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HomeMy WebLinkAbout19910301Reply Comments.pdf.tBaal BARTON L. KLINE LARRY D. RIPLEYc/o Idaho Power Company P. 0. Box 70 Boise, ID 83707 (208) 383-2674 Attorneys for Idaho Power Company Street Address for Express l.lail: 1220 }lest Idaho Street Boise, Idaho 83702 FAX Telephone No. (208) 383-2336 IN THE MATTER OF THE APPLICATION OF IDAHO POI.IER COMPANY FOR APPROVAL OF AN INTERCONNECTION TARIFF FOR NON-UTI LITY GENERATION nECilYri) [il rILED I '3i nflR 1 ftn B 11 i;iAl-10 iluiJLic UII LITI ES COIJ },II SS I Oil BEFORE THE IDAHO PUBLIC UTILITIES COi4MISSION ) ) ) ) ) cASE N0. IPC-E-90-20 REPLY COMMENTS Ii I. INTRODUCTION In accordance with IPUC 0rder No. 23548, Idaho Power Company hereby responds to the comments of A. Irl. .Brown (Brown) and the Independent Energy Producers of Idaho (IEPI) submitted in oppos'ition to the Appiication of Idaho Power Company for approval of new tariff Schedule No. 72. II. REPLY T0 C0MMENTS 0F A. }l. BROt'lN l. Ratepayer Neutralitv Requjres That Idaho Power Charge 0F Developers For Interconnection Costs. 0n pages 2 and 3 of his protest, Brown challenges Idaho Power's right to collect any interconnect'ion costs from fac'ilit'ies which meet the criteria for qual i fy'ing faci I i tV (QF) status under PURPA. The Commission first addressed the issue of QF interconnection costs jn 1980 in Order No. 15745 issued in Case No. P-300-12. A copy of the pert'inent portion of 0rder No. 15746 is attached as Exhibit 1. Since 1981, each of Idaho Power's 63 QF contracts approved by this Commission has required that the QF reimburse Idaho Power for the costs of jnterconnecting the QF project to Idaho Power's system. Requiring QF developers to reimburse Idaho Power for jnterconnection costs 'is proper because Idaho Power's avoided costs include the transmission, transformation, substation and other costs of integrating Idaho Power's "SAR avoidable resource" jnto Idaho Power's system. The site specific costs of constructing and insta'11 ing the interconnection facjl itjes to permit QF developers to engage in parallel operations with Idaho Power are paid by the QF developer because those costs would not be'incurred by Idaho Power jf it constructed the USAR'or purchased power on the wholesale market. To argue, as Brown does, that project-specific interconnection costs should be assumed by the utiljty and its ratepayers would mean that the QF developer would be credjted tw'ice. 0nce through the jnclusion in avojded cost rates of Idaho Power's cost of integrating the SAR and a second tjmein the form of a waiver of the costs 'incurred by the utjlity to interconnect the QF. Such a double credit would constitute an impermissible subsidy from ratepayers to the QF. See 0range and Rockland. et al. FERC 861,067 (1988). Such a double credjt would also mean that Idaho Power ratepayers would not be economically indifferent as to whether or not Idaho Power purchased power from QF's or generated or purchased the power jtself. 2 (t tlith this double credit, QF developers would receive more than Idaho Power's avoided costs and ratepayers would be d'isadvantaged. 2. Idaho Power Does Not Profit From The Recoverv of Interconnection Costs From 0F's. Brown's statements on pages 2 and 3 of his protest that Idaho Power wjll "as they have in the past, under a Commission mandate, realized sign'ificant profits from this source of construction by overcharg'ing w'ith'impunity." denotes a basic misunderstanding of utility accounting and ratemaking pract'ice. It js a commonly held misunderstanding among QF developers that Idaho Power increases 'its "ratebase" when it constructs faciljties to jnterconnect QF generators with its system. As the Commission is well aware, when the QF developer reimburses Idaho Power for the cost of construct'ing the QF interconnection facilities, there is no increase in Idaho Power's ratebase assets for ratemak'ing purposes. Another misunderstand'ing evidenced by Brown's comments js that Idaho Power has an incentive to inflate interconnection construction costs'in order to generate h'igher operation and maintenance charges, thereby increasing Idaho Power's profits. The 0&M charges proposed in Schedule 72 only recover Idaho Power's average costs of operation and maintenance of equipment and fac'iljt'ies of a similar sjze and type to those provided to QF's. The 0&M percentage charge includes physjcal maintenance as well as an allocation for taxes, insurance, and other overheads that are legitimate costs paid by the Company. Idaho Power's retail customers reimburse the Company for those costs through their reta'il rates. Because QF facil ities do not purchase power from Idaho Power, the only way that their fair share