20040220Notice of Petition.pdf

Office of the Secretary
Service Date
February 20, 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A PETITION FILED BY CASE NO. IPC-O4-
IDAHO POWER COMPANY FOR AN ORDER
DETERMINING OWNERSHIP OF THE NOTICE OF PETITION FOR
ENVIRONMENTAL ATTRIBUTES DECLARATORY RULING
ASSOCIATED WITH A Q U ALIFYIN
FACILITY UPON PURCHASE BY A UTILITY NOTICE OF MODIFIED
OF THE ENERGY PRODUCED BY PROCEDURE
QUALIFYING FACILITY.
NOTICE OF COMMENT/
PROTEST DEADLINE
YOU ARE HEREBY NOTIFIED that on February 5, 2004, Idaho Power Company
(Idaho Power; Company) filed a Petition with the Idaho Public Utilities Commission
(Commission) requesting an Order determining ownership of the marketable "environmental
attributes"l associated with a PURP A qualifying facility (QF) when Idaho Power enters into a
long-term, fixed rate contract to purchase the energy produced by that QF. Reference IDAPA
31.01.01.101.
Background
In June 2003, the Federal Energy Regulatory Commission (FERC) received a
Petition for Declaratory Order from PURP A QFs seeking FERC interpretation of its avoided cost
rules under PURP A. Specifically, Petitioners sought an Order declaring that avoided cost
contracts entered into pursuant to PURP A, absent express provisions to the contrary, do not
inherently convey to the purchasing utility any renewable energy credits (RECs) or similar
tradable certificates. It was the contention of Petitioners that the power purchase price that the
utility pays under such a contract compensates a QF only for the energy and capacity produced
by that facility and not for any environmental attributes associated with the facility. Reference
FERC Docket EL03-133-000.
1 Idaho Power does not derIDe "environmental attributes." A good defmition is included in a white paper prepared
by the Energy Trust of Oregon Inc.Green Tag Ownership and Disposition (September 17, 2003). See attached
Appendix A"
NOTICE OF PETITION FOR DECLARATORY RULING
NOTICE OF MODIFIED PROCEDURE
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In an Order issued on October 1 , 2003 (105 FERC ~ 61 004), FERC granted the
Petitioners request for a declaratory order, to the extent that the petition asked the Commission to
declare that Commission s avoided cost regulations did not contemplate the existence of RECs
and that the avoided cost rates for capacity and energy sold under contracts entered into pursuant
to PURP A do not convey the RECs, in the absence of an expressed contractual provision.
FERC's Order made the following specific findings:
19. Section 210(a) of PURPA requires the Commission to prescribe rules
imposing on electric utilities the obligation to offer to purchase electric
energy from QFs. Under Section 21 O(b) of PURP A, such purchases must
be at rates that are: (1) just and reasonable to electric consumers and in
the public interest; (2) not discriminatory against QFs; and (3) not
excess of the incremental cost to the electric utility of alternative electric
energy. Section 21O( d) of PURP A, in turn, defines "incremental costs of
alternative electric energy" as "the cost to the electric utility of the
electric energy of which, but for the purchases from (the QFJ, such utility
would generate or purchase from another source.
20. The Commission implemented the purchase obligations set forth in
PURPA in Section 292.303 of its regulations, 18 CFR 9 292.303(a)
(2003), which provides:
Each electric utility shall purchase in accordance with Section 292.304
any energy and capacity which is made available from a qualifying
facility. . . .
Section 292.304, in turn, requires that rates for purchases shall: (1) be just
and reasonable to the electric customer of the electric utility and in the
public interest; and (2) not discriminate against qualifying cogeneration
and small power production facilities. 18 CFR 9 292.304(a)(1) (2003).
The regulation further provides that nothing in the regulation requires any
electric utility to pay more than the avoided costs for purchases. 18 CFR
9 292.304(a)(2) (2003). "Avoided costs" is derIDed as the "incremental
costs to an electric utility of electric energy or capacity or both which, but
for the purchase from the qualifying facility or qualifying facilities, such
utility would generate itself or purchase from another source." 18 CFR 9
292.101(b)(6) (2003).
21. Section 292.304 sets forth what factors are to be considered in
determining avoided costs. See 18 CFR 9 292.304(e) (2003). The
factors to be considered include:
(1) The utility's system cost data;
NOTICE OF PETITION FOR DECLARATORY RULING
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/ PROTEST DEADLINE
(2) The availability of capacity or energy from a QF during the
system daily and season peak periods;
(3) The relationship between the availability of energy or capacity
from the QF to the ability of the electric utility to avoid costs; and
(4) The costs or savings resulting from variations in line losses from
those that would have existed in the absence of purchases from
the QF.
22. Significantly, what factor is not mentioned in the Commission
regulations is the environmental attributes of the QF selling to the utility.
This is because avoided costs were intended to put the utility into the
same position when purchasing QF capacity and energy as if the utility
generated the energy itself or purchased the energy from another source.
In this regard, the avoided costs that a utility pays a QF does not depend
on the type ofQF, i., whether it is a fossil-fuel-cogeneration facility or a
renewable-energy small power production facility. The avoided costs
rates, in short, are not intended to compensate the QF for more than
capacity and energy.
23. As noted above, RECs are relative recent creations of the states. Seven
states have adopted renewable portfolio standards that use unbundled
RECs. What is relevant here is that the RECs are created by the states.
