27463.docx

(text box: 1)BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT APPLI-CATION OFIDAHO POWER COMPANY AND FMC CORPORATION FOR APPROVAL OF A SPECIAL CONTRACT FOR SERVICE TO FMC CORPORATION AND A REVISED SCHEDULE 28--FMC TARIFF AND FOR APPROVAL OF REVISIONS TO THE POWER COST ADJUSTMENT OF IDAHO POWER COMPANY AS A RESULT OF THE NEW FMC CONTRACT.
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CASE NO.  IPC-E-97-13
ORDER NO.  27463
On December 31, 1997, Idaho Power Company and FMC Corporation filed a Joint Application and a revised Tariff Schedule 28 (the FMC tariff) requesting that the Commissionapprove a new special contract for electric service to FMC Corporation to replace the existing 1973 Contract.  Idaho Power and FMC also sought approval to revise Idaho Power Company’s Power Cost Adjustment (“PCA”).  They claimed the tariff revisions and the revisions to the PCA will be necessary if the Commission adopts the new proposed FMC Contract.
In Order No. 27336, issued January 26, 1998, the Commission suspended the proposed  effective date of the contract and Schedule 28 and ordered the Application be processed under Modified Procedure.
Timely comments were received from the Commission Staff, the Idaho Irrigation Pumpers Association, Inc., the Industrial Customers of Idaho Power, P4 Production, L.L.C. (Joint Venture owned by Monsanto and Solutia) and Kirk Hansen, Mayor of Soda Springs, Idaho.  No one requested a hearing.  All the comments generally supported approval of the FMC proposed Contract, the revised tariff and the changes to the PCA.  With exception of the Commission Staff, all the commentors also requested the Commission allow other Idaho Power customers to have the same opportunities and benefits.  Based on the comments, the responses, the record, and the law, the Commission approves the Joint Application as conditioned below.
BACKGROUND
Idaho Power is a public utility providing electric energy to consumers in Idaho, Nevada and Oregon.  Historically, Idaho Power has been primarily a hydroelectric utility.  In recent years, Idaho Power has relied increasingly on thermal generation to supply the growing demands being placed on its system.
FMC is a Delaware corporation, producing phosphorus, whose Idaho operations are located near Pocatello, Idaho.  FMC is the largest single customer of Idaho Power, purchasing approximately 14% of Idaho Power’s total energy sales.  Derived from Exhibit 36, Case No. IPC-E-94-5.  The next largest Idaho Power customers are: Micron (2.4% load), Simplot (2.1% load) and Department of Energy (1.5% load).  Id.  FMC utilizes the bulk of the power sold to it in four electric furnaces at its phosphorous manufacturing plant.  Under the current contract, a portion of FMC’s supply of electric service from Idaho Power is “interruptible,” i.e., Idaho Power can interrupt service to FMC’s Pocatello plant.  
A.  Procedural Background
In the Joint Application, Idaho Power and FMC requested that both the proposed Contract and the revised Tariff Schedule 28 (FMC tariff) become effective January 1, 1998 or upon Commission approval.  They also sought approval to revise Idaho Power Company’s PCA.  The Commission suspended the proposed effective dates for a period of thirty (30) days plus three (3) months and ordered the Joint Application be processed under Modified Procedure with comments due March 30, 1998.  Order No. 27336.
In response to Idaho Power and FMC requests, Staff conducted a public workshop to discuss how Idaho Power’s PCA should be revised. On February 20, 1998, FMC and Idaho Power modified their Joint Application in response to the workshop.  The proposed special contract and proposed revised tariff were not modified by the February 20, 1998 filing.  However, Idaho Power and FMC withdrew the previously proposed changes to the PCA and proposed other changes in their place.  An amended notice of those proposed changes was issued on February 27, 1998.  Order No.27377.  The Commission did not change the comment deadline.
The Idaho Irrigation Pumpers Association, Inc. and Industrial Customers of Idaho Power each petitioned the Commission to intervene.  No timely objection was filed.  Intervenor status was granted by Order Nos. 27371 and 27382, respectively.  Solutia, Inc., formerly Monsanto Company,also petitioned to intervene.  FMC and Idaho Power timely opposed intervention.  The Commission denied intervention on February 27, 1998.  Order No. 27378.  Solutia petitioned for reconsideration, or in the alternative, clarification.  The Commission denied reconsideration.  Order No. 27435.
