20160930Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF

FROM: CAMILLE CHRISTEN
DEPUTY ATTORNEY GENERAL

DATE: SEPTEMBER 30, 2016

SUBJECT: THE PETITION OF IDAHO POWER COMPANY FOR A
DECLARATORY ORDER REGARDING PROPER AVOIDED COST
PRICING FOR JACKPOT SOLAR, CASE NO. IPC-E-16-21

On September 26, 2016, Idaho Power Company petitioned the Commission for a
Declaratory Order regarding proper avoided cost pricing for Jackpot Solar under the Public
Utility Regulatory Policies Act of 1978 (PURPA). The Company states that Jackpot Solar is
requesting avoided cost pricing for four qualifying facilities (QF), each planned to have a
nameplate capacity of 20 MW. The Company states that Jackpot Solar is requesting avoided
cost pricing under the Company’s incremental cost Integrated Resource Planning (IRP) method,
calculated at the time of contracting. According to the Company, Jackpot Solar claims that it is
entitled to lock-in an avoided cost rate for capacity at the time of the initial two-year contract,
although the Company is not capacity deficient until 2024. The Company asks for a declaratory
ruling that, under these facts, the proper avoided cost is determined at the beginning of each two-
year contract term, not upon the initial contract; and that a QF is not entitled to lock-in an
avoided cost rate beyond the two-year maximum contract term.
BACKGROUND
PURPA was passed as part of the National Energy Act of 1978. The Act’s goals
include the encouragement of electric energy conservation, efficient use of resources by electric
utilities, and equitable retail rates for electric consumers, as well as the improvement of electric
service reliability. 16 U.S.C. § 2601 (Findings). Under the Act, the Federal Energy Regulatory
Commission (FERC) prescribes rules for PURPA’s implementation. 16 U.S.C. § 824a-3(a), (b).
State regulatory authorities such as the Idaho Public Utilities Commission implement FERC
DECISION MEMORANDUM 2
rules, but have “discretion in determining the manner in which the rules will be implemented.”
Idaho Power Company v. Idaho Pub. Util. Comm., 155 Idaho 780, 782, 316 P.3d 1278, 1280
(2013) (citing F.E.R.C. v. Mississippi, 456 U.S. 742, 751 (1982)).
PURPA requires electric utilities, unless otherwise exempted, to purchase electric
energy from QFs. 16 U.S.C. § 824a-3; see also 18 C.F.R. § 292.101, 292.303(a). In Idaho, the
Commission must approve the purchase rate in a utility’s contract to buy QF energy under
PURPA. Idaho Power, 155 Idaho at 789, 316 P.3d at 1287. The purchase rate for PURPA
contracts must be “just and reasonable to the electric consumers . . . and in the public interest”
and “shall not discriminate against [QFs].” 16 U.S.C. § 824a-3(b); 18 C.F.R. § 292.304. Also,
the purchase rate shall not exceed the “incremental cost” to the utility, defined as the incremental
cost of electric energy or capacity which, “but for the purchase from [the QF], such utility would
generate itself or purchase from another source.” 16 U.S.C. § 824a-3(d); 18 C.F.R. § 292.101(6)
(defining avoided costs).
PURPA and FERC’s implementing regulations are silent as to contract length;
consequently, the contract length is left to the Commission’s discretion. See Afton Energy, Inc.
v. Idaho Power, 107 Idaho 781, 785-86, 693 P.2d 427, 431-32 (1984); Idaho Power, 155 Idaho
at 782, 316 P.3d at 1280. Ever since PURPA was implemented in Idaho, this Commission has
periodically modified the length for PURPA contracts. See Order No. 29029. Initially, the
Commission established a maximum contract term of 35 years, which it shortened to 20 years in
1987. Order Nos. 21018, 21630. The term was reduced to five years in 1996, and raised back to
20 years in 2002. Order Nos. 26576, 29029. In 2015, the term was reduced to two years for
individually-negotiated contracts (those not subject to standard “published” rates). Order Nos.
33357, 33419. When it shortened the term, the Commission also determined that utilities should
establish a capacity deficiency date at the time the initial contract is signed. Order No. 3357 at
25-26; Order No. 33419 at 9, 21-23. The Commission decided that, as long as the QF
continuously sells power to the utility, the QF would be entitled to payments for capacity based
on the capacity deficiency date established at the time of the initial contract. Order No. 3357 at
25-26; Order No. 33419 at 9, 21-23. The Company now asks for a declaratory ruling that the
avoided cost prices for these negotiated contracts, including the capacity component, are to be
calculated and reset prior to each successive two-year contract term.
DECISION MEMORANDUM 3
Procedural Rules 101 and 102 provide for the issuance of declaratory rulings by the
Commission. IDAPA 31.01.01.101 and .102. Pursuant to Rule 101, persons seeking a
declaratory ruling must state the ruling that the petitioner seeks, set out the factual allegations,
and indicate the statute or other controlling law pertaining to the petition. IDAPA
31.01.01.101.02. Rule 102 provides that the notice of the petition for a declaratory ruling will be
issued to all affected utilities. IDAPA 31.01.01.102.
STAFF RECOMMENDATION
Staff recommends that the Commission issue a Notice of Petition and Notice of
Modified Procedure, with comments due within 21 days of the service date of the Order and
reply comments, if any, due within 14 days of the comment deadline.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Petition and Notice of Modified
Procedure, with comments due within 21 days of the service date of the Order, and reply
comments, if any, due within 14 days of the comment deadline?

Camille Christen
Daphne Huang
Deputy Attorneys General

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