20100528reconsideration_order_no_31092.pdf

Office of the Secretary
Service Date
May 28 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ADJUSTMENT OF
AVOIDED COST RATES FOR NEW PURP
CONTRACTS FOR A VISTA CORPORATION
DBA A VISTA UTILITIES, IDAHO POWER
COMPANY, AND PACIFICORP DBA ROCKYMOUNTAIN POWER
CASE NO. GNR-I0-
ORDER NO. 31092
On March 16 2010, the Commission issued final Order No. 31025 in Case No. GNR-
1 0-01 approving a revised and updated calculation of the published avoided cost rates for
Avista Corporation dba Avista Utilities, Idaho Power Company, and PacifiCorp dba Rocky
Mountain Power. In our final Order we stated:
Presented in this case for Commission approval are revised publishedavoided cost rates incorporating the (Northwest Power and Conservation)
Council's March 8, 2010 medium natural gas price forecast. The
methodology for calculation of avoided cost rates was established in Case No.
GNR-02-, Order No. 29124. We find that the method for revising the
fuel cost adjustment to published avoided cost rates is a simple arithmetic
calculation. We find that the Council's new natural gas price forecast was
approved on March 2 2010, and posted on the Council's website on March 82010. Sixth Power Plan, Appendix A. We find that the change in avoided
cost rates depicted in Attachments 2-4 to this Order accurately incorporate the
Council's revised natural gas price forecast and are consistent with theCommission-approved SAR methodology. We find it reasonable to issue an
Order implementing new published avoided cost rates without further notice
or procedure.
Order No. 31025 at 2.
On April 6, 2010, Windland, Inc. (Windland) and AgPower Jerome, LLC (AgPower)
(collectively Petitioners) filed a Petition for Reconsideration of Order No. 31025.
Idaho Code
61-626; IDAPA 31.01.01.331. An Answer to the Petition for Reconsideration was filed by
PacifiCorp on April 13, 2010. A reply to PacifiCorp s Answer was filed by Petitioners on April
2010.
On April 21 , 2010, the Commission granted limited reconsideration and established a
filing schedule for Petitioners ' comments regarding the calculation of the fuel cost related
adjustment to published avoided cost rates. Order No. 31057
citing Idaho Code ~ 61-626(2).
ORDER NO. 31092
On April 28 , 2010, Windland, Inc. and AgPower Jerome, LLC filed comments on the
Commission s Order No. 31057 granting "limited reconsideration.Petitioners provided no
comment regarding the accuracy of the revised and updated calculation or whether the approved
methodology was correctly implemented. Finding no reason to change what we have determined
to be an administrative and ministerial revision in updating the published avoided cost rates
pursuant to a previously approved methodology, the Commission in this Order reaffirms the
published rates of Order No. 31025.
BACKGROUND
A. PURPA
Out of the nationwide energy crisis of the late 1970s, Congress enacted the Public
Utility Regulatory Policies Act of 1978 (PURP A). Sections 201 and 210 of PURP A require
electric utilities to purchase power produced by co-generators or small power producers that
obtain qualifying facility (QF) status. Under PURP A Section 21 O(b), the rate to be paid for such
power is not to exceed "the incremental cost to the utility of alternative electric energy.
C. ~ 824a-3(b), (d). See generally, Rosebud Enterprises v. Idaho Public Utilities
Commission 128 Idaho 609, 917 P.2d 766 (1996).
Pursuant to Congressional directive, the Federal Energy Regulatory Commission
(FERC) promulgated regulations implementing Sections 201 and 210 of PURPA. Under FERC
regulations, the utility requirement to purchase power from QFs is set out in 18 C.R. ~
292.303(a). The rate a qualifying facility is to receive for the sale of its power is generally
referred to as the "avoided cost" rate - the incremental cost to an electric utility of electric
energy or capacity or both which, but for the purchase from the qualifying facility, such utility
would generate itself or purchase from another source. 18 C.R. ~ 292.101(b)(6). PURPA
Section 21 O(b) and related FERC regulations provide that the rates for QF purchases shall: (1)
be just and reasonable to the electric consumers of the electric utility and in the public interest;
and (2) not discriminate against qualifying co-generators or small power producers. 18 C.F .R. ~
292.304(a)(1)(i), (ii).
