06082001.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
LYNN ANDERSON
DAVE SCHUNKE
KEITH HESSING
TERRI CARLOCK
RANDY LOBB
GENE FADNESS
WORKING FILE
FROM:
DATE:
JUNE 8, 2001 RE: CASE NO. IPC-E-01-14 (Idaho Power)
TEMPORARY MOBILE GENERATION
REQUEST FOR ACCOUNTING ORDER OR DETERMINATION OF
EXEMPT STATUS

On May 4, 2001, Idaho Power Company (Idaho Power; Company) filed an Application with the Idaho Public Utilities Commission (Commission) seeking an accounting Order authorizing Idaho Power to include expenses associated with the acquisition and operation of temporary mobile electric generating facilities in the true-up portion of the Company’s Power Cost Adjustment (PCA). In the alternative, the Company requests an Order determining that the generation from the temporary mobile generators be exempt from regulation by the Commission.
In response to projected low stream flows and high wholesale market prices for purchase of energy, Idaho Power states that it has entered into lease arrangements to temporarily obtain, install, and operate mobile electric generators. Idaho Power anticipates that these mobile generators will benefit customers by providing a reliable source of electric generation at a cost that is less than the cost of purchasing an equivalent amount of power from the wholesale markets during periods of time when the Company has deficiencies. If the Company experiences periods when there is surplus, generation from the mobile generators may be sold into the wholesale market if market prices exceed the cost of the mobile generation. Given projected energy market prices, the Company anticipates that the mobile generation will provide customer benefits whether the Company is surplus or deficient.
Idaho Power acknowledges that the temporary mobile generators are not identified as an alternative to market purchases in the near-term action plan in the Company’s 2000 Integrated Resource Plan (IRP). Nevertheless, the Company believes that installation of the temporary generation is consistent with the intent of the IRP. The mobile temporary generation provides, it states, a cost effective, short-term alternative to plant wholesale market purchases.
The mobile generators have been leased on a turn-key basis, which includes all maintenance costs and all required fuel and fueling services from the leasing entity. Each mobile generator unit can provide approximately 1.6 MW of generating capacity. Each unit is a stand-alone module utilizing a diesel engine for its motive force. Idaho Power anticipates locating eight individual units each at two separate sites and nine individual units at a third site. The fully distributed cost of the mobile generators, assuming 44,380 hours of operation at a 98% capacity factor between May 1, 2001 and October 31, 2001, is $124 per Megawatt hour (MWh).
As Idaho Power identifies the exact sites where temporary generating units will be located and operated, the Company will supplement its Application. Reference Company Supplement to Application filed May 31, 2001.
The current lease arrangement contemplates that the temporary mobile generators will only be in service through October 31, 2001. Depending on hydroelectric generating conditions, market prices, environmental permitting and other factors, the Company states that it may be prudent to increase the number of units and/or extend the term of the leases. If so, Idaho Power states that it will make additional filings with this Commission as required to maintain Commission approval for ratemaking purposes.
While admitting that predicting future energy prices is not an exact science, Idaho Power’s marketing and trading analysts project that annual average heavy load period market prices for the next few years will likely be in the range of $50 to $350 per MWh. The estimated forward price, the Company states, is approximately $350 per MWh for April 2001 through March 2002. Hourly prices, it states, have historically been several times the annual average and could be in excess of $1,000 per MWh in the near term.
Idaho Power in its Application requests approval of specified accounting treatment so that the expenses incurred in 2001-2002 associated with the mobile generators may be included as a system power supply expense in the true-up portion of the Company’s May 2002 Power Cost Adjustment recovery.
Should the Commission determine that Idaho Power’s decision to install the temporary generation is not prudent for revenue requirement purposes, the Company requests that the Commission immediately issue an Order determining that the facilities, expenses and revenues associated with the temporary generation will be permanently exempt from Commission regulation. Such an Order, the Company states, is necessary to allow Idaho Power to sell the output from the temporary mobile generation at wholesale at market prices that would not be included in Idaho Power’s revenue for retail ratemaking purposes.
Should the Commission determine that the Company’s Application requires notice, the Company requests that the matter be processed under Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204.
Commission Decision
Staff concurs in the Company’s request for Modified Procedure in this case. Does the Commission agree that Modified Procedure is appropriate? If not, what is the Commission’s preference?

vld/M:IPC-E-01-14_sw

DECISION MEMORANDUM 3