of system 0&l,l costs can be recovered 'is by the payment 3 II of an 0&M charge. In addition, any 0&l'l charges collected from QF developers act as an offset to Idaho Power 0&M revenue requirement so there is no double recovery by Idaho Power. If Idaho Power is unable to collect the QF developer's share of 0&M costs through an 0&lil charge, the end result wjll be an unlawful and unreasonable subsjdy from Idaho Power 's ratepayers to QF developers. A third misunderstanding commonly held by QF deveiopers is that Idaho Power's actual costs of operation and majntenance of QF interconnection facilities are substantjally less than the amounts collected by the percentage 0&M charges. Brown evidences that misunderstanding in hjs protest by complaining on page 5 that Idaho Power has performed substantially less actual maintenance on hjs line than the amount Idaho Power has collected in operation and maintenance charges. Brown's position seems to be that Idaho Power should only collect those actual 0&l'l costs incurred by Idaho Power when working on the QF's specific facilities. It js obvious why Brown would make such a proposal. Maintenance on a brand new line will usually be much less than on an older line. As a line gets older, maintenance and operation costs tend to increase. QF developers tend to focus only on the ear'ly years of the project's life. It is typ'ical in QF contracts for the original developer to sell or transfer the project prior to the expirat'ion of the QF contract. Therefore, h'igher 0&M costs in the later years of the contract are of much less concern to the original developer. QF developers would always prefer to pay actual majntenance costs during the ear'ly years of the economic life of the'interconnection facilities but have Idaho Power and its ratepayers absorb the costs during the later years. The percentage 0&l'l amounts in Schedule 72 are based on Idaho Power 4 {I system average costs of operation and maintenance for facilities of similar s'ize and character to those installed at QF sites. Those average costs include both new and older facilitjes. By using an average cost of 0&M, Schedule 72 recognizes the real ity of increasing operation and maintenance costs over the 20 or 35 year life for the typical QF contract. There is no question that charging for 0&M as a percentage of construction cost substantially reduces the administrative cost to Idaho Power as compared to charging and collecting for actual 0&M costs. Charging and collecting actual 0&M costs for QF projects would mean that Idaho Power would have to establish separate system of maintenance work order preparation and billing just for QF projects. Such a requirement is both unreasonable and unnecessary. The present system of charging a percentage of construction costs reasonab'ly approximates Idaho Power's actual 0&M costs and provides the QF with a high level of predictability as to what hjs 0&M costs will be over the life of the project. Idaho Power has been advised that this predictability is h'igh1y desirable when QF's seek to borrow money to finance their projects. In Idaho Power's experience, most QF developers prefer to pay the monthly average 0&l'| charge and not have to worry about coming up with a large amount of cash if a future catastrophic event were to require a sign'ificant rebu'ilding of interconnection faci I ities. III. REPLY TO COMMENTS OF IEPI l. The Five Year Vested Interest Refund Period is Reasonable. The IEPI proposes that the vested interest refund period for Interconnection Fac'ilitjes funded by QF developers be equal to the term of the 5 {I ( contract wjth Idaho Power. IEPI argues that QF's should recejve more favorable treatment than a retail customer of Idaho Power because their situation'is djfferent. A closer examination of IEPI's position demonstrates that there js no valid dist'inction between a QF and a retail customer for purposes of line extension "refunds". Experience has demonstrated that QF projects are often sold and partial jnterests in projects are routinely assigned. The fjnancial institutions and other investors obtaining an interest in the refunds do change and keeping "track" of the varied interests for an extended period would be an onerous burden. Idaho Power's experience wjth line extensions under Schedule 71 led to the five year refund period for retail customers. The longer the refund period, the more exotic and complicated the interests in possible refunds become. IEPI erroneously assumes that QF's will be the only party ever interested in the "vested refund." Keep in mind that to the extent the QF receives a refund from a third party, the third party in turn now has an interest. The administration (and disputes over the proper computation