20040319Exergy Corp. Comments.pdf

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James T. Carkulis
Exergy Development Group LLC
PO Box 5212
Helena, MT 59601
[phone]
(406) 4490294 fax
mtli~in-tch.com
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UTiLi! IES COr1i ISSION
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A PETITION FILED BY
IDAHO POWER COMPANY FORAN ORDER
DETERMINING OWNERSHIP OF THE
ENVIRONMENTAL ATTRIBUTES
ASSOCIATED WITH A QUALIFYING FACILITY )
UPON PURCHASE BY A UTILITY OF THE
ENERGY PRODUCED BY A QUALIFYING
FACTILITY
CASE NO. IPC-04-
COMMENTS OF THE EXERGY
CORPORATION
In response to the Notice of Modified Procedure issued in the above captioned matter
the Energy Development Group, a Montana LLC, hereby submits the following comments:
The question before the Commission is simple in its structure, yet slightly more
sophisticated in its fundamental nature. The Environmental Attribute rEA) commonly referred to
as Tradable Renewable Certificates (TRC) or Green Tags can be qualified, oftentimes
quantified, and possibly monetized. Attempts have been made to clarify where the EA lies, with
the generator, the utility, or even the end customer of the energy/capacity product. One may
opine on where the EA lies under a renewable resource generation scenario, but regardless of
assorted published suggestions reflecting guidance on the issue, one ruling should be the
contemporaneous authority on the subject: The October 1 st, 2003 , ruling by FERC (Docket No.
EL03-133-00) dominates in elucidation. This Order clearly indicates where and under what
circumstances state authority for ascertaining ownership of Environmental Attributes embedded
in renewable programs exists. Under the tenets incorporated into PURPA, whereby the utility is
required to purchase energy and capacity only, the EA is not part of the protocol. Furthermore
from our review, no Idaho enabling statute exists for a decision on the question of ownership of
an EA by the Idaho Public Utility Commission.
With all due respect to this regulatory body, without a specific legislative , regulatory, or
legal provision in the Idaho Code or in the Idaho Administrative Rules, there appears to be no
legal mechanism to authorize this body to create new law. Absent of those provisions, without
an existing statute to interpret, a directive from the state legislature or superceded by Federal
mandate, the IPUC cannot implement a decision deleterious to either the generator, the utility,
or contrary to FERC and PURPA. Therefore, the FERC ruling is unambiguous and clear in its
direction: Where no state initiated mandatory guidelines are evident, the EA remains with the
generator.
But the question of whether law exists should be moot regardless. Such a law is
inappropriate based on the single fact the generator bears the risk of compliance rwhich is born
in capital cost and schedule when negotiating the energy sales agreement), therefore, the
generator should also have the benefit of environmental attributes. The generator is solely
responsible to mitigate pollution consequences , not the customer or utility, and all the liabilities
or attributes of that generation lie with the generator.
Indeed , it may be argued if a renewable resource generator is required to relinquish the
Environmental Attributes to the customer of the product, foreseen as possibly offsetting the cost
of energy for the consumer, then the opposite should also hold true. Emissions, other pollutants
and societal impacts from fossil fuel, hydro, or nuclear generation, including, but not limited to
QF co-generation, purchased by the customer should carry with it the inherent liabilities and
extra costs associated with this energy and capacity. These liabilities are rapidly becoming
monetized under emission SOx trading, the recently created Carbon trading floor in Chicago
and the Kyoto Protocol. Given these developments, should not the end customer subsidize the
utility and generator for these liabilities under a quid pro quo resulting in a potential disincentive
to the end product customer? Obviously, this has not, nor will occur in the real world of least-
cost, rate-based structuring. Still, if the customer is willing to accept the monetized value of
those consequences and is willing to pay additionally into the rate base , then we would submit
the EA may possibly be ascribed to the consumer.
The inception of the Tradable Renewable Certificates or Green Tags derived from the
Environmental Attributes was designed towards proliferation of renewable generation sources.
The rationale was to provide to the generator an additional source of income from the potential
offset of fossil-fuel emissions and other environmentally sensitive generators. Since renewable
generation carries a disproportionately larger installed cost with no ability to pass through fuel
risk, any additional inducement results in expanded opportunities to increase the amount of
renewable resources.
The decision behind the avoided cost rate for a Qualifying Facility (QF) in Idaho is based
on a natural gas-fired generator. There is no Environmental Attribute associated with this
baseline generator, only Capacity and Energy. They alone are the basis for the avoided cost
rate mandated by the IPUC for QFs that generate 10 000 kW or less in anyone hour. No EA is
associated with this mandate. Equally as important, not all QFs are necessarily renewable
energy based resources. Therefore, not all QFs in the ::;10 MW category can even demonstrate
an EA.
But there is a more germane argument to be voiced under the concept of Integrated
Resource Planning. Even if the EA is "stripped" from the renewable resource generation , there
still is no rational nexus which purports the generating source to be anything other than
nonpolluting. A renewable resource generator stripped of the EA, is still a nonpolluting generator
resource and displacing fueled or hydro generation. No paper commodity will modify the
evolution of the electrons produced. Given this transparency, the EA need not be part and
parcel of any societal generation mix. The generator is nonpolluting and the potential to offset
existing facilities, new emission or social-impact generation is tangible.
When PURPA was created in 1978, it was demonstrated as essential to create an
environment of energy competition. Today, that philosophy is compounded by additional
relevant factors making this judicious pathway even more imperative. Smaller, distributed
generation can be realized to add security and bolster transmission grids, while mitigating new
infrastructure upgrades. Software and new technology make integration of small generating
resources a seamless product for the utility. Demands for innovative , clean energy resources
reverberate as societal values. This said, the primary drawbacks for new, smaller generator
resources remain the disproportionably high initial capital cost and the inability to amortize those
costs proportionally against the life cycle of the facility. Enabling the generator to maximize any
potential return on investment, given the regimented structure employed under the auspices of
the IPUC for small QF, should be encouraged.
PURPA is still the rule , FERC is still the interpreter absent state jurisdiction, and PURPA
is explicit in the mission for utilities and regulatory agencies: To assist and provide the
necessary incentives for small, renewable generation to flourish. An EA, whether monetized or
not, is separate from the energy and capacity of the generation source as tendered by both
FERC and the IPUC.
Until such time the state of Idaho decides to enact legislation essentially forcing PURPA
projects to r1) relinquish the EA to the ratepayer or utility, r2) creating a renewable portfolio
standard or r3) implementing another such mandate for renewable resource generation
requirements into the Integrated Resource Plan of the utilities serving the Idaho customer (and
the energy sales price reflects this requirement), the irrefutable answer to the question posed is
the EA remains with the generator, unless otherwise mutually agreed upon between generator
and purchaser.
Thank you for allowing us to comment on the noted petition.
i~/.
DATED this I g day of March, 2004.
Exergy Development Group, LLC