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1 BOISE, IDAHO, THURSDAY, OCTOBER 28, 1993, 8:30 A. M.
2
3
4 COMMISSIONER MILLER: Good morning, everyone.
5 Let's take up Idaho Public Utilities Commission
6 Case IPC-E-92-31. This is the time previously set by
7 Commission Notice for oral argument upon a motion to strike
8 that's been filed by one of the parties to this case.
9 Before we proceed with the oral argument, let's for the
10 record take the appearances of the parties.
11 Mr. Orndorff.
12 MR. ORNDORFF: Owen H. Orndorff, Orndorff,
13 Peterson, et al. for Rosebud Enterprises.
14 COMMISSIONER MILLER: And let's just go around
15 the room. Mr. Woodbury.
16 MR. WOODBURY: Scott Woodbury, Deputy Attorney
17 General, for Commission Staff.
18 COMMISSIONER MILLER: Sir, are you appearing
19 as an attorney for some party?
20 AUDIENCE: No, I'm with Washington Water
21 Power.
22 COMMISSIONER MILLER: Thank you. Mr. Kline.
23 MR. KLINE: Yes, Barton L. Kline and Larry D.
24 Ripley appearing on behalf of the Idaho Power Company.
25 COMMISSIONER MILLER: Mr. Richardson.
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1 MR. RICHARDSON: Thank you, Mr. Chairman.
2 Peter Richardson and Susan Buxton of the firm Davis Wright
3 Tremaine appearing on behalf of the Independent Energy
4 Producers of Idaho.
5 COMMISSIONER MILLER: And Mr. Eriksson.
6 MR. ERIKSSON: John Eriksson of the firm
7 Stoel, Rives, Boley, Jones and Grey for PacifiCorp.
8 COMMISSIONER MILLER: I note we've also
9 granted intervention to a number of irrigation districts.
10 Does anybody appear on behalf of those parties?
11 MR. WOODBURY: I did speak with Mr. Olowinski
12 and he indicated he might not appear.
13 COMMISSIONER MILLER: I think that, then, gets
14 all of the parties correctly identified. As we indicated,
15 the purpose of our hearing this morning is to take oral
16 argument upon a motion filed by the Independent Energy
17 Producers. Since it is their motion, we'll hear from them
18 first and then I propose to hear from Idaho Power Company
19 and PacifiCorp and then Rosebud and then any comments from
20 the Commission Staff. Would that be an acceptable order for
21 everyone? All right, that's how we'll proceed then.
22 Mr. Richardson.
23 MR. RICHARDSON: Thank you, Mr. Chairman.
24 It's difficult to provide you with an overview of our
25 position without going through, in detail, both sections of
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1 Idaho Power's answer that we are asking you to strike
2 today. There really is no other way to put this matter in
3 proper perspective. First, however, I will summarize our
4 position in this case.
5 At the heart of this matter is the integrity
6 of the avoided cost system. This is a system that you have
7 developed, the Commission has developed, over the course of
8 a decade with some considerable effort and with the input
9 and participation of all the parties in this room. Also at
10 issue in this proceeding is the very ability of the
11 Commission's orders to command the deference to which they
12 are entitled.
13 The IEPI is not interested in the dispute
14 between Idaho Power and Rosebud as far as it concerns
15 Rosebud's status or Idaho Power's willingness to negotiate.
16 The IEPI is however vitally interested in the integrity of
17 the system and that is why we are here today, in addition to
18 the fact that the Commission was gracious enough to find
19 room on its busy calendar to accommodate an early morning
20 oral argument.
21 Now, we are asking you to strike Sections 2
22 and 3 of Idaho Power's answer, and Idaho Power suggests that
23 we are really asking for partial summary judgment with
24 respect to those two sections. Regardless, by admitting the
25 issues Idaho Power raises in those two sections as
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1 legitimate areas of concern in this proceeding, the
2 Commission will have made the most drastic, dramatic and
3 devastating decision it has ever made affecting avoided cost
4 rates, ever, and will have done so without an opportunity
5 for the industry to offer input, indeed without even the
6 opportunity for the Commission's own Staff to have input
7 into the decision. For by admitting the issues in
8 Sections 2 and 3 to be heard in this, a complaint action by
9 a QF seeking a contract, the Commission would be saying, in
10 effect, that none of the existing precedent or rates and
11 procedures are valid any longer.
12 Now, what are the issues in Sections 2 and 3
13 that we object to? First, if you have Idaho Power's answer
14 in front of you, I would suggest you turn to Page 5 and look
15 at the heading under Section 2. That heading reads: "The
16 Commission should convene a special hearing to establish
17 avoided cost rates for Rosebud's Mountain Home project."
18 Now, the Commission's avoided cost orders do
19 indeed contemplate special consideration for projects
20 greater than 10 megawatts. The first paragraph of
21 Section 2 is, therefore, from our perspective, relatively
22 harmless. However, the second paragraph of Section 2 makes
23 it clear that Idaho Power has no intention of complying with
24 Order No. 22636. Reading from the first two sentences of
25 that paragraph, and I'll quote, "As noted in Order
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1 No. 22636, the Commission has never established standard
2 purchase rates for QF projects 10 megawatts and larger.
3 Under the Commission's orders, rates for such large projects
4 are to be determined in the first instance by negotiations
5 between the QF developer and the utility."
