HomeMy WebLinkAbout20000901Application.pdfBARTON L. KLINE ISB #1526
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Telephone: (208) 388-2682
FAX Telephone: (208) 388-6936
Attorney for Idaho Power Company
Street Address for Express Mail
1221 West Idaho Street
Boise , Idaho 83702
RECEIVED mFILED
2300 SEP - f PM ~: 48
fDt\HO PUBLIC
UTILITIES COMMISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF AN AGREEMENT FOR
ELECTRICITY SUPPLY AND MANAGE-
MENT SERVICES BETWEEN IDAHO
POWER COMPANY AND IDACORP
ENERGY SOLUTIONS, LP
CASE NO. IPC-oo-
APPLICATION
COMES NOW, Idaho Power Company, and hereby requests that the
Commission issue its Order approving Idaho Power Company s entering into the
attached Agreement For Electricity Supply and Management Services (the
Agreement") by and between Idaho Power Company ("Idaho Power ), an Idaho
Corporation , and IDACORP Energy Solutions, LP , a Delaware Limited Partnership, dba
IDACORP Energy ("IES"). A copy of the Agreement is attached as Exhibit 1. Idaho
Power is also requesting the Commission to approve the Statement of Policy and Code
APPLICATION , Page
of Conduct which is attached as Exhibit 3. In support of this Application , Idaho Power
hereby states as follows:
BACKGROUND
Idaho Power is an electric utility subject to the regulation of the
Idaho Public Utilities Commission ("Commission ). Idaho Power and IES are both
wholly-owned subsidiaries of IDACORP, Inc. The activities of IES are not regulated by
the Commission.
Idaho Power owns and operates electric generating equipment and
transmission facilities ("System Resources ) to supply the electric load and service
reliability requirements of its customers. Idaho Power also performs wholesale
electricity marketing activities to acquire electricity to supplement System Resources
and to optimize their operation. These activities provide Idaho Power s customers with
additional system reliability and with additional revenue offset which is used to reduce
their overall cost of energy.
Idaho Power has also engaged in power transactions in the
wholesale power market which do not involve sales from System Resources and are
not related to balancing system loads and resources or achieving system reliability.
Such transactions are referred to as "non-operating transactions." Transactions in the
wholesale marketplace that involve the sale of energy capacity from System Resources
or are made for the purpose of balancing system loads and resources or achieving
system reliability are referred to as "operating transactions." In Case No. IPC-99-
(Idaho Power s 1999-2000 PCA case), FMC and the Industrial Customers of Idaho
APPLICATION, Page 2
Power ("ICIP") expressed concern relating to Idaho Power s operating and non-
operating transactions and whether expenses and capital costs are being properly
allocated between operating and non-operating transactions. In response to those
comments , the Commission, in Order No. 28049, directed the parties to determine
informally, how best to address the issue. Subsequently, on February 14 2000 , the
Commission Staff filed a report addressing some of the issues raised by the Industrial
Customers in the IPC-99-3 case. The Commission acknowledged receipt of that
report in Order No. 28358 in Case No. IPC-00-6 (Idaho Power s 2000-2001 PCA
case) and encouraged the parties to address the issues further.
IES is engaged in the marketing of electricity and natural gas on
the wholesale level , and makes sales directly to end users in those states where retail
access is permitted. Operating in this competitive environment, IES has developed the
capability to provide a full range of electricity and natural gas supply management
services.
In response to the concerns expressed in the above-cited cases
Idaho Power intends to move its non-operating marketing operations into a separate
entity. IES has been chosen as that entity. IES will rent office space from someone
other than Idaho Power, will have its own employees , and will be managed and
operated independently from Idaho Power. Idaho Power will still provide some
corporate support services , such as human resources services and legal services.
These support services will continue to be supplied pursuant to a Support Services
Agreement subject to audit by the Commission. Moving non-operating transactions to
IES will substantially reduce the levels of support services currently provided by Idaho
APPLICATION , Page 3
Power and will provide a clear line of demarcation between the regulated and
non regulated electric marketing businesses of I DACORP , Inc. By entering into this
Agreement, Idaho Power would no longer participate in the nonregulated market, and
the more speculative transactions that are currently "non-operating transactions" would
be undertaken exclusively by IES. Idaho Power believes that the transfer of trading
activities from Idaho Power to IES and the physical and structural separation of lEg
from Idaho Power should meet the concerns expressed by the Industrial Customers
and acknowledged by the Commission in the above-cited orders.
