970226.docx

DECISION MEMORANDUM
TO:COMMISSIONER NELSON
COMMISSIONER SMITH
COMMISSIONER HANSEN
MYRNA WALTERS
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
RANDY LOBB
TONY JONES
WAYNE HART
DAVID SCOTT
WORKING FILE
FROM:BRAD PURDY
DATE:FEBRUARY 26, 1997
RE:CASE NO. IPC-E-95-15; IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AN ORDER REVISING THE RATES, TERMS AND CONDITIONS UNDER WHICH IDAHO POWER PURCHASES NON-FIRM ENERGY FROM QUALIFYING FACILITIES
B A C K G R O U N D
In October 1995, the Idaho Power Company (Idaho Power; Company) filed an Application for an Order (1) approving revisions to the Company’s current Schedule 86 entitled “Cogeneration and Small Power Production—Non-Firm Energy;” (2) approving revisions to the rates to be paid for non-firm energy sold to Idaho Power under Schedule 86, and; (3) authorizing the Company to file documentation supporting the computation of purchase rates under Schedule 86 on a semi-annual rather than a monthly basis.  The Company ultimately amended its proposed revisions to Schedule 86 and on January 22, 1997, the Commission issued Order No. 26750 approving, with modifications, the Company’s amended application.  Specifically, the Commission authorized Idaho Power to eliminate the three mil capacity adder included in Schedule 86 due to the lack of participation in this schedule.  The Commission also agreed that it was reasonable to allow Idaho Power to reduce the number of compliance filings made with the Commission under Schedule 86 from monthly to semi-annually.  The Commission further authorized Idaho Power to eliminate the fixed rate option (Option A).  The most controversial changes to the Company’s Schedule 86, however, involved its proposed revisions to Option C (net metering).  The Commission chose to retain Option C, in some form, for the benefit of those customers interested in eliminating some or all of their loads through their own generation.  The Commission found that a reasonable net metering option is one that (a) allows the Company to use its existing billing system, (b) allows the customer to use a conventional single-metering system, (c) charges the customer the rate consistent with its class of service while the meter is running forward, (d) pays the customer the five year rolling average avoided energy cost rate when the meter is running backwards, and (e) charges the customer a minimum fee that is consistent with the amount of backup supply and capacity being provided to the Company.  
PETITION FOR RECONSIDERATION
On February 12, 1997, Aurora Power & Design petitioned the Commission for reconsideration of Order No. 26750.  Aurora charges that the Commission’s Order (1) offsets customer power production with the avoided cost rather than retail rates under the guise of a “service charge”, (2) does not make available the use of Option C to the type of customer who can best use it, and (3) gives Idaho Power of placing unwarranted burdens on those customers through the “conditions of sale” provisions contained in the standard Option C contract.  
Aurora notes that it is a power systems design and supply company that is in direct competition with Idaho Power’s solar photovoltaic service.  Aurora contends, therefore, that the Commission’s Order has direct consequences to Aurora’s livelihood.  Aurora argues that Idaho Power has long been a protagonist to the small, independent power industry.  Aurora advocates that the development of new energy resources, particularly those that are non-consumptive such as solar power, should be promoted.  Aurora contends that the Commission’s Order is anathema to that objective.  The revised Schedule 86, Aurora contends, causes two-thirds of the energy produced by a customer to go to a service charge.  The net effect is that the small power producer recovers the avoided cost under the guise of this charge.  Aurora contends that this calculation is overly complex and subjective.  It is not reasonable, Aurora contends, for the Commission to state in its Order that allowing annual net metering would require substantial changes in the Company’s billing system and at the same time support a monthly service charge calculation that appears to be impossible to incorporate into any billing system.  
Aurora questions how this excessive service charge can be justified when Idaho Power is simultaneously requesting authorization of a public purposes charge to fund its involvement in a region wide conservation effort (Case No. IPC-E-96-26).  Aurora proposes that if the Commission is genuinely concerned that there will be a significant use of net metering, then the Commission could put a cap on its use.  Otherwise, Aurora argues, small independent power producers can already receive avoided costs without using a complicated formula.
Aurora further challenges the Commission’s Order because it limits the availability of Option C to residential and small commercial customers (rate schedules 1 and 7).  The Commission’s Order notes that running the meter backwards for a customer with a demand as well as an energy meter could potentially reduce that customer’s demand and subsequent bill which is inappropriate because the energy supplied by that customer is non-firm.  Aurora questions why this is inappropriate because demand itself is not firm.  That is why there is a demand meter.  If a utility customer ceases its operations, there is a reduction in demand.  Similarly, if an independent power producer produces power to reduce its demand during the entire month, this is also legitimate reduction in demand.
