20220615Final_Order_No_35428.pdf

ORDER NO. 35428 1
Office of the Secretary
Service Date
June 15, 2022
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO ESTABLISH A NEW
SCHEDULE TO SERVE SPECULATIVE
HIGH-DENSITY LOAD CUSTOMERS

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CASE NO. IPC-E-21-37

ORDER NO. 35428

On November 4, 2021, Idaho Power Company (“Company”) applied to the Commission
for authority to establish a new schedule to serve speculative high-density customers—
specifically, large-scale cryptocurrency mining operators (“HDL Customers”). Application at 1.
On December 1, 2021, the Commission issued a Notice of the Company’s Application
and Notice of an Intervention Deadline. Order No. 35276. The Industrial Customers of Idaho
Power (“ICIP”) and 2140 Labs, LLC (“2140 Labs”) intervened. Order No. 35276.
On February 2, 2022, the Commission issued a Notice of Modified Procedure and set
public comment and Company reply deadlines. Order No. 35308
On April 12, 2022, Commission Staff (“Staff”) and 2140 Labs filed comments to which
the Company replied.
With this Order, we approve the Company’s Application.
APPLICATION
The Company reported that it had recently received increased prospective HDL Customer
interest of approximately 1,950 megawatts (“MW”) in the last few months—an additional load
that, if interconnected with the Company’s system, would exceed its ability to serve total system
load during the summer. In addition, the Company explained that recent restrictions on
cryptocurrency mining in China, coupled with the Company’s favorable rates, open parcels of
land in its service area, and high reliance on clean, hydroelectric power had created a resurgence
of interest in cryptocurrency mining in the Company’s service area. Id. at 4. The Company
pointed to the drastic rise in the price of bitcoin (a type of cryptocurrency) between mid-2017
and the end of 2019. The Company asserted that from the end of 2017 through 2020, as the price
of bitcoin declined from its December 2017 peak, “new market entrants canceled development of
large-scale projects or declared bankruptcy with electric service providers listed as creditors and
owed multimillions of dollars.” Id. at 9.
ORDER NO. 35428 2
The Company stated its concern that increasing electricity demand due to cryptocurrency
operations coupled with limited capacity would likely constrain its ability to meet peak demand
until at least 2026. The Company expressed additional concern that it would acquire new
resources to meet demand that would ultimately become stranded when the economics of
cryptocurrency changed. Id. at 14. Thus, the Company proposed implementing a new Schedule
20 to mitigate risks inherent to HDL Customers while meeting its obligation to reliably serve all
customers.
The Company explained that attributes of cryptocurrency mining operations were: (1)
high energy use and load factor; (2) the ability to relocate and disaggregate equipment to obtain
favorable rates; (3) volatile load growth and load reduction; (4) sensitivity to short-term
economic signals or volatility; and (5) lack of demonstrated financial viability. Application at 3.
The proposed Schedule 20 would incorporate three modifications to Schedule 9’s (Large
General Service) and Schedule 19’s (Large Power Service) rate design including: (1) fully
interruptible service during the summer peak season between 1:00 p.m. and 11:00 p.m. Monday
through Friday; (2) a proposed reallocation of the portion of cost-of-service derived summer
generation capacity costs currently collected in an on-peak demand charge; and (3) a proposal to
“price energy at a marginal cost in all pricing periods, based on Avoided Cost Averages as listed
in . . . the Company’s most recently acknowledged Integrated Resource Plan.” Id. at 14-15.
STAFF COMMENTS
Staff supported the Company’s overall proposal. However, Staff recommended that once
the Company had experience dealing with HDL Customers under Schedule 20, the Company
address Staff’s concerns and ensure that HDL Customer costs and benefits were appropriately
allocated in the next general rate case. Staff Comments at 2.
Staff noted that Schedule 20 is designed to: (1) minimize the risk of stranded assets by
treating HDL Customers’ demand as non-firm and requiring interruptible service during summer
On-Peak Hours to avoid the need to invest in resources to meet their capacity needs; (2) ensure
Schedule 20 customers’ share of demand-classified cost is being fully recovered throughout the
year, as a result of Schedule 20 requirements for interruptible service during summer On-Peak
hours; and (3) recover energy costs using marginal cost energy rates. Id.
ORDER NO. 35428 3
Staff’s comments focused on the following five areas: (1) cryptocurrency mining risk; (2)
interruptible/non-firm service; (3) pricing and recovery of energy-related cost; (4) pricing and
recovery of demand-related cost; and (5) an accounting treatment for Schedule 20.
1. Cryptocurrency Mining Risk
Staff believed it was reasonable for the Company to proactively mitigate risks inherent to
cryptocurrency mining by establishing the proposed customer class. Although Staff noted that no
entity is currently pursuing the large-scale cryptocurrency mining operations described in the
