20081219Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL

DATE: DECEMBER 17, 2008

SUBJECT: CASE NO. GNR-E-08-03
PETITION TO OPEN INVESTIGATIVE DOCKET
RFP COMPETITIVE BIDDING GUIDELINES

On November 26, 2008, the Northwest and Intermountain Power Producers Coalition
(NIPPC), the Industrial Customers of Idaho Power (ICIP), the J.R. Simplot Company, and the
Idaho Irrigation Pumpers Association, Inc. (IIPA), collectively Petitioners, filed a Petition with
the Idaho Public Utilities Commission (Commission) asking the Commission to open a generic
investigation into the desirability of establishing competitive bidding guidelines for the
procurement of supply-side resources by Idaho Power, PacifiCorp and Avista.
Petitioners contend that electric utilities in Idaho are free to offer supply-side resource
acquisition requests for proposals (RFPs) that are designed and administered completely without
Commission or other stakeholder input. Integrated Resource Plans (IRPs), while useful
tools in analyzing resource options, Petitioners contend, are generally silent on the method
by which any particular resource should be acquired. The IRP process, Petitioners contend,
does not provide a framework for oversight of the resource acquisition process. Electric
utilities in Idaho, Petitioners state, are even free to make supply-side resource acquisition
decisions without the benefit of RFPs. In the Pacific Northwest States of Washington and
Oregon, Petitioners contend that the same utilities are required to make resource
acquisitions through a Commission-approved, and stakeholder involved, process. Idaho,
Petitioners contend, is the only State in the Pacific Northwest that does not actively oversee
DECISION MEMORANDUM 2
or provide guidelines for the investor-owned utilities it regulates that govern their
acquisition of supply-side resources.
The adoption of guidelines and active oversight of supply-side resource
acquisition decisions, Petitioners contend, is increasingly the norm. Petitioners cite a July
2008 Report of NARUC/FERC entitled “Competitive Procurement of Retail Electric
Supply: Recent Trends in State Policies and Utility Practices.” That Report concludes:
Competitive procurements for retail electricity supply have been used for
many years in different states. More than forty percent of the states now
rely on formal policies and rules for procurements, while regulators in
many other states encourage use of competitive procurements by utilities
in determining which resources to add to their mix of retail supply.
Where regulators have committed to relying upon competitive
procurement approaches as a means to help identify the “best” resources
needed to meet the needs of the utility’s customers, the process should be
designed and implemented so that it reflects the following criteria (and is
generally viewed as being consistent with them):

● Fair and objective;
● Designed to encourage robust competitive responses from
market participants with creative responses from the market;
● Based on evaluations that incorporate all appropriate and
relevant price and non-price factors;
● Efficient, with a timely selection process; and
● Supported by regulatory actions that positively reinforce the
commission’s commitment.

The Report, Petitioners contend, is a blueprint on how to implement guidelines that are both
fair and effective.
NIPPC contends that several of its members are actively participating in Idaho
Power’s current RFP for new resources. All of NIPPC’s members, whether they are
participating or not, it contends, have expressed serious concern regarding Idaho Power’s
RFP design, timing and intent. They have concluded that the just-closed RFP resembles
other recent Idaho Power solicitations, i.e., it favors the utility’s self-build option. The
consequence of an under-subscribed RFP and/or one where the outcome is pre-ordained,
Petitioners contend, deprives the ratepayers of access to the competitive marketplace. It
also forecloses the opportunity of tapping into what may prove to be least cost – in
economic and environmental terms – power generated by independent power producers
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(IPPs). Petitioners contend that competitively procured power purchase agreements
(PPAs) can shift tangible and considerable risk from ratepayers onto IPPs. The IPP business
model, Petitioners state, is based on competition and the principle of pay for performance; it
leverages the profit motive to consumers’ advantage. Regardless of the current “need for
action,” the implementation of competitive procurement guidelines in Idaho, Petitioners
contend, is consistent with good regulatory practice.
Petitioners request that the Commission open a docket for the purpose of
exploring whether competitive RFPs should be required of Idaho Power, PacifiCorp and
Avista. If the answer is in the affirmative, Petitioners contend that the docket should be
used to explore reasonable parameters and rules governing the supply-side acquisition
process through competitive procurement.

Staff has reviewed the Petition and believes that Petitioners have not established
a prima facie case for opening an investigative docket. Petitioners provide anecdotal
speculation only as to Idaho Power’s RFP process and make no representations as to the
Idaho RFPs conducted by PacifiCorp or Avista. Petitioners make no representations
regarding participation of their members in the Idaho IRP processes of Avista, Idaho Power
or PacifiCorp and whether attempts to address the RFP process, elements and perceived
lack of transparency in those forums have been rebuffed by the utilities or Commission.
Petitioners express no familiarity as to the regulatory opportunities for public input in Idaho
on utility RFPs and selected resources. Petitioners make no representations or comparisons
regarding the different competitive bidding guidelines and procurement approaches used in
Washington, Oregon, Utah, Montana or Wyoming. No representations are made as to
whether the competitive bidding guidelines adopted in those states are uniformly applied,
comply or depart from the related recommendations of NARUC or result in acquisition of a
lower cost and better resource. What we are provided with is some anecdotal speculation
by NIPPC members about Idaho Power’s recent and current RFP process being rigged to
favor self-build options. Staff recommends that prior to any Commission determination to
initiate an investigation that the Petitioners be required to supplement their Petition with
supporting prefiled testimony.

DECISION MEMORANDUM 4
COMMISSION DECISION
Petitioners have requested that the Commission open a generic investigation into
the desirability of establishing competitive bidding guidelines for the procurement of
supply-side resources by Idaho Power, Avista and PacifiCorp. Staff recommends that prior
to any determination to initiate an investigation that the Petitioners be required to
supplement their Petition with supporting prefiled testimony. Petitioners have agreed to
file supporting testimony. Does the Commission find it reasonable to require the
Petitioners in this case to file testimony in support of their Petition to initiate an
investigation?

Scott Woodbury
Deputy Attorney General

bls/M:GNR-E-08-03_sw