20071105Reply comments.pdf

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IDAHO
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An IDACORP Company
BARTON L. KLINE
Senior Attorney
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November 5 2007
Jean D. Jewell , Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise, Idaho 83720-0074
Re:Case No. IPC-07-
IN THE MATTER OF IDAHO POWER'S PETITION TO MODIFY THE
METHODOLOGY FOR DETERMINING FUEL COSTS USED TO
ESTABLISH PUBLISHED RATES FOR PURPA QUALIFYING
FACILITIES
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of Idaho
Power Company s Reply Comments for the above-referenced matter.
I would appreciate it if you would return a stamped copy of this transmittal
letter in the enclosed self-addressed , stamped envelope.
Very truly yours
Qktl~
Barton L. Kline
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Enclosures
O. Box 70 (83707)
1221 W. Idaho St.
Boise, 1083702
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C E i \/ t':
BARTON KLINE, ISB # 1526
LISA D. NORDSTROM , ISB # 5733
Idaho Power Company
1221 West Idaho Street
P. O. Box 70
Boise , Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
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Attorney for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER'
PETITION TO MODIFY THE
METHODOLOGY FOR DETERMINING
FUEL COSTS USED TO ESTABLISH
PUBLISHED RATES FOR PURPA
QUALIFYING FACILITIES
CASE NO. IPC-07-
IDAHO POWER'S REPLY COMMENTS
COMES NOW , Idaho Power Company ("Idaho Power" or the "Company ) and
hereby submits the following Reply Comments.
Background
Idaho Power s Request.
In its Petition Idaho Power requested that the Commission modify the methodology
currently used to determine the fuel costs that are used to compute published avoided cost
rates to be paid to qualifying cogeneration and small power production facilities ("QFs
For a 2008 QF project , fuel costs will make up 71 % of total avoided costs. Idaho Power
recommended that the Commission change the method for determining the fuel cost
component to utilize the average of all twenty years set out in the Northwest Power
Planning Conservation Council's (NWPCC) 2007 final median forecast of natural gas
IDAHO POWER'S REPLY COMMENTS - Page
prices rather than continuing to use the escalated average of the first three years of the
same forecast.
Wind Developers' Position
Exergy Development Group ("Exergy ), Intermountain Wind , LLC ("Intermountain
Idaho Wind Farms, LLC ("Idaho Wind Farms ) and engineers, Gary Seifert and Kurt Myers
who work at the Idaho National Engineering Laboratory ("Seifert-Myers ) collectively, Wind
Developers , all filed comments urging the Commission to reject Idaho Power s Petition and
continue to set the fuel cost component using the average of the first three years of the
NWPCC's twenty year forecast of natural gas prices as the starting point.Wind
Developers argue that without the higher purchase prices resulting from continued use of
the current method , the development of new QF wind generation resources might not be
economically feasible.
Utility and Staff Position
Avista Corporation ("Avista ), Rocky Mountain Power ("Rocky Mountain ) and the
Commission Staff ("Staff") all filed comments supporting Idaho Power s position that the
current methodology used to compute the fuel cost component of avoided cost rates
should be changed. They concur that the current methodology does not present natural
gas prices representative of the costs set out in the NWPCC's forecast. However, Avista
Rocky Mountain and Staff recommend that the Commission determine the fuel cost
component in a different way than that proposed by Idaho Power. The two utilities and
Staff recommend that the Commission simply use each year of the NWPCC's entire
forecast "as is . Under their proposal, each year of a twenty-year QF contract would have
a different fuel cost component as a part of the total published rate.