There are two general caveats under PURP A: (1) electric utilities are not required to
pay more than the utility's avoided costs for purchases of QF capacity and energy (PURPA
Section 210(b), 18 C.R. ~ 292.304(a)(2)); and (2) co-generators and small power producers in
their sales to utilities are not to be subjected to pervasive utility type regulations, i., regulation
ORDER NO. 31092
respecting (i) the rates of electric utilities and (ii) the financial and organizational regulation of
electric utilities. PURP A Section 21 O( e); 18 c.F .R. ~ 292.602( c)(1 )(i)(ii).
In implementing PURP A, the Idaho Commission has developed a body of regulatory
decisions in generic ratesetting and complaint actions since 1980 that set out the general
principles and framework under which Idaho electric utilities are to purchase power from
qualifying facilities. Rosebud 128 Idaho at 615, 917 P.2d at 772.
B. The Current Avoided Cost Methodology
The current administrative Surrogate Avoidable Resource (SAR) methodology for
calculating the published avoided cost rates for QFs smaller than 10 aMW is based on a
surrogate (hypothetical) natural gas-fired combined-cycle combustion turbine. Case No. GNR-
02-, Order No. 29124 (September 26, 2002). One of the key input variables in the
computation of avoided cost rates under this methodology is a long-term natural gas price
forecast; i., the "medium" natural gas price forecast developed by the Northwest Power and
Conservation Council (NPCC; Council). Order No. 29124 at 10.
In our 2002 Order approving the present methodology, we noted recent volatility
extremes in gas prices, acknowledged that gas prices had returned to more normal levels and
expressed concern that our failure to adjust published avoided cost rates to reflect the lower gas
costs could result in unreasonable and unfair high costs being borne by the regulated utility; costs
that would ultimately be paid by utility ratepayers. Order No. 29124 at 4.
The Commission considered many proposals for indexing and adjusting natural gas
prices and in the end adopted the "medium" fuel price forecast prepared by the Council along
with the method for establishing the starting year gas price and escalation rate proposed by the
Idaho Independent Energy Producers (IIEP), an intervenor in that case.
In doing so, we stated:
(w)e express confidence in the source and the use of a medium forecast which
we believe has the highest probability of being right. We acknowledge that
the Power Council does not issue its forecast on a regular basis. This will
preclude a regular updating of the fuel price. Natural gas prices can be
updated when a new NWPPC forecast becomes available. A proceeding to
review. . . the starting gas price can also be initiated at any time by the
Commission on its own motion or by petition of any utility or QF.
I In particular, the Order stated that the "Commission cannot expose ratepayers to avoided cost rates that rely too
heavily on uncharacteristically high (natural) gas prices in combination with a high escalation rate.Jd.
ORDER NO. 31092
Order No. 29124 at 10-11.
Based on subsequent changes in the natural gas price forecasts issued by the Council
the Commission, pursuant to the established SAR methodology, issued Orders revising and
updating the calculation of published avoided cost rates: Order No. 29391 (December 5 , 2003 ~
gas price change); Order No. 29646 (December 1 , 2004 - gas price change and Idaho Power and
Avista cost of capital changes); and Order No. 30744 (March 12, 2009 - gas price changes;
Idaho Power cost of capital changes; changes to non-fuel variables).
