HomeMy WebLinkAbout28655.docBEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR APPROVAL OF SCHEDULE 62—GREEN ENERGY PURCHASE PROGRAM. )
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CASE NO. IPC-E-00-18
ORDER NO. 28655
On November 16, 2000, Idaho Power Company (Idaho Power; Company) filed an Application with the Idaho Public Utilities Commission requesting approval of a proposed Schedule 62—Green Energy Purchase Program (Green Program). The Green Program is an optional program designed to provide customers an opportunity to participate in the purchase of new environmentally friendly green energy—e.g., wind, solar, geothermal. It is the Company’s program intention to stimulate demand for green resources and their development for future supply.
At the time of program enrollment, customers will select a fixed monthly payment amount (any dollar amount) based on their desired level of participation. The designated amount will be added to their monthly electric bill. Payments received for the Green Program will be accounted for in a separate account (FERC Account No. 142). The funds will wholly be used to purchase green energy or cover the green energy price premium with no customer amounts allocated to Idaho Power program overheads or marketing expenses. Green energy purchases will be accounted for separately and will not affect the Company’s Schedule 55 Power Cost Adjustment.
Idaho Power indicates its intention to use the Bonneville Environmental Foundation (BEF) to facilitate the purchase of green energy for the program. BEF, a non-profit foundation organized in September 1998, is dedicated to the replacement of fossil fuel generation and new renewable resources sited and operated in a manner consistent with sustainable resource practices. BEF will serve as the brokering party to facilitate electricity sales from resources certified by three leading regional environmental organizations as “green.” The BEF is located in Portland, Oregon.
Idaho Power indicates its intention to purchase both wind and solar energy from the BEF. The wind and solar products will not be available until December 2001. The Company will purchase a green resource blend product until the wind and solar products become available.
The Company notes that in developing its Green Program it met with representatives from Idaho Rivers United and the Northwest Energy Coalition. The Company has incorporated several suggestions made by these groups such as:
Idaho Power will give priority to wind and solar resources when purchasing green energy;
Idaho Power will provide information to customers regarding the benefits of green energy and how much green energy has been purchased with accumulated amounts;
Idaho Power will pursue marketing and partnership opportunities with environmental and local public interest groups to encourage participation in the program.
On December 18, 2000, the Commission issued a Notice of Modified Procedure and established a December 29 deadline for filing written comments with respect to the Company’s Application and the use of Modified Procedure. On December 20, the deadline for filing written comments was extended to January 12, 2001. Comments were received from the Commission Staff, Potlatch, Aurora Power, the Northwest Energy Coalition (NWEC), the Idaho Dairymen’s Association, the Land and Water Fund of the Rockies (LAW Fund), Idaho Rivers United (IRU), Earth Power Resources and Vulcan Power Company. Idaho Power filed a Response to Comments on January 25, 2001. The comments can be summarized as follows:
All of the commenting parties support some type of a renewable energy program; however, none fully support Idaho Power’s Green Energy Program as proposed. All either offer recommendations for modifications to the proposed program, or in some cases, recommend rejection of Idaho Power’s proposal in favor of a different program. Comments cover a broad range of subjects, but many share common elements. A summary of comments by subject area, followed by Idaho Power’s response, is presented below. While Idaho Power addressed the comments received, it made no offers to voluntarily change any of the proposed program elements.
Price Structure
Idaho Power’s proposed program is based on contributions received from customers. Customers would simply choose an amount each month to donate toward the development and purchase of generation from green energy projects. Customers would not be required to commit to participating for more than one month at a time, and there would not be a required minimum contribution amount for any customer class. Customers would not know at the time of their contribution how much green energy they are purchasing; in fact, they would only know the effect of their contributions through periodic program updates that Idaho Power would provide to participating customers.
Most of the commenting parties are critical of the approach proposed by Idaho Power. NWEC, for example, stated “We are concerned that the proposed program’s donation approach does not incorporate lessons learned by other utilities undertaking similar efforts and will not provide Idaho Power customers with the most effective means of acquiring new clean energy resources. Recent analysis has shown that without tying customer payments to energy usage and specific renewable energy installations of resources, it is more difficult to attract program participants and therefore jeopardizes the success of the program.” IRU echoes these comments and cites studies showing that customer participation in programs where green energy is quantity priced are more than twice that of contribution programs. The LAW Fund expresses similar concerns, stating “We suggest several changes to the program to make it less confusing and more marketable. First, Idaho Power must abandon the current concept of pooling customer contributions, and instead package the product such that consumers understand both the nature and the price of the product. Consumers want to know that their dollars bought a specific amount of kilowatt-hours of green energy, or that they purchased a specific environmental benefit (for example, an approximate amount of offset greenhouse gases and other air pollutant emissions). Further, the product must have a defined pricing structure—something that is totally absent from the proposed program. Rather than asking customers to contribute random amounts of money to the green tag program, Idaho Power should sell the product in 100 kWh green energy blocks, or other clearly defined units of sale.” Staff also recommends a block-type program and points out that contribution-based programs such as proposed by Idaho Power are much less common throughout the country.
