19910301Reply Comments.pdf

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BARTON L. KLINE
LARRY D. RIPLEYc/o Idaho Power Company
P. 0. Box 70
Boise, ID 83707
[phone]
Attorneys for Idaho Power Company
Street Address for Express l.lail:
1220 }lest Idaho Street
Boise, Idaho 83702
FAX Telephone No. [phone]
IN THE MATTER OF THE APPLICATION OF
IDAHO POI.IER COMPANY FOR APPROVAL
OF AN INTERCONNECTION TARIFF FOR
NON-UTI LITY GENERATION
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BEFORE THE IDAHO PUBLIC UTILITIES COi4MISSION
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cASE N0. IPC-E-90-20
REPLY COMMENTS
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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.
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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
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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
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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.
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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
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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
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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
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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
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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".
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