20090610Answer to Motions.pdf

A vista Corp.
1411 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170
REClSlveo
209 JO 10 AttiG: II
IDAHO puei.ir.
UTILITIES COMMIŠSION
~~~'V'STA.
Corp.
June 9, 2009
Jean Jewell, Commission Secretary
Idaho Public Utilities Commission
Statehouse Mail
472 W. Washington Street
Boise, il 83702
Re: Case No. A VU-E-09-04
Avista Corporation's Answer to Motion to Dismiss and Motion for an Order
Rejecting Stay
Dear Ms. Jewell:
Enclosed for fiing with the Commission are an original and seven (7) copies of A vista
Corporation's Answer to Motion to Dismiss and Motion for an Order Rejecting Stay.
If you have any questions regarding this filing, please contact Patrick Ehrbar at (509)
495-8620.
Sincerely,
?' ~~i.
Kelly Norwood
Vice President, State & Federal Regulation
cc:Service List
CERTIFICATE OF SERVICE
I hereby certify that on this 9th day of June 2009, true and correct copies of
the foregoing ANSWER TO MOTION TO DISMISS AN MOTION FOR ORDER
REJECTING REQUEST FOR STAY were delivered to the following persons via
electronic mail and overnight delivery for the Commission.
Jean Jewell
Idaho Public Utilities Commission
472 W. Washington St.
Boise, il 83702
SecretarCfuc.idaho. gov
Dean J. Miler, Esq.
McDevitt, & Miler, LLP
PO Box 2564
Boise, il 83701-2564
joe(7mcdevitt -miler. com
Daniel E. Solander
Senior Counsel
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Daniel.solander(7pacificorp. com
Donovan E. Walker
Barton L. Kline
Idaho Power Company
POBox 70
Boise, il 83707-0070
dwalker(7idahopower. com
Ted S. Sorenson, P.E.
Sorenson Engineering, Inc.
5203 South 11 th East
Idaho Falls, il 83404
ted(7sorenson.net
Benjamin Ellis
Vice President
20 Wilow Street
Jackson, WY 83001
Ben. ellis(7sagebrushenergy .net
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington St.
Boise, il 83702
scott. woodburyCfuc.idaho.gov
Peter Richardson
Richardson & O'Leary
515 N. 27th St.
PO Box 7218Boise, il 83702
peter(7richardsonandoleary.com
Ted Weston
il Regulatory Affairs Manager
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Ted. westonCf,pacificorp. com
GregW. Said
Randy C. Allphin
Idaho Power Company
PO Box 70
Boise, il 83707-0070
gsaid(7idahopower. com
Scott Atkinson, President
Idaho Forest Group LLC
171 Highway 95 N
Grangevile, il 83530
scottaßYidahoforestgroup. com
David Schiess, P .E.
Schiess & Associates
7103 South 45th West
Idaho Falls, il 83402
(via U.S. Mail)
~.~Patty Olsn ss
Rates Coordinator
Michael G. Andrea (Po Hac Vice Pending)
Senior Counsel
A vista Corpration
1411 Eat Mission,
Spokae, W A 99202
Phone: [phone]
Facsime: [phone]
Joseph N. Pire (ISB # 6973)
ELA & BURKE, P.A.
251 E. Front Strt, Suite 300
POBox 1539
Boise, ID 83701
Phone: [phone]
Facsimie: [phone]
RECEIVED
2mJUN 10 AM 10: II
IDAHO PUBUC
UTILITIES COMMiSSION
BEFORE TH IDAHO PUBLIC UTITIES COMMSSION
IN TH MA'IR OF A PETIION FID BY
AVISTA CORPORATION FOR AN ORDER
DETERMINING THE OWNRSHI OF TH
ENVIRONMNT AL ATTUTS ("RECS")
ASSOCIATED WIT A QUALIFING
FACILITY UPON PURCHASE BY A UTILIT
OF TH ENERGY PRODUCED BY A
QUALIFG FACILIT
)
) CASE NO. A VU-E-09-04
)
)
) ANSWER TO MOTION TO DISMISS
) AN MOTION FOR ORDER
) RECTG REQUET FOR STAY
)
)
Puuant to IPUC Rule of Procedure 57, petitioner Avista Corpration ("Avista") hereby
submits its answer to the Motion to Dismiss ("Motion to Dismiss") fied by Exergy Development
Group of Idaho, LLC ("Exergy") and the Motion for Order Rejectig Request for Stay ("Motion
to Reject Stay") fied by Sagebrush Energy LLC ("Sagebrush") on May 26,2009.1 As discussed
herein, the Commssion has subject matter jursdiction to determne the ownership of
environmenta attbutes (sometimes referr to as RECs) in ths proceeng, Avista's Petition
for an Order Determning the Ownership of RECs and Stay of Any Requirement to Award RECs
IOn June 2, 200, Idaho Forest Group fied a concurence to Sagebrush's Motion to Reject Stay. On June
3, 200, Exergy fied a supplementa fiing in support of its Motion to Dismiss.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
Page -i
to a PURA Developer ("Petition") is not a collateral attck on any final order, and Avista's
request for a stay satisfies the requirments for a prelimar injunction. Accordingly, Avista
respetflly requests that the Idaho Public Utiities Commssion ("Commssion") deny Exergy's
Motion to Dismiss and Sagebrush's Motion to Reject Stay and that the Commssion grant
Avista's reuest for an order staying any requirment to award RECs to a PURA developer that
has tendered or may tender a PUR A project to A vista until such time as the issue of ownership
ofRECs rase in Avista's Petition is resolved.