C. The 2009 Avoided Cost Order
In our 2009 Order No. 30744, we increased published avoided cost rates
incorporating the Council's December 29, 2008 medium case (East-Side Delivered) natural gas
price forecast (draft fuel prices for the Sixth Power Plan). In the case, PacifiCorp contended that
use of the Council's medium natural gas price curves resulted in avoided cost prices that were
too high and recommended that there be no change in the published rate until the Council's draft
fuel prices became final. We denied the relief requested by PacifiCorp. The Commission found
that under the current avoided cost methodology "rates are changed when the Council issues a
new gas price forecast." Order No. 30744 at 3 (emphasis added). We reiterated that the change
in natural gas prices resulted in changes in avoided cost rates (which are) a simple arithmetic
calculation Id. at 3-4 (emphasis added).
In our Order No. 30744, we took notice of the draft nature of the Council's planning
assumptions and fuel forecast and expressed confidence that the numbers and values would be
used by the Council in its Sixth Power Plan. In doing so, we stated "(h)owever, should the
numbers and values change appreciably in the Council's final Sixth Power Plan document we
will adjust the rates accordingly for prospective QF contracts." Order No. 30744 at 4. Again, a
change in the fuel gas forecast would cause the avoided cost rates to change. Calculating new
rates, we stated
, "
is a simple arithmetic calculation.Id.
D. Order No. 31025
In September 2009, the Council issued and solicited public comments on its draft
Sixth Northwest Power Plan (Sixth Plan). On February 10 2010, the Council approved a new
natural gas price forecast in conjunction with the Council's approval of its Sixth Plan. The
approved fuel forecast was posted on the Council's website on March 8, 2010. Commission
Staff recalculated avoided cost rates using the approved SAR methodology and the Council'
ORDER NO. 31092
March 8 gas price forecast. Staff provided its calculations to the utilities by letter dated March 9
2010. The letter was filed with the Commission on March 9 2010. A case docket was opened
under Case No. GNR-10-01 on the same date and was posted to the Commission s web site.
On March 15, 2010, the Commission by Motion and unanimous approval amended
the March 15 decision agenda to add consideration of the proposed fuel cost adjustment to
published avoided cost rates. Idaho Code ~ 67-2343(4). The Commission routinely places items
on its decision agenda so that parties and interested persons are advised that the Commission is
processing a case. Adjusting the avoided cost rates was an administrative action. In accordance
with the Commission-approved methodology, the Commission issued Order No. 31025 on
March 16, 2010 , implementing new (and lower) published avoided cost rates. Given the nature
of the published avoided cost rate as defined by PURP A and FERC and the fact that the simple
arithmetic recalculation was executed pursuant to a Commission-approved methodology, we
found it reasonable to publish the revised and updated calculation "without further notice or
procedure. "
The appreciable decrease in the gas price forecast included in the Council's final
Sixth Power Plan precipitated our recalculation and reduction of the avoided cost rates in Order
No. 31025. It is from this Order that Petitioners seek relief.
PETITION FOR RECONSIDERATION
Petitioners, Windland and AgPower, contend that issuing Order No. 31025 changing
published avoided cost rates "without notice or further procedure" violated their "statutory and
constitutional rights to notice and opportunity to be heard.Petitioners contend that the
published avoided cost rates established in Order No. 30744 are a government-created, statutory
entitlement and that QFs pursuing the published rates have an entitlement to those rates protected
by the Due Process Clause. Citing Idaho Code ~ 61-307 (Schedules - Change in Rate and
Service); Article I, ~ 13 of the Idaho Constitution and the 14th Amendment of the United States
Constitution (the right to procedural due process oflaw). Petition at 7, 10-12.
Petitioners contend that each were engaged in developing PURP A projects and in
perfecting eligibility for power contracts at the published rates and interconnection for their
respective projects. They also assert they made financial expenditures in reliance on the higher
published rates set forth in Order No. 30744. Id. at 3-
ORDER NO. 31092
Had the Commission provided Windland and AgPower with an opportunity to review
Staffs calculations and to comment on what they allege was a significant reduction in avoided
cost rates, Petitioners state they may have advocated for additional changes to the SAR
methodology. Petition at 10. These changes, Petitioners opine, may have included alterations to
carry forth what they contend is PURPA's objective, i., to promote renewable energy
development. Petitioners requested that the Commission delay the effective date of Order No.