Company’s Application in the Company’s service area, Staff believed it was probable that
customers who would qualify under Schedule 20 would seek to obtain service from the Company
in the future.
2. Interruptible/Non-firm Service
Staff stated the proposed interruptible service in Schedule 20 minimized stranded-asset
cost risk by reducing the Company’s need to acquire additional capacity to serve HDL
Customers. Staff pointed out that “[r]equiring non-firm treatment is a reasonable approach for a
customer class whose members are high-risk and whose combined loads may lack the stability
necessary to minimize stranded-asset cost risk.” Id. at 4. After reviewing the proposed
interruptible service requirements and available options for obtaining non-interruptible service,
Staff concluded that the mandatory interruptible service feature struck a reasonable balance
between stranded asset risks and the Company’s obligation to meet customer demand.
Staff noted the parameters and methods for determining the scope of interruptible service
to minimize stranded-asset cost risk in this case were based on similar parameters and methods
recently approved to determine curtailment for demand response participants in Case No. IPC-E-
21-32. Staff further noted that HDL Customers who desire non-interruptible service can enter
special contracts allowed for customers requiring an excess of 10 Megawatts (“MW”), reduce
their capacity to qualify for service under a different schedule, or obtain electric service
elsewhere.
Staff believed that, ultimately, the parameters for interruptible service should be carefully
reviewed in the next general rate case or after Schedule 20 customers are established and data
has been collected to determine the amount, frequency, and timing of interruptions in service that
occur. Id. at 4. Staff also recommended that after it gains further experience with these
ORDER NO. 35428 4
customers, the Company consider the potential for HDL Customers with loads less than 10 MW
to be eligible for special contracts.
3. Pricing and Recovery of Energy-Related Cost
Staff noted the Company’s current customers’ energy rates are based on embedded
average costs derived from a test year. Id. at 6. To determine the energy rates for Schedule 20
customers, however, the Company proposed using the Avoided Cost Averages (“ACA”) in the
Company’s Integrated Resource Plan (“IRP”) as a marginal cost of energy. The Company
currently uses an embedded average cost rate structure for its current customer classes. Staff
noted there must be a level of stability within each customer class under the embedded cost rate
structure to ensure each customer’s cost-of-service allocation remains relatively stable between
rate cases. If the assumption held true that the Schedule 20 customer class lacks stability, Staff
agreed that a marginal energy rate was appropriate since it is based on the cost of the next
increment of electricity beyond what is needed by the Company’s core customers. Id.
That said, Staff was concerned with using an avoided cost rate not derived from a test
year and not currently used for any other customer rates. Thus, while Staff agreed in principle to
using the ACA in the Company’s IRP for Schedule 20 energy rates as proposed, it recommended
the Company consider alternative methods, including a marginal energy cost rate derived from a
test year in preparation of the next general rate case.
4. Pricing and Recovery of Demand-Related Cost
Staff stated that Schedule 20’s demand charges were based on Schedules 9 and 19 rate
designs. Id. Staff noted that Schedules 9 and 19 both have an On-Peak Demand charge that
charges customers for their highest 15 minutes of use during On-Peak hours only during summer
months. Staff supported the Company’s proposal to reallocate cost of service derived summer
generation capacity costs from the On-Peak Demand charge to the standard Billing Demand
charge to ensure Schedule 20 customers paid their fair share for use of the Company’s system.
5. Accounting Treatment
Staff supported the Company’s proposed treatment of Schedule 20 energy costs, revenue,
and usage in the Power Cost Adjustment (“PCA”). Staff noted, however, that additional analysis
was needed to determine how Schedule 20’s costs, benefits, and loads were incorporated into
base rates. Staff recommended the Company meet with Staff prior to the next general rate case to
examine how Schedule 20 should be incorporated.
ORDER NO. 35428 5
STAFF RECOMMENDATIONS
Staff recommended the Commission approve the Schedule 20 customer class as filed and
authorize implementation prior to the start of the June 15 to September 15 interruption period.
Staff also recommended the Commission order the Company to file conforming tariffs.
Within five years from the date the Company commences service to customers under
Schedule 20, Staff recommended the Company evaluate:
1. Assumptions regarding the risks and need for mandatory interruptible service;
2. The need for non-interruptible service through special contracts or other options
for customers with loads below 10 MW; and
3. The need for marginal cost-based rates.
Prior to developing the next general rate case filing, Staff recommended the Company:
1. Evaluate and compare other methods for determining a marginal cost of energy in
