20040115Final Order No 29420.pdf

Office of the Secretary
Service Date
January 15 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR APPROVAL
OF AN AGREEMENT WITH THE
AMALGAMATED SUGAR COMPANY, LLC FOR)
THE SALE AND PURCHASE OF SURPLUS ELECTRIC ENERGY.
CASE NO. IPC-03-
ORDER NO. 29420
On September 2, 2003 , Idaho Power Company (Idaho Power, Company) filed an
Application requesting an Order that approves an Agreement for Sale and Purchase of Surplus
Energy (Agreement) between the Company and the Amalgamated Sugar Company, LLC
(T ASCO). The Company filed an amended Application on November 10, 2003 that
incorporated the original Application by reference and replaced the original Agreement attached
as Exhibit 1 with a modified Agreement. The Company asked the Commission to declare that all
payments for energy purchases made under this Agreement be allowed as prudently incurred
expenses for ratemaking purposes.
In the Notice of Application and Modified Procedure issued on December 9, 2003
the Commission solicited comments regarding Idaho Power Application. Only the
Commission Staff submitted comments, which supported approval of the Agreement. In this
Order the Commission grants Idaho Power s Application as set out in greater detail below.
BACKGROUND
Idaho Power provides electric service to TASCO's refined sugar production facility
in Nampa, Idaho, under Schedule 19 to supplement TASCO's own on-site electric generation.
During periods where it generates electricity in excess of its needs, T ASCO sells its excess
generation to Idaho Power.
The Commission has approved the sale and purchase of surplus energy between Idaho
Power and TASCO in the past. In Order No. 27885 issued in Case No. IPC-98-15 on January
, 1999, the Commission approved an agreement for the sale and purchase of surplus electric
energy from T ASCO at market-based prices. The Commission approved modification of this
contract in Order No. 28865 issued in Case No. IPC-01-26 on September 28 2001 , to increase
ORDER NO. 29420
the maximum surplus electric energy that TASCO was permitted to deliver to Idaho Power to 8.
MW and extend the contract's expiration date to September 1 , 2003.
THE AGREEMENT
Although the parties wish this arrangement to continue, the Application indicated that
the previous contract did not adequately address the future electrical requirements of Idaho
Power or TASCO. Both Idaho Power and TASCO believe this new Agreement addresses
current regulations and operating issues to their satisfaction. Electric energy to be sold under the
new Agreement is non-firm energy and will only be available when TASCO's Nampa facility
does not consume the electric energy and/or when T ASCO elects to generate in excess of its
energy consumption. Under the new Agreement:
The purchase price for the energy is set at 85% of the Avoided Energy
Cost as defined within Idaho Power s IPUC Schedule 86.
The term of the Agreement is 5 years with automatic annual renewals.
Following the initial 5-year term, either party may terminate the
Agreement with 6 months prior written notice.
The interconnection equipment and point of delivery terms specified in the
2001 amended contract will continue.
Although the Agreement states its effective date as September 1 , 2003 for purposes of
a smooth transition, the Agreement provides that it will not become effective until the
Commission approves the Agreement and declares that all surplus energy payments made under
the Agreement shall be allowed as prudently incurred expenses for ratemaking purposes.
The only portion of the Agreement that has changed since the original Application
was filed on September 2, 2003 is the Surplus Energy Purchase Price term found in Section
2. As this section appears in the amended November 10, 2003 Application, if Idaho Power
requests and T ASCO agrees to provide continuous energy at a designated MW level for set
length of time, the Adjusted Surplus Energy Price for that energy will be less than or equal to the
Surplus Energy Price set forth in the Agreement. This provision will not bind Idaho Power if the
Company determines the continuing operation of its electrical system is in jeopardy or access to
alternative energy resources is not physically possible. In the event the parties agree to an
Adjusted Surplus Energy Price, Idaho Power will advise the Commission of the agreed upon
pnce.
ORDER NO. 29420
STAFF COMMENTS
Staff filed the only comments received by the Commission in this case. In short
Staff recommends that the Agreement for Sale and Purchase of Surplus Energy between Idaho
Power and the Amalgamated Sugar Company 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.
Staff noted that under the Agreement, TASCO is required to annually provide Idaho
Power with estimated monthly surplus energy amounts before April 1 of each contract year.
Thus, while Idaho Power will not know the precise amount or timing of the surplus energy it will
be required to purchase from TASCO, it will at least have a fair indication. TASCO's monthly
estimates of surplus energy make it firmer than most of the energy Idaho Power purchases under
its Schedule 86 non-firm energy tariff, where neither the timing nor the amount of generation
provided is generally known with any certainty.
The Agreement also contains a provision that permits the parties to adjust the surplus
energy price if, at the request of Idaho Power, TASCO agrees to provide continuous energy at.
designated MW level for an agreed upon length of time. The Agreement envisions such a
circumstance, for example, when Idaho Power s access to alternative sources of supply is not
physically possible or when the continuing operation ofIdaho Power s system is in jeopardy. In
such an instance, Staff agrees that it may be advantageous to Idaho Power and its customers to
pay more than 85% of market price. The Agreement requires Idaho Power to notify the
Commission of the price paid, the energy purchased and the circumstances that the Company
believes warranted such purchases.
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, subject to
Staff's normal audit. By paying 85% of market prices for these power purchases , customers will
benefit by Idaho Power either offsetting market purchases at full market price or reselling power
it does not need at full market price. Moreover, the purchase price is consistent with the price
Idaho Power pays for other non- firm energy purchases.
ORDER NO. 29420
DISCUSSION
The Commission has reviewed and considered the filings of record in Case
No. IPC-03-, including the comments and recommendations of the Commission Staff.
Based on our review, we continue to find it reasonable to process this case pursuant to Modified
Procedure, i., by written submission rather than by hearing. Reference IDAP A 31.01.01.204.
We note that there were no opposing comments and the only comments submitted supported
approval of the Agreement.
The Commission believes the Agreement's use of market prices as a basis for the
purchase price is both advantageous to ratepayers and appropriate given the short-term nature of
the Agreement and the somewhat non-firm nature of the energy. We find that the rates that
Idaho Power will pay for surplus energy generated by T ASCO under this Agreement are
reasonable and thus the Agreement between Idaho Power and T ASCO should be approved.
TASCO is a qualifying facility pursuant to the Public Utilities Regulatory Policy Act of 1978
(See, 18 c.F.R. Part 292). We further find that payments to TASCO under the Agreement are
prudently incurred expenses for ratemaking purposes and are recoverable through the Power
Cost Adjustment mechanism.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power Company,
an electric utility, pursuant to the authority and power granted it under Title 61 of the Idaho Code
and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.and the Public Utilities
Regulatory Policies Act of 1978 (PURP A).
The Commission has the authority under PURP A and the implementing regulations
of the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed term obligations for the purchase of energy from qualifying facilities
and to implement FERC rules.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company s Application requesting
approval of an Agreement for Sale and Purchase of Surplus Energy between the Company and
the Amalgamated Sugar Company, LLC (T ASCO) is granted.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-03-
ORDER NO. 29420
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this order or in interlocutory Orders previously issued in this
Case No. IPC-03-10. For purposes of filing a petition for reconsideration, this order shall
become effective as of the service date. Idaho Code ~ 61-626. Within seven (7) days after any
person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
/~#--
day of January 2004.
PA LKJEU PRESIDENT-
1Pr.-~;U &.:Jz(
MARSHA H. SMITH, COMMISSIONER
ATTEST:
Commission Secretary
O:IPCE0310 In
ORDER NO. 29420