Idaho Power response:
Idaho Power responds that a pricing structure that would consist of a set pricing for a per-kWh block purchase is not the design of the proposed program. Such a design, the Company states, would significantly alter the program which has been developed to accommodate Idaho Power customers’ interests as well as the ability to optimize the number of participants in the program at the lowest possible cost.
In regard to the program being viewed as a charitable contribution program, the Company recognizes that the program design is unique in that customers are not required to purchase green energy specifically tied to the amount of energy they use. The Company points out that the program is designed to provide the environmental benefits associated with green energy resources. Simply because a proposal is unique should not be a reason for its rejection, rather, the Company reasons, it should be given serious consideration because it is unique.
Idaho Power states that it firmly intends to pursue the proposed program pricing structure as filed in its Application. The Company believes that the notion that customer response may be greater if a “blocked” pricing structure is used is purely speculative. Idaho Power notes that its customers have expressed interest in a voluntary, fixed monthly dollar amount based on their discretion to stimulate green energy development. The Company believes it has proposed a program that is responsive to customers’ interests.
Type of Green Resources
Idaho Power states in its Application that it intends to purchase energy that is specifically generated from wind or solar facilities (at least after the first year, when a wind and solar product is available). This preference is a result of input from environmental groups that were consulted prior to filing the Application. Several parties including Staff, Earth Power Resources, Vulcan Power Company, the Idaho Dairymen’s Association, Potlatch and Aurora Power commented on this issue. All of these comments suggest that Idaho Power’s focus on only wind and solar generation is too narrow and that other forms of renewable resources such as geothermal, biomass and environmentally benign small hydro should be considered. Staff, for example, states “Staff believes that such a narrow focus is inappropriate. The BEF relies on very specific criteria developed and reviewed by several notable regional environmental organizations to determine which generation projects are, in fact, green. Stringent criteria have been developed for hydro, geothermal, biomass, and landfill gas in addition to wind and solar. … Idaho Power should not predetermine that the environmental benefits of wind and solar are superior to the benefits of other types of generation projects certified as green by BEF.” Potlatch recommends that all of the usually accepted forms of green energy be recognized in Idaho, and suggests that the Commission list several acceptable forms of green energy in its Order, along with providing a mechanism for adding to the list in the future. The Idaho Dairymen’s Association expresses its support for the development of generation using anaerobic digestion of animal wastes.
Idaho Rivers United, the Northwest Energy Coalition and the Land and Water Fund support Idaho Power’s intention to only purchase energy produced from wind and solar resources.
Idaho Power response:
The Company reaffirms its intention to focus on wind and solar energy, at least initially, and reiterates that the proposed program is a first step. The Company states that the availability of a particular renewable resource should be examined in the future and may change. Idaho Power states that it is not feasible for a low cost program to draft its own green energy resource criteria. The Company has accepted the Bonneville Environmental Foundation’s criteria of renewable energy resources for at least the early stages of the program.
Reliance on BEF
Earth Power, Aurora Power, the Idaho Dairymen’s Association, and Vulcan Power object to the exclusive use of the Bonneville Environmental Foundation (BEF) as the sole source for acquiring green energy. They believe that the development of native Idaho renewable resources will be disadvantaged in favor of wind and solar resources in other parts of the region. Some express frustration in gaining Idaho Power’s interest in its own green energy projects. Vulcan Power objects to the insertion of a quasi-governmental marketing entity in the form of the Bonneville Environmental Foundation which re-markets out-of-state renewables into Idaho and marks up the transaction costs of those sales in order to support itself in competition with the private sector. Earth Power reasons that entering into what is essentially a cost plus arrangement with BEF all but guarantees any green energy acquired will be more expensive than green energy acquired from independent developers who should be required to compete for the privilege of selling green energy resources to Idaho Power. Earth Power suggests this can be accomplished through requests for proposals (RFPs) or through procedures allowing direct green power marketing programs priced at a premium to normal IPCo retail or wholesale rates. Idaho Power’s exclusive arrangement with BEF, Earth Power states, freezes out others who may have innovative projects that are not on BEF’s favored list of green projects. Aurora Power believes that any other power producer that would meet green power certification standards in the region would be locked out of the opportunity to sell power to Idaho Power customers without going through the BEF.
Idaho Power response:
Although Idaho Power does not respond directly to these comments, it does note that if it were to be the administrator of the program instead of BEF, staffing would be necessary to ensure compliance with the green energy criteria on an ongoing basis. Idaho Power states that it has obtained the services of BEF to perform these tasks.
Delay in Collecting Customer Funds
IRU and the LAW Fund recommend that Idaho Power wait to start green tag purchases until the strictly solar/wind product is available from BEF in late 2001. They believe the change in midstream from a blended green energy product consisting of a variety of green resources to a strictly solar/wind product would be confusing to customers. They also suggest that with a solar/wind product, it will be easier to tie customer contributions to the purchase of a specific product. In the meantime however, they suggest that Idaho Power begin accepting customer contributions.