The size and complexity of the wholesale markets for electricity and
ancillary services has increased dramatically in the past few years. The increased
volume of wholesale transactions between suppliers, marketers and consumers of bulk
electricity has created an increasing demand for market participants to maintain a high
level of market intelligence and understanding of market movements. The increasing
availability of sophisticated financial instruments for managing price volatility risk for
electricity transactions has further stimulated the burgeoning wholesale market for
electricity. Regardless of the status of the restructuring of the retail electric industry in
the state of Idaho, this expanding wholesale market is and will continue to significantly
affect the way Idaho Power, the Commission , and Idaho Power's customers will operate
in this changing environment.
To prudently respond to this evolving wholesale electricity market
and to comply with the orders of the FERC governing the exchange of market
information between Idaho Power s transmission business and other market
participants , Idaho Power has been required to substantially increase the number of
APPLICATION , Page 4
employees and amount of other resources it directs toward compliance with regulatory
requirements for participating in this electricity market. While the expanding wholesale
market has the potential to provide opportunities for increased price efficiency resulting
from a larger and more diverse group of market participants and products, there are
certainly greater costs and risks associated with managing power supplies within this
new environment.
Idaho Power s goal is to prudently and cost-effectively participate in
this new market. Idaho Power believes there are significant cost savings and market
risk mitigation benefits that could be realized by contracting with IES to provide
electricity marketing and other electricity supply management services to Idaho Power.
Idaho Power believes that the proposed relationship between Idaho Power and
under the IES Agreement is substantially similar in structure and intent to existing
contracts covering natural gas supply management services approved by the
Commission for both Intermountain Gas Industries and Avista Energy.
II.
DESCRIPTION OF THE AGREEMENT
Under the Agreement, Idaho Power will continue to own, operate
and maintain its System Resources and be responsible for system reliability. Idaho
Power will continue to dispatch the System Resources to match generation and load
within the Idaho Power control area. The Agreement will not modify Idaho Power
commitment or ability to manage its System Resources in a manner that will provide
Idaho Power s customers with access to all available capacity and energy from Idaho
Power s System Resources on a first-priority basis.
APPLICATION, Page 5
10.Under the Agreement, to balance system loads with resources , lEg
may purchase power from third parties and resell the power to Idaho Power when IES
determines that such transaction would result in a lower cost to Idaho Power. With the
exception of forward term contracts which IES will broker with third parties, Idaho Power
will make all of its wholesale power purchases from lEg at market prices. The market
prices for sales from IES to Idaho Power (and from Idaho Power to IES) will be
determined by reference to published market indices (Mid-C or Palo Verde) or through
the solicitation of quotes from a number of potential "suppliers or purchasers.
11.As a part of its services under the Agreement, IES will buy power
from Idaho Power at market prices when IES determines that Idaho Power has surplus
power for sale and that such sales would be beneficial to Idaho Power and its
customers. With the exception of forward term contracts which IES will broker with third
parties , Idaho Power will make all of its wholesale power sales to IES at market prices.
12.From time to time IES may act as a broker between Idaho Power
and third-party wholesale purchasers or sellers. IES will function as a broker for term
forward contracts which will be specifically approved by Idaho Power s Oversight
Manager in accordance with Section 16 below.
13.In addition to the power purchases and sales described above, the
Agreement provides that IES will provide office support services for marketing activities.
lEg will confirm purchases and sales , administer contracts, coordinate scheduling of
energy transactions in adherence with transaction protocols , and resolve discrepancies
between the net of all sales, purchases and wheeling transactions. rES will also
provide Idaho Power with risk management services to mitigate price volatility risk.
APPLICATION , Page 6
14.Idaho Power will continue to be responsible for planning System
Resource operations and for preparing and obtaining regulatory acknowledgment of the
integrated resource plan as required by the IPUC and the OPUC. IES will assist Idaho
Power in load forecasting and reviewing resource adequacy and resource options to
create a cost-effective strategy for satisfying future load requirements.
15.IES will also provide finance and accounting support and counter-
party credit analysis for power marketing activities. IES will be responsible for invoicing
all counterparties and providing collections and reconciliations. IES will also provide
certain communications services , including public relations, web-based commerce
innovations, internal and external message development, and collateral support.
