20090501final_order_no_30790.pdf

Office of the Secretary
Service Date
May 1 , 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPROPRIATE
DISPOSITION OF IDAHO POWER
COMP ANY'S SULFUR DIOXIDE EMISSION
ALLOWANCES FOR 2008 AND 2009
CASE NOS. IPC-08-
IPC- E-09-
ORDER NO. 30790
On March 18, 2009, Idaho Power Company filed a report disclosing that the
Company recently recorded the sale of surplus sulfur dioxide (S02) emission allowances. The
Company reported that it either sold or entered into contracts for the sale of 16 500 S02
allowances. After deducting its brokerage fees of $4 125 , Idaho Power anticipates booking S02
proceeds of$2 341 375. The Company s report also notes that during calendar year 2008, it sold
000 S02 allowances. After deducting brokerage fees, the Company reported net S02
revenues in 2008 of$2 958 500. See Case No. IPC-08-14 (report filed July 24 2008).
On March 27, 2009, the Commission issued a Notice of Modified Procedure
requesting written comments on the appropriate disposition and ratemaking treatment of the
reported S02 revenues.Order No. 30761.The Commission received four comments in
response to its Notice. After reviewing the report and the comments, the Commission finds that
these S02 revenues should be included in the Company s annual Power Cost Adjustment (PCA)
case.
BACKGROUND
Title IV of the Clean Air Act Amendments of 1990 establishes a national program for
the reduction of acid rain. 42 US.C. ~~ 7651 et seq. The centerpiece of the acid rain program is
the incentive- or market-based "cap and trade" S02 program. Under the cap and trade program
the U.S. Environmental Protection Agency (EP A) sets a cap or ceiling on the total amount of
S02 emissions allowed nationwide. Based upon this cap, EP A allocates a certain number of
S02 emission allowances to thermal power plant owners. Each allowance, or credit, provides
authority to emit one ton of S02. Idaho Power has an ownership interest in three thermal power
plants in the west: Jim Bridger, North Valmy, and Boardman.
A thermal power plant owner must hold sufficient allowances each year to cover its
actual S02 emissions. A power plant owner that does not possess sufficient allowances to cover
ORDER NO. 30790
its annual emissions must purchase additional allowances or it is automatically fined and must
surrender future-year allowances to cover the shortfall. A power plant owner holding surplus
S02 allowances in a given year may retain the allowances or sell them. S02 allowances are
fully marketable commodities and can be traded on the open market or in special EP A-sponsored
auctions. Id.
Idaho Power s report merely notes that the Company has accrued S02 credits but
does not recommend a particular disposition or ratemaking treatment for the funds. Staff
recommended that the Commission initiate a docket to determine the appropriate disposition of
the 2008 and 2009 (thus far) S02 credits. In past cases, S02 proceeds have been included in the
Company s annual Power Cost Adjustment (PCA) case. See Order Nos. 30041 and 30529. In
Order No. 30760 issued March 27, 2009, the Commission authorized $500 000 (with interest) in
S02 proceeds to fund a two-year energy education program.
ACCOUNTING ADJUSTMENTS
In its report, Idaho Power proposes that the "same 90/1 0 percent sharing of benefits
be utilized to allocate the proceeds from the sale of S02 allowances booked during 2008 and in
January 2009. Report at ~ 7. The Company recognizes that subsequent S02 sales will be subject
to the new 95/5 percent sharing methodology consistent with the parties' stipulation approved by
the Commission in Order No. 30715 (Case No. IPC-08-19). In addition to the change in
sharing methodology, Idaho Power also asserts that the jurisdictional allocations were adjusted in
the Company s recent rate case Order No. 30722. In particular, Idaho s jurisdictional percentage
increased from 94.70% to 94.79%. Id.
THE COMMENTS
1. Public Comments. The Commission received two customer comments in response
to its Notice. One customer recommended that the Commission set aside at least $500 000 per
year from the sale of S02 credits to further energy education. In addition to energy education
programs, the customer urged the Commission to consider allocating some of the S02 revenues
for conservation and residential weatherization programs designed to assist low-income and
senior homeowners. The other customer also suggested that a percentage of the S02 revenues be
used for energy education.
2. Idaho Energy Education Project (JEEP). The JEEP suggested that some of the
monies from the sales of S02 credits "be invested in energy education or some other form that
ORDER NO. 30790
enhances energy efficiency and conservation.More specifically, IEEP recommended the
Commission consider using a percentage of S02 proceeds equal to that amount in the energy
education project in Case No. IPC-08-11. This amount would then be set aside in an account
similar to the telephone trust funds" to promote energy education following completion of the
two-year pilot program in the 08-11 case.
3. Commission Staff. The Staff stated it verified that the S02 sales transactions were
booked accurately. Staff also calculated that the S02 proceeds have accrued interest through
March 31 , 2009, in the amount of $47 578 ($43 983 for 2008 sales and $3 595 for 2009 sales).
Staff Comments at 2. Interest would continue to accrue until the funds are dispersed. Id.
Staff recommended that the proceeds from the sale of S02 allowances be used to
offset costs in Idaho Power s Power Cost Adjustment (PCA) case this year. Staff noted that the
PCA costs through the end of March 2009 were estimated to be nearly $200 million. Id. at 3.
Staff further noted that "Passing the customers' share of funds through the PCA will reduce the
current PCA cost subject to recovery and (also) mitigate the impact of what will likely be a very
large (PCA) surcharge for 2009.Id. Given the Commission s recent Order No. 30760
allocating $500 000 of S02 proceeds to fund the energy education program, Staff believed that
the current S02 proceeds should be fully applied to the PCA rather than reserving a portion for
energy education programs. Consequently, Staff recommended that the S02 proceeds of
347 453 ($5 299 875 plus interest of $47 578 as of March 31 2009) be included in this year
PCA. Id. at 4.
DISCUSSION AND FINDINGS
After reviewing the S02 report and the comments filed in response to our Notice, the
Commission fmds it appropriate to use the S02 emission allowance proceeds to offset this year
PCA balance. We decline the customers ' and JEEP's suggestion that a portion of the S02
proceeds be reserved for another energy education project. As the Staff observed, the
Commission recently funded a two-year energy education proposal with more than $500 000 in
S02 proceeds. The education proposal is set to begin at the start of the 2009 school year this
September. We believe it is not appropriate to set aside additional S02 proceeds for energy
education until the two-year pilot project has been evaluated. Consequently, we decline to set
aside a portion of the current S02 proceeds before the pilot program has even started.
ORDER NO. 30790
We agree with the Commission Staff that the best use of these S02 proceeds and the
accumulated interest is to offset the proposed increase in the PCA rates. The S02 funds will
provide an immediate benefit to all customers. Consequently, we direct that the proceeds of the
S02 sales on a system basis of $5 347 453 ($5 299 875 plus interest of $47 578 as of March 31
2009) be used to offset Idaho Power s PCA deferral balance. Interest shall continue to
accumulate until the S02 funds are dispersed.
ORDER
IT IS HEREBY ORDERED that the $5 347 453 ($5 299 875 plus accrued interest of
$47 578 as of March 31 2009) be used to offset the Company s PCA deferral balance this year.
The S02 proceeds shall continue to accrue interest until dispersed.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in these Case Nos. IPC-08-
14 and IPC-09-08 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 or in interlocutory Orders
previously issued in these cases. 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. 30790
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 30-;-J..
day of April 2009.
;./.
11 TON PRE ENT
MARSHA H. SMITH, COMMISSIONER
ATTEST:
D. Jewel
Commission Secretary
bls/O:IPC-08-14 IPC-09-08 dh2
ORDER NO. 30790