6 Idaho Power's assertion that rates are to be
7 determined in the first instance by the parties through
8 negotiations is flat out wrong and a complete misstatement
9 of Order 22636 as well as all of the Commission's other
10 pronouncements on the question of the appropriate rates for
11 QFs larger than 10 megawatts. Those orders are unambiguous
12 and clear. The published rates for projects over 10
13 megawatts -- excuse me. The published rates for projects
14 under 10 megawatts are to form the starting point for
15 negotiations, which simply means Idaho Power starts with the
16 published rates in the negotiations process. To claim that
17 the rates are determined in the first instance through
18 negotiations between the parties is completely beyond the
19 system that this Commission has created for the
20 determination of avoided cost rates for projects greater
21 than 10 megawatts.
22 Furthermore, it is quite obvious the utility
23 will not offer rates anywhere close to the published avoided
24 cost rates to QFs greater than 10 megawatts if it were
25 completely free to set its own avoided cost rates. One need
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1 only look to the magnitude of the rates Idaho Power has
2 offered Rosebud to make that determination.
3 The very act by this Commission of permitting
4 this portion of Idaho Power's answer to stand as a
5 legitimate issue for discussion in this proceeding
6 challenges the Commission's avoided cost methodology.
7 The starting point for negotiations issue is
8 not the only objectionable part of Section 2. The next
9 paragraph, the third paragraph of Section 2, provides at the
10 first sentence: "It is undisputed that under PURPA a
11 utility is not obligated to purchase capacity or energy that
12 it does not need," and I certainly don't dispute that
13 statement. However, the next sentence reads: "At the
14 special hearing, one of the issues to be determined would be
15 whether Idaho Power needs to acquire any additional
16 resources prior to the year 2000."
17 The issue of when Idaho Power needs to acquire
18 resources for purposes of avoided cost rates has already
19 been decided by this Commission. Idaho Power has not been
20 reluctant to file trigger cases when it believes that it has
21 added sufficient resources to cause a recalculation of its
22 avoided cost rates. What has come to be known as Appendix A
23 to the trigger case orders evaluates Idaho Power's loads,
24 resources and incorporates into that evaluation all new QF
25 purchases as well as other resource additions. The
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1 Commission, through Appendix A, establishes when and how
2 much generation Idaho Power needs to acquire in the QF
3 context. However, one of the central issues in Idaho
4 Power's answer is when it needs to acquire resources. You
5 have already answered that question. Indeed, you answer it
6 every time you decide a trigger case of which Idaho Power
7 has already had two.
8 By admitting this issue as a legitimate matter
9 for discussion in this complaint action, you will, in
10 effect, throw out all of the work done in the prior avoided
11 cost cases with respect to the determination of resource
12 deficit dates.
13 Turning to the very next sentence in
14 Section 2, Idaho Power asserts: "To make that
15 determination," that is the determination of when Idaho
16 Power needs additional resources, "To make that
17 determination, the Commission would need to review Rosebud's
18 and Idaho Power's respective load and resource analyses."
19 The system Idaho Power envisions is that
20 starting from scratch, each new QF would provide a new
21 resource/load analysis forcing the Commission to
22 continuously redetermine Idaho Power's load/resource deficit
23 date for every new contract in excess of 10 megawatts.
24 Indeed, Idaho Power is asking Rosebud to complete a
25 separate, competing load/resource analysis. Under such a
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1 scheme, every QF would have to relitigate when it believes
2 Idaho Power is resource deficit. Fortunately, you have
3 already addressed this issue in the trigger proceedings.
4 You have, in other words, already answered the question that
5 Idaho Power posits in that sentence. Idaho Power's attempt
6 to relitigate this issue is nothing more than a collateral
7 attack on the Commission's established policies for
8 determining the Power Company's resource deficit date.
9 As an aside, you should know that under the
10 current system that you have established, the 40 megawatts
11 or so that Rosebud is offering to Idaho Power is factored
12 into the Company's load/resource determination, that is
13 Appendix A, as part of determining the rates for the
14 project. In other words, the impact on Idaho Power's
15 resource balance date is already factored into the rate for
16 for each project greater than 10 megawatts as it negotiates
17 under the system you have established.
18 Now, the next sentence begins: "If the
19 Commission determines that Idaho Power does not need to add
20 any new resources for an extended period of time..." and
21 then it goes on, again, the Commission has already made that
22 determination. Idaho Power simply ignores, and by doing so
23 implicitly overturns, the Commission's prior orders on the
24 question of load/resource deficit dates, which is, of
25 course, a collateral attack on final Commission orders
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1 establishing those dates.
2 The next paragraph in Idaho Power's Section 2,
3 which if you're following along is the first full paragraph
4 on Page 6 of Idaho Power's answer, that paragraph begins
5 with the sentence: "One of the underlying principles of
6 PURPA is the concept that utility ratepayers should be
7 indifferent to whether the utility obtains future capacity
8 and energy by means of a purchase from a QF or by building
9 its own resources."
10 Now, I don't dispute that assertion, the
11 assertion that Idaho Power makes in that sentence, that is,
12 that ratepayer indifference is perhaps one of the underlying
13 principles of PURPA. However, in the very next sentence of
14 that same paragraph, Idaho Power goes on to, once again,
15 completely undermine the existing system that this
16 Commission has painstakingly installed for QF acquisitions.
17 That sentence reads: "At a special hearing for the project,
18 one of the issues to be addressed will be whether additional
19 take and pay, non-dispatchable energy purchase contracts,
20 like the one demanded by Rosebud, will maintain ratepayer
21 indifference."
