200142_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
LYNN ANDERSON
DAVE SCHUNKE
BILL EASTLAKE
RANDY LOBB
GENE FADNESS
WORKING FILE
FROM:
DATE:
APRIL 2, 2001 RE: CASE NO. IPC-E-01-10 (Idaho Power)
FIRM ENERGY SALES AGREEMENT—SECOND AMENDMENT
SIMPLOT POCATELLO FERTILIZER PLANT

On March 20, 2001, Idaho Power Company (Idaho Power; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting approval of a negotiated second amendment to a Firm Energy Sales Agreement between Idaho Power and the J.R. Simplot Company (Simplot) for the Pocatello Fertilizer Plant cogeneration project (project).
As reflected in the Application, Idaho Power and Simplot entered into the underlying Firm Energy Sales Agreement (Agreement) for the project on January 24, 1991. The project is a qualifying cogeneration facility under the Public Utility Regulatory Policies Act of 1978 (PURPA). The original Agreement approved by the Commission in Order No. 23552 established rates at which Idaho Power would purchase power and provided a five-year effective term ending December 31, 1995.
On December 31, 2000 the parties entered into a first amendment extending the effective term of the Agreement to December 31, 2001, and changing the purchase rates. The rates established by the first amendment were the average non-levelized rates approved by the Commission in Case No. IPC-E-93-04, Order No.24911, Appendix C. The first amendment was approved by the Commission in Order No. 25353.
Under the terms of the proposed second amendment, the term of the current Agreement is extended from December 31, 2001 to December 31, 2003. Under the second amendment, the rates that will be in effect from January 1, 2001 through December 31, 2003 are summarized as follows:
Calendar
Year 2001 Calendar
Year 2002 Calendar
Year 2003 Price for first 240,000 kWh delivered per day

KWh delivered in excess of 240,000 per day 7.5¢ per kWh

50% of market price 9¢ per kWh

90% of market price 85% of market price

85% of market price
The market price defined in the Agreement uses the same index (Mid C) that the Commission has approved for non-firm purchases of power under the Company’s existing Rate Schedule 86.
The Company represents that the rates in the second amendment for calendar year 2001 will result in a reduction that would have been otherwise paid by Idaho Power to Simplot during 2001 under the terms of the existing Firm Energy Sales Agreement. As reflected in Application Attachment 2, during the first two months of 2001 Idaho Power’s customers under the proposed second amendment will save approximately $485,000. The Company also contends that the purchase prices under the second amendment during calendar years 2002 and 2003 will be cost-effective when compared to alternative market purchases of equivalent availability and reliability. The modified rates for 2001 and the prices contained in the two year extension, the Company contends, represent compromises made by both Idaho Power and Simplot.
Idaho Power requests that the Commission approve the second amendment for an effective date of January 1, 2001. The Company requests a Commission finding that the purchase of power on the rates, terms and conditions set out in the second amendment will be in the public interest. The Company also requests that all costs of purchasing power under the second amendment be allowed to Idaho Power as prudently incurred power purchase expense for ratemaking purposes.
Commission Decision
Staff recommends that the Company’s Application be processed pursuant to Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204. Does the Commission agree with Staff’s proposed procedure? If not, what is the Commission’s preference?

vld/M:IPC-E-01-10_sw

DECISION MEMORANDUM 1