16.To ensure ongoing and timely consultation and oversight of IES'
services , lEg and Idaho Power will each designate an officer or senior manager to
provide such oversight ("Oversight Manager ). Idaho Power s Oversight Manager will
report directly to the office of the Chief Executive Officer and to Idaho Power s Risk
Management Committee. The Idaho Power Oversight Manager will be responsible for
coordinating with IES and providing a single decision-making point from Idaho Power
concerning IES's provision of the power marketing and system management services.
III.
BENEFITS FOR CUSTOMERS
By entering into the Agreement with IES, Idaho Power believes it will be
able to lower its expenses, reduce the risks associated with power market volatility, and
maintain its existing high level of system operating efficiency and reliability. Idaho
Power believes it can capture those benefits by means of the following:
APPLICATION , Page 7
Reduced Costs
(a)Economies of Scale To participate in the rapidly expanding and
increasingly complex wholesale power markets, Idaho Power has been required to
expand its professional staff and provide them with increasingly more sophisticated
technology. IES also possesses the personnel and technology necessary to manage
power supplies in this competitive electric market. By contracting with IES, Idaho
Power can directly reduce its costs for support technology, personnel and related
overheads. This will result in lower overall costs for Idaho Power s customers.
Attached as Exhibit 2 is a chart showing the increases in cost Idaho Power has
experienced since 1997 directly related to greater participation by Idaho Power in the
wholesale markets. Exhibit 2 also shows the potential cost savings which could accrue
to Idaho Power if the Agreement is approved by the Commission.
(b)Increased Market Presence. Idaho Power believes that its
commodity pricing will be improved with the IES Agreement in place. IES's continual
access to physical and financial market information , access to a wider array of
commodity and third-party transmission sources , and a larger, more sophisticated
professional staff using enhanced technology will , in Idaho Power s judgment, result in
overall lower commodity prices on the purchase side and higher returns when surplus
System Resource output is sold.
Reduce Risks Associated With Market Volatility
(a)Recent events have certainly demonstrated that today s more
volatile energy markets can present significant risks for utilities and potentially for their
customers. Under the Agreement, Idaho Power will obtain increased access to a very
APPLICATION , Page 8
experienced group of professional power marketers and market volatility risk managers.
IES can provide a more sophisticated level of monitoring of both transactions and
counterparty credit to augment Idaho Power s existing safeguards.
(b)Under the Agreement Idaho Power will also have increased access
to people familiar with sophisticated financial instruments intended to reduce risk and
mitigate price volatility.
Maintain System Efficiency and Reliability
Under the IES Agreement, Idaho Power will continue to own, operate
maintain and dispatch the System Resources. All of Idaho Power s existing system
reliability standards, operating criteria and maintenance processes are kept in place.
IV.
CODE OF CONDUCT
In conjunction with the attached Agreement, Idaho Power is offering to put
in place a formal Statement of Policy and Code of Conduct which would further define
the relationship between IES and Idaho Power. The proposed Statement of Policy and
Code of Conduct is attached as Exhibit 3. The voluntary adoption of such a Statement
of Policy and Code of Conduct is consistent with Idaho Power s commitment that this
new arrangement will not be managed in a way that would disadvantage Idaho Power
customers.
NOTICES
Communications with reference to this Application should be sent to the
following:
APPLICATION , Page 9
Barton L. Kline
Senior Attorney
Idaho Power Company
O. Box 70
Boise, ID 83707
John R. Gale, General Manager
Pricing and Regulatory Services
Idaho Power Company
O. Box 70
Boise, 10 83707
VI.
PROCEDURAL ISSUES
In Order No. 28049 the Commission directed the Commission s Staff to
" . . . coordinate with Idaho Power, FMC, the ICIP and all other interested persons to
determine, informally, how best to address the issue (capital and expense allocation
between operating and non-operating transactions). Those parties might consider
conducting a workshop. If necessary, any or all of them are free to petition this
Commission to initiate a formal case.
. . .
" Order 28049, p. 5 , parenthetical added.
