20040517Petition for Reconsideration.pdf

BARTON L. KLINE , ISB # 1526
MONICA B. MOEN , ISB # 5734
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise , Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
FtECEIVED FILED
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UTILiTIES COi4HtSSION
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A PETITION FILED BY
IDAHO POWER COMPANY FOR APPROVAL)
OF MODIFICATIONS TO THE SECURITY
PROVISIONS REQUIRED TO BE INCLUDED
IN AGREEMENTS BETWEEN IDAHO
POWER AND CO-GENERATORS
AND SMALL POWER PRODUCERS
CASE NO. IPC-03-
IDAHO POWER COMPANY'
PETITION FOR RECONSIDERA-
TION OR, IN THE ALTERNATIVE
PETITION FOR CLARIFICATION
COMES NOW Idaho Power Company ("Idaho Power" or the "Company
and in accordance with RP 325 and 331 et. seq.hereby requests that the Commission
reconsider or clarify a portion of Order No. 29482 issued in this case on April 27, 2004.
Idaho Power seeks reconsideration or, alternatively, clarification of that portion of Order
No. 29482 under which QF's are given the option to prepare and file the security
interest documentation, presumably on behalf of Idaho Power Company. This option
discussed on Page 12 of Order No. 29482.
While the Company understands the Commission s desire to minimize QF
transaction costs , Idaho Power is concerned with the conflict of interest created by
IDAHO POWER COMPANY'S PETITION FOR RECONSIDERATION
, IN THE ALTERNATIVE, PETITION FOR CLARIFICATION Page
allowing QF developers to prepare and file the documents needed to secure Idaho
Power s security interest in the assets of their respective QF projects.1 Idaho Code
Title 28, Chapter 9, is the portion of the Idaho Code that governs secured transactions.
It sets out very precise documentation and filing requirements to perfect a security
interest. If the requirements are not filed precisely, the security interest is not perfected
and is subject to attack in the event of competing creditors seeking to foreclose on the
QF's assets. The QF's failure to correctly document, perfect and maintain a security
interest in QF project assets would jeopardize the Company s ability to maintain a
priority creditor position on the assets covered by the security interests. If the project
experiences financial problems, the conflict of interest arises because the QF developer
and its other creditors could be financially benefited by the failure of Idaho Power
security interest (created by the QF) and Idaho Power and its customers would be
harmed by such failure. QF developers have a disincentive to do a thorough job of
creating and perfecting Idaho Power s security interest. Giving the QF developer the
option to create the security interest that Idaho Power would have to rely on in a
foreclosure or bankruptcy proceeding, presents such a basic conflict of interest that
Idaho Power believes the Commission should reconsider this portion of the Order.
Idaho Power questions whether the minimal cost savings to the QF developer is worth
the risk to customers.
If the Commission still desires to provide this option to QF developers
Idaho Power requests that the Commission clarify Order No. 29482 by requiring that QF
developers that desire to prepare and file the documentation to perfect Idaho Power
The legal term for this documentation and filing process is "perfecting" a security interest. Idaho
Code, Title 28, Chapter 9.
IDAHO POWER COMPANY'S PETITION FOR RECONSIDERATION
, IN THE ALTERNATIVE , PETITION FOR CLARIFICATION Page 2
security interest in the QF's projects must permit the Company to review and approve
all aspects of the creation of the security interest. The Commission should also clarify
that if the QF exercises this option to self-file , Idaho Power will have no obligation to
take remedial steps if the QF developer fails to adequately cover all project assets or
fails to file any required continuation statements to maintain the viability of the security
interest over the full term of the contract.
The above-described review and approval procedure will require the
Company to incur additional legal expense. Considering both the QF's cost to have its
counsel prepare the security interest documents and the cost Idaho Power will incur to
review them, it is likely that the QF self-filing option will be more expensive than if the
Company had prepared the lien documents in the first place. Nevertheless , Idaho
Power believes the initial review and approval by Idaho Power is necessary to at least
reduce the likelihood of potential problems if a QF project experiences financial
problems.
On Page 12 of Order No. 29482 the Commission cautions the Company
that if it fails to enforce QF compliance with the Commission s -292 case security
requirements, it will be Idaho Power and not its customers that will be at risk for the
foregone security. Idaho Power believes it is unreasonable for the Commission to
require Idaho Power to accept security interests created by the QF developer and then
put the Company at risk if those security interests are not enforceable or do not cover all
of the assets associated with the QF project. If the Commission gives QF developers
the option to prepare and file the documents needed to perfect Idaho Power s security
interest in the QF's assets, the Company should be relieved of any liability if it's
IDAHO POWER COMPANY'S PETITION FOR RECONSIDERATION
, IN THE ALTERNATIVE , PETITION FOR CLARIFICATION Page 3
ultimately determined that the security interest provisions of the Commission s -292
security requirements do not cover all of the assets or cannot be enforced.
Based on the foregoing, Idaho Power respectfully requests that the
Commission issue its order granting reconsideration of that portion of Order No. 29482
which gives QF developers seeking levelized rates the option to prepare and file the
security interest documentation for their own projects. Alternatively, Idaho Power
requests that the Commission clarify Order No. 29482, to require the QF to allow the
Company to review and approve the security interest documentation and perfection
process as a condition of contract compliance on the part of the QF.
Finally, the Company requests that the Commission clarify. Order No.
29482 to provide that if the QF developer exercises the option to prepare and file the
lien documents needed to secure Idaho Power s security interest in the assets of the QF
projects, even if Idaho Power has review and approval authority, Idaho Power would be
relieved of any liability for failure to comply with the security interest provisions of the
Commission s -292 security requirements.
If the Commission grants reconsideration, Idaho Power believes that
written comments would be sufficient to address the issues raised by this Petition.
Respectfully submitted this 17th day of May, 2004.
BARTON L. KLINE
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S PETITION FOR RECONSIDERATION
, IN THE ALTERNATIVE , PETITION FOR CLARIFICATION Page 4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 17th day of May, 2004, I served a true
and correct copy of the within and foregoing IDAHO POWER COMPANY'S PETITION
FOR CLARI FICA TION upon the following named parties by the method indicated
below, and addressed to the following:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, Idaho 83720-0074
Hand Delivered
S. Mail
Overnight Mail
FAX [phone]
&tL
BARTON L. KLINE
CERTIFICATE OF SERVICE