20031216Comments.pdf

LISA NORDSTROM
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5733
HECEIVED IIiFILED
LuG3 DEC 16 P~1 2:
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UTiLITIES CGr1i11SSION
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 IDAHO POWER
COMP ANY'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-O3-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Lisa Nordstrom, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on
December 9 2003 submits the following comments.
On October 27 2003, Idaho Power Company (Idaho Power; Company) and the
Amalgamated Sugar Company LLC (T ASCO) entered into an Agreement for the Sale and
Purchase of Surplus Energy (the "Surplus Energy Agreement") under which Idaho Power agrees
to purchase non-firm surplus energy generated by TASCO's Nampa electric generation facility.
Idaho Power requests that the Commission approve this Agreement and declare that all payments
for purchases of energy under the Agreement shall be allowed as prudently incurred expenses for
ratemaking purposes.
STAFF COMMENTS DECEMBER 16, 2003
A prior, similar Agreement between T ASCO and Idaho Power was entered into on
October 31 , 1998 under which Idaho Power purchased up to 2 MW of surplus electric energy
from TASCO at market-based prices. Case No. IPC-98-, Order No. 27885. That Agreement
was amended on July 25 2001 , wherein TASCO decided to add an additional 8 MW of capacity
to the 2 MW of generating capacity that already existed, bringing the total generating capacity at
the Nampa plant to 10 MW. Under the amended Agreement, Idaho Power agreed to purchase the
additional surplus energy generated by TASCO at prices less than market-based non-firm energy
prices. The amended Surplus Energy Agreement terminated on September 1, 2003. Case
No. IPC-01-, Order No. 28865.
The Agreement in this case begins on September 2003, thus succeeding the prior
Surplus Energy Agreement and its July 2001 amendment.
Analysis
Electric energy to be sold under the Surplus Energy Agreement is non-firm energy and
will only be available when T ASCO does not consume the electric energy in the Nampa plant.
However, T ASCO 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. T ASCO' 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.
Under the Agreement, the purchase price for the energy provided by T ASCO is 85
percent of the avoided energy cost as defined in Idaho Power s Schedule 86. Currently, the
avoided energy cost in Schedule 86 is equal to the monthly average non-firm Dow-Jones Mid-
Columbia Index price.
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 COMMENTS DECEMBER 16, 2003
The Agreement also contains a provision that permits the parties to adjust the surplus
energy price if, at the request ofIdaho Power, T ASCO agrees to provide continuous energy at a
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 of Idaho Power s system is in jeopardy.
such an instance, Staff agrees that it may be advantageous to Idaho Power and its customers to
pay more than 85 percent 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.
Staff believes that the price terms agreed to in this Agreement are attractive to Idaho
Power and its ratepayers. Using market prices as a basis for the purchase price, rather than the
methodology established for determining long run avoided costs, is appropriate given the short-
term nature of the Agreement and the fact that the energy is somewhat non-firm. Most
importantly, the purchase price is consistent with the price Idaho Power pays for other non-firm
energy purchases.
The term of the Agreement is for five years and will automatically renew and extend each
year thereafter unless either party decides to terminate.
Ratemaking Treatment
Idaho Power requests that all payments for surplus energy under the amended 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, subject to Staffs 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.
Recommendations
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
STAFF COMMENTS DECEMBER 16, 2003
on purchases at full market price, thus minimizing power supply costs. Staff also recommends
that the reasonably incurred costs associated with the T ASCO Agreement be passed through the
PCA.
'-111
Respectfully submitted this /10 day of December 2003.
Technical Staff: Rick Sterling
U:/rsterli/Idaho Power/ipceO3. I 0ln.rps
STAFF COMMENTS DECEMBER 16, 2003
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 16TH DAY OF DECEMBER 2003
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-03-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
MONICA MOEN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
JOHN P PRESCOTT
VICE PRESIDENT - POWER SUPPLY
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
SECRETARY
CERTIFICATE OF SERVICE