20100415Reply to PacifiCorp's Answer to Petition.pdf

Peter J. Richardson
Gregory M. Adams
Richardson & O'Lear, PLLC
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter!ßrichardsonandoleary.com
greg!ßrichardsonandoleary. com
R".TV'"~ ¡;,..""
2010 APR 15 Pi1 2: 05
Attorneys for Petitioners
Wind1and, Inc., and AgPower Jerome, LLC
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ADJUSTMENT OF)
AVOIDED COST RATES FOR NEW PURPA ) CASE NO. GNR-E-I0.:0l
CONTRACTS FOR AVISTA CORPORATION)
DBA A VISTA UTILITIES, IDAHO POWER ~ REPLY TO PACIFICORP'S
COMPANY AND PACIFICORP ANSWER TO PETITION OF
DBA ROCKY MOUNTAIN POWER ~ WINDLAND, INC., AND
) AGPOWER JEROME, LLC,FOR RECONSIDERATION OF
ORDER NO. 31025
INTRODUCTION
This is a reply to PacifiCorp's answer to the petition for reconsideration fied by
Windland, Inc. ("Windland") and AgPower Jerome, LLC ("AgPower") (collectively
"Petitioners") with the Idaho Public Utilties Commission (the "Commission") in ths
docket on April 6, 2010. The background regarding the Public Utilty Regulatory
Policies Act of 1978 ("PURPA") and the Commission's rate change in Order No. 31025
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-l
has been well established in prior filings in this docket. Petitioners will therefore limit
this reply to rebutt ofPacifiCorp's arguents.l
REBUTTAL ARGUMENT
A. Petitioners should be allowed to file this reply.
PacifiCorp filed its answer on April 13,2010, and Petitioners respectfully request
the Commission consider this reply fied two days later, April 15, 2010. The
Commission's rules do not expressly provide for, or prohibit, a reply to an answer to a
petition for reconsideration. Petitioners submit that they should be entitled to provide a
reply to PacifiCorp's answer in this case because Petitioners had no opportunity to
paricipate in ths docket prior the Commission's final order - Order No. 31025. Because
Petitioners have filed their reply within two days of PacifiCorp's answer, this reply will
not unduly impede the Commission's preparation of a decision on the petition for
reconsideration within the 28 days required by I.C. § 61-626(2). Furher, without an
opportty to reply, Petitioners would be left without the opportity to rebut new
arguents in PacifiCorp's answer and adequately establish the administrative record in
this docket.
This reply will not address all arguments or authorities in PacifiCorp's answer.
Petitioners merely attempt to address the arguments and authorities raised by PacifiCorp
that were not directly addressed in Petitioners' original petition for reconsideration.
Petitioners continue to stad by all arguents in the original petition and in no way
concede any point not directly addressed in this reply.
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-2
B. Order No. 31025 violated Petitioners' procedural due process rights.
1. Federal courts have repeatedly recognized a protected propert
interest in government entitlements similar to PURPA's standard avoided
cost rates.
A long line of federal authorities is to the contrar of PacifiCorp's position that
qualifying facilities ("QFs") have no entitlement to published avoided cost rates. Federal
law establishes protected propert interests in a variety of statutorily-created entitlements,
not the subject of an absolute entitlement, but nevertheless essential to pursuit of
livelihood. See, e.g., Bell v. Burson, 402 U.S. 535, 539 (1971) (holding that due process
restraints protect an entitlement to a driver's license); Alaska Airlines, Inc. v. City of Long
Beach, 951 F.2d 977, 986 (9th Cir. 1991) (relying upon airline's expenditure on
advertisements and anouncements of flghts to find protected entitlement to flght
allocations and hold city violated due process with its ordinance that could
"automatically" reduce flght allocations without prior notice and hearng).
As in Alaska Airlines, Inc., Petitioners expended sums in reliance on a
governent-created entitlement in pursuit of livelihood - published avoided cost rates to
develop PURP A projects. Petitioners are therefore entitled to at least some notice and
process prior to being deprived of that right. The Commission may not "automatically"
reduce those protected avoided cost rates without some advance notice and process.
2. The authorities relied upon by PacifiCorp for a due process test
cannot overcome federal case law and are factually distinguishable.