of refund) will become geometrically more complex with the addition of every thjrd party. Extending this process for up to 35 years conjures up prospects of controversy which even the most fertile 'litigious minds cannot anticipate. Th'is is exactly why under Schedule 71 the vested interest period js limited to five years. IEPI also contends that it is only administrat'ive ease which prompts Idaho Power to propose the five year limit on vested interest refunds for QF developers. However, once a QF has paid the origina'l interconnect'ion cost, it becomes the respons'ibility of Idaho Power to replace the facilities with no 6 i additional contribution from the QF. To put into effect a "life of the contract" refund provisions while at the same time providing that the QF is not required to contribute for rep'lacement of facilities, is not Iogical or equitable. Again, this is why refunds for l'ine extension prov'isions for retail customers are limited to five years. IEPI's contention that they should receive more favorable treatment than retail customers for line extensions ra'ises an interesting issue. t,lhy should they receive any refunds for line extensions at all? 0bv'ious1y, as refunds are made to the QF, this "refund" becomes rate base and is translated into investment the retail customers must support in revenue requirement proceedings. The QF is a seller of power, not a purchaser of power. Is interconnection investment not a cost of doing business for the QF producer? The Company, in its tariff, has proposed to treat the QF and the retail customer the same based on "a fairness doctrine." Admittedly, however, IEPI's comments as to thjs issue raise the question as to whether refunds are appropriate. Most certainly, the QF is not entjtled to more favorable treatment than other customers contribut'ing facil ities. 2. Adoption of IEPI's Reouirement That Interconnection Equ'ipment Should Always Be Valued at Actual Construction Cost Could Disadvantage Manv 0F's. It is important to remember that the "Interconnection Fac'iljties" addressed in proposed ScheduleT2 are those facilities that are orwill be a part of Idaho Power's electrical system. They will be used not only for delivery of QF power but will have an impact on the delivery of reta'il serv'ice to customers. As a result, it is critical that these Interconnection Fac'ilities be constructed 7 tI { { to the same quality standards and specifications as the rest of Idaho Power's system. That portion of the interconnectjon on the QF's side of the Po'int of Delivery, will be constructed, operated and maintained solely by the QF. Idaho Power will 'in'it'ia'lly review the design of those facil ities to ensure compatibility with the system but will not control construction quality or 0&M practices on the QF's side of the Point of Delivery. l,lith that in mind, a brief explanat'ion of how Idaho Power determines Interconnection Facility Constructjon Cost may clear up some of the confusion evidenced by IEPI's comment regard'ing the pricing of constructing and instalf ing Idaho Power Interconnect'ion Faciljties under Schedul e 72. Ilhen constructjng line extensions larger than 100 Klrl under ex'isting Schedule 7l and when constructing the interconnection facilities for exjsting QF's, Idaho Power uses work order estimated construction costs to determine the cost of line extensions and QF interconnection facilities. l,lork order estimated construction costs are determined by visiting the site of the ljne and related substation locatjon. Based on the routing of the I'ine, the terrajn and the sojl cond'itions (1ava, etc. ), the work order est'imate i s prepared. The cost of equipment to be jnstalled is determined by using compatibie unit codes for various types and groups of equipment, i.e., poles, conductor, ground wire, staples, etc. Transformation, relays and other substation equipment costs are based on the actual purchase prices from the manufacturers. By utilizing work order construct'ion cost est'imates, Idaho Power is able to give customers and QF developers a firm commitment as to the cost of installing fine extensions and 'interconnection facjl'ities. The developer can pay these construction costs up 8 t front and lock in the total construction cost it will jncur for interconnecting its project to Idaho Power's system. The vast majority of QF developers have found this process to be desirable, as it assists in thejr abiiity to firmly quantify costs for financing purposes. 