IDAHO POWER'S REPLY COMMENTS - Page 2
Wind Developers' Comments Fail to Acknowledge the Federal Law that Governs
Avoided Cost Rate Setting
The Wind Developers' Comments ask the Commission to reject Idaho Power
proposal based on portions of Idaho state law and Commission policy associated with
retail ratemaking. Later in these Reply Comments , Idaho Power will demonstrate that its
proposal is fully consistent with Idaho state law and policy associated with retail
ratemaking, even though it is federal law that is controlling in this case. The Company will
also show that federal law requires that the Commission apply very different standards
when setting avoided costs than when it engages in retail ratemaking. However, in light of
the Wind Developers' efforts to blur the distinction between Idaho law governing retail rate
setting and the body of federal law that governs avoided cost rate setting, Idaho Power
believes a brief summary of the legal underpinnings of PURPA may assist the Commission
in its analysis of this case.
Sales of electricity by QFs to Idaho electric utilities are wholesale sales that are
subject to the exclusive jurisdiction of the Federal Energy Regulatory Commission
FERC"
).
(Connecticut Light and Power Company, 70 FERC ~ 61 ,012 (1995)). Sections
201 and 210 of the Public Utility Regulatory Policies Act of 1978 ("PURPA") established
the legal requirement for regulated electric utilities to purchase energy from QFs and
directed FERC to promulgate rules to implement PURPA consistent with its wholesale
jurisdiction. (16 U.C. 9 824a-3(a) (1988)). Pursuant to its authority under PURPA, FERC
delegated a portion of its wholesale rate setting authority to the state regulatory
commissions of the various states and required the state regulatory commissions to set
avoided cost rates for purchases from QFs situated in their respective states. (Federal
Energy Regulatory Com n v. Mississippi 102 S.Ct. 2126 (1982)). However, the delegation
IDAHO POWER'S REPLY COMMENTS - Page 3
of authority from the FERC was not open-ended. FERC promulgated rules proscribing the
boundaries within which state regulatory commissions can set avoided cost rates. (18
R. 9292.101 et. seq.
).
The FERC's rules and its subsequent interpretations of its rules
are binding upon the state commissions as they establish avoided cost rates for their
jurisdictional electric utilities. (16 U.C. 9 824a-3(f) (1988)).
Apropos to this case, there are several federal statues and FERC rules
implementing those statues that this Commission must consider in reviewing the
Comments filed by the Wind Energy Developers in this case:
The FERC's delegation of wholesale ratemaking authority to this Commission
under PURPA requires that the Commission implement the FERC's regulations. (18 CFR
9292.401 ).
Under PURPA , the avoided cost rates an electric utility pays for electric
energy from a QF must not discriminate against QFs and must "be just and reasonable
the electric consumers of the electric utility and in the public interest." (16 U.C. 9824a-
3(b)) (Emphasis added).
To comply with PURPA requirements , avoided cost rates set by this
Commission cannot exceed the incremental cost to the electric utility of alternative electric
energy. (16 U.C. 9824a-3(b)). The term "incremental cost of alternative energy" means
the cost to the electric utility of electric energy which , but for the purchase from such co-
generator or small power producer, such utility would generate a purchase from another
source. (16 U.C. 9834a-3(d)). Stated another way, after the Commission has set
avoided costs , customers should be economically indifferent as to whether the utility
purchases an amount of energy from QFs, generates the same amount of energy itself, or
IDAHO POWER'S REPLY COMMENTS - Page 4
purchases the energy on the wholesale market. This is commonly referred to in avoided
cost proceedings as the Ratepayer Neutrality Test.
Once the IPUC has established QF purchase rates equal to full avoided
costs, the IPUC's obligation to encourage the development of QF resources has been
satisfied. (Connecticut Light and Power Company, 70 FERC ~ 61 012 (1995)).
Wind Developers' Single Issue Rate Case Argument is Flawed
Exergy and Intermountain argue that Idaho Power s proposal to modify only the fuel
cost input of the avoided cost methodology is the equivalent of a "single issue rate case
and thus is disfavored in Idaho because it would not examine all the components of the
avoided cost rate at the same time. (Intermountain Comments p. 2). Exergy s and
Intermountain s characterization of the Commission s view of single issue rate cases
overreaches. While not appropriate in all circumstances, abbreviated cases that focus on
limited issue(s) are regularly used by the Commission to balance the desire for precision in
setting retail rates with judicial economy. Idaho Power believes the Commission not only
has the legal authority under both federal and state law, to adjust the fuel cost component
in isolation , but also that the public interest would be served by doing so in this instance.