22 Ratepayer indifference has obviously already
23 been established by this Commission's finding of a
24 reasonable level for avoided cost rates for Idaho Power. We
25 all know the standard this Commission applies when it
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1 implements PURPA by setting avoided cost rates; that is,
2 that the rate is set at the Commission's determination of
3 Idaho Power Company's avoided costs. That is, but for the
4 purchase from the QF the utility would have had to pay
5 roughly the same price to acquire roughly the same amount of
6 energy. That is the standard. That is what the Commission
7 does when it sets avoided cost rates. Ratepayer
8 indifference is inherent in the concept of your
9 determination of avoided costs. There's simply no other way
10 to say it. Idaho Power's administratively determined
11 avoided costs are just that, its avoided costs. The
12 ratepayers are by definition indifferent. This claim of a
13 need to reevaluate ratepayer indifference in the context of
14 a complaint action is nothing more than another example of
15 Idaho Power's collateral attack on your final orders setting
16 avoided cost rates.
17 The very next sentence in that paragraph
18 reads: "As Exhibit 206 shows, Idaho Power has advised
19 Rosebud that it believes that to maintain ratepayer
20 neutrality, future resources should be acquired when needed
21 and should be dispatchable."
22 Now, this sentence contains two separate
23 concepts. First is the concept that Idaho Power should
24 acquire future resources only when needed, and it certainly
25 sounds like a good concept, but it completely disregards
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1 your prior findings on this subject. You have devised a
2 system that permits acquisition of resources now, with
3 energy payments only through the existing surplus period,
4 and with the addition of a capacity component rolled into
5 the rate beginning in the first deficit year. Furthermore,
6 you decide when Idaho Power is deficit for avoided cost
7 purposes and you have already done so. Idaho Power's
8 challenge to your decision on this issue is indeed a blatant
9 collateral attack.
10 The second concept contained in this sentence
11 deals with Idaho Power's reevaluation of this Commission's
12 established system of payments for all energy produced.
13 Idaho Power states that all future resources should be
14 dispatchable. None of Idaho Power's existing QF resources
15 are dispatchable. Indeed, this Commission has never
16 required dispatchability. The dispatchability argument,
17 like the rest of this section, is an indirect attack, an
18 indirect challenge to the Commission's prior orders
19 establishing the avoided cost methodology that is in effect
20 today.
21 The last sentence of the paragraph is mere
22 posturing with no substantive effect. The next paragraph,
23 fortunately, is only one sentence long. It reads: "In
24 considering the question of ratepayer neutrality, it will
25 also be necessary for the Commission to take into
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1 consideration the impact of additional non-dispatchable,
2 take and pay contracts on the Company's debt-equity
3 requirements."
4 The Commission just concluded hearings on this
5 very subject in connection with the implementation of the
6 Energy Policy Act of 1992. If Idaho Power has some more
7 information to add to the Commission's record in that case,
8 then perhaps it should attempt to do so in that proceeding,
9 not this one.
10 That concludes my summary of the defects in
11 Idaho Power's answer that are contained in Section 2 of that
12 pleading. Section 2, to recap, is nothing more than one
13 collateral attack after another. The Power Company seeks to
14 revise avoided cost rates, change the method for determining
15 those rates for projects greater than 10 megawatts, change
16 the load/resource deficit date, change the method the
17 Commission uses for setting avoided cost resource deficit
18 dates, and even apparently shift the burden of proof on
19 deficit date determinations to the QF industry. The Company
20 also seeks to require dispatchability when none is now
21 required and somehow, and without opening a general rate
22 case, redetermine the utility's equity capitalization rates
23 and debt obligations for ratemaking purposes.
24 Section 3, the other section of Idaho Power's
25 answer that the IEPI objects to.
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1 Section 3 is very telling, Mr. Chairman. It
2 consists of just three short paragraphs, but it is, in
3 essence, a tacit admission on Idaho Power's part that the
4 claims in Section 2 are unfounded and unsupported by this
5 Commission's existing avoided cost orders and
6 methodologies.
7 Now, the first paragraph in Section 3 is
8 straightforward enough. It simply recites the Power
9 Company's intention to file its resource management report.
10 We have no problem with that.
11 The second paragraph of Section 3 is telling,
12 however, and it sets the stage for Idaho Power's admissions.
13 Idaho Power in the second paragraph tells Rosebud that it is
14 going to file an avoided cost rate case, apparently
15 incorporating the conclusions found in its resource
16 management report. And we know from the preceding section
17 that the resource management report, as Idaho Power sees it,
18 will result in dramatic reductions in avoided cost rates and
19 even radical changes in the avoided cost methodology,
20 including Idaho Power's obligation to purchase QF power.
21 The third paragraph of Section 3 actually
22 contains Idaho Power's admission that its preceding section,
23 and indeed its treatment of Rosebud, is contrary to the
24 Commission's avoided cost scheme. The Company says, well,
25 your project is not scheduled to come on line until 1998,
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1 and then in the second sentence of that paragraph, the
2 Company says: "Idaho Power does not believe it is
3 unreasonable for Idaho Power and Rosebud to defer
4 negotiations regarding acquisition of the project output
5 until the Commission has had an adequate opportunity to
6 review the RMR and Idaho Power's proposed purchase rates for
7 dispatchable and non-dispatchable capacity and energy."
8 Until the Commission has had an opportunity to
9 review and I think that's the key here. Idaho Power is
10 telling Rosebud to wait until Idaho Power has had a chance
11 to litigate its avoided cost case before it signs a
12 contract. By that time, according to the Power Company, it
13 will have given the Commission an opportunity to review its
14 proposed new rates, deficit year, dispatchability request,
15 et cetera, et cetera. If Idaho Power wants new avoided cost
16 rates and if Idaho Power wants to change, fundamentally, the
17 methods by which QF energy is purchased, then Idaho Power
18 has to file an application to accomplish such feats. Trying
19 to get such changes in through the back door in a complaint
20 action is fundamentally unfair and an illegal collateral
21 attack on the system you have devised for determining
22 avoided cost rates.
