE:And I'm Bart Kline.I'm appearing
on behalf of Idaho Power Company.
MR. WOODBURY:Scott Woodbury, Deputy Attorney
G e n era 1 for Co mm iss ion S t a f f .
CHAIRMAN KEMPTON:Okay.Are there any
preliminary matters to bring before the Commission at
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this time?
MR. RICHARDSON:I have none, Mr. Chairman.
MR. KLINE:I did deliver and put on your desk a
copy of a visual aid that I intend to use later in the
oral argument.But I just want to let you know what it
was.
CHAIRMAN KEMPTON:Is thi s the Schedule 72?
MR. KLINE:It is a sheet from Schedule 72 with
some highlighting on it.I've delivered copies to both
staff counsel and counsel for Exergy.
MR. RI CHARDSON:Mr. Chairman, just a point of
clarification.It also has otherIt has highlighting.
marks on it not on the original Schedule 72.
MR. KLINE:The three numbers are not a part of
the Schedule 72.I was intending to bring that to the
Commission's attention, yes.
MR. RICHARDSON: As well as the underscoring.
MR. KLINE:That's right.
CHAI RMAN KEMPTON:They are intended to present
only in the order that you are intending to present them?
MR. KLINE:That's right.
CHAI RMAN KEMPTON:Well, just as a matter of
procedure, I would note that the Chair will accept
que s t ion s fro m the Co mm iss ion e r sat any poi n tin tim e
during the presentations, if there's no objections from
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either of the presenters at this point.
MR. KLINE:No objection.
MR. RICHARDSON:No obj ection.
CHAIRMAN KEMPTON:Okay.We'll hear from
Exergy, Mr. Richardson first, and then Mr. Kline for
Idaho Power, followed again by peti tioner Mr. Richardson.
So Mr. Richardson, you can go ahead.
MR. RI CHARDSON:Than k you, Mr. Cha i rman .
First of all, I want to thank you for the
opportunity to present our case here this morning. I
want to first to let you know what we are not trying to
accomplish this morning in this proceeding.We are not
trying to get out of paying for the costs we impose on
Idaho Power's system as a result of interconnections.
That's not what we're about.We do intend to pay for the
costs we impose, but we also hope to do so following the
rul es that thi s Commi s s ion has put in place for how and
when we do so.
Now, I've struggled wi th Idaho Power's reliance
on first rules and procedures for interconnections,
because, as we all know FERC has no jurisdiction over
these interconnections. And Idaho Power states as much
in its own pleadings. It is black letter of the law that
FERC has no jurisdiction over QF interconnections such as
we are discussing today.
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So then, why do the FERC rules and procedures
permeate Idaho Power's QF interconnection processes?
Indeed, why does Idaho Power use the FERC rules for QF
interconnections? And I think the answer can be found in
Idaho Power's arguments it made before FERC in the
proceeding in which FERC adopted its small generator
interconnection rule.
In that proceeding, Idaho Power argued that FERC
did not have jurisdiction to issue its small generator
interconnection rules.Idaho Power argued that FERC
should not adopt the SGIA for short because it didn't
want for there to be one set of rules for a QF
interconnection and a different set of rules for a nonQF
interconnection.You see, whether a QF interconnection
is FERC jurisdictional or Idaho PUC jurisdictional
depends solely on whether the developer chooses to sell
its output to Idaho Power or move its output through
Idaho Power's system to, say, Avista or Raft River
Cooperative.The physical interconnection is identical.
The rules that potentially govern that
in terconnect ion can be qui te di f f erent, however,
depending upon who the purchaser is.Idaho Power wanted
to avoid that resul t by trying to get FERC to forebear or
not issue a small generator interconnection order.
And wi th the pleasure of the Chair, I have a
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handout here I'd like to provide you.This is a copy,
Mr. Chairman, of Idaho Power's comments for FERC on the
small generator interconnection rule.And if you would
turn to page 3 of this document -- it's actually the
fourth physical page, but it's page No.3.
the first full paragraph on that page.
I won't read it to you, but the second sentence
And look at
of that paragraph is very telling.It says there can be
no dual jurisdiction over the physical lines as suggested
by the Co mm iss ion.Idaho Power was very strong in this
statement that there can be no dual jurisdiction.They
weren't arguing that FERC -- that the FERC proposed rule
was necessarily bad.They just didn't want to serve two
masters when it comes to interconnections on their
system.FERC respectfully disagreed with Idaho Power,
and made it clear that FERC' s rules apply to
Idaho Power's facilities for wheeling transactions, and
that the State's rules applied to Idaho Power's
facilities for QF transactions.
With the indulgence of the Chair, I have another
hand out.
CHAIRMAN KEMPTON:Okay.
MR. RICHARDSON:This is an excerpt from the
FERC rule.I just have one for you, sorry.This is an
excerpt from the FERC Small Generator Interconnection
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Rule.Tha t 's a very vol uminous rule.I have attached
the cover page of the rule, and then the pages wi thin the
order of FERC addressing Idaho Power's concerns.
And if you turn to what is numbered paragraph
471 on page 123 of this order, FERC addresses
Idaho Power's concern.And they recite, essentially,
what I j ustsaid to you earlier, that Idaho Power doesn't
want to serve two masters.I have it highlighted in
yellow.
And you also note on paragraph 472 that
Pacificorp, another jurisdictional utility that this
Commi s s ion regulates, al so was try ing to get FERC to
forebear issuing an order such as it did.
And then if you turn over to page 128 of that
order, paragraph 490, FERC proposed a solution to
Idaho Power's concerns.Note that FERC essentially said
that if states want consistency in interconnection rules,
that you can go ahead and adopt the FERC rules, or adopt
your own rules.
Now, NARUC, the National Association of
Reg u 1 at 0 r y Uti lit Y Co mm iss ion s, 0 f w hi c h t his Co mm iss ion
is a member, petitioned for reconsideration of FERC' s
ruling on this issue.NARUC argued that interconnections
for nonQF's or QF's wheeling should be governed by State
law and not the FERC small generator interconnection
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process.
And with one final indulgence from the Chair, I
have one more hand out for you.This is FERC' s order on
reconsideration.If you turn to page 51, again, I've
attached the first page of the order, and then the
relevant pages from the order.You'll note that FERC
identifies the issue that NARUC raised when -- which
NARUC says the Commission should clarify that a QF not
selling at wholesale, such as my client is proposing to
do, should interconnect under State law.
And FERC again declines to defer to State law on
those interconnections.They say that State programs
cannot displace Federal rules for interconnections. And
the flip side of that is obviously true.That is,
Federal rules cannot displace State rules for State
jurisdictional interconnections.FERC encouraged the
states, in its order on reconsideration, to adopt FERC
methodology if they want consistency with that
methodology.But they refused to defer to the states on
their jurisdictional interconnections.