BACKGROUN
I. Reguatory Backgrund
The Federal Energy Regulatory Commssion ("PERC") has determed that the
ownership of RECs is not contrlled by the Public Utility Regulatory Policy Act of 1978
("PUR A,,).2 PERC furter held that "States, in creatig RECs have the power to determe
who owns the REC in the initial instace and how they may be sold or tred(.1"3 Finaly, PERC
held that "a state may decide that a sale of power at wholesale automatically trsfers ownership
of the state-created RECs, (but) that requirment must find its authority in state law, not
PURA.',4
Ownership of RECs associated with PUR A Qualifying Facilties (referr to as
"PURA projects" or "QFs") is not setted in Idaho.s In 200, Idao Power fied a petition with
the Commssion requestig a declartory order to determne the ownership of the marketable
2 American Ref Fuel Co., et al., 105 PERC If 61,00, P 23 (2003), order on reh'g, 107 PEC If 61,016
31d.
41d. atP 24
5 Based on Order Nos. 29480 and 29577, Sagebrush assert that ''te curnt state of the law in Idao is
clea and unambiguous" beause, according to Sagebrush, "(o)n two previous occasions the Commssion has
reognze tht under curnt law, RECs ar the propert of the generator." Sagebrush is incorrt. Sagebrush
Motion to Reject Stay at 2-3. As discusse herein, in both Order No. 29780 and Orer No. 29577, the Commssion
declined to address the issue of ownership ofRECs and, therefore, contr to Sagebrush's asserton there is no clea
and ambiguous Idaho law that provides that RECs ar the propert of the generator.
(200).
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
Page -2
environmenta attbutes associated with a PUR A project when Idao Power entere into a
long-term, fied rate contrct to purchase the energy produced by such project.6 In Order No.
29480, the Commssion found that "the issue presente by Idao Power in its Petition d(idl not
present an actual or justiciable controversy in Idaho and (wals not ripe for a declaratory
judgment by ths Commssion." 7
Afer the Commssion issued Order No. 29480, Idaho Power fied an application with the
Commssion in Case No. IPC-E-04-16 requesting approval of a Fir Energy Sales Agreement
between Idaho Power and J.R. Simplot Company ("Simplot Agreement,,).8 In the Simplot
Agreement, Idao Power agree to waive any claim to ownership of RECs, if the Commssion
provided Idao Power reasonable assurance that it would not be penalzed in a futue revenue
requirment proceedng for having agree to forego any ownership interest or right in such
RECs.9 Idao Power argued that by fing the Simplot Agrment it had presented the
Commssion with a real case or contrversy and, therefore, the issue of ownership of RECs that
the Commssion declined to address in Order No. 29480 was now ripe.1O In Order No. 29577,
the Commssion found that the regulatory landscape had not changed and again declied to
address the issue of ownership of RECs associated with PUR A Projects. 11 In ths case, as
6 IPUC Case No. IPC-E-04-o2.
7 Order No. 29480 at 16. The Commssion did note that Idaho Power could negotiate the sale and purchase
of RECs, but the cost of such RECs could not be reovered as PUR A costs. ¡d. at 16-17. Neverteless, the
Commssion declined to dirtly addrss the issue of ownership ofRECs rase by Idao Power's petition. See id.S Orer No. 29577 at 1.
9 ¡d. at 2-3. The fact that Idaho Power agr to waive any right to RECs in the Simplot Agrment and
that Idao Power sought assurances from the Commssion that it would not be later penalize for doing so
demonstrtes that, contr to Sagebrush's asserton (see supra note 5), Order No. 29480 did not clealy and
unambiguously reognize that RECs belong to the generator-if it had, Idao Power would have had no right to the
RECs to waive and there would have been no reason for Idaho Power to seek assurces frm the Commssion that
it would not be penalize for waiving such rights.
10 ¡d. at 3.
11 ¡d. at 5-6.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
Page -3
discussed below, A vista has five inquires or requests for PUR A contrts.12 As discussed
below, that fact as well as substatial changed circumstaces since 200 when ths issue was last
presented to the Commssion, gives rise to a justiciable controversy.
ß. Current Preeding
On May 5,2009, Avista initiated the above-captioned proceedng by filing its Petition
requesting an order declarng that the ownership of RECs associate with PUR A projects wil
be assigned to the utilities that purhase energy from such projects. Avista's Petition
demonstrates that, assuming RECs do not transfer to A vista when it purchases the energy from
PURA projects, Avista's ratepayers wil substatially overpay for energy from wind QFs.13
Moreover, Avista's Petition states that allowing PURA developers to retan and market
separtely the RECs associated with their projects may negatively impact Avista's abilty to
acquir cost effective renewable resources in a competitive acquisition process.14 Given that the
issue of ownership of RECs is not yet setted in the State of Idaho and the potential for
substatial har, and given the five pending reuests or inquires from developers for PUR A
contrcts, A vista also requests in its Petition that the Commssion issue an order staying any
requirement to award RECs to PUR A developers until a final order resolving the issues raised
in Avista's Petition is issued. Avista requests expeted treatment of its request for a stay.
12 Speifically, Avista has reeived the following reuests or inquies for PURA contrts: (1) Sagebrush
has reueste a PUR A contract for a proposed PUR A project locate in Montaa for which it desires to sell the
output to Avista in Idaho; (2) IFG Energy I, LLC has reueste a PURA contrt for a proposed PURA project
locate near Grageville, Idao; (3) IFG Energy IT, LLC has reueste a PURA contrt for a propose PURA
project near Chilco, Idaho; (4) IFG Energy il, LLC has reueste a PURA contrct for a propose PURA project
near Lalede, Idaho; and (5) Fodge Pulp, Inc. has inquire about a PURA contrct for a propose PURA project
near Bonners Ferr, Idao. Sagebrush is an intervener in ths proeeing. Avista understands that IFG Energy I,
IFG Energy IT, and IFG Energy il ar afliated with Idao Forest Group, which is also an intervener in ths
proeeins-i E.g., Petition at 4-5 (stating that "Avista's customers wil overpay by approximately $310 millon over
the expecte 20-year lives" of the contrcts associate with five propose PURA projects, if th RECs associated
with such projects ar not transferr to Avista when it purchases the energy from such projects); Kaich Dit at 14
(same).14 Petition at 5; Kaich Dirt at 24.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
Page -4
On May 26,200, Exergy fied its Motion to Dismiss. In its Motion to Dismiss, Exergy
argues that Avista's Petition should be dismissed beause the Commssion lacks subject matter
jursdiction. Exergy furter argues that Avista's Petition should be dismissed beause Avista's
Petition is a collatera attck on Order Nos. 29480 and 29577.