0n a few occasions, QF deve'lopers have requested that Idaho Power charge for jnterconnectjon facilities on the basis ofactual cost jncurred rather than on the basis ofwork order estimated costs. In those cases, Idaho Power has collected the work order estimated cost amount prior to the start of construction, and when all of the various construction costs, subcontract payments, easement costs and other cost reconcjljations have been completed, Idaho Power either made refunds or charged any overage directly to the QF. It usually takes 6 to 9 months after completion of constructjon to collect all of this "paperwork" and compute the actual cost of construction. Idaho Power advises QF's that they have the alternative to proceed in this fashjon, but only a small handful have ever exercised that option. Those who have exercised the actual cost option tend to be large, self-fjnancjng organizations who aren't as concerned about having a maximum construction cost locked 'in, but prefer to take the chance that actual construction costs will be lower than estimated. As the Commission knows, IEPI represents a group consisting primarily of'large jndustrial cogenerators. In most cases, thjs type of developer will utilize internal financing to construct thejr projects and as a result they are not so concerned about locking in costs to satisfy third party lenders. However, IEPI's proposal that jnterconnection constructjon costs should only be determined on the basis of actual construction costs rather than work order estimates will not work as well formany smaller QF's that desjre to have the up-front certa'inty 9 {{ that goes along with Idaho Power's use of work order estimated construction costs. Idaho Power believes that IEPI js reading the "construction cost" provisions of Schedule 72 much more strictly than js necessary. Schedule 72 js primarily directed to the 95% of the cases where the QF developer chooses to utilize the work order estimated construction cost determination rather than the actual cost determination. However, Schedule 72 as written does not preclude use of actual construct'ion cost if the QF deve'loper chooses that option, and Idaho Power will continue to advise QF developers that this option is available. It i s al so 'important to remember that Schedul e 72 al I ows QF developers to contract for the construction of a portion of the Interconnect'ion Faciljties and transfer them to Idaho Power. If the QF developer befieves that he can construct those facjlities at a price that is lower than Idaho Power's "Construction Costs" or "Transfer Costs", he may want to opt to construct thjs portion of the Interconnection Facilities himself. Idaho Power beljeves that the IEPI goes too farwhen it requests that the Commission require that the construction cost of interconnection equipment should onlv be valued utilizing the actual constructjon costs. In fight of the fact that Schedule 72, as proposed, does not prec'lude the use of actual construction costs and allows the QF to construct and transfer portions of the Interconnect Facilitjes to Idaho Power, such a requ'irement could adversely affect smaller QF's without prov'iding any material benefit to the large QF developers represented by IEPI. l0 (I Of Tho OF fnntn:rt Shnrrld Ro Daawrminad hrr tha fnmmiccinn Idaho Power concurs that in reviewing Schedule 72, the Commission should address the question of "Salvage Yalue" and the disposition of interconnection equipment at the expiration of a QF contract. At the outset, it is'important to distinguish between contract expiration and contract termination. IEPI's comments refer to contract termination. It is Idaho Power's posit'ion that if a QF contract is terminated prior to completion of the full term, the QF has only those rights establ'ished jn the Firm Energy Sales Agreement and the lien documents between the QF's first mortgage lender, Idaho Power and the QF. Therefore, in these comments, Idaho Power is addressing only the situation that occurs upon expiratjon of the contract term after full performance by the QF. As a part of the implementation of 0rder No. 15746 issued on August 8, 1980, in Case No. P-300-12, the Commission required Idaho Power to include the "Sa'lvage Value" provision presently contained in all Idaho Power QF contracts. A copy of the pertinent portions of that implementatjon document'is attached as Exhibit 2. By requiring the jnclusjon of the Salvage Value provis'ion in all QF contracts, the Conrmission determined that interconnection equipment installed by Idaho Power to complete an interconnection between Idaho Power and a QF developer would be treated more favorably than a line extension constructed to supply service to a non-QF developer. Line extensions under Schedule 71 do not provide for "Salvage Value" or payments to the original deve'loper when service js ended. Idaho Power would request that the Commission reexamine this preferent'ia1 treatment accorded to QF developers. 