Idaho Power believes that this application provides a vehicle for accomplishing the
Commission s desire that the interested parties address this issue. Idaho Power
believes that this case should be processed on Modified Procedure which would
include a workshop followed by a prehearing conference. Idaho Power believes it is
important to schedule a prehearing conference so that the parties have a set date to
report to the Commission the progress achieved in the workshop. Idaho Power would
be willing to take the initiative in setting up and facilitating the workshop. It is Idaho
Power s hope that it can receive the necessary regulatory approvals that would allow
IES to proceed under the Agreement effective January 1 , 2001. In addition to the Idaho
Commission filing, Idaho Power will also have to file with the FERC, the Oregon PUC
and possibly the Nevada PUC. Obviously this is an ambitious schedule , and Idaho
Power is hopeful that the interested parties can work cooperatively to achieve this goal.
APPLICATION , Page 10
VII.
CONCLUSION
The enclosed Agreement For Electricity Supply and Management
Services and Statement of Policy and Code of Conduct represent a reasonable and
prudent response to the new environment in which Idaho Power, its customers and the
Commission must operate today. The arrangement contemplated by the Agreement is
substantially similar to the arrangement approved by this Commission for the gas
operations of Intermountain Gas Industries and Avista Energy. The Agreement
provides Idaho Power and its customers with a means to reduce expense and better
manage the risks attendant to today s more volatile power markets. Idaho Power
respectfully requests that the Commission issue its Order approving Idaho Power
execution of the Agreement and approving the Statement of Policy and Code of
Conduct.
DATED this 1 st day of September, 2000.
~J-~
BART N L. KLINE
Attorney for Idaho Power Company
APPLICATION , Page
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the st day of September, 2000, I served a
true and correct copy of the within and foregoing APPLICATION OF IDAHO POWER
COMPANY upon the following named individuals by the method indicated below, andaddressed to the following:
Donald L. Howell, II
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise , Idaho 83720-0074
Hand Delivered
S. Mail
Overnight Mail
FAX
~dt:L--
BARTON L. KLINE
CERTIFICATE OF SERVICE
EXHIBIT
AGREEMENT FOR ELECTRICITY SUPPLY MANAGEMENT SERVICES
BETWEEN
IDAHO POWER COMPANY AND IDACORP ENERGY SOLUTIONS LP
THIS ELECTRICITY SUPPLY MANAGEMENT SERVICES AGREEMENT
(the "Agreement") is made and entered into as of the day of
2000, by and between IDAHO POWER COMPANY ("Idaho Power ), an Idaho
corporation , and IDA CORP ENERGY SOLUTIONS LP , dba IDACORP ENERGY
IES"), a Delaware Limited Partnership. Idaho Power and IES may also be referred to
in this Agreement individually as "Party" or collectively as "Parties." Idaho Power and
IES are both wholly-owned subsidiaries of IDACORP , Inc.
RECITALS
Idaho Power owns and operates electric generating equipment and
transmission facilities to supply the electric load and service reliability requirements of
its customers.
Idaho Power performs wholesale electricity marketing activities to
acquire electricity to supplement its own electric generation resources and to optimize
the operation of its electric generation resources. These activities provide Idaho
Power s customers with additional system reliability and with additional revenue offset
which is used to reduce their overall cost of energy.
IES is engaged in the marketing of electricity and natural gas and
has the capability to provide electricity and natural gas supply management services.
Idaho Power and IES are both wholly-owned subsidiaries of
IDACORP , Inc.
Idaho Power believes there are cost-savings and risk mitigation
benefits that could be realized by contracting with IES to provide electricity marketing
and other electricity supply management services.
AGREEMENT
Services. IES will perform those electricity supply management
services for Idaho Power (the "Services ) that ~re more particularly described in the
Statement(s) of Services" which are attached to this Agreement. Each Statement
Services shall be construed as a part of this Agreement. If there are any conflicts
between the terms and conditions contained in the body of this Agreement and the
terms and conditions in a Statement of Services, the terms in the Statement of Services
shall prevail.
Term. This Agreement shall remain in effect for five (5) years from
the date final approval from the Commissions is obtained in accordance with Section 9
herein ("Initial Term ). Following the Initial Term, this Agreement will be automatically
extended for additional two (2) year terms ("Extension Terms ) unless either Party
cancels this Agreement by giving notice of cancellation at least six (6) months prior to
the expiration of the Initial Term or any Extension Term.
Compensation. IES's compensation for providing the Services
provided shall be in accordance with the schedules set forth in each Statement of
Services.
Cooperation. Consistent with all applicable Commission-approved
Standards of Conduct and/or Codes of Conduct, each Party will provide the other Party
with such information that may be reasonably required by the other to manage their
activities under this Agreement. Each Party shall designate an officer or senior
manager to facilitate management communication between the Parties ("Oversight
Managers
).