23 In essence, Mr. Chairman, Idaho Power is
24 telling Rosebud that it must accept Idaho Power's version of
25 avoided cost rates and Idaho Power's version of who is
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1 entitled to those rates. It ignores the bulk of what you
2 have done in this field. However, in the event Rosebud
3 balks at Idaho Power's ultimatum, the Company simply
4 responds with, well, why don't we wait until the Power
5 Company gets around to filing an avoided cost case to
6 legitimize its unilateral changes to the Commission's
7 avoided cost scheme.
8 It's been now almost a year since Idaho Power
9 has filed that answer, and it has not filed an avoided cost
10 case and it has offered nothing to anyone that I am aware of
11 to suggest that it intends to do so soon. So where does
12 that leave us? It leaves us with Idaho Power attempting to
13 unilaterally, and collaterally, alter your orders setting up
14 avoided cost rates and the methodology by which QFs are
15 entitled to those rates.
16 We submit that the only appropriate response
17 to such a challenge is to strike the offensive portions of
18 Idaho Power's answer, or if you accept Idaho Power's
19 phrasing of the pleading, then grant partial summary
20 judgment with respect to this portion of Idaho Power's
21 answer to the Rosebud complaint.
22 That concludes my oral presentation regarding
23 why the Independent Energy Producers filed its motion to
24 dismiss or strike, if you will.
25 COMMISSIONER MILLER: All right, thank you,
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1 Mr. Richardson. Do the Commissioners have questions now or
2 prefer to wait until we've heard all the presentations?
3 COMMISSIONER NELSON: I don't have any
4 questions now.
5 COMMISSIONER MILLER: Commissioner Smith, do
6 you have questions now?
7 COMMISSIONER SMITH: Well, I just have one,
8 Mr. Richardson, since you didn't address it in your comments
9 and Idaho Power brought it up in its response to your motion
10 that under our rules your motion to strike portions of their
11 answer is not timely.
12 MR. RICHARDSON: That's technically correct,
13 Madam President, that responses to answers according to
14 Rule 56 are required to be filed within two weeks of the
15 answer being filed. However, your Rule No. 61 provides for
16 liberal construction of pleadings and substantive amendments
17 to pleadings liberally.
18 COMMISSIONER SMITH: I'm well aware that we
19 usually don't put form over substance.
20 MR. RICHARDSON: And I would hope the
21 Commission wouldn't do so in this case as well.
22 COMMISSIONER SMITH: Is there any response
23 also to their point of why you didn't bring it up at the
24 last prehearing conference since I notice you've been an
25 intervenor in this case for several months and there were
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1 other opportunities?
2 MR. RICHARDSON: We participated in one, I
3 think there's been three prehearing conferences in this
4 case, we participated in the last one, and part of the
5 reason that I filed this motion when I did, first of all, I
6 filed it well before Idaho Power's testimony is due, well
7 before their motion is due so that I don't think any party
8 has been prejudiced by the timing of the filing, but the
9 timing of the filing has been driven in part by the actions
10 of the other two utilities that this Commission has
11 jurisdiction over relative to our attempt to consolidate the
12 issues in this proceeding that are generic in nature as well
13 the issues that are generic in nature in the PacifiCorp
14 filing and Water Power filing; so there are forces in
15 addition to just simply this complaint that are forcing my
16 hand here, if you will, and my goal has been to efficiently
17 and expeditiously bring this matter to a resolution and my
18 hope is that the Commission will indeed consolidate these
19 issues into a single case which will endure to the benefit
20 of all parties, including the Commission, to efficiently
21 litigate these issues.
22 COMMISSIONER SMITH: Thank you. That's all I
23 have.
24 COMMISSIONER MILLER: Mr. Eriksson, do you
25 have any comments?
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1 MR. ERIKSSON: Mr. Chairman, PacifiCorp, as
2 you know, is not only an intervenor to this case, but also
3 the applicant in the UPL-E-93-3 and PPL-E-93-3 case which is
4 the subject of the Independent Energy Producer's motion to
5 consolidate. We're not here to state any position on the
6 Independent Energy Producer's motion to strike, but rather
7 only to respond to the motion to consolidate.
8 We've submitted a written response to that
9 motion and would simply reiterate that we don't believe that
10 there are matters that are common to the respective cases.
11 While we're certainly in favor of efficient and effective
12 means of resolving common issues, we just don't see that
13 they exist in this case and that's why we oppose the
14 consolidation.
15 COMMISSIONER MILLER: Well, that's helpful. I
16 think for the purpose of today, though, we're going to focus
17 on, I think our notice for hearing today is the motion to
18 strike within the confines of the Rosebud case, but we'll
19 certainly take that into account.
20 All right, then, Mr. Kline, let's go to you.
21 MR. KLINE: Mr. Chairman, Mr. Ripley is going
22 to argue.
23 MR. RIPLEY: I think it's important at the
24 very inception of my comments to point out that the
25 complaint was filed by Rosebud and the answer of Idaho Power
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1 Company that the IEPI now has moved to strike portions of
2 that answer was filed on January 5th, 1993. It's hard and
3 difficult to follow the arguments of IEPI because they skip
4 around. When it's apparently convenient for their argument,
5 then they act as if nothing has transpired between
6 January 5th of '93 and today. When it is convenient to
7 recognize that things have transpired, then they point it
8 out.