11 {( { For QF developers who obtain 20 year or 35 year contracts with Idaho Power, the question of the value of interconnection equipment at the end of that time period has traditionally been a non-issue. The on'ly time the question of "Salvage Value" has been an issue for negotiation was in the recent contract wjth J. R. S'implot Company. That contract is for a 5 year term, and as a result, the 'issue of the disposition of interconnection equipment at the end of the contract was a subject of discussion. In the case of a'long-term QF contract, in all likelihood at the end of the contract term, the equipment that the QF orjginally paid for wi'11 have been fully depreciated or replaced by other equipment in the ordinary course of Idaho Power's operation and maintenance of its system. Therefore,'it js a legitimate question whether or not the QF really has any retained value in the equipment at the end of 20 or 35 years. Nevertheless, jn light of the language in Exhibit 2, Idaho Power has previously agreed to pay sa'lvage value if the equipment was actually removed at the end of the contract. If the Commission desires to consjder such an expansion of the "Salvage Value" concept as requested by the IEPI, it must keep in mjnd that the only time the jssue arjses is when the interconnect'ion facjlitjes are to be physically removed at the end of the agreement. In jts comments, the IEPI requested that the salvage value concept be expanded to address three "scenarios" under which Idaho Power's treatment of developer funded Interconnectjon Facilitjes at the end of the contract termwould be predetermined. IEPI's fjrst scenario would preclude Idaho Power from removing the Interconnection Fac'iljtjes at the end of the QF contract term if the QF desired to enter into a subsequent contract w'ith Idaho Power. In actuality under this t2 i scenario, there would be no reason for Idaho Power to remove the facilities, as they would still be needed to insure the safe del'ivery of power to Idaho Power under thjs new agreement. Because the operation and maintenance charges would be governed by a tariff, there would be no change in 0&M charges to the QF. The second scenario would be similar to the first. In the QF desjred to have Idaho Power wheel the QF generation off Idaho Power's system, Idaho Power would still need to have the interconnection and safety equipment remajn in place to assure the interconnection would cont'inue to operate safely. 0bviously, there may be other wheel ing costs jn addition to the costs of the interconnection equipment that would be incurred dealt in a wheeling situation. Those additional costs would be addressed in a separate contract between the QF and Idaho Power. The third scenarjo described by the IEPI comments is the only one that actually'involves the removal of interconnectjon equipment. It is at thjs point that the question of the length of the term of the contract should be addressed. In the case of a contract of very short duration, (fike the Simplot contract), the salvage or resjdual value of the equipment may be sufficient that it may be more appropriate to consider paying salvage value or delivering the equipment to the QF. As noted previously in these reply comments, other customers of Idaho Power that fund interconnectjon equipment are not afforded the same treatment upon dispositjon of interconnectjon facilities that the Commission has previously extended to QF developers. IEPI seeks to expand that preference even further by requiring that Idaho Power turn the actual equipment over to the QF developer at the time of the expiration of the QF contract. Finally, Idaho Power does not beljeve any changes need to be made to ScheduleT2lo address the vast majority of long term QF contracts. In the case l3 f i of very short QF contracts, (5 years maximum), the sa'lvage value issue should be addressed on a case specifjc basis in the QF contract. IV. CONCLUSION Idaho Power believes that Schedule 72 as submitted represents a reasonable approach to the numerous issues raised by the interconnection of QF facilities to Idaho Power's system. ScheduleT2, as proposed, is based on Idaho Power's l0 years of experience 'in negotiating QF contracts and constructing and installing interconnection facilities between Idaho Power and approximately 60 QF developers. Schedule 72 also draws upon the many years of experience Idaho Power has had in administering Schedule 71. Idaho Power believes that Schedule 72, as submitted, will provide stable, standard treatment for the vast majority of QF interconnections. As with all tariffs, it will be necessary to maintain a measure of flexibility in administering Schedule 72. Idaho Power believes that all of the concerns raised by the IEPI are adequately addressed