This Commission has not entertained any case
since FERC' s ruling on this issue.Admi t tedly, the
ruling was just issued in late 2005.However,
Idaho Power has had ample time to bring this issue to the
C omm iss ion's at ten t ion for res 0 1 uti 0 n .It has not
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brought its concerns that were so forcefully expressed to
the FERC about consistency and application of
interconnect ion rules to thi s Commi s s ion's at tent ion.
Instead of asking this Commission to harmonize its
interconnection rules wi th FERC' s, Idaho Power took it
upon itself to adopt FERC's rules here in Idaho.That
sol ved Idaho Power's concern about serving two masters.
It would simply serve FERC and not this Commission.
Unfortunately, they got the cart before the
horse, because they never asked you to rule or ratify
that decision.For FERC, for QF's, we're left to the
only applicable rule that you have adopted, and that is
rule 72.In all of its simplicity and in all of its
a mb i g u i t y, t hat's 0 u r r u let hat we h a vet 0 1 i ve wit h , not
the FERC rules.
Idaho Power asserts that application of the FERC
interconnection process is, quote, compatible and
consistent wi th the terms of Schedule 72.You can see
that in their answer to our motion to compel on pages 9
and 10.And I don't necessarily disagree wi th
Idaho Power.It may be compatible, and it may be
consistent, but you haven't authorized its use.
FERC's SGIA rules consumed over two and a half
years of litigation in order to process their final
orders.There are scores of issues that were drilled
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down and resolved in that process.And Idaho Power's
applying a complex and sophisticated interconnection
pro c e sst hat t his Co mm iss ion has n eve rev en had the
opportunity to review, let alone adopt.
And as far as Idaho Power's consistency and
compatibility argument goes, I propose that that would be
a slippery slope in the extreme.For instance, likewise,
it would be compatible wi th Idaho Power's residential
tariff to charge time of use rates for that class because
time of use rates. are more closely aligned wi th the
actual cost to serve.
Indeed the residential tariff doesn't prohibit
time of use rates just like Schedule 72 doesn't prohibit
the company from adopting FERC' s interconnection
procedures.And the imposition of time of use rates on
that class would be compatible and consistent with this
Commis s ion's goa 1 s of set t ing rates that recover cos t s .
However, just because a practice is consistent and
compatible with this Commission's goals doesn't mean it's
an authorized practice or even a desirable one.
Idaho Power asserts that it has provided Exergy
with a cost estimate, and that it is just collecting
costs on an incremental basis. The problem is that it
use d FER C 's r u 1 e s for do i n g so, and not t his C omm iss ion's
rule for doing so.They charged Exergy a deposi t in
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order to provide us with this cost estimate, which they
are not allowed to do.They want the charges to deposi t
for the next level of cost estimates, which they are not
allowed to do.They want to charge a deposit for even
the follow-up estimate of cost estimates, which they are
not allowed to do.
I don't disagree that Schedule 72 may have its
flaws, but it is clear that we are entitled to a cost
estimate that, once paid, initiates construction of the
interconnection.It doesn't permi t Idaho Power to charge
a series of deposits that enable it to determine the
final design and cost of the interconnection.Schedule
72 also doesn' t permit Idaho Power to impose the FERC
process on Idaho jurisdictional interconnections.
And I would be happy to answer any questions,
Mr. Chairman.
CHAI RMAN KEMPTON:Are there any questions,
Marsha?
COMMISSIONER SMITH: No.
COMMISSIONER REDFORD: I just have one question.
Didn't the FERC final ly addres s the issue by its comments
with regard to PURPA, and that PURPA allows the states to
regulate interconnection agreements of renewable resource
projects?
MR. RI CHARDSON :Mr. Chairman, Mr. Commissioner,
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absolutely, FERC addressed that head-on.And they said
it's not the distinction of whether or not you're a PURPA
QF. FERC's jurisdictional hook is when you are
transmitting electricity in interstate customers for
resale.So when I'm a QF interconnecting to Idaho Power
for Idaho Power's consumption, that's not a FERC
jurisdictional interconnection. If I'm a QF and I'm
interconnecting to Idaho Power for the purpose of moving
my power to a different utility, that's the FERC
interconnection process jurisdictional interconnection.
COMMISSIONER REDFORD:So in that case, you
would simply be using Idaho Power's transmission
facilities to connect to others?
MR. RI CHARDSON:Exactly.And that's the dual
facility issue that Idaho Power raised in the pleading I
provided you.They said it's inconsistent and it's
incompatible with efficiencies to have two different
jurisdictions over what is essentially physically the
interconnection.But FERC was very jealous of its
jurisdiction and said, "no.If you want to have
consistency in the interconnection rules, get your state
to adopt our rules."
COMMISSIONER REDFORD:I have no further
questions.Thank you, Mr. Richardson.
CHAI RMAN KEMPTON:Mr. Richardson, I have one
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question.And that is, in that distinction, when you're
wheeling power like that, I thought that there was some
connection between whether that power was not necessarily
connected to another utility, but whether the power was
actually sold intrastate.
Is the distinction you're making between
wheeling between individual utilities? Or are you
wheeling between utili ties intrastate versus moving
outside of the state?
MR. RICHARDSON:FERC doesn't make a distinction
on state boundaries once you move the power over a host
utility to another utility.They define that as
interstate customers, whether or not I'm moving the power
from, say, Malta, Idaho to Raft River or in Ashton, Idaho
or somewhere else.As long as I'm moving -- wheeling the
power over the interconnected grid, that's interstate
customers as far as FERC is concerned.
jurisdictional transaction.
But if I'm just selling it to Idaho Power,
And that's a FERC
FERC -- and I think you could make a consti tutional
argument that that's interstate customers.But FERC has
been careful not to step on the state jurisdictional
prerogative, if you will, of regulating that transaction.
But -- and NARUC and Idaho Power, Pacificorp, Avista,
they all weighed in in this SGIA process and argued that
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FERC didn't have jurisdiction, shouldn't exert that
jurisdiction.
But FERC said, "no, we're going to regulate what
we're" -- what they view the Federal Power Act authorized
them and requires them to regulate.And that's a sale of
power for resale in interstate customers.And I think
you could make an argument that even these QF
interconnections are arguably FERC jurisdiction. But
FERC said no.They deferred to the State on that issue.
COMMISSIONER REDFORD:What about the situation
where Idaho Power accepting the power from a QF tells the
QF that, in fact, its power's going to be sold out of
state?That doesn't -- does that have any distinction?
MR. RI CHARDSON:That's an interesting --
Mr. Chairman, Commissioner Redford, that's an interesting
question. And a similar issue was raised in the FERC
docket. And I think it was Avista that said to FERC,
"well, if the -- it's totally up to the developer whether
the interconnection's jurisdictional."