31025 pending hearing and final Order on Reconsideration. Id. at 2.
In its Answer, PacifiCorp requested that the Commission deny the Petition for
Reconsideration contending that the Commission s Order No. 31025 violates neither Idaho Code
~ 61-307 nor the procedural due process clauses of the Idaho or United States Constitutions.
Should reconsideration be granted, PacifiCorp requests that the avoided cost rates adopted in
Order No. 31025 remain in effect unless and until found to be unjust or unreasonable.
A. Order No. 31057 Granting "Limited Reconsideration
On April 21 , 2010, the Commission issued Order No. 31057 granting limited
reconsideration and established a filing schedule for Petitioners' comments regarding the
calculation of the fuel cost related adjustment to published avoided cost rates.
Idaho Code ~ 61-
626(2).
We acknowledged in Order No. 31057 that the change in published avoided cost rates
of Order No. 31025 was triggered by a new fuel price forecast issued by the Northwest Power
and Conservation Council. The avoided cost methodology did not change and the adjustment of
the rates was a simple arithmetic calculation. Order No. 31057 at 6. As noted in Order No.
30744, the fuel cost component of avoided cost rates is to be updated when the Councilor the
Council's general advisory committee issues a new gas price forecast. Order No. 30744 at 1.
The change in published rates, we noted, is an implementation of an approved methodology and
is not an opportunity to revise the methodology. We noted that there is a separate and open
docket for review ofthe SAR methodology in Case No. GNR-09-03.
Recognizing that Petitioners were contending that they did not have an opportunity to
review the calculations revising the published avoided cost rates or to provide comment on them
we granted limited reconsideration to allow Petitioners the opportunity to file written comments
on whether the avoided cost rates were correctly calculated and whether the approved
ORDER NO. 31092
methodology was correctly implemented. Order No. 31057 at 7. It was not, we stated, an
opportunity to comment on the methodology or to propose changes to the methodology. Id. at 6.
We also reco gnized in Order No. 31057 that there are economic consequences to Q
developers in a downward adjustment to rates. We stated that this case is not the forum
however, to present such information, nor is such information relevant in determining the timing
of a decrease in rates, a rate we note that is ultimately paid by utility customers. A delay in
changing avoided cost rates, we noted, ultimately means that ratepayers are saddled with rates
that are too high and therefore unreasonable. Order No. 31057 at 6 citing PURPA 9 2l0(b);
Idaho Code 9 61-622.
In our Order we made the following further findings:
Petitioners contend that the manner in which the published avoided cost rates
were changed resulted in a denial of due process in contradiction of statutes
rules and constitutional rights. We find the revision and recalculation of the
published avoided cost rates in this case to be an administrative and
ministerial act. As set out in the Attachment, the calculation of new avoided
cost rates is a simple process. We further find that no violation of notice or
due process has occurred and that no cure is necessary. We find Petitioners
arguments to the contrary to be unpersuasive and without merit. The existing
SAR methodology for calculating avoided cost rates was a result of a fully
litigated prior proceeding. It is well established that a utility cannot
required to pay more for QF power than its avoided cost. Under the approved
methodology, with a posting of a new gas forecast, the variable component of
the avoided cost rates changes. A downward adjustment of the gas forecast
results in a lower avoided cost. Our explicit findings in Order No. 31025 can
be read in no other way than but an implicit finding of "for good cause
shown." Reference Idaho Code 9 61-307.
Order No. 31057 at 6-
The Commission also observed that the Petitioners had filed complaints alleging that
they should be entitled to the former (and the higher) published rates of Order No. 30744.
