20040319Avista Comments.pdf

R. Blair Strong
Paine, Hamblen, Coffin
Brooke & Miller LLP
717 West Sprague Avenue, Suite 1200
Spokane, WA 99201-3505
Telephone: [phone]
Facsimile: [phone]
Attorneys for A vista Corporation
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION u;'
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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-04-
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COMMENTS OF A VISTA
CORPORATION
Idaho Power Company petitioned the Idaho Public Utilities Commission on
February 5 , 2004, to issue an order determining ownership of marketable environmental
attributes ("Renewable Energy Credits II or "RECs ) associated with PURP A generating
facilities ("QF'
),
when Idaho Power enters into long-term fixed rate contracts to
purchase the energy produced by QFs. The Commission on February 20, 2004, invited
written comments or protests with respect to the petition. Avista Corporation ("Avista
respectfully submits the following comments.
I. INTRODUCTION
Idaho Power Company s petition seeks an order applicable to those situations
when Idaho Power enters into long-term, fixed-rate contracts with a QFs. Neither Idaho
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Power s petition, nor the notice issued by the Commission, expressly suggest that any
order issued by the Commission should apply to any company providing electric utility
service in Idaho other than Idaho Power. However, A vista is concerned that any order
issued herein will be precedent with respect to other companies. Therefore, A vista
submits these comments to recommend that the order requested by Idaho Power should
expressly not apply to Avista Corporation. In the alternative, if the Commission deems it
necessary to formulate a policy statement on this issue that is applicable to all regulated
electric utility companies in Idaho, the Commission should declare that ownership of
RECs associated with renewable resources will be vested or conveyed to the purchasing
utility company as a condition of a QF receiving a contract from the purchasing utility
company at Commission determined and published avoided cost rates.
II. COMMENTS
Avista Corporation agrees with Idaho Power that QFs located in Idaho receive a
benefit and incentive when they contract to sell to a utility at a long-term, fixed-rate
contract. The QF developers receive the benefit of the utility s credit standing, and the
likely certainty of a steady continued cash flow over a long period of time. However
A vista submits that ownership of RECs should remain with the purchasing utility
company when the utility company is compelled to purchase power from the QF pursuant
to Commission determined and published avoided cost rate schedules.
The foundation principle of PURP A as implemented in Idaho is that the power
that a utility purchases at avoided cost rates from QF projects is intended to displace
power from resources that the utility otherwise would have had to construct or purchase.
The utility s customers are intended to be indifferent from a cost standpoint as to whether
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the power supplied to them originates from a QF purchase or a utility owned resource.
Therefore, if a utility company purchases power at published avoided cost rates from a
, then the utility and its customers should incur no more costs, and receive no less
economic benefit than had the utility owned the generating unit and operated it for its
customers.
Unforeseen revenues associated with generating units that supply retail electric
customers generally accrue to the benefit of retail customers through the regulated rate
structure. In this respect, revenues from RECs are like unexpected revenues derived from
sales of electric power that are surplus to retail requirements. These revenues ultimately
flow through to the benefit of the retail customers. The benefits of RECs associated with
utility owned resources will also flow through to the benefit of retail customers.
Monetary benefits of RECs associated with power sold by QFs at Commission
determined avoided costs rates should similarly flow through to the benefit of retail
customers.
Although the exact nature of RECs is yet to be determined in the State of Idaho
their value will likely be proportional to generation output of the renewable resource
facilities. A purchasing utility normally expects to acquire all of the attributes and value
of the output that it purchases from a QF pursuant to a published avoided cost rate. As an
example, although reactive power ("V ARS ) is seldom assigned a separate economic
value or separately measured, reactive power is an attribute of the QF that the Company
acquires as an incident of the power purchase and sale. If the utility does not acquire all
the value of the QF output pursuant to published avoided cost rates, then there is not an
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equivalence of value between a QF project and a comparably sized utility owned
resource.
