Petition_RequestforExpeditedHrg.doc

JOHN R. HAMMOND, JR.
Deputy Attorney General
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, ID 83720-0074
Tele: [phone]
Idaho Bar No. 5470
FAX: [phone]

Street Address for Express Mail:

472 W Washington
Boise, ID 83702-5983

Attorney for the Idaho Public Utilities Commission

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

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

PETITION

REQUEST FOR
EXPEDITED HEARING
Comes now the Staff of the Idaho Public Utilities Commission and petitions the Commission to enter an Order, consistent with its authority under Idaho Code § 61-502, that will abrogate the rates set for the remaining buy-back provision of the Letter Agreement between Idaho Power Company (“Idaho Power”) and Astaris LLC. Specifically, Staff contends that the Commission should abrogate the rates because the 15.9 ¢ per kilowatt hour (kWh) average price that Idaho Power is paying Astaris over the remaining 15 months of the Letter Agreement for 50 megawatts (MW) of energy is no longer just and reasonable. Staff calculates that Idaho Power will pay $45 million in excess of reasonable rates for the remaining months of the Agreement. Continuation of this unjust and unreasonable rate is not in the public interest, will impose an “excessive burden” on all of Idaho Power’s ratepayers, and result in an inappropriate preferential windfall to Astaris. If the Commission abrogates this rate, Staff requests that the Commission set a new just, reasonable and sufficient rate on a prospective basis.
Staff contends that because Idaho Power is incurring substantial costs on a going forward basis as a result of the buy-back portion of the Letter Agreement, it is necessary to process this case in an expedited fashion. Accordingly, Staff recommends that the Commission escrow the unreasonable portion of the monthly payments until the Commission has issued a final Order. Staff urges the Commission to set a prehearing conference promptly in order to discuss preliminary issues and set the evidentiary hearing. In support of this Petition and to speed the processing of this case, Staff is prefiling the Direct Testimony of Keith D. Hessing, a Public Utilities Engineer.
BACKGROUND
Idaho Power is an electric utility engaged principally in the generation, purchase, transmission, distribution and sale of electric energy and provides retail electric service to approximately 360,000 customers in southern Idaho, eastern Oregon and parts of northern Nevada. Astaris LLC is a supplier of phosphorus chemicals, phosphoric acid and phosphate salts producing line of phosphorus and derivative products. The Company is a 50/50 joint venture company owned by FMC Corporation and Solutia Inc. Astaris began operations as an independent company in April 2000. Relevant to this Petition Astaris owns and operates an elemental phosphate processing plant in Pocatello. Astaris is the largest single customer of Idaho Power, purchasing nearly 14% of Idaho Power’s total energy sales under a special contract.
1. The Electric Service Agreement.
On April 27, 1998, the Commission approved the Electric Service Agreement (“ESA”), dated December 30, 1997, between Idaho Power and Astaris. See Case No. IPC-E-97-13, Order No. 27463. See also Staff Exh. 109 and 110. The ESA required Idaho Power to supply two large blocks of electric power to Astaris’ phosphate processing facility in Pocatello. ESA at p. 4, § 4.2.1. The first block is for 120,000 kilowatts (“kW”) per hour and is a “take or pay” block (i.e., Astaris must pay for the power whether it uses it or not). ESA at p. 5, § 4.2.2. On mutual agreement of FMC and Idaho Power, the amount of energy delivered under the first block could be reduced below 120,000 kWh for an agreed upon time period. Id. In its Reply Comments in the ESA case Astaris described situations where this provision might be utilized:
This could occur, for example, when Idaho Power’s system is constrained or import power requirements and prices are extraordinarily high and FMC is, for some reason, temporarily unable to consume the full 120 megawatts, or in a position to reschedule maintenance to reduce its demand. In these circumstance [sic], FMC’s reduction in demand would benefit Idaho Power’s other customers in addition to the two parties to the contract. The provision was only intended to recognize that these types of extraordinary circumstances could arise during the term of the contract. It does not constitute a general limitation of Idaho Power’s supply obligation or FMC’s take or pay obligation, and it will only be invoked to the benefit, and not the detriment, of other ratepayers.

FMC’s Reply Comments at p. 2, Case No. IPC-E-97-13 (emphasis added).