What's the intent of the developer to sell it to
Idaho Power or to sell it to a third party? What happens
within a situation where a developer initially sells it
to Idaho Power and then decides, well, we're going to
sell it to a third party? And FERC said it's that
initial interconnection that makes the difference.
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So if I'm a QF developer and I say I'm selling
to Idaho Power under a state jurisdictional QF contract,
and Idaho Power turns around and resells that power, my
transaction's still a state transaction.It's the Idaho
Power's transaction reselling it, it then becomes a FERC
jurisdictional interstate customer.
COMMISSIONER REDFORD:Thank you.
CHAI RMAN KEMPTON:Are there any other
questions?
COMMISSIONER REDFORD: No.
CHAIRMAN KEMPTON:Okay.There being none, we
can move to the Idaho Power Respondent's posi tion,
Mr. Kline.
MR. KLINE:Thank you, Mr. Kempton.
At the outset, what I'd like to do is introduce
Mr. Dave Angell.Mr. Angell is sitting here with me at
counsel table.Dave is Idaho Power's manager of delivery
planning.And I've asked Mr. Angell to si t here so that,
in the eve n t the Co mm iss ion has so m e que s t ion s 0 f a m 0 r e
technical nature as to the operation of the Q, or how he
managed the Q, that he'll be able to do that.
COMMISSIONER REDFORD:Are you asking this
gentleman to be a witness?
MR. KLINE:Only if you have questions that I
can't answer.I can certainly address the legal and
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policy questions.If you have some question that's more
technical, or if you need some additional information as
to how we manage the Q, those kinds of things, Dave is
available as a resource.
COMMISSIONER REDFORD:This is oral argument.
MR. KLINE:Yep.
COMMISSIONER REDFORD:It's not for the purpose
of questioning Idaho Power's staff.
MR. KLINE:That's fine.I didn't mean to
interrupt.If there are no questions of that nature, we
certainly won't need to have Mr. Angell speak.
COMMISSIONER REDFORD:Even if there are
questions, the questions will be directed to you, as far
as I i m concerned.
MR. KLINE:That's fine.
COMM~SSIONER REDFORD: And they will not be
responded to by another party, another person.
MR. KLINE:All right.I'm okay with that.
Okay.COMMISSIONER REDFORD:
CHAI RMAN KEMPTON:The chair appreciates this
kind of a cross-discussion in the absence of the legal
technical i t ie s a s socia ted with what Commis s ioner Redford
brought up.And I agree wi th wha t he's saying.
MR. KLINE:Thank you.
This case is really nothing more than a tariff
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interpretation case.Idaho Power has a rate schedule,
Schedule 72, that it utilizes to govern interconnections
between itself and qualifying facility generators. And
Schedule 72 is the tariff that you need to look at and
interpret to decide this case.
Commission is being asked to decide Idaho Power
has acted reasonably consistent with Schedule 72 in
response to Exergy' s request for interconnection. Mr.
Mr. Richardson laid out a number of things that
Idaho Power is not allowed to do, three or four series of
things that we are not allowed to do.Fact of the matter
is, thi s Commi s s ion wi 1 1 decide what we are not allowed
to do and what we are allowed to do.And our position
will be, at the end of this oral argument, hopefully
you'll be able to understand that the application of the
four FERC study procedures are perfectly consistent with
Schedule 72 contemplated by Schedule 72, and that our
interpretation and operation of Schedule 72 is reasonable
and consistent with your rules.
Before we look at Exergy's specific allegations,
I think it's important to talk and lay some groundwork
just on the fundamentals of tariffs, of rate schedules in
Idaho Power files, and in a more general manner.
First of all, there are really two general kinds
of tariffs.The first ones are the ones that are very
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specific, for example, the tariff that sets out Idaho
Power's rates to be charged to residential customers. It
has a very specific rate in that tariff. It goes out to
four decimals. It's that specific. And those that
one is very narrow, a very narrow tariff.And it doesn't
have a lot of interpretation or any -- the utility,
essentially, can't charge more or less than that rate.
And typically, that's the tariff where the filed
rate doctrine comes into effect. If you've got a tariff
on file, you can't deviate from that tariff. That's the
filed rate doctrine.
But there's a second kind of tariff. And
Idaho Power has a number of them.One of them, for
example, is the Company's Rule H. And another one is
Schedule 72. And both of these kinds of tariffs are more
admini s tra ti ve in nature. They lay out a procedure, a
set of policies, a framework in which the utili ty
operates and deals with its customers with some of the
day-to-day things that utilities and customers work with.
And they definitely include the -- in anticipation that
the utility is going to exercise some judgment, some
discretion, it's going to work with its customers. And
so there's not the very specific rigid rules that are
contemplated in the other types of tariffs that the
company has.
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And the test when the utili ty is operating
within that kind of a tariff is whether or not the
utility is acting reasonably and fairly.And if the
Commission doesn't think that it is, or if a customer
doe s n 't t h ink t hat i tis, i t com est 0 t his Co mm iss ion,
and t his Co mm iss ion can tel i the uti lit Y , " you ' r e not
doing you're not administering that tariff correctly.
Do it this way."
Mr. Richardson paints a picture that this kind
of tariff is much more proscriptive and rigid than could
possibly be if they're going to operate in any kind of
reasonable fashion.
So those are the two basic kinds of tariffs.
Schedule 72 is the second one.It's not the rigid type
of tariff that Mr. Richardson paints it to be.
The other thing that I think is important to
talk about just very briefly is the different approach
that Idaho Power is taking to Schedule 72 and that is
than that Exergy takes.In its motion to compel, Exergy
has indicated that this case is not about cost
responsibility, but rather about the timing of when those
costs are paid.
And Mr. Richardson said the same thing when he
started his oral argument.In fact, in its motion on
page 12 -- this is the motion to compel -- Exergy
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restates its position on the top of that page where it
says, "Power purchase agreements approved by the
Commission contemplate reimbursement of Idaho Power's
costs not prepayment." And that's a fundamental
difference between the way we view the way Schedule 72 is
supposed to be operated and the way that Exergy views the
way that Schedule 72 is supposed to be operated.
In Exergy' s view, the utili ty will go through
and do the work, expend the time, expend the resources,
and then a fter the fact, Exergy would re imbur se the
utility for the expenses that it had incurred.Idaho
Power believes that Schedule 72 and prudent management
requires that we, in fact, get and have the QF developer
prepay in incremental amounts the costs that the company
is going to incur as it moves forward in studying these
interconnection requests, in expending engineering time,
expending engineering resources.
And the reason we do that, of course, is that
the QF developer can exi t the process at any time. And
they can just simply decide after they' ve received an
estimate from the company as to how much it's going to
cost.They can simply say, you know, "that's just not
going to work, and I'm leaving."