QFs of a certain size are automatically entitled to sell their output to regulated
utility companies at Commission determined avoided cost rates.However, utility
customers should not pay more, or receive less value, from the output of these
projects than they would from utility owned resources. Utility customers will receive less
value from QF purchases if the monetary benefit of RECs is assigned to the project
developer instead of flowing with the power to the benefit of utility customers..
The wholesale market for RECs is not nearly as liquid at this time as is the
wholesale market for electricity. However, one may speculate that the value of RECs
may increase significantly concurrent with societal concerns about global warming. If
there is a significant and unexpected increase in the wholesale market value of RECs
then the utility s rate payers should receive the benefits of the increase, just as they will
benefit from RECs associated with utility owned resources. Although a QF developer
who retains RECs may be unexpectedly advantaged by an increase in their value, the
corresponding disadvantage is that utility customers will not have benefited from the
same unexpected increase in value of RECs associated with utility owned resources that
might have been developed, but for the QF acquisition.It is consistent with the
principles of PURP A that the monetized value of renewable resource development of
QFs be retained by the utility customers, in the same manner that the customers would
benefit from the monetized value ofRECs associated with utility generation.
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Finally, QF development will not be significantly deterred if REC's are retained
by utilities that purchase power from QFs at published avoided cost rates. QFs are not
precluding from taking their electricity output and RECs to the wholesale markets, if they
perceive that the wholesale markets offer greater rewards than they will receive at
Commission determined avoided cost rates. If QF developers believe that they will earn
more profit on the unregulated whole sale market, they will always have the option of
selling their project output there, because there is no requirement that they offer their
project output to any particular buyer. On the other hand, the utility customers will
always bear the costs associated with mandated purchases from QFs at Commission
determined avoided cost rates, because utilities are required to offer to purchase such
output. The utility and its customers should receive the monetary benefits of RECs
associated with mandated QF purchases, when the utility has no discretion to negotiate
the purchase rates.
The monetary value of RECs are not preserved to the utility and its customers, if
the QF developer retains ownership of the RECs, even if the QF developer assigns a right
of first refusal to the utility. The utility and its customers should be able to benefit from
any increase in the value over time of RECs, irrespective of whether the RECs are
associated with utility owned generation, or are acquired by purchase from a QF at
published avoided cost rates.
III. SERVICE OF FURTHER PLEADINGS
Service of further pleadings, and other documents relating to this proceeding
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should be served upon the following:
H. Douglas Young
A vista Corporation
O. Box 3727
Spokane, W A 99220-3727
Telephone: [phone]
Facsimile: [phone]
E-mail: doug.young(illavistacorp.com
and
R. Blair Strong
Paine, Hamblen, Coffin, Brooke & Miller LLP
717 West Sprague Avenue, Suite 1200
Spokane, WA 99201-3505
Telephone: [phone]
Facsimile: [phone]
E-mail: rbstrong(illpainehamblen.com
IV. CONCLUSION
Avista Corporation respectfully requests that the order requested by Idaho Power
ifit is issued by the Commission, be limited in effect to Idaho Power.
In the alternative, if the Commission deems it necessary to make a general policy
statement that is applicable by implication or precedent to Avista Corporation, then
A vista recommends that the Commission issue an order declaring that as a precondition
for a QF to be entitled to sell power at published avoided cost rates to regulated utility
companies in Idaho, the QF shall agree that the purchasing utility company shall be
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deemed to be the owner ofRECs from the QF.
RESPECTFULLY SUBMITTED this day of March, 2004.
Paine, Hamblen, Coffin, Brooke & Miller LLP
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By:
R. Blair Strong
Attorneys for A vista Corporation "
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 18th day of March, 2004 I caused to be served
a true and correct copy of the foregoing by the method indicated below, and addressed to
the following:
Ms. Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83720-0074
Randy C. Allphin
Contract Administrator
Idaho Power Company
O. Box 70
Boise, ID 83707-0070
u.S. Mail
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Barton L. Kline
Monica B. Moen
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise, ID 83707-0070
Scott Woodbury, Esquire
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83720-0074
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R. BLAIR STRONG
00167529
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