20110706Reply Comments.pdf

Peter J. Richardson
ISB No. 3195
Gregory Adams
ISB No. 7454
Richardson & O'Lear, PLLC
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone] Tel
Fax: [phone] Fax
peter($richardsonandoleary.com
greg($richardsonandoleary .com
Attorneys for Clark Canyon Hydro
RECEIVED
zon JUl -6 PM~: 4 J
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF)
IDAHO POWER COMPANY FOR A )
DETERMINATION REGARING THE FIRM )
ENERGY SALES AGREEMENT WITH )
CLAR CANYON, LLC FOR TH SALE AND)
PURCHASE OF ELECTRIC ENERGY )
)
)
CASE NO. IPC-E-II-09
REPL Y COMMENTS
OF CLAR CANYON, LLC
COMES NOW, Clark Canyon, LLC ("Clark Canyon") and provides it's Reply
Comments to the Comments of the Staff of the Idaho Public Utilties Commission ("Staff') in
the above captioned matter dealing with the Application of the Idaho Power Company
("Company" or "Idaho Power") for approval of a PURP A agreement with Clark Canyon.
i.
SUMMARY
Clark Canyon is appreciative of Sta s review of the Agreement between it and Idaho
Power and respects Staf s duty to thoroughly review the terms and conditions of such
agreements. Nevertheless, Clark Canyon is concerned that Staffs Comments addressing the
separate REC ownership agreement it entered into with Idaho Power may reflect a
misunderstading relative to the Commission's role with respect to RECs. The purose of these
Reply Comments is to provided some context as to why Clark entered a separte REC agreement
and express concern relative to Stas conclusion that "the variety of ownership arangements
demonstrated in recent Idaho Power contracts may be an indication that consistent ownership
rules or laws need to be established in the futue." Staff Comments at p. 4.
II
DISCISSION - THE IDAHO PUBLIC UTILITIES COMMISSION HAS NO mRISDICTION
OVER REC OWNERSHIP
The question of ownership of RECs was addressed by the Commission in 2004 in a
docket in which it was asked by Idaho Power to determine the ownership of marketable
environmenta attbutes associated with the sale of renewable energy from a PURP A quaifying
facilty to Idaho Power. See Case No. IPC-E-04-2. In that docket, the Staff fied Comments that
contained an extensive legal analysis of the question of the Commission's jurisdiction to even
address that question, let alone rue in favor of one of the paries to the PURP A agreement then
pending before the Commission for approval. See Comments o/the Commission Staff IPC-E-
04-2Id. (March 19,2004).
Staff began its legal analysis by asking a series of relevant questions:
Staff contends that the initial question before the Commission is one of jursdiction.
Does the Commission have the statutory authority and jursdiction to determine who
owns the "environmenta attbutes" associated with a QF project that requests a PURP A
contract and proposes to sell capacity and energy to a regulated utility? If PURP A and
FERC rues do not address and do not require a QF developer to sell "environmenta
attibutes," to the purchasing utilty can the Commission in its implementation ofPURPA
restrict their sale to other paries? If the Commission has the authority under PURP A,
should it restrict their sale? Can the Commission require as a PURP A contract condition
that a QF grant a purchasing utilty a "right of first refusal" to purchase the "Green Tags"
associated with the QF facility?
Id atpp. 5 -6.
Reply Comments - IPC-E- i 1-09 2
Staff properly began its analysis of the questions posed by addressing the basic jursdictional
issue:
It is well settled that the Idaho Commission is a creatue of statute and derives its general
authority vis-à-vis electric utilties from Title 61, Idaho Code. Under State Law, the
Commission has authority over retail service. Wholesale power transactions are
regulated by the Federal Energy Regulatory Commission (FERC). The Federal Power
Act defines "sale at wholesale" as any sale to a person for resale. 16 U.S.C. § 824(d).
Therefore, all QF sales to an electrc utility are wholesale transactions.
Id atp. 6.