On May 26,200, Sagebrush fied its Motion to Reject Stay, in which it requests that the
Commssion reject Avista's request for a stay. Sagebrush assert that Avista's reuest for a stay
should be evaluate under the law of prelimnar injunctions and rejected because, in
Sagebrush's view: (1) Avista has not demonstrated that it is liely to prevail on the merits; and
(2) Avista has not shown irparable injur. Sagebrush also argues that the Commssion should
reject Avista's request for a stay on public poli~y grounds.
As discussed below, Exergy's and Sagebrush's arguments are without merit.
Accordingly, Avista requests that the Commssion deny both Exergy's Motion to Dismiss and
Sagebrush's Motion to Reject Stay and issue an order granting Avista's request for a stay of any
requirement to award RECs to a PURA developer until the issues raised in Avista's Petition ar
resolved.
ARGUMNT
I. Exerg's Motion to Dismiss Should be Denied
A. The Commssion has Jurisdicton to Determine the Ownership of RECs
Assciated with PUR A Prjec
The Commssion has subject matter jursdiction to determne the ownership of RECs in
ths proceeng. PERC has expressly disclaied such jursdiction and has held that states "have
the power to determne who owns the REC in the initial instace, and how they may be sold or
trded."IS Moreover, PERC has expressly state that states have the authority to "decide that a
15 American Ref-Fuel Co., et al., 105 FERC at P 23.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
Page-5
sale of power at wholesale automatically trsfers ownership of the state-created RECs, (but)
that reuirment must find its authority in state law, not PURA.,,16 Under Idaho law, the
Commssion has subject mattr jursdiction to determne ownership of RECs associate with
PUR A projects.
Exergy cites at lengt the Idaho Supreme Court's opinion in Empire Lumber v.
Washington Water Power,17 for the proposition that ''te Commssion's jursdiction relative to
QFs (stems) solely from PURA and PERC's implementing regulations.,,18 Exergy's citations to
Empire Lumber and any discussion ofPURA or PERC's rules regarding the implementation of
PURA ar irlevant. As PERC expressly stated, ownership ofRECs is governed by state law,
not PUR A. 19 The sole issue with regard to the Commssion's subject matter jursdiction with
regard to the issues rased in ths proceeng is whether Idao law authorizes the Commssion to
determne the ownership of RECs associate with PUR A projects.
The Commssion's enablig statutes authorize the Commssion to determne the
ownership of RECs associated with PUR A projects. The Commssion has the authority to issue
declaratory orders clarying or constrcting orders, rules, and statutes.20 The Idaho Code
provides:
The public utities commssion is hereby vested with power and jurisdiction to supervise
and regulate every public utility in the state and to do all thgs necessar to car out the
spirt and intent of the provisions of ths act. 21
16 ¡d. atP 24
17 114 Idaho 191, 755 P.2d 1229 (1998).
18 Exergy Motion to Dismiss at 5-7.
19 American Ref-Fuel Co.. et al., 105 PERC at PP 23,24.
20 See IPUC Rules of Procur 53,101.
21 lC. § 61-501.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
Page -6
The Idaho Code fuer provides:
The commission shall prescribe rules and regulations for the performnce of any service
or the fumishings of any commodity of the character fumished or supplied by any public
utility, and, on proper demand and tender of rates, such public utility shall furnsh such
commodty or render such service withn the time and upon the conditions provided in
such rules.
22
There can be no doubt that RECs are a commodty of the charcter fushed or supplied by any
public utility.23 The Commssion is expressly empowered by statute to "prescribe rules and
regulations for the performance of any service and the fumishings of any commdity of the
character fumished or supplied by any public utilty.,,24 Accordingly the Commssion has
subject matter jurisdiction to determne in ths proceeg the ownership of RECs associated
with PUR A projects.25
Other jursdictions that have addressed the issue of ownership of RECs have determned
that their state public utility commssions have subject mattr jursdiction over ths issue.26 For
22 I.C. § 61-507 (emphasis added).
23 Wheelabrator Lisbon, Inc. v. Connecticut Dep't of Pub. UtiL. Control, 531 F.3d 183, 186 (2d Cir. 2(08)
(afirng decision of Connecticut Deparent of Public Utility Contrl reuinng trsfer of RECs to electrc utility
under electrcity purchase agrments and noting that "(t)he energy conveyed in the (pURA) Agrement possesses
certn renewable energy attrbutes that, since the signing of the Agrment, have beome independently trdeable
commodities known as 'renewable energy credits' ('RECs')."); In re the Ownership of Renewable Energy
Certifcates ("RECs"), 389 N.J. Super. 481,484,913 A.2d 825, 826 (2007) (afng Board of Public Utilities'
decision that renewable energy certficates issued on pre-existing contrcts for the sae of electrcity to public
electrc utility belonged to utility rather than the proucer and stating that RECs ar a commodity).24 LC. § 61-507 (emphasis added).
