20030825_598.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:AUGUST 19, 2003
RE:CASE NO. PAC-03-9 (PacifiCorp)
ELECTRIC SERVICE SCHEDULE NO.
NEW WIND, GEOTHERMAL & SOLAR POWER RIDER-OPTIONAL
On July 11 , 2003, PacifiCorp dba Utah Power & Light Company (PacifiCorp,
Company) filed a request with the Idaho Public Utilities Commission (Commission) for approval
of a new renewable energy tariff, Schedule 70 - New Wind, Geothermal & Solar Power Rider.
The Company has requested a September 1 , 2003 , tariff effective date. Under the proposed
program, residential and non-residential customers can purchase newly developed wind
geothermal and solar power energy at a premium of $1.95 per 100 kilowatt-hour block. The
Company has recommended an effective date of September 1 , 2003. The premium is in addition
to the normal billed rate which includes but is not limited to a basic charge as well as energy and
delivery charges. The premium covers the costs of the program. These costs include the
incremental costs of the new renewable energy, marketing costs and program administration.
Under the proposed Schedule 70 tariff, consumers can choose the number of blocks to purchase
which is not dependent on the amount of energy used.
Currently PacifiCorp offers this option, called Blue Sky, to consumers in four other
states - Oregon, Utah, Washington and Wyoming. The Company s Blue Sky emollment roster
includes over 11 500 customers. Qualified customers may apply for or terminate from Schedule
70 anytime during the year. The Company will not accept emollments for customer accounts
that have a time payment agreement in effect or have received one or more disconnect notices or
have been disconnected within the last 12 months.
DECISION MEMORANDUM
Under the Company s proposed tariff, PacifiCorp plans to purchase tradable
renewable credits (green tags) and/or bundled power to satisfy the requirements. Including both
purchase options, the Company states, is beneficial to customers as it allows the Company to
pass along lower prices. In addition, it is beneficial to the Company, as it allows for the more
efficient balancing of purchases and sales and will minimize the risk of not achieving a zero net
gain or loss at the program life. Green tags represent an amount of renewable kilowatt/hours
sent to grid, displacing less environmentally friendly energy.
As set forth in the tariff Schedule, new wind, geothermal or solar power energy will
be delivered within two years of when the energy is purchased by the customer. Tradable
renewable credits will be delivered within 18 montl~s of when energy is purchased by the
customer. PacifiCorp will keep interested parties informed of purchases for the program on a
twice per year basis. If there is not availability at the right price to purchase at a level (capped
within the $1.95 retail price) then PacifiCorp will attempt to make purchases at the next level.
The reports will summarize purchases and note reasons for choosing a "tier" and, if applicable
foregoing more preferred options in light of available tag supply.
As reflected in its filing, PacifiCorp states that several environmental organizations
including Renewable Northwest Projects and the Land and Water Fund of the Rockies endorse
the Company s program which meets Renew 2000 standards. Renew 2000 standards were
established by a collaboration of interested regional utilities and environmental organizations to
ensure that optional renewable energy products offered to consumers in the Northwest met
minimum content standards, thus protecting and assuring consumers that such products provide
benefit to the environment.
The wind energy purchased on behalf of t~e Company s Blue Sky customers is in
addition to renewable energy investments PacifiCorp has made to serve all its customers.
Currently, Blue Sky wind energy purchases come from Foot Creek IV in Wyoming; from wind
farms in Condon and Klondike, Oregon; and from the Stateline Wind Facility on the Oregon-
Washington border. All renewable energy generation linked to the program at minimum will
come from facilities that went online post-January 2000.
On July 25, 2003 , the Commission issued Notices of Application and Modified
Procedure in Case No. P AC-03-09. The deadline for filing written comments was August 14
2003. Comments were filed by the Commission Staff and Mr. Mike Settell. Mr. Settell'
DECISION MEMORANDUM
comments are attached. Staff recommends approval ofPacifiCorp s proposed Schedule 70 tariff
with an effective date of September 1 , 2003. As reflected in Staff comments, PacifiCorp first
proposed a "green tariff' program on March 10 , 2000 in Case No. PAC-OO-1. On May 18
2000, the Commission issued final Order No. 28380 in Case No. PAC-OO-l denying the
Company s Application. In its Order, the Commission stated:
The Company s filing is a follow-up to a commitment made in the
ScottishPower merger proceedings. Although the submitted tariff is structured in
such a way that all program costs are paid by participants-marketing costs
program administration, and incremental cost of new energy, we will not approve
it at this time.