Having reached the basic conclusion that PURPA sales are not subject to ths Commission's
jursdiction, but are in fact subject to the exclusive jurisdiction ofFERC, the Stafs analysis next
tured to what powers federal law, through FERC, has delegated to this Commission relative to
PURPA:
Under federal authority, i.e., PURP A and the implementing regulations of FERC, the
Idaho Commssion has the authority to set avoided costs, to order electrc utilities to enter
into fixed term obligations for the wholesale purchase of energy from quaifying facilties
and to implement FERC rules regarding such purchases.
Id Emphasis provided.
The next question addressed by the Staf in their Comments is the relationship between RECs
and PURP A and the relevant FERC ruings addressing that relationship:
FERC in the Order cited by Idaho Power in its Petition (105 FERC ir 61,004) states that
the contract sale ofQF capacity and energy entered into pursuant to PURPA does not
convey renewable energy credits (RECs) to the purchasing utility (absent an express
provision in the contract to the contrar). FERC notes that RECs are relatively recent
creations of the States and suggested that "States, in creating RECs, have the power to
determine who owns the REC in the initial instace, and how they may be sold and
traded." "It is not" FERC states, "an issue controlled by PURPA."
Id
Consistent with Staffs recommendations in that case, the Commission rejected Idaho Power's
request for a right of first refusal and rejected PacifiCorp's and Avista's arguents in that case
Reply Comments - IPC-E-l 1-09 3
that the utilities owned the RECs in an Idao PURP A contract. Specifically the Commission
stated:
While this Commission wil not permit (Idaho Power J in its contracting practice to
condition QF contracts on inclusion of such a right-of-frst refusal term, neither do we
preclude the paries from voluntaly negotiating the sale and purchase of such a green tag
should it be perceived to have value. The price of the same we find, however, is not a
PURPA cost and is not recoverable as such by the Company.
Order No. 29480, at pp. 16 - 17 (emphasis provided). The QF's logically own the RECs because
the rates on the avoided costs of a gas-fired power plant do not include compensation for any
social or environmenta benefits that may be associated with a paricular facilty's generation of
electricity.
It is clear from Sta s analysis tht there are no RECs created in a PURP A contract with
an investor owned utility in Idao. It is also clear that if RECs exist at all, one must tu to state
law to discern how and whether they exist and who owns them. Staf s analysis of the status of
RECs in Idaho was directly on point:
Staf notes that Idaho is not a State that has established a renewable energy portfolio
standard for electrc utilties. Nor is it a State that has by legislation created green
certificates, green tags, renewable energy credits (RECs) or tradable renewable
certificates (TRCs) or established a market for the same. Nor also is Idaho presently a
state that has provided ta incentives or credits for the development of renewable energy.
(footnote on pending ta legislation omitted) In short, there appears to Staff to be no
hook that gives the Commission jurisdiction over "environmenta attibutes," not under
PURP A or federal law (including the Energy Policies Act of 1992), and not under Title
61 of the Idaho Code.
Id at pp 6 - 7. Emphasis provided.
Staff was unequivocal in its conclusion that the Commission has no subject matter
jurisdiction over the question ofREC ownership. Instrctive to the Commission as it
contemplates Stas curent comments on REC ownership is Stafs 2004 observation on Idaho
Reply Comments - IPC-E-II-09 4
Power's attempt to build a right of first refusal to REC ownership in PURP A contracts approved
by this Commission:
Arguably what Idaho Power proposes is an impermssible "tag" of propert. The Fift
Amendment of the U.S. Constitution states, "nor shall private property be taen for
public use without just compensation." This provision is called the ''takings clause."
Idaho Power requests a Commission Order granting the utilty by reguatory fiat a "right
offirst refusal." It proposes no compensation to the QF for the right. Electrc utilty
purchases of energy and capacity from PURP A QFs are mandatory. (citation omitted)
The environmenta attibutes associated with renewable QF projects are curently
separate from the capacity and energy sold to Idaho utilities. They are not bundled
together as a matter oflaw. Nor is the cost to purchase environmental attibutes included
in an Idaho utility's avoided cost. To the extent those attbutes have value and provide
additional developer incentive, Staff believes they should remain with the developer. At
ths time, no arguent has been advanced nor authority cited to justify or require placing
any regulatory restriction by this Commission on their ownership.
Id atp. 8.