If we haven't received some kind of deposit,
so m e kin d 0 f pre p a ym en t , it' s ve r y d iff i cui t for the
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utility to then collect those costs. And if we don't
collect them from the developer, then the rest of our
customers ul timately absorb those costs. We think that's
prudent management. We think that's exactly what
Schedule 72 contemplates that we will do is that we will
get the money up front before we put our customers' money
at risk. We think that process is fair to both QF's and
to customers.
QF's only pay for the work that's actually done.
The deposits are keyed to recover the costs that the
utility is going to expend for that phase of the study
process. There are multiple off ramps for the QF's if
they get one of the four studies or one of the three
study resul ts and decide they don't want to go forward,
they don't have to. They can stop right there and
there's no financial penalty. All they ever pay is what
Idaho Power has actually expended in studying that
transmission interconnection. And in the end, if the
amount of the deposit or the prepayment that the QF has
made exceeds the amount that Idaho Power has expended, we
make a refund.
Now, I want to spend just a couple of seconds
here-- excuse me, antihistamines -- talking about the
FERC process and the FERC four-step study process that
was the subj ect of much of Mr. Richardson's discussions.
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First of all, Mr. Richardson says that Idaho Power can't
charge deposi ts because the word deposi t is not used in
the tar i ff . He al so says the Commi s s ion has not approved
the four-step study process and the use of deposits. The
fact of the matter is, that's simply not correct. And to
look at this, you have to look at Schedule 72.
And I have given you a copy, but I'd direct your
attention to the Schedule 72 excerpt that I previously
presented to you. This is the one that has the
highlighting on it. And as previously discussed, in
addition to the highlighted section, the numbers 1, 2 and
3 are things that I have added to this to help you
understand the three-step process. And if you look at --
look at this, you can see the three-step process that we
go through.
First of all, the seller, that Idaho Power
provides an initial cost estimate to the QF. Secondly,
once that co s test ima te has been provided, then uti 1 i ty
has the authority under Schedule 72 to request that the
QF pay the estimated cost of the interconnection prior to
the company's doing anything further on processing that
request. Certainly a reading of that section would
indicate that the utility could, if it wanted to, get
100 percent of those costs paid up front at that point in
time.
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What Idaho Power has chosen to do, consistent
with the rules that the FERC has presented to the
company, is to break that up into the four study -- or
the three study groups that we've talked about in our
pleadings.We think that's we think that's an
equitable way to go.We think it's fair to the QF's.We
think it protects customers.
I think initially there was -- part of the
problem was that there was a misunderstanding on the part
of Exergy that, in fact, Idaho Power had not provided it
with cost estimates, and that it was objecting to paying
for the deposits because it hadn't received the cost
estimates.As we indicated in our response to Exergy's
motion, we did, in fact, provide the feasibility cost
estimates to Exergy prior to requesting the deposits. So
I think that that issue has gone away.And it doesn't
sound like that Exergy is now disputing that they have
received the cost estimates that they originally had felt
that they had not received.
Exergy has spent an awful lot of time in this
case arguing that there's something wrong with
Idaho Power utilizing the four-step FERC process in
administering and studying interconnections between QF' s
and Idaho Power.The handouts that Mr. Richardson
provided to you today talked about the concern the
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company had about serving two masters.
Fact of the matter is, we lost that argument.
And we do, in fact, have small generation and large
generation interconnection arrangements that we utilize
as required by the FERC tha t are embodied in our open
access transmission tariff.But we didn't have to change
S c h e d u 1 e 7 2 t 0 a c c 0 mm 0 d ate tho s e f 0 u r stu d y r e qui rem en t s ,
because it fits perfectly with Schedule 72.Now, at the
time that the FERC processes was undergoing, we weren't
sure that it would work that way, but it turned out that
it did.So we do, in fact, serve two masters, and
they're not inconsistent.
I think the argument about FERC jurisdiction and
the Idaho PUC jurisdiction over these interconnections is
really a classic red herring.The terms and condi tions
of Schedule 72 specifically permit Idaho Power to follow
the process that it does.There is no conflict between
them.The idea that they're going to pit the Idaho
Co mm iss ion's j uri s d i c t ion a g a ins t the FER C 's j uri s d i c t ion
simply doesn't exist.There isn't an inconsistency.We
don't derive jurisdiction or the right to request the
deposi ts from the FERC jurisdictional rules.
them from the plain language of Schedule 72.
One 0 the r t h i n g I t h ink t his Co mm iss ion s h 0 u 1 d
We derive
take into consideration in addressing this complaint is
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that we have processed Idaho Power has processed
multiple requests from QF developers, dozens, frankly.
And in each and every instance, all of those QF
developers have been willing to provide the deposi ts in
the exact same process that we're asking Exergy to
follow, wi th no obj ection.
And I think it's also important to note that no
other QF has joined Exergy in its complaint in this case,
as is often the case when one QF brings a complaint
against a utili ty, it's often joined by many others.
That hasn't happened in this case.And I think that's
telling.I don't think the other QF developers have any
problem wi th what we're doing.In fact, I think they
like the certainty that the process, by using the FERC
interconnection process, brings to the process.They
like the idea that they know how fast Idaho Power has to
process the -- process the request.They like the idea
of what -- of knowing what the costs are going to be.
They like the idea tha t they could exi t whenever they
want to wi thout financial penal ty.
The 0 the r t h i n g t hat I t h ink t his Co mm iss ion
needs to consider is the impact that having the Exergy
projects sitting in the Q without having paid the
deposits, without having come up with the same amounts of
money that QF developers have brought up, the uncertainty
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that imposes on the entire process.I think it's unfair
to the other developers. They have put up money. And
Exergy has not. And I think there is some equity in
there.
Hopefully this Commission will be able to move
quickly and resolve this issue, and we can move forward.
In conclusion, I believe the case is strong that
I daho Power's admini s t ra t ion 0 f Schedule 72 is cons i sten t
with the terms of the schedule itself.It's fair to
customers and to QF' s.And Idaho Power requested the
Commission to deny the complaint.
CHAI RMAN KEMPTON:
COMMISSIONER SMITH:
COMMISSIONER REDFORD:
COMMISSIONER SMITH:
Are there questions, Marsha?
Yes, I do. Thank you.
I i II defer to Marsha.
Actually, my question isn't
for Mr. Kline.It's for Mr. Richardson.So if you want
me to wait until he's closed, I can do that.
CHAIRMAN KEMPTON:Let's do that.
I do have one question, Mr. Kline. There was an
argument discussed on both sites in this process about
the ability to pay. And I don't see that, in your
presentation, as a deposit requirement based on, I think,
if the developers do not meet minimum credi t
requirements. And I didn't hear that in your
presentation or how that would tie in specifically with
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the four items that -- I'm sorry, strike that -- the four
items, in conjunction with the schedule for evaluations
that go along in the process of going from the initial
estimate of costs through the process as you add and move
toward actually putting everything on line.
So how does that fit?
MR. KLINE:Let me address that.And I -- the
question of credit came up very early.And I apologize.