9 Commissioner Smith has asked what's their
10 position on the timeliness of the motion. I think it's
11 extremely important to point out and I agree that this is an
12 administrative agency and that form over substance shouldn't
13 be the prime goal of the Commission, but there is a point in
14 orderly procedure which IEPI has patently violated and for
15 which they even made no comment. They even said they filed
16 the motion in conformance with the rule and it wasn't in
17 conformance.
18 They didn't ask that they be permitted to file
19 this motion out of time and why. They simply filed it, and
20 it's riddled with the same old stuff that we see and that
21 Commissioner Miller has cautioned us not to do and that is
22 let's not get emotionally involved, and what do we see,
23 Idaho Power's chicanery and these type of arguments, which
24 I, frankly, don't think has any place in the arguments
25 presented either orally or on paper, but we seem to be
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1 slipping into it.
2 The parties to this hearing want to cast the
3 utilities, and particularly Idaho Power, as some kind of a
4 bad actor, and, frankly, that causes concern with the
5 Company. We think that we're operating in good faith. We
6 may be wrong, that's what the Commission is for, but to
7 always capture it in the light that we're somehow unlawful I
8 don't think leads anywhere and I think it just creates more
9 and more problems, but enough of that.
10 Let me get to the issues. What we are talking
11 about are projects over 10 megawatts. We are not talking
12 about the Commission's procedures for projects under
13 10 megawatts; so let's focus on that and let's recognize
14 that what counsel for the IEP is asking you is to rule as a
15 matter of law as to what the procedures are for projects
16 over 10 megawatts which everybody recognize as stated by
17 counsel is a Commission-developed procedure.
18 I think the Commission in their prior orders
19 has made it clear and it's the position of Idaho Power
20 Company that this is an evolutionary-type process. We don't
21 know for certain what the rules are for over 10 megawatts
22 and I think it's important that the Commission has pointed
23 out that you can't look just at the prior orders of this
24 Commission to evolve that procedure, that this is an
25 administrative agency, and as issues come up, they will be
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1 sorted through by the Commission, the Commission will issue
2 orders, but the basic premise that this Commission has
3 instructed Idaho Power and the IEPI and everybody else
4 that's a QF is negotiate in good faith.
5 Now, the central issue in this proceeding is
6 has there been to date negotiations in good faith. Now, the
7 IEPI must answer that by saying, well, if you move to strike
8 all of Idaho Power's contentions that you have to look at
9 the load/resource balance, you have to look at the
10 dispatchability of the large projects, you have to look at
11 where they're located, all of the issues, the rates as they
12 would apply to a large project, when it would come on line,
13 all of that cannot be discussed in negotiations. I'm not
14 telling you that Idaho Power Company will prevail. What
15 they're asking you is rule as a matter of law that those are
16 issues that will not be discussed, and that's exactly what
17 transpired in the Rosebud case.
18 You instructed Idaho Power Company and Rosebud
19 get together and negotiate. Those negotiations sessions
20 lasted 15 minutes per the affidavit of Mr. Kline and why,
21 because Rosebud takes the position, as IEPI has taken the
22 position, those are issues which will not even be discussed;
23 so, therefore, Idaho Power, when you raise what this does
24 with the load/resource balance, even though it's a project
25 over 10 megawatts, it doesn't count, don't want to discuss
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1 it, it's not an issue. That's why we believe that you
2 should rule that there have not been negotiations to date
3 based upon the evidence that you have in this record.
4 The complaint should be dismissed with
5 prejudice and you should tell the parties to negotiate in
6 good faith -- without prejudice, excuse me. That is the
7 issue that is presented to you today and that's the only
8 issue.
9 Now, counsel would have you believe that you
10 have a very rigid formula for projects over 10 megawatts and
11 I submit to you that you don't have a procedure that's
12 exact. You expect the parties to negotiate. We've cited to
13 you in our case the eminent domain discussion by the Idaho
14 Supreme Court because we think it fits so very well what's
15 going on here, and that is you don't say, okay, Idaho Power,
16 what's the rate, and we say what the rate is and they say,
17 okay, that's no good and file a complaint. It's
18 unfortunate, but in a sense if I were a cogenerator
19 representing QF facilities, that's exactly what I would do
20 because you've triggered everything as far as timing is
21 concerned to the filing of a complaint, not an application
22 for a determination of the appropriate rate, but a
23 complaint.
24 It's unfortunate that we are always here in a
25 complaint-respondent type of atmosphere when we're talking
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1 about cogeneration, but that's the way your procedure has
2 evolved and I think the Commission should carefully review
3 that procedure to see whether or not as your procedure
4 evolves that's correct, but, again, in this proceeding we
5 are talking about a project over 10 megawatts.
6 Now, at what point would it become logical for
7 Idaho Power Company to say, well, wait a minute, you're
8 offering me 200 megawatts. I'm being inundated with too
9 much power. I can't buy 200 megawatts based on existing
10 rates. Now, does the cogenerator get to say, tough, after
11 you buy my 200 megawatts and a trigger files, then you can
12 drop the rate. Maybe you won't have to buy any more for 20
13 more years, but you've got the 200 megawatts today. I
14 submit to you that that answer is nonsensical.
15 It's a question of fact as to whether or not
16 40 megawatts will or will not affect Idaho Power Company's
17 load/resource balance. It's a question of fact whether or
18 not that resource should be dispatchable or
19 non-dispatchable. It's a question of fact how that rate
20 should deviate from your avoided cost rates. You can't rule
21 as a matter of law that Idaho Power Company can't even raise
22 these issues in negotiation, but that's what IEPI wants you
23 to do, rule as a matter of law what the formalistic
24 procedure is going to be for projects over 10 megawatts. I
25 submit to you that if that is going to be your ruling, then
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1 you're going to straightjacket Idaho Power Company in
2 negotiations and negotiations will become exactly what they
3 became in Rosebud, a pro forma requirement that the QF
4 producer has to go through before it can file its complaint
5 with you. There has not been good faith negotiations.