B.  The FMC Contracts.
Idaho Power furnishes electrical service to FMC pursuant to a special contract.  The agreement was originally executed between the parties on April 23, 1973.  After several modifications over the last 25 years, a new contract was negotiated to replace the 1973 Contract.  The proposed Contract is the subject of this Application.
1.The Term of Each Contract.
The 1973 Contract was based on Idaho Power owning an all hydro system.  The 1973 Contract provided for delivery of electric service to FMC under four separate service schedules.  Each schedule expired at staggered two year intervals.  The first schedule expired December 31, 1975.  The 1973 Contract allowed FMC, at its option, to renew any expiring service schedule by giving one year advance notice of its intention to renew.  Not later than October 15 of the calendar year in which any service schedule was set to expire, the parties were to “agree upon rates and charges for the ensuing two year period to be included in each and every Service Schedule.”  In so acting, the parties were to give “consideration to the changes in all factors bearing upon the costs for the services supplied.”  The 1973 Contract further required any negotiated agreement be submitted to the Commission for final approval.  
The proposed Contract’s initial term ends December 31, 2002.  Following the expiration of the initial term, the proposed Contract remains in effect until either Idaho Power or FMC gives written notice of termination.  After December 31, 2000, either Idaho Power or FMC may terminate the agreement by delivering a written notice of termination.  In that event, termination would occur two years after the written notice.
2.Supply of Demand(footnote: 1) and Energy -- the First Block and the Second Block.
In the 1973 Contract Idaho Power agreed to supply interruptible capacity and energy that included 120 MW of primary power and 120 MW of secondary power.  All but 17 MW of the primary portion could be interrupted when load and capacity conditions on Idaho Power’s system require it.  According to the 1973 Contract, these interruptions could not exceed “300 kWh per kilowatt of the primary power contract amount per year.”  Secondary power interruptions were subject to Idaho Power’s discretion.  Only two constraints on interruption of secondary power existed—a maximum interruption of 4,380 kWh per kW of average secondary power contract amount per year, and a requirement that not less than 6,720 kWh per kW of average secondary power must be made available during a stated ten-year period.
Under the 1973 Contract, when FMC was interrupted, Idaho Power would, at FMC’s election, “use its best efforts” to replace the interrupted power if supplies could be obtained from other sources.  If FMC purchased replacement power, it reimbursed Idaho Power for the purchase at the market price and paid a standard rate for the service.  In Case No. IPC-E-94-5, the Commission found that FMC’s replacement power costs for the previous six years averaged $3,172,625 per year.  Order No. 25880 at p. 31.
Like the 1973 Contract, the proposed Contract provides for a first block of energy and a second block.  Under the 1973 Contract, the two blocks were defined as one-half of the contract demand of 240 MW.  The proposed Contract defines the first block of energy as 120 MW and the second block of energy as 130 MW.  The proposed Contract also retains the interruptibility  capability in the first block of energy for load shedding(footnote: 2) during system transmission disturbances.  However, the proposed Contract does not allow Idaho Power to curtail FMC’s first block for generation or supply purposes.
3.Rates.
The 1973 Contract permitted rate adjustments any time an adjustment was demonstrated to be appropriate.  The parties contemplate that the rates established by the proposed Contract are “contract standard” rates as opposed to “tariff standard” rates.  “Contract standard” rates are not normally adjusted in a general rate case but remain at contract levels over the life of the contract.(footnote: 3)  Under the current Tariff Schedule 28, FMC pays 11.432 mills per kWh for primary energy.  The proposed Contract increases the energy rate for the first block of 120 MW to 16.65 mills per kWh.  First block rates are designed to pay full cost-of-service.
