20100428Comments on Reconsideration.pdf

Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter(frichardsonandoleary.com
greg(frichardsonandolear .com
REeE
ZUHi ~.PR 28 rl1 I: 41
Attorneys for Petitioner
Windland, 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 AVISTA UTILITIES, IDAHO POWER ~ COMMENTS ON "LIMITED
COMPANY, AND PACIFICORP RECONSIDERATION" BY
DBA ROCKY MOUNTAIN POWER ~ WINDLAND, INC. AND AGPOWER
) JEROME, LLC OF ORDER NO. 31025
)
)
)
)
INTRODUCTION
COMES NOW, Windland, Inc. ("Windland") and AgPower Parers, LLC
("AgPower") (collectively "Petitioners") and pursuant to the Notice of Scheduling and
Order No. 31057 issued on April 21, 2010 by the Idaho Public Utilities Commission (the
"Commission") hereby provide their collective comments.
COMMENTS OF WINDLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-l
INCORPORATION BY REFERENCE OF PRIOR ARGUMENTS AND
FACTUAL STATEMENTS
The Petitioners hereby incorporate by reference all of the legal arguments and
factual assertions made in their original Petition for Reconsideration and their Reply to
PacifiCorp's Answer to Petition for Reconsideration and reassert all said arguments and
assertions here as if set out in full.
THE COMMISSION'S ORDER ON RECONSIDERATION MISSES THE
FUNDAMENTAL POINT OF NOTICE
The essence of Petitioners' Petition for Reconsideration is that they had no prior
notice ofthe change in avoided cost rates. Notice is fudamental not only for puroses of
allowing the affected parties an opportunity to address the accuracy of a proposed rate
change, but also for puroses of allowing the affected paries an opportunity to rearange
their business affairs in response to the proposed rate change. This is true in the context
of the Public Utility Regulatory Policies Act of 1978 ("PURP A") as well as in the context
of setting generally applicable rates charged by a utilty. As pointed out in Petitioners'
prior pleadings, the Idaho Supreme Court has ruled that the notice statute in play -- LC. §
61-307 --applies to avoided cost rate changes. See A. W Brown Co., Inc. v Idaho Power
Co., 121 Idaho 812, 818, 828 P.2d 841, 847 (1992) (holding that when engaged in
avoided cost rate setting, rather than the more onerous provisions of Idaho's
Administrative Procedures Act, the Commission "need only fulfill the notice
requirements imposed on it by the public utility regulation statutes," including LC. § 61-
307).
COMMENTS OF WINDLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-2
Without addressing a single legal argument raised by Petitioners, the Commission
ruled that:
Petitioners contend that the maner 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 Attchment, the
calculation of new avoided cost rates is a simple process. We fuher find
that no violation of notice or due process has occured and that no cure is
necessary. We find Petitioners' arguents to the contrar to be
unpersuasive and without merit.
Order No. 31057, at p. 6. Even if the Commission were to consistently follow a process
whereby the recalculation of the published avoided cost rates was merely an
administrative and ministerial act, that fact would not excuse or abrogate the notice
requirements contained in LC. § 61-307.1 There are no exceptions to the notice statute
for "administrative and ministerial" acts by the Commission. Indeed, much of the
Commission's business may be characterized as administrative and ministerial in nature,
yet it must stil comply with the notice provisions in the Code when engaged in activities
of that natue.
The Commission routinely issues rate changing orders that are administrative and
ministerial in nature while complying with the notice requirements found in the Code.
F or example, when changing rates for natural gas utilties to account for changes in
wholesale natural gas prices, the Commission applies the new gas rates to a Purchased
Gas Adjustment ("PGA") formula and publishes notice of the rate change. Just last
Petitioners strongly disagree that the Commission regularly follows such a
ministerial process, and reiterate that the Commission allows implementation of the new
avoided cost rates to be significantly delayed when the gas forecast calls for increased
rates. See Petition for Reconsideration, at pp. 8-9 (discussing how the Commission
allowed substatial delays in increases in the avoided cost rates to fully consider utility
concerns in Order Nos. 30744 and 30480).