6 Now, why? I'm not casting Rosebud in the
7 light of they're just bad people and they refuse to
8 negotiate. They refuse to negotiate on these issues because
9 they're taking the same position as the IEPI. These are
10 issues which we do not have to negotiate. I think they have
11 to negotiate them and that's why we're here, and that's what
12 you've got to rule. Can Idaho Power Company on projects
13 over 10 megawatts bring up what happens to the load/resource
14 balance? We think that your prior orders have provided that
15 that's one of the issues. If you take all of the issues and
16 all of the orders that discuss what happens on projects over
17 10 megawatts, I come away with one good answer to all of
18 these inquiries and that is you must negotiate in good faith
19 and this Commission has not prohibited any of these issues
20 being raised in negotiations as to the effect upon the
21 utility and its revenue requirement and its rates. These
22 are projects over 10.
23 Now, you've made it abundantly clear, and I've
24 got the scars on my back to demonstrate, that on projects
25 under 10 megawatts you have a more formalistic procedure,
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1 which I submit to you that Idaho Power Company has
2 followed. Mr. Kline can show you the scars on his back for
3 following under 10 megawatts, but we're talking about a
4 project over 10 megawatts and I don't think that you have
5 made all of the factual determinations that counsel for IEPI
6 would contend that you have made, that it is a rigid,
7 formalistic procedure for projects over 10 megawatts and
8 Idaho Power Company cannot raise the effect upon its
9 load/resource balance of a project in excess of
10 10 megawatts, it cannot raise the dispatchability, it cannot
11 raise what changes in the rates there should be as a result
12 of the fact that it's over 10 megawatts. I'm not saying,
13 and I want to make it abundantly clear, that Idaho Power
14 Company has the last say and that whatever we say goes.
15 Obviously, after those discussions in good faith have
16 transpired, then it's time for the complaint to be filed,
17 but you have created a procedure that if I were a QF
18 producer, I'd spend about as much time as Rosebud did with
19 Mr. Kline before I filed my complaint because I don't have
20 to negotiate in good faith.
21 We filed Mr. Kline's affidavit and that's why
22 I'm arguing. I realize it's unusual and I realize that this
23 Commission likes to proceed to a factual determination
24 before it issues its order, but if you are convinced that
25 Idaho Power Company is entitled to look at the load/resource
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1 balance, if it is entitled to raise these issues, then I
2 think you're doing more harm to Rosebud than you are to
3 Idaho Power. That's what we will present in our
4 proceeding. That will be the evidence and then if you rule
5 yes, then it will be after December 15th and then Rosebud
6 will get its answer.
7 I don't think we are looking for any great
8 deviation from your prior orders. I think your prior orders
9 make it clear that it's an evolutionary process for projects
10 over 10 megawatts, that these are legitimate issues to be
11 discussed in negotiation. You can then test the position of
12 the parties as to what their final position on those
13 negotiations were based upon a factual determination of good
14 faith and that's what should happen, and I think, quite
15 frankly, that you should dismiss without prejudice Rosebud's
16 complaint on the basis that there have not been negotiations
17 on these issues and that as a matter of law they are not
18 issues which are prohibited from being discussed.
19 COMMISSIONER MILLER: All right, thank you,
20 Mr. Ripley. Questions for Mr. Ripley.
21 COMMISSIONER NELSON: I have none.
22 COMMISSIONER MILLER: All right.
23 MR. ORNDORFF: Mr. Chairman, I guess I'm next.
24 COMMISSIONER MILLER: You are, if you would
25 like to be.
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1 MR. ORNDORFF: I'm a bit confused. Is there a
2 motion from Idaho Power to dismiss the complaint that's
3 being heard today? Maybe I missed that in the filing. I'm
4 confused, I guess, at this point.
5 COMMISSIONER MILLER: My impression,
6 Mr. Orndorff, and this is subject to correction, of course,
7 is that the only motion that we're taking under
8 consideration today is a motion to strike. I took
9 Mr. Ripley's comments not to be in the form of a motion, but
10 more as a method of argument.
11 MR. ORNDORFF: I just wanted to be sure I
12 hadn't missed something. I really have just brief
13 comments. I want to talk a little bit about history, where
14 we are in the negotiations since that seems to be of
15 interest, and just where the whole overall policy is going.
16 Now, I've had some problems in the last 10
17 years, I've lost some hair, I'm a little heavier and I seem
18 to be reinventing history again. I have this funny feeling
19 that this is the 199 case and the 200 and Afton revisited.
20 I've got Idaho Power doing essentially what they did in the
21 Afton complaint, coming in with a whole litany of new facts,
22 new assertions, a new load/resource, no need for power, and
23 claiming that that impacts the right of a QF that has been
24 pursuing the Company, in that case Afton, for over a year.
25 I think the Commission correctly handled the
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1 Afton rate proceeding and the post Afton QFs that came in
2 and I would suggest to the Commission that history indeed is
3 reinventing itself and that the Company has reverted back to
4 its prior tendencies of fighting every QF that comes down
5 the road for whatever creative reason it can determine.
6 Why, because the Company has determined that it no longer
7 wants to buy independent competing generation.