The Idaho Supreme Court made it clear that a complete rate proceeding is NOT
required in everY instance when the Commission adjusts rates. In R. Simplot Co. v.
Intermountain Gas Co.630 P.2d 133, 102 Idaho 341 (1981), the Idaho Supreme Court
specifically approved the practice of a "tracker" or "single item" rate proceeding regarding a
specific cost which could be separately identified. The Supreme Court ruled:
Where , as in this case, the utility has no control over
substantially increased costs, a pass-through rate increase to
cover the additional costs will not impact the authorized rate of
return. In such situations , the common utility regulation
practice is to permit a scaled down proceeding focusing only
IDAHO POWER'S REPLY COMMENTS - Page 5
on the particular increase. (Citations omitted.
) "
Little purpose
is served by requiring the commission to hold a general rate
proceeding recalculating all expenses , revenues, rate base
and rate of return , when the only substantial issues are
extraordinary changes in fuel costs... ." (Citations omitted.
With a view to constitutional considerations, it is clear that
within the regulatory context, due process is a flexible concept
permitting expert administrative agencies broad latitude to
adapt procedure to the specific regulatory needs of their
jurisdictions. (Citations omitted).
102 Idaho at 342 630 P.2d at 134.
In Order No. 21340 issued in Case No. U-1500-164 investigating the effects of
federal Income Tax Code revisions, the Commission noted that while the Simplotdecision
did not "catalog(e) all of the possible circumstances in which a 'single-issue' proceeding
may be appropriate " it listed two criteria under which the Commission has discretion to
conduct a single issue proceeding consistent with due process: when the utility has no
control over a change in expense and when the adjustment will not effect the authorized
rate of return. (Order No. 21340 at 5). The two criteria identified in Simplot are present in
this docket as well. First, Idaho Power has no control over the content and timing of the
NWPCC's forecast and second, the Company s proposed avoided cost rate adjustment will
not financially benefit the Company.
In 2000 , the Idaho Supreme Court reaffirmed its Simplot findings in Industrial
Customers of Idaho Power v. Idaho Public Utilities Commission 134 Idaho 285, 1 P.3d 786
(2000). The Industrial Customers of Idaho Power and Micron argued that the Commission
erred when it permitted Idaho Power to recover deferred DSM expenditures in a single item
expense case rather than in a general rate case. After determining that an accelerated
rate of recovery of Idaho Power s DSM expenditures would not increase the Company
authorized rate of return, the Idaho Supreme Court held that "the Commission regularly
IDAHO POWER'S REPLY COMMENTS - Page 6
pursued its statutory authority when it adopted abbreviated proceedings to account for the
Company s single item expense.Id. at 292. Thus, the Idaho Supreme Court has twice
upheld the Commission s decision to use single issue rate cases to achieve just and
sufficient retail rates.
Although Exergy and Intermountain imply that the Commission uniformly
discourages single issue rate cases, history does not support this view. The single issue
rate case is a tool the Commission has used on multiple occasions in the past to review the
reasonableness of retail rates. It is an important part of the Commission s established
practice. For example , the Commission routinely considers trackers that increase or
decrease a gas utility s rates and charges without considering any expense item other than
its purchased gas cost. In addition , this Commission annually reviews the power cost
trackers of Avista and Idaho Power, focusing exclusively upon these electric utilities net
power supply costs.
Not limited to just tracker cases, the Commission has also used single issue
proceedings to include costs in retail rates associated with Avista s Coyote Springs 2 and
Idaho Power s Bennett Mountain generating plants (Case Nos. AVU-05-1 and IPC-05-
, respectively). The Commission has entertained numerous limited-issue retail rate
cases for utilities over the years, including those stemming from Case No. U-1500-164'
Investigation of the Effects of Revisions of the Federal Income Tax Code upon the Cost of
Service of Regulated Utilities Order No. 21340. Single issue rate cases have been used
to adjust the rates of non-energy utilities as well , including those of Mountain Bell (Order
No. 16047, Case No. U-1 006-52; Order No. 17665, Case No. U-1006-61; Order No. 19956
Case No. U-1000-92) and Hayden Pines Water Company (Case No. HPN-89-, Order
No. 23554).