The purchase price for the contract demand for the first block under the agreement is $3.70 per kW-month for 120,000 kW. Id., § 5.2.1. The base energy rate for the first block is 1.665 ¢ for each kWh made available by Idaho Power. Id., § 5.2.2. The second block is for 130,000 kW per hour to be supplied by Idaho Power at Astaris’ request. Id. at p. 5, § 4.2.3. The ESA provides that energy commitments under its provisions may be modified by Idaho Power for Astaris’s account in accordance with sections 4.2.4 and 4.2.5. ESA at p. 4, § 4.1. The method for modifying energy commitments will be set forth in mutually agreed to operating procedures. Id.
In section 6 of the ESA the parties stated that it was their intention that the rates set within it would not be subject to change by the Federal Energy Regulatory Commission (FERC) or by the Idaho Public Utilities Commission. Thus, the parties through the ESA contemplated that the rates established by it were “contract standard” rates as opposed to “tariff standard” rates and would remain at contract levels over the life of the contract.
Section 13 of the ESA also recognized and outlined the Commission jurisdiction:
Except as provided in section 6, this Agreement and the respective rights and obligations of the parties hereunder shall be subject to (1) Idaho Power’s general rules and regulations as now or hereafter in effect and on file with the Commission, and (2) the jurisdiction and regulatory authority of the Commission and the laws of the state of Idaho.