8 I don't know the reasons for that. I just
9 point that out as a historical similarity to previous
10 conduct and perhaps that beckons a response that goes beyond
11 Rosebud's complaint at some point. That's entirely up to
12 the Commission.
13 Rosebud's primary interest in this motion by
14 IEPI is to proceed with an orderly and expedited resolution
15 of its complaint. We believe we are quite capable of
16 pointing out the fallacies of Idaho Power's arguments in any
17 complaint. By leaving the portions in the answer from an
18 industry policy viewpoint, you have a very chilling effect
19 on any potential entry into this business if everybody has
20 to go through the gauntlet like Rosebud is being put through
21 by Idaho Power.
22 As Rosebud's attorney, I'm not offended, I'm
23 not surprised, that's where the Company is today, but
24 somebody on the outside who looks at what goes on in Idaho
25 and what Idaho Power will do to frustrate you and the
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1 defenses and the ferocity in which they go after a QF, it
2 becomes a place where you go elsewhere, and I think the
3 Company's intent is to do that. If you want to have an
4 independent generation business in the times of extreme high
5 growth to try to hold rates down from a ratepayer sense, the
6 Commission is going to have to get more active in Rosebud's
7 view to regulate and to explain and enforce what the rules
8 are. The days of, and we experienced from '83 to roughly
9 '87, apparently where compliance was the order of the day
10 clearly have somehow alluded us.
11 Lastly, I'd point out that I don't know, I
12 read Order 25160 in the Twin Falls reconsideration, and I
13 guess on Page 5, as a pretty clear indication to both
14 Rosebud and to Idaho Power where the starting place is in
15 negotiating over 10 megawatts. Well, the Company may claim
16 that there are no good faith negotiations. I think the
17 letters and the correspondence and the Company's offer
18 clearly show no firm energy price, a Schedule 86 non-firm
19 energy price offered up to 2006 in the face of two previous
20 contracts that the Company submitted to this Commission for
21 approval, which were in a matter of course approved at rates
22 that were substantially in compliance with the Commission's
23 previous orders.
24 Now, that deviation is without precedent and
25 is totally inconsistent with the arguments that are before
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1 that the Company is now making to the Commission that over
2 10 megawatts the rules are unknown. It's a little bit odd
3 to hear these arguments with all of the applications for
4 over 10 megawatt projects that have been before this
5 Commission where the Company is the sponsoring organization
6 or independent generation. It's just a little peculiar.
7 I look forward to the hearing on the 15th or,
8 in the alternative, a speedy resolution and settlement with
9 Idaho Power. I'm perfectly willing at any point to sit down
10 with them and talk and so is Rosebud. We just haven't
11 really had any further negotiations since April 1.
12 Thank you, Mr. Chairman.
13 COMMISSIONER MILLER: Thank you,
14 Mr. Orndorff. Mr. Woodbury, do you have any comments to the
15 Commission?
16 MR. WOODBURY: Just a few comments. I believe
17 that what we're discussing here today are the issues of
18 methodology and starting point for negotiation for QFs
19 larger than 10 megawatts. Those are issues that Staff
20 believes have been developed in prior cases and orders and
21 are a matter of record. Staff has expressed its position on
22 this matter as early as the first prehearing conference in
23 this case on February 3rd and has explicitly stated its
24 position in the prefiled testimony which it has filed in
25 this case.
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1 The Commission has acknowledged that
2 negotiation for QFs larger than 10 megawatts, in this case
3 40 megawatts, may entail, however, consideration of a myriad
4 of factors which have significant effect on a utility and
5 how it operates. Given the utilities in this state and this
6 Commission's relatively little experience with larger
7 facilities, it is my understanding that this Commission has
8 expressed a desire to fully develop this case, to hear the
9 parties out, to identify the factors of importance, and to
10 that end, the Commission has established a schedule for
11 prefile and hearing and I don't take issue with that. I
12 think it's important for the Commission to fully understand
13 what it decides.
14 We've heard a motion to strike characterized
15 as a motion for summary judgment. I think it also could be
16 characterized as a petition for declaratory ruling and I
17 think that the Commission in this regard has already spoke
18 in that the direction that we are headed is for a hearing.
19 If the parties negotiate a settlement in the interim, then
20 it's all fine, but I don't know that there will be anything
21 accomplished in short-circuiting it at this point.
22 Staff can appreciate IEP's perception that
23 Idaho Power, Washington Water Power and PacifiCorp are
24 attempting to dismantle the Commission's uniform methodology
25 for avoided cost in this state. Staff does not agree,
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1 however, that this Commission is headed down a slippery
2 slope. I think Staff has confidence that the Commission is
3 ever mindful of the methodology that it has established and
4 will make the right decision.
5 Those are my only comments.
6 COMMISSIONER MILLER: Thank you,
7 Mr. Woodbury.
8 Mr. Richardson, we'll take concluding comments
9 from you if you'd like.
10 MR. RICHARDSON: Thank you, Mr. Chairman.
11 Idaho Power's response basically contained three points.
12 Its first point is the timeliness issue. In their answer,
13 their written answer, to our motion, Idaho Power disclaims
14 the significance of the issue by stating: "Idaho Power's
15 objection to the motion should not be taken as form over
16 substance." Then a few moments ago Mr. Ripley said that the
17 timeliness issue is extremely important, but he doesn't tell
18 us why.
19 Rule 66 of the Commission's rules of procedure
20 provides that defects that do not substantially affect the
21 rights of the parties will be disregarded, and I suggested
22 to you earlier that the timeliness of the motion certainly
23 did not prejudice or substantially affect the rights of any
24 party to this proceeding, no harm, Mr. Chairman.