addition to the use of Avoided Cost Averages in the IRP for the Schedule 20
energy rate; and
2. Collaborate with Staff after re-evaluating Schedule 20 cost assignment based on
usage characteristics and system requirements and assign cost and benefits
incorporating interruption requirement parameters.
2140 LAB COMMENTS
2140 Labs contended there was no need to create a new Schedule as there were no new or
existing customers who would qualify under Schedule 20. 2140 Lab’s Comments at 1-2. 2140
Labs further contended that the Company’s research regarding cryptocurrency was scant and too
selective. Id. at 2. Specifically, 2140 Labs argued that—when cryptocurrency mining user load
was compared to residential user demand and cryptocurrency’s price fluctuation was compared
to other markets (e.g., Gold, S&P 500, and oil) over a longer time span—the Company’s
assertions that cryptocurrency load was inconsistent and unpredictable, and that its price was
highly volatile were inaccurate. Id. at 3. 2140 Labs also argued that cryptocurrency mining
operations entailed a host of economic development opportunities.
Based on the above arguments, 2140 Labs requested the Commission consider renaming
Schedule 20 as “Emerging Industry” rather than “Speculative High-Density Load.” Id. at 4. 2140
Labs averred that the word “speculative” had negative connotations and, moreover, did not aptly
ORDER NO. 35428 6
describe cryptocurrency operations. In sum, 2140 Labs suggested that renaming Schedule 20
would benefit Idaho by positioning it as a blockchain-friendly state. Id. at 4.
COMPANY REPLY COMMENTS
The Company stated it supported Staff’s recommendations. The Company pointed to the
recent example of a large-scale cryptocurrency mining operation breaking its contract and
quickly relocating to a different service area to meet clean energy goals and other corporate
goals. Company Reply Comments at 3. The Company stated that cryptocurrency miners’ stated
interest in using shipping containers which are easily movable to different service areas, and the
potential that current technological advances in cryptocurrency could reduce electricity demand
by 99.9 percent create a real potential for the incurrence of stranded asset costs.
The Company agreed with 2140 Lab’s assessment that cryptocurrency mining load
operates at a consistent and predictable load, but that “it cautions the risk of conflating the
cryptocurrency miners’ high load factor with transitory load and the associated stranded cost
risks [the Company] seeks to mitigate.” Id. at 6.
In conclusion, the Company requested the Commission approve the Company’s
Application and authorize implementation of Schedule 20 prior to the start of the June 15 to
September 15 interruption period.
FINDINGS AND DISCUSSION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-502 and 61-
503. The Commission is empowered to investigate rates, charges, rules, regulations, practices,
and contracts of public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provision of law, and to fix the same by order. Idaho Code
§§ 61-502 and 61-503.
The Commission has reviewed the record, including the Application, Staff and the
intervenor comments, and the Company’s reply comments. We find that the Company’s creation
of a new electric service schedule to provide service to potential HDL Customers is a reasonable
approach to proactively mitigate potential stranded asset costs to its core customers. Based on
our review, we find it fair, just, and reasonable to approve the Application.
While there are no customers currently seeking service under Schedule 20, we encourage
the Company to continue to evaluate assumptions regarding the risks and need for mandatory
interruptible service, the need for non-interruptible service through special contracts or other
ORDER NO. 35428 7
options for customers with loads below 10 MW, and the need for marginal cost-based rates.
Before it develops and files its next general rate case, we direct the Company to evaluate and
compare other methods for determining a marginal cost of energy in addition to the use of ACA
in the IRP for setting the Schedule 20 energy rate. We further direct the Company to collaborate
with Staff after the Company evaluates cost assignments based on usage characteristics and
system requirements under Schedule 20 and then assign cost and benefits incorporating
interruption requirement parameters.
We appreciate the comments of 2140 Labs and its optimism that cryptocurrency mining
operations will bring a host of economic development opportunities to Idaho. However, at this
time, we decline to rename Schedule 20 to “emerging industry.”
ORDER
IT IS HEREBY ORDERED that the Company’s Application is approved as filed. We
authorize the Company to establish a new customer classification applicable to HDL Customers
operating in a speculative industry and approve implementation of Schedule 20—Speculative
High-Density Load for HDL Customer effective as of the file stamp of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-
626. ///
ORDER NO. 35428 8

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 15th day of
June 2022.

ERIC ANDERSON, PRESIDENT

JOHN CHATBURN, COMMISSIONER

JOHN R. HAMMOND JR., COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\IPC-E-21-37 New Schedule\orders\IPCE2137_Final_rn.doc