IDAHO POWER'S REPLY COMMENTS - Page 7
It is reasonable for the Commission to use a single item adjustment in this present
case as well. The Commission has for many years sanctioned the use of "trackers" to
collect changes in fuel expenses. Idaho Power s petition seeks to similarly modify the
forecasted fuel component of the avoided cost rate. Moreover, the fuel forecast is issued
by the NWPCC and thus is not within Idaho Power s control. Costs associated with the
natural gas price forecast comprise the lion s share (approximately 70% for a 2008 project)
of the published avoided cost rate paid to QFs and QF payments and expenses are fully
recovered in the Company s PCA. Consequently, any adjustments made to the fuel
forecast component of the avoided cost rate will not impact Idaho Power s authorized rate
of return or otherwise benefit its finances. At the same time , the adjustment Idaho Power
proposes will ensure that the fuel cost component of the avoided cost methodology will
more accurately track the NWPCC's forecast and that additional accuracy will benefit
customers.
The Legal Standards for Setting Avoided Cost Rates is Different Than the
Standard for Setting Retail Rates
In its Comments, Intermountain argues that avoided cost rates determined under
PURPA are subject to the same "fair, just and reasonable" standards as are retail rates set
in accordance with Idaho Code 9 61-502. Intermountain then posits that because Idaho
Power s proposal only seeks to adjust the fuel cost component, rather than all of the
components that go into determining the published avoided cost rates, it is impossible
under Idaho law , for the Commission to come to the conclusion that adjusting the fuel cost
component as proposed by Idaho Power would result in just and reasonable avoided cost
rates.In making this argument , Intermountain ignores the difference between the
standards the Commission is required by federal law to follow in establishing avoided cost
IDAHO POWER'S REPLY COMMENTS - Page 8
rates and the standard that Idaho law establishes for setting retail rates. This distinction is
significant and the Commission should reject Intermountain s argument because it fails to
recognize the purpose of the controlling federal statues as compared to the purpose of
Idaho Code 9 61-502. To illuminate that difference , a comparison of the specific code
provisions as required.
First, 16 U.C. 9 824a-3(b) provides:
(b)Rates for purchases by electric utilities
The Rules prescribed under subsection (a) of this
section shall insure that, in requiring any electric utility to offer
to purchase electric energy from any qualifying cogeneration
facility or qualifying small power production facility, the rates for
such purchase-
(1) shall be just and reasonable to the electric
consumers of the electric utility and in the public
interest, and
(2) shall not discriminate against qualifying co-
generators or qualifying small power producers. No
such rule prescribed under subsection (a) of this section
shall provide for a rate which exceeds the incremental
cost to the electric utility of alternative electric energy.
(Emphasis added).
Next, Idaho Code 9 61-502 provides:
Determination of Rates. Whenever the commission
after a hearing had upon its own motion or upon complaint
shall find that the rates , fares , tolls, rentals , charges or
classifications , or any of them , demanded, observed , charged
or collected by any public utility for any service or product or
commodity, or in connection therewith, including the rates or
fares for excursions or commutation tickets, or that the rules
regulations , practices, or contracts or any of them, affecting
such rates, fares, tolls , rentals, charges or classifications , or
any of them, are unjust, unreasonable, discriminatory or
preferential , or in any wise in violation of any provision of lawor that such rates, fares , tolls , rentals , charges
classifications are insufficient, the commission shall determine
the just, reasonable or sufficient rates fares , tolls, rentals
IDAHO POWER'S REPLY COMMENTS - Page 9
charges, classifications , rules , regulations , practices or
contracts to be thereafter observed and in force and shall fix
the same by order as hereinafter provided , and shall, under
such rules and regulations as the commission may prescribe
fix the reasonable maximum rates to be charged for water by
any public utility coming within the provisions of this act relating
to the sale of water. (Emphasis added). (Citations omitted).
