IPCO PostHearingBrief.doc

LARRY D. RIPLEY ISB #965
Idaho Power Company
P. O. Box 70
Boise, Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]

Attorney for Idaho Power Company

Street Address for Express Mail:

1221 West Idaho Street
Boise, Idaho 83702

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE PETITION OF ) CASE NO. IPC-E-01-43
THE COMMISSION STAFF REQUESTING )
THAT THE COMMISSION INVESTIGATE )
THE BUY-BACK RATE IN THE LETTER ) IDAHO POWER COMPANY
AGREEMENT ENTERED INTO BY IDAHO ) POST-HEARING BRIEF
POWER COMPANY AND ASTARIS LLC )
)

As Idaho Power Company (“Idaho Power”) stated in its brief on Commission authority dated February 11, 2002, Idaho Power believes that its function is to ensure (to the extent Idaho Power can assist) that the Commission is apprised of the appropriate facts and legal authority concerning Staff’s proposal to reduce the prices paid to Astaris by Idaho Power for Astaris reducing its consumption of power. Idaho Power does not intend to argue either pro or con, but only to assist the Commission in ensuring that the Commission has the necessary record (both evidentiary and legal) upon which to base its decision. The Company will comment on certain evidentiary matters which the Company believes are not truly contestable in the proceeding.
THE CONTRACT BETWEEN IDAHO POWER COMPANY AND ASTARIS LLC

There is only one agreement between Idaho Power and FMC/Astaris. The terms of that agreement initially were all contained in the Electric Service Agreement (“ESA”) dated December 30, 1997, the parties being FMC Corp. and Idaho Power Company. Astaris received an assignment of that contract from FMC. A letter agreement was executed between Astaris and Idaho Power which amended the underlying ESA dated December 30, 1997. The letter agreement was dated March 16, 2001. The letter agreement amended various provisions of the underlying ESA, but did not in any way change the requirement of a take or pay provision. The letter agreement amended certain provisions, one of which was that Astaris agreed to reduce its consumption in the First Block by 50 MW. Thus, Astaris agreed to consume no more than 70 MW per hour of its contracted 120 MW First Block. The take or pay provision for the 120 MW remained.

An even cursory review of the March 16, 2001 letter agreement would indicate that the letter agreement is an amendment to the underlying agreement dated December 30, 1997. The letter agreement amends certain provisions of the underlying agreement. It does not provide solely for a voluntary load reduction by Astaris. The letter agreement, standing alone is not a complete document, it must be read in conjunction with the ESA dated December 30, 1997. As was noted by Staff, the paragraph in the ESA providing for Commission jurisdiction was not changed by the letter agreement.

THE TAKE OR PAY PROVISIONS OF THE AGREEMENT
MUST BE CONSIDERED WHEN REVIEWING THE
VOLUNTARY LOAD REDUCTION CHARGES

The Commission approved the ESA dated December 30, 1997 between FMC and Idaho Power, by Order No. 27463 issued in Case No. IPC-E-97-13 on April 27, 1998. The two blocks of power became known as the First Block and the Second Block. The First Block became take or pay, and by agreement had no provisions for interruption of that Block. The Second Block was served at market prices and could only be interrupted if transmission was unavailable. Estimated Second Block revenues were adjusted in the PCA to match the estimated purchased power expense that would occur to serve the Second Block. Actual FMC Second Block revenues would offset actual power supply expenses to serve the Second Block. No loss of First Block revenues was envisioned because of the take or pay provisions of the ESA. The letter agreement amending the ESA provided that Idaho Power would pay Astaris to voluntarily reduce their First Block load by 50 megawatts. The rate that Idaho Power would pay was a negotiated rate approved by the Commission. The rate was established by taking into consideration the forward market prices for power, the take or pay provisions of the ESA and the envisioned benefits that customers would see due to reduced PCA expenses. The reduced PCA expenses would be the difference between the voluntary load reduction payments and the payments that would otherwise have been made for the forward purchase of power. Astaris First Block loads would remain at 120 megawatts for PCA purposes because there would be no loss of First Block revenues.