PacifiCorp relies heavily on the due process analysis in Rosebud Enterprises, Inc.
v. Idaho Pub. Uti!. Comm 'n ("Rosebud Il'), 131 Idaho 1, 951 P .2d 521 (1997), for the
proposition that, in order to establish an entitlement to existing avoided cost rates
protected by the due process clause, a QF must perfect its obligation to sell to the utilty
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-3
pursuat to 18 C.F.R. § 292.304(d)(2)(ii). From there, PacifiCorp asserts that Rosebud II
provides only two ways to perfect such grandfather status - a fully executed contract or a
complaint for grandfather status pre-fied before the rate change. See PacifCorp's
Answer at pp. 8-10. But Rosebud II is inapplicable here.
First, Rosebud II does not distingush whether it was addressing federal or state
constitutional rights. It does not mention the Bell line of federal cases, or distinguish
federal cases expressly stating that PURP A creates a "benefit to which QFs are entitled."
Freehold Cogeneration Associates, L.P. v. Board of Regulatory Comm'rs of the State of
New Jersey, 44 F.3d 1178, 1191 (3rd Cir. 1995) (emphasis added). Federal law entitles
QFs to the standard rates at any time QFs choose to secure them. The requirement that a
QF file a grandfathering complaint with the Commission to establish a protected interest
in its federal entitlement to the standard avoided cost rates is inconsistent with federal
law. So Rosebud II (or at least PacifiCorp's reading of it) is inapplicable to this case,
where Petitioners rely on the United States Constitution.
Second, Rosebud II addressed only the factual situation where QFs had prior
notice of an impending rate change, and thus adequate opportity to file a complaint
prior to the rate change. See Rosebud II, 131 Idaho at 6, 951 P.2d at 526 (relying upon
A. W. Brown Co, Inc. v. Idaho Power Co., 121 Idaho 812, 816, 828 P.2d 841,845 (1992),
as legal authority approving ths grandfather test). The pre-fied complaint requirement
in the prior cases relied upon by PacifiCorp arose from a procedure where the utilty filed
a petition to change existing rates well in advance of the effective date of the rate change.
See, e.g., A. W. Brown Co, Inc., 121 Idaho at 814, 828 P.2d at 843 (noting that utilty fied
petition to change rates in Januar 1985, and rates did not go into effect until late April
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-4
1985); Order No. 19745, at pp. 1,3 (noting that utility fied applications to lower rates in
"sumer 1984" and Janua 25, 1985, but cut-off date for filing a complaint for
grandfather status at April 29, 1985). In those cases and thus the facts addressed in
Rosebud II, QFs at least had notice of the impending rate change such that they could
timely pre-fie a complaint before a rate change.
Furer, Rosebud II and A. W. Brown merely approved of ths grandfather test;
neither stated it was the only way to establish a legally enforceable obligation to sell to
the utilty and thereby achieve grandfathered status. See Rosebud II, 131 Idaho at 6, 951
P.2d at 526. And the Commission has not required this pre-filed complaint test
consistently. See Order No. 25802 (noting that complaint was filed February 11, 1994,
afer rates had changed Januar 14, 1994, but neverteless finding QF entitled itself to the
old rates with its willngness to sign a contract prior to the rate change).
Because reasonable prior notice of the rate change did not occur here, Petitioners
had inadequate opportty to fie a complaint prior the rate change to perfect their
entitlement to the existing rates under the grandfather test approved in Rosebud II and
A. W. Brown. That test, therefore, canot satisfy due process here. Both Petitioners filed
complaints shortly after the abrupt rate change. See Case Nos. IPC-E-1O-11, PAC-E-10-
05. Even if PacifiCorp is correct, therefore, that a QF must establish a meritorious
grandfathering case in order to be protected by the due process clause, Petitioners have
both done so.
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-5
3. The Oregon procedure for changing avoided cost rates cited by
PacifCorp actually gave QFs prior notice and an opportunity to comment
before the rate change, and merely providing a post-rate-change hearing wil
not now cure the constitutional infirmity in this Idaho case.
PacifiCorp cites the recent avoided cost rate change in Oregon as a possible
template for the Commission to cure any due process infrmities that have occured here.
