20120720Legal Brief.pdf

Benjamin J. Otto (ISB No. 8292)
710 N 6th Street
Boise, ID 83701
Ph: [phone] x 12
Fax: [phone]
[e-mail]
RE G E11 VFt)
20I2JUL20 PM 3:13
IDAHO
UTILITIES OOMMSSiCN
Attorney for Idaho Conservation League
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
COMMISSION'S REVIEW OF PURPA QF
CONTRACT PROVISIONS INCLUDING
THE SURROGATE AVOIDED
RESOURCE (SAR) AND INTEGRATED
RESOURCE PLANNING (IRP)
METHODOLOGIES FOR CALULATING
PUBLISHED AVOIDED COST RATES.
CASE NO. GNR-E-11-03
LEGAL BRIEF OF THE IDAHO
CONSERVATION LEAGUE
This case presents the Commission with a host of factual, legal, and policy issues. In this
brief, the Idaho Conservation League ("ICL") addresses only two legal issues: (1) the
Commission's authority to assign Renewable Energy Credits ("RECs"), and (2) the legal
framework under Federal Energy Regulatory Commission ("FERC") licenses and the Clean
Water Act governing Idaho Power's operation of four Mid-Snake River dams. Until the technical
hearing ICL takes not position on the other legal, factual, or policy issues present in this case.
I. The Commission does not have the legal authority to resolve REC ownership under Idaho
law, unless the owner unequivocally dedicates the REC to public use.
In 2004, the PUC Staff succulently stated there is "no hook that gives the Commission
jurisdiction over 'environmental attributes,' not under PURPA or federal law (including the
Energy Policies Act of 1992), and not under Title 61 of the Idaho Code. Comments of the
Commission Staff at 6 - 7, Case IPC-E-04-02. Since this statement, the Federal Energy Regulatory
Commission has consistently confirmed that "PURPA does not address the ownership of RECs
and that states have the authority to determine ownership of RECs in the initial instance, as well
as how they are transferred from one entity to another." Morgantown Energy Associates, 139
FERC 161,066 at P 46 (April 24, 2012). But a precondition to a state's authority to determine
REC ownership is the creation of RECs as a legal commodity. Many states have passed such
legislation; Idaho has not.
ICL LEGAL BRIEF 1 July 20, 2012
The Commission is a creature statue with a limited set of powers prescribed in Idaho
Code Title 61. In the words of the Idaho Supreme Court: "The Idaho Public Utilities
Commission has no authority other than that given to it by the legislature. It exercises a limited
jurisdiction and nothing is presumed in favor of its jurisdiction." McGuire Estates Water Co., v.
Idaho Pub. Utils. Comm "n, 111 Idaho 341 (1986). These limited powers do not include the
authority to create and assign a non-electric property interest. The Commission recently
explained, "RECs are inventions of state property law whereby the renewable energy attributes
are 'unbundled' from the energy itself and sold separately." Order 32580 at 4 (citing Wheelabrator
Lisbon v. Connecticut Dept. Public Utility Control, 531 F.3d 183, 186 (2d Cir. 2008). The Idaho
legislature has considered, but ultimately rejected, recognizing RECs as a property right under
Idaho law. Order No. 32580 at 5,8-9. And the Commission, along with Idaho's investor owned
utilities, all recognize that "no Idaho law. . . addresses the ownership of RECs." Id. at 9. Until
the Idaho legislature recognizes RECs as a legal commodity, the Commission simply does not
have the authority to resolve the ownership issue.
Despite a lack of legal authority, the utilities and Staff all urge the Commission to resolve
the ownership of RECs. Clements Direct at 6— 10; Sterling Direct at 39-48; Kalich Rebuttal at 9-
10; Stokes Rebuttal at 41 - 451 Mr. Clements and Mr. Sterling misconstrue the law by arguing
that environmental attributes, represented by a REC, are a precondition to developers availing
themselves of the PURPA purchase mandate. Clements at 7-9; Sterling at 41. FERC has
consistently rejected this argument by stating, "RECs are created by the States. They exist outside
the confines of PURPA." American Re-Fuel 105 FERC 161,004 at P 23 (Oct. 1, 2003);
Morgantown at P 46. Along the same lines, FERC has explained that Mr. Clements' and Mr.
