28605.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE SECRETARY OF THE DEPARTMENT OF ENERGY’S ORDER DECLARING AN EMERGENCY IN CALIFORNIA AND THE DETERMINATION OF EXCESS HYDRO GENERATION

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CASE NO. GNR-E-00-1

ORDER NO. 28605

On December 14, 2000, the Secretary of the U.S. Department of Energy issued an order pursuant to Section 202(c) of the Federal Power Act declaring an emergency. In particular, the Secretary found that an emergency existed in the state of California “by reason of the shortage of electric energy.” Consequently, he ordered 75 entities to sell electricity to the California Independent System Operator (ISO) “that is available in excess of electricity needed by each entity to render service to its firm customers.” Although the emergency order was set to expire on December 21, the Secretary extended the order until December 27, unless the order is subsequently revoked or modified.
According to the Department’s press release that accompanied the December 14 order, the identified entities were selected because they have provided power to the California ISO during the 30 days preceding the emergency order. The order further provided that the ISO’s requests for power were “in proportion to each entity’s available excess power.” Three of the entities identified by the Secretary are subject to this Commission’s jurisdiction – Avista Utilities, Idaho Power Company, and PacifiCorp. Pursuant to Idaho Code § 61-533, the Commission issues this Order without notice to address the Secretary’s order and Idaho’s hydroelectric resources.
BACKGROUND
The Commission Staff has reported that it has received several inquiries from Idaho’s three electric utilities regarding appropriate responses to the emergency order. In particular, Idaho Power has informed the ISO that it has no excess power, yet the ISO continues to demand detailed information regarding the Company’s hydro and thermal generating plants. In addition, on December 21, 2000, Governor Kempthorne wrote a letter to the Secretary expressing his concern that the order does not consider Idaho’s unique hydropower system which is primarily designed to meet the power requirements of Idaho.
The Governor observed in his letter that Idaho’s hydropower system is operated to serve multiple purposes. Under normal conditions, snow packs accumulate in the winter months and replenish reservoirs so that spring run-off waters may be stored and subsequently released through the entire year. Water releases and thus hydro generation is delivered at times necessary to meet the electrical needs of customers during periods of normal and peak usage. In addition,
[p]ower production must be carefully balanced and is constrained by other public purposes. Water flows in the state of Idaho are used for irrigation, fisheries and other recreational activities as well as the production of hydropower. During the winter months this hydropower generation is incidental to in-stream flows and minimum stream flow requirements and not based upon calls for water for power generation.

Governor’s Letter dated December 21, 2000.

Finally, the Governor also noted that the California ISO should provide adequate assurances and guarantees that electric suppliers will receive payment for power sold to the ISO. As recently reported in the “Wall Street Journal,” the cost of power purchased by the ISO is exceeding by about $4 billion the rates that customers currently pay. Page 2A, December 20, 2000. This cost versus revenue imbalance increases the financial risk to suppliers especially if the ISO were unable to pay supplier for the provided power. At least one rating service has recently downgraded the financial rating for Southern California Edison and Pacific Gas & Electric “from stable to negative because of the utilities’ growing losses.” Electric Power Alert at p. 4 (November 29, 2000). These potential “losses faced by utilities should taken seriously and the ongoing debate over them only serves to increase uncertainty in financial markets. . . . The problem has been made worse by the onset of unseasonably cold temperatures in California and continued high demand.” Id.
DISCUSSION
A. Idaho’s Hydro System

