20110606Letter re RECs.pdf

HIDA~POR~
RECEIVED
UIIJUN -6 PH ~: 35
An IDACORP Company
Tim Tatum
Manager, Cost of Service
ttatum(~,Idahopower .com
June 6,2011
Ms. Jean Jewell
Commission Secretar
Idaho Public Utilities Commission
PO Box 83720
Boise, Idaho 83720-0074
RE: Idaho Power Sales of Renewable Energy Cerificates ("REC"), Case No. IPC-E-08-24
Dear Ms. Jewell:
On June 11, 2010, the Idaho Public Utilties Commission ("Commission") issued Order No.
32002 approving Idaho Power Company's ("Company") REC Management Plan. Under the
currently approved plan, the Company sells its RECs in the near-term and retus the customers'
share of the proceeds through the power cost adjustment mechansm while continuing to acquire
and hold long-ter contractual rights to own RECs for use in meeting a futue federal renewable
energy standard. Since the plan was approved, the Company has had success selling its RECs
into the wholesale or spot market. However, recent developments in the REC market have
forced the Company to reevaluate its REC sales approach.
In recent months, the Company has observed a reduction in the demand for RECs in the spot
market from counteraries that purchase RECs for compliance purposes. These counterparies
consist primarly of investor-owned utilities ("IOU") that are subject to renewable energy
standards and make up what is refered to as the "compliance market". The other main segment
of the REC market is the "voluntar market" which consists of IOU s that purchase RECs as par
of voluntar "green power" programs or businesses that wish to purchase renewable attrbutes as
a voluntar business practice. REC sales into the voluntar market have also become
increasingly more difficult to execute due to limited buyers and have typically brought lower
prices than transactions in the compliance market.
Upon investigating the cause of recent changes in the REC market, the Company has found that
most REC buyers in the compliance market have moved toward purchasing the majority of their
RECs under longer-ter agreements through requests for proposals ("RFP"). This change in
market conditions has made it extremely difficult for Idaho Power find spot market buyers for its
RECs in recent months. As a result, the Company is planing to include bidding into REC RFPs
issued by compliance buyers in its REC sales strategy. This approach may require the Company
to commit to selling a portion of its available RECs for up to a five-year perod. Until now, the
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1221 W. Idaho St. (83702)
P.o. Box 70
Boise, 10 83707
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Company has limited its REC transactions to agreements with a maximum term of two-years.
Because the Company is aware of the possibility that it may become subject to a federal
renewable energy standard in the futue, it plans to evaluate each REC sales agreement with an
eye toward minimizing its risk exposure under future requirements.
While this new approach may require the Company to enter into sales agreements for up to five
years, the Company believes that the approach is consistent with the intent of the curently
approved REC Management Plan and wil allow the Company to maximize the value of its RECs
to the benefit of its customers. Although Idaho Power is not requesting any specific action by
the Commission at this time, the Company feels it is important to notify the Commission of this
modification to its previous REC sales strategy. If the Commission prefers that Idaho Power
formally clarfy its REC Management Plan to address these maximum five-year contracts, please
so advise.
v~
Tim Tatum
TET:kt
cc: Randy Lobb, IPUC
Terr Carlock, IPUC
Rick Sterling, IPUC
Lisa Grow
Johny Anderson
Greg Said
Regulatory Files
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