Moreover, under the proposed Contract, the first block of energy (120 MW) is “take-or-pay.”  In other words, Idaho Power would recover its full cost for providing power and FMC would be obligated to pay for the first block of energy whether it can use the power or not.  The second block of energy (up to 130 MW) would be supplied by Idaho Power at FMC’s request.  The price for power supplied by Idaho Power for FMC’s second block of power would be established at the existing market price as determined by the marketplace.  FMC would also pay for all “supply-related and transmission-related services” required to deliver the second block of energy.  Such related services could include, but are not limited to, off-system transmission, reserves, and replacement costs.  In addition, FMC must pay $1.39 per kW-month for the contract demand and 0.142 cents per kWh for the amount of transmission either reserved or used to deliver the second block of energy across Idaho Power’s system, whichever is higher.  Idaho Power and FMC assert that the entire cost for providing service to FMC is to be fully recovered under the proposed Contract.  Consequently, Idaho Power’s rates for other customers will be unaffected by the rate design proposed in the new contract
In the proposed Contract, if, after Idaho Power and FMC execute a written commitment  for the second block of energy, there are changes in FMC’s second block energy requirements, Idaho Power may be required to supply additional energy or dispose of unneeded energy.  All costs associated with such transactions are borne by FMC.  The proposed Contract allows FMC to use this second block power to produce its primary product, elemental phosphorus.  Conversely, FMC can have Idaho Power sell all, or part of it, on the market.  If Idaho Power can dispose of the committed second block of energy at a profit (after FMC pays for all transactional costs), any profits from the sale are shared 75% - 25% between FMC and Idaho Power.  If the current market price is less than that committed to by FMC, FMC will pay the shortfall.  Under the proposed Contract, energy transactions for the second block of energy would be negotiated by an Idaho Power “trader” stationed at the FMC facility with the associated costs being fully paid by FMC.  The “trader” is an employee of Idaho Power.
C.  Idaho Power’s Power Cost Adjustment Changes
In Order No. 24806issued March 29, 1993, the Commission approved a Power Cost Adjustment (PCA) for Idaho Power. The PCA allows Idaho Power to adjust its rates as actual production costs vary from year to year in relation to stream flow changes.  In years with ample stream flows, the “costs” of generating hydropower are reduced so rates are adjusted downward.  Conversely, in poor water years, rates are adjusted upward to reflect the smaller supply of water.  Each year the PCA is based on annual, forecasted power supply costs.  Deviations from the predicted power costs are deferred and then reconciled in the succeeding year. The proposed Contract affects Idaho Power’s PCA mechanism and requires some changes be made.  
At Idaho Power’s request, Staff held a public workshop to discuss how the PCA mechanism should be adjusted to accommodate the proposed Contract.  As a result of that workshop, FMC and Idaho Power modified their Joint Application and recommended the following changes to the PCA mechanism:
1.Treat the change from primary energy to first block energy (51,840 MWh) as load growth.
2.If the change from primary energy to first block energy (51,840 MWh) is treated as load growth (Item 1 proposal), no change to the Idaho retail allocation will be necessary.
3.Although the second block energy revenue is unknown because the price will float with the market, the 16.84 m/kWh rate used for the firm load growth rate will be used for determining a normalized secondary revenue amount.  If FMC’s usage is set at normalized levels, the load growth adjustment for the first block at 16.84 mills per kWh would be offset by the second block energy decrease at 16.84 mills per kWh.
NormalizedNormalizedNormalized
   Energy     Price (mills)    Revenue  
Secondary Energy   590,678     23.00 $13,585,594
Second Block Energy   538,838       16.84    9,074,032
4.Track the actual second block energy revenues, just as actual secondary revenues are tracked for Power Cost Adjustment true-up purposes.
Staff explained that these changes to the Power Cost Adjustment mechanism are minimal and should not have a substantial effect on PCA results.  
Primarily, the changes are required due to differences between energy classified as primary and secondary under the current 1973 Contract versus energy classified as first block and second block under the proposed Contract.  The current secondary energy block is larger than the proposed second energy block.  Staff assumed that total normalized FMC energy will be the same in both contracts because no supportable reasons for change along with quantifiable differences have been identified.
INDUSTRIAL CUSTOMERS’ COMMENTS
The Industrial Customers of Idaho Power is an unincorporated association of large industrial customers served by Idaho Power Company.  All Industrial Customers receive electric utility service under Tariff Schedule 19.(footnote: 4)  Generally the Industrial Customers supported the proposed FMC Contract.  Industrial Customers’ Comments at 2.  The Industrial Customers suggested that “FMC’s proposed arrangement with Idaho Power is considerably more straightforward and flexible, yet affords Idaho Power with revenue stability and an opportunity for cost recovery.”  Id.
