20040206Application.pdf

MONICA MOEN , ISB # 5734
BARTON L. KLINE, ISB # 1526
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise, Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
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Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A PETITION FILED BY
IDAHO POWER COMPANY FOR AN ORDER)
DETERMINING OWNERSHIP OF THE
ENVIRONMENTAL ATTRIBUTES
ASSOCIATED WITH A QUALIFYING
FACILITY UPON PURCHASE BY A UTILITY
OF THE ENERGY PRODUCED BY A QUALIFYING FACILITY
CASE NO. IPC-fr-
PETITION FOR A
DECLARATORY ORDER
COMES NOW Idaho Power Company ("Idaho Power" or the "Company ) and
pursuant to IPUC Rule of Procedure 101 , hereby petitions the Idaho Public Utilities
Commission ("IPUC" or the "Commission ) to issue an Order determining ownership of the
marketable environmental attributes associated with a PURPA Qualifying Facility ("QF"
when Idaho Power enters into a long-term, fixed rate contract to purchase the energy
produced by that QF.
BACKGROUND
In June 2003 , the Federal Energy Regulatory Commission ("FERC") received
petition for a declaratory order in which the Petitioners in that action sought an
PETITION FOR A DECLARATORY ORDER -
interpretation of FERC's regulations implementing Section 210 of the Public Utility
Regulatory Policies Act of 1978 ("PURPA"
).
See FERC Docket No. EL03-133-000.
Specifically, the Petitioners in that matter sought a FERC Order declaring that avoided cost
contracts entered into pursuant to PURPA , absent express provisions to the contrary, do
not inherently convey to the purchasing utility any renewable energy credits or similar
environmental attributes or certificates.
In an Order issued on October 1 , 2003, FERC granted the Petitioners
request for a declaratory order and determined that (1) absent an express provision in a
contract to the contrary, FERC's avoided cost regulations did not contemplate the
existence of environmental attributes and , therefore, contracts for the sale of QF capacity
and energy entered into pursuant to PURPA do not convey environmental attributes to the
purchasing facility; and (2) states may decide that a sale of power at wholesale
automatically transfers ownership of any state-created environmental attributes to the
purchasing utility.
DECLARATORY RULING SOUGHT BY IDAHO POWER
Idaho Power hereby seeks a declaratory order from the I PUC determining
ownership of the marketable environmental attributes associated with a PURPA Qualifying
Facility when the Company enters into a long-term , fixed rate contract for the purchase of
the energy produced by that QF.
IDAHO POWER'S INTEREST IN THE MATTER
AND THE FACTS IN SUPPORT OF THE COMPANY'S PETITION
Idaho Power Company already generates a significant portion of its electricity
from renewable hydroelectric resources. The Company s resource portfolio also includes
electricity purchased from other renewable energy resources. Idaho Power currently is
under contract to purchase energy from 69 PURPA QF projects , the majority of which use
PETITION FOR A DECLARATORY ORDER - 2
renewable resources in the generation of power.
Regional organizations exist to facilitate green energy transactions from
resources that have been certified as green energy compliant by those organizations.
These entities issue tradable "Green Tags" to certified renewable energy producers.
Some of the QFs from whom the Company anticipates making purchases in the future
have indicated an intention to obtain marketable Green Tags as a result of entering into
contracts with Idaho Power.
Green Tags represent the environmental and other non-power attributes of a
measured quantity of electricity generated from a renewable resource.2 Green Tags avoid
the need to package the electricity with its environmental attributes. The Tags provide a
way in which to "unbundle" the environmental attributes from the electricity and permit the
sale of the environmental attributes of renewable generation separately from the electricity
generated. In effect , Green Tags are a currency that can be traded to individuals and
entities wishing to support "green" energy.
As documented in the recent FERC Order , FERC suggested that individual
states may decide ownership of the Green Tags.As a result, Idaho Power seeks
guidance from the Commission as to ownership of potentially marketable certificates in
Idaho. Because there may be value in owning these Green Tags in the future , both Idaho
Power and the QF developers have a keen interest in ownership of the Tags.
In Idaho, a utility and its customers confer additional value on QFs by virtue
of the long-term , levelized, fixed rate contracts that the utility enters into with QFs. That
value is in addition to the avoided cost paid to the QFs for the energy produced. Vesting
the utility with some ownership interest in the Green Tags would remunerate the utility for
Green Tags are also known as Green Certificates , renewable Energy Credits (RECs) and Tradable
Renewable Certificates (TRCs).
A Green Tag represents the environmental and other non-power attributes associated with one
megawatt-hour (MWh) of electricity generated from renewable resources.
PETITION FOR A DECLARATORY ORDER - 3
the additional value conferred to the QFs.
The QFs contend, however, that their ownership of the Green Tags provides
the incentive they need to invest in the production of energy from a renewable resource.
They assert that the sale of the Green Tags associated with the generation of green power
compensates the QF for the facility s environmental attributes and rewards the additional
risks associated with the investment in and the design and operation of a renewable
energy resource plant.
In this petition, Idaho Power Company requests a declaratory order from the
Commission clarifying ownership of these Green Tags. The respective arguments are
presented below.
A. Idaho Power Has An Incentive To Obtain The Green Tags
Associated With Renewable Energy Purchases.