Idaho Code 9 61-502 requires the Commission to set retail rates that are just and
reasonable to consumers. But Idaho law also requires the Commission to set rates that
are sufficient to allow the utility to recover its costs and earn a return of and return on its
investment in utility plant.This is the regulatory compact that underlies all retail
ratemaking.
In contrast, U.C. 9 824a-3(b)(1) does not require the Commission to consider
whether the avoided cost rates it sets are sufficient to make QF projects economically
viable. If the Commission sets avoided cost rates that are equal to "the incremental cost to
the utility of alternative energy" the published rates are per se just, reasonable and non-
discriminatory.
Intermountain s Comments create the impression that the Commission is required to
look at the "just and reasonable" standard from the perspective of the QF developer and
not from the perspective of the "electric consumers of the electric utility." However, the
provisions of 16 U.C. 9 824a-3(b) make it clear that the Commission cannot set avoided
cost rates with the goal of making sure that the published rate is high enough to allow all
QF projects to develop. Under PURPA , the Commission is only allowed to set avoided
cost rates equal to the electric utility s incremental cost of alternative electric energy.
IDAHO POWER'S REPLY COMMENTS - Page 10
The Commission Is Prohibited From Artificiallv Stimulating Development of
Resources
In its Comments, Exergy urges the Commission to deny Idaho Power s petition
because the 2007 Idaho State Energy Plan requires the Commission to give a high priority
to the development of renewable resources. Apparently, Exergy equates compliance with
the State Energy Plan with maintaining the published rates at a level that is sufficient to
make all QF projects economically attractive. (Exergy Comments p. 3). Despite Exergy
urging, federal law does not permit the State of Idaho to artificially stimulate the
development of QF resources by requiring the Commission to set QF purchase prices
above avoided costs.
In Connecticut Light and Power Company, FERC ~ 61 012 , the FERC ruled that a
Connecticut statute requiring Connecticut electric utilities to purchase energy from certain
QF facilities owned by municipal corporations at prices that exceeded the utilities full
avoided cost was unlawful. The FERC ruled that federal law, PURPA , preempted state
statutes that required electric utilities to pay more than avoided costs for purchases from
QFs. FERC stated "Henceforth , however, if parties are required by state law or policy to
sign contracts that reflect rates for QF sales at wholesale that are in excess of avoided
costs , those contracts will be considered to be void ab initio.
Idaho Power concurs that the acquisition of energy from renewable generating
resources such as wind and geothermal is desirable. However, the purchase of energy
from QF resources under PURPA is not the only way that energy from renewable
resources will be acquired by Idaho utilities. Renewable resources playa large role in the
Company s Integrated Resource Plan (IRP). Consistent with the IRP, Idaho Power has
conducted competitive bidding programs for both wind and geothermal resources with a
IDAHO POWER'S REPLY COMMENTS - Page
third request for proposals in the planning stage. As a result of these competitive bid
solicitations , the Company has entered into contracts for 146 MW of renewable energy
generation. To date, Idaho Power has been fortunate that the contracts resulting from its
competitive bidding solicitations have contained purchase prices that are lower than the
published avoided costs. The contracts for wind and geothermal resources acquired as a
result of the competitive bid process also include all or a portion of the renewable energy
credits (RECs) which are not included as a part of QF contracts. Ownership of those RECs
is becoming increasingly important as neighboring states adopt renewable portfolio
standards.