Sterling's argument that avoided costs under PURPA compensates developers for the RECs "is
inconsistent with PURPA." Morgantown at P 47; Clement at 9; Sterling at 41, 46.2 More
specifically, FERC has explained "the avoided cost that a utility pays a QF does not depend on the
type of QF i.e., whether it is a fossil fueled cogeneration facility or a renewable-energy small
power production facility." American Ref-Fuel at P 22. And FERC has clearly stated that RECs
created by state law are "outside the confines of, and, in addition to the PURPA avoided cost
Mr. Stokes "adopts and supports" Mr. Clements testimony. Stokes Rebuttal at 45.
2 Interestingly Mr. Kalich correctly states "under PURPA it is not appropriate to include the value
of RECs in avoided costs." Kalisch Rebuttal at 9. This contradiction between utility witnesses
goes to show how untenable their position is - each uses the opposite argument to support the
same conclusion.
ICL LEGAL BRIEF 2 July 20, 2012
rate[.]" California Public Utils. Comm'n, 133 FERC ¶ 61,059 at P 31 (Oct. 21,2010); American
Ref-Fuel at P 23.
Mr. Clements goes on to claim that selling energy unbundled from RECs in somehow
defective. Clements at 9 - io. Again, this argument does not conform to the legal landscape.
FERC has consistently upheld the rights of states to allow for unbundled REC sales. American
Ref-fuel at P 23; W. Sys. Power Pool, 139 FERC ¶ 61,061 at P24 (April 20, 2012). And FERC
recently distinguished its authority over bundled and unbundled REC transactions exerting
"jurisdiction over the wholesale energy portion of the [bundled] transaction as well as the REC
portion of the bundled REC transaction under FPA sections 205 and 206." W. Sys. Power Pool, at
P 24. The Commission should ignore the arguments of the utilities and staff regarding RECs
because they do not conform to applicable law.
While the Commission has no authority to resolve REC ownership, the Idaho Supreme
Court does pursuant to its judicial power and appellant jurisdiction. I.D Const. art. V, §§ 2,9;
Marbury v. Madison, 5 U.S. 137 (1803). Prior Idaho Supreme Court decisions regarding water
rights are a useful analogy for REC ownership because they distinguish the unqualified rights of
property owners to private waters against the qualified rights to public waters. In King V.
Chamberlin the court ruled that a property owner who, through their own efforts, collects rain
and snow melt on their property holds such water as private property and is not subject to the
dedication to public use of water prescribed in Article 15 of the Idaho Constitution. 118 P. 1099
(Idaho 1911). In Idaho Public Utils. Comm'n v. Natatorium, the court applied this rule to a
property owner who collected hot water and delivered it to surrounding homes. 211 P. 533, 533 -
534, (Idaho 1922)(Natatorium). Finding the property owners developed a private water source;
the court overturned the Commission's exertion of regulatory authority over the owner. "If these
waters are private waters, in the absence of an unequivocal intention to and dedication thereof to
a public use by the appellant, the appellant would not be a public service corporation, and
therefore subject to regulation as a public utility. Such dedication is never presumed." Id. at 534.
Similarly, energy and capacity sold to a public utility is dedicated to public use and subject
to the Commission's jurisdiction. I.C. § 61-129. But the environmental attributes are a distinct
property interest arising spontaneously, just like a water seep or rainwater falling on private
lands. As the Commission has explained, "RECs are inventions of state property law whereby the
Selling energy and capacity separately from RECs is an unbundled transaction; selling the three
commodities together is a bundled transaction.