We indicated in our responses that if the QF didn't have
good credit, then there were other alternatives available
to it.And I think that we were not as clear as to why I
was bringing that issue up.
The situation is this.I f a QF or any other
generator comes to Idaho Power and wants to interconnect
to the system, if they have a good credit rating, they do
not have to put up the deposi ts or provide any other
kinds of security.However, if they don't have good
security, then -- or good credit, they can either put up
a deposit; they can post a letter of credit; they can put
money in escrow.Any of these security provisions are
available to them.
Again, the whole idea is we want to make sure
that we don't spend time, money and resources, and then
aren't able to recover it from the QF in the event that
they don't follow through, and the interconnection's not
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actually constructed.
All of that information is available on
Idaho Power' s website.All of the QF developers, I
believe, or all the other generators are aware of it. We
brought it up simply to make sure that everyone
understands that that's a course that Exergy could have
followed.They did not.
This Commission has, in the past, indicated that
we are not entitled to require the QF to have good credit
before we'll do any of these things.Hopefully Exergy
understands -- I would think they would -- that the fact
that they don't have to demonstrate good credit doesn't
necessarily mean that that's not available to them.
CHAIRMAN KEMPTON:But, in fact, isn i t a part of
that issue the fact that you have no way of actually
making an evaluation of their credit status?
MR. KLINE:That's true.We do not have the
ability to evaluate their credit status unless they
volunteer to let us evaluate their credit status.And if
they do, then they avoid the deposits.
prepayment s, al 1 of those things.
They avoid the
CHAIRMAN KEMPTON:Okay.If there are no other
questions --
COMMISSIONER REDFORD:
Thank you.
Yes, I have some.
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CHAIRMAN KEMPTON:Commissioner Redford.
COMMISSIONER REDFORD:First of all, I wanted to
just ask you, what you're doing is using FERC to
interpret your tariffs?That's what you said?
MR. KLINE:If I did, I certainly misspoke, and
I apologize.The reason that we have adopted the study
process for uses with QF developers, the study process
that the FERC has outlined in its rules is because we
believe that provides a number of things.It provides a
consistent review process for all projects, whether
they're QF or not.We think it provides certainty for,
again, all of the proj ects so they'd know exactly what
the process is and how it's going to proceed and that we
have a uniform process for evaluating comparable
projects.
COMMISSIONER REDFORD:So really what you're
doing is just adopting an internal policy that follows
FERC?
MR. KLINE:Correct.
COMMISSIONER REDFORD:Wi th regard to
Schedule 72, if a -- if a developer wants to get into the
wind business, don't you think he has a right, and
Idaho Power has an obligation to give him an initial cost
estimate to make the determination as to whether he wants
to go forward, or can afford -- or whether the cost is so
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much that he can't pay for his facility, don't you think
he has a right to know some wild -- even if it's a wild
guess?
MR. KLINE: Absolutely, and we do that.
the first thing that we do.
That i s
COMMISSIONER REDFORD:Okay.So in this case,
you gave Exergy this cost estimate, this feasibility
study.
MR. KLINE: Correct.
COMMISSIONER REDFORD:And the feasibility study
generally is for the purpose of determining whether it
can be constructive, two, whether it's in a situation
where it -- because of other factors, it just can't be
cited there.And those are things that you provide in
feasibility, constructibility estimate?
MR. KLINE:That's correct.
Okay.And so once you doCOMMISSIONER REDFORD:
that, and this is a -- this is an estimate, it's kind of
a global estimate based upon historic costs, right?
MR. KLINE: It is. It is certainly a nonbinding
estimate, but it's a pretty good estimate.
COMMISSIONER REDFORD: It's a good estimate.
MR. KLINE: Mm-hmm.
COMMISSIONER REDFORD:Okay.So then you do
that wi thout a deposi t?
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MR. KLINE:Without a deposit.There is an
application fee, but it's not a deposit.
COMMISSIONER REDFORD:So you're telling me that
the feasibility study is a pretty -- is not a wild guess.
MR. KLINE: No.
COMMISSIONER REDFORD:It's a pretty darn good
one.
MR. KLINE:It is.
COMMISSIONER REDFORD:Well, then -- then you go
after that into an initial estimate, cost estimate?
MR. KLINE:
impact study.
COMMISSIONER REDFORD:
The second phase is called a system
Well, wai t a minute.You
just told me that the feasibility study you do right out
of the gate is free.
MR. KLINE:It's free.It's a part of the --
you pay for it with the application fee.
COMMISSIONER REDFORD:Okay.Then you -- then
you -- then you jump into No.1.
initial cost estimate.
What's the difference between an ini tial cost
It talks about an
estimate that the developer i s required to pay and a free
feasibility study?
MR. KLINE:The second study is more detail.It
provides addi tional certainty to the estimate.
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COMMISSIONER REDFORD:It's a firm, fixed price.
MR. KLINE:It's not a firm, fixed price.It is
still a still a less than fully developed estimate.
But it's abetter, more fully featured estimate.
COMMISSIONER REDFORD:Well, I have a little
difficulty in your statement that feasibility study based
upon historic cost isn't a good measure as to what the
cost is going to be.And then you get to the ini tial
cost, which seems to be another study.
you ask for a hundred thousand dollars.
And in this case,
MR. KLINE:There are three stages.And the
hundred thousand dollar cost will come when you're
actually getting down to very -- much more specific cost
estimate.I think within, like, plus or minus 10 percent
or some number like that.
COMMISSIONER REDFORD:And that pays for design?
MR. KLINE:That pays for design.At that
stage, you might advise the developer, "we're going to
have some long lead time pieces of equipment here. Do
you want us to go ahead and order it?"
COMMISSIONER REDFORD:It's detail design and
procurement issues?
MR. KLINE:Right.
COMMISSIONER REDFORD:Seems like you've already
done that wi th the feasibili ty study.
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MR. KLINE:Haven't gone to that level of
detail,Mr. Commiss ioner.
COMMISSIONER REDFORD: All right.In this case,
4 did you give Exergy a feasibility study?
5
6
MR. KLINE:We have.
COMMISSIONER REDFORD:And is that in the
7 record?
MR. KLINE:It is.We have copies of the
feasibility studies that were given to Exergy, our
Exhibi ts 1 through 5 to the Company's answer to Exergy' s
motion.
COMMISSIONER REDFORD:Okay.And --
COMMISSIONER SMITH:Tab 8.
COMMISSIONER REDFORD:Tab 8? Okay.
Can you direct me to where you talk about the
cost in these feasibility studies? They seem to be
fairly boilerplate.
MR. KLINE:And attachment 2 to the Company's
answer to Exergy's motion to compel has five reports for
various Exergy studies.The cost estimate, what we've
given you as pages 2 and 3, I believe, are not the full
cop y, Mr. C h a i rm an - - 0 r Mr. Co mm iss ion e r .But at the
bottom, looking at the first one looking at the lava beds
wind park, in my book, that's the first one of the five.