ESA at p. 21, § 13 (emphasis added). Section 18 of the ESA also contains a provision entitled “Governing Law” that states, “[t]his Agreement shall be construed and interpreted in accordance with the laws of the State of Idaho, excluding any choice of law or rules which direct the application of laws of another jurisdiction.” ESA at p. 23, § 18.
The initial term of the ESA was to end on December 31, 2002. ESA at p. 3, § 3.1. Following expiration of the initial term, the ESA would remain in effect until either Idaho Power or Astaris gave written notice of termination. ESA at p. 4, § 3.2. After December 31, 2000, either party could terminate the agreement by delivering a written notice of termination with actual termination to occur two years after the written notice. Id.
2. The ESA Order.
In its Order approving the ESA, the Commission observed that “[b]y statute, the Commission has continuing jurisdiction to review existing contracts and on its own motion to investigate rates or practices and to order them changed. Idaho Code § 61-503.” Order No. 27463 at p. 14. Furthermore, and most importantly, the Commission ordered that as a condition of approval of the ESA that it would retain “authority over the [ESA] to insure that, as it is implemented, it does not impair the financial ability of Idaho Power to continue its service nor harm other rate payers.” Order No. 27463 at p. 15 (emphasis added). Neither party to the ESA petitioned the Commission for reconsideration of Order No. 27463 nor moved to void the ESA pursuant to section 14.
3. The Letter Agreement.
In the fall and winter of 2000-2001, three external factors prompted the parties to amend the ESA. First, low water conditions reduced Idaho Power’s hydrogeneration. Second, this low water condition compelled the Company to replace the lost generation with much higher priced power purchased in the volatile regional power market. Third, Astaris desired to discontinue its elemental phosphorus process and switch to a “wet” process. Hessing Dir. at p. 6. On March 16, 2001, Idaho Power filed an Application requesting approval of a Letter Agreement that would amend certain sections of the ESA. See Case No. IPC-E-01-9. Idaho Power represented in the Application that Astaris would greatly accelerate implementation of its committed strategic direction to shift away from reliance on elemental phosphorus toward purified phosphoric acid as its new material base. Application at pp. 1-2. Consequently, Astaris’ need for large amounts of power could be significantly reduced. Furthermore, according to the Letter Agreement “[d]ue to the recent significant increase in electric power prices the parties mutually desire to amend the [ESA][.]” LA at p. 1.
The Letter Agreement proposed that Astaris would consume “no more than 70,000 kW’s of energy per hour” from the First Block, starting from April 1, 2001 and continuing through the term of the Agreement. LA at p. 2, ¶ 3. However, Astaris would continue to pay for 120,000 kW of energy per hour under section 4.2.1 of the ESA. Id. The difference – 50,000 kW or 50 MW – would be made available to Idaho Power for twenty-four (24) months beginning April 1, 2001 and ending March 31, 2003. Idaho Power would pay Astaris for the 50 MW at then projected market rates, over the entire term of the Letter Agreement, minus a 13.5% discount. See LA, Schedule A. The total buy-back amount for the 50 MW of power was estimated at approximately $140 million over the two years, or about 15.9¢ per kWh ($159 per MWh). Id. Idaho Power also represented that the 15.9¢ proposed buy-back payment would be offset by the Company’s continued recovery of the energy charge for the entire 120,000 kWh in the first block. Finally, Idaho Power requested that that the payments it would make to Astaris under the Letter Agreement be treated as a purchased power expense for purposes of Idaho Power’s Power Cost Adjustment (“PCA”) mechanism. Application at p. 2; LA at p. 3, ¶ 7.
The Letter Agreement also provided for the permanent shut down of furnaces No. 1 and No. 4 at the Astaris facility in Pocatello. LA at p. 1, ¶ 1. As a result, the contract demand set forth in section 4.2.1 of the ESA would be reduced by 130,000 kW and the charges for the second block demand under section 5.2.4 of the ESA would be reduced accordingly as of April 1, 2001. See ESA at pp. 8-9, § 4.5. The Letter Agreement proposed that the ESA be amended to terminate at midnight on March 31, 2003. LA at p. 1. The Letter Agreement also provided that Idaho Power and Astaris would negotiate in good faith to develop a replacement electric service agreement for the Pocatello facility, which would become effective after the amended termination date of the ESA and its Letter Agreement on March 31, 2003. LA at p. 2, ¶ 5.
Idaho Power and Astaris represented that the Letter Agreement’s terms were conditioned on favorable approval by the Idaho Public Utilities Commission. Id.; see also, LA p. 2, ¶ 6. The Letter Agreement also stated that “[a]ll other terms and conditions of the [ESA] except those expressly modified by this Letter of Understanding shall remain in full force and effect.” LA at p. 3, ¶ 8.