ICL LEGAL BRIEF 3 July 20, 2012
renewable energy attributes are 'unbundled' from the energy itself and sold separately." Order
No. 32580 at 4. Absent legislative recognition, the legal status of RECs as property must depend
on traditional notions of common law, which in Idaho vest those rights in the owner who
expends the time and effort to create the property. King 188 P. at 510 - 511. And the
Commission's jurisdiction over the RECs only applies when the owner makes "an unequivocal
intention to and dedication thereof to a public use[.]" Natatorium, 211 P. 1009. Because QF
developers expend their own time and resources to create an independent property right in
RECs, unless they make an unequivocal dedication to the public, QF developers inherently own
RECs under Idaho law.
II. The Federal Power Act and Clean Water Act allow flexibility in Idaho Power's run of river
projects on the Mid-Snake River.
Although she admits not being qualified to address the issue, Idaho Power witness Tessia
Park claims Idaho Power's Mid-Snake River hydroelectric projects are must run resources
pursuant to FERC licenses and Clean Water Act constraints. Park Rebuttal at 9 - 11; Park Direct
at 20. By modeling these resources as "must-run" Idaho Power artificially reduces the ability and
increases the costs to integrate PURPA projects. The legal framework provides more flexibility
than Ms. Park allows. The Commission should reject Idaho Power's artificial modeling constraint
based on an inaccurate application of the legal framework.
The Federal Power Act empowers FERC to regulate the construction and operation of
hydroelectric facilities through the issuance and conditioning of licenses. 16 U.S.0 §797(e).
Before issuing a license, FERC must provide a state the opportunity to certify the terms and
conditions of construction and operations will comply with state water quality standards - known
as a 401 certification. 33 U.S.0 §1341(d); PUD No. 1 ofJefferson County v. Washington
Department of Environmental Quality, 511 U.S. 700, 707 - 708 (1994); S.D. Warren Co. v. Maine
Board of Environmental Protection, 547 U.S. 370, 374-375 (2006). A state can waive the 401
certification affirmatively, or by not responding with the statutory time frame. 33 U.S.C.
§ 1341(a) (1). But even if a state waives the 401 certification, FERC has an obligation to impose
license terms and conditions that balance power generation with protecting fish and wildlife
habitat as well as water quality generally. 16 U.S.C. §803(a). Through this approach, FERC
balances the operation of the hydroelectric project with the protection of other public benefits
including aesthetics, water quality, and fish habitat.
ICL LEGAL BRIEF 4 July 20, 2012
Pursuant to this legal framework, FERC issued licenses for Idaho Power's hydroelectric
dams that include operating terms and conditions that will protect water quality. See generally
Hayes Direct. The terms and conditions cover two characteristics, the amount of flow and the
rate of change, or "ramping rate" in the by-passed reach. Id. Because the purpose of these terms
is to comply with the Clean Water Act, any fair consideration of whether Idaho Power can legally
vary from them must be based on the potential impact to water quality and habitat. While
altering the operations of the dams may be technically challenging, as described by Ms. Park,
nothing in the Federal Power Act, the Clean Water Act, or the FERC licenses prevents Idaho
Power from reducing generation and increasing spill within the applicable ramping rates. Any
claim by Idaho power they are legally prohibited from changing operations within these
parameters misstates the applicable law and should be rejected.
Conclusion
The Commission has a long record of carefully applying the applicable legal standards to
the facts and policy decision before them. For the two issues addressed in this brief the legal
standards are clear. First, absent legislative recognition, the Commission simply does not have
the legal authority to resolve REC ownership. However, the Idaho Supreme Court does, and the
analogous case law holds the legal status of RECs as property must depend on traditional notions
of common law, which, in Idaho, vest those rights in the owner who expends the time and effort
to create the property. Second, at least for the four largest Mid-Snake River dams, nothing in the
Federal Power Act, the Clean Water Act, or the FERC licenses prevents Idaho Power from
reducing generation and increasing spill within the applicable ramping rates. Accordingly, the
Commission should:
(1)Reject the utilities and staff suggestion to allocate RECs to the utilities;
(2)Reject Idaho Power's artificial modeling constraint that deems the Milner, Twin Falls,
Bliss, and Lower Salmon projects must-run resources.
