20100514Comment (ICL-RNP).pdf

Benjamin Otto, ISB No. 8292
710 N 6th Street
PO Box 844
Boise, ID 83701
Ph: [phone] x 12
Fax: [phone]
botto(aidaoconservation.org
RE.CEWED
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Attorney for Idao Conservtion League
Suzanne Leta Liou
Senior Policy Advocate
Renewable Northwest Project
917 SW Oak St, Suite 303
Portland, OR 97205
Ph: [phone]
Fax: [phone]
suzne(arnp.org
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TIER OF THE
APPLICATION OF IDHAO POWER
FOR AUTHORTTO RETURE ITS
GREEN TAGS.
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CASE NO. IPC-E-08-24
COMMENTS OF IDAHO CONSERVATION LEAGUE
AND RENEWABLE NORTHWST PROJECT
COMES NOW, Idaho Conseration League (ICL) and Renewable Nortwest Project
(RN) with these comments in the above captioned matter. As Idao's larest state-basd
conservtion orgaization, ICL represents over 9,500 members many of whom are customers of
Idaho Power. As customers of Idaho Power, ICL and its members have a deep interest in
promoting the efficient use of our energy resources in order to protect clean air, water, and open
space. RN is a non-profit advocacy organization promoting solar, wind and geothermal
resources in the four Nortwest states. RN's members are a unique combination of
environmental and consumer organizations as well as a varety of businesses engaged in the
development of renewable energy projects.
ICL COMMENTS 1 May 14,2010
On April 23,2010 in Order No. 31062, the Commission notified the public that Idao
Power had fied their REC Management Plan and established a public comIent period on this
plan. ICL and RN submit the following comments regarding this Plan.
BACKGROUN
Renewable Energy Credits Generally
A Renewable Energy Credit (RC), also known as a Green Tag, is a regulatory and
accounting mechanism that separtes the environmental attbutes from the energy produced by a
generation source and represents the value of those environmental attbutes. Using wind as an
example, when the tubine begins generating, the output is one megawatt-hour of energy and one
REC. The energy generated by the project is sold to utilities in the same maner as trditional
generation. The project developer can sell the RECs from the project to utilties, or to a wider
body of customers though the volunta REC market place.
A utilty may purchase RECs to satisfy a regulatory obligation such as a Renewable
Portfolio Stadard. Utilties and individuals can also acquire RECs through the voluntary
marketplace like Idao Power's Green Power Puchase Progrm. The REC system attempts to
captue the value - created by regulation or consumer demand - of a renewable energy project's
the environmental attibutes (including displaced fossil fuel-powered generation and associated
reductions in air pollution) and provides a reliable and auditable marketplace in which to trde
this value.
Once acquired, the REC owner has two options, either sell the REC or retire it. They can. .
sell the REC to another buyer just as in any other normal commercial transaction. Alteratively,
the owner can retire the REC (a peranent, legal obligation not to sell the REC to another
entity). Once the owner retires the REC, the owner is able to make a public claim about the
ICL COMMNTS 2 May 14,2010
environmental attbutes the REC embodies. For example, a clothing store could purchase and
retire a REC and then tell its customers the store is powered by renewable energy. The clothing
store cannot tell its customers that the store is powered by renewable energy without retirig the
REC.
RECs are essentially a marketing and accounting tool that makes up for the physical
impossibilty of trcking individual electrons. Instead of tracking electrons, utilties and REC
marketers in the Western Electrcity Coordinating Council (WECC) region use the Western
Renewable Energy Generation Information System (WRGIS) to account for renewable
megawatt-hours and their associated environmental attbutes that move though the system. The
WRGIS system keeps track of the RECs separated from the megawatt-hours of associated
energy that are fed into the grd and allocates these RECs into individual accounts as either sold,
baned, or retired. By moving RECs between these accounts, sellers, buyers, and regulators can
track their use of RECs. i
The Commodity Futues Trading Commission and trth in advertising laws at the state
level regulate the REÇ marketplace. In order to prevent misleading information or consumer
confusion, trth in advertising laws require that companies making environmental claims are
able, among other things, to substantiate their claims based on "competent and reliable
evidence." According to the National Association of Attorneys General, because it is physically
impossible to track the source of electrons delivered to customers, utilties and REC marketers
i WRGIS, Final Operating Rules, § 6, pp. 14-20 (June 4, 2007)( explaining the various accounts
for RECs and the effect of moving a REC between varous accounts). Available at:
htt://ww.wregis.org/ocuments.php
ICL COMMENTS 3 May 14,2010
should instead use "an auditable contrct path" that trcks the financial trsactions back to
specific generation sources.2
The WRGIS system provides this auditable contract path and supplies the competent
and reliable evidence in order for Idao Power to make trthful claims concerning the
environmental attbutes about its generation portfolio. Some examples of untrthful claims are:
(a) describing a utilty portfolio mix as supplying of 100 megawatt-hours of renewable energy
without consuming, i.e. retirg, the RECs to substatiate this claim, or (b) double counting
environmental attbutes by both claiming a portfolio supplies 100 megawatt-hpur and then
sellng the RECs substatiating this claim to another buyer. If Idao Power does either of these
things, they may be exposed to legal liabilty for makng false advertising claims.