At the time the Letter Agreement was proposed, Idaho Power was increasing its purchases of power from the western wholesale market due to drought conditions. Because the prices for power on the wholesale market at that time were extremely high, Idaho Power began developing conservation and/or load reduction options such as the Letter Agreement in an effort to limit its exposure to these prices while at the same time securing power necessary to serve its native load. See Order No. 28695 at p. 5. Another motivation for Idaho Power to develop these types of programs was to mitigate impacts on ratepayers as the most recent PCA adjustment passed on $227 million in deferred costs to Idaho Power ratepayers. As discussed above, the Letter Agreement would allow the Company to secure 50 MW of load at a price that was 13.5% below the estimated future market prices that were used to establish the buy-back price. If actual, wholesale market rates averaged the same amounts as the forward market prices that were used to establish the buy-back price over the life of the Letter Agreement then it was possible that retail rates as adjusted by the next PCA proceeding would have been reduced by 13.5%.
After considering these circumstances the Commission preliminarily found that approval of the Application was in the public interest. Order No. 28678 at p. 3. On April 10, 2001, the Commission issued its final Order and approved the Letter Agreement as a system resource and allowed the load reduction to be added to the Company’s resource portfolio. Order No. 28695 at 6. In approving the Letter Agreement, the Commission noted that it could save Idaho Power and ratepayers as much as $21 million if the forward market prices used to establish the prices for the buy-back became a reality. Order No. 28695 at pp. 5-6. The Commission further found that reasonably incurred payments made by Idaho Power to Astaris for purchases of energy should be treated as a purchase power expense and recovered through the Company’s PCA mechanism. Id.
Through December 31, 2001, Astaris is expected to have received $80.4 million in payments from Idaho Power under the Letter Agreement with the remaining $59 million to be paid over the remaining 15 months of the contract.
4. Current Market Conditions.
After the Commission approved the Letter Agreement actual market prices during April and May 2001 continued in the $280-$300 range per MWh, near the levels anticipated under the Letter Agreement. In June, the wholesale market price for power in the West plunged dramatically to under $50 per MWh and remain close to historical levels of $20 to $30 MWh. Even after six months and well into the winter peaking months for Idaho Power, prices have remained below $50 per MW. Thus, Idaho Power under the buy-back portion of the Letter Agreement is now paying Astaris 200% to 700% more for 50 MW of power than what it would spend to obtain the same amount of power at current forward market prices, over the remaining term of the contract. Hessing Dir. at p. 11; Staff Exh. 102.
In another development, Astaris LLC announced on October 11, 2001 that the Company would cease elemental phosphorus production and close its operation at the Pocatello plant by year-end. FMC website, http://www.fmc.com; http://www.astaris.com. Following cessation of production by Astaris, FMC would be responsible for the site and decommissioning of the plant. Id.
LEGAL STANDARDS
In determining whether the Commission is properly vested with the authority to consider and resolve a question brought before it several general tenets must be recognized. The Public Utilities Commission has no inherent power but its powers and jurisdiction are derived in entirety from the enabling statutes. “[N]othing is presumed in favor of its jurisdiction.” Alpert v. Boise Water Corp., 118 Idaho 136, 140, 795 P.2d 298, 302 (1990); Lemhi Tel. Co. v. Mountain States Tel. & Tel. Co., 98 Idaho 692, 696, 571 P.2d 753, 757 (1977). However, once jurisdiction is clear the Commission is allowed all power necessary to effectuate its purpose. Lemhi, 98 Idaho at 696, 571 P.2d at 757.
The Commission acts in the public interest by insuring: that all rates and charges made by a public utility are just and reasonable, Idaho Code § 61-301; and that all public utilities maintain service, as shall promote the safety, health, comfort and convenience of the public and its customers. Idaho Code § 61-302.
Several statutes recognize the ability of public utilities to enter valid private contracts, that among other things set rates for service, by providing procedures for reviewing them. See Idaho Code §§ 61-305, 61-307, 61-502, 61-503, 61-622, and 61-623. Idaho Code § 61-305 requires public utilities to file all contracts relating to rates. Idaho Code §§ 61-307, 61-622 and 61-623 authorize the Commission to review proposed rates and contracts, and if necessary, to suspend the effective date of such contracts so that the Commission may thoroughly review their provisions. Idaho Code §§ 61-502, 61-503, and 61-622 authorize the Commission to investigate contracts and to set new contract rates if such rates are found to be “unjust, unreasonable, discriminatory or preferential.” Idaho Code § 61-502.
The Idaho Public Utilities Act through Idaho Code §§ 61-502, 61-503 and 61-622 delegates rate fixing/making authority to the Commission. The Idaho Supreme Court described these authorities in United States v. Utah Power & Light Company, 98 Idaho 665, 570 P.2d 1353 (1977):
Idaho Code § 61-622 provides that before a public utility can raise rates or alter contracts to affect a rate increase a showing must be made before the Commission that such increase is justified. Idaho Code § 61-502 gives the Commission the authority either upon its own motion or upon complaint to abrogate existing rates including those set by contract if they are found to be ‘unjust, unreasonable, discriminatory, preferential, or in any way in violation of law’ and fix new rates in their stead. Idaho Code § 61-503 completes the Commission’s power over rate making by giving it the authority, implicit in the prior statutes to investigate rate schedules and contracts affecting rates. The delegation of rate making authority to the Commission was upheld by this Court at an early date. Idaho Power & Light Co. v. Blomquist, 26 Idaho 222, 141 P. 1083 (1914).