The take or pay provisions for the entire First Block of 120 MW influenced the charge that could be paid to Astaris for the reduction in consumption. To infer that the 120 MW of the First Block can be segregated into two components is completely contrary to the letter agreement or the underlying ESA. At no time was the take or pay provision for the 120 MW ever amended or in any way revised. The assurance of take or pay payments for the 120 MW is an obvious benefit to the retail customers of Idaho Power, in that PCA expenses do not increase when the FMC First Block is not served and, should the load reduction permit additional surplus sales, those revenues are included in the PCA as well. The Commission, in its deliberation concerning its investigation of the voluntary load reduction payment must make it clear that in performing this investigation, it has considered at all times the take or pay requirements for the First Block 120 MW.

It has been implied in the proceeding that the Commission can somehow divide the voluntary load reduction charges into two components, i.e. the allocated share for the Idaho PCA and the allocated share to the remaining jurisdictions. The Commission approved the charges based upon an allocation formula, which is premised upon the total payment paid by Idaho Power to FMC/Astaris. To contend that the payment can be compartmentalized is contrary to every jurisdictional allocation procedure that the Idaho Commission has ever undertaken. Clearly it is the Idaho jurisdictional share of the total price that is then allocated for PCA purposes.

THE ESA DATED DECEMBER 30, 1997
AND THE AMENDING LETTER AGREEMENT
OF MARCH 16, 2001 IS A SPECIAL CONTRACT

Clearly the ESA dated December 30, 1997 and the letter agreement which amended the ESA, are one special contract. The rates, terms and conditions of which are subject to the jurisdiction of the Idaho Public Utilities Commission. The agreement in so far as it provides for the rates, terms and conditions of service are subject to the primary jurisdiction of the Idaho Public Utilities Commission.
61-501. Investment of authority. — The public utilities commission is hereby vested with power and jurisdiction to supervise and regulate every public utility in the state and to do all things necessary to carry out the spirit and intent of the provisions of this act. (emphasis added)

61-502. Determination of rates. — Whenever the commission, after a hearing had upon its own motion or upon complaint, shall find that the rates, fares, tolls, rentals, charges or classifications, or any of them, demanded, observed, charged or collected by any public utility for any service or product or commodity, or in connection therewith, including the rates or fares for excursions or commutation tickets, or that the rules, regulations, practices, or contracts or any of them, affecting such rates, fares, tolls, rentals, charges or classifications, or any of them, are unjust, unreasonable, discriminatory or preferential, or in any wise in violation of any provision of law, or that such rates, fares, tolls, rentals, charges or classifications are insufficient, the commission shall determine the just, reasonable or sufficient rates, fares, tolls, rentals, charges, classifications, rules, regulations, practices or contracts to be thereafter observed and in force and shall fix the same by order as hereinafter provided, and shall, under such rules and regulations as the commission may prescribe, fix the reasonable maximum rates to be charged for water by any public utility coming within the provisions of this act relating to the sale of water. (emphasis added)

61-503. Power to investigate and fix rates and regulations. — The commission shall have power, upon a hearing, had upon its own motion or upon complaint, to investigate a single rate, fare, toll, rental, charge, classification, rule, regulation, contract or practice, or any number thereof, or the entire schedule or schedules of rates, fares, tolls, rentals, charges, classifications, rules, regulations, contracts or practices, or any thereof, of any public utility, and to establish new rates, fares, tolls, rentals, charges, classifications, rules, regulations, contracts or practices or schedule or schedules in lieu thereof. (emphasis added)

An agreement between the Utility and one of its customers to compensate the customer for reducing its load (which the customer is entitled to receive), is a service related issue. This service related provision is no different than excess demand charges or other provisions of service and the crediting or charging for these services is within the jurisdiction of the regulatory agency in this case, the Idaho Public Utilities Commission. To attempt to compare a service contract with the provision for the purchase of power from a third party, fails to recognize this essential element, i.e. the voluntary load reduction agreement, and the charges or payments for that load reduction are service related. The rates, terms and conditions for that service being under the jurisdiction of the Idaho Public Utilities Commission.