AgPower (Case No. IPC-10-11) and Windland (Case No. PAC-10-05). This docket, we
stated, is not a forum to pursue those claims, rather Petitioners will have an opportunity to pursue
those claims in the other dockets. Order No. 31057 at 7.
B. Petitioners ' Comments
On April 28, 2010, Petitioners filed their response to the Commission s Order
granting limited reconsideration. No comment was provided regarding the accuracy of the
ORDER NO. 31092
published avoided cost rates set forth in Commission Order No. 31025 or failure, if any, to
follow the approved methodology.
Instead Petitioners renew the allegations set forth in their Petition for
Reconsideration and make additional arguments regarding the sufficiency of the notice provided.
Notice, Petitioners contend, means more than just being provided an opportunity to comment on
a proposed rate. Notice is necessary, Petitioners contend, so that parties can put their affairs in
order and seek to finalize preparations for a new QF project in order to obtain the existing higher
rate before it is reduced.
Petitioners contend that the recalculation procedure followed for increases and
decreases to rates under the approved methodology is non-symmetrical and therefore constitutes
discriminatory ratemaking. 18 C.R. ~ 292.304(a)(1)(ii).
Petitioners renew their contention that the Idaho Supreme Court in A. W Brown 121
Idaho 812, 828 P.2d 841 (1992), explicitly ruled that the notice provisions of Idaho Code ~ 61-
307 applied to changes in avoided costs. The fact that this Commission believes that a rate
change is reasonable, Petitioners contend, is not sufficient "good cause" to eliminate the notice
requirement of 61-307.
Petitioners renew their request to declare Order No. 31025 null and void and
recommend that the rates of Order No. 30744 be reinstated.
COMMISSION DISCUSSION AND FINDINGS
The Commission has reviewed and considered the filings of record in this case
including final Order No. 31025, Order No. 31057 granting limited reconsideration, and
Petitioners' comments. Following the filing of Petitioners' comments the Commission
scheduled and posted this matter on its May 3 , 2010 decision meeting agenda, the date for
purposes of final Order that we find the Petition to be finally submitted for reconsideration.
Idaho Code ~ 61-626(2).
We have reviewed PURP A Sections 201 and 210 and the implementing regulations of
FERC, and related decisions of the Idaho Supreme Court. We have reviewed our authority
pursuant to Idaho Code, Title 61 , and our Rules of Procedure, IDAPA 31.01.01.000 et seq.
have also reviewed the current SAR methodology approved initially in Order No. 29124 and our
subsequent Orders approving fuel cost adjustments pursuant to that methodology.
ORDER NO. 31092
A. The A voided Cost Recalculation
We begin our findings by examining the avoided cost rates established in final Order
No. 31025. In our Order No. 31057 granting limited reconsideration, we provided Petitioners the
opportunity to file comments regarding the calculation of the fuel cost related adjustment to
published avoided cost rates and whether the avoided cost methodology was correctly
implemented. Petitioners in their comments on reconsideration did not address the calculation of
the fuel cost related adjustment or whether the avoided cost methodology was correctly
implemented. Accordingly, we find no evidence that the avoided cost rates published in Order
No. 31025 were inaccurate or that our SAR avoided cost methodology was incorrectly
implemented.
B. Notice
1. Actual Notice We now turn to Petitioners' contention that they had no notice and
were entitled to notice of the change in the published avoided cost rates. We find the Petitioners
are mistaken on both counts. First, a brief review of how the Commission has implemented the
avoided cost methodology is helpful. In September 2002, the Commission established the
current avoided cost methodology in Order No. 29124. In that Order, we adopted the natural gas
forecast developed by the Northwest Power and Conservation Council in its draft Fifth Power
Plan. Order No. 29124 at 10. We observed that because the Council "does not issue its (natural
gas) forecast on a regular basis (, this) will preclude a regular updating of the fuel price.Id.
We further stated that "(n)atural gas prices can be updated when a new (Council) forecast
becomes available." A proceeding to review the gas price "can also be initiated at any time by
the Commission on its own motion or petition of any utility or QF.Id. at 10-11.