25 Idaho Power's second issue is their assertion
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1 that good faith negotiations are the central issue of this
2 case, of this motion. It may be the central issue of the
3 dispute between Rosebud and Idaho Power. It's not even an
4 issue in our motion. As we stated up front at the beginning
5 of today's oral argument and up front at the beginning of
6 our motion, we do not wish to interject ourselves into the
7 dispute between Idaho Power and Rosebud relative to who said
8 what to whom and when.
9 Good faith negotiations are not the central
10 issue of our motion. The central issue of our motion is
11 whether or not the Commission's policies are to be adhered
12 to by those over whom you have jurisdiction, and I agree
13 with Mr. Ripley, you don't have rigid policies relative to
14 avoided cost negotiations, but you do have policies, and I
15 agree with Mr. Ripley that it is an evolutionary process,
16 but I would submit that we've gone beyond the primordial
17 ooh's stages of evolution.
18 Relative to Mr. Woodbury's statement that the
19 impact of larger than 10 megawatt projects ought to be
20 analyzed as to how it affects the utility's operations,
21 that's exactly what you've asked for in your orders. For
22 projects greater than 10 megawatts, the utility must take
23 into account how it affects their operations. It does not
24 take into account resource management report assertions of
25 various resource deficit dates. It doesn't require
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1 dispatchability and it doesn't change that the starting
2 point for negotiations for rates is the published rate for
3 projects under 10 megawatts. You have explicitly stated
4 that time and time again in order after order; so really,
5 the central issue of this case, Mr. Chairman, is whether or
6 not you wish to adhere to your policies that you've
7 established and whether or not you will permit back door
8 changing of those policies without an application providing
9 all parties an opportunity to confront and address these
10 issues.
11 As an aside, Mr. Chairman, I would note that
12 Idaho Power already has two contracts for projects much
13 greater than 10 megawatts. Neither one of these projects
14 has been subject to this revisionist view of the
15 Commission's policies; so with that, Mr. Chairman, I would
16 conclude my oral argument.
17 COMMISSIONER MILLER: All right, thank you,
18 Mr. Richardson. Questions or comments from the
19 Commissioners.
20 COMMISSIONER NELSON: Mr. Richardson, in
21 regard to those two contracts that are signed by the Company
22 and the independent producer, what distinction do you see in
23 the negotiations there and here?
24 MR. RICHARDSON: The first contract I see
25 none, Mr. Commissioner, and that would be what I would
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1 reference the Auger Falls contract, which is, I believe,
2 35 megawatts or so. It was offered a rate of approximately
3 85 percent of the under 10 megawatt rate. I see no
4 distinction.
5 The second one, obviously, is the Meridian
6 Generating contract and we went around and around on that
7 one here relative to whether or not the deal Idaho Power cut
8 for Meridian Generating was indeed motivated by a settlement
9 of the Afton litigation. I pointed out in pleadings in that
10 case that Idaho Power's signing of that deal with Meridian
11 Generating took place before the litigation was resolved; so
12 I see very little difference, Mr. Commissioner.
13 If Idaho Power thinks that they're going to be
14 inundated with 200 megawatt CTs up and down the Snake River
15 Valley, then they probably ought to file a case here saying
16 that we need to revise your policies, but they can't revise
17 your policies in an answer to a complaint action. There's
18 just simply no notices and there are a lot of people out
19 there who would have something to say on this issue if
20 indeed you're going to start revising your fundamental
21 policies for contract negotiations and none of them are
22 here.
23 COMMISSIONER NELSON: My next question is so
24 far off the subject that I'm not going to ask it.
25 COMMISSIONER MILLER: Well, with that, then,
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1 we'll consider this motion fully considered and we note that
2 the schedule we've previously established for this case
3 contemplates on November 1st Idaho Power Company is
4 scheduled to file its direct prefiled testimony along with
5 any motions that it may have, all of this leading to a
6 contemplated hearing on December 14th, and I think that, I
7 hope we can try to get some response to this motion out
8 quickly so that that schedule can be maintained and
9 Mr. Orndorff's legitimate desire for an orderly process of
10 processing this matter according to the schedule that we
11 have previously established can be preserved; so in one
12 manner or another we will try and give this matter its
13 appropriate consideration and get some answer out to the
14 parties so that that schedule can be preserved.
15 COMMISSIONER SMITH: Mr. Chairman, I would
16 just note that I recall that we strongly indicated that
17 there would have to be death or some other major catastrophe
18 to move the December hearing date and it would certainly be
19 my intention that that date remain fixed.
20 COMMISSIONER MILLER: And from the looks of
21 it, in order to maintain that date, we almost have to
22 maintain all the other dates.
23 All right, that's what the Commission will try
24 and do then. Thank you for your comments. This obviously
25 is more than a procedural matter; so it will take some
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1 discussion by the Commission to come to a conclusion, but
2 we'll endeavor to do that in a way that keeps us on track.
3 If there's nothing else, we'll be adjourned.
4 (The Oral Argument adjourned at 9:45 a.m.)
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1 AUTHENTICATION
2
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4 This is to certify that the foregoing oral
5 argument held in the matter of Rosebud Enterprises, Inc.,
6 Complainant, versus Idaho Power Company, Respondent,
7 commencing at 8:30 a.m., on Thursday, October 28, 1993, at
8 the Commission Hearing Room, 472 West Washington, Boise,
9 Idaho, is a true and correct transcript of said oral
10 argument and the original thereof for the file of the
11 Commission.
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16 CONSTANCE S. BUCY
Certified Shorthand Reporter
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