COMMENTS OF WINDLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-3
sumer the Intermountain Gas Company fied an application to reduce its rates by $72.4
milion on August 19,2009 in Docket No. INT-G-09-02. The Commission duly issued a
Notice of Application and took comments on the proposed rate reduction. The rate
reduction was made effective on October 1,2009 by Order No. 30913. Despite the fact
that the ratepayers were paying more than they should, the Commission took the time to
follow notice provisions in LC. § 61-307.
The Commission's concern about ratepayer neutrality in this case appears to be
discriminatorily applied given the assertion that "(i)t is well established that a utilty
canot be required to pay more for qualifying facilities ("QFs") power than its avoided
costs." Order No. 31057, at pp. 6-7. It is also well established that a utility cannot
charge ratepayers more than its cost of service -- but that is what the Commission
allowed Intermountain Gas Company to do pending notice and opportunity to comment.
That the Commission can perform a true-up of the natural gas rates at a later date does
not change the fact that ratepayers were paying more than they "should" pending the
Commission's compliance with the notice provisions of LC. § 61-307. Truing up rates
does not hold the ratepayer harless because the ratepayers have a much higher cost of
money than a utilty and hence, more lost opportties due to the timing difference in
receiving their rate reduction.
Notice means more than just being provided an opportunity to comment on a
proposed rate. Notice is necessar so that parties may put their affairs in order in
anticipation of the new rate. This is true not just for ratepayers but also for the QF
industr. There is nothing untoward with a QF reacting to a notice of a pending avoided
cost rate decrease, by seeking to finalize its preparations for a new QF project in order to
COMMENTS OF WINDLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-4
obtain the existing rate before it is reduced. During the notice and comment period
necessar to satisfy due process, the existing rate is stil valid and should be made
available to any QF positioned to assert entitlement to a contract.
FERC has recognized that the rates in a long term contract with a QF will not
always match a utility's avoided cost rate at every moment over the duration of the
contract. FERC very recently reaffirmed "the right of QFs to long-term avoided cost
contracts or other legally enforceable obligations with rates determined at the time the
obligation is incured, even if the avoided costs at the time of delivery ultimately differ
from those calculated at the time the obligation is originally incured." JD Wind 1, LLC,
"Order Denying 'Request for Rehearing, Reconsideration or Clarification,''' 130 FERC ir
61,127, at p. 10 (Februar 19, 2010). "(I)n order to be able to evaluate the financial
feasibility of a cogeneration or small power production facility, an investor needs to be
able to estimate, with reasonable certinty, the expected retu on a potential investment
before constrction of a facility." Id (quoting Order No. 69, 45 Fed. Reg. 12,214 (Feb.
25, 1980)).FERC has concluded "in the long ru, 'overestimations' and
'underestimations' of avoided costs wil balance out." Order No. 69, 45 Fed. Reg. at
12,224.
Furhermore, Order No. 31057 overstates the case when it states the notice
requirement should be ignored on the ground that "(a) delay in changing avoided cost
rates means that ratepayers are saddled with rates that are too high and therefore
uneasonable." Order No. 31057, at p. 6. In addressing a similar issue regarding PURP A
contracts' impact on ratepayers, FERC stated "(i)f part of the savings from cogeneration
and small power production were allocated among utilities ratepayer, any rate reductions
COMMENTS OF WINDLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-5
will be insignificant for any individual customer." Order No. 69, 45 Fed. Reg. at 12,222.
FERC went on to state "(o)n the other hand, if these savings are allocated to the relatively
small class of qualifying cogenerators and small power producers (by providing them
with rates at the full avoided costs), they may provide a significant incentive for a higher
growth rate of these technologies." Id
The Commission's singular focus on minimizing the amount utilities pay for
PURP A contracts overlooks that in addition to not exceeding the utilities' avoided costs,
FERC regulations require that the avoided cost rate must compensate QFs for the
utilties' full avoided cost. See 18 C.F.R. § 292.304(a). In promulgating that regulation,
FERC directly rejected proposals to provide QFs with rates of less than the full avoided
cost. See Order No. 69, 45 Fed. Reg. at 12,222-12,223. The Commission, however,
allowed substantial delays in increases in the avoided cost rates to provide the utilties
with proper notice and then fully consider utilty concerns over avoided cost rate
increases in Order Nos. 30744 and 30480. Durng the time that the Commission
accorded the utilities with their statutory and constitutional due process rights, qualifying
facilities could only enter into PURP A contracts at rates that later proved to be far lower
than the full avoided cost rates. This one-sided approach to the avoided cost ratemakng
procedure is discriminatory ratemaking, and therefore violates FERC regulations. See 18
C.F.R. § 292.304(a)(1)(ii) (prohibiting avoided cost rates that discriminate against QFs).