In March 2009, the Commission adopted a new gas forecast issued by the Council'
general advisory committee in late December 2008. In Order No. 30744, we observed that the
Commission-approved avoided cost methodology (Order No. 29124) natural gas prices are to
be updated when a new forecast becomes available from the Councilor the Council's general
advisory committees." Order No. 30744 at 1. The Order also states that the proposed avoided
cost rates "are made in accordance with existing Commission Orders and approved
methodology. The resultant change in avoided cost rates is a simple arithmetic calculation Id.
at 2 (emphasis added).
ORDER NO. 31092
Although PacifiCorp challenged the 2009 increase in the avoided cost rate, the
Commission found that under the "present methodology (avoided cost) rates are changed when
the Council issues a new gas price forecast. The calculation of the fuel cost adjustment to
published avoided cost rates is arithmetic.Id. at 3; 4. The Commission also reaffirmed its
intent to update the gas forecast. In particular, the Commission recited that
We take notice of the draft nature of the Council's planning assumptions
and fuel forecast and have reasonable confidence that the numbers and values
will be used by the Council in its Sixth Power Plan. However should thenumbers and values change appreciably in the Council's final Sixth PowerPlan document we will adjust rates accordingly for prospective OF contracts
Order No. 30744 at 4 (emphasis added).
In final Order No. 31025 in the present case, we described the Council's recent
change in its natural gas forecast as "automatically trigger(ing) a recalculation of the published
avoided cost rates.Order No. 31025 at 1. Updating the avoided cost rates "is a simple
arithmetic calculation.!d. The Commission further found it was reasonable to change the
avoided cost rates "without further notice or procedure.Id.
In their Petition, Windland and AgPower maintained that they had no notice of the
Commission s intent to change the published avoided cost rates. More specifically, they indicate
that they relied upon "the published avoided cost rates on file pursuant to Order No. 30744.
Petition at 2. However, as emphasized above, it was well established that the Commission would
change the avoided cost rates when the Council issued a new gas forecast. Order No. 30744 at 3.
Order No. 30744 also states that the Commission will adjust the avoided cost rates ifthe Council
changed the rates in its final Sixth Power Plan. Id. at 4. The Petitioners concede that they were
aware of Order No. 30744 and relied upon it. Consequently, we find that the Petitioners had
notice that the Commission "will change avoided cost rates" if the Council changes its forecast
in the final Sixth Plan.
The Petitioners' next contend that they were entitled to particular notice of the change
in rates on various grounds. We address these arguments in greater detail below.
2. Opening the Docket.Petitioners argue that the Commission did not post Staffs
March 9, 2010 letter opening this docket until after Order No. 31025 was issued on March 16
2010. Petition at 4. The Petitioners are wrong. As indicated on our web site, the Staff letter was
posted and the case opened on March 9, 2010
, -
the date of Staffs letter.
ORDER NO. 31092
www.puc.idaho.gov/interneticases/summary/GNRE1 001.html.Moreover Windland and
counsel for both Petitioners concede they received a copy of Staffs letter the next day (March
2010). Petition at 5; Reply to PacifiCorp s Answer at 6.
3. Section 61-307. The Petitioners next assert that avoided cost rates may not be
changed without 30 days ' notice pursuant to !daho Code 961-307. Comments at 3. Petitioners
have misconstrued Idaho Code ~ 61-307. In pertinent part, this statute provides
Unless the commission otherwise orders, no change shall be made by any
public utility in any rate. . . except after thirty (30) days' notice to the
commission and to the public as herein provided. ... The commission, for
good cause shown, may allow changes without requiring the thirty (30) days
notice herein provided for, by an order specifying the changes so to be made
and the time when they shall take effect.
...
Idaho Code ~ 61-307 (emphasis added). As expressly stated above, the Commission has the
authority and discretion to change rates "without requiring the thirty (30) days ' notice.Id.
