20080125Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DEPUTY ATTORNEY GENERAL
DATE:JANUARY 24, 2008
SUBJECT:IDAHO POWER'S RECOMMENDATIONS REGARDING THE USE OF
THE PROCEEDS FROM THE SALE OF S02 ALLOWANCES,
CASE NO. IPC-07-
On November 9, 2007, Idaho Power filed a report disclosing that the Company sold
000 sulfur dioxide (S02) allowances in calendar year 2007 for a total (less brokerage fees) of
$19.642 million. . The after-tax amount of the proceeds allocated to Idaho were reported to be
$10 131 560. Rather than utilizing the proceeds from the S02 sales to offset this year s Power
Cost Adjustment (PCA) mechanism, Idaho Power recommended that the Commission explore
other possible uses for the S02 proceeds. The Company requested that the Commission convene
a public workshop for the purpose of allowing interested persons to discuss other possible
alternatives.
PROCEDURAL HISTORY
On December 20, 2007 , the Commission issued Order No. 30478 granting the
Company s request to convene a public workshop. As part of the Order, the Commission issued
a Notice of Workshop inviting interested persons to discuss the appropriate disposition of S02
revenues. The Commission scheduled the workshop for January 15, 2008. The following parties
attended the workshop: Idaho Power, the U.S. Department of Energy, the Idaho Energy
Education Project, Ridgeline Energy, the Snake River Alliance, Windland, Avista Utilities, the
Idaho Conservation League, the Commission Staff, Micron, Dean 1. Miller, and the Industrial
Customers of Idaho Power (ICIP).
DECISION MEMORANDUM
The participants generally discussed four possible uses for the S02 proceeds. First
as was the case last year, S02 proceeds could be included in the annual PCA mechanism this
year. If included in the PCA, the amount of the S02 revenue would be grossed up to
approximately $16 million. This amount would offset the PCA deferral account and mitigate
any pending increase in the PCA rates. Second, Idaho Power suggested that S02 proceeds could
be used to purchase multi-year streams of "renewable energy certificates ('green tags ) from the
owners of renewable generation facilities" that have entered into PURP A contracts with Idaho
Power. Order No. 30478 at 3 citing Idaho Power s Report!Motion at ~ 8. Idaho Power
suggested that if Congress enacts a renewable portfolio standard (RPS)\ for electric utilities
Idaho Power will be required to purchase green tags at prices expected to be higher than those
existing today. Id.
Third, Idaho Power also suggested that the S02 proceeds could be used to purchase a
wind project's developmental rights. Under such an approach, Idaho Power would enter into
negotiations or issue a request for proposal (RFP) to purchase a permitted wind project. In
essence, the Company would be purchasing the wind project with capital contributed by
customers. This would result in a reduction in the Company s rate base. See Order No. 30478 at
4. Fourth, the Idaho Energy Education Project suggested that approximately $500 000 could be
used to develop and implement classroom education programs about energy efficiencies. The
remaining balance of the proceeds could be directed to energy efficiency operations or other
beneficial uses.
Because the workshop participants were unable to reach consensus regarding the
appropriate use of the S02 proceeds, the participants recommend that the Commission issue a
Notice of Modified Procedure. This would allow interested persons and the public to comment
on the appropriate disposition of the S02 proceeds. Consequently, the participants
recommended that the Commission process this case under Modified Procedure with a 21-day
comment period.
I A RPS typically requires that a certain percentage of an electric utility's generating resources be renewable
resources (such as wind, solar, biomass, etc.) by a certain year.
DECISION MEMORANDUM
COMMISSION DECISION
Does the Commission wish to issue a Notice of Modified Procedure setting a 21-day
comment period in this matter?
Don Howell
Deputy Attorney General
bls!M:IPC-O7-18 dh2
DECISION MEMORANDUM