25 To the extent that Exergy asserts tht Avista's Petition is deficient under IPUC Rule of Procedur 101
beause it does not expressly cite to I.C. §§ 61-501, 61-507, that deficiency provides no basis for grting Exergy's
Motion to Dismiss. Unless prohibited by statute, the Commission may permt deviation from its Rules of Procure
when it finds compliance with them is impracticable, unnecessar or not in the public interest. IPUC Rule of
Procedure 13. Morever, IPUC Rule of Prdur 66 provides that "(t)he Commssion may allow any pleaing to
be amnded or corrcte or any omission to be supplied. Pleadings wil be liberaly constred, and defects that do
not afect substatial nghts of the pares wil be disregarded." Avista's failur to cite setions 61-501 and 61-507 of
the Idaho Code does not afect a substatial nght of any par and, therefore, should be disregared. To the extent
necessar, Avista reuests that the Commssion allow Avista to amend its Petition to include any necessar citations
to the Idaho Code.26 The public utility commissions of severa states have, in varous contexts, made determnations regaring
the ownership ofRECs, including the public utility commissions of the states of Connecticut, Nevada New Jersey,
Nort Dakota, Orgon, Pennsylvania, Uta, and Colorao.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
Page -7
example, in In re The Riley Energy Corp.,27 the Connecticut Light and Power Company
("CL&P") requested that the Connecticut Deparent of Public Utility Control ("DPUC") issue a
declartory ruling regarding the ownership of RECs under a pre-existing power purchase
agreement entered under PUR A. The power purchase agreement did not contemplate
ownership of RECs, but provided for the sale of the entie net electrc output of the facilty. The
DPUC found that under the power purchase agreement the RECs transferred to the utility as par
of the electrcal output purchased by the utility. In reaching its conclusion, the DPUC found that
it had subject mattr jursdiction. The Connecticut Supreme Cour afired the DPUC's
decision.28 Notably, the court found that the issue of whether the DPUC had jursdiction to
determne the ownership of RECs was not an issue of pure contractual intent, but "more a
question of legislative intent and public policy than a question of the intent of the pares.,,29
Thus, the court found that the DPUC had subject matter jurisdiction under its general enabling
statues.
30
Finally, it is wort noting that both Exergy and Sagebrush argue in their motions that the
Commssion has aleady addressed the issue of RECs in its prior orders.31 Such arguments
necessarly concede that the Commssion has subject matter jursdiction over the issue in ths
27 200 WL 3160 (Conn. DPUC 200).
28 Whelabrator Lisbon, Inc. v. Dep't of Pub. Util. Control, 283 Conn. 672, 931 A.2d 159 (2007). The
producers also sought relief from the DPUC's decision in federa cour. Wheelabrator Lisbon, Inc. v. Dep't of Pub.
Util. Control, 526 F.Supp.2d 295 (D. Conn. 200), affd, 531 F.3d 183 (2d Cir. 2(08). The federa cour addresse,
among other things, whether the DPUC's decision was prempted by PURA and whether assignng ownership of
RECs to the utilty was a taking under the Unite States Constitution. The federa distrct cour held, among other
thngs, that the DPUC's decision was not prempte by PURA and that assigning the RECs to the utility was not a
tang. Wheelabrator Lisbon, Inc., 526 F.Supp.2d at 305-07. The Unite States Court of Appeals for the Second
Circuit affied the judgment of the distrct court. Whelabrator Lisbon, Inc. v. Dep't of Pub. Util. Control, 531
F.3d 183 (2d Cir. 2(08).29 Whelabrator Lisbon, Inc., 283 Conn. at 687,931 A.2d at 169-70.
30Id. at 689,931 A.2d at 171. Speifically, the court found that the DPUC had authority, and therefore
subject mattr jursdiction, to determne ownership or RECs in ths cas bas on C.G.S.A. §§4-176 and 16-9, which
authorize any person to petition the DPUC, or the DPUC to initiate on its own motion, to initiate a procing for a
declartorr ruling and authorizes the DPUC to rescind, revers or amend its prior decisions. Id.3 Exergy Motion to Dismiss at 8; Sagebrush Motion to Reject Stay at 2-3.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
Page -8
proceeding. To be sure, if the Commssion does not have subject matter jursdiction to
determne that RECs are assigned to the utilities that purchase energy from QFs the Commssion
similarly has no jurisdiction to determne that QFs retan such RECS.32 It necessarly follows
from ths reasoning that, absent legislative action, there is no forum for determning the
ownership of RECs in Idaho. Ths is clearly incorrect. Arguments that the Commssion lacks
jurisdiction in ths proceeng are without merit and should be summly rejected.
B. Avista's Petition is Not a Collatera Attack of Commion Order Nos. 29480
or 29577
Exergy next argues that Avista's Petition is an impermssible collatera attack of
Commssion Order Nos. 29480 and 29577. Exergy's argument appear to be based on two
related incorrect premises-i.e., (i) that the Commssion has aleay spoken on the issue of
ownership of RECs in Order Nos. 29480 and 2957733 and (ü) A vista's petition is based on the
same factual allegations raised in Idao Power's petition for a declartory order in Case No. IP-
E-04-2. Each of these premises is demonstrbly incorrect.
With regard to Exergy's first incorrect premise-that the Commssion has aleady spoken
on the issue of REC ownership-the Commssion did not address the issue of ownership of
RECs in Order No. 29480 or Order No. 29577. Rather, the Commssion expressly declined to
rule on the issue of the ownership of RECs associated with PUR A projects on grounds that, at
the tie those orders were issued, the issue was not yet ripe for a declaratory judgment.