All parties note that the tariff premium (4.75~/kWh) exceeds the cost of
other regional programs. The Company cautions us in making such a comparison
however, that we do not know whether the renewable premium rates of the other
regional energy providers are cost-based, inferring that they may be subsidized.
The Company may be right. The fact remains that the cost appears to be too high.
Nearly one-third of the proposed premium is apparently for program
administration and marketing. The commenting parties are concerned that the
Company s focus appears to be more on marketing and promotion than on actual
renewable resource development. While marketing and promotion are necessary,
resource development should have the benefit of the majority of premium dollars
provided to customers.
In the merger case, the overriding customer sentiment in the Company
southeast Idaho service territory was a desire for lower cost electricity.
Geographically, the Company Idaho customers are uniquely situated
surrounded by municipal, cooperative and investor-owned utilities, all providing
lower cost power. The Company in this case presents us instead with a higher
cost resource. In a separate case, also pending, it presents a rate increase related
to the elimination of the BPA exchange credit (Case No. UPL-OO-l).
cannot ignore that while the Company forecasts a penetration rate of 2.75% on a
system-wide basis for its new green tariff, it expects to achieve only half of that
penetration rate in Idaho. The Commission finds that regardless of the voluntary
nature of the submitted program, we must consider customer acceptance and we
have a responsibility to assure fair pricing. While this Commission supports the
development of renewable resources, we believe that the Company needs to refine
its proposal. Perhaps experience gained in other states will result in program
improvements. We encourage the Company to file a "green tariff' for UP&L that
supports deployment of renewable resources and is priced to foster customer
acceptance.
DECISION MEMORANDUM
On May 26, 2000, the Company filed a Petition for Reconsideration with the
Commission requesting reconsideration ofthe Commission s Order No. 23830. In its Petition
the Company asked the Commission to consider the following:A. A future renewable resource program will likely be more costly than the
current proposed program due to the expiration of federal tax credits;
Customers have indicated a desire to participate in renewable resource
programs;
The currently offered program benefits from economies of scale. Designing a
program for the estimated 800 PacifiCorp customers in Idaho that are
expected to participate would be prohibitively costly.
Marketing expenditures have been mischaracterized as representing a high
percentage of program costs.
The Commission, in Order No. 28406 denied the Petition, stating:
PacifiCorp in its petition for Reconsideration proposes no changes in its
tariff offering and offers to provide no additional information or facts that would
cause us to change our prior decision. The Company continues to offer a higher
priced choice to a customer base that wants lower cost energy. We continue to
find that the tariff the Company proposed for its southeast Idaho service territory
is not priced at a level that would foster customer acceptance.
PacifiCorp should not interpret our decision in this case as opposition to
renewable resource programs. The Company-estimated number of Schedule 70
participants in southeast Idaho is extremely small, a much lower expected
participation rate than in any of the Company s other jurisdictional service areas.
We do not believe the current proposal is the best that can be offered. We expect
that the Company willieam from its experience in those states that have approved
the tariff and that advances in technology will continue to make wind power and
other renewable generation resources more competitive. We find that it is also
reasonable in this time of increasing costs for fossil-based fuels to expect that the
federal tax credits for renewable energy will not expire but be re-authorized or
extended. We encourage the Company to continue to design its renewable energy
program based on in experience in other states and refile an improved program in
the future. It will be easier for the Company to demonstrate market acceptance
with a proven track record. The Commission finds that the Company s Petition
for Reconsideration should be denied and Order No. 28380 is reaffirmed.
DECISION MEMORANDUM
Staff states that the Company s current proposal is to implement the same renewable
energy program (Blue Sky) in Idaho that has been offered since 2000 in Oregon, Utah
Washington and Wyoming. The one key difference from the tariff that was initially proposed in
Idaho is the price per 100 kWh block. In the Company s earlier proposal in 2000, PacifiCorp
proposed a price of $4.75 per 100 kWh block. That price has now been reduced to $1.95 per 100
kWh block. The reduced price was implemented in Oregon, Utah, Washington and Wyoming
beginning in April 2003. The reduced price is the result of substantially lower cost for green
energy and lower overall administrative and marketing costs. Staff contends that the proposed
premium is now more in line with the price premiums charged by other utilities in the region
with green energy tariffs, and in fact, is lower than many.
