20090108Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
R=Ci:'\ ~_ ..l~_
100Q JMl -8 PK \2: 0 I
Ip"ql'\Jr'\ri'ir
1-.,.,.UilL i It;:¡
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 AUTHORITY )
TO RETIRE ITS GREEN TAGS. )
)
)
)
CASE NO. IPC-E-08-24
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 30701 on December 11,2008
in Case No. IPC-E-08-24, submits the following comments.
BACKGROUND
On November 14,2008, Idaho Power Company (Idaho Power; Company) fied an
Application with the Commission seeking authority to "retire" the Green Tags1 it has obtained or
wil obtain in the future. By acquiring, retaining, and retiring the Green Tags, Idaho Power states
it can comply with renewable certification and verification standards while clearly
1 Green tags are also known as green certificates, renewable energy credits (RECs) and tradable renewable
certificates (TRCs).
STAFF COMMENTS 1 JANUARY 8, 2009
communicating the Company's renewable portfoli02 to customers, meet customer expectations for
increased use of renewable energy, and align with Idaho's interests in promoting renewable
energy.
Idaho Power's Application describes Green Tags as tradable environmental commodities
that monetize the environmental and social benefits of the non-energy attributes of renewable
energy generation. Essentially, the entity that possesses a Green Tag holds the legal right to make
claims about the environmental benefits associated with renewable energy. A Green Tag is
produced for each megawatt-hour (MWh) of electricity generated by an eligible renewable energy
resource. An active market exists for the purchase and sale of Green Tags.
Idaho Power purchases energy and receives the accompanying Green Tags from two
qualifying renewable energy facilties, the Elkhorn wind project and the Raft River geothermal
project. These facilities have generated more than 320,000 MWh of Green Tags in 2007 and
2008.3 If the market value of each tag is between $5 and $6 as suggested by Idaho Power in its
Application, the value of the Green Tags produced to date is $1.6 to $1.9 milion.
If Idaho Power sells the Green Tags from these facilties, it loses the right to claim any
environmental attributes gained from these renewable energy resources. The person/entity buying
the Green Tag retains the sole claim to have purchased "renewable" energy. In contrast, Idaho
Power claims that by "retiring" the Green Tags it can clearly communicate the Company's
renewable portfolio to customers, meet customer expectations for increased use of renewable
energy and align with State interests in promoting renewable energy.
Idaho Power contends that the acquisition and retention of Green Tags are necessary to
accurately represent the renewable energy component ofIdaho Power's resource portfolio.
Acquiring and retaining Green Tags assures Idaho Power's customers that it acquires or generates
energy from renewable resources. The Company recognizes that the State of Idaho has no
2 "Renewable portfolio" generally refers to the portion of the Company's electrcity produced by renewable resources
such as wind, solar, biomass, low-impact hydropower and geothermal energies.
3 Idaho Power is entitled to receive i 00% of the Green Tags associated with energy from the Elkorn project. The
Company is entitled to receive the Green Tags associated with 3 MW of the output from the Raft River project for its
first i 5 years and 51 percent of the project's green tags for the remaining i 0 year. Because the Elkhorn project did
not go online until late in 2007, and because the Raft River project did not begin commercial operation until 2008,
both projects together should anually generate approximately 320,000 Green Tags initially and considerably more if
Raft River can increase its production to expected levels.
STAFF COMMENTS 2 JANUARY 8, 2009
requirement that electric utilties possess Green Tags, but claims that retaining Green Tags would
allow the Company to satisfy future federal or state laws imposing renewable energy stadards.
STAFF ANALYSIS
Unlike states with Renewable Portfolio Standards (RPS), Idaho curently has no
requirement for utilties to acquire, retain or retire Green Tags. Because Idaho Power has no
requirement to possess Green Tags, Staff believes that the appropriate question for the
Commission to consider is whether customers wil be better off if Idaho Power retires them, sells
them, or continues to simply hold onto them.
Staff opposes Idaho Power's request to retire its Green Tags for the reasons discussed
below.
Retiring Green Tags wil not cause any additional renewables projects to be developed.
Absent an RPS requirement, Staff believes that Green Tags only have real value if they
cause new renewables projects to be built that would not otherwise be built. Retiring Green Tags
wil not cause any additional renewables projects to be developed, nor will it change Idaho
Power's resource portfolio in any way.
Green Tags have the greatest value to Idahoans if they are sold.
Retiring Green Tags means that revenues foregone by not sellng them cannot be
productively used for any purose. The foregone revenues simply become the price paid to
permit Idao Power to tell its customers that some of their power is renewable, without violating
rules or guidelines of Green-e or other renewable certification organizations.
Many customers do not subscribe to the idea that environmental benefits can be bought and
sold.
The existence of Green Tags is based upon the premise that the environmental attributes
of a renewable energy project can be separated from the MWhs that are generated. As separate
"paper" commodities, Green Tags are deemed to have value and can be bought and sold.
However, except perhaps for reductions in greenhouse gases which have global impacts, the
environmental benefits of renewable projects are generally local, and enjoyed mostly by those
people living in relatively close proximity to the project. Whether Green Tags are sold or retired,
STAFF COMMENTS 3 JANUARY 8, 2009
Idahoans will continue to enjoy the environmental benefits of the Elkhorn project located just
across the border in Oregon and the Raft River project in southern Idaho.4 Many customers, Staff
believes, simply canot accept the idea that the environmental benefits of renewable energy
projects are lost or transferred merely by the exchange of a piece of paper saying that they have
been purchased by someone else.