The Oversight Managers shall be the authorized representatives of the
Parties and shall have the responsibility of coordinating with the other Party s Oversight
Manager regarding IES provision of the Services. Each Party understands that
effective management of this Agreement depends on the Oversight Managers' timely
and effective decision-making and approvals of proposed actions. Each Party shall
inform the other in writing of the name and any limitations on the scope of authority of
its Oversight Manager.
Invoicing and Payment.Unless otherwise specifically agreed in a
Statement of Service, the Parties shall submit invoices monthly for Services provided
and reimbursable expenses incurred through the end of each month. Invoices will
include information reasonably required to verify the items billed. Bills will be payable
fifteen (15) days following the date of the rendered bill ("Due Date ). Interest will accrue
on all payments due and unpaid after the Due Date until paid at the rate of one percent
(10/0) per month.
Commission Jurisdiction The respective rights and obligations of
the Parties hereunder shall be subject to the jurisdiction and regulatory authority of the
Idaho Public Utilities Commission (IPUC), the Oregon Public Utility Commission
(OPUC), the Public Utility Commission of Nevada (PUCN), and the Federal Energy
Regulatory Commission (FERC). The IPUC , the OPUC , the PUCN and the FERC are
hereinafter collectively referred to as "Commissions.
Codes of Conduct. At all times the Parties shall observe the
Standards of Conduct and/or Codes of Conduct approved by the Commissi~ns.
Compliance With Laws and Regulations . IES shall observe all
applicable laws , ordinances, rules and regulations relating to delivery of the Services
and shall procure and maintain in force, at its sole expense, all registrations, permits
licenses , and approvals required by law or governmental authority to perform the
Services.
Commission AQProval.This Agreement and any future
amendments shall not become effective until the Commissions have issued their
respective final orders approving the Agreement or any future amendments. If the final
orders of any of the Commissions initially approving this Agreement contain material
terms or conditions that either Party finds unacceptable, within fourteen (14) days of the
issuance of the order, the adversely affected Party will have the right to cancel this
Agreement by giving thirty (30) days written notice of cancellation to the other Party.
10.Future ReQulatory Authority If in the future the laws of the United
States or the laws of the states of Idaho, Oregon or Nevada are modified to materially
reduce or eliminate the FERC', the IPUC', the PUCN's or the OPUC's authority to
regulate all or any portion of the activities addressed by this Agreement, the Parties
agree that only those portions of this Agreement which by their terms are subject to the
continuing jurisdiction of the FERC , the IPUC, the PUCN or the OPUC shall continue to
be subject to Section 6 above.
11.General Provisions.
11.Successors and Assi~. This Agreement and all the terms
and provisions hereof shall be binding upon and inure to the benefit of the respective
successors and assigns of the Parties hereto , except that no transfer by merger or
otherwise , nor any assignments hereof by IES shall become effective without the prior
written consent of Idaho Power being first obtained. Such consent shall not be
unreasonably withheld or delayed.
11.Taxes. IES shall be responsible for payment of all taxes
including, but not limited to , sales, use, gross receipts , transaction , business and
occupation or any other taxes, licenses or fees assessed by any taxing jurisdiction
directly associated with providing the Services. If either Party is entitled to an
exemption from any such taxes or fees, it shall furnish the other Party satisfactory
supporting documentation. IES shall include in its invoices for Services provided
pursuant to this Agreement, and Idaho Power will reimburse IES for any taxes (except
taxes based on IES payroll or net income), licenses, or fees assessed or to be
assessed against IES by any taxing jurisdiction, directly as a result of providing the
Services , including, but not limited to, sales , use, gross receipts, transactions or
business and occupation taxes.
11.Warranty of Title Each Party warrants that it has or will
have title to all electrical energy or capacity or transmission capability purchased or sold
pursuant to this Agreement and that such products will be free and clear of all liens
encumbrances and adverse claims.
11.Venue. This Agreement shall be governed and interpreted
in accordance with the laws of the State of New York and venue for any litigation shall
be the Fourth Judicial District Court for Ada County in Boise, Idaho.
11.Chang~. Any change, modification or alteration of this
Agreement shall be in writing, signed by the Parties.
