20060531final_order_no_30059.pdf

Office of the Secretary
Service Date
May 30, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF AN ENERGY SALES
AGREEMENT FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
BETWEEN IDAHO POWER COMPANY
AND CO-GEN CO, LLC
ORDER NO. 30059
CASE NO. IPC-06-
On January 26, 2006, Idaho Power Company ("Idaho Power" or "Company ) filed
an Application with the Idaho Public Utilities Commission requesting a declaration that all
payments for purchases of energy under an Energy Sales Agreement (the "Agreement") between
Idaho Power and Co-Gen Co, LLC ("Seller ) dated December 29 2005 be allowed as prudently
incurred expenses for ratemaking purposes.
BACKGROUND
According to the Application, Seller owns, operates and maintains a 10 MW
nameplate capacity wood waste (biomass) generation unit that is located adjacent to the Prairie
Wood Products Mill in Prairie City, Oregon (the "Facility ). The Facility is a qualified small
power production facility under the applicable provisions of the Public Utility Regulatory
Policies Act of 1978 (PURP A).
Under the terms of the Agreement, Seller has elected to enter into the Agreement
with Idaho Power for a one-year term. Seller further elected to receive payments from the
Company computed in accordance with the Gas Market Method set out in the Company
Oregon Tariff No. E-, Schedule 85 , dated August 11 , 2005 or its successor schedule as
approved by the Oregon Public Utility Commission, as shown on Exhibits 1 and 2 to the
Application. In essence, Idaho Power seeks approval of the payments made under an agreement
for an Oregon-sited facility using an Oregon agreement, an Oregon cost methodology, with
delivery of the energy in Oregon.
On February 8 , 2006, the Commission issued Notices of Application and Modified
Procedure in this case. The deadline for filing written comments was March 1 , 2006, and Staff
was the only entity to file comments. The Company filed reply comments on April 3, 2006, and
the Staff filed additional comments on April 17, 2006.
ORDER NO. 30059
THE COMMENTS
The Staff stated that most of the terms and conditions of the Agreement are nearly
identical to those that are typically contained in agreements for projects located in Idaho and
subject to the jurisdiction of the Commission. However, there are a few differences, primarily
associated with rates. One of the primary differences between Idaho Power QF contracts in
Oregon and Idaho is that avoided cost rates are computed for on-peak and off-peak hours in
Oregon, while in Idaho there is no distinction between on-peak and off-peak generation.
Another difference is that the energy and capacity components of the avoided cost rate are
separately computed in Oregon. Under Oregon s Gas Market Method option the energy payment
component is based on monthly natural gas index prices.
Because of these differences, the Staff expressed concern that the rate to be paid for
purchases under the Agreement may be higher than the costs that would usually be paid in Idaho.
Staff recommended that the amount approved for recovery at this time in Idaho be equal to the
actual amounts paid under the contract and not to exceed the amounts that would be paid if this
were an Agreement subject to the avoided cost rates set forth in Appendix B to Order No. 29646
(Avoided Cost Rates for Non-Fueled Projects, one-year contract length, on-line year 2006).
The Company stated in its reply comments that Staff s recommendation may result in
the Company being unable to recover all of its expenses incurred under the Agreement. In its
additional comments, Staff stated its recommendation does not preclude the Company from full
recovery because the Company may seek recovery of expenses that exceed the Idaho avoided
cost rate from the Oregon Public Utility Commission.
COMMISSION FINDINGS
The Commission has reviewed the filings of record in Case No. IPC-06-
including the Agreement and filed comments. Idaho Power has presented an Energy Sales
Agreement with Seller and seeks recovery of payments made under the Agreement as prudently
incurred expenses. The Agreement is for a 10 MW biomass generation unit located in Prairie
City, Oregon.
As represented and pursuant to contract, under normal and/or average conditions the
project will not exceed 10 aMW on a monthly basis. We thus find that the project is a facility
entitled to recovery of payments of avoided cost rates.
ORDER NO. 30059
We find it reasonable to allow payments made under the Agreement in accordance
with the avoided cost rates published by this Commission as prudently incurred expenses for
ratemaking purposes. As part of the PCA review in the coming year, we direct the Staff to
examine how this project's costs compare to the Idaho avoided cost rates. The findings and
conclusions of this Order are limited to the facts of this Case No. IPC-06-2 and are not to be
considered as precedent for any other matter that may come in front of this Commission.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power, an electric
utility, pursuant to the authority and power granted it under Title 61 of the Idaho Code and
PURP A. The Commission has authority under PURP A and the implementing regulations of the
Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric utilities to
enter into fixed term obligations for the purchase of energy from qualified facilities and to
implement FERC rules.
ORDER
IT IS HEREBY ORDERED that the payments for purchases of energy under this
Energy Sales Agreement may be allowed, subject to the avoided cost rates published by this
Commission in Order No. 29646, as prudently incurred expenses for ratemaking purposes.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code ~ 61-
626.
ORDER NO. 30059
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 3(J
day of May 2006.
ARSHA H. SMITH, COMMISSIONER
ENNIS S. HANSEN, COMMISSIONER
ATTEST:
~L0Je D. Jewell.Co ission Secretary
O:IPC-06-cg2
ORDER NO. 30059