20030515Order No 29241.pdf

Office of the Secretary
Service Date
May 15 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF THE
INDEPENDENT ENERGY PRODUCERS OF
IDAHO FOR AN ORDER INCREASING THE
SIZE AT WHICH A QF IS ENTITLED TO
PUBLISHED AVOIDED COST RATES.
CASE NO. GNR-O3-
ORDER NO. 29241
On March 6 , 2003 , the Independent Energy Producers of Idaho (IEPI) filed a Petition
with the Idaho Public Utilities Commission (Commission) requesting that the Commission
increase from 10 MW to 30 MW the size at which a qualifying cogeneration or small power
production facility (QF) is entitled to published avoided cost rates. Reference Public Utility
Regulatory Policies Act of 1978 (PURP A).
The Federal Energy Regulatory Commission (FERC) requires only that published
rates be made available to QFs with a design capacity of 100 kW or less. 18 C.
~ 292.304(c)(l). In recent Case No. GNR-02-, the Commission increased the size at which a
QF is eligible to receive published avoided cost rates from 1 MW to 10 MW. Order No. 29069
July 2, 2002. Under PURP A there are no limitations on the size of eligible wind, solar, waste or
geothermal facilities; the size limitation for eligible cogeneration facilities is 80 MW. 18 C.
~ 292.204(a); ~ 292.203.
On March 28, 2003 , the Commission in final Order No. 29216 denied the Petition
filed by IEPI. In our Order we stated
We continue to find the established avoided cost and contract methodology to
be reasonable and find that IEPI in its Petition presents no persuasive
argument for revisiting the QF eligibility capacity limit for published avoided
cost rates.
Order No. 29216 at p. 3.
A separate dissent was filed by Commissioner Smith.
Petitions for Reconsideration of Order No. 29216 were filed by US Geothermal, Inc.
and Vulcan Power Company. US Geothermal, Inc. contends that an increase in QF size (from 10
MW to 30-50MW) is important to the development of renewable energy resources in Idaho and
would have a positive effect on PURP A project economics, especially for the development of
ORDER NO. 29241
renewable energy such as geothermal and wind. US Geothermal is working on the development
of the Raft River geothermal field in Cassia County and requests a formal public proceeding to
reconsider the Commission s Order. US Geothermal contends that denying IEPI's Petition
without holding a public proceeding to gather and consider information from other parties is
unreasonable and inconsistent with the best interests of power consumers and stakeholders of the
state ofIdaho.
Vulcan Power Company does not dispute the legality of a contracting procedure that
requires individual negotiation of contracts for QFs larger than 10 MW but does dispute the
practicality and actual results of such a process. Traditional utility negotiations, Vulcan
contends, have not been productive. Vulcan states that it has shared the frustration of other
independent energy producers in attempting to conduct "good faith" contract negotiations with
Idaho electric utilities. While noting that FERC requires only that published rates be made
available to QFs with a design capacity of 100 kW or less, Vulcan notes that FERC does not
preclude the posting of rates for facilities greater than 100 kW. The key factor that gives
significance to the actual megawatt size of QFs, Vulcan contends, is whether the QF size leads to
the actions desired by the stated goals of the Commission. The 10 MW size for posted rates
Vulcan contends, is insufficient to trigger additional QF development. Vulcan contends that the
QF eligibility threshold should be increased from 10 MW to 30 MW. If sufficient steps are not
taken by the Commission to encourage the diversification of resources that QF development
provides, Vulcan contends that the parties will likely be back in a proceeding to increase the
avoided cost rates. In support of its Petition, Vulcan cites deteriorating hydro and natural gas
supply conditions.
