20040415Reply Comments of Renewable Energy of ID.pdf

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Peter Richardson
Richardson & O'Leary PLLC
99 East State Street, Suite 200
O. Box 1849
Eagle, Idaho 83616
Telephone: [phone]
Fax: [phone]
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Attorneys for Renewable Energy of Idaho, Inc.
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TIER OF THE APPLICATION OF )IDAHO POWER COMPANY FOR
APPROVAL OF AN AGREMENT FOR SALE
AND PURCHASE OF ELECTRIC ENEGTY
BETWEEN IDAHO POWER COMPANY AND)
RENEWABLE NERGY OF IDAHO INC.
CASE NO. IPC-04-
REPLY COMMENTS OF
RENEWABLE ENERGY OF IDAHO
INC.
COMES NOW Renewable Energy of Idaho, Inc. (Renewable Energy), by and through
its attorney of record, Peter J. Richardson, and in response to the Comments of the Commission
Staff dated April 6, 2004, and submits the following Reply Comments:
Renewable Energy understands Staffs concerns relative to Idaho Power s decision not to
utilize the AURORA model in evaluating the reasonableness of the rates it offered Renewable
Energy for the output of its QF project. However, it appears that there is an ambiguity in
whether the Settlement Stipulation referenced in Staff's comments is still applicable. Based on
Staff's comments it appears that Idaho Power Company does not believe the settlement
stipulation is still applicable given the many dramatic changes in both Idaho Power s resource
Renewable Energy s Reply Comments
position and the electric markets in general. For example, in its Order approving the Stipulation
that calls for the use of the AURORA Model this Commission observed:
Significant changes have swept through the electric industry since
we last examined the issue of contract length. The FERC has
mandated open access to the transmission system, thermal
technologies have improved gas prices are low, there is a
considerable surplus of energy available in this region resulting in
very low spot market prices for electricity and, finally, even the
continued existence of PURP A is being called into question.
Order No. 26576 at page 6, emphasis provided.
Significant changes" appear to be more the norm than the exception in the electric
industry. It seems that the electric industry has completely turned around since September 1996
when the Commission issued the above quoted order reducing the mandated contract period from
twenty years to five years. Now the region is in deficit, and Idaho Power in particular is
scrambling to acquire resources, particularly in the treasure valley. Idaho Power s apparent
belief that Order No. 26576 is no longer applicable is reasonable in light of the dramatic changes
the market has endured over the past two years. In addition, Idaho Power s belief that the
settlement agreement and Order No. 26576 were unique to the situation at the time (one
megawatt threshold and five year contract term) was justifiable and reasonable.
Order No. 26576 clearly has an inherent ambiguity - that is, whether it is applicable to
the unique circumstances surrounding the creation of that Order or whether it is applicable in
today s radically different electric markets. Unfortunately for Renewable Energy, the
disagreement between Staff and Idaho Power caused by that ambiguity has caused Renewable
Energy to be caught in the cross-fire between the well intentioned Staff and Idaho Power
Company. Renewable Energy and Idaho Power have been in negotiations over the rates and
terms contained in the Agreement before the Commission for over seven months at a cost of
Renewable Energy s Reply Comments
many thousands of dollars to Renewable Energy. Many concessions were made on Renewable
Energy s part to expedite the process. In fact, there are provisions in the agreement that
Renewable Energy s counsel objects to, but Renewable Energy choose to live with those
provisions in order to avoid delay caused by seeking Commission guidance on those contract
provisions. The reason for Renewable Energy s acquiescence is that time is critically important.
As the Commission knows, this is a wood waste burning facility on which the United States
Forest Service and Bureau of Land Management are relying to dispose of surplus waste forest
materials created as a result of Congress' Healthy Forest mandate. Delay in the on line date for
this facility could jeopardize the project's viability. Site preparation work has already
commenced. Renewable Energy urges the Commission to approve this agreement based on the
good faith efforts of both Idaho Power and Renewable Energy. Ifthe Commission believes the
AURORA model and process adopted in Order No. 26576 remains applicable, it should declare
it to be applicable for future contracts and not apply it retroactively to Renewable Energy
agreement with Idaho Power.