Speifically, in Order No. 29480, the Commssion held:
We find that the issue presented by Idaho Power in its Petition does not preent an
actual or justiciable controversy in Idao and is not ripe for a declaratory judgment by
ths Commssion. Declaratory rulings ar appropriate regarding the applicabilty of any
32 See, e.g., Sagebrush Motion to Reject Stay at 2.
33 To the extent tht Exergy argues that Avista's Petition is an impermssible collatera attck beause the
Commssion has already spoken on the question ofRECs, Exergy's Motion to Dismiss necessarly concedes that the
Commssion has subject mattr to determne the ownership of RECs. See Exergy Motion to Dismiss at 8.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
Page -9
statutory provision or of any rule or order of ths Commssion. See IDAP A 31.01.01.10
1; Uniform Declaratory Judgment Act Idao Code 10- 1201 et seq. A declaratory ruling
contemplates the resolution of prospetive problems. The rights sought to be protected
by a declaratory judgment may invoke either remedial or preventive relief; it may relate
to a right that is only yet in dispute or a status undistube but theatened or endangered;
but in either event it must involve actual and existing facts. Idaho Code Supreme Court
in Harris v. Cassia County, 106 Idaho 513,516-517,618 P.2d 988 (1984). We find that
none of the predcates are present in ths case. In mang ths finding, the Commssion
notes that PERC on April 15,200 (Docket EL03-133-oo1107 PERC 1 61,016) denied
reheang of its ealier October 1, 2003 Order (105 PERC 1 61 00). We note also that
the State of Idao has not created a green tag program, has not established a tradng
market for green tags, nor does it require a renewable resource portolio stadard.
Whle ths Commssion wil not permt the Company in its contracting practice to
condition QF contrcts on inclusion of such a right-of- first refusal term, neither do we
preclude the pares from voluntaly negotiating the sale and purchase of such a green tag
should it be perceived to have value. The price of same we find, however, is not a
PUR A cost and is not recoverable as such by the Company. Recovery of those
expenses wil be reviewed as are al other non-PURPA costS.34
Because the Commssion found that Idao Power's petition did not present an actual or
justiciable controversy that was ripe for a declaratory judgment, the Commssion declined to
grant Idaho Power's petition.35
The Commssion simlarly declined to address the issue of REC ownership in Order No.
29577. Speifically, the Commssion stated:
The Commssion has reviewed its pnor Order No. 29480 language in Case No. IPC-04-2
regarding environmenta attbutes. The regulatory landscape has not changed. The state
of Idao has still not created a green tag program, has not established a trading market for
green tags, nor does it require a renewable resource portolio stadad. We note, as we
did earlier, that the utility and QFs are free to voluntaly contract and negotiate the sale
and purchase of such green tags should environmenta attbutes be perceived by the
contrting pares to have value. The pnce of same we find, however, is not a PUR A
cost and is not recoverable as such by the Company. Recovery of those expenses wil be
reviewed as are all other non-PUR A costs. 36
34 Order No. 29480 at 16.
35 ¡d. at 17.
36 Order No. 29577 at 5-6. . The Commission's statements in Order Nos. 29480 and 29577 that Idaho Power
could not reover the cost of RECs as a PUR A cost is consistent with FERC's precedent that maes clear that
RECs are not governed by PURA. See American Ref-Fuel Co., et al., 105 FERC at PP 23,24. The Commssion's
statements regarding how the cost of RECs may be reovere does not indicate that the Commssion addresse the
issue of ownership of RECs; rather, the Commission expressly declined to addrss that issue.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
Page -10
Because the Commssion did not rule on the issue of ownership of RECs in Order Nos. 29480
and 29577, Avista's Petition cannot be a collateral attck of those orders.
Second, Avista's Petition is not based on the same factual allegations raised in Idao
Power's petition for a declaratory order in Case No. IPC-E-04-2. Rather, Avista assert in its
Petition that circumstaces have substatially changed. A vista cites five specific changes in the
regulatory landscape since the Commssion issued Order No. 29480: (1) PURA rates have
increed substatially; (2) interest in PURA contacts has increased; (3) states have adopted
renewable portolio stadards ("RPS"); (4) a robust market for RECs has emerged; and (5) the
value ofRECs has increased dramatically.37 The changed circumstaces cited in Avista's
Petition occured afer the Commssion issued Order No. 29480 and, therefo~, were not (and
could not possibly have been) present in Idao Power's petition in Case No. IPC-E-04-2.38
Exergy appea to read Order Nos. 29480 and 29577 to require the speific circumstaces
liste in those orders to occur-i.e., that the State of Idaho create a RPS or other green tag
program or established a trng program for RECs-before the issue of REC ownership wil be
ripe in ldao.39 Such a reading is too narow in that it fails to recognze the multitude of other
potential changes that may give rise to an actual justiciable controversy regarding the ownership
of RECs. With regard to whether the issue presented by A vista's Petition is ripe, the fact that
37 Petition at 2-3.
38 Exergy cites Avista's prior comments in Cae No. IP-E-0-2 to support its asserton that the five
changed circumstaces that Avista cites in its Petition were in the reord in 200. Speifically, Exergy quotes the
following frm A vista's prior comments:
(OJne may speulate that the value of RECs may increase signficantly concurnt with societa concerns
about global warng. If there is a significant and unexpete increase in the wholesae market value of
RECs than the utility's rate payers should reeive the benefits of the increase.. .
Exergy Motion to Dismiss at 9 (quoting Comments of Avista Corporation Cas No. IP-E-0-2, Marh 19,200 at
p.4) (internal footnote omittd). Exergy reliance on Avista's prior comments misses the point. In IPC-E-04-2
Avista noted the potential that in the future the maket value ofRECs would increase substatially. Avista's petition
in this case does not cite potential future circumstances; rather, A vista cites actual present conditions that present a
justiciable contrversy. In this regard, Exergy's reliance on Avista's prior comments in IP-E-0-2 is misplaced.39 See Exergy Motion to Dismiss at 10.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
Page-ll
State of Idaho has not create a RPS or other green tag program or established a trading program
for RECs is not determnative-RECs are generated by projects that are located in the State of
Idaho and by projects that sell their output withn the State of Idaho and there is .a market for
such RECs. There is clearly an actual justiciable controversy regarding the ownership of RECs,
notwithstading the fact that Idaho has not created a RPS or other green tag progr or
established a trg program for RECs.