98 Idaho at 667-68, 570 P.2d at 1356.
Once the Commission has approved private utility contracts, they are usually protected from governmental interference by the Idaho Constitution, Article I, § 16, that mandates that no “law impairing the obligation of contracts shall ever be passed.” Despite this general limitation, Idaho Code § 61-502 provides the Commission with residual authority and jurisdiction over contract rates should the need arise. In Sandpoint Water and Light Co. v. City of Sandpoint, the Idaho Supreme Court stated:
It is held uniformly and universally that the power to supervise and regulate rates or charges for services rendered by public utilities is an inherent function of government, and occupies a large place within the domain of the police powers of the state.

31 Idaho 498, 501, 173 P. 972, 973 (1918).
Pursuant to this police power, it has been settled that the State, through the Commission, may set rates for public utility service that will supersede rates previously established by a private contract when it is in the public interest to do so. Agricultural Products Corporation v. Utah Power & Light Company, 98 Idaho 23, 28, 557 P.2d 617, 622 (1976). See also United States v. Utah Power & Light Company, 98 Idaho 665, 570 P.2d 1353 (1977). This continuing authority over private utility contracts and their rates is a valid exercise of the police powers of the State and such regulation is not a violation of the constitutional prohibition against the impairment of contractual obligations. Agricultural Products, 98 Idaho at 29, 557 P.2d at 623. Thus, private contract rates with utilities are regarded as entered into subject to the reserved authority of the State to modify the contract when necessary to protect the public interest. Id.
Our Supreme Court has also discussed the limits and the ability of state power to abrogate or alter a contract. In Agricultural Products, the Court stated that:
While a state may exercise its legislative power to regulate public utilities and fix rates, notwithstanding the effect may be to modify or abrogate private contracts . . . . The power to fix rates, when exerted, is for the public welfare, to which private contracts must yield; but it is not an independent legislative function to vary or set aside such contracts, however unwise and unprofitable they may be. Indeed the exertion of legislative power solely to that end is precluded by the contract impairment clause of the Constitution. The power does not exist per se. It is the intervention of the public interest which justifies and, at the same time conditions its exercise.

98 Idaho at 29, 557 P.2d at 623, quoting Arkansas Natural Gas Co. v. Arkansas R.R.Comm'n, 261 U.S. 379, 382-383, 43 S.Ct. 387, 388, 67 L.Ed. 705 (1923).
Thus, to justify state interference with a utility contract, there must be a finding that the rate “is so low as to adversely affect the public interest-as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.” Agricultural Products Corporation, 98 Idaho at 29. See also Federal Power Comm's v. Sierra Pac. Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956). Furthermore, if the Commission lawfully abrogates a contractual rate it may only prospectively set the just, reasonable and sufficient rate. Sierra Pacific Power, 350 U.S. at 353, 76 S.Ct. at 371.
ARGUMENT
The average contract rate contained in the Letter Agreement during April 2001 through March 2003 is $159 MWh. Exh. 111, LA, Schedule A. Currently forward market prices for power on the western wholesale market have returned to historical levels, below $50 per MWh. Thus, Idaho Power under the buy-back portion of the Letter Agreement is paying Astaris 200% to 700% more for 50 MW of power than what it would spend to obtain the same amount of power at current forward market prices, over the remaining term of the contract. Staff Exh. 102 and 104. Accordingly, for the remainder of the Letter Agreement and ESA, Idaho Power and eventually all ratepayers will pay $45 million more for 50 MW of buy-back energy than if the contract rate were abrogated by the Commission and replaced with rates that are just and reasonable. Thus, Staff asserts that the remaining rates contained in the Letter Agreement are unjust and unreasonable, and if adjusted to reasonable levels should save a total of $45 million or more than $34 million for ratepayers in PCA surcharges from January 2002 until the conclusion of the ESA and Letter Agreement on March 31, 2003. Hessing Dir. at pp. 14-16. To support its contention that the Commission should abrogate this rate, Staff shall discuss the costs that occur as a result of this program, how the PCA mechanism treats these costs and passes them on to all ratepayers, and the impact on all ratepayers this contract rate will have if it is not abrogated.