It is equally without merit to contend that Astaris is somehow a vendor. Astaris is selling nothing to Idaho Power. The charge for compensating the customer for the voluntary load reduction the customer has agreed to has nothing to do with providing any goods or services to Idaho Power.

THE PUBLIC INTEREST STANDARD

Clearly, the Idaho Public Utilities Commission has jurisdiction to review the special contract between Idaho Power and FMC/Astaris. This review extends to the letter agreement which amended ESA. Both the underlying agreement and the letter agreement acknowledge the Commission’s continuing jurisdiction in so far as the voluntary load reduction payment is concerned. The ability of the Commission to exercise its authority is as acknowledged by all parties succinctly stated in Agricultural Prod. v. Utah Power & Light Co., 98 Idaho 23, 557 P.2d 617 (1976). At Page 5 of the Astaris reply brief, Astaris sets forth the standards by which the Commission should determine if it should take any action in this proceeding:

“First, in applying this test the Commission should recall that the objective is not to determine a rate that is just and reasonable. See Agricultural Products Corp. v. Utah Power & Light Co., 557 P.2d 617, 98 Idaho 23 (1976). Rather, the Commission may only abrogate the contract and lower the price of the buy-back contract to the limited extent necessary to avoid placing an undue burden on ratepayers, avoid severe financial harm to the utility, or prevent undue discrimination. . . “ Astaris Reply Brief, Pg. 5.

It is for the Commission, based upon the evidence presented to it, to determine if it should order a reduction in the payments paid by Idaho Power to Astaris. These proceedings have taken a unique turn of events in that the customer that has agreed to reduce its consumption has decided to essentially close its plant and thus not consume any energy. It remains, however, for the Commission to decide if the evidence is sufficient to determine that the payments Astaris has received to voluntarily reduce its load should give rise to a determination that the payments to Astaris place an undue burden on the remaining rate paying customers of Idaho Power, or that the change in conditions of Astaris’ operation would give rise to undo discrimination.

In reviewing that situation, the Commission, in fairness to Astaris, must recognize that Astaris must continue its payments to Idaho power under its take or pay obligation.

Respectfully submitted this 8th day of March, 2002.

LARRY D. RIPLEY
Attorney for Idaho Power Company

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on the 8th day of March, 2002, true and correct copies of IDAHO POWER COMPANY POST-HEARING BRIEF in Case No. IPC-E-01-43 were e-mailed as indicated below to the following named parties:

John R. Hammond, Jr.
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
P.O. Box 83720
Boise, ID 83720-0074
E-Mail: [e-mail]
Robert M. Pomeroy, Jr.
Thorvald A. Nelson
Holland & Hart LLP
8390 E. Crescent Pkwy, Suite 400
Greenwood Village, CO 80111
E-Mail: [e-mail] Miguel F. Ugarte
Astaris LLC
622 Emerson Road
P.O. Box 411160
St. Louis, MO 63141
E-Mail: [e-mail]
Richard Pasquier
FMC Corporation
1735 Market Street
Philadelphia, PA 19103
E-Mail: [e-mail] Randall C. Budge
Racine, Olson, Nye, Budge & Bailey
201 E. Center
P.O. Box 1391
Pocatello, ID 83204-1391
E-Mail: [e-mail]
Anthony Yankel
29814 Lake Road
Bay Village, OH 44140
E-Mail: [e-mail] Peter J. Richardson
Richardson & O’Leary, PLLC
99 E. State Street, Suite 200
P.O. Box 1849
Eagle, ID 83616
E-Mail: [e-mail]

______________________________________
LARRY D. RIPLEY
IDAHO POWER COMPANY POST-HEARING BRIEF , Page 1

CERTIFICATE OF SERVICE