While generally endorsing the proposed Contract, the Industrial Customers also requested the Commission modify the FMC proposed Contract before approval.  Id. at 3.  It argued that section 4.2.2 of FMC’s proposed Contract is internally inconsistent.  The Industrial Customers asserted that while the 120 MW “First Block of Energy” is characterized as being supplied as “take or pay,” the first block can be reduced upon the “mutual agreement” of the parties.  The Industrial Customers urged the Commission to delete the “mutual agreement” provision.  With that deletion, the Industrial Customers supported approval of the proposed Contract.  Industrial Customers’ Comments at p. 3.
The Industrial Customers did not comment on either the revised Tariff Schedule 28 or the proposed changes to the PCA.  Finally, it urged the Commission direct Idaho Power to “develop similar rates and contracts for all customers with loads greater than 1,000 kilowatts in Idaho Power’s service territory.”  Id.
IRRIGATORS’ COMMENTS
The Irrigation Pumpers Association, Inc. represents nearly 12,000 irrigators scattered through Idaho Power’s service territory whose rates are set out in Tariff Schedule 24.  In the aggregate, the Irrigators use approximately 14% of Idaho Power’s energy output.  Derived from Exhibit 36, Case No. IPC-E-94-5.  The Irrigators “do not oppose” approval of the proposed Contract and revised Tariff Schedule 28, “provided that other customers will be afforded similar opportunities to aggregate their loads and gain direct access to wholesale energy markets in a timely and meaningful fashion.”  Irrigators’ Comments at 1-2.  Thus, if the Commission approves this contract, the Irrigators urged the Commission to open a new proceeding designed to accomplish this.
The Irrigators argued that the proposed Contract is unique because, with respect to the “Second Block of Energy,” the proposed Contract would allow FMC to “determine the price, terms and conditions of 120 MW available for FMC to purchase on the open market.”  Id. at 3.  “Idaho Power supplies transmission from the resource and provides a ‘trader’ to act as FMC’s agent in negotiating market purchases.”(footnote: 5)  Id.  It claimed this makes FMC a “power marketer.”  Id.  The Irrigators are concerned that the combination of FMC’s size and its opportunity to “both buy through direct access to wholesale markets and sell at its discretion, could potentially destabilize and monopolize energy markets for its own purposes.”  Id. at 4.  To protect against this possibility, the Irrigators suggested the Commission track the sales and prices associated with FMC’s purchases and sales to determine the extent to which they may detrimentally impact wholesale prices to other Idaho customers.  Id.  They asserted this is a form of deregulation and should be afforded to the rest of the customers.
The Irrigators, with those caveats, supported approval of the FMC proposed Contract, the revised Tariff 28, and the proposed modifications of the Power Cost Adjustment.  Id. at 7.
P4 PRODUCTION’S PUBLIC COMMENTS
Although denied intervention, P4 Production filed public comments and suggested that the Commission carefully consider the effects a decision to approve or disapprove the FMC proposed Contract would have on other large power customers.  It asserted the contract would allow FMC access to the open market and transform Idaho Power from a supplier to a “purchasing agent.”  P4 Productions did not request the Commission “disapprove” the contract.  Id.  However, without any analysis or explanation, it concluded the special contract would “seriously harm our ability to compete in the phosphorus business.”  Id.  It did not comment on the revised Tariff 28 or the proposed modifications of the Power Cost Adjustment.
SODA SPRINGS MAYOR’S PUBLIC COMMENTS
The Mayor of Soda Springs suggested that the Commission consider approving a similar contract for Monsanto/Solutia.  This large customer is served by PacifiCorp.  Soda Springs’ Comments.  He did not take a position on the appropriateness of this particular contract, the revised Tariff 28, or the proposed modifications to the Power Cost Adjustment procedure.