They exist outside the confines of PURP A. PURP A thus does not
address the ownership of RECs. The contracts for sales of QF capacity
and energy, entered into pursuant to PURP A, likewise do not control the
ownership of the RECs (absent an express provision in the contract).
States, in creating RECs, have the power to determine who owns the REC
in the initial instance, and how they may be sold and traded; it is not an
issue controlled by PURP A.
24. We thus grant Petitioners' Petition for Declaratory Order , to the extent
that they ask the Commission to declare that contracts for the sale of QF
capacity and energy entered into pursuant to PURP A do not convey
RECs to the purchasing utility (absent an express provision in a contract
to the contrary). While a state may decide that a sale of power at
wholesale automatically transfers ownership of the state-created RECs
that requirement must find its authority in state law, not PURP A.
NOTICE OF PETITION FOR DECLARATORY RULING
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/ PROTEST DEADLINE
Petition for Declaratory Ruling
Regional organizations, Idaho Power contends, exist to facilitate green energy
transactions from resources that have been certified as green energy compliant by those
organizations e., Bonneville Environmental Foundation (BEF). These entities issue tradable
green tags" to certified renewable energy producers. Green tags are also known as green
certificates, renewable energy credits (RECs) and tradable renewable certificates (TRCs).
green tag represents the environmental and other non-power attributes associated with
megawatt hour (MWh) of electricity generated from a renewable resource. Some of the QFs
from whom Idaho Power anticipates making purchases in the future, the Company contends
have indicated an intention to obtain marketable green tags as a result of entering into contracts
with Idaho Power. 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, the Company states that green tags are a currency that
can be traded to individuals and entities wishing to support "green" energy. Example: Idaho
Power Schedule 62 Green Energy Purchase Program (Case No. IPC-00-, Order
No. 28655).
Referencing the foregoing FERC Order, Idaho Power states that FERC suggested
that individual states may decide ownership of the green tags. As a result, the Company seeks
guidance from the Commission as to ownership of potentially marketable certificates in Idaho.
Idaho Power contends that 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 the QFs. That value, it asserts, is in addition to the avoided costs paid to the QFs for the
energy produced. Vesting the utility with some ownership interest in the green tags, it states
would remunerate the utility for the additional value conferred to the QFs. The QF position, the
Company represents, is that QF 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 with the facility'
environmental attributes and rewards the additional risks associated with the investment in and
the design and operation of a renewable energy resource plant.
NOTICE OF PETITION FOR DECLARATORY RULING
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/ PROTEST DEADLINE 4
In this Petition, Idaho Power Company requests a declaratory order from the
Commission clarifying ownership of these green tags. The "respective arguments" of the
Company and QFs are presented in the Company s Petition.
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 the 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.
YOU ARE FURTHER NOTIFIED that the Commission has reviewed the filings of
record in Case No. IPC-04-2. The Commission has preliminarily found that the public interest
in this matter may not require a hearing to consider the issues presented, and that the issues
raised by the Company s filing may be processed under Modified Procedure , by written
submission rather than by hearing. Reference Commission Rules of Procedure IDAP A
31.01.01.201-204.
YOU ARE FURTHER NOTIFIED that the deadline for fIling written comments or
protests with respect to Idaho Power s Petition and the use of Modified Procedure in Case
No. IPC-04-2 is Friday, March 19,2004.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the deadline, the Commission may consider the matter on its merits and enter its
Order without a formal hearing. If comments or protests are filed within the deadline, the
Commission will consider them and in its discretion may set the matter for hearing or may
decide the matter and issue its Order based on the written positions before it. Reference IDAPA
31.01.01.204.
YOU ARE FURTHER NOTIFIED that written comments concerning Case
No. IPC-04-2 should be mailed to the Commission and the Company at the addresses reflected
below.
NOTICE OF PETITION FOR DECLARATORY RULING
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/ PROTEST DEADLINE 5
COMMISSION SECRETARY
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
Street Address for Express Mail:
MONICA B. MOEN, ATTORNEY II
BARTON L. KLINE, SENIOR ATTORNEY
IDAHO POWER COMP ANY
PO BOX 70
BOISE ID 83707-0070
bkline~idahopower .com
mmoen~idahopower.com
472 W WASHINGTON ST
BOISE, ID 83702-5983 RANDY C. ALLPHIN, CONTRACT ADMIN.
POWER SUPPLY PLANNING
IDAHO POWER COMPANY
PO BOX 70
BOISE, ID 83707-0070
rallph in~j dahopower. com
Street Address for Express Mail
1221 WEST IDAHO STREET
BOISE, ID 83702
All comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.state.id.us. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to the Applicant at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set, the Commission will consider this matter on its merits and
enter its Order without a formal hearing. If written comments are received within the time limit
set, the Commission will consider them and, in its discretion, may set the same for formal
hearing
YOU ARE FURTHER NOTIFIED that the Application in Case No. IPC-04-2 may
be viewed at www.puc.state.id.by clicking on "File Room" and "Electric Cases " or can be
viewed during regular business hours at the Idaho Public Utilities Commission, 472
Washington Street, Boise, Idaho and at the general business office of Idaho Power Company,
1221 W Idaho Street, Boise, Idaho.
NOTICE OF PETITION FOR DECLARATORY RULING
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/ PROTEST DEADLINE
DATED at Boise, Idaho this
~ ~
day of February 2004.
~1DJe D. Jewell
Commission Secretary
Vld/N :lPCEO402 _sw2
NOTICE OF PETITION FOR DECLARA TORY RULING
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/ PROTEST DEADLINE