Unlike thermal generating plants, hydro generation is dependent upon river flows and reservoir storage which, in turn, is dependent upon the weather. Idaho’s hydropower utilities, primarily Avista and Idaho Power, operate their hydro generation and storage facilities to meet the historic demands of their customers throughout the entire year. For example, in a normal water year, Idaho Power generates approximately 60% of its total system requirements from its hydropower facilities. Unlike other generating “fuels,” water generally cannot be replenished by simply purchasing additional water. Hydroelectric utilities cannot control the weather.
Our Staff reports that weather and hydrological conditions in Idaho are not favorable. In particular, Staff reports that the month of November was 8.2º colder than the average daily temperature in Avista’s service area and 7.2º colder than the average temperature in the Boise area. Based upon available data, this trend has continued in Avista’s service territory where the average December temperature is 5.2º below the average daily temperature. Colder weather typically increases the demand for heating energy.
In addition to the cold weather, Idaho Power reports that its hydro generation capacity for the year 2001 in the Snake River Basin is below normal. Based on data provided by the National Weather Service, the current snow pack is projected at 26% below normal in the Snake River Basin with less than normal precipitation projected for the next several months. In Avista’s Clark Fork Basin, the snow pack is 30% below normal. Even with normal precipitation for the rest of the water year, such precipitation will not replenish river flows to their normal levels. The Idaho Department of Water Resources reports that based upon current data, the 2001 water year for the Snake River Basin is shaping up to look like the “really dry” year of 1991 when Brownlee flows were only 42% of normal for April thru July.
Given these conditions and the uncertain (if not poor) outlook for seasonal flows, the Commission issues this Order without notice and declares an emergency pursuant to Idaho Code § 61-533.
B. The Emergency Order
As the Secretary noted in his order, the identified entities “are only required to sell electricity to the California ISO that is available in excess of electricity needed by each entity to render service to its firm customers.” Given the conditions described above, the Commission finds that drawing upon existing hydro resources that are already below normal would reduce the companies’ ability to meet current and projected needs to serve firm load customers. Indeed, the Secretary’s emergency order is predicated on “a shortage of water to generate electricity” – exactly the Governor’s and Commission’s concern here. Even the California ISO’s letter requesting the Secretary issue an emergency order states that:
California has already exhausted water supplies that would have otherwise been needed next spring. We believe that the Northwest is in a similar situation. . . .By making [all available thermal] generation available, California and the West can preserve critical water supplies for use later in the year and next year.

Letter from Terry M. Winter to the Secretary dated December 14, 2000.
This Order comports with the ISO’s understanding that critical water supplies must be preserved for existing and future firm needs. Drafting water to generate energy in excess of projected firm load would reduce our hydro utilities’ abilities to meet their own power needs during the upcoming year. This practice would create inadequate or insufficient power to serve Idaho firm customers.
This Order should not be perceived as insensitive to California’s current situation. Section 202(c) of the Federal Power Act provides that actions taken to resolve emergencies should “best meet the emergency and serve the public interest.” 16 U.S.C. § 824a(c). The Commission finds that drafting additional water from Idaho reservoirs that are forecast to be substantially below normal, is not in the public interest. Drafting water now increases the likelihood that Idaho utilities could be required to buy market power next year at prices that are not capped by this Commission.
Although this Order prohibits Idaho’s hydro electric utilities from drafting water to serve non-system firm loads, it does not affect the operation of their thermal facilities. As is the normal utility practice, the Commission expects that utilities may draft water to generate energy necessary to serve their firm load customers. In addition, this Order does not restrict Idaho jurisdictional utilities from acquiring non-system power and selling it to the California ISO.
C. Conserving Energy
The current energy situation has already prompted us to request that Idaho electric customers take actions to conserve electricity. Conserving electricity ultimately reduces customers’ monthly bills for electricity and means that Idaho’s electric utilities do not have to buy electricity on the open market to serve peak-demand periods. In the long run, electricity conserved eventually will translate into money savings for Idaho’s consumers.
The time of day when consumers can conserve energy is every bit as important as the total amount of energy saved. Currently, electric utilities experience peak demand for electricity between the hours of 6:00 to 8:00 a.m. and between 4:00 to 8:00 p.m. These periods of “peak demand” correspond to the time of the day when people are preparing for the day’s activities or returning home and beginning their evening activities. Turning out unneeded lights, delaying the time when clothes or dishes are washed, and turning off computers and other unneeded appliances can all help.
Other energy saving tips include turning down thermostats, reducing water-heater temperatures, adjusting refrigerators to mid-level settings, and turning “completely off” unused appliances. These conservation tips can all add up to energy and money savings. For additional energy conservation tips, go to the Commission’s website at www.puc.state.id.us or the Department of Energy’s website at www.energy.gov.
O R D E R
IT IS HEREBY ORDERED that Avista, Idaho Power and PacifiCorp not draft additional water from reservoirs or through hydro facilities to generate excess energy to serve non-system needs.
IT IS FURTHER ORDERED that the Commission Staff monitor weather and water conditions and advise the Commission accordingly.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case No. GNR-E-00-1 may petition for reconsideration within twenty-one (21) days of the service date of this Order with regard to any matter decided in this Order or in interlocutory Orders previously issued in this Case No. GNR-E-00-1. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of December 2000.

DENNIS S. HANSEN, PRESIDENT

Commissioner Smith Out of the Office this Date
MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

bls/O:gnre001_dh
One the identified entities is “Washington Water Power” dba Avista Utilities.

IPUC Comments in FERC Docket No. RM95-8-000 and Docket No. RM94-7-001 at 3 (August 4, 1995).

ORDER NO. 28605 1

Office of the Secretary
Service Date
December 22, 2000