1. Direct Costs of the Agreement and Current Reasonable Rates.
Under the approved terms of the ESA and Letter Agreement, Staff expects that the total costs related to the buy-back of 50 MW over the life of this contract will be approximately $139.4 million. From April 2001 until December 31, 2001, Idaho Power will pay Astaris $80.4 million. From January 1, 2002 until March 31, 2002, Idaho Power is scheduled to pay Astaris approximately $17 million. From April 1, 2002 until March 31, 2003, Idaho Power is scheduled to pay Astaris approximately $42 million. Hessing Dir. at p. 10; Staff Exh. 101.
After the Agreement was approved, market prices stayed high – near the levels anticipated by the parties. However, during the month of June market prices fell dramatically to historical levels or under $50 per MWh where they have remained since that time. Hessing Dir. at pp. 8-9; Staff Exh. 102. Staff maintains that the contract rates are two to seven times higher than the current forward prices obtained from two separate sources. Staff Exh. 104 and 106.
Staff employed the same method that was used to establish the buy-back rates in the Letter Agreement, and has calculated the costs of the contract, on a going forward basis, using the current forward market prices. Staff did not discount the forward prices used as an adjustment. Using the full, current forward market prices for power for the remaining 15 months of the Letter Agreement, Staff contends that Idaho Power should pay Astaris approximately $13.5 million from January 1, 2002 to March 31, 2003, the remaining term of the Letter Agreement and ESA. Using the current rates would mean that Idaho Power would pay Astaris approximately $2.4 million from January 1, 2002 until March 31, 2002 and approximately $11.1 million from April 1, 2002 until March 31, 2003. See Table infra; Staff Exh. 103; Hessing Dir. at p. 14. This would result in a total savings of $45.5 million.
2. PCA Savings to Ratepayers.
To determine how much of these Letter Agreement costs could be passed on to ratepayers, the PCA mechanism must be employed. Through the PCA mechanism 10% of the total cost of the Agreement is absorbed by Idaho Power shareholders as well as 15% being allocated to other jurisdictions. After these adjustments, approximately $106.6 million in direct costs would be deferred and recovered from ratepayers in the 2002/2003 and 2003/2004 PCA years. During the life of the contract the buy-back costs are deferred on a monthly basis. Although interest accumulates on deferred PCA balances Staff has not included interest savings. Hessing Dir. at p. 10.
If the Staff’s adjustment were accepted, the PCA surcharge would recover approximately $71.9 million spread over PCA years. After PCA treatment, $1.9 million would accrue from January 1, 2002 until March 31, 2002 and be passed on to ratepayers in the 2002/2003 PCA and $8.5 million would accrue from April 1, 2002 until March 31, 2003 and be passed on to ratepayers in the 2003/2004 PCA year. Hessing Dir. at p. 14, 16. The Staff’s adjustment would save $34.8 million through the PCA mechanism.
The Tables below show the total contract savings and savings that ratepayers will receive through the PCA if the Letter Agreement rates are abrogated:
TOTAL CONTRACT SAVINGS (in $ millions)
L.A. Revenue Staff Adjusted Revenue Contract savings
Apr. 01-Dec. 01 $ 80.4 $80.4 $ 0
Jan. 02-Mar. 02 $ 17.0 $ 2.4 $14.6
Apr. 02-Mar. 03 $ 42.0 $11.1 $30.9
Totals $139.4 $93.9 $45.5

TOTAL SAVINGS TO RATEPAYERS AFTER PCA TREATMENT (in $ millions)
L.A. PCA Revenue Staff Adjusted Revenue PCA Savings
Apr. 01-Dec. 01 $ 61.5 $61.5 $ 0
Jan. 02-Mar. 02 $ 13.1 $ 1.9 $11.2
Apr. 02-Mar. 03 $ 32.1 $ 8.5 $23.6
Totals $106.7 $71.9 $34.8
Source: Staff Exhibits 101, 103, 104 (rounded).
For the 2002/2003 PCA rates, customers would save the following amounts if the contract rate were abrogated and re-established at the just and reasonable forward market rate: 1) Uniform Tariff Rate Customers - $9.4 million reduction or a 2.11% reduction across the class; and 2) Special Contract Customers - $1.8 million or a 3.65% reduction across the group. For the 2003/2004 PCA, the impact is as follows: 1) Uniform Tariff Rate Customers - $19.8 million reduction or a 4.45% reduction across the class; and, 2) Special Contract Customers - $3.8 million reduction or 7.70% reduction across the group. Hessing Dir. at pp. 16-17; Staff Exh. 105.
3. The Letter Agreement Rates Are Unjust and Unreasonable and Impose an Excessive Burden on Ratepayers.