Idaho Power s Proposal to Change the Avoided Cost Methodology is Not a
Collateral Attack
In its Comments, Intermountain asserts that by requesting that the Commission
change the methodology for determining the fuel cost component of the published rates
Idaho Power is launching a collateral attack on Order No. 29124, the Order that
established the current avoided cost methodology. In making that assertion, Intermountain
has apparently misunderstood Idaho Power s position. It is true that Idaho Power believes
that continued use of the current methodology will result in the fuel cost component being
set at a level that exceeds the NWPCC's forecast of natural gas prices and as a result, the
published rates will be higher than the costs Idaho Power can avoid. But, as Idaho
Power s Petition indicates, the reason for its filing is the difference between the shape of
the NWPCC's natural gas forecast and the shape of the forecast that was used by the
Commission in Order No. 29124 to establish the current fuel cost methodology. The
Commission Staff in its Comments came to the same conclusion. Staff noted "The current
methodology, while it fairly replicated gas price forecasts in the past where prices were
IDAHO POWER'S REPLY COMMENTS - Page 12
always increasing, now fails to recognize the expected downward trend in fuel prices
apparent in NWPCC's twenty year forecast. Failure to recognize the downward price trend
in the NWPCC's 2007 forecast will cause the published rates to be much higher than they
otherwise would be." (Staff Comments p. 2-3).
Idaho Power is not requesting that the Commission set aside its prior determination
that the fuel cost component should be based on the NWPCC's forecast of future gas
prices. Idaho Power is only proposing that the Commission move away from continued
use of the three-year average methodology utilized in Order No. 29124 and instead utilize
the NWPCC's entire twenty year forecast of natural gas prices. The Commission could
utilize the full twenty-year forecast either by adopting the average of the twenty years as
proposed by Idaho Power or by using the twenty individual years as proposed by Staff
Avista and Rocky Mountain.
Even If the Commission Agrees to Change the Fuel Cost Component, Avoided
Cost Rates Will Increase Significantly
All of the commentors urging the Commission to deny Idaho Power s Petition are
either wind developers or wind development advocates. What the Wind Developers fail to
acknowledge is that wind generation resources are not the only QFs that will benefit from
the substantial increase in published rates that will occur if the changed fuel cost
methodology recommended by either Idaho Power or the Staff, Avista and PacifiCorp is
adopted. If the Commission accepts Idaho Power s proposal, levelized published avoided
cost rates for a QF project coming only line in 2008 will increase from $63.84 per MWh to
$68.15 per MWh, an increase of approximately 6.75 percent.
If the fuel cost component methodology recommended by Staff, Avista and
PacifiCorp is adopted , Idaho Power s levelized published rates for a QF project coming on
IDAHO POWER'S REPLY COMMENTS - Page 13
line in 2008 would increase from $63.84 per MWh to $67., an increase of approximately
17 percent.
If the fuel cost component methodology remains unchanged , Idaho Power
levelized published rates for a QF project coming on line in 2008 would increase from
$63.84 per MWh to $73., an increase of approximately 14.69 percent.
The Wind Developers all point out that, since the Commission issued Order No.
29872 directing the Company to analyze the costs associated with integration of
intermittent wind resources, development of QF wind resources has stalled. With the
Commission s recent resolution of various interconnection issues associated with wind
projects, (Order No. 30414 issued in the Cassia Wind Park case , case No. IPC-06-21),
Idaho Power expects wind generation projects with approximately 70 MWs of nameplate
generation to move forward with construction in the near term. In addition , during this
same period , Idaho Power has received a steady stream of inquiries regarding potential
development of non-wind QF resources. Specifically, recent interest has been expressed
in QF projects using anaerobic digesters to produce methane gas as fuel for generation
geothermal , biodiesel , biomass generating projects and combined heat and power projects.
Comments of the Wind Developers devote a great deal of their effort to discussing
the fact that the Commission is currently considering an adjustment to avoided cost rates to
compensate customers for the additional integration costs associated with intermittent wind
resources. Wind Developers emphasize that the combination of the reduction in avoided
costs to compensate customers for wind integration costs and a reduction in avoided costs
to revise the fuel cost component as proposed by Idaho Power, could significantly affect
QF developers' ability to economically pursue QF wind projects.Whether Wind
Developers' fears are justified is unknown. What is known , is that federal law prohibits the
IDAHO POWER'S REPLY COMMENTS - Page 14
Commission from setting avoided cost rates based on a determination that the rates must
be sufficiently high to allow development of QF projects. Under PURPA, the Commission
can only determine Idaho Power s avoided costs , establish published rates consistent with
those avoided costs , and it is then up to the QFs to determine the economic viability of
their projects.