The Green Tags represent value to the Company and its customers.
Because Idaho Power anticipates purchasing green energy from green-certified QFs in the
near future , it has an incentive to obtain the Green Tags associated with those renewable
energy purchases. The environmental attributes associated with the production of energy
from renewable resources, in the form of Green Tags, have a monetary value that may be
marketed to individuals, businesses , organizations, utilities or governmental jurisdictions
separate from the actual energy produced.
Green Tags are a vehicle to monetize the environmental and social benefits-
the non-energy attributes - of renewable generation. Should the Company receive a part
if not all , of the Green Tags associated with the production of that green energy, it could
sell those Tags. The net revenue from Idaho Power s Green Tag sales could be used to
either lower the energy costs of its customers or be reinvested in the development of
additional renewable resources within the State.
PETITION FOR A DECLARATORY ORDER - 4
All of the Company s existing QF energy purchase agreements were entered
into before the concept of Green Tags existed. As a result , those agreements are silent
with respect to the issue of ownership of any environmental attributes associated with the
energy produced from renewable energy resources. However, the Commission has
historically required its jurisdictional electric utilities to enter into long-term , levelized , fixed
rate contracts with QFs. Twenty to thirty-five year contracts are the norm. The length of
term and the use of levelization have been, and continue to be , contract features that
surrounding states do not require of their jurisdictional utilities. These contract features
bestow real financial value on QF developers in Idaho.
By receiving these long-term , fixed-rate contracts, the QFs receive the benefit
of the backing of Idaho Power's favorable credit rating when the QFs seek financing for
their projects. Thus, the QF developers have and will continue to receive value from Idaho
Power for the electricity the QFs generate beyond the purchase price of the energy. QFs
have benefited and will continue to benefit by contracting, on a long-term, fixed rate basis
with a credit worthy entity, Idaho Power.
B. Alternatively, Green Tags Represent Value To The Renewable
Energy Power Producers.
Green Tags have been created in recent years by state programs typically
designed to promote increased reliance on renewable energy resources. These state
programs usually are premised on promoting policy goals such as improved air and water
quality, broader fuel diversity, enhanced energy security and hedging against the price
volatility of fossil fuels.
Green Tags, QFs contend , operate as an incentive for the production of
energy from renewable resources. Renewable energy power producers maintain that the
power purchase price that the utility pays under a contract merely compensates the QF for
PETITION FOR A DECLARATORY ORDER - 5
the energy and capacity produced by that facility and not for the environmental externalities
associated with QF generation. The QF developers assert that the ability to sell the Green
Tags associated with the generation of energy from renewable resources compensates
them for the facility s environmental attributes and rewards the extraordinary risks
associated with the investment in and the design and operation of a renewable energy
resource plant.
Further, they claim that allowing QFs , rather than the utilities , to trade the
Green Tags associated with a renewable facility will facilitate the development of liquid and
efficient markets of Green Tags which will , in turn, create incentives for the development
and use of renewable energy resources for the generation of power. Thus , the QFs
maintain, the Green Tags should remain the property of the QF developers.
IDAHO POWER'S RECOMMENDATION
Despite Idaho Power s interest in owning the Green Tags, the Company
acknowledges that retention of those Tags by the QF developers may encourage the
development of additional green energy resources in Idaho without the need to increase
energy purchase prices. Given the heightened public interest in the development of new
renewable resources, Idaho Power respectfully recommends that the Commission
determine that developers of such generation facilities receive full ownership rights in any
Green Tags issued to them conditioned upon the requirement that the QF developers who
qualify for Green Tags and from whom Idaho Power purchases energy grant the Company
a right of first refusal to purchase those Tags.
By assigning the value of the Green Tags to the QF developers , additional
opportunities may be provided in the State for a broad spectrum of renewable generation
without additional cost to the Company s customers. At the same time , by requiring the QF
developers from whom Idaho Power purchases electrical energy to grant Idaho Power a
PETITION FOR A DECLARATORY ORDER - 6
right of first refusal to purchase any Green Tags issued to them , Idaho Power can
purchase those Tags from the developers when the Company deems it in the interest of
the utility and its customers to do so.
SERVICE OF DOCUMENTS
Service of pleadings, exhibits, orders and other documents relating to this
proceeding should be served on the following:
Monica B. Moen , Attorney II
Barton L. Kline, Senior Attorney
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Randy Allphin , Contract Administrator
Power Supply Planning
Idaho Power Company
O. Box 70
Boise, Idaho 83707
CONCLUSION
NOW WHEREFORE, based on the foregoing, Idaho Power Company hereby
requests that the Commission issue its Order declaring that ownership of any Green Tags
issued to the developers of energy produced from renewable resources be vested in those
developers conditioned upon the requirement that the QF developers from whom the
Company purchases energy grant to Idaho Power a right of first refusal to purchase said
Tags.
Idaho Power Company does not believe that an evidentiary hearing is
necessary to consider the issues presented by this Petition and requests that the matter be
processed under modified procedure.
Respectfully submitted this 5th day of February 2004.
MONICA B. MOEN
Attorney for Idaho Power Company
PETITION FOR A DECLARATORY ORDER - 7