06052002_jh.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
BILL EASTLAKE
LOU ANN WESTERFIELD
DON HOWELL
RANDY LOBB
KEITH HESSING
TERRI CARLOCK
BEV BARKER
TONYA CLARK
GENE FADNESS
WORKING FILE

FROM: JOHN R. HAMMOND

DATE: JUNE 5, 2002

RE: STATUS OF POSSIBLE STIPULATION AND SETTLEMENT AGREEMENT IN CASE NO. IPC-E-01-43, THE INVESTIGATION INTO THE LOAD REDUCTION RATES PAID BY IDAHO POWER TO FMC CORPORATION/ASTARIS LLC.

The parties in this case have reached a settlement on all issues in this case. The parties represent that this settlement is just, fair and reasonable, in the public interest, and in accordance with the law and regulatory policy. Accordingly, the parties request that the Commission review the Stipulation and Settlement Agreement and adopt it by its Order.
BACKGROUND
On January 8, 2002, the Commission on its own Motion initiated an investigation to examine whether the load-reduction rates contained in the Letter Agreement between Idaho Power and Astaris LLC are unjust, unreasonable, imposed an excessive burden on ratepayers and were no longer in the public interest. Order No. 28928. The Letter Agreement amended the Electric Service Agreement (“ESA”) that governs the delivery of electric service to Astaris’ Pocatello plant. Specifically, the Letter Agreement provided that Astaris would reduce its consumption of First Block power under the ESA by 50 Megawatts per hour and that Idaho Power would pay the Company for this load reduction at then projected market rates, over the remaining term of the amended ESA, minus a 13.5% discount. Letter Agreement, Schedule A. At this time the Commission also established an intervention deadline for interested persons and parties. Id. On January 18, 2002, the Commission granted intervention to Astaris LLC, FMC Corporation, Astaris of Idaho LLC, the Idaho Irrigation Pumpers Association and the Industrial Customers of Idaho Power. In addition, independent of its decision to grant intervention the Commission ordered that Idaho Power and Astaris LLC were parties to this proceeding. Order No. 28928 at 12. Furthermore, the Commission ordered that because the interests of Astaris LLC, FMC Corporation and Astaris of Idaho LLC were aligned, as represented by their counsel, they would be treated as a single party in this case. Order No. 28933 at 5.
The parties in this case agreed and the Commission ordered that this case be processed in an expedited fashion. Order No. 28933. On February 21-22, 2002, an evidentiary hearing was held and the Commission took all the issues presented, including dispositive motions, under advisement.
After the hearing the Commission was concerned that the expedited schedule in this case did not provide a sufficient period of time for the parties to consider the possibility of settling this dispute. Accordingly, the Commission scheduled a settlement conference for April 2, 2002. Order No. 28983. In this Order the Commission notified the parties that, “[i]n attempting to settle this matter, we encourage the parties to explore spreading the benefits and obligations equally among Idaho Power, Astaris and the general body of ratepayers.” Order No. 29893 at 2.
The parties were unable to reach a settlement of the issues at this meeting, but negotiations continued on an informal basis until the Commission Staff, Idaho Power and FMC/Astaris reached a settlement agreement that has been memorialized in the Stipulation and Settlement Agreement that is attached to this memorandum. The Agreement was provided to the Industrial Customers of Idaho Power and the Irrigation Pumpers Association Inc. for their review on May 31, 2002.

THE STIPULATION AND SETTLEMENT AGREEMENT
The Stipulation and Settlement Agreement resolves the disputes between the Parties regarding:
The December 30, 1997, Electric Service Agreement (“ESA”) between Idaho Power and FMC/Astaris providing for the retail sale of electricity from Idaho Power to the FMC/Astaris Pocatello facility (the take pay or obligation);

The March 15, 2001, Letter Agreement amending the ESA to provide for Voluntary Load Reduction (“VLR”) payments from Idaho Power to FMC/Astaris with respect to 50 MW of electricity FMC/Astaris agreed to no longer consume at its Pocatello facility; and

The proceeding before the Idaho Public Utilities Commission (Case No. IPC-E-01-43) and the declaratory judgment action filed by FMC/Astaris against Idaho Power (captioned as Case No. CV-OC-0108506D) in the Fourth Judicial District for the State of Idaho.