by the tariff, and it is hoped that these reply comments have clarifjed the quest'ions rajsed in the Comments. For all of these reasons, Idaho Power would request that the Commission issue its 0rder approving Schedule 72 as proposed. Idaho Power further requests that the Commission consider eliminating the requirement to pay salvage value for QF contracts longer than 5 years. Idaho Power also believes that the Commission can issue its Order based on the written comments received. l4 { It does not appear to Idaho Power that convening a hearing to further address these issues wou'ld add much clarification. RESPECTFULLY SUBMITTED thi s 28th day of ebruary, 1991. CERTIFICATE OF 1'lAILING I hereby certify that on this 28th day of February, 1991, I mailed a true and correct copy of the w'ithin and foregoing REPLY C0MMENTS, postage prepaid and addressed as follows: Scott I'loodbury Idaho Public Utilities Commission Statehouse Boise, ID 83720 A. Ir. Brown Company, Inc. 3416 Via Lido, Suite F Newport Beach, CA 92663 Peter J. Richardson DAVIS }'RIGHT TREMAINE 350 North 9th Street, Suite 400 Boise, ID 83702 15 t ( U of che ucilicy's Coomission-approved curtailraenc plan so as to give special consideratlon !o coteneraEors, resenracion of a block of power to serrre t,he cogeneraEor's oun needs, or subcraction of oucages causcd by ucili,ty currailocncs fron the coteoeracorts toEal aoounc of firn por.rer cooaitnenB in a given tlae fraoe.24 The solution is noc, as suggesced by Poclatch, !o create a poecr cnlitlerDent in che cusE,ooer equal ro che a[ount of pouer ir ls generacing. This rould be double councing. If onc opts for thc bencfics of a simullancous purchase and sale, the trro processes arc i.ndependent of one another. One cannoE receive capacicy payoent,s based on a legally enforceable obligation to deliver poeer and, at the sane tioc, rcEain the right to keep chat polrer to oneself at tioes of eurtailnent. Problcos of chis sorr are precisely che reason rhy large faciliries require individually negoBiated conE,racts. VIIl. INTERCONNECTIOII AIID TJHEELING. The issucs of inrerconnection and reheeling did not reccivc exEensive discussion during the Coooisgionrs February and Junc hcarings. Nonetheless, they represen! areas of significanc concern. The costing principlcs are straightforuard enough. Secsion 292.306 of the federal rules nakes ic thc duty of the qualifying facllicy to reiabursc lhe utility for incerconn€cE,i,on cosEs on a nondiscrininatory basis with respect to ocher cuscoacrs having sioilar load characteristlcs. This Eeans that thc cotencrator or soall poeer producer is responsible for the "net increased lnterconneccion costs" iuposed on the uti,lity "compared to lhose coscs ic ';ould have incurred had i! generated rhe energy itself or purchased an cquivalent anount" froo anocher source. 45 Federal Rcqistcr aa 122n.25 Horcover, lhesc cosEs includc ,,only 24. Coeoents to thc FERC rules noce chac che cogeneracoroay deserve addicional, palruenE.s if it conEracts "t,o forego icsorrn u3e of energy during 3ysteo eoergcncles and provide power toa uEiIiEy's sysEen" 45 Rcderal tregister az L2227. 25. Thcse costs oay befor facilcies with a desi.gnledcral iQegjster ac 12230. assegsed on a class average basiscapacicy of 100 KLl or less. 45 38 ft<hibit 1 ( { ,lI rhose addicional interconnecrion e.\penses incurred by the ucilicy as a result of c,he purchase." They do "noc include any porrion of che incerconnection cosEs for grhich the qual.i.fying facility has already paid through its retail races." Ibid. FinalIy, ugilicies are encouraged to errange for paynenc of these coscs on a rcasonablc aoortizaEion schedule raEher than in a large lunp suE. 45 Federal Segister aE 12230. Of far greater concern is the questioo of whether che qualifying facilicy has a righc co h:rve ics pouer uheeled co a uri,ltty locaced oucside Ehe senrice area nhere it is intercon- nected. The FERC comnent,s offer litcle guidance on this poinc. They noce chac There are several circumstances ln trhich aqualifying facility oighc desire that BheelecEric utiliEy eith ehich it is intercon-nected not be the purchaser of the qualifyingfacility's energy and capaci!y, buE, uouldprefer instead E.haE an electric utility rriBhuhich che purchasing utilicy is incerconnectednake such a purchase. 45 Federal Segjster aa L2219. The exaople given is an all-rcquire- Ecnrs uciliCy thac possesses no generaEing capacity of irs onn and uhose avoided costs, therefore, are Ehose of its wholesale bulk power conEraccs. This is an easy exaople, but not really to che poinc. The poi,nc is that any sophi,sticated qualifying facility rill {g3p desire to sell its outpuc outsidc tbc serrrice arca of ics otrn utiliE,y if ic can get a higher price clser.rhere. In parr,icular, assuoing that t,he transtrission capability esisEs, cogeneracors and snall power producers in che Northnest r.rould always find it to cheir advantage co sell to California uti.licies in order co receive the higher avoided costs of those ucilitics. l'Ie do not see an eesy resol.ucion of chis problco. For onc Ching. ree do noc believe chat PURP.