20050112Press Release.pdf

IDAHO PUBLIC UTILITIES COMMISSION
Case No. IPC-04-8, IPC-04-, Order No. 29682
January 11 , 2005
Contact: Gene Fadness [phone]
Web site: www.puc.idaho.2ov
Commission denies reconsideration request from small-power producers
BOISE - The Idaho Public Utilities Commission denied a request from wind and geothermal
power developers to reconsider a November order that establishes parameters for power
contracts between regulated utilities and small-power producers.
S. Geothermal, a 15-megawatt geothermal facility in Cassia County, and two wind power
developers, Bob Lewandowski, east of Boise, and Mark Schroeder, Bliss-Hagerman, said the
commission s November order included PURP A contract provisions never before used that
would discourage the development of renewable energy.
The energy crisis of the late 1970s prompted Congress to pass the Public Utility Regulatory
Policies Act, or PURP A. Its purpose is to encourage the promotion and development of
renewable energy technologies as alternatives to burning fossil fuels or the construction of new
power plants. PURP A requires large electric utilities like Idaho Power to buy electricity
generated by small-power producers who obtain Qualifying Facility status. The rate utilities must
pay qualifying facilities (QFs) is set by the state commission. The rate, sometimes called
avoided-cost rate, is to be equal to the cost the electric utility avoids if it would have had to
generate the power itself or purchase it from another source.
The small-power producers objected to an Idaho Power proposal to pay other than the commission-set
posted rates when the output from the developers ' projects is less than 90 percent or more than
110 percent ofprojected output. Idaho Power claimed that when output is less than 90 percent it
must find power from other sources that can be more expensive. When output is more than 110
percent, Idaho Power said it might have to sell the energy in the surplus market or reduce output
at a more economic generation plant.
In its November order, a 2-1 majority on the commission ruled that when developers deliver in
excess of 110 percent or below 90 percent ofprojected output that they be paid 85 percent of the
market rate or the PURP A contract rate, whichever is less, for that portion of the output above
the 110 percent or below 90 percent.
Developers said penalties should not be based on market price and said the commission
solution severely penalizes a developer if production is only one-tenth of 1 percent below the 90
percent target.
The commission said performance bands are necessary because both parties to a contract must
have reciprocal and enforceable obligations.
Ruling on the reconsideration request, the same 2-1 majority on the commission, said developer
fears that the performance band could lead to small-power producers actually owing regulated
utilities money are not correct. "Projects failing to produce at least 90 percent of their monthly
energy commitments are paid non-firm energy rates capped at the rate that would have otherwise
been paid under the contract " the commission said.
In her dissent last November, Commissioner Marsha Smith said the incentive for all small-power
producers is to provide all the power they can. "They need to be paid to stay in operation and if
they do not produce, they do not get paid. The banding proposal would operate as a penalty, not
an incentive " she said. On the reconsideration petition, Smith said she would have granted the
petitioners request for further hearings to explore the reasonableness of a performance band and
a market-based rate for surplus and shortfall energy.
While adopting the 90-110 performance band, the commission allowed developers more
opportunities to revise their output estimates, creating a greater likelihood of staying within the
performance band. The commission also lessened the severity of the financial penalties proposed
by Idaho Power in the event of a shortfall in energy output.
Documents related to this case can be accessed on the commission s Web site at
www.puc.idaho.gov. Click on "File Room " then "Electric Cases " and scroll down to Case No.
IPC-04-
END