11.Limitation of Liability. In no event will either Party be liable
hereunder for indirect, consequential , punitive or exemplary damages.
IN WITNESS WHEREOF , the Parties have executed this Agreement the
day and year first above written.
IDAHO POWER COMPANY
Idaho Power")
Its
IDACORP ENERGY SOLUTIONS LP
dba IDACORP ENERGY (IES)
For IDACORP, Inc. General Partner
A TT ACHMENT
STATEMENT OF SERVICES NO.
ELECTRICITY SUPPLY MARKETING AND MANAGEMENT
Definitions
When used in this Statement of Services No., the following terms have the
following meanings:
Power Marketing means the sale and purchase of electric capacity and
energy, together with associated transmission services and ancillary
services. Power Marketing includes providing all of the individual Services
described in Sections 2 and 3 of this Statement of Services No.
System Resources means the electric generation facilities owned by
Idaho Power, the electrical energy and capacity generated by those
facilities or purchased by Idaho Power from third parties, and any
associated Ancillary Services. For purposes of this Agreement, System
Resources expressly exclude transmission facilities and transmission
capability owned or acquired by contract by Idaho Power.
Native Load means the electric loads of Idaho Power s retail customers
located in Idaho Power s certificated area in the states of Idaho, Oregon
and Nevada and the loads of Idaho Power s full-requirements wholesale
customers, including the City of Weiser, Idaho.
Terms defined in the main body of the Agreement will have the same
meanings in this Statement of Services.
General Description of Services to be Provided
I ES will provide Idaho Power with the Power Marketing and System
Resource management functions ("Services ) generally described in this
Section 2 and more particularly described in Section 3 below. The Parties
intend that the Services provided under this Statement of Services No.
will include those Power Marketing and associated System Resource
management services necessary to allow Idaho Power to supply its Native
Load cost-effectively and reliably. To accomplish that goal, the Services
will generally include: (1) the Power Marketing activities associated with
marketing System Resources that are surplus to Native Load
requirements and making purchases from the market to supply Native
Loads when Idaho Power s loads exceed its System Resource capability
or when market prices are below the variable cost of System Resources;
(2) Management of System Resources as necessary to optimize the
Power Marketing activities described herein; and (3) acquiring from Idaho
Power's Delivery Business Unit the right to use Idaho Power-owned
transmission capability for the Power Marketing and System Resource
management activities described herein; and (4) the following:
Real-Time Power Marketing: Real-time power marketing is
transacted on a frequent basis occurring in increments from a
minimum of a few minutes up to a maximum of 12 hours ahead.
IES will provide twenty-four hour staffed coverage of hourly
resource and transmission management for balancing resources
and loads.
Intramonth Power Marketing: Intramonth marketing is transacted in
time increments from a minimum of one day to a maximum of one
month. IES will provide full-time staff coverage for day-ahead
balancing of generation , transmission and load.
HedQl!lg ManaQement:Hedges are executed with the use of
financial instruments such as forwards , swaps, futures or options
contracts. Financial instruments will be managed by a full-time IES
staff to minimize the risk of financial loss from an adverse price
change in a commodity market.
Third-Party Transmission Services : The provision of transmission
capability to deliver electrical energy from the generation sources
to the agreed-upon destination(s). IES will be responsible for
acquiring third-party transmission to effectuate the purchases and
sales described in Section 3.
Ancillary Services: Interconnected operations services necessary
to effect transfers of electricity between purchasing and selling
entities. Includes load following, reserves , voltage control and
imbalance management. IES will acquire such ancillary services
as are required to effectuate the purchases and sales described in
Section 3.
SchedulinqlQperations: Scheduling and Operations includes the
provision of back office support to marketing initiatives on behalf of
Idaho Power. A full-time rES staff confirms purchases and sales
administers contracts, works with Idaho Power s dispatchers to
schedule energy transactions, and resolves discrepancies between
the net of all sales, purchases and wheeling transactions. The IES
staff will also provide IS support to Power Management and
System Resource management.
Risk Management:Risk Management activities reduce the
occurrence of losses that would cause Idaho Power to incur higher
costs for supplying Native Load. Risk Management will be
provided by a full-time IES staff that will identify the source of
exposure, quantify the exposure, assess the capacity for managing
the exposure internally and recommend the appropriate risk
management products to the Oversight Managers~ Risks to be
managed include power prices, volatility, interest rates , counter-
party credit risk and foreign currency fluctuations.