{ had as a goal che cradication of : sgatc boundaries and che creation of a "value of sewice" priclng oechaniso uhereby che ucility r,rich che highest avoided costs bids up the price and bccones the recipienc of all pouer available fron all cogenerators and soall por.rer groducers in a given region. For anochcr, r.lc believe EhaE in tines of oassive curtailneoE, due to regional drought, Idaho ratepayers gould find it unacceprable 39 ( IDAIIO PIIBLIC IITILITIES COMMISSION STATEHOUSE BOISE, IDAHO 83720 334-3143 CONLEY WARD. JR.. President RALPH H. WICKBERG. Commissioner PERRY SWISHER, C ommissioner JOHN V. EVANS Goverttor 1:' October 24, 1980 Mr. Bart Kline Idaho Power CompanyP. O. Box 30Boise, Idaho 83721 Dear Mr. Kline: Order No. L5746 regarding cogeneration and small povTer pro- duction required Idaho's electric utilities to carry out Sections 201 and 2L0 of the Public UtiLity Regulatory Policies Act byoffering to purchase electricity froq iqdividual cogenerators and small power producers. The vehicle for extending this publicoffering is to be a package similar to that proposed by Washington Water Power: 1) a tariff for smaller producers wishing to sell non-firm energy at system avoided energy costs; and 2) a standard fomcontract for transactions up to 10 MW that may involve either fi::uror non-firm sa1es. As you are no doubt aware, few proposals are accepted by the Couurission without some iterative process of modification. Thereis no set path for this process, other than that dictated by the circumstances of each case. In this instance, creating a uniformcontract for all Idaho's electric utilities is not necessary or even desirable. The choice remaining is to work individually with each uriLity. I,lhile ldaho Power Company has submitted a packageconsisting of a tariff and a standard form contract, review of thesubmittals leads me to recomrend several changes in the positions, wording and nr"mbers incorporated in your standard form contract andtariff. The accompanying pages contain my recommendaLions and comrents.After consideration of this material if ldaho Power will modify itsfiling to include these or other changes, submit a revised filingas soon as possible, or noEify the Conurission of your intention inthis regard. Sincerely, Curt I{interfeLd, Director Research & Consr:mer Assistance CW:k1Enclosures Bhibir 2 (( :<; ( -7- The contract does not specify what, if any, paFtenLs will be required by Sel1er during temporary outages covered under force majeure. If Se11er's Facility is destroyed with an ensuing lengthy reconstruction period, the conEract should specify continuation or suspension of capacity payments to setter *g\drlo Power. In the event of Contract Termination due to force majeure, i.€., the Facility cannot be rebuilt, Appendix C should clearly state what termination charges are applicable. Article VIII (C) should be a:nended to include the language that, "if the damaged or destroyed Facility is not repaired or repLaced, Idaho shall pay Seller from the proceeds that portion which exceeds the refund obligation of Seller to Idaho as set forth under the terms and conditions of Appendix C. " Finally, adding the specifics mentioned above could require other minow revisions to various contract sections. L7. The net salvage value of reinforcement, extension, or other additions to ldaho Power's system paid by the Seller as a condition of the contract under "special facility" requirements should be returned to the Seller. The most appropriate place to include this provision in the contract would be in App endix B, "Speliel f4cil1!y end Costs".Adding the paragraph belorr is satisfactory. B-2 Salvage Value A. Within 60 days of the Contract Termination date, Idaho will prepare and forward to Seller an estimate of the remaining value of those Special Facilities in B-1 of this Appendix less the cost of removal and transfer to ldaho's nearest warehouse, if the Special Facilities will be removed. Idaho may then be invoiced by Seller for the net Salvage value esLimated by Idaho for the Special Facilities and shall pay such aaount to Se1ler r^rithin 30 days after receipt of said Invoice. Seller shall have the right to offset any amounts due it against any present or future palmrents due ldaho. 18. On the second line from the bottom of page 11, the transpose of "an" should be correcEed to read "unable". I