Despite the lower price, Staff notes that the administrative and marketing costs
continue to be responsible for the majority of the price premium. The cost of acquiring green
power accounts for only about 38% of the $1.95 price premium. As the price premium for wind
energy continues to shrink, Staff would expect that marketing and administration costs would
also shrink.
Staff notes that in the next ten years PacifiCorp has chosen to pursue acquisition of
400 MW of new renewable generation, primarily wind, out of a total new resource need of
000 MW. This is in addition to the approximately 70 MW of wind generation already a part of
the Company s existing generation portfolio. It would seem inconsistent, Staff contends, for the
Company to charge a premium for Schedule 70 customers buying wind energy while, at the same
time, justifying the acquisition of wind generation for all of its other non-participating customers
on the basis that it is the least cost resource. Staff recommends that the Company continue to
evaluate the program costs and the premium on an ongoing basis to ensure that participating
customers are not paying more for the same renewable energy benefits enjoyed by all PacifiCorp
customers.
As previously expressed in comments on the Company s earlier proposal, Staff
continues to believe that the most important consideration is that non-participating customers not
be required to bear any of the program costs. As the program is structured, Staff believes that
that is indeed the case. Only those customers who voluntarily elect to participate will contribute
to the program costs, and any excess revenue generated due to program revenues exceeding
DECISION MEMORANDUM
actual program costs will be used to either to reduce the price premium in the future or purchase
more green energy.
Staff notes that PacifiCorp expects the following participation levels by year for its
Idaho customers:
YEAR PARTICIPANTS
160
250
350
415
PacifiCorp serves approximately 59 554 customers in Idaho, of which approximately 47 000 are
residential customers
Commission Decision
PacifiCorp requests approval of a new renewable energy tariff, Schedule 70. The
tariff structure is similar to the Blue Sky Program previously rejected by the Commission. The
difference in the two Applications is a significant reduction in the premium price.Staff
recommends approval of the Schedule 70 tariff with an effective date of September 1 , 2003.
Staff also recommends that the Company continue to evaluate the program costs and the
premium on an ongoing basis to ensure that participating customers are not paying more for the
same renewable energy benefits enjoyed by all PacifiCorp customers. Does the Commission
find it reasonable to approve the Company s proposed renewable energy tariff? With or without
Staffs recommendation of continued evaluation?
Scott Woodbury
Vld/M:P ACEO309 _sw2
DECISION MEMORANDUM
Jean Jewell
From:
Sent:
To:
Subject:
Ed Howell
Monday, July 28, 2003 3:25 PM
Jean Jewell; Ed Howell; Gene Fadness; Tonya Clark
Comment acknowledgement
WWW Form Submission:
Monday, July 28 , 2003
2:24:41 PM
Case:
Name: Mike Sette1l
Street Address: 2300 Buckskin Rd
Ci ty: Pocatel1o
State: ID
ZIP: 83204
Home Tel ephone:E-Mail: micoad0veloci tus . net
Company: Pacificorpmailinglist _yes _no: yes
Comment description: Current limits on green tags are ~50kW and up. Smaller generators
need to be considered in the upcoming request by Pacificorp for renewables. Smaller
generator s should have access to green tags. Smaller generators diversify the power
supply and create economies of scale as a group. Conversely Pacificorp puts all our eggs
in one basket. Therefore , if there is a request to purchase green tags , keep in mind
that these will not help small independent generators , for whom they were originallyintended.
Second, if Pacificorp is collecting fees for green money, in Idaho, these fees should stayin Idaho. This provides the opportunity for in-state energy dependence and creation ofjobs.
Finally, any grant to allow increased access to wind power, via siting and requirements
should be offset a comparable amount in hydro. This way, the water could be retained in
Idaho for other purposes rather than spinning turbines for California and the West cost.
This would also allow for timed flushes needed by migrating salmon.
Regards
Mike Settell
Transaction ID: 7281424.Referred by: http: / /www. puc. state. id. us/ scripts/polyform. dll/ipuc
User Address: 207.141.253
User Hostname: 207.141.253