10092001.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
BILL EASTLAKE
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
LYNN ANDERSON
DAVE SCHUNKE
KEITH HESSING
RANDY LOBB
TERRI CARLOCK
ALDEN HOLM
DAN GRAVES
GENE FADNESS
WORKING FILE
FROM:
DATE:
OCTOBER 9, 2001 RE: CASE NO. IPC-E-01-14 (Idaho Power)
TEMPORARY MOBILE GENERATION—FINAL ORDER NO. 28837
PETITION FOR RECONSIDERATION

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 recovery of expenses associated with the acquisition and operation of temporary mobile electric generating facilities in the true-up portion of the Company’s 2002 Power Cost Adjustment (PCA). In the alternative, the Company requested that the Commission immediately exempt the facilities and related expenses and revenues from regulation.
The Company's Application was processed pursuant to Modified Procedure. Reference IDAPA 31.01.01.201-204. Comments were filed by the Commission Staff, the Industrial Customers of Idaho Power (ICIP) and a number of the Company's customers. Reply comments were filed by Idaho Power. On September 6, 2001, the Commission issued final Order No. 28837 “authorizing Idaho Power to include expenses associated with the acquisition and operation of 25 temporary mobile electric diesel generators in the true-up portion of the Company's 2002 Power Cost Adjustment (PCA) mechanism.” In its Order the Commission made the following findings:
COMMISSION FINDINGS
The Commission has reviewed the filings of record in Case No. IPC-E-01-14 including the comments and recommendations of the Commission Staff and the Industrial Customers of Idaho Power and the reply comments of Idaho Power Company. The Commission continues to find it reasonable to process this matter pursuant to Modified Procedure. Reference IDAPA 31.01.01.204.
The Company in its Application requests (1) regulatory recovery of lease and operating costs for 25 mobile generating units or (2) a determination that the leased units are exempt from regulation. Both Staff and ICIP agree that the Company’s decision to lease was prudent when made. We agree. The Commission finds that at the time the Company made the decision to lease, it was a prudent means of securing supply in a volatile market.
ICIP points out the post-lease transaction events and changes in the market price of power and recommends that the Commission grant the Company its alternative relief, i.e., exempt it from regulation. The Company in its reply comments characterizes its alternative relief requested as simply a request for expedited treatment. We caution the Company that if expedited treatment is what it wants, that is what it should specifically request. With hindsight, we can see that exemption from regulation would shift the risk of this expense to the Company’s shareholders. However, we find it would also create inappropriate incentives for the Company in the future. We want Company management to plan for power supply in advance and take prudent steps to have adequate, reliable supply available. The fact that months later it can be determined that other options turned out to be lower cost does not invalidate the prudent decision made based on information known at the time. Therefore, we decline to choose exemption in this case.
We also do not wish to discourage the Company from being responsive to customers’ health concerns (air pollution and noise) and subsequent changes in the energy market. We make no findings in this case regarding the Company’s post-lease operating decisions. We find that the PCA is an appropriate mechanism for recovery of these temporary mobile generation expenses. The Company shall maintain separate sub-accounts to allow tracking and verification of these expenditures in the PCA. We make no decision in this case regarding the dollar amount to be included in the PCA nor do we foreclose the Staff or other parties from challenging the reasonableness of said amounts when the Company requests recovery.
On September 18, 2001, a Petition for Reconsideration (with attachments) was filed by Norman E. Anderson of Kuna, Idaho, a customer of Idaho Power and one of the commentors on Modified Procedure. (See original June 21, June 29, August 20, September 10 Comments—attached…“Idaho Power rented diesel generators…not to produce power for Idaho…but to sell electricity to California…; Idaho Power now expects us to pay for the generators because the wholesale price of electricity fell below the cost to produce it…; The diesel emissions are harmful to human and animal health…; The PUC should hold a public hearing “) Reference Idaho Code § 61-626; IDAPA 31.01.01.331. Mr. Anderson prefaces his Petition for Reconsideration remarks by stating “while I followed the logic presented by the Commission, I must respectfully disagree with the conclusion.”
Noting that he and his wife Diane waged a major campaign to have numerous individuals submit comments in this case, Mr. Anderson initially challenges the accuracy of the following statement in Order No. 28837 “the Commission Staff and the Industrial Customers of Idaho Power (ICIP) were the only parties to file comments.…” The Commission’s e-mail confirmation states “your comments…will be circulated to the Commissioners for their information and placed in the Commission Secretary’s official file.…” The fact that our comments were not acknowledged in the Commission’s Order, Mr. Anderson states, begs the question “what happened to our comments? Did the Commissioners even see or read them? Do public comments and opinions just not count with the PUC?”