Finance and Accounting: Finance and Accounting will be provided
by a full-time IES staff that provides financial consultation and
analysis for Power Marketing activities. The IES staff will be
responsible for the invoicing of all counter-parties associated with
financial transactions, collections and reconciliations.
.fuJecific Description of Power Marketing and System Resource
Management Services to be Provided
Purchases to SufWlv Native Load As a part of the Services provided
under this Statement of Services No., IES will undertake Power
Marketing activities as necessary to acquire for subsequent purchase by
Idaho Power sufficient energy and capacity to supply Native Load when
all of the Native Load cannot be served by System Resources or when
market prices for delivered electric capacity and energy are less than the
cost of System Resources. The sales price for delivered energy and
capacity acquired by Idaho Power from IES to supply Native Load will be
equal to the Market Price determined in accordance with Section 5.
Under this Section 3., IES may also broker a purchase and sale
transaction between Idaho Power and a third party as provided in
Section 3.
Sale of Surplus System Resources : As a part of the Services provided
under this Statement of Services No., IES will purchase from Idaho
Power all of the generation from the System Resources that is surplus to
the needs of Native Load. The amount paid to Idaho Power for surplus
System Resource generation will be the Market Price at the time of sale
determined in accordance with Section 5. Under this Section 3.2 IES may
also broker a purchase and sales transaction between Idaho Power and a
third party as provided in Section 3.
Ancillary Services and Third-Party Transmission: All Ancillary Services
and Third-Party Transmission Services necessary for Power Marketing,
both for supplying Native Load requirements and selling surplus System
Resources shall be acquired and managed by lEg to effectuate the
purchases and sales described above. Costs of acquiring Ancillary
Services and Third-Party Transmission incurred for Power Marketing to
supply Native Load shall be included in the Market Price.
Hedqing Transactions From time to time IES may enter into hedging
transactions as a part of the Services to optimize System Resource
management. Hedging transactions undertaken as a part of the Services
shall be used exclusively for hedge (risk reducinq) transactions. No
speculative (risk accumulatinq) transactions will be executed on behalf of
Idaho Power. Hedge transactions will only be undertaken with the prior
consultation and approval of the Idaho Power Oversight Manager.
BrokerinQ Transactions From time to time lEg may act as a broker to
arrange power purchase or sales transactions between Idaho Power and
third parties. If Idaho Power desires to enter into forward transactions
IES will only participate as a broker. Idaho Power will not enter into
forward transactions brokered by ES without the prior consultation and
approval of the Idaho Power Oversight Manager.
Priority For Use of System Resources
At all times and under all conditions IES will provide the Services in a
manner that will provide Native Load customers with the first priority right
to utilize all available capacity and energy from the System Resources
and to utilize any Idaho Power-owned or third-party-supplied transmission
as necessary to supply Native Load on a first-priority basis.
Market Prices
The Market Prices referred to in this Statement of Services shall be the
actual market settlement prices based on the appropriate published index
price or third-party quotes for the product, taken from the closest relevant
product market for the applicable time and location of the transaction. For
example, during the spring and winter seasons , the Market Price for
electric energy is most likely to be based on the Dow Jones Mid-Columbia
Electricity Price Index ("Mid-CIJ). During the early summer and fall , the
Market Price for electric energy is most likely to be based on the Dow
Jones Palo Verde Price Index ("Palo Verde
).
The actual computation of
total Market Price will be computed in accordance with the following:
For Term and Intramonth transactions, the market settlement price
will be in accordance with the formulae set out on Table 1 attached
to this Statement of Services No.
For Real-Time Transactions , the market settlement price will be an
hourly settlement price equal to the average of all real-time
transaction prices recorded for that hour.
For Ancillary Services , the actual price paid by IES for Ancillary
Services used to supply Native Loads.
IES Compensation For Power Services Provided
For providing the Power Marketing and System Resource management
services under this Statement of Services No.1 J IES will be paid
$300 696.30 per month.
Pricing For Non-Power Goods and Services Provided
The prices for all non-power goods and services purchased and sold
between I ES and Idaho Power shall be determined in accordance with the
then-current Affiliated Services Agreement between the Parties as
provided to the Idaho Public Utilities Commission pursuant to IPUC Order
No. 27348. For the year 2000 , IES will pay Idaho Power $87 293.53 per
month for non-power goods and services.
