11272001.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
LYNN ANDERSON
DAVE SCHUNKE
RICK STERLING
RANDY LOBB
GENE FADNESS
WORKING FILE
FROM:
DATE:
NOVEMBER 27, 2001 RE: CASE NO. IPC-E-01-35 (Idaho Power)
AGREEMENT FOR SALE AND PURCHASE OF SURPLUS ENERGY
IDAHO POWER/AMALGAMATED SUGAR (TASCO)

On October 19, 2001, Idaho Power Company (Idaho Power; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting approval of an Agreement for Sale and Purchase of Surplus Energy (Agreement) between Idaho Power and Amalgamated Sugar Company, LLC (TASCO) under which Idaho Power agrees to purchase surplus electric energy up to 3 MW from TASCO’s refined sugar production facility in Twin Falls at prices that are less than market-based non-firm energy prices. The term of the Agreement will run for five (5) years following the initial service date.
Pursuant to the Agreement, the electric energy to be sold under the Surplus Energy Agreement is non-firm energy and will only be available when TASCO does not consume the electric energy in the Twin Falls plant. The surplus energy to be purchased from TASCO is priced at 85% of the monthly weighted average non-firm Dow Jones Mid-Columbia Index price. Setting the purchase price at a discount from market price, Idaho Power contends, assures that when the Company needs the energy, the price will always be more attractive than buying from the market. When it does not need the power, Idaho Power believes it should be able to resell the energy at the higher wholesale market price.
Idaho Power notes that the Agreement contains a new Section 9, which has previously not been included in contracts between Idaho Power and qualifying facilities. Section 9 entitled “Reliability Management System”, is required by the Western Systems Coordinating Council (WSCC) as a part of Idaho Power’s participation in the WSCC Reliability Management System.
Idaho Power requests that the Agreement be approved without change or condition and requests a Commission determination that all payments for purchases of energy incurred under the Agreement be allowed as prudently-incurred expenses for ratemaking purposes.

On November 9, 2001, the Commission issued Notices of Application and Modified Procedure in Case No. IPC-E-01-35. The deadline for filing written comments or protests was November 29, 2001. The Commission Staff was the only party to file comments (attached). Staff notes that the purchase price under the submitted Agreement is identical to the price agreed to in a similar agreement between Idaho Power and Amalgamated Sugar’s Nampa plant. Reference Case No. IPC-E-01-26, ON 28865. Staff recommends that the Agreement between Idaho Power and TASCO for its Twin Falls plant be approved. Staff believes that the Agreement will help Idaho Power meet expected loads while reducing the Company’s reliance on purchases at full market price, thus minimizing power supply costs. Staff also recommends that the reasonably incurred costs associated with the Tasco Agreement be passed through the Company’s Power Cost Adjustment (PCA) mechanism like any other power supply expense.
Commission Decision
Idaho Power has presented a five-year purchase Agreement with TASCO for the purchase of up to three MW of surplus electric energy from Tasco’s refined sugar production facility in Twin Falls at prices that are a percentage of market price (85%) rather than a fixed price. Does the Commission find it reasonable to approve the Agreement and provide assurance to the Company that all payments for purchases of energy incurred under the Agreement will be allowed as prudently incurred expenses for ratemaking purposes? Staff recommends that the Application be approved. Does the Commission agree?

vld/M:IPC-E-01-35_sw2

DECISION MEMORANDUM 2