THE COMMISSION'S IMPLICIT FINDING OF
"GOOD CAUSE SHOWN" IS FATALLY FLAWED
Apparently addressing Petitioners' argument that "good cause shown" must mean
something more that the Commission's standard for finding a rate to be no longer
COMMENTS OF WINLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-6
prudent, Order No. 31057 simply asserts that, "(o)ur explicit findings in Order No. 31025
can be read in no other way than but an implicit finding of 'for good cause shown.'"
Order No. 31057, at p. 7. The Idaho Code provisions applicable to the Commission do
not define the phrase "for good cause shown." When faced with similar circumstances,
cours that have examined the standard, "for good cause shown" have held that it must be
construed in the context of the statute in which it appears.2 Here the statute in question
requires notice of a rate change and the Idaho Supreme Cour has explicitly ruled that it
applies in the QF context. See A. W Brown Co., Inc., 121 Idaho at 818,828 P.2d at 847.
Despite the obvious contradiction in the concept of an implicit finding of good cause
shown, the sole fact the Commission believes a rate change is reasonable is not sufficient
to eliminate the notice requirement in LC. § 61-307. Indeed, such a concept eviscerates
the very purose of the statute. Under the Commission's reasoning, whenever a utilty
fies for a rate change that the Commission finds to be reasonable, there would be an
implicit finding of good cause shown for no notice. This would be tantamount to reading
out of the statute the requirement for a showing of good cause for providing less than
thirty days notice, which clearly this Commission may not do.
PRAYER FOR RELIEF
For all the foregoing reasons and for the reasons set forth in Windland's and
AgPower Jerome's Petition for Reconsideration and Reply to PacifiCorp's Answer to
Petition for Reconsideration of Order No. 31025, the Commission is respectfully urged to
declare that Order No. 31025 is null and void for violating LC. § 61-307 and the
2 In Re David Lucus _ CaL.Rptr.3d_, 182 CaL.App.4th 797,809-810 (March 5,
2010); California Portland Cement Co. v. CaL. Unemployment Insurance Appeals Bd., 3
CaL. Rptr. 37,178 CaL.App.2d 263,272-73 (1960).
COMMENTS OF WINDLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-7
Procedural Due Process Clauses of the Idaho and United States Constitution, and declare
the rates curently in effect to be the rates in Order No. 30744 until full compliance with
these legal provisions.
Respectfully submitted this 28th day of April 2010,
ßd~
Peter Richardson
Attorney for Windland, Inc. and
AgPower Jerome, LLC
ISB No: 3195
COMMENTS OF WINDLAND, INC. AND AGPOWER JEROME, LLC ON RECONSIDERATION
OF ORDER NO. 31025
PAGE-8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 28th day of April, 2010, a true and correct copy of the
within and foregoing COMMENTS ON "LIMTED RECONSIDERATION" BY WINLAN,
INC., AN AGPOWER JEROME, LLC, OF ORDER NO. 31025
was served in the maner shown to:
Jean Jewell
Commission Secretay
Idaho Public Utilties Commission
472 W Washington
Boise ID 83702
Barton L Kline
IDAHO POWER COMPANY
POBox 70
Boise ID 83707
Jeffrey K Larsen
PacifiCorp
201 South Main Ste 2300
Salt Lake City UT 84111
Clint Kalich
AVISTA Corporation
PO Box 3727
Spokane W A 99220
Jeffrey S Lovinger
Kenneth E Kaufman
Lovinger Kaufman LLP
825 NE Multnomah Ste 925
Portland OR 97232
Danel E Solander
Rocky Mountain Power
201 South Main St Ste 2300
Salt Lake City UT 84111
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Nina Curis
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