FMC’S AND IDAHO POWER’S RESPONSES
Both Idaho Power and FMC replied to the Industrial Customers’ comments concerning the consistency of Section 4.2.2.  They suggested that allowing FMC and Idaho Power to mutually agree to reduce the first block of energy does not change the import of the “take or pay” provision.  It merely allows both parties to the contract to reduce the amount when it is in both parties’ interest.  FMC gives the following example:
This could occur, for example, when Idaho Power’s system is constrained or import power requirements and prices are extraordinarily high and FMC is, for some reason, temporarily unable to consume the full 120 megawatts, or in a position to reschedule maintenance to reduce its demand.  In these circumstance [sic], FMC’s reduction in demand would benefit Idaho Power’s other customers in addition to the two parties to the contract.  The provision was only intended to recognize that these types of extraordinary circumstances could arise during the term of the contract.  It does not constitute a general limitation of Idaho Power’s supply obligation or FMC’s take or pay obligation, and it will only be invoked to the benefit, and not the detriment, of other ratepayers.
FMC’s Reply Comments at 2.
STAFF RECOMMENDATION
Staff recommended approval of the proposed Contract.  Staff cautioned that the proposed  Contract could potentially impact how Idaho Power earnings are shared between ratepayers and shareholders.  On October 20, 1995, in Case No. IPC-E-95-11, the Commission approved a stipulation creating a revenue sharing process between Idaho Power shareholders and the rate payers.  Order No. 26216.  
Since market prices and power quantities that will be supplied under the proposed  Contract are unknown, it is not possible to know with certainty whether ratepayers or shareholders will benefit from the proposed Contract.  Therefore, Staff stated that differences in revenue sharing that may result from approving the proposed Contract are unknown and may fluctuate from year to year.
After carefully considering the proposed Contract and its effects, Staff concluded that the risks inherent in approving this contract are reasonable and recommended approving the proposed  Contract, the revised Idaho Power Company’s Power Cost Adjustmentand the revised Schedule 28--FMC tariff.
DISCUSSION AND FINDINGS
Idaho Power Company is an electrical corporation subject to the Commission’s regulation under Title 61 of the Idaho Public Utilities Law.  The Commission has authority pursuant to Idaho Code §§ 61-307, 61-502 and 61-503 to approve utility contracts and the rates contained therein.  Based on a review of the existing 1973 Contract and its related tariff, the Commission finds that the 1973 Contract is 25 years old and no longer meets the needs of either Idaho Power or FMC.  Therefore, the Commission finds that the 1973 Contract and its related rates are no longer just or reasonable.  As clarified in greater detail below, the Commission finds the FMC proposed Contract and its related rates, as conditioned below, are fair, just and reasonable and approves its terms.
In arriving at its decision, the Commission carefully considered those unique characteristics that distinguish FMC from other Idaho Power customers.  In the most recent Idaho Power rate case, Case No. IPC-E-94-5, decided in January 1995, the Commission found that FMC has the lowest cost of service of any of Idaho Power’s customers. See Appendix 3, Order No. 25880. The Commission also finds that FMC is Idaho Power’s largest single customer with approximately 14% of Idaho Power’s jurisdictional energy.  Derived from Exhibit 36, Case No. IPC-E-94-5.  No other single customer uses that much energy from Idaho Power.  Id.  The next three largest customers each use less than 2.5% of Idaho Power’s jurisdictional energy.  Id.  There are over 90 Schedule 19 large industrial customers (those using 1 MW to 25 MW) that together account for approximately 14% of Idaho Power’s jurisdictional energy and nearly 12,000 Schedule 24 irrigators who, like the Schedule 19 customers, together also account for approximately 14% of Idaho Power’s jurisdictional energy. Id.  This clearly makes FMC Idaho Power’s largest single customer.
Moreover, in the rate case, the Commission found that the interruptibility of FMC’s 1973 Contract directly benefitted the Idaho Power system and its other customers.  Order No. 25880 at pp. 30-31. Specifically, in the 1973 Contract, FMC contracted for 120 MW of primary power and 120 MW of secondary power.  All but 17 MW of the primary portion could be interrupted when load and capacity conditions on Idaho Power’s system required.  In the proposed Contract, the first block remains interruptible for load shedding during system transmission disturbances.  The second block is fully interruptible.  Therefore, the Commission finds that this interruptibility continues to benefit the Idaho Power system and its other customers.  