Are you there?
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COMMISSIONER REDFORD: I'm looking here.
Okay. Okay.
MR. KLINE: I'm sorry, attachment 1.
Mr. Angell's helping me here. Attachment 1 is the
feasibility study for the Golden Valley Wind Park
proj ect .
COMMISSIONER REDFORD: Okay.
MR. KLINE: If you look on page 2 under summary,
it lays out the general parameters of the
interconnection, and indicates that the estimated cost is
$333,000.And we do the same -- and I've incl uded the
same thing for each of the other five. Again, only
providing the first couple, three pages.
The feasibility studies themselves are rather
long. And I guess in an effort to save paper, I've just
given you a portion of those.But we can certainly
provide in full anything you'd like.
COMMISSIONER REDFORD: That's all right. I'm
just -- you were talking about a feasibili ty study. It's
the sum of the upgrade that you're talking about there.
It's not broken down as to cost.
MR. KLINE:It is a lump -- it's a single cost.
Although, I think, as a part of the feasibility study, if
I had given you the full feasibility study, you would
have seen the breakout of the individual parts.
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Okay.And so theseCOMMISSIONER REDFORD:
exhibits are the exhibits you provided to Exergy and as
to initial cost estimate?
MR. KLINE: They received the full study.
COMMISSIONER REDFORD: And then the second
the second step is you go to initial -- an initial cost
estimate.
What's the difference between the initial cost
estimate and the feasibility study and an initial cost
estimate of the company-owned interconnections building,
facili ty?
MR. KLINE:The second step we call the system
impact study, not initial cost estimate.
COMMISSIONER REDFORD:Well, it says here
initial cost estimate.
MR. KLINE:I'm sorry.I'm sorry, yes.
Schedule 72 refers to it as an initial cost estimate.
And that is the feasibility study.
one after that.
Then there is another
COMMISSIONER REDFORD:Well, you've already told
me it's to get the feasibili ty study for nothing.
MR. KLINE: Right.
COMMISSIONER REDFORD: And now you're telling me
that they have to pay, that that's included in the
initial cost estimate.
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MR. KLINE: In my mind, the feasibility study is
an initial cost estimate. From that point on, there will
be additional feasibility studies with increasing levels
of complexity.
COMMISSIONER REDFORD: Detail design.
MR. KLINE: Correct.
COMMISSIONER REDFORD: Detail cost and so on~
MR. KLINE: And if QF decides, after they
receive the first one, they don i t want to go any further,
they don't have to.They can exi t r igh t then.They can
say, "this isn't going to work."
All right.I'm still aCOMMISSIONER REDFORD:
little confused here.
You get a free estimate on the feasibility
study.
MR. KLINE:Correct.
COMMISSIONER REDFORD:And then you go on and
you're saying that that really is the initial cost
estimate.
MR. KLINE: Yes.
COMMISSIONER REDFORD:There i S nothing in the
reg or in the tariff that says -- well, let me back up a
little bit.
You give it to them free, and then you want to
charge them for it?
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MR. KLINE:If they want to proceed, and ifNo.
they want to have the more sophisticated study, we can do
that.
COMMISSIONER REDFORD:Well, why didn't you say
that in here?
MR. KLINE:In the schedule?
COMMISSIONER REDFORD:Yeah.
MR. KLINE:It seemed to us that that was a
rea son a b lew a y to a dm in i s t e r the tar iff, and t hat the
having provided the initial cost estimate, we could at
that point in time, if we wanted to, under the tariff,
ask for a hundred percent of that up front.But we
didn't do that.And we don't do that.
COMMISSIONER REDFORD:Well, okay.I don't want
to belabor this.Get free feasibility study.And then
you go right from that feasibility study to detailed
design.
MR. KLINE:I f they want us to.
COMMISSIONER REDFORD:Okay.And I'm just
concerned about the statement initial cost estimate.
Detail design is not an initial cost estimate.
It's the feasibility study is the initial cost estimate,
which they get free.
MR. KLINE:Yes.
COMMISSIONER REDFORD: But then you say later on
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that -- here, that they have to pay for the initial cost
estimate.
MR. KLINE:I apologize.I am -- I'm not
tracking.
CHAIRMAN KEMPTON:Mr. Kline, I wonder if we
couldn't, to -- so we get the names right, and in the
order that they are, you have a response that was filed
on September 26th of 2007. And if the Commissioners
would go to that one, that filing, the date on it is
September 26th, 2007.
MR. KLINE: Yes.
CHAIRMAN KEMPTON: And if you will go to
page 3 -- let's see, page 4 in that filing, you have the
names in the order of the FERC stipulated requirements.
In each of those, in the order that you take them,
starting with the feasibility study, which as I
understand, you are referencing as the initial study that
is -- estimate that has already been provided to
Exergy
MR. KLINE: That is correct.
CHAIRMAN KEMPTON: and then after that, you
go to the system impact study, which is the next study.
And then you go to the facility study
MR. KLINE:That's correct.
CHAIRMAN KEMPTON:-- which can go up to a
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hundred thousand dollars.Isn't it -- let's see, yes.
And then you go on and talk about the intent of the
four-stage process.I may have missed one, but that's
where the four stages are represented.
I'm sorry, which one isCOMMISSIONER REDFORD:
that? What tab is that?
CHAIRMAN KEMPTON: It's not a tab.
COMMISSIONER SMITH: It's tab 8.
CHAIRMAN KEMPTON: And I think you're right,
tab 8.
COMMISSIONER REDFORD: Here, I can get that.
CHAIRMAN KEMPTON: Page 4.
COMMISSIONER REDFORD: I see what you've got in
I can't reconcile it to your tariff.
MR. KLINE: Let me try one more time.
All right. Look at if you would -- I'm
working off of the marked up one. Okay. Look at No.1.
here.
It says, "initially we'll provide" -- "we'll provide"
"an initial cost estimate of company-owned
interconnection facili ties will be provided to seller."
So that's step 1.
COMMISSIONER REDFORD: At no cost.
MR. KLINE: At no cost.
Second step, "payment of the estimated cost will
be required prior to the company's ordering, installing,
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modifying, upgrading or performing any other work
associated with the interconnection facilities."
COMMISSIONER REDFORD:Okay.
MR. KLINE:So at that point in time, this
tariff allows us to request addi tional monies to move
forward wi th the development of the interconnection. And
that certainly would include the cost of additional
studies that are necessary to provide the more refined
interconnection cost.
And what we thought was the right way to do it
and the part that is consistent with the FERC process is
to then move through those various stages of study. If
the develope r want s us to charge them 100 percent 0 f that
cost, we can certainly give them a fully completed study
after they've received the ini tial cost estimate. But
most of them don't want us to do that.
to do it the other way.