A vista has demonstrated substatial changed circumstaces that give rise to an actual
justiciable controversy in ths case. Speifically, most states, including the neighboring states of
Washington, Oregon, and Montaa have now develope RPS requirments. In fact, according to
the Renewable Energy Policy Project, all but 16 states now have renewable portolio stadads.40
Because more states have adopted RPS requirements, a robust market for RECs, including RECs
generated by PURA projects located in Idaho, has emerged.41 The value of RECs has also
increased draticaly. In 200, RECs were valued at approximately $2 per MW. Tody REC
values can be $15 per MW or more.42 These facts, combined with substatially higher avoided
cost rates in Idaho-urrently $94.64 (or $84.30 for wind projects afer subtrting the current
wind integration charge) as compared with $53.56 in 200and the related increase in interest
in PURA projects demonstrted by the fact that Avista currently has five pending requests or
inquires for PURA contrts,43 give rise to an actual controversy regarding the ownership of
RECs.44 As a result, the issue of ownership of RECs is now ripe.
The Commssion has subject matter to junsdiction to determne the ownership of RECs
associated with PUR A projects. The Commssion has previously declined to addrss the issue
40 Kaich Direct at 13.
41 ¡d.
42 ¡d.
43 See supra note 12.
44 Petition at 2-3; Kaich Diret at 3, 13-14.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
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of ownership of RECs in Order Nos. 29482 and 29577 on the grounds that, at the time those
orders were issued, the issue was not ripe. A vista's Petition is not a collatera attck of those
orders. Rather, Avista's Petition demonstrtes changed circumstaces such that an actual
justiciable controversy regarding the ownership of RECs is now present. Accordingly, Exergy's
Motion to Dismiss should be denied.
II. Sagebrush's Motion to Rejec Stay Should be Denied
Sagebrush advances two arguments in support of its motion to reject A vista's request for
a stay. Firt, Sagebrush asserts that Avista's request for stay should be evaluated under the law
of preliminar injunctions. Second, Sagebrush asserts that Avista's request for stay should be
rejected on public policy grounds. Sagebrush's arguments are without merit.
Assuming arguendo that the law of preliminar injunctions applies. A vista has satisfied
the requirements for a prelimnar injunction and, therefore, its request for stay should be
granted. Moreover, rather than providing a basis for rejecting Avista's request for stay, public
policy considerations strongly favor Avista's request for stay.
A. A vista Has Satisfied the Requirements for a Stay
Idaho Rule of Civil Procedure ("IRCP") 65e sets fort the grounds for preliminar
injunctions. IRCP 65e states, in relevant par, that a preliminar injunction may be grted in
either of the following cases:
(1) When it appe by the complaint that the plaintiff is entitled to the relief demanded,
and such relief, or any par thereof, consists in restraining the commssion or continuance
of the acts complained of, either for a limted period or perptually.
(2) When it appes by the complaint or affidavit that the commssion or continuance of
some act durng the litigation would produce waste, or great or ireparable injur to the
plaitiff.45
45 IRCP 65e(1), e(2). IRCP 65e(3)-(6) ar not applicable.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
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As discussed below, A vista's Petition demonstrtes that it is entitled to the relief requested and,
therefore, a stay is properly issued under IRCP 65e(1). Even assuming that the Commssion
concludes that Avista's Petition somehow does not demonstrte that Avista is entitled to the
relief requested, A vista has demonstrte in its Petition that failure to grant the stay wil result in
an ireparble injury and, therefore, a stay is properly issued under IRCP 65e(2).
1. Avista's Request for Stay Satisfies IRCP 65e(l)
Under IRCP 65e(1), a prelimnar injunction is appropriate if there is a substatial
likelihood that the proponent of the preliar injunction wil prevaiL46 As discussed below,
Avista's Petition satisfies the reuirements for a prelimnar injunction under IRCP 65e(1).
Sagebrush argues that A vista has not demonstrated that it is likely to prevail on the
merits.47 Avista's Petition clealy demonstrates that: (1) PERC left the issue of ownership of
RECs to the states; (2) that the IPUC has not yet issued an order determning the ownership of
RECs; (3) that PERC precedent requires the rates for purchases of electrc energy from QFs to be
just and reasonable to the ratepayers of the utility, in the public interest, and not exceed the
incrementa cost to the electrc utity of alternative electrc energy; (4) that, absent a
Commssion order assigning the RECs associated with PUR A projects to the utilities that
purchase the e!1ergy from such project, the cost of energy from a PUR A wind project wil
substatially excee the incremental cost to the utity of alternative electrc energy; and (5)
allowing PURA projects to retan and market separtely the environmenta attbutes associated
with such projects wil liely negatively impact Avista's abilty to acquire cost-effective
renewable resources in a competitive acquisition process.48 Avista's Petition is supported by Mr.
Kalich's diect testiony. Avista's Petition demonstrates a substatial likeliood that it wil
46 Harris v. Cassia County, 106 Idaho 513,518,681 P2d 988, 993 (1984).
47 Sagebrush Motion to Reject Stay at 4-8.
48 Petition at 2-5.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
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prevail in the above-captioned proceeng. Moreover, Sagebrush provides no persuasive
argument that A vista wil not prevail in ths proceeg.
a) Mr. Kalich's Direct Testiony is Not Flawed
Sagebrush argues that A vista has not demonstrated that it is liely to prevail on the
merits because Sagebrush believes that Mr. Kalch's diect testimony is flawed. Speifically,
Sagebrush taes issue with Mr. Kalich's testimony that Nortwest Power and Conservation
Council ("NWC") estiates for wind generation project development constrction and
operation result in an avoided cost of $64 per MW when levelized over 20 year.49 Sagebrush
notes that "one NWC sta analysis the (sic) calculated twenty-year levelized cost for base-case
wind power development for the Pacific Nortwest is (sic) $100.03.,,50
In his testimony, Mr. Kalich explained the derivation of the $64 per MW levelized
avoided cost. Specifcally, Mr. Kalch testified that the $64 per MW levelized avoided cost
reflected the impact of federa ta subsidies.51 The $100.03 that Sagebrush points to as evidence
that Mr. Kalch's calculations are flawed appear to not account for certain ta incentives and,
therefore, is misleading.
b) Avista's Petition is Not a Collateral Attack on the Avoided
Cost Rate
Sagebrush also argues that Avista's Petition is an impermssible collatera attck on
Order No. 30744.52 Sagebrush is incorrect. In Order No. 30744, the Commssion established the
current avoided cost rates. A vista is not challenging the avoided cost rates in its Petition.
