20040315Comment.pdf

1509 Tyrell Lane, Suite B. Boise. ID 83706 Tel: [phone] Fax: [phone]
March 15, 2004
Idaho Public Utilities Commission
472 W. Washington
Boise, Idaho 83720
Re: Case No. IPC-04-2 : Ownership of Environmental Attributes
Dear Commissioners
I am writing in response to the Idaho Power request for summary judgment on the issue of the ownership
of environmental attributes ("Green Tags ) for QFs under PURP A contracts in Idaho. US Geothermal
strongly supports the recommendation made by Idaho Power that the QF developers own the Green Tags
associated with their facilities. It is clear than the natural gas fired SAR used as the basis to calculate the
avoided cost rate does not have green attributes, nor is the value of the Green Tags included in the
avoided cost rate calculation.
During a recent conversation, the Bonneville Environmental Foundation (BEF) estimated the current
wholesale value of Green Tags to be 0.4 to 0.6 mils per kw-, with BEF focusing on purchasing
primarily at the 0.6 mil level. By contrast, Idaho Power offers Green Tags, through it's retail Green
Power program (sourced through BEF), priced at 1.25 mils per kw-hr ($15 for 1200 kwhr). In short
Green Tags have significant value to the developer, and although they are typically not sold until the QF
is in operation, they can have an important economic impact on the viability of renewable projects.
US Geothermal does not agree with Idaho Power on their request for a "right of first refusal" (ROFR) on
the commercial rights to the Green Tags however. Clearly, since Idaho Power wants a ROFR, they
believe it has value, and as such, there should be a separate value returned to the developer for granting it.
For the reasons below, Idaho Power s petition to be granted the ROFR should be denied:
There is no "ownership" relationship between the utility and the developer. Why then should the
utility have a ROFR on any aspect of the developer s property?
The PURPA rate is carefully calculated as the cost of the utility operating a gas-fired plant. There
is no component in the SAR cost calculation for the value of the Green Tags. In fact a Green Tag
is calculated by comparing the emissions from the subject plant against the emissions from a gas-
fired plant. By definition, the SAR can neither produce nor capture a Green Tag value.
Similarly, there is no cost calculation in the SAR for the value of the "right of first refusal"
Green Tags were not created by PURP A nor by an Idaho state authority. They are traded
nationally and internationally and should not be regulated by the state.
The utility is free to negotiate the purchase of the Green Tags from the developer. US Geothermal
is more than willing to offer all or part of our Green Tags to an Idaho utility if they are interested
in buying them. We believe Green Tag sales from an Idaho based facility, rather than from an out-
of-state facility would be welcomed and strongly supported by Idaho consumers.
Granting a ROFR decreases the value of the Green Tags by discouraging other potential buyers
from bidding on the Green Tags in a true open market. With the ROFR, the utility can come in as
a spoiler after all other good-faith negotiations are completed. In fairness, if the utility wants the
Green Tags, they should have to invest the same effort in negotiations as any other purchaser.
Granting the utilities a ROFR would burden the QF and make it much more difficult to market the
Green Tags to third parties. This marketing complication is real and was confirmed to us by third-
party purchasers.
Administratively the proposed ROFR would be ambiguous and cumbersome. How exactly is the
ROFR defined and when can it be exercised? When the PURP A contract is first signed? Does it
mean after the 1 s1 sale of Green Tags has been negotiated in good-faith with another purchaser? If
the Green Tags are sold on an annual basis (a common practice), does the "right of first refusal"
give the utility that right each and every time that a new contract for the sale is readied? Is the
developer required to offer the utility the same terms and conditions? Does the utility have the
right to view a third party confidential contract to confirm that they have been offered the same
terms and conditions?
In summary, we respectfully ask that the PUC grant Idaho Power s request that Green Tag ownership be
vested with the QF developer, and that the PUC deny the request to grant a right of first refusal. Thank
you for the opportunity to comment on this critical issue.
Sincerely,
::Doug (jflajpe'f
Doug Glaspey
Chief Operating Officer