20060417Additional comments.pdf

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CECELIA A. GASSNER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6977
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
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
ADDITIONAL COMMENTS
OF THE COMMISSION STAFF
CASE NO. IPC-O6-
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through
its Attorney of record, Cecelia A. Gassner, Deputy Attorney General, and responds to the Reply
Comments submitted by Idaho Power Company in this matter on April 3, 2006.
BACKGROUND
On January 26, 2006, Idaho Power Company submitted for the Commission
approval an Energy Sales Agreement for the sale and purchase of electric energy between
Company and Co-Gen Co, LLC (Co-Gen). Co-Gen owns, operates and maintains a 10 MW
nameplate capability wood waste (biomass) generation unit that is located adj acent to the Prairie
Wood Products Mill in Prairie City, Oregon. The facility is approximately 100 miles west of
Ontario, Oregon. The facility is located in the service area of the Oregon Trails Electric
Cooperative (OTEC) and in Idaho Power s electrical control area. Generation from the facility is
delivered to Idaho Power over the transmission lines of OTEC and the Bonneville Power
Administration.
ADDITIONAL STAFF COMMENTS APRIL 17, 2006
As represented, Co-Gen is a qualified small power production facility (QF) under the
applicable provisions of the Public Utility Regulatory Policies Act of 1978 (PURP A). In
accordance with PURP A, the Public Utility Commission of Oregon (OPUC) is the state
regulatory agency with jurisdiction to implement PURP A in the state of Oregon and to determine
Idaho Power s avoided costs in Oregon.
On December 29, 2005 , Idaho Power and Co-Gen entered into an Energy Sales
Agreement in conformance with the rates, terms and conditions established by the OPUc. Under
the terms ofthe Agreement, Co-Gen elected to contract with Idaho Power for a one-year term
commencing January 1 , 2006. Co-Gen further elected to receive payments from the Company
computed in accordance with the Gas Market Method (Option 3) set out in Idaho Power
Oregon Tariff No. E-85 dated August 11 , 2005. Under Option 3 the rates paid to Co-Gen are
based upon the average monthly spot prices of natural gas at Sumas. Reply Comments at 3.
Idaho Power requests an Order from the Commission declaring that all payments
made under the Agreement shall be allowed as prudently incurred expenses for ratemaking
purposes.
II.
Idaho Power filed its Reply Comments to the Staffs Comments on April 3 , 2006.
ADDITIONAL COMMENTS
The Staff's Recommendation Does Not Preclude Company s Recovery of its
Costs for the Purchase of Energy from Co-Gen.
In its previously filed comments the Staff recommended that the amount recovered
by the Company from Idaho ratepayers not exceed the amount that would be paid if this were an
Agreement within the jurisdiction of the Idaho Commission and subject to the avoided cost rates
from Order No. 29646 (currently 51.50 mills per kilowatt-hour). Staff observed that the spot
market pricing of Option 3 differs considerably from the Idaho avoided costs methodology. In
its Reply Comments, the Company speculates that the purchase prices it will pay to Co-Gen will
exceed this amount. Further, the Company asserts that the Staffs recommendation "may result"
in the Company s inability to recover all of its costs in violation of PURP A. Reply Comments at
4. The Staff respectfully disagrees with the Company s supposition.
Staff agrees that PURP A authorizes each state to determine its own avoided cost
rates. However, PURPA does not mandate that a state recognize another state s rates for
recovery within its jurisdiction. In addition, the Federal Energy Regulatory Commission (FERC)
ADDITIONAL STAFF COMMENTS APRIL 17, 2006
has recognized that states may set their own rates for QF-generated energy but also does not
require a state to adopt the rates of another state.
Idaho Power is in no way stymied in its path to full cost recovery. Indeed, the avenue
for such recovery is wide open - it may seek recovery of the costs from Oregon. The OPUC has
approved of the Gas Market Method to set rates, and Idaho Power is entitled to seek recovery of
any costs not approved in Idaho from the OPUC when it files its next rate case.
In fact, the Staff already noted in its original comments that "Staff recommends that
the Commission reserve the right to adjust the amount allowed for recovery in Idaho if the
OPUC ultimately does not approve the contract in Idaho Power s next general rate case in
Oregon.The Staff recognizes that Oregon, though unlikely do so, may balk at allowing
recovery of its own imposed rates. As a matter of first principle, however, the Staff believes that
Idaho ratepayers should not bear the burden or risk of reimbursing the Company for a rate
methodology established by another jurisdiction.
The Doctrine of Comity is Inapplicable to the Instant Matter.
Despite the Company s assertion that Idaho should apply the doctrine of comity and
respect Oregon s PURPA rate mechanism, it is inapplicable to this matter. As noted, PURPA
authorizes each state to implement its own avoided cost rates and is achingly silent as to
requiring a state to consider the rates that another state has implemented.
Comity has not routinely been applied in PURP A-related matters. This Commission
has seen other states reject the application of Idaho avoided cost rates within their own
jurisdictions and has first-hand experience to demonstrate that the doctrine of comity is generally
not considered in such discussions. Moreover, Idaho Power recognizes that the OPUC has
primary jurisdiction over the Oregon PURP A agreement and Oregon avoided costs. Nothing
compels the Idaho Commission to approve the subject agreement.
The Staff is Not Declaring the Oregon Tariff to be Either Imprudent or
Unreasonable.
The Staff has not stated nor does it now assert that the Oregon Gas Market Method
(Option 3) is either imprudent or unreasonable. It has not and does not state that the rates are
exorbitant and that Idaho Power should not be able to recover its avoided costs. Instead, the
ADDITIONAL STAFF COMMENTS APRIL 17, 2006
Staff recommends that the Commission recognize the PURP A methodology implemented by
Idaho and limit Idaho recovery to Idaho s avoided costs. Indeed, it would be difficult for the
Staff to conclude that the rates were imprudent or unreasonable as the QF chose the Gas Market
Method approved by Oregon, which pegs the price paid to the QF upon the price of natural gas at
Sumas. With the state of current gas markets, the Staff is not in a position to judge or predict the
rates, and the Company s attempt to imply that the Staff is doing so is unavailing.
Conclusion.
The Staff continues to recommend that the Agreement be approved. Considering the
limited scope, term and impact of this particular contract, the Commission might approve the
Agreement without the proposed cap on the recovery of the costs, provided that such a decision
is limited to this agreement based upon the facts of this case alone. Approval of this Agreement
should not guarantee the future treatment of any other energy sales agreements with QFs that the
Company may enter into in another jurisdiction.
IY'
Respectfully submitted this It day of April 2006.
cecetJt.~
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:comments/ipceO602 cg additional.doc
ADDITIONAL STAFF COMMENTS APRIL 17, 2006
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS
TH DAY APRIL 2006 SERVED
THE FOREGOING ADDITIONAL COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
MONICA MOEN
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
RANDY ALLPHIN
CONTRACT ADMINISTRATOR
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
~WLill.
SECRETARY
CERTIFICATE OF SERVICE