Idaho Power response:
Idaho Power does not agree that there is any benefit from soliciting customer pledges several months prior to billing a customer. The marketing dollars and effort to educate and stimulate interest in the program several months before participating customers would have the commitment listed on their bills is detrimental, Idaho Power believes, to providing customers with an active successful program. As time lapsed for participating customers to start receiving customer bills with Green Energy Program charges, Idaho Power believes customer confusion would arise, and as a result customers may cease participation in the program even before funding began.
Promotional Efforts
In its Application, Idaho Power does not indicate specifically how it intends to market the Green Energy Program. Some commenting parties expressed concern about this apparent lack of detail with regard to marketing, and a few expressed concerns about the lack of program details in general. For example, Staff states “…Idaho Power has not developed a program budget or a marketing plan. It has not estimated the expected level of customer participation or the revenue expected to be generated by the program. It does not know what its own program management and administration costs will be. There have been no goals or milestones set that could be used to gauge the program’s success.” IRU also notes the lack of details in the Company’s Application and specifically addressed the absence of marketing plans. IRU and NWEC echo comments suggesting that effective marketing is vital in making green energy programs successful. IRU cites studies showing that the quality of marketing efforts has a significant impact on the percentage of customers who sign up for green pricing programs.
Idaho Power response:
Idaho Power states that it will incorporate the promotional principles as outlined in “Marketing Green Power to End Users” Green Power Marketing Workshop manual presented by the BEF and the Bonneville Power Administration. This promotional tool includes the expertise of green power marketers plus experience gained from past and current utility programs. Idaho Power also reiterates that it has committed to an approved program that will be included as one of the primary promotional campaigns during 2001.
Rate Making Recovery of Costs
Idaho Power has stated that it intends to expense all administration and marketing program costs until its next general rate case. At the time of its next general rate proceeding, however, the Company informed Staff that it intends to seek recovery of these costs if the program is approved. Staff was the only party to address this issue.
In its comments, Staff notes that customer participation in the program is voluntary, and states that it believes the costs of the program should be borne solely by participating customers. Staff states that it would not support recovery of these program costs from non-participating customers in a future general rate proceeding. Staff recommends that Idaho Power be required to maintain separate sub-accounts for all direct and indirect administrative, marketing and bad debt costs.
Idaho Power response:
In its response, Idaho Power reiterates that all participating customer funds will directly be used for green energy purchases and reminds the Commission that administration and marketing expenses involved in the program will be expensed upon commencement of the program. The Company states that it will absorb the expenses of the program until the next general revenue requirement proceeding.
Idaho Power goes on further to point out its commitment to the program. The Company states that it is willing to underwrite the costs of a one-MW purchase in the first year of the program even if there are not sufficient contributions to fund purchase of that amount. The Company believes this clearly demonstrates a self-imposed incentive to market the program to the best of the Company’s ability. Any shortfall of this effort will be to the detriment of the Company’s shareholders. This, the Company believes, illustrates a high level of commitment on the Company’s part to the success of the proposed program.
Processing Under Modified Procedure
Only two commenters—Earth Power and Vulcan Power—specifically request the Commission to hold appropriate hearings and other further proceedings in this case.
Idaho Power response:
The Company continues to believe that this matter should be processed under Modified Procedure. Earth Power, the Company notes, did not state the type of evidence that it would present. Idaho Power submits that the Commission has the necessary documentation before it to either deny or approve Idaho Power’s proposal.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case No. IPC E 00-18 including the comments of interested parties and the Company’s response. Based on our review of the record, we continue to find that the public interest does not require a formal public hearing to consider the issues presented and that it is reasonable to issue an Order without further Notice or public comment. Reference IDAPA 31.01.01.204.
Idaho Power is to be commended for providing its customers with a green alternative. We find the Green Program to be a first step in what could develop into a very important addition to the Company’s and this region’s generation resource portfolio. We encourage the Company to seriously consider modifications to the program based on the comments received. Many good points were made and the suggestions could enhance both the effectiveness and longevity of the program.
Although many suggestions were tendered as modifications to the Company’s Green Program, we find it reasonable at this point to approve the Application as proposed. Following a year of program history, we request a report from the Company summarizing customer participation, marketing efforts, program administration costs that shall be segregated in a separate sub-account, an assessment of the Idaho Power/BEF relationship and a cost/benefit analysis of the program. We also expect the Company at that time to provide the Commission with an assessment of the potential for developing cost-effective green Idaho resources—including a summary of actual proposals presented to and considered by the Company.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power Company, an electric utility, and its Application in Case No. IPC-E-00-18 pursuant to the authority and power granted under Title 61 of the Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
O R D E R
In consideration of the foregoing and as more particularly described above, IT IS HEREBY ORDERED and the Commission does hereby authorize implementation of the Company proposed Schedule 62—Green Energy Purchase Program.
IT IS FURTHER ORDERED and the Company is directed to comply with the reporting and accounting requirements set out in the Commission’s findings.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of February 2001.
DENNIS S. HANSEN, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
PAUL KJELLANDER, COMMISSIONER
ATTEST:
Jean D. Jewell
Commission Secretary
vld/O:IPC-E-00-18_sw
ORDER NO. 28655 1
Office of the Secretary
Service Date
February 23, 2001