1. The Agreement provides for the following:
A $5,000,000.00 reduction in the amount of Voluntary Load Reduction payments Idaho Power will make to FMC/Astaris under the terms of the Letter Agreement amendment to the ESA. The benefit of this reduction will flow through Idaho Power’s PCA mechanism to the general body of ratepayers. Idaho Power has also agreed that its jurisdictional PCA share of the VLR savings, approximately $425,000, shall be distributed to Idaho ratepayers through the PCA mechanism.
The take or pay obligation shall be based upon the rates in effect as a result of the 2001 PCA and shall not be affected by the rates set by the Commission’s recent Power Cost Adjustment (“PCA”) mechanism decision. The specific obligation was negotiated prior to the 2002 PCA decision in order to eliminate it being an issue in that case.
A $7,968,473 reduction in the overall take-or-pay obligation that FMC/Astaris would otherwise pay to Idaho Power under terms of the ESA. Idaho Power has agreed that it will not seek to recover $6,968,473 of this credit in any proceeding before the Idaho Public Utilities Commission. The parties have also agreed that the remaining $1,000,000 of FMC/Astaris take-or-pay credit will be included in the 2002/2003 PCA true-up balance without any reduction.
The parties agree that because the ESA and Letter Agreement would expire on March 30, 2003, the PCA charge on the 120 MW take-or-pay commitment for the period of April 1, 2003 through May 15, 2003, in the amount of $275,663 will be included in the 2002/2003 PCA true-up balance without any reduction. This adjustment recognizes the difference between Astaris’s take or pay obligation under the Commission’s 2002 PCA Oorder and the fact that the ESA expires before the end of the PCA period.
The parties have agreed that IPC-E-01-43 can be closed if the Commission accepts the Stipulation and Settlement Agreement by Order. Furthermore, FMC/Astaris has agreed to dismiss, with prejudice, its declaratory judgment action that it filed against Idaho Power in the Fourth Judicial District for the State of Idaho.
Revenue Requirement and Ratemaking issues contained in the Agreement
The parties have agreed that the FMC/Astaris ESA-Letter Agreement obligation will be excluded from test year analyses for any general rate case.
The parties have also agreed that through March 2003 the FMC/Astaris ESA-Letter Agreement obligation of 120 MW will be reflected “as serve” for PCA purposes (i.e., no reduced load at $16.84 per MWh).
The parties also agreed that after March 2003 the FMC/Astaris ESA-Letter Agreement obligation load will be removed from the PCA normalized load.
Finally, the parties have agreed that after March 2003 the FMC/Astaris ESA-Letter Agreement obligation load of 120 MW will no longer be reflected “as served” for PCA purposes.
PARTIES RECOMMENDATION
Because an Agreement has been reached, all parties have signed the Stipulation and Settlement Agreement, the matter is ripe for Commission review and determination of whether the Agreement is just, fair and reasonable, in the public interest, or otherwise in accordance with law or regulatory policy.
The Parties recommend that based upon the Agreement, the Commission accept this settlement as presented. The parties further agree that this Stipulation presents an opportunity to finally resolve all ESA issues between the Parties. This Stipulation is made to compromise contested claims and is entered solely for the purpose of avoiding expense, inconvenience, and uncertainty of further litigation. The parties agree that the Settlement itself spreads the obligations and benefits among Idaho Power, FMC/Astaris and the general body of ratepayers. Furthermore, the Parties agree that this Stipulation represents a reasonable resolution of the issues between the Parties and believe that it is in the public interest for the Commission to approve the Stipulation and Settlement Agreement.
COMMISSION DECISION
Does the Commission wish to accept/approve by its Order the Stipulation and Settlement Agreement based on the record currently before it?
If the Commission does not wish to accept the Agreement based on the current record does the Commission wish to establish the procedure by which it will consider and evaluate it?

John R. Hammond

Staff: Randy Lobb
Terri Carlock

The parties in this case have been informed that Astaris of Idaho LLC has been renamed FMC of Idaho LLC.

DECISION MEMORANDUM 5