Idaho Power contends that if it does not retire its Green Tags, it cannot explain to
customers what the true source of their power is. Presumably, wind or geothermal energy from
Elkhorn and Raft River could not be described as a renewable or green resource, but instead
would have to be described as "null electricity", meaning energy that has been stripped of its
environmental attributes. Staff believes that many customers would find such a concept to be
irrationaL.
Green Tags retired now may not satisfy future RPS requirements.
Staff is uncertain whether any Green Tags retired now would be eligible to satisfy future
renewable portfolio standards, if implemented. As stated previously, there are currently no Green
Tag requirements in Idaho. It is unown if and when federal or state requirements might be
implemented. However, if requirements are eventually implemented, Staff believes it is unlikely
that utilties will be expected to comply immediately. Instead, it is likely that utilties would be
given some time to comply, making it unecessary for Idaho Power to have a stockpile of retired
Green Tags.
Retiring Green Tags is an expensive way to satisfy a minority of Idaho Power customers.
Staff does not believe it is necessary to have to represent, at least to most customers, that
they are purchasing renewable energy from the Elkhorn and portions of the Raft River projects.
Staff believes that most Idaho Power customers realize that a significant portion of their power is
generated by hydroelectric plants, and that most customers consider hydropower to be renewable.
Customers who may want assurance that some of their power is supplied by the Elkhorn and Raft
River projects are, in Staffs opinion, a very small minority. This need for assurance by a very
small minority should not deny the majority of customers of the potential revenue from Green
4 The Elkhorn project is located in Oregon, approximately 130 miles northwest of Boise. The Raft River project is
located in Idaho, approximately 36 miles southeast of Burley.
STAFF COMMENTS 4 JANUARY 8, 2009
Tags, especially when the revenue could be used to acquire additional renewable energy. Staff
believes that most customers would rather receive a bil credit or more renewables projects than
the paper assurance that some of their energy supply is renewable.
Green Tags from some Idaho Power resources have already been sold.
Some of the RECs from the Raft River project have already been sold to another entity in
Colorado, so Idaho Power canot claim all of the MWhs it purchases from the project are
renewable anyway. To the extent such a problem really exists, Idaho Power already has to deal
with the problem of explaining that only a portion of the Raft River project is renewable,
regardless of whether it retires or sells the remaining Green Tags from the project.
Similarly, Idaho Power does not curently receive Green Tags from any of the 92 projects
with which it has PURP A contracts. In fact, for contracts signed after June 2004, Idaho Power
voluntaily waives any claims to ownership of Green Tags associated with the projects.
Presumably, if any of these projects or any futue PURPA projects eventually choose to sell
Green Tags to anyone other than Idaho Power, the Company could not claim that power it
purchases from them is renewable.
STAFF PROPOSALS
As an alternative to permitting Idaho Power to retire its Green Tags, the Commission
could require that the Green Tags be sold and that the sale proceeds be returned back to customers
through the PCA. This is the same mechanism by which the proceeds from surplus S02 credits
are being retured to customers.
As a second alternative, the Commission could require Idaho Power to sell all Green Tags
until they are needed, and fuher, to require that the sale proceeds be held in a dedicated account
directed towards the future purchase of power from new renewable projects. Funds could be used
either for directly purchasing renewable energy from others under a contract, or for buying down
rate base associated with future projects that might be owned by Idaho Power. That way, the
purchase of renewable energy could actually cause more renewables to be acquired than
otherwse might be. Effectively, under this approach, more renewables projects could potentially
be developed if the Green Tags are sold than if they are retired.
STAFF COMMENTS 5 JANUARY 8, 2009
Furthermore, converting Green Tags into dollars, i.e., sellng them, preserves their value
for use in the future. Green Tags normally have a "shelf life." Green Tags generated in the past
at some point become too stale and lose their abilty to satisfy curent or future renewable energy
requirements, such as RPS stadards. However, the proceeds from Green Tag sales, if used to
buy down rate base of future projects, benefit customers year after year for the life of the new
projects.
Staff recommends that Idaho Power sell its uneeded Green Tags for a year at a time
rather than under multi-year agreements, in order to preserve its abilty to retain and retire Green
Tags for its own use if they are required in the future.
Certification fees for retired Green Tags
If Idaho Power is permitted to retire Green Tags, Staff sees no point in paying fees to have
the Green Tags certified by Green-e. Fees charged by Green-e seem to not be based on actual
costs incurred for certification, and instead seem to be arbitrar.
RECOMMENDATIONS
Staff opposes Idaho Power's request to retire Green Tags it has obtained or wil obtain in
the futue. Staff recommends instead that Idaho Power be instructed to sell its Green Tags until
such time as they may be required in the future, and return the proceeds to customers through the
PCA. As an alternative, Staff would support holding the proceeds from Green Tag sales in a fud
dedicated to acquiring additional new renewable generation in the future. Policies regarding use
of the fuds could be determined in the future as specific opportunities for acquiring renewables
arse.
Respectfully submitted this e-t day of January 2009.
.Im Kristine A. Sasser
zr Deputy Attorney General
Technical Staff: Rick Sterling
i :umisc: commentsipce08.24ksrps
STAFF COMMENTS 6 JANUARY 8, 2009
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF JANUARY 2009,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-08-24, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
LISA NORDSTROM
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: Inordstrom(ßidahopower.com
bkline(ßidahopower .com
MARK STOKES
KARL BOKENKAMP
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: mstokes(ßidahopower.com
kbokenkamp(ßidahopower.com
~.\(oc
SECRETARY
CERTIFICATE OF SERVICE