49 Sagebrush Motion to Reject Stay at 5 (citing Kaich Dirt at 6).
50 ¡d. at 5 (footnote omittd) (citing Jeff King's Workbook "MicroFin 14.2.6042109", Reportng yea re
dollar 200, commercial operation 2010, Busbar cost for 100 MW wind project with 32% capacity factor).51 Kaich Diret at 6-7.
52 Sagebrush Motion to Reject Stay at 5-6.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER REECTIG STAY
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Sagebrush points to Mr. Kalich's statement in his testimony that the curnt avoided cost
rate of $90.64 per MW is "simply too high" as evidence that A vista is attempting to collateraly
attck Order No. 30744. Sagebrush taes Mr. Kalich's statement out of context.
A vista's Petition does not tae any position regarding whether the current avoided cost
rates, which apply generally to all PURA projects, ar appropriate. Rather, it is Avista's
position that, with regard to those PUR A projects that also generate RECs, at the current
avoided cost rates awarding the RECs to the PUR A project instead of the utilities that purchase
the energy creates a substatial discrepancy between the cost of a PUR A resource and the cost
associated with the utility building and operating an equivalent resource. Mr. Kalich's testiony
is clear in ths regard. For example, Mr. Kalich testifies that:
The purpose of my testimony is to support Avista's reuest that the Commssion
declare that the environmenta attbutes (hereinafer referred to as "Renewable Energy
Credts" or "RECs") associated with PUR A projects be grante to the utilities that
purhase the energy. In my testiony I explain that current PURA rates in the State of
Idaho (assuming that the utilty does not obtan ownership of the RECs when it purchases
the energy generated by a wind Qualfied Facility) substatially excee the cost of
building and operating a wind plant. Ths disparty equates to approximately $60 millon
in excess costs over a 20-year PURA contract term for a single 10 aM project.53
Mr. Kalch fuer testifies:
A vista therefore requests that the Commssion recognize ths signficant
discrepancy between the actual cost of developing a renewable resource and the
published PUR A rate, and declare that ownership of all RECs associated with PUR A
projects be transferred to the utility purchasing the energy from such projects.
54
Sagebrush is incorrect that Avista's Petition is a collatera attck on Order No. 30744.
Avista is not arguing in this proceedig that Order No. 30744 was wrongly decided nor is Avista
seeking to revise the current avoided cost rates. Rather, A vista seeks a determnation regarding
the ownership of RECs associated with PUR A projects.
53 Kalich Diret at 2-3 (footnote omittd).
54 ¡d. at 4.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTG STAY
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. c) The Commion has Subject Matter Jurisdicton to Determne
Ownership of RECs in this Proceeing
Sagebrush next argues that the lielihood of A vista prevailing in ths proceedng is in
question based on Exergy's argument in its Motion to Dismiss that the Commssion does not
have subject mattr jursdiction to decide the question of REC ownership.55 As explained in
response to Exergy's Motion to Dismiss above, the Commssion has subject matter jursdiction
to determne the ownership of RECs in ths proceeding.
d) Sagebruh's Laundry List of Purprted Policy and Legal
Considerations Prvide No Basis for Rejecting Avista's
Request for Stay
In its Motion to Reject Stay, Sagebrush provides a laundr list of purprt policy and
legal considerations in an effort to rase doubt about the ments of Avista's Petition.56 The
laundr list contans conclusory statements without any support or explanation. The items in
Sagebrush's laundr list or purorted policy and legal considerations provide no basis for
rejecting Avista's request for a stay.
Severa of the items listed by Sagebrush are similar to arguments raised by Sagebrush and
Exergy that are discussed above. For example, the first five items appear to be related to
whether the Commssion has subject matter jursdiction to determne the ownership of RECS.57
As discussed in detal above, the Commssion has subject matter jurisdiction in ths proceeng.
Other items in Sagebrush's list raise issues that have aleady been rejected in other forums.
Specifically, Sagebrush includes two bullets that suggest that assignng ownership of RECs to
55 Sagebrush also assert in its Motion to Reject Stay that "(on) two previous occasions the Commission ha
reognized that under curnt law, RECs ar the propert of the generatot' and base on those two pnor
Commission orders "the currnt state of law in Idaho (regarding the ownership of RECs assoiated with PUR A
projects) is clear and unambiguous." Sagebrush Motion to Reject Stay at 2-3. Accordingly, Sagebrush's own
Motion to Reject Stay, like Exergy's Motion to Dismiss appear to concede that that the Commssion has subject
mattr jursdiction to decide the question of REC ownership. See supra note 33.56 Sagebrush Motion to Reject Stay at 6-7.
57 ¡d.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
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the utilities would constitute a tang in violation of the Fifth and Foureenth Amendments to the
United States Constitution. A similar tang argument was considered, and rejected in
Wheelabrator Lisbon, Inc. v. Connecticut Dep't of Pub. Util. Controi.58
At most, Sagebrush's arguments demonstrate that the issue ofREC ownership rased in
Avista's Petition is ripe and that a heang may be appropriate. However, Avista's Petition
demonstrates a substatial likelihood that it wil prevail in the above-captioned proceedng.
Sagebrush provides no persuasive argument that A vista wil not prevail in ths proceeng.
Accordingly, Avista requests that the Commssion issue an order grting Avista's request for a
stay in ths proceedng.