Most of us prefer
COMMI S S lONER REDFORD:Isn't the controversy
really about the initial cost estimate?
MR. KLINE:I'm not -- I don't believe that it
is, Mr. Co mm iss ion e r .I believe that the controversy is
Idaho Power following a reasonable process in asking QF
developers like Exergy to provide deposits for an
increasing series of study.I think that's the dispute.
I think the dispute is they don't want to put the money
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up.
COMMISSIONER REDFORD:And that's based upon
credi tworthiness?
MR. KLINE:We haven't even looked at
creditworthiness.
COMMISSIONER REDFORD:And you do this for every
developer?
MR. KLINE:Every developer.
COMMISSIONER REDFORD:Okay.I i m sorry to have
belabored this.I guess my questions have been answered.
Thank you.
CHAIRMAN KEMPTON: Commissioner Smith?
COMMISSIONER SMITH: So I guess I looked at
Schedule 72 now.And it seems to me that Schedule 72 is
a tariff that requires prepayment.And that seems very
clear in that, after the company is to get gives this
estimate of the cost, which it seems to me is the total
cost of company-owned interconnection facilities, then
the developer is supposed to pay that before the work is
done.And then after the work is finished, there's a
true-up, whether it was over or under what actually
happened.
But what you're telling me, Mr. Kline, is that
you don't follow that procedure, that you have borrowed
from the Federal side an incremental approach where the
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developer doesn't pay it all, they pay incrementally,
based on the next step of what the company says needs to
be done next. And they decide at each step whether. they
go forward.
Is that correct?
MR. KLINE:I think that's an accurate
representation.
COMMISSIONER SMITH:Okay.So I added up the
costs in your attachments and got somewhere over
$7 million. And then I added up costs which Exergy had,
in its filing, paid, which is something over $42,000.
So what is it they paid? Are these just the
application fees, or are these other fees?
And then my second question is, when the
developers pay at each of these stages that you're using,
does that reduce the total initial cost estimate that was
given?
MR. KLINE: At -- what Exergy has paid,
depending on the stage at which their proj ect is in
the study process is, they've all paid an application
fee. All the proj ects have paid feasibili ty studies fee.
Some proj ects have gone to the system impact study level.
I don't think any of Exergy' s have gone to the
feasibility study yet.
One of the problems is, of course, that we
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haven't gone to that level because they haven i t been
willing to put up the -- pay the prepayments -- I'm
sorry, the feasibility, the four-step being facility, I
apologize.
And it is true that all of the dollars that they
pay for the studies and for anything else that is done to
develop the incremental -- the interconnection cost will
.be deducted from or will be applied to the total cost of
the interconnection. So
COMMISSIONER SMITH:So the studies that you do
subsequently after providing the initial cost estimate
are part of that cost estimate?
MR. KLINE:That's correct.
COMMISSIONER SMITH:Okay.Thank you.
Mr. Chairman.
COMMISSIONER REDFORD:I just have one further
question.
CHAIRMAN REDFORD:Okay.
COMMISSIONER REDFORD:But you will accept a
letter of credi t or surety bond of some sort?
MR. KLINE:Yes.
COMMISSIONER REDFORD:So theoretically, a
developer could give you a surety bond for the total
amount of the proj ect, and then he would be --
MR. KLINE:He would be done.
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COMMISSIONER REDFORD:However he's arranged it?
MR. KLINE:He would be done and we move forward
on the interconnection.
COMMISSIONER REDFORD:Okay.Thank you.
CHAIRMAN KEMPTON: Are there any other
questions?
COMMISSIONER SMITH: Nope.
COMMISSIONER REDFORD: No.
CHAIRMAN KEMPTON:Okay.Mr. Richardson.
MR. RICHARDSON:Than k you, Mr. Cha i rman .
Just a couple of points.In the Idaho Power's
pleadings, they refer to their process as being consist,
quote, and, quote, compatible.But now Mr. Kline is
using a new adjective to describe their process. And
they say that Schedule 72 actually contemplates -- the
FERC process is contemplated by Schedule 72.And of
course, the FERC process took place after Schedule 72 was
adopted by this Commission.Schedule 72 cannot have
contemplated this FERC process.
Another point I'd like to make is that this
concept that Mr. Kline brought forth that there's two
different kinds of tariffs, there's rigid tariffs and
nonrigid tariffs, that's a totally new concept in
regulatory law that I've ever heard of. So schedule
Idaho Power's rate schedules are rigid, but Schedule 72
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is limp?I mean, that's almost a bizarre concept in law.
Schedule 72 is over 30 pages long, extremely
detailed. This Commis sion went through a proceed
several proceedings in adopting Schedule 72. And I don't
think Idaho Power's given the right to liberally
interpret Schedule 72 to accomplish its goal that it was
unable to accomplish in front of FERC.
I don't disagree that Schedule 72 may be awkward
for Idaho Power. But calling ita nonridged tariff is
not the way to sol ve ambigui ties or problems wi th the
tariff. If there's problems with the tariff, the company
should be -- it should be incumbent upon the company to
come be fore thi s Commi s s ion and addres s tho se problems
head-on.
Idaho Power said that the feasibility study is
indeed what Schedule 72 calls the ini tial cost estimate.
But then the next process, the system impact study, they
charge a deposit for. The next step, the facility study,
they want to charge a hundred thousand dollar deposi t
for. I think it's incumbent upon Idaho Power to have a
cost estimate that the Schedule 72 requires them to
provide, and have it be a valid cost estimate, and not
str ing us along in pha se s . Thi s Commi s s ion can adopt the
FERC process, but you haven i t done it.
So calling it a red herring to talk about the
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FERC process that Idaho Power was unable to derail at the
Federal level and now trying to impose it upon us is not
accurate.It's not a red herring, it's one of the
central issues here.
The credi t issue is a good example of an issue
cut from poor cloth on Idaho Power's part. Schedule 72
doesn't contemplate letters of credi t or posting bonds.
It says they will give us a cost estimate. And then we
pay the cost estimate, and they construct. That's the
proces s that thi s Commi s s ion ha s adopted.
So the credi t issue is one that's a good example
of where this Commission would probably want to delve
into questions about when you can post a letter of
credit, what kind of letter of credit, what kind of
credit rating you need in order to be required to post a
letter of credit, whether your credit rating is triple A
or triple B, does that trigger some different level of
deposit requirement. Those are legitimate issues that
probably should be flushed out and not left to
Idaho Power's interpretation.
And Commissioner Redford was questioning
Mr. Kline.Commi s s ioner Redford, I think - - I got the
quote here -- said, "so you really are adopting an
internal policy that follows FERC." And Mr. Kline said,
"correct." But it's my hope that this Commission doesn't
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permit Idaho Power to adopt internal policies when
implementing or devising tariff schedules or policies for
dealing with issues that are solely within your
jurisdiction.