See PacifCorp's Answer at p. 13 n. 12. But this procedure and the Oregon Commssion
Stas Report support Petitioners' arguent. In Oregon Advice No. 09-012, PacifiCorp
filed its application to lower the avoided cost rates on July 9, 2009, and the effective date
of the rate change was not until August 26,2009. See OPUC Docket No. UM 1442, Staff
Report, p. 1 (August 20, 2009). During July and August, multiple QFs commented on the
proposed rate change prior to the effective date of the rate change. Id. at p. 2. Moreover,
the Staff Report advised the Commssion that even with that advance notice of the rate
change, "a hearing is appropriate upon a valid wrtten complait . . . as a matter of the
paries being able to exercise their rights to due process." See id. at p. 3.
Counsel for PacifiCorp should be commended for attempting to cure the obvious
due process infrmity in the rate change process here by providing counsel for Windland
and AgPower with Staffs March 9 letter. But this theoretical, two-day window to object
to the rate change in a docket the Commission had not yet opened, even with a post-rate
change hearing, does not come close to satisfying the requirements of due process.2
2 PacifiCorp's reliance on a Pennsylvania Supreme Cour opiilon is likewise
unavailing. See PacifCorp's Answer, at p. 12 (citing Allegheny Ludlum Steel Corp. v.
Penn. Pub. Uti!. Comm'n, 501 Pa. 71, 459 A.2d 1218 (1983)). The majority decision
there, which drew a persuasive dissent from two of the five Justices, is not binding on this
Idaho case and canot overcome the federal case law cited above. See Alaska Airlines,
Inc., 951 F .2d at 986 (invalidating ordinance providing no prior notice and opportty to
challenge flght allocation reductions).
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-6
C. Order No. 31025 violated I.C. § 61-307.
1. PacifiCorp misreads the requirement for 30-day notice to the "public"
in I.C. § 61-307.
PacifiCorp argues that the requirement for 30-day notice to the public prior to a
rate change applies only when a utilty changes the rates on its own initiative, and not, as
occured here, when the Commission initiates the rate change. PacifiCorp's
interpretation reads out of the statute the requirement that no rate be changed "except
afer thirty (30) days notice to the Commission and to the public." I.C. § 61-307
(emphasis added). PacifiCorp is simply incorrect that the statute allows a rate change
without a 30-day notice period for the public to inspect the proposed rate schedules, and
the Idaho Supreme Cour has underscored the importce of 30-day public notice period.
See Intermountain Gas Co. v. Idaho Pub. Util. Comm'n, 98 Idaho 718, 723, 571 P.2d
1119, 1124 (1977).
2. Section 61-307 applies to avoided cost rate changes.
PacifiCorp questions the applicabilty of § 61-307 to avoided cost rate changes.
See PacifCorp 's Answer, at p. 5 n. 6. But the Idaho Supreme Cour held that, rather than
the more onerous requirements of the Idaho Administrative Procedures Act, the modest
30-day notice requirement in the Commission-specific § 61-307 applies to avoided cost
rate changes. See A. W. Brown Co., 121 Idaho at 819,828 P.2d at 848. The Commission
may not ignore with this 30-day notice requirement.
3. PacifCorp misconstrues the "good cause exception" to the 30-day
notice requirement such that the exception swallows the rule.
PacifiCorp also misreads I.C. § 61-307 to allow the Commission to dispense with
that section's requirement to "keep open for public inspection new schedules stating
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-7
plainly the change or changes to be made," simply by stating a good cause reason at the
time it changes the rates. See PacifCorp's Answer, at pp. 5-6. The statute allows for
dispensing with the public's right to 30-day notice to inspect proposed rate schedules
only for "good cause shown." I.C. 61-307 (emphasis added).
Order No. 31025 fails even PacifiCorp's interpretation of the statute because the
order provided no good cause reason to dispense with notice to the public. But even if it
had, PacifiCorp's reading cuts against the purose of the statute, which is obviously to
allow interested paries to examine the proposed rates to either take steps to challenge
them or plan for how the new rates may affect them. The Commssion must always find
good cause to approve a rate change, even after the required 30-day notice. Allowing the
Commssion to judge the rate-change case before allowing the public with notice for any
good cause reason would read the notice provision out of the statute. Thus, the good
cause exception should apply only when the Commission shows good cause to determine
in advance of an upcoming rate-change why it wil not provide for public inspection of
the precise rate schedules for 30 full days. Here, even according to PacifiCorp, the good
cause reason and the rate change occured at the same time. Finding such a practice
permissible would effectively erase the the 30-day notice requirement from the statute.