On April 24, 2003, Idaho Power Company filed Answers to the Reconsideration
Petitions of Vulcan Power Company and US Geothermal, Inc. Idaho Power contends, as
recognized by the Commission in prior Orders, that large QF projects are more likely to have
unique characteristics that require that a purchase arrangement be individually negotiated. Idaho
Power s disagreement with Vulcan s Petition, it states, arises out of Vulcan s failure to apprise
the Commission that Vulcan has had no discussions with Idaho Power for several years. Idaho
Power believes that it is unreasonable for Vulcan to claim that the Commission s long-standing
policy of requiring the developers oflarge QF projects to negotiate project-specific contracts is a
failure when Vulcan has made no credible effort to comply with the policy. Negotiations
ORDER NO. 29241
between utilities and QFs may not ultimately lead to contracts, the Company contends. But that
result, Idaho Power argues, does not necessarily indicate a failure of the policy of requiring
negotiations. Idaho Power notes also that US Geothermal, in its discussions with the Company,
has never asked to negotiate a QF contract for other than a size qualifying for posted rates.
Idaho Power notes that electric utilities are required by Commission Order to
negotiate with QFs in good faith to develop a purchase price that is equivalent to the contracting
utility s avoided cost. It is unfair, Idaho Power contends , to prejudge the negotiation process and
assume that utilities will act in bad faith.
COMMISSION FINDINGS
The Commission has reviewed the filings of record in Case No. GNR-03-
including our final Order No. 29216. We have also reviewed and considered the Petitions for
Reconsideration filed by US Geothermal, Inc. and Vulcan Power Company and the related
Answers to the Petitions filed by Idaho Power Company.
Petitioners contend that the QF eligibility size for published avoided cost rates must
be increased if the Commission wants to promote the diversification of resources and renewable
energy such as geothermal and wind. The Petitioners contend that projects larger than lO MW
are not being developed because posted rates are not available to them. Neither Petitioner, it
seems, has attempted to secure a purchase contract for a facility larger than the size eligible for
posted rates. This Commission requires good faith contract negotiation from both utilities and
QFs. We cannot support a large QF's failure to initiate negotiations for a project-specific
contract and avoided cost rate because it presumes the utility will not negotiate in good faith.
Should a utility fail to negotiate in good faith with a qualified QF, a complaint can be filed with
this Commission. We find that Petitioners have failed to demonstrate that a change in posted
rate eligibility is needed or that the established avoided cost methodology and contract
negotiation requirement for large QFs is unworkable. The avoided cost methodology for projects
larger than 10 megawatts is the Integrated Resource Plan (IRP) based methodology approved in
Case No. IPC-95-, Order No. 26576, not the Surrogate Avoided Resource (SAR) based
methodology used to calculate posted rates.
The Commission is convinced that if operating efficiencies and economies of scale
are to be realized by projects greater than 10 MW that those projects will be developed and that
the contract negotiation requirement for large QFs will not present an insurmountable hurdle.
ORDER NO. 29241
The caveat of course is that the purchase price is the electric utility s avoided cost and not the QF
project viability cost. The Commission finds the arguments raised by Petitioners to be
unpersuasive and finds it reasonable to deny the Petitions for Reconsideration.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over the Petition filed in Case
No. GNR-03-1 by IEPI pursuant to the authority and power granted it under Title 61 of the
Idaho Code, and the Public Regulatory Policies Act of 1978 (PURP A).
The Commission has authority under PURP A and implementing regulations of the
Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric utilities to
enter into fixed term obligations for the purchase of energy from qualified cogeneration and
small power production facilities, and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby deny the Petitions for Reconsideration
filed by US Geothermal, Inc. and Vulcan Power Company in Case No. GNR-03-
THIS IS A FINAL ORDER ON RECONSIDERA nON. Any party aggrieved by
this Order or other final or interlocutory Orders previously issued in this Case No. GNR-03-
may appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho
Appellate Rules. See Idaho Code ~ 61-627.
ORDER NO. 29241
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this lif+"-
day of May 2003.
Commissioner Smith Adopts Prior Dissent
MARSHA H. SMITH, COMMISSIONER
ATTEST:
i:. Je D. JewellCo ISSlon Secretary
vld/O:GNRE0301 sw2
ORDER NO. 29241