20100104REC Management Plan.pdf

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An IDACORP Company
LIsA D. NORDSTROM
Senior Counsel
Inordstromtiidahopower.com
4: 48
December 30,2009
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-08-24 - REC Management Plan
Dear Ms. Jewell:
In Order No. 30818, the Commission directed Idaho Power Company ("Idaho
Powet' or "the Company") to formulate a business plan that describes how it wil manage
Green Tags generated in 2009 and later. Enclosed with this letter is Idaho Power's
Renewable Energy Credit ("REC") Management Plan describing the scenarios under which
Idaho Power wil likely acquire RECs and how it intends to manage them going forward.
If you have any questions or concerns, please do not hesitate to contact me at 388-
5825.
Very truly yours,
cA~jJ 'J~~
Lisa D. Nordstrom
LDN:csb
Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise. ID 83702
RECEI r..; ;,
IDAHO POWER REC MANAGEMENT PLAN
2009 DEC 30 PH 4: 48
Renewable Energy Credits iDAHD FULi..i
UTILITIES COMrAI
To promote the construction of renewable resources, a system was created that
separates renewable generation into two parts: (1) the electrical energy produced by a
renewable resource and (2) the renewable attributes of that generation. These
renewable attributes are referred to as renewable energy credits ("RECs") or green
tags. The entity that holds a REC has the right to make claims about the environmental
benefits associated with the renewable energy from the project. One REC is issued for
each megawatt-hour ("MWh") of electricity generated by a qualified resource. Electricity
that is split from the REC is no longer considered renewable and cannot be marketed as
renewable by the entity that purchases the electricity.
A REC must be retired once it has been used for regulatory compliance and once
a REC is retired, it cannot be sold or transferred to another party. The same REG may
not be claimed by more than one entity, including any environmental claims made
pursuant to electricity coming from renewable energy resources, environmental labeling,
or disclosure requirements. State renewable portolio standard ("RPS") requirements
also typically specify a "shelf life" for REGs so they cannot be banked indefinitely.
Idaho Power's RECs
Idaho Power Company ("Idaho Powet') is currently receiving all of the RECs
from the 101 megawatt ("MW") Elkhorn Valley Wind Project in northeast Oregon. The
Elkhorn Valley Wind Project is expected to provide approximately 300,000 REGs to
Idaho Power annually throughout the term of the power purchase agreement ("PPA")
that expires in 2027.
Idaho Power is also receiving RECs from the 13 MW Raft River Geothermal
Project. For the first 10 years (2008-2017) of the agreement, Idaho Power is entitled to
75 percent of the RECs from the project for generation that exceeds a monthly average
of 10 MW. For the second 10 years of the agreement (2018-2027), Idaho Power is
entitled to 51 percent of the RECs generated by the Raft River Geothermal Project.
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Regulatory Treatment of Idaho Power's RECs
In late 2008, Idaho Power filed an Application with the Idaho Public Utilties
Commission in Case No. IPC-E-08-24 asking to retire RECs received as part of the
long-term power purchase agreements for generation from the Elkhorn Valley Wind
Project and the Raft River Geothermal Project. Because the state of Idaho does not
have a RPS, these RECs could be either voluntarily retired or sold. Idaho Powets
Application indicated that these RECs needed to be retired in order for Idaho Power to
represent to its customers they were receiving renewable energy from these projects.
In May 2009, the Commission issued Order No. 30818 directing Idaho Power to
sell eligible 2007 and 2008 RECs from these projects and include the proceeds in the
Company's 2010 Power Cost Adjustment ("PCA") calculation. The Order also
instructed Idaho Power to file a business plan addressing the disposition of future RECs
by the end of 2009.
Idaho Power's REC Management Strategy
Idaho Power believes there is a reasonable likelihood that a federal renewable
energy standard (" RES") wil be passed by Congress that wil require the Company to
obtain and retire RECs for compliance. Idaho Power also believes it is prudent to
continue acquiring ownership of RECs associated with renewable resources to minimize
the impact when a federal RES is implemented. However, because of current economic
conditions and recent increases in costs and customer rates, the basic philosophy of
Idaho Powets REC Management Plan is to sell its RECs in the near-term and return
the customers' share of the proceeds through the PCA mechanism while continuing to
acquire and hold long-term contractual rights to own RECs for use in meeting a future
federal RES.
Proposed federal RES legislation includes a shelf life for RECs, thereby allowing
the holder to "bank" RECs for a period of time. The ability to bank RECs is important to
Idaho Power because the number of RECs required to comply with a federal RES is
expected to fluctuate depending on hydrologic conditions. The proposed federal RES
legislation would allow Idaho Power to deduct generation from its hydroelectric
resources from the sales base used to calculate the number of RECs required annually.
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In above average water years, Idaho Powets REC requirement wil be lower
because of increased production from hydroelectric resources. In low water years,
Idaho Powets hydroelectric resources wil produce less electricity and the number of
RECs required will increase. With the abilty to bank RECs, Idaho Power would be able
to save additional RECs from good water years and rely on banked RECs to meet
requirements in low water years.
Therefore, Idaho Powets REC Management Plan is as follows:
1. Existing Long-Term PPAs. For existing projects, such as Elkhorn
Valley Wind Project and the Raft River Geothermal Project, in which Idaho Power
receives RECs as part of a long-term power purchase agreement, Idaho Power plans to
sell the near-term RECs and return the customers' share of the proceeds through the
PCA while continuing to acquire and hold long-term contractual rights to own RECs for
use in meeting a future federal RES.
2. Existing PURPA and REC Generating Contracts. For existing
PURPA and other REC generating projects that provide output to Idaho Power under
mid- to long-term contracts (such as Fossil Gulch Wind Project or the Arrowrock
Hydroelectric Project/Clatskanie Exchange), if a mutually agreeable price can be
reached with the project owner, Idaho Power may enter into contracts to purchase the
project's RECs on a mid- to long-term basis with the expectation that the REC
acquisition costs wil be treated as a PCA expense. In this situation, Idaho Powets
intent is the same - to sell the near-term RECs and return the customers' share of
proceeds through the PCA while continuing to acquire and hold long-term contractual
rights to own RECs for use in meeting a future federal RES.
3. New Long-Term PPAs. For new long-term power purchase
agreements, like the recently filed Neal Hot Springs Geothermal contract (Case No.
IPC-E-09-34), Idaho Power intends to continue to acquire long-term rights to the RECs
under these agreements. As noted above, Idaho Power intends to sell the near-term
RECs and return the customers' share of the proceeds through the PCA while
continuing to acquire and hold long-term contractual rights to RECs for use in meeting a
future federal RES.
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4. Qualified Renewable Projects. To the extent Idaho Powets small
hydroelectric projects can be certified as renewable under other states' renewable
portolio standards, Idaho Power wil consider sellng the near-term RECs as
opportunities become available and return the customers' share of the proceeds
through the PCA.
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