System Resources
Idaho Power will own, operate, maintain and dispatch the electric
generation and transmission facilities included in System Resources. IES
will take such steps as may be required to obtain from Idaho Power
Delivery Business Unit the right to use Idaho Power-owned transmission
capability for Power Marketing under this Agreement.
Allocation of Counter-Party Defaults
The Parties recognize that wholesale market transactions carry a risk of
counter-party default. Upon such default, the Parties will pro-rate any loss
based on Idaho Power s share of IESts total transactions with the
defaulting party at each delivery point where a default occurs.
TABLE
STATEMENT OF SERVICES NO.
Purchases (using Mid-C Index for intramonth deals, using Mid-C quote for term
deals)
Transfer Cost = (Mid-CLL x Total LL MWh) + (Mid-CHL x Total HL MWh) + Transmission
Cost where 'Transmission Cost' is the sum of firm transmission tariff rate of a
transmission provider that has available transmission capacity from Mid-C and cost of
transmission losses charged by the transmission provider.
Sales (using Mid-C Index for intramonth deals, using Mid-C quote for term deals)
Transfer Cost = (Mid-CLL price x Total LL MWh) + (Mid-CHL Price x Total HL MWh) -
Transmission Cost where 'Transmission Cost' is the sum of firm transmission tariff rate
of a transmission provider that has available transmission capacity to Mid-C and cost of
transmission losses charged by the transmission provider.
Purchases (using Palo Verde Index for intramonth deals, using Palo Verde quote
for term deals)
Transfer Cost = (Palo VerdeLL Price x Total LL MWh) + (Palo VerdeHL Price x Total HL
MWh) + Transmission Cost where 'Transmission Cost' is the sum of firm transmission
tariff rate of a transmission provider that has available transmission capacity from Palo
Verde and cost of transmission losses charged by the transmission provider.
Sales (using Palo Verde Index for intramonth deals, using Palo Verde quote for
term deals)
Transfer Cost = (Palo VerdeLL Price x Total LL MWh) + (Palo VerdeHL Price x Total HL
MWh) - Transmission Cost where 'Transmission Cost' is the sum of firm transmission
tariff rate of a transmission provider that has available transmission capacity to Palo
Verde and cost of transmission losses charged by the transmission provider.
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:
STATEMENT OF POLICY AND CODE OF CONDUCT
GOVERNING THE RELA TJONSHIP BETWEEN IDACORP ENERGY
AND IDAHO POWER COMPANY
PURPOSE
Idaho Power Company (" Idaho Power") and IDACORP Energy Solutions
, dba IDACORP Energy (illES") have entered into an Electric Supply Management
Services Agreement ("Agreement"). Both Idaho Power and IES are wholly-owned
subsidiaries of IDACORP, Inc. Under the Agreement, IES will , among other things
provide Idaho Power with certain energy supply, management, marketing and brokering
services. This Statement of Policy and Code of Conduct is intended to establish
guidelines and procedures which will govern the relationship and transactions between
Idaho Power and IES.
CODE OF CONDUCT
IES and Idaho Power will comply with the following:
Sales of Power. When IES and Idaho Power are engaging in
power purchases and sales between themselves, IES and Idaho Power will comply with
the following:
Purchases and sales of power between IES and Idaho
Power will be subject to the transaction reporting requirements specified by the FERC.
Any transmission service provided by Idaho Power to
will be provided under Idaho Power s FERC-approved open access transmission tariff.
Page
Short-term power purchases and sales will only be made
market prices.
Long-term power sales or purchases will be subject to prior
approval by the Idaho Public Utilities Commission in the same manner as long-term
contracts are approved for inclusion in Idaho Power's Power Cost Adjustment.
Non-Power Goods and Services. Sales of any non-power goods or
services between Idaho Power and IES will be in accordance with the then-current
Affiliated Services Agreement between the Parties as provided to the Idaho Public
Utilities Commission pursuant to IPUC Order No. 27348.
BrokerinQ of Power To the extent IES seeks to act as broker in
arranging power purchases and sales:
IES will offer Idaho Power s power for sale prior to offering
power owned or controlled by IES.
When brokering power transactions between Idaho Power
and third parties , in accordance with the terms of the Agreement, IES will be paid an
amount sufficient to recover its cost of providing the brokering services. This cost
recovery price will not include an additional commission or fee.
Page 2