In Order No. 31025, the Commission found that the method for revising the fuel cost
adjustment to published avoided cost rates "is a simple arithmetic calculation." Order No. 31025
at 2. The Commission further found that "the change in avoided cost rates depicted in
Attachments 2-4 to this Order accurately incorporate the Council's revised natural gas price
forecast and are consistent with the Commission-approved SAR methodology. We find it
reasonable to issue an Order implementing new published avoided cost rates without further
notice or procedure.Id.
As the Commission explained in its Order granting reconsideration, the Commission
found that it is "well established that a utility cannot be required to pay more for QF power than
its avoided cost." Order No. 31057 at 6-7. The Commission further found that a "delay in
changing avoided cost rates means that ratepayers are saddled with rates that are too high and
therefore unreasonable. PURPA ~ 21O(b); Idaho Code ~ 61-622.Id. at 6. Under PURPA the
rates to be paid for QF power are not to exceed the utility s avoided costs. PURP A ~ 21 O(b), 16
US.C. ~ 824a-3(b), (d); 18 C.R. ~ 292.304(a)(2); Rosebud Enterprises v. Idaho PUC 128
Idaho 609, 621 , 917 P.2d 766, 778 (1996). In Rosebud our Supreme Court held that QF
contracts in excess of avoided costs "will be considered void ab initio.Id. at 623 , 917 P.2d at
780. The Commission concluded that its "explicit findings in Order No. 31025 can be read in no
ORDER NO. 31092
other way than but an implicit finding of 'for good cause shown.'" The Commission exercised
its authority in Idaho Code ~ 61-307 to implement rates on less than 30 days' notice.
4. Due Process. The Petitioners maintain that the issuance of new avoided cost rates
in Order No. 31025 deprived them of their rights in violation of due process protected by the
state and federal constitutions. Petition at 11. Petitioners state "PURP A's published avoided
cost rates are a government created statutory entitlement." Petition at 12. Petitioners are wrong.
The Petitioners have confused "eligibility" with "entitlement." Our Supreme Court has
previously held that QFs are not entitled to individual notice or an opportunity to be heard before
the Commission changes avoided cost rates. In Rosebud Enterprises v. Idaho PUC 131 Idaho 1
951 P.2d 521 527 (1997), the Court held that a QF without a "legally enforceable obligation
does not have "reasonable expectation that (the Commission) could not change the
methodology for determining avoided cost rates.In other words, Windland and AgPower
never had a property interest in the rpriorl rates, and due process never attached to the IPUC'
consideration of the change of the (prior 1 rates Id. (emphasis added). As the Court explained
in Rosebud a "legally enforceable obligation" is where the Petitioners have signed a power
contract with the utility where it is legally obligated to deliver power, or where they have filed "
meritorious complaint alleging that the (QF) project is mature and that the (QF) developer has
attempted and failed to negotiate a contract with the utility but for the conduct of the utility.Id.
at 6 951 P.2d at 526 citing A. W Brown v. Idaho Power Co.121 Idaho 812, 816, 828 P.2d 841
845 (1992).
Here the Petitioners do not have signed contracts. However, Windland and AgPower
have each filed a complaint alleging that they are entitled to the higher grandfather rate prior to
Order No. 31025. Without addressing the merits of their complaints, we note that this case is
about the setting of new avoided cost rates, while their complaints address the merits of whether
they are entitled to the previous avoided cost rates. Consequently, the Petitioners did not have a
property interest in the prior avoided cost rates, and due process never attached to the
Commission change in the rates.