Staff alleges that under the Letter Agreement the rate Idaho Power will pay Astaris for the 50 MW of power for the remaining term of the contract is unjust and unreasonable. The buy-back rate will also impose an excessive burden on the general body of ratepayers through the 2002/2003 and 2003/2004 PCA years as demonstrated in the Tables above, Staff Exhibit 105, and in the prefiled Direct Testimony of Keith Hessing. Staff contends that if the Commission does not abrogate the Letter Agreement rate and set a new rate, customers will experience a substantial rate increase in future PCA adjustments. Specifically, Staff alleges that by its calculations that ratepayers will pay an additional $11.2 million in the upcoming 2001/2002 PCA year and $23.6 million in the 2002/2003 PCA year. Accordingly, Staff requests that the Commission abrogate this rate pursuant to its retained jurisdiction over the ESA and its authority under the Idaho Public Utilities Act. After abrogating this rate Staff requests that the Commission set a new just and reasonable rate for the remainder of the Letter Agreement as proposed by the Staff (without a market discount).
4. Escrow.
In processing its Petition, Staff recommends that beginning in January 2002 the Commission require Idaho Power to pay Astaris for the 50 MW buy-back at current forward market rates and place the difference between this price and the buy-back price in an escrow-type reserve account. Interest on the escrow amount would accrue at the customer deposit rate (IDAPA 31.21.01.106) until the Commission issues a final Order in this matter. Upon final Order by the Commission in this case the amount held in the escrow account would be given to the appropriate party in accordance with the final decision. Staff makes this recommendation because Astaris is closing its facility in Pocatello and it is unclear how any overpayments that may occur during the time it takes to process this case would be recovered if the Commission abrogates the buy-back rates in the Letter Agreement.
Staff asserts that escrowing the amounts in dispute is reasonable because the Commission retained jurisdiction over the ESA and the Letter Agreement to insure that ratepayers are not harmed. Order No. 27463 at p. 15. Escrowing insures that ratepayers are not harmed during the processing of this case. Likewise, allowing interest to accrue on such amounts will insure that Astaris is not harmed should it prevail. In addition, paying the reasonable amounts for the buy-back power allows Astaris to continue to receive reasonable payments for the power.
5. Expedited Processing.
Staff also recommends that the Commission process this case in an expedited fashion. At the time the Letter Agreement was originally proposed circumstances justified that the Commission act promptly to consider and approve it. Indeed the Letter Agreement was preliminarily approved in just four days. Similar circumstances exist today because substantial costs are accruing on a daily basis under the Letter Agreement buy-back rate that will impose an excessive burden on all Idaho Power ratepayers. In order to aid in the processing of this case in an expedited manner, Staff recommends that the Commission set a prehearing conference to follow its Decision Meeting on January 14, 2002 to discuss preliminary issues and to schedule an evidentiary hearing.
CONCLUSION
Staff requests that the Commission process this case in an expedited fashion as any further delay will have significant impacts on all Idaho Power ratepayers. In order to expedite the processing of this case Staff requests that the Commission hold a prehearing conference on January 14, 2002 after its Decision Meeting to discuss preliminary issues and to set an evidentiary hearing.
At the prehearing conference Staff also requests that the Commission direct Idaho Power to pay Astaris for the 50 MW buy-back at current forward market rates and place the difference between this price and the Letter Agreement price in an escrow-type reserve account. Interest on the escrow amount would accrue at the customer deposit rate until the Commission issues a final Order in this matter. Upon final Order by the Commission, the amount held in the escrow account would be given to the appropriate party in accordance with the final decision.
Staff requests that the Commission abrogate the buy-back rate contained in the Letter Agreement because it is unjust and unreasonable, will impose an excessive burden on all Idaho Power ratepayers and is preferential to Astaris. Idaho Code § 61-502. Consequently, such rates are contrary to the public interest and the Commission should find the rate unreasonable and unfair. After abrogating this rate Staff requests that the Commission set a new just and reasonable rate at current, forward market projections for the remaining 15 months of the Letter Agreement.
RESPECTFULLY SUBMITTED this 28TH day of December 2001.

John R. Hammond, Jr.
Deputy Attorney General

N:IPCE0143_jh
Pursuant to Idaho Code § 61-301 “[e]very unjust or unreasonable charge made, . . . for such product or commodity or service is hereby prohibited and declared unlawful.”
Idaho Code § 61-502 states:

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.
Commonly called the “Agricultural Products doctrine” in Idaho, this principle adopts and parallels what is known as the “Sierra-Mobile doctrine” whose genesis came from two United States Supreme Court cases, Federal Power Commission v. Sierra Pacific Power Company, 350,U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956) and United States Pipeline v. Mobile Gas Service Corporation, 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956).
The Staff is not contesting the $80.4 million that Idaho Power has paid Astaris through December 31, 2001 that will result in $61.5 million being passed on to ratepayers through the 2001/2002 PCA rate adjustment.
Using a discount would increase the savings.
Including interest savings would of course increase savings to ratepayers.

Staff believes that one issue the Commission should take up at the prehearing conference is whether it is appropriate for Idaho Power to claim that current forward looking prices contained in Staff Exh. 103 and 104 are confidential.

PETITION
REQUEST FOR
EXPEDITED HEARING 11