2. A vista's Request for Stay Satisfies IRCP 65e(2)
Assuming that the Commssion concludes that Avista has not satisfied IRCP 65e(l),
A vista has demonstrted that allowing PUR A projects to retan RECs wil cause ireparable
injury. Accordingly, the Commssion should grt Avista's request for stay under IRCP 65e(2).
Avista's Petition states:
A vista is curently negotiating new PUR A contracts for five proposed projects.
If each of these contracts are executed at the present rates, and the RECs associated with
such projects are not trsferred to Avista with the sale of energy, Avista's customers
wil overpay by approximately $310 millon over the expected 20-year lives of these
contrcts. Allowing PURP A developers to retan and market separately the
environmenta attbutes associated with their projects may also negatively impact
Avista's abilty to acquire cost-effective renewable resources in a competitive acquisition
process, as explained by Mr. Kalich. As a result, a stay of any requirement to award
RECs to a developer that has tendered or that may tender a PUR A project to A vista until
such tie as a final order is issued that fully resolves the issues raised in Avista's Petition
to Determne Ownership ofRECs is necessar to protect Avista's customers from
substatial overpayment for PUR A resources. A vista respectflly requests that the
IPUC grant expeted treatment of Avista's reuest for a stay given the existing interest
expressed by PUR A developers in tendering projects to A vista. 59
58526 F.Supp.2d at 307, affd, Wheelabrator Lisbon, Inc., 531 F.3d at 183-90.
59 Petition at 5 (internal footnote omitted).
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER REECTG STAY
Page-18
Sagebrush does not deny that if PUR A Projects are allowed to retan the REC A vista's
ratepayers wil be hared by overpaying under PUR A contracts or that allowing PUR A
projects to retan the RECs wil negatively impact Avista's abilty to acquir cost-effective
renewable resources in a competitive acquisition process.6O Rather, Sagebrush again appear to
argue that Avista is attempting to collateraly attk Order No. 30744 by statig that "the
existence of any so-called overpayment by rate payers is founded on an assumption that Order
No. 30744 was wrongly decided.,,61 As discussed above, Avista's Petition is not a collatera
attck of Order No. 30744. Avista seeks an order declarng that the ownership of RECs
associated with PUR A projects wil be assigned to the utilities that purchase the energy from
such projects; Avista is not challenging the avoided cost rates set in Order No. 30744.62
Avista's Petition demonstrtes that allowing PURA projects to retan RECs wil cause
irparable injury. Accordingly, Avista requests that the Commssion issue an order grting
Avista's request for a stay in ths proceeng.
ID. A STAY is IN THE PUBLIC INREST
Sagebrush argues that granting Avista's request for a stay would be bad public policy.63
Although not entiely clear, Sagebrush appear to be assertng that granting Avista's requested
stay wil impede the development of renewable resources. Again, as discussed above, Mr.
Kalich diectly addrssed ths issue in his testiony. Speifically, Mr. Kalich testified that
''under current (Idao) PUR A rates, PUR A developers are compensated at a rate more than
60 To the extent that Sagebrush argues that Avista's failed to allege any injury to itslf, as oppose to injur
to its ratepayers, that argument is without merit. As an initial matter the har to Avista's ratepayers is suffcient.
Moreover, Avista also assertd dirct har to itself-Le., a negative impact to its abilty to acquire cost-effective
renewable resources in a competitive acquisition process if PUR A projects can retan and separately market RECs.
Petition at 6.61 Sagebrush Motion to Reject Stay at 8.
62 Petition at 5-6.
63 Sagebrush Motion to Reject Stay at 9.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
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suffcient to enable their success in constrcting new renewable energy projects and earng a
suffcient retu on their investments.,,64
Contrar to Sagebrush's asserton, Avista's requested stay is in the public interest. The
risk of overpayment for PURA resources is clear and present. Absent the requested stay,
A vista wil be required to enter into long-term contrcts with developers of PUR A wind
projects that may not be subject to the outcome of ths proceeing. Accordingly, there is a
potential that A vista wil be required to pay the currnt PUR A rate of $90.64 per MW for a
term of up to 20 years and may also not be able to obtan any ownership of the RECs associated
with such projects. As a result, for wind resources the cost to A vista and its ratepayers of each
such PUR A resource wil be 72 percent higher than the cost associated with building an
equivalent renewable resource.65 Over a 20-year contrct term, the overpayment for each 10
aM PURA project could excee $62 millon ($30 millon on a present-value basis).66 Avista
is currently negotiating contracts for five proposed PUR A projects. If each of these contrcts is
execute, the overpayment for these resources wil be approximately $310 millon over the
expected 20-year lives of these contracts.
In addition to the potential for substatial overpayment for PURA projects by Avista's
ratepayers, there is also a very real concern that allowing PUR A projects to retan RECs wil
adversely impact Avista's abilty to acquire cost effective renewable resources in a competitive
acquisition process.67 Avista's requested stay is in the public interest.
64 Kaich Dit at 16.
65 ¡d. at 4-5.
66 ¡d. at 8-9.
67 Petition at 5; Kaich Diret at 24.
ANSWER TO MOTION TO DISMISS AN MOTION FOR AN ORDER RECTIG STAY
Page-20
CONCLUSION
For the reans stated herein, A vista repelly requests that the Commission deny
Exergy's Motion to Dismiss and Sagebrush's Motion to Rejec Stay. Avista fuher requests that
the Commission grt Avista's reuest for a stay and enter an order staying any reuirement to
award RECs to PURP A developer until a final order reslving the issues raised in A vista's
Petition is issued.
Respefully submitted this c¡ day of June 2009.
iL ;1,~
J eph N. Pirtle
ttomey for A vista Corporation
ANSWER TO MOTION TO DISMISS AND MOTION FOR AN ORDER REJECTING STAY
Page -21