C. Other Issues
1. Investments Petitioners also claim they made financial investment in their
projects in reliance on the published rates. However, any outlay by QFs prior to an executed and
approved power purchase contract is a cost of project development. We have long
ORDER NO. 31092
acknowledged that there are milestones to be accomplished before a project matures to the point
that it is entitled to a power purchase contract. We find, as did the Idaho Supreme Court in
Rosebud that any expectation that the rates would continue unchanged was misplaced and
without foundation. 131 Idaho at 7, 951 P.2d at 527. Nor is there any QF right to a period of
time before rates change to get their affairs in order. Any advice received to the contrary was
mistaken.
The change in rates in this case was initiated by the Commission and was an
administrative and ministerial act executed pursuant to a previously adopted methodology. The
change in rates was triggered by a change in the forecasted natural gas prices by the Northwest
Power and Conservation Council. Petitioners state "that Staff feels it necessary to send its draft
calculation to the utilities for their review confirms that the methodology is not so simple that
notice to interested parties is unnecessary." Petition at 12. Petitioners are wrong. As we stated
in our Order No. 31057 granting limited reconsideration
Our characterization of the change in rates to be "a simple arithmetic
calculation" is not a mischaracterization. The recalculation process consists
of (1) copying (or cutting as the computer function is often called) the column
of numbers (prices) set forth in the Council's medium case fuel price forecast
(East-Side Delivered), (2) pasting them into the avoided cost calculation
model (whereupon an instantaneous recalculation occurs), and (3) pushing the
print button.
2. Symmetry. We next address the Petitioners ' argument that the procedures
followed for increasing and decreasing rates under the approved methodology are non-
symmetrical. We find the consequences of delay for each are more important than such
symmetry. When avoided costs, and therefore rates, increase, neither QFs nor ratepayers are
harmed. On the other hand when avoided costs decrease, there are real economic consequences
and harm to the utility and its customers if the utility were required to pay QFs more than the
utility's avoided costs. Indeed, as stated above, the rates to be paid for QF power are not to
exceed the utility s avoided costs. Such a result is prohibited by PURP A and FERC regulations.
18 C.R. ~~ 292. 10 (b)(6); 292.304(a)(2).
Under PURPA Sections 201 and 210, QFs selling their energy have a statutorily
mandated purchaser, the regulated utilities. The risk of rates being reduced prior to contract
execution and a legally enforceable obligation must lie with the QF, not the utility and not the
ratepayers. Petitioners state "absent the rates purportedly available in Order No. 30744, the
ORDER NO. 31092
economic viability of Petitioners' projects would be substantially diminished.Petition at 12.
We remind Petitioners that the avoided costs on which published rates are based are those of the
utility, and are not based on the purchase prices required to make a QF financially viable. In
demanding a contract at the higher rate, Petitioners are demanding a subsidy from ratepayers
which results in a purchase rate exceeding the utility s avoided costs. This Commission has no
authority to grant such a subsidy.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over A vista Corporation dba
A vista Utilities, Idaho Power Company, and PacifiCorp dba Rocky Mountain Power, electric
utilities, pursuant to the authority and power granted it under Title 61 of the Idaho Code and the
Public Utility Regulatory Policies Act of 1978 (PURP A).
The Commission has authority under PURP A Sections 201 and 210 and the
implementing regulations of the Federal Energy Regulatory Commission (FERC), 18 C.R. ~
292, to set avoided costs, to order electric utilities to enter into fixed-term obligations for the
purchase of energy and capacity from qualified facilities and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above, IT IS HEREBY ORDERED and the Commission reaffirms the published avoided cost
rates published in Order No. 31025. To the extent that Petitioners in their Petition for
Reconsideration requested that the rates be vacated and the higher rates of Order No. 30744 be
reinstated, we find their arguments unpersuasive.
THIS IS A FINAL ORDER DENYING RECONSIDERATION.Any party
aggrieved by this Order or other final or interlocutory Orders previously issued in this Case No.
GNR-10-01 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. 31092
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 2. fr
f4...
day of May 2010.
D. KEMPTO , P DENT
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~p~
D. Jewell
Commission Secretary
bls/O:GNR-IO-sw3
ORDER NO. 31092