Idaho Power's RECs
Since 2008, Idao Power has acquird RECs from two Power Puchase Agreements.
From Telocast Wind Power Parers, Idao Power acquires 100% of the RECs generated by the
101 MW Elkorn Valley Wind Project, roughly 300,000 RECs anually. See Order No. 30259,
IPC-E-06-31. From U.S. Geothermal, Idaho Power acquires a portion of the RECs generated by
the Raft River Geothermal Project. See Order No. 30485, IPC-E-07-17. The Commission, in
both of these orders, approved Idao Power's request to include the price of the RECs when
incorporating these projects into the Power Cost Adjustment. Id; Id.
Going forward, Idao Power plans to acquire some RECs and not acquire others. As part
of the Neal Hot Springs Unit 1 Geothermal PPA application, fied on December 28,2009, Idao
Power includes the RECs as par of the energy price and intends to recover this through the PCA.
2 National Association of Attorneys General, Environmental Marketing Guidelines for
Electricity, § 2 (b), pp. 4-8 (December 1999). Available at:
http://www.naag.orgliiblications environment.php (titled Green Marketing Guidelines)
ICL COMMENTS 4 May 14,2010
See Application at 5, IPC-E-09-34. In their 2009 IRP, Idaho Power explains the planed upgrade
to Shoshone Falls Hydroelectric Project "becomes even more economically attactive" when
they include the sale ofRECs. Idaho Power 2009 IRP at 36 - 37. However, both the Idao
Winds PP A approved last year and the curently pending PP A with Cargil Inc. do not include
RECs in the energy price. See Application, at exhibit 1 p. 17, IPC-E-09-25; Application, at
exhibit 1, p. 17, IPC-E-1O-15.
Regulatory History of Idaho Power's RECs
This matter originally arose when Idaho Power requested permission to retire the RECs it
acquired in 2007 aid 2008. Initially the Commission approved this request, over the objections
of the Staff, so that Idao Power could meet a futue federal renewable energy stadard and
communicate the level of renew abIes in their portfolio to customers. See Order No. 30720, at 3.
After granting the Industral Customers Petition for Rehearing, the Commission changed course
and ordered Idaho Power to sell the RECs it curently held and file a business plan for RECs
acquired in 2009 and beyond. See Order No. 30818, at 4-5. In this Order, the Commission noted
that Idaho Power also changed course and explained their desire to ban RECs instead of retire
them. Id., at 3-4. The Commission found "no compellng evidence" that baning the RECs
would "lessen the burden in meeting a futue federal stadard." Id., at 4. Instead, the
Commission concluded, "that the best use of (RECs) at issue în this case is to sell them and use
the proceeds to benefit Idaho ratepayers." Id. When the Industral Customers petitioned for
clarfication regarding the treatment ofRECs generated in 2009 and beyond, the Commission
denied this petition and instead explained "we. . . await Idaho Power's submission ofa business
plan that wil maximize the value of its futue (REC)s." Order No. 30868, at 3. The submission
of this business plan brings us to the present round of comments.
ICL COMMENTS 5 May 14,2010
Idaho Power's REC Management Plan
Idao Power's plan is to continue to acquire RECs, but sell them and retu the money to
ratepayers until obligated to retir them. They base their REC Management Plan on "a
reasonable likelihood that a federal renewable energy stadad ("RES") wil be passed by
Congress that wil requir the Company to obtain and retire RECs for compliaice." Idaho
Power REC Management Plan, at 2. Interestingly this Plan does not mention the other
justifications for retiring RECs Idaho Power previously put fort - to communicate the portion of
renewables in their portfolio to customers, and "align with state interests in promoting renewable
energy." Idaho Power's Reply Brief on Reconsideration, at 2, (April 20, 2009).
Turing to specific soures of RECs, the Plan defines four categories. For their existing
long term PP As for the Elkorn and Raft River sources, Idaho Power proposes to simply sell the
RECs and retu the income to ratepayers. Id., at 3. For existing PURA and other "REC
Generating Contrcts," they propose to acquir RECs "if a mutually agreeable price can be
reached with the project owner." Id. For New Long-term PPAs, Idao Power intends to include
the RECs in the contrcts (e.g. the proposed PPA with the Neal Hot Springs Geothermal Unit
fied as case No. IPC-E-09-34). Id. Finally, for "Qualified Renewable Projects," which
apparently include only Idaho Power's small hydroelectrc projects that "can be certified as
renewable under other states renewable portfolio stadards," they ''wil consider selling the near-
term RECs." ¡d., at 4.
COMMENTS
ICL and RN acknowledge the REC system can be conceptually challenging but
maintain that this system is very important for utilty customers. The Idao Energy Plan
instrcts Idao Power to purue the following resource priority: effciency followed by
ICL COMMNTS 6 May 14,2010
renewables. See 2007 Idaho Energy Plan, at 2. The REC system allows project developers,
utilities, and consumers to fulfill the policy priority by providing a trsparent, auditable
marketplace for the environmental attbutes of renewable generation.