Respectfully submitted this 20th day of July 2012,
/ ~ ~ 6- X-e~
Benjamin J. Otto
Idaho Conservation League
ICL LEGAL BRIEF 5 July 20, 2012
CERTIFICATE OF SERVICE
I hereby certify that on this 20th day of July, 2012 I delivered true and correct copies of
the foregoing LEGAL BRIEF to the following persons via the method of service noted:
Hand delivery:
Jean Jewell
Commission Secretary (Original and seven copies provided)
Idaho Public Utilities Commission
427 W. Washington St.
Boise, ID 83702-59
Electronic Mail only:
PUC
Donald L. Howell, II
Kristine Sasser
Deputy Attorneys General
Idaho Public Utilities Commission
472 W. Washington
Boise ID 83702
[e-mail]
[e-mail]
Idaho Power
Donovan E. Walker
Jason B. Williams
Idaho Power Company
1221 West Idaho Street
Boise, Idaho 83707-0070
[e-mail]
[e-mail]
Avista
Michael G. Andrea
Avista Corporation
1411 E. Mission Ave.
Spokane, WA 99202
[e-mail]
Rocky Mountain Power
Daniel Solander
PacifiCorp/dba Rocky Mountain Power
201 S. Main St., Suite 2300
Salt Lake City, UT 84111
[e-mail]
NIPPC
Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
515 N. 27th Street
Boise, ID 83702
[e-mail]
[e-mail]
Robert D. Kahn, Executive Director
Northwest and Intermountain Power
Producers Coalition
117 Minor Ave., Suite 300
Seattle, WA 98101
[e-mail]
Simplot
Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
515 N. 27th Street
Boise, ID 83702
[e-mail]
[e-mail]
Don Sturtevant, Energy Director
J.R. Simplot Company
P.O. Box 27
Boise, ID 83707
[e-mail]
Grandview Solar II
Peter J. Richardson
CERTIFICATE OF SERVICE 6 July 20, 2012
Gregory M. Adams Clearwater Paper Corp
Richardson & O'Leary, PLLC Peter J. Richardson
515 N. 27th Street Gregory M. Adams
Boise, ID 83702 Richardson & O'Leary, PLLC
[e-mail] 515 N. 27th Street
[e-mail] Boise, ID 83702
[e-mail]
Robert A. Paul [e-mail]
Grandview Solar II
1590 Vista Circle Mary Lewallen
Desert Hot Springs, CA Clearwater Paper Corporation
[e-mail] 601 W. Riverside Ave., Suite 1100
Spokane, WA 99201
Exergy Development [e-mail]
Peter J. Richardson
Gregory M. Adams Dynamis Energy
Richardson & O'Leary, PLLC Ronald Williams
515 N. 27th Street Williams and Bradbury, P.C.
Boise, ID 83702 1015 W, Hays St.
[e-mail] Boise, ID 83702
[e-mail] [e-mail]
James Carkulis Wade Thomas, General Counsel
Managing Member Dynamis Energy, LLC
Exergy Development Group of Idaho 776W. Riverside Dr., Suite 15
802 W. Bannock St., Suite 1200 Eagle, ID 83616
Boise, ID 83702 [e-mail]
[e-mail]
Renewable Energy Coalition
Dr. Don Reading Ronald Williams
2070 Hill Road Williams and Bradbury, P.C.
Boise, ID 83702 1015 W, Hays St.