The Commission further finds that under the current schedule 28 FMC pays 11.432 mills per kWh for its primary portion (120 MW).  The proposed Contract would increase the rate for the first block of 120 MW to 16.65 mills per kWh.  The Commission finds that this is an increase of nearly 46% and benefits Idaho Power customers.
Moreover, the proposed Contract makes the first block of energy “take or pay.”  The Commission finds this is a significant change in that it provides Idaho Power with a stable source of revenue and alone will generate $22,830,480 annually.  Joint Application at p. 4.  The Commission finds that this block meets its full cost of service.
While the Industrial Customers suggest this first block is not really “take or pay,” the Commission finds that allowing the parties to mutually agree to modify this arrangement in emergencies does not change the essential character of this provision.  The Commission rejects the  Industrial Customers’ characterization and further finds that this “take or pay” provision benefits both Idaho Power and its other customers.
The Commission finds that when service to FMC is interrupted under the 1973 Contract, Idaho Power must “use its best efforts” to replace the interrupted power if supplies can be obtained from other sources.  The price paid to Idaho Power for the replacement power is either the 23 mills per kWh found in the existing Schedule 28 Tariff or whatever Idaho Power paid on the market plus its costs, whichever is higher.  The Commission finds that FMC’s replacement power costs have averaged nearly $3.2 million per year under the 1973 Contract.  Order No. 25880 at p. 31. In the proposed Contract, the second block of energy (up to 130 MW) would be supplied by Idaho Power for FMC at FMC’s discretion.  The price paid by FMC for power supplied by Idaho Power for its second block of energy will be the market rate.  
The Commission reviewed and analyzed the intervenors’ concerns regarding the use of market rates to price the energy in the second block.  Contrary to the assertions that these provisions would give FMC direct access to the market, the use of the market rates is a pricing mechanism only.  FMC will continue to buy its power from Idaho Power.  Moreover, under the 1973 Contract, FMC is already paying market rates plus costs to Idaho Power when Idaho Power buys replacement power from other sources for more than the tariff rate.  The Commission finds that the Irrigators’ suggestion that the proposed Contract permits FMC to “determine the price” is incorrect.  
In addition, under the proposed Contract, the Commission finds that FMC will pay for all “supply-related and transmission-related services” required to deliver the second block of energy.  Such related services could include off-system transmission, reserves, and replacement costs. It will also pay $1.39 per kW-month for the contract demand and 0.142 cents per kWh for the amount of transmission either reserved or used to deliver the second block of energy across Idaho Power’s system. Thus, FMC will pay all Idaho Power costs associated with the second block.  
The Commission finds that the provisions that allow FMC to direct Idaho Power to resell power it cannot use, clearly allocate the costs to FMC and where there are profits, Idaho Power receives 25% of the profit in addition to all its costs.  The Irrigators suggest that the proposed  Contract “could potentially destabilize and monopolize energy markets.” The Commission disagrees and finds this will not allow FMC to monopolize or destabilize the market. Authorizing Idaho Power to purchase up to 130 MW on the market, if necessary, to supply a customer will have no effect on the market.  One-hundred thirty (130) MW is a very small amount of energy in the overall regional market.  Moreover, under the 1973 Contract, Idaho Power is already purchasing up to 120 MW of replacement power to supply FMC when it does not have power available.  If the Irrigators are suggesting that this proposed Contract would destabilize or monopolize Idaho Power’s energy, that makes no sense.  All Idaho Power customers’ rates are set by tariff.  This proposed Contract only slightly increases FMC’s total contract demand from 240 MW to 250 MW.  An increase of 10 MW does not give FMC a monopoly.
Likewise, the Commission finds that these provisions do not allow FMC to force Idaho Power to use “expensive” power for its other customers.  Contrary to the Irrigators’ assertion, the “trader” is not an FMC agent.  By contract, the “trader” is an employee of Idaho Power.  See proposed Contract, ¶ 4.9.  As Idaho Power’s employee, the “trader” is an agent for Idaho Power, not FMC, and subject to Idaho Power’s ultimate authority with corresponding responsibilities to Idaho Power.  Idaho Power has retained that authority by contract.