And with that, I will stand for any questions
that the Commissioners may have. And I thank you again
for your time this morning.
CHAIRMAN KEMPTON:
COMMISSIONER SMITH:
Co mm iss ion e r S mit h .
Thank you. So
Mr. Richardson, it seems to me that your argument is that
you wan t the Co mm iss ion to a p ply S c h e d u 1 e 7 2 toy 0 u r
client's proj ects.
MR. RICHARDSON: That's correct.
COMMISSIONER SMITH: When I look at the language
of Schedule 72, it seems to me that what it contemplates
is that full payment to the company will be made in
advance of the company ordering, installing, modifying,
upgrading or performing in any other way work associated
with the interconnection facility.
So is your reading of Schedule 72 different from
that?
MR. RI CHARDSON :It's not.
COMMISSIONER SMITH:So seems to me what the
company has done is tried to be more accommodating to
projects. Instead of asking for the full initial cost
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it, Co mm iss ion e r .It's that Idaho Power said, "if you
want a real number that you can rely on, pay us a hundred
thousand dollars."
COMMISSIONER SMITH:But isn't that the -- I
mean, I don't see that you gain anything with your
argument that you'd rather pay the 333,000 with the
true-up after the work is completed, which is what the
tariff contemplates, than to say, "okay, we're willing to
invest another hundred thousand to get further down the
road. "
I'm just not tracking.
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MR. RICHARDSON:Well,I think the tariff
me, C omm iss ion e r S mit h ,I think the tariffexcuse
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of the costs.And then we pay that amount and go
forward.And if we don't pay that --
COMMISSIONER SMITH:Okay.I'm assuming if you
pay the $333,000, the company would go forward.But
8 you're still stuck with -- the actual costs would be
9 reconciled against the estimated previously paid.And
the appropriate billing or refund will be processed.
So I don't know what you're gaining by arguing
against paying it incrementally.
MR. RI CHARDSON :Well, I think what --
Commissioner Smi th, what we're gaining is that we're
going to get Idaho Power to follow Schedule 72 by
providing us with an accurate estimate of the costs up
front without charging us for it.And then we have the
option at that point to proceed by paying the full amount
subject to reconciliation at the end of the day.
COMMISSIONER SMITH:Okay.So in January of
2007 when you received this estimate, you had some reason
to believe it wasn't accurate, and so you didn't pay the
full amount to proceed?
MR. RICHARDSON:Co mm iss ion e r S mit h , the pro c e s s
Idaho Power is following obviously suggests that that's
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not an accurate estimate, because they're saying it's
going to cost so much more money to get you an accurate
estimate.It's not a number you can take to the bank,
because you know it's not right.
COMMISSIONER SMITH:Well, no estimate is ever
absolutely correct.And that's why the tariff, I think,
says it's got to be reconciled after the work's done, and
you know the real number, because people got to pay wha t
the cost is, not what it was estimated to be.
MR. RI CHARDSON :Well, that's absolutely true.
The problem is that Idaho Power does a
back-of-the-envelope calculation and says, "well, we've
got a lot more work to do to get you an accurate number.
And then you have to pay us for that." And the tariff
says, "no.Gi ve us the accura te number we can ta ke to
the bank and finance."
COMMISSIONER SMITH:Well, the tariff says
you're entitled to an initial cost estimate.
MR. RICHARDSON:Correct.And once that initial
cost estimate is paid, Idaho Power's obligated, according
tot h eta r iff, to c omm en c e w 0 r k .
COMMISSIONER SMITH:After you pay it.
MR. RICHARDSON:Right.
COMMISSIONER SMITH:So if you pay -- like, for
the example, I was using the $333,000.They would be
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obliga ted to commence the work. And when they were
completed, then there would be the reconciliation of what
was actually spent versus what was actually paid.
MR. RICHARDSON: Correct. And the point is that
they're not prepared to commence work if we pay that
$333,000 because they need to go through several more
leve 1 s of study in order to get a real number.
COMMISSIONER SMITH:Isn't the several more
layers of study part of the work that was included in the
initial cost estimate?
MR. RI CHARDSON :And that's the nub of the
issue. Is it part of the work or not? Is it giving us
an estimate of the work contemplated or not? It's our
view the estimate is not part of the work, because the
sentence that defines part of the work includes phrases
like "ordering material," actual ly doing the
construction.The estimate has to be an accurate
estimate that a developer can finance.And I can't go to
the bank and say, "well, this is a back-of-the-envelope
number; lend me $333,000 so Idaho Power can get me a real
number. "
circles.
COMMISSIONER SMITH:
Thank you.
Mr. Chairman.
I think we're going in
CHAIRMAN KEMPTON:Mr. Redford.
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COMMISSIONER REDFORD: I just have a couple of
questions. I'm really interested about the ini tial cost
estimate that you can't bank. Don't you think it's a
responsibility of a developer to come up with accurate
engineering cost estimates of itself to go to get the --
go to the bank to finance?
MR. RICHARDSON:The interconnective issues is
solely wi thin Idaho Power's court. They i re the ones that
own the facilities. And they' re the ones that give us
the details about how the interconnect will happen. We
can come up with an interconnect, and typically can do it
much cheaper than Idaho Power, but Idaho Power's the one
that tells us how to do it, which widgets to use, which
wire to second, what's necessary. There's a lot of that
stuff developers don't believe is necessary. And we
could do an interconnect a lot less expensively than
Idaho Power's studies tell us to do it. But if Idaho
Power tells us to do that for whatever reasons -- they
have safety issues and consistency issues with all their
equipment. They want it all to be the same so that their
linemen don't come across surprises in the field.
But you know, we could come up wi th an
interconnect number and be very different from Idaho
Power's.
COMMISSIONER REDFORD:I don't have any further
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questions.
Thank you.
CHAIRMAN KEMPTON:I have no further questions.
Is there anything else to be brought before
the
Commission at this point?
MR. RICHARDSON: I have nothing, Mr. Chairman.
MR. KLINE: Nor do I.
CHAIRMAN REDFORD: Then this concludes the
parties' oral argument.And the Commis s ion will now
consider the record closed, and will render a decision
accordingly.
So thi s complete s the Commi s s ion Hear ing today.
And the hear ing is adj ourned.
MR. KLINE: Thank you.
(Proceeding concluded at 11:15 a.m.)
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1 AUTHENTICATION
2
3
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6 This is to certify that the attached proceedings
7 be for e the I d a hoP u b 1 i cut i lit i esC 0 mm iss ion, in the
S matter of the complaint of EXERGY DEVELOPMENT GROUP OF
9 IDAHO, LLC, were held as herein appears, and that this is
10 the original transcript thereof for the file of the
11 Commis s ion.
12 IN WITNESS WHEREOF, I have hereunto set my hand
13 February 4, 200S.
14
15 -.~~~~Debora Ann Kreidler, Court Reporter
CSR No. 754
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