19911002.docx

Minutes of Decision Meeting
October 2, 1991 - 3:00 p.m.
In attendance:
Commissioners Joe Miller, Ralph Nelson and Marsha H. Smith and staff members Scott Woodbury, Tom Faull, Don Oliason, Stephanie Miller, and Myrna Walters.  Also in attendance was David Hirschi.
Matter discussed was Scott Woodbury's October 1, 1991 Decision Memorandum re:  Case No. IPC-E-91-13 - Petition for Declaratory Ruling.
Answer to first question - declaratory order?  Yes.
Commissioner Smith said she wouldn't eliminate low water insurance requirement.  
Commissioner Nelson said he wouldn't either.  Liked the proposal of Marysville Hydro to take a look at the specific facts in front of you, like 20 water years and see what the chances are of low water year, year-end and base debt service on that.  Maybe that gets into an engineering project which is unreasonable.  Think they would have to do a lot of water study before building.  
Commissioner Miller quoted question from case this morning.  When should it be generic and when should it be case-specific?  Don't know what staff thinks about it, one way to proceed is to decide that the proposed contract provisions for Auger Falls are an acceptable alternative to low water insurance and leave open for other projects the possibility of other things on case by case basis.  Recognize that the other suggestions are potentially workable depending on the facts of those cases but not delay to decide those cases or use facts of those cases to change results in Auger Falls Case.
Idaho Power somewhere says that case by case review might be workable if they have the resources and commitment to do that.  If you take the general approach of trying to formulate a general standard that would apply in all cases or simply say in cases we will waive, depending on the case.
Tom Faull said on the K factor, that is what he thought.  There are too many different combinations to waive the K factor.  On insurance, he didn't know if Commissioners want to hear a case everytime someone submits a contract.
Commissioner Miller said it seemed to him that if a party was able to negotiate an arrangement based on debt service or other factor, ought to give them that option.
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Tom Faull said that falls into how much you want the utility and the Commission to look into financial arrangements of the QF.  Don't really have a position on that.  But it has been his understanding that the Commission does allows that.
Commissioner Miller said arguably if the QF initiates that idea and he wants to do it that way, if he is willing to let them have access to financial information, we are intruding on him.  That was always Perry Swisher's big idea.  He had found some legislative intent that we couldn't do that.  Think we weren't going to regulate QFs on rate of return regulation.  If for some other reason the QF is willing to let you know financial information and wouldn't lead to him being regulated, don't see whats wrong with that.
Commissioner Nelson said he thought there were circumstances where it was appropriate.
Commissioner Smith asked - do you think we are denying industry a reasonable degree of certainty if we limit this to Idaho Power?
Commissioner Nelson said if we say that the reserves that the banks require for low water requirement, that can be generally applied.  That is one or two of the big questions.  Maybe the big question.  Think if they are both proposing 3%, can approve that.
Scott Woodbury said it was originally 2.5%.
Commissioner Nelson said he didn't know why Auger Falls would agree to change that.  The other thing that has happened with 5 low water years is this is a good time to determine if low water insurance is needed.  Don't know the answer to that.
Scott Woodbury said there one facility that is just walking away is HeedCo.
Commissioner Nelson said this is the time to make a showing for low water years.
Commissioner Smith asked if it was Commissioner Miller's intent to answer general questions and petitions on Auger Falls?
Commissioner Nelson said he was saying there well could be other ways to do it.  Think to eliminate the low water insurance would be to revisit '292 and don't want to do that.  
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Could say - would reserve alternative to low water.  Approve 3% periodic deposit - and the lump sum of 1/3 water years.  
If they agreed to those, don't have objection.
Periodic Certification - 2 yrs. versus 4 years.
Commissioner Nelson said he thought four was more reasonable.
Scott Woodbury said Peter Richardson indicated that when it was available, all the QFs did purchase it.  Didn't agreed with that.  Why would someone want to throw money away with 3% when you could be making %.
Idaho Power has requested that if it does become available, utility would like the option.
Commissioner Nelson said he didn't know if the utility should have that option.  Could petition the Commission.
Tom Faull suggested language - say the contract is proposed (low water insurance) it appears to be reasonable and will review whats presented to us.
Commissioner Miller commented with the experience everyone is gaining, everyone knows the major concerns, parties are getting better at negotiating, am willing to leave a good part of this to the negotiating process rather than us with highly imperfect knowledge to prescribe a detailed level of how things ought to go.
Scott Woodbury said the shortest question to be answered is:  we are saying debt service account is a reasonable alternative to low water insurance, but are we saying there is no obligation to fund any account if the company has no debt to retire?
Commissioner Nelson said that is the question in Auger Falls.
Commissioner Miller said he hadn't thought about that.  Didn't think it was a question we were faced with.