Finally, Aurora challenges the Commission’s evaluation of the “conditions of purchase and sale” provisions contained in the standard Schedule 86 contract.  Aurora believes that the Commission’s Order allows Idaho Power to waive these conditions at its discretion.  Consequently, Aurora argues, if the customer employs Idaho Power’s solar photovoltaic service, then these conditions will likely be waived.  If the customer employs Aurora Power & Design as its provider of solar equipment, then they will not.  Aurora asserts that the requirement to have a licensed engineer certify interconnection between the Company’s system and a Schedule 86 customer is unwarranted.  Aurora contends that most licensed engineers are not qualified to make this certification and the Idaho Code already requires a licensed electrician to make these installations.  Moreover, Idaho Power customers will soon be implementing net metering without any approval of the Commission, Aurora contends.  If the Commission is truly concerned about safety, Aurora argues, then proper net metering must be required, not unusable options approved by the Commission’s Order.
Idaho Power Response
On February 21, 1997, Idaho Power filed a response Aurora’s Petition for Reconsidera­tion.  Idaho Power contends that Aurora’s Petition consists primarily of statements of opinion.  It does not identify any facts or legal conclusions that it claims are inaccurate.
Idaho Power notes that much of Aurora’s dissatisfaction with the Commission’s Order appears to arise from the assumption that alternative energy technologies are entitled to be paid at retail rates which are currently in excess of the Company’s avoided costs.  Idaho Power points out that the Public Utilities Regulatory Policies Act of 1978 (PURPA) specifically prohibits the Commission from requiring electric utilities to purchase energy from qualifying facilities (QFs) at rates that exceed avoided costs.  Therefore, the Company contends, the Commission’s decision to allow smaller alternative energy producers to be paid full avoided costs without paying the costs associated with dual metering and interconnection protection equipment that other QF developers are required to provide constitutes a reasonable level of incentive to alternative energy technologies.
Idaho Power notes that its solar photovoltaic service Schedule 60 was suspended in November 1966.  Prior to suspension, the service was only available to off-grid locations.  Because Schedule 86, at issue in this case, is applicable only to on-grid applications, Idaho Power argues that Order No. 26750 will have no impact on Aurora’s ability to compete with any entity to develop off-grid solar photovoltaic applications as Aurora contends.
Idaho Power contends that Aurora’s criticism that the monthly charge contained in Schedule 86 is complex and impossible to incorporate into any billing system is without any objective support or evidence.  The Company notes that the Commission Staff has reviewed and accepted the monthly charge methodology.  Idaho Power concedes that the computation is based on an algorithm and is intimidating on the surface but once the data regarding the customer’s generating equipment is obtained from the customer, computation of the charge is not difficult, the Company contends.  Idaho Power argues that once the monthly charge is computed, the Company can use its existing retail billing computer program to add the monthly charge to the customer’s retail electric bill as a separate charge.
Finally, regarding Aurora’s criticism of the requirement in Schedule 86 that interconnec­tions be certified by a licensed electrician, the Company states that it is imperative that Idaho Power know about any installation in which a customer installs electric generating equipment having the capability to energize Idaho Power’s distribution lines.  This is necessary for Idaho Power to have the ability to protect its employees and system from energy or damage.  Idaho Power states that it “does not believe that having qualified personnel be responsible for reviewing and approving such protection is ‘laughable.’”
A N A L Y S I S
Rule 331 of the Commission’s Rules of Procedure (IDAPA 31.01.01) provides that any person interested in the final Order of the Commission may petition for reconsideration within 21 days after the day of service of that Order.  Such Petition must set forth the ground or grounds why the petitioner contends that the Order is unreasonable, unlawful, erroneous or not in conformity with the law and a statement of the nature and quantity of evidence or argument that the petitioner will offer if reconsideration is granted.  The rule further provides that any person may cross-petition within seven days after an initial petition for reconsideration is filed.
Aurora’s Petition was timely filed.  The Petition appears to comply with the procedural requirements set forth in Rule 331.  No cross-petitions have been filed.  The Commission may deny the Petition, in which case, it simply needs to issue an Order to that effect.  The Commission may, of course, grant the Petition and either solicit written comments from all concerned or schedule an evidentiary hearing if its deems necessary.
Commission Decision
How does the Commission wish to rule on Aurora’s Petition?
Brad Purdy
vld/M:IPC-E-95-15.bp4