Public notice is a fudamental purose ofI.C. § 61-307. See Intermountain Gas Co., 98
Idaho at 723, 571 P.2d at 1124. Good cause must be so interpreted such that the
fudaental purose of the legislation is not destroyed.
Furer, as explained above, the lack of notice violated due process requirements.
A procedure that violates due process canot constitute good cause.
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-8
D. The petition for reconsideration is not a pretense to secure the old rates, and
Petitioners substantive rights are at issue.
Petitioners have raised issues challenging the avoided cost rate calculation
methodology, and the lack of procedures followed to implement it. See Petition for
Reconsideration, at p. 10 (suggesting that the Commission increase the avoided cost rate
for renewables with no risk of gas price varabilty). Despite PacifiCorp's assertion that
Petitioners fied this petition for reconsideration as a pretext for securing the old rates in
Order No. 30744, Sta is the par that raised the grandfathering issue. Staffs decision
memorandum in ths docket expressly recommended that "the Commission not adopt
grandfathering criteria for entitlement to existing rates." Decision Memorandum, at p. 2.
Staffs decision memorandum is dated March 15, 2010 - the same date the Commssion
held its decision meeting. The legal status of a decision memorandum as a pleading by a
par is unclear. Neverteless, for Staff to be allowed to address the grandfathering issue
in what it portays to be a docket to "automatically" update the avoided costs without
providing an opportunity for QFs to respond highlights the infirmity with the procedure
the Commission used to change the avoided cost rates.
As set fort in detal in the original petition for reconsideration, the curent rate
change process of providing notice only to the utilties results in delay whenever
increased gas prices call for an increase in the avoided cost rate, and immediate drops in
the avoided cost rates when gas prices drop. See Petition for Reconsideration, at p. 9
(citing Order No. 30480, at pp. 2, 10-12; Order No. 30744, at pp. 2, 4-5). This non-
parallel treatment to ratemakng is simply discriminatory. It chills the QF market in
Idaho, and contrar to federal law it discourages PURP A development. This docket
should have involved the public, including the QF communty, from the sta, and at least
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-9
allowed the public with the opportty to demonstrate that the drastic drop in the
avoided cost rates called for in Order No. 31025 could be mitigated by reconsidering
arguents that Q F s have raised in the past.
CONCLUSION
Windland and AgPower respectfully request the Commission issue an order that it
will reconsider Order No. 31025, declare that order null and void for violating I.C.§ 61-
307 and the Procedural Due Process Clauses of the Idaho and United States
Constitutions, and declare the rates curently in effect to be the rates in Order No. 30744,
until all interested paries have an opportity to review and be heard on the rate schedule
contained in Order No. 31025.
Respectfully submitted this 15th day of April 2010,,
f?dge~ ~
Peter Richardson
Attorney for Petitioners
ISB No: 3195
REPLY TO PACIFICORP'S ANSWER TO
PETITION FOR RECONSIDERATION OF
ORDER NO. 31025
PAGE-I0
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 15th day of April, 2010, a tre and correct copy of the
within and foregoing REPLY TO PACIFICORP'S ANSWER TO PETITION OF WINLAN,
INC., AN AGPOWER JEROME, LLC, FOR RECONSIDERATION OF ORDER NO. 31025
was served in the maner shown to:
Jean Jewell
Commission Secreta
Idaho Public Utilties Commission
472 W Washington
Boise ID 83702
.- Hand Delivery
_U.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Baron L Kline
IDAHO POWER COMPANY
PO Box 70
Boise ID 83707
_ Hand Delivery
llU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Jeffrey K Larsen
PacifiCorp
201 South Main Ste 2300
Salt Lake City UT 84111
_ Hand Delivery
llU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Clint Kalich
A VISTA Corporation
PO Box 3727
Spokane W A 99220
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Jeffey S Lovinger
Kenneth E Kaufman
Lovinger Kaufman LLP
825 NE Multnomah Ste 925
Portland OR 97232
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Danel E Solander
Rocky Mountain Power
201 South Main St Ste 2300
Salt Lake City UT 84111
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
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