[e-mail] Boise, ID 83702
[e-mail]
Adams county Board of commissioners
Peter J. Richardson John R. Lowe, Consultant
Gregory M. Adams Renewable Energy Coalition
Richardson & O'Leary, PLLC 12050 SW Tremont St.
515 N. 27th Street Portland, OR 97225
Boise, ID 83702 [e-mail]
[e-mail]
[e-mail] Interconnect Solar Development, LLC
R. Greg Ferney
Bill Brown, Chair Mimura Law Office, PLLC
Board of Commissioners of Adams County 2176 E. Franklin Rd., Suite 120
P.O. Box 48 Meridian, ID 83642
Council, ID 83612 [e-mail]
[e-mail]
Bill Piske, Manager
CERTIFICATE OF SERVICE 2 July 20, 2012
Interconnect Solar Development, LLC Boise, ID 83701
1303 E. Carter [e-mail]
Boise, ID 83706
[e-mail] Glenn Ikemoto
Margaret Rueger
Intermountain Wind, LLC Idaho Windfarms, LLC
Dean J. Miller 672 Blair Avenue
McDevitt & Miller, LLP Piedmont, CA 94611
P.O. Box 2564 [e-mail]
Boise, ID 83701 [e-mail]
[e-mail]
Blue Ribbon Energy
Paul Martin M.J. Humphries
Intermountain Wind, LLC Blue Ribbon Energy, LLC
P.O. Box 353 4515 S. Ammon Road
Boulder, CO 80306 Ammon, Id 83406
[e-mail] [e-mail]
Twin Falls and North Side Canal Companies Arron F. Jepson
C. Thomas Arkoosh Blue Ribbon Energy LLC
Capitol Loaw Group, PLLC 10660 South 540 East
205 N. 100' St., 4th Floor Sandy UT 84070
P0 Box 2598 [e-mail]
Boise, ID 83701
[e-mail] Renewable Northwest Project
Dean J. Miller
Brian Olmstead, General Manager McDevitt & Miller, LLP
Twin Falls Canal Company P.O. Box 2564
P.O. Box 326 Boise, ID 83701
Twin Falls, ID 83303 [e-mail]
[e-mail]
Megan Walseth Decker
Ted Diehl, General Manager Senior Staff Council
North Side Canal Company Rnewable Northwest project
921 N. Lincoln St. 421 SW 6th St, Suite 1125
Jerome, ID 83338 Portland, OR 97204
[e-mail] [e-mail]
Birch Power Company Snake River Alliance
Ted Sorenson, P.E. Liz Woodruff
Birch Power Company Ken Miller
5203 South 1 Ph East Snake River Alliance
Idaho Falls, ID 83404 P0 Box 1731
[e-mail] Boise, ID 83701
1woodrufRsnakeriveralliance.org
Idaho Windfarms, LL C [e-mail]
Dean J. Miller
McDevitt & Miller, LLP Energy Integrity Proiect
P.O. Box 2564 Tuana Christensen
CERTIFICATE OF SERVICE 3 July 20, 2012
Energy Integrity Project
769N 1100E
Shelly, ID 83274
[e-mail]
Idaho Wind Partners I, LLC
Deborah E. Nelson
Kelsey J. Nunez
GIVENS PURSLEY LLP
601 Bannock St
P0 Box 2720
Boise, ID 83701
[e-mail]
[e-mail]
Ridgeline Energy LLC
Dean J. Miller
Chas F. McDevitt
MecDevitt & Miller, LLP
420 W. Bannock St.
Boise, ID 83702
Mountain Air Projects, LLC
J. Kahle Becker
The Alaska Center
1020 W. Main St. Suite 400
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Michael J. Uda
Uda Law Firm, P.C.
7 W. 6th Avenue, Suite 4E
Helena, MT 59601
Telephone [phone]
Facsimile: [phone]
[e-mail]
Benjamin J. Otto
Idaho Conservation League
CERTIFICATE OF SERVICE 4 July 20, 2012