ipce01.35swrps.doc

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR APPROVAL OF THE AGREEMENT FOR SALE AND PURCHASE OF SURPLUS ENERGY BETWEEN IDAHO POWER COMPANY AND THE AMALGAMATED SUGAR COMPANY LLC – TWIN FALLS FACILITY.
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CASE NO. IPC-E-01-35

COMMENTS OF THE
COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on November 9, 2001, submits the following comments.
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.

Analysis
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 purchase price for the energy provided by TASCO is 85 percent of the monthly weighted average non-firm Dow-Jones Mid-Columbia Index price. The purchase price under this Agreement is identical to the price agreed to in a similar agreement between Idaho Power and Amalgamated Sugar’s Nampa plant. That agreement was approved by the Commission in Order No. 28865 on September 28, 2001.
There are a couple of minor differences between this Agreement for TASCO’s Twin Falls plant and the agreement for TASCO’s Nampa plant. First, the Twin Falls Agreement is for a term of five years, whereas the Nampa agreement provides a September 1, 2003 termination date. The Nampa Agreement terminates sooner because an original five-year agreement for 2 MW of capacity was signed in 1998 and a two-year amendment for an additional 8 MW of capacity was approved approximately three years into the original agreement. Second, the location at which the generation will be delivered is obviously different. Generation from the Nampa plant is closer to Idaho Power’s largest load center, while the Twin Falls plant is closer to a much smaller load center. However, because generation from the Twin Falls plant will only be 3 MW, Staff believes this generation can easily be consumed in the Twin Falls area and is thus as valuable to the Company as generation from the Nampa plant.
One additional difference between the Twin Falls Agreement and the Nampa agreement is the inclusion of a new section in the Twin Falls Agreement concerning compliance with WSCC reliability criteria. In order to maintain the reliable operation of the transmission grid, the WSCC Reliability Criteria Agreement sets forth reliability criteria adopted by the WSCC to which the Twin Falls generator and Idaho Power Company are required to comply. Under the new WSCC Reliability Criteria Agreement, all generators on Idaho Power’s system must meet certain reliability criteria or be subject to sanctions for non-compliance. Under the Idaho Power-TASCO Agreement, any sanctions imposed by the WSCC on Idaho Power as a result of actions or inactions by the Twin Falls generator must be paid by TASCO. Staff expects that similar language will be included in all future PURPA power sales agreements.
Because the price to be paid under the Agreement is a percentage of market price rather than a fixed price, the amount paid by Idaho Power will increase or decrease as market prices change. When Idaho Power needs the energy, the price will always be more attractive than buying from the market. When it does not need the power, Idaho Power should be able to resell the energy at the higher full market price and credit the revenue to its power sales account.
Staff believes that the prices agreed to in this Agreement are attractive to Idaho Power and its ratepayers. Using market prices as a basis for comparison, rather than the methodology established for determining long run avoided costs, is appropriate given the short-term nature of the Agreement. Because this Agreement is so similar to the recently approved agreement for TASCO’s Nampa plant, Staff believes it would be reasonable to approve this Agreement as well.

Ratemaking Treatment
Idaho Power requests that all payments for surplus energy under the Agreement be allowed as prudently incurred expenses for ratemaking purposes. Staff agrees that the payments should be treated as system power supply costs and passed through the Power Cost Adjustment (PCA) mechanism in the same manner as other PURPA power supply costs. By passing these power supply costs through the PCA, customers will benefit by Idaho Power offsetting higher purchase power costs or reselling power it does not need.

Recommendations
Staff recommends that the Agreement between Idaho Power and the Amalgamated Sugar Company 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 PCA like any other power supply expense.

Respectfully submitted this day of November 2001.

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Scott Woodbury
Deputy Attorney General

Technical Staff: Rick Sterling

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STAFF COMMENTS 3 NOVEMBER 26, 2001