Commissioner Nelson said he didn't know if we needed to answer that now.
Scott Woodbury said it came out of comments filed by Idaho Power in the '292 case.
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Commissioner Nelson said if Idaho Power takes first lien they wouldn't need as much security.
Tom Faull said they have some of that money in place already.
Scott Woodbury asked - is the Commission willing to defer to lenders to set up the requirements of any reserve account and go with what lender says is reasonable on the project or do you want to establish minimum standards to be met and if lenders fall within that, fine?  They have to comply with the greater standard?
Commissioner Miller asked - do we have to decide that in Auger Falls?
Commissioner Nelson said he didn't think so.
Tom Faull said the worry is if it is too low.
Commissioner Nelson said if the lender doesn't require anything, why do we have to do anything different?
Tom Faull said another option is to say this is part of the negotiation process and Idaho Power is responsible for those.  Commission's duty is to review.
Commissioner Nelson said if the project agrees to the lender's terms, if it is a large number, we don't have to do anything and we can deal with lower number.
Scott Woodbury said thinking of how the contracts are presented to us, we are not going to be privy to any of the financing terms.
Commissioner Nelson said the contract is going to have to say something about the security involved.  
Scott Woodbury asked commissioners if they wanted that detailed there?
Commissioner Nelson said if it isn't detailed there, we will have to do some inquiry.
Scott Woodbury said Commission has the Horseshoe Bend and Falls River contracts.  Asked Dave Hirschi about double down, water and K factor.
Dave Hirschi said they're not in there.  Had agreed to wait for the Commission's decision.
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Scott Woodbury said the periodic deposit you found to be reasonable.  The other proposals of some of the parties had proposed funding on excess profits, which is certainty, do you want to make any statement as to that not being workable?
Commissioner Nelson went over Auger proposal.  Think in this instance would approve it in Auger Falls but it seems oneous.  If you wanted to say 3% you could.
Tom Faull asked if there wasn't a cap on it?
Scott Woodbury said Idaho Power is proposing that the funding requirement should be based on percentage of estimated annual revenue.  Other parties felt it should be tied to actual debt service.  Yet, think that some of the concerns raised by Idaho Power are valid.  Whether or not that is statutorily prescribed on everything or if you think all we have to do is not regulate them as a utility, can look at those numbers if they are offered by the project ....
Commissioner Smith said she thought what we were going to see is for them, that it is reasonable in their contract but it wouldn't be limited to the people choosing other measures.
Scott Woodbury said he wondered what kind of guidance that gives to the company?  We haven't really told them what our thoughts are on that.
Commissioner Nelson said we have indicated that this method is acceptable.
Commissioner Miller said he had not realized those contracts were in here.  Thought if we approved Auger and said we would look at others, that would give everyone maximum flexibility and keep us out of the details.
Commissioner Nelson said while he thought these were coming in, thought they probably had language similar to Auger Falls.
Tom Faull asked how difficult it would be to put a proposal together?  Asked David Hirschi.
David Hirschi said they know what the project can bear.  Idaho Power has a pretty good idea.  Explained how you get that.
Commissioner Nelson said he would suggest that the way to handle these contracts would be to get some proposed language in; agreed on what you can and we can act on what the parties can't.
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Commissioner Smith said that would be preferable to what we have now.
Commissioner Nelson said if either party wants a provision that is different, then they are going to need something to back it up.  Think that gets us back to approving contract or looking at it if they can't agree.  Auger Falls is starting more from scratch.
Tom Faull said on a case by case basis you can make those decisions.  What was developed in this case was broad range of possibilities for exemption.  Each project is different.
Commissioner Nelson said the K factor is really different here.
Commissioner Miller said he guessed we are doing the right thing here.  Think we are helping people.
Commissioner Nelson said requiring David Hirschi to go back and do some negotiating puts pressure on him.
K Factor for Auger Falls -
Commissioner Nelson said he didn't know exactly how this works.  What kind of water right do they have at Auger Falls?  Suggested Orndorff should bring in more information.
Scott Woodbury said it seemed like one of the questions being presented is the requirement of double down stream water rights a hard and fact rule or can the QF go present other?
Commissioner Miller said commission is saying they can but they haven't.  Marysville can.  Horseshoe cannot.  Deer Creek cannot.
Commissioner Nelson asked if Owndorff didn't make one good point?  Quoted that point.
Tom Faull said you wouldn't need low water insurance if you proved there would never be low water.
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Scott Woodbury said going back to Horseshoe Bend, their offer is on Pages 7 and 8.
**Need to know if Idaho Power agreed to that.
Commissioner Nelson said commission could dodge a lot of it but need language on these other two projects.  
**Put back on next agenda.
Meeting adjourned.
        DATED at Boise, Idaho this       day of December, 1991.
Myrna J. Walters
Commission Secretary
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