Two factors drve the valiie of this marketplace - regulatory obligations and consumer
demand. The Commission ordered Idaho Power to submit a REC Management Plan ''tat wil
maximize the value" ofRECs going forward. Order No. 30868, at 3. To trly maximize the
value, this Plan should consider both of these value drivers. However, the Plan only considers
the value ofRECs to meet futue regulatory obligations in the form of a renewable energy
stadad. It fails to consider the valiie of REC retirement to meet existing regulatory obligations
imposed by trth in advertising laws. Idao Power originally requested the authority to retire
RECs in order to "comply with stadards regarding characterization of its resource portfolio to
customers." Idaho pOlYer Reply Brief on Reconsideration, at 2. As described above, ifldaho
Power consumes RECs by making public statements concerning the environmental attbutes of
the Elkorn, Raft River, or other renewable resources, they must retire suffcient RECs to
account comply with regulatory obligations imposed by trth in advertising laws. Compliance
with these obligations has value to ratepayers by both avoiding legal liabilty and faciltating
Idaho Power's abilty to communicate with their customers.
By only sellng RECs, Idaho Power's plan fails to maximize the value ofRECs that
retirement could provide. The Commission expressly did not foreclose the possible value of
futue retirement. See Order No. 30818, at 4. Instead, the Commission ordered Idaho Power to
sell prior year's RECs "unless and until the federal governent establishes renewable energy
standards and corrëspònding guidelines." Id. ICL and RN submits that, while no Federal RES
curently exists, there are guidelines and procedures for captung the value of REC retirement in
ICL COMMENTS 7 May 14,2010
the form of trth in Commodity Futues Trading Commission regulations, trth in advertising
laws, and the WRGIS trckig system. Idao Power's plan should explain how the company
intends to maximize the value ofRECs by complying with these guidelines and procedures.
Turing to the four categories ofRECs identified in the Plan, ICL and RN submit these
fuer comments. Firt, existing RECs from long term PPA provide a source of revenue for
ratepayers if sold, but alternatively allow for compliance with existing regulatory obligations and
consumer demands if retired. Idaho Power may not be maximizing the full value of the RECs if
the company chooses to sell them.
Second, for existing PUR A and REC Generating Contrcts, which Idaho Power may
acquire, the Plan does not attempt to explain how this seconda revenue stream could be used to
pursue additional renewable energy projects. The Plan does not explain how the curent practice
of not acquiring RECs maximizes the value of this potential revenue stream for ratepayers.
Third, for New Long-term PPAs, Idao Power "intends to continue to acquire long-term
rights to the RECs under these agrements." REC Management Plan, at 3. However, the Plan
does not explain why acquirg RECs for these projects should be treated differently than
acquirng RECs from PUR A projects. There maybe a simple reason for this, such the fact that
PURA contrcts are at avoided costs while other PP As are at negotiated costs. But the Plan
does not explain why this distinction maximizs the value of RECs for ratepayers.
Four, for Qualified Renewable Projects, the Plan considers acquirig RECs only from
projects that "can be certified as renewable under other states renewable portfolio stadards."
The Plan does not explain whether these projects may generate RECs based on other
qualifications such as those established for the region by WRGIS or nationally by Green-e.
Green-e certfies RECs, including some forms of hydropower, and provides a system for the
ICL COMMENTS 8 May 14,2010
..
captung this valiie thoiigh the volunta marketplace. See Green-e Energy National Standard
Version 1.6 (December 2008).3 By ignorig the ability to generate, acquire, and then sell or
retire RECS under these systems, the Plan may not maximize the value ofRECs to ratepayers.
CONCLUSION
TheREC system, while it can be conceptually challenging, provides a trsparent,
aiiditable marketplace for captung the added value of renewable energy projects. This value is
drven by both regulatory obligations, in the form of renewable portfolio stadard compliance
and trth in advertising laws, and consumer demand, in the form of the volunta marketplace
and consumer expectations. While complicated, this marketplace is real and growing. Even if
Idaho does not have a state-based regulatory requirement for renewable energy, Idaho Power
must stil comply with other regulatory and consumer obligations. These obligations create some
value to retiring RECs, including from avoiding liabilty and communicating with consumers.
Without addressing the issues raised by ICL and RN, Idaho Power's plan may not maximize
this value. We respectfully request the Commission to order Idaho Power to develop a more
detailed plan regarding whether or not to acquire RECs from all potential sources and how to
best derive value from these potential assets.
DATED this 14th day of May, 2010.
lsi &"\ ~ 0/1 6t'k//a/ Çt.L .
Suzanne Leta Liou
Renewable Northwest Project
Benjamin J. Otto
Idaho Conservtion League
3 Available at: htt://ww .green-e.org/getcert Je _ sta.shtml#stadard
ICL COMMENTS'9 May 14,2010