In the rest of his Petition, Mr. Anderson comments on the respective positions of the Commission Staff (“It appears that Staff came closer to understanding the case than the Commission; however, both are accepting the Idaho Power explanation that it leased the generators to benefit its ratepayers.”), ICIP (“The ICIP correctly contends that ratepayers should not be required to pay for the unnecessarily expensive and unneeded power. This position is the same one that private citizens have taken from the beginning. There never was a power shortage…the “shortage” exists only because Idaho Power has not been prudent in forecasting its power needs and taking action to add permanent power producing facilities as the state demand has grown.”) and Idaho Power (Idaho Power states that the “wait and see strategy” was not an option…however, for the ratepayers, the wait and see approach would have been the appropriate action.…”)
Mr. Anderson also describes what he terms the “public scenario”—Idaho Power’s DEQ permit application and zoning applications for temporary use permits from Boise City and Ada County; also Company admissions made in public meetings held by Idaho Power on May 14 and August 6.
Idaho Power Response
On October 4, 2001, Idaho Power filed a Motion to Dismiss the Petition for Reconsideration and in the alternative, an Answer.
Motion toDismiss
In its Motion to Dismiss, the Company contends that Mr. Anderson’s Petition is defective and raises the following points:
RP65 provides that defective, insufficient or late pleadings may be dismissed.
RP63.3 provides that all documents must be served upon the representatives of every party of record—Mr. Anderson did not serve Idaho Power with a copy of his letter/Petition.
RP331.01 requires that “Petitions for Reconsideration must set forth specifically the ground or grounds why the Petitioner contends that the Order or any issue decided in the Order is unreasonable, unlawful, erroneous or not in conformity with the law, and a statement of the nature and quantity of evidence or argument the Petitioner will offer if reconsideration is granted.”—The letter/Petition does not (apart from Order No. 28837, p. 2 ¶3 “the Commission Staff and the ICIP were the only party to file comments.”) specify those portions of Order No. 28837 that are unreasonable, unlawful, erroneous or not in conformity with the law. The letter/Petition also fails to identify “the nature and quantity of the evidence or argument the Petitioner will offer if reconsideration is granted.”
Failure to comply with this Rule is not a trivial matter, Idaho Power contends. These requirements form the foundation for any subsequent appeal. Case authority cited.
RP331.03 requires that a Petition for Reconsideration “must state whether the Petitioner…requests reconsideration by evidentiary hearing, written briefs, comments, or interrogatories”—Anderson’s letter/Petition fails to satisfy this requirement.
When it comes to the standards that the Commission will apply to Petitions for Reconsideration, it is important, the Company states, that the Commission expect compliance with its rules from “pro sae parties equivalent to the compliance it expects from regular practitioners before the Commission. If the Commission does not apply its rules with a consistent degree of rigor, its Orders will be more vulnerable to attack.
Answer
The bulk of Mr. Anderson’s Petition, the Company contends, consists of a restatement of arguments the Commission considered and rejected in Order No. 28837. Mr. Anderson, the Company states, asks the Commission to apply 20-20 hindsight to the Company’s decision to lease the mobile generators—the Commission refused to do that, i.e., “the Commission finds that at the time the Company made the decision to lease, it was a prudent means of securing supply in a volatile market.…We want Company management to plan for power supply in advance and take prudent steps to have adequate, reliable supply available. The fact that months later it can be determined that other options turned out to be a lower cost does not invalidate the prudent decision made based on information known at the time.” Order No. 28837, p. 6 Commission Findings.
Mr. Anderson, the Company states, expresses his belief that Idaho Power’s decision to proceed with the acquisition of the mobile generators was “motivated by the desire to profit at the expense of customers.” The facts presented to the Commission, the Company contends, do not support such a conclusion. Obviously, Idaho Power can build or otherwise acquire generation resources in an amount sufficient to serve all of its electric loads, even under the most adverse of hydro conditions. The downside to that strategy (that Mr. Anderson’s Petition fails to acknowledge) is that the Company’s permanent retail rates would then reflect the additional costs associated with owning generating resources that will not be needed during times of more normal hydro conditions. The Company notes that the question of whether Idaho Power should modify its resource planning process to assume a lower level of water availability or to increase its reserve requirements is a key question that it will be addressing in its upcoming 2002 Integrated Resource Plan (IRP). The Company notes a related public meeting at 7:00 p.m. August 16th at Company Headquarters, 1221 West Idaho Street, Boise, Idaho.
Mr. Anderson, the Company states, repeatedly states that Idaho Power was motivated to acquire the mobile generation in order to profit at the expense of the Company’s customers. This belief, the Company contends, reflects a misunderstanding of Idaho Power’s ratemaking process—, i.e., 90% of the proceeds associated with sale of surplus resources are returned to customers and used to decrease customers’ total power supply expense for ratemaking purposes.
Mr. Anderson, the Company states, criticizes the Company for not pursuing a “wait and see” strategy. This criticism, the Company argues, fails to consider Idaho Power’s legal “obligation to serve” the electric loads of its customers and its concurrent obligation to serve those loads at the lowest reasonable cost.
Whether or not the Commission chooses to address the concerns raised by Mr. Anderson, Idaho Power recommends that the Petition for Recommendation be dismissed as defective.
Commission Decision
How does the Commission wish to handle the Petition for Reconsideration? Dismiss as defective; deny for other reasons; grant reconsideration—if so, what procedure?

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DECISION MEMORANDUM 1