The adjustment to avoided cost rates to address wind integration costs is a separate
and distinct analysis from the adjustment to avoided costs presented by the Company
Petition. The Commission must consider them both on their respective merits but in the
end, the analysis is driven by Idaho Power s costs, not the QF developers' economic hurdle
rates.
The Alternative Methodology Used to Set the Fuel Cost Component to be Included
in Avoided Cost Rates Proposed by Staff. Avista and Rocky Mountain is
Reasonable
Staff , Avista and Rocky Mountain propose an alternative to the twenty-year average
proposal made by Idaho Power. They propose using the NWPCC's twenty-year forecast
as is . In other words , the fuel cost for each year during the twenty year term of a typical
QF contract would use the actual NWPCC's natural gas price forecast for that year as the
fuel cost component.
Idaho Power agrees that the approach advocated by Staff, Avista and Rocky
Mountain is reasonable and is superior to the current methodology. When compared to
Idaho Power s proposed methodology, the Staff's and utilities' proposal will cause greater
swings in the cash flows of QF developers. Idaho Power does not know whether or not QF
developers and their financiers can structure project financing to accommodate the
changes in cash flow.
IDAHO POWER'S REPLY COMMENTS - Page 15
In the final analysis, a QF that performs for the full twenty-year term of its contract
would receive the same compensation under either Idaho Power s proposal or the proposal
of Staff, Avista and Rocky Mountain. Only the shape of the payment stream would be
different.
Conclusion
The end result of this proceeding is to determine how best to ensure that customers
will pay QFs rates equivalent to the costs that utilities can actually avoid spending when the
utilities purchase power from QFs under PURPA. If history is any indication , a full avoided
cost rate case that updates all cost components will likely take considerable time. Idaho
Power does not wish to limit access to avoided cost rates until such a proceeding is
completed , but neither does it believe ratepayers should commit to funding 20-year PURPA
contracts whose largest expense is based on a front-loaded forecast until these issues are
fully vetted.
Therefore , Idaho Power filed its Petition and asked the Commission review the
reasonableness of the avoided cost fuel forecast component as a single item case. This
will ensure that the "ratepayer neutrality" provisions of PURPA are not violated while still
allowing developers to continue with their projects. Idaho Power is agreeable to hosting a
meeting no later than March 1 , 2008 to identify and quantify necessary updates to the
remaining avoided cost components. This process may take some time given the number
of parties involved , but Idaho Power is hopeful that an agreement on the appropriate cost
components can be reached and subsequently filed with the Commission as a consensus
document.
IDAHO POWER'S REPLY COMMENTS - Page 16
Respectfully submitted this ili
IDAHO POWER'S REPLY COMMENTS - Page 17
YOf
BARTON L. KLINE
Attorney for Idaho Power Company
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this day of November 2007, I served a true
and correct copy of the within and foregoing upon the following named parties by the
method indicated below, and addressed to the following:
Scott W oodbu ry
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
Post Office Box 83720
Boise , Idaho 83720-0074
Exergy Development Group of Idaho
Peter J. Richardson
Richardson & O'Leary PLLC
515 N. 2ih Street
O. Box 7218
Boise , Idaho 83700
Intermountain Wind LLC
Dean J. Miller
McDevitt & Miller LLP
420 West Bannock Street
O. Box 2564-83701
Boise , Idaho 83702
Rocky Mountain Power
Jordan A. White
Brian Dickman
Rocky Mountain Power
201 South Main Street , Suite 2300
Salt Lake City, Utah 84111
Avista
Kelly Nowood
Vice President
A vista Corporation
1411 East Mission Ave.
Spokane , Washington 99202
IDAHO POWER'S REPLY COMMENTS - Page 18
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