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Idaho Public Utilities Commission

Case No. IPC-E-10-22, Order No. 32094

October 15, 2010

Contact: Gene Fadness [phone], 890-2712

Website:
http://www.puc.idaho.govwww.puc.idaho.gov

Oral arguments set in biomass case

The Idaho Public Utilities Commission has scheduled Oct. 26 as the date for oral argument on whether an Idaho Power sales agreement with the developer of a biomass power project should be approved.

The staff of the commissioners who will decide the case cannot recommend approval of the project under the agreed upon rate. The developers of the project, Yellowstone Power Inc. will make arguments as to why the sales agreement with Idaho Power should be approved. Idaho Power is also in favor of the agreement.

The Yellowstone Power project is a biomass-fueled combined heat and power project. The project would be co-located with the recently commissioned Emerald Forest Sawmill, which employs up to 47 workers in Gem County. Power is generated using steam created from the controlled burning of the woody biomass fuel.

Idaho Power and the Yellowstone Project have agreed on a 15-year contract under which the project would generate an average 10 megawatts per month. Projects that generate 10 megawatts or less qualify for a rate posted by the commission under the provisions of the federal Public Utility Regulatory Policies Act, or PURPA.

At issue in this case is whether the project was far enough along in development that it can be grandfathered under an older PURPA rate that expired on March 15 and was replaced by a rate that is about 15 percent lower. Because the costs of PURPA projects are included in customer rates, the commission must ensure that Idaho Power and its customers are not paying an unreasonable rate for the power.

Under PURPA, regulated electric utilities are required to buy power from qualifying small-power producers or co-generators. The rate the utility pays power project developers is determined by the commission and is called the “avoided cost rate” because it is to be equal to the cost the electric utility avoids if it would have had to generate the power itself or purchase it from another source.

A key factor the commission uses in calculating the avoided-cost rate is a long-term natural gas forecast issued by the Northwest Power and Conservation Council. A change in the forecast automatically triggers a recalculation of the published avoided cost rates.  In March, the NPPC issued an updated forecast that resulted in a lower rate because of declining natural gas prices.

However, there are criteria established by the commission that allow projects to qualify for rates other than the posted rate if a project is under development when the rate changes. Those criteria include: 1) the developer has executed a power sales agreement  before the new rate became effective and 2) the developer has filed a meritorious complaint alleging the project was sufficiently mature and far enough along in the contracting process that a contract would have been signed had not the utility delayed the process.

The commission staff recommended the project not be approved under the former higher rates because a power sales agreement was not in place at the time the posted avoided cost rates were lowered and the developers had not filed a complaint alleging that a contract would have been in place had not the utility delayed it.

Idaho Power says the agreement should be approved because it was engaged with the developer in discussions throughout 2009. Further, Idaho Power claims, the developer was considering developing a larger project that would qualify for rates other than the posted rates before it was determined the larger project would not be cost-effective.

The project developer is Dick Vinson of Thompson Falls, Montana.

Oral arguments will begin at 2 p.m. on Oct. 26 in the commission hearing room at 472 W. Washington St.

Written comments are also being accepted via e-mail by accessing the commission’s homepage at
http://www.puc.idaho.gov/www.puc.idaho.gov and clicking on "Comments & Questions About a Case." Fill in the case number (IPC-E-10-22) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to [phone].

Documents related to this case are is available on the commission’s Web site. Click on “File Room” and then on “Electric Cases” and scroll down to the above case number.