Renewable Energy has secured sufficient fuel to operate this project at the 17 MW level.
There are no physical or operational constraints that require Renewable Energy to locate all 17
MW of production at a single location. There are economies captured by Renewable Energy by
using a single location for its project. Those economies are what permitted Renewable Energy to
accept rates that are actually LOWER that the published avoided cost rates. In order to keep the
project viable and avoid the months of delay that will ensue while Idaho Power compiles the data
necessary to revive the AURORA model, Renewable Energy is now actively seeking a second
site to begin construction of two separate QF projects. One ten megawatt project would be
located at the old Boise Cascade Mill site in Emmett. A second, somewhat smaller QF, would be
Renewable Energy s Reply Comments
located at a new location. The result is that Renewable Energy will suffer from lost economies
caused by consuming its fuel source at two different sites, the ratepayers will suffer from paying
more for the power than they otherwise would have, and Idaho Power sufferes because it loses
the benefit of being able to add additional resources targeted at their Summer peak. Attached
for the Commission s information, at Appendix A is a spread sheet showing the additional cost t
the ratepayers of forcing Renewable Energy to split this project into two separate QFs.
A unique and very beneficial feature of this agreement is that Renewable Energy has
agreed to only operate in Seasons Two and Three which are the seasons Idaho Power is most in
need of power in the Treasure Valley. Renewable and Idaho Power have worked hard to craft an
agreement that provides benefits to Idaho Power and its ratepayers.
CONCLUSION
Renewable Energy appreciates Staffs concerns. Staff has a difficult job to do and must
fulfill its mandate to insure that the utilities operating under the Commission s jurisdiction do so
in full compliance with all of the Commissions rules and regulations. It is Renewable Energy
hope, however, that this Commission look to the spirit and intent of those orders as well. Staff
noted in their comments that
, "
The contract prices developed by Idaho Power are not necessarily
unreasonable." Given the fact that Renewable Energy is able to actually seek two separate
agreements and therefore legally increase the contract prices to full avoided cost rates seems to
make the contract prices per se reasonable.
With all due respect to the Commission s Staff, Renewable Energy urges this
Commission to exercise its discretion and approve the Contract before it. Should the
Commission determine that additional clarification of its prior orders is called for, then that
Renewable Energy s Reply Comments
process may proceed - but without putting Renewable Energy in the center of a dispute, not of
its making, between Staff and the Idaho Power Company.
DATED this day of April, 2004.
Renewable Energy s Reply Comments
Richardson & O'Leary P.L.L.C.
By dB
Peter Richardson
Attorneys for Renewable Energy of
Idaho, Inc.
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 14th day of April 2004 I caused a true and
correct copy of the REPLY COMMENTS OF RENEWABLE ENERGY OF IDAHO, INC.
to be served by the method indicated below, and addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 West Washington Street
Post Office Box 83720
Boise, Idaho 83720-0074
( ) U.S. Mail, Postage Prepaid
(x) Hand Delivered
( )
Overnight Mail
( )
Facsimile
( ) Electronic Mail
Scott Woodbury
Idaho Public Utilities Commission
472 West Washington Street
Post Office Box 83720
Boise, Idaho 83720-0074
( ) U.S. Mail, Postage Prepaid
(x) Hand Delivered
( )
Overnight Mail
( ) Facsimile
( ) Electronic Mail
Barton L. Kline
Idaho Power Company
Post Office Box
Boise, Idaho 83707-0070
(x) U.S. Mail, Postage Prepaid
( ) Hand Delivered
( )
Overnight Mail
( )
Facsimile
( ) Electronic Mail
Signed rJ~Ovx1\~
Nina M. Curtis
CLEAR TALK
CERTIFICATE OF SERVICE - 1