Staffs comments are as apropos today as they were in 2004. Indeed, the Idaho Legislatue has
clearly established a state policy against the concept of a mandatory renewable portfolio stadard
- which is arguably the only state policy upon which one could conjure up an argument that
RECs belong to the utilties in the PURPA context. In 2007, the Idaho Legislatue adopted the
Idaho State Energy Plan which unequivocally rejects the concept of a mandate that utilties
acquie renewable energy sources:
While the Committee endorses renewable resources in general because of the many
benefits they provide, it declines to adopt specific tagets or stadards out of concern that
setting arbitrar tagets could conflict with the goals of maintaining Idaho's low-cost
energy supply and ensuring access to affordable energy for all Idahoans. The Committee
is also concerned that adopting firm tagets may not provide suffcient flexibilty for
Idaho energy providers given the rapid development of new energy technologies.
2007 Idao Energy Plan, (January 19,2007).
Thus, the Idaho Legislature has provided the Commission with policy guidance to the effect that
there be no mandated renewable portfolio stadard and that Idaho's utilities have no obligation
to, per se, acquire renewable energy.
Reply Comments - IPC-E-II-09 5
CLAR CANYON, LLC'S REC EXPERIENCE WITH IDAHO POWER
Clark Canyon voluntaly gave up ownership of its RECs durng the last ten years of the
curently pending power purchase agreement for the sole reason that it was under exteme time
pressure to execute the agreement for fmacing and other external reasons. It has been Clark
Canyon's position, consistent with the Stas comments cited above, that it owned and will own
all RECs associated with renewable projects it develops in Idao uness it voluntaly gives or
sells those RECs to another par. Idaho Power improperly insisted on contract language that
would have put a cloud on the marketabilty ofRECs. Clark Canyon did not have the resources
or the luxur of time to engage in protracted negotiations and possible litigation against Idaho
Power to prevent the power company's ''tg'' of the value of Clark Canyon' RECs. As a
result of a compromise, and in exchange for removing the offending languge, Clark Canyon
agreed to give Idaho power clear title to all RECs beginnng in year eleven of this twenty year
contract while retaning clear title in years one through ten.
Staff s comments that perhaps, "ownership rues or laws need to be established in the
future" are, for all of the foregoing reasons, off the mark. Ownership rues and laws are
unecessar in light of the fact that REC ownership unequivocally and legally lies with the
renewable energy developer. Franly, what is needed is for Idaho Power to cease flexing its
unequal bargaining. strength vis-a-vis QF developers and stop insisting on a cut of the action for
which it refuses to pay and for which it has no legal claim.
CONCLUSION
Clark Canyon, LLC urges the Commission to approve its Power Purchase Agreement
with Idaho Power as quickly as possible and without reservation. Whle appreciative of Staffs
concern with regard to Idaho Power's having engaged in a "varety of (REC) ownership
Reply Comments - IPC-E- I 1-09 6
argements," the solution is for the Commssion to diect Idao Power to ret to the statu
quo ante in which "in all prior Idao Power PURA contracts in which RECs are produced by a
projec, Idao power has voluntaly waived any right or claim to ownership of RECs and 100
percent of.the RECs have ben claied by project owners." StaComients at p. 3; see Order
No. 29577.
RESPECTFULL Y SUBMITTED THIS 6th day of July 201 1.
Richardson & O'Lear, LLP
By ó?tu~~
Peter J. Richardson
Clark Canyon, LLC
Reply Comments- IP-E-lI-09 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 7th day of June, 201 I, a true and correct copy of the
withn and foregoing REPL Y COMMENTS OF CLAR COUNTY HYDRO, LLC, was served
in the maner shown to:
Ms. Jean Jewell
Commssion Secreta
Idao Public Utilities Commssion
POBox83720
Boise, il 83720-0074
Donovan E Walker
Idaho Power Company
POBox 70
Boise, Idaho 83707-0070
dwalker($idahopower.com
Lisa Grow
Vice President, Power Supply
Idaho Power Company
PO Box 70
Boise ID 83707-0070
19row($idahopower.com
Randy Allphin
Cogeneration & Small Power Development
Idaho Power Company
POBox 70
Boise ID 83707-0070
~Cus
Nina Curis
Administrative Assistant
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