Further, the Commission finds that FMC does not sell or buy power.  Idaho Power buys and sells power.  In deciding to approve the Joint Application, the Commission finds that FMC will not use the provisions allowing it to mitigate its costs related to the second block, to request Idaho Power to buy or sell power for its “use” as an entrepreneurial enterprise.  These provisions are only intended to allow FMC to mitigate the effects of buying power in advance that later it no longer needs.  If after monitoring this proposed Contract the Commission discovers that these provisions are being misused by FMC to supplement its primary business, it specifically retains the authority to review its decision to approve this proposed Contract.  By ordering Idaho Power to report the operational results tracking the sales and prices associated with its FMC purchases and sales, the Commission can check for abuses.  If it appears that these provisions are being misused, the Commission retains the authority to reconsider whether this proposed Contract, as implemented, is contrary to the public interest.
After considering all the comments and independently reviewing the contract provisions, the Commission finds that this proposed Contract does not open the door to retail deregulation.  By statute, the Commission has continuing jurisdiction to review existing contracts and on its own motion to investigate rates or practices and to order them changed.  Idaho Code § 61-503.  Thus, there is no retail deregulation.  The Commission further finds that the proposed Contract does not violate the Electric Supplier Stabilization Act, Idaho Code §§ 61-322 et seq. or give FMC the ability to choose a different supplier of electrical energy.  Only Idaho Power will buy or sell power under the proposed Contract; FMC does not directly purchase or sell power.  It is not a “marketer.”  
The various intervenors also requested the Commission require Idaho Power, and potentially other energy companies, to provide the same contractual opportunities to all their customers.  The Commission finds that there is not a sufficient factual record in this case to make such a broad ruling and declines to do so at this time.  The Commission finds that each special contract and each case must depend upon its own particular facts and the customer’s unique characteristics.  Likewise, each utility has its own revenue requirements and unique conditions.
The Commission further finds that approval of the proposed Contract, its provisions, or its pricing mechanism shall not be considered to be a determination that the terms of this particular contract are appropriate in every instance. Parties that negotiate similar special contracts in the future must demonstrate that the circumstances justify approval.  Costs of service, quantity of energy  used, the nature of the use, the time of use, the pattern of use, the differences in the conditions of service, the reasonable efficiency and economy of operation and the actual differences in the customer’s situation for delivery of service may be different.  In short, this decision shall, henceforth, be viewed as pertaining only to the agreement in question.
Based on the Commission’s review and the lack of any objection, the Commission further finds that the recommended changes to the Power Cost Adjustment mechanism are appropriate and therefore approves them.  The revised Tariff 28 reflecting the terms of the proposed Contract is also approved.
The Commission finds that because variations in revenue sharing may result from approving the proposed Contract and those cannot be known in advance and may fluctuate from year to year, the Commission will monitor the actual operating results and require quarterly reporting, with the first report closing on September 30, 1998.
O R D E R
IT IS HEREBY ORDERED that the proposed Contract between FMC Corporation and Idaho Power Company is approved as conditioned above.
IT IS FURTHER ORDERED that Idaho Power’s proposedrevised Schedule 28 (FMC tariff) is approved.
IT IS FURTHER ORDERED that the changes to the Power Cost Adjustment mechanism described above are approved.
IT IS FURTHER ORDERED that Idaho Power Company will report its operational results quarterly to the Commission with the first report closing September 30, 1998 and submitted no later than the 22nd day of the following month.
IT IS FURTHER ORDERED that as a condition of this contract, the Commission retains authority over the contract to insure that, as it is implemented, it does not impair the financial ability of Idaho Power to continue its service nor harm other rate payers.
THIS IS A FINAL ORDER.  Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-E-97-13 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 or in interlocutory Orders previously issued in this Case No. IPC-E-97-13.  Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration.  See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this                  day of April 1998.
                                                                                      DENNIS S. HANSEN, PRESIDENT
                                                                                      RALPH NELSON, COMMISSIONER

MARSHA H. SMITH, COMMISSIONER
ATTEST:

Myrna J. Walters
Commission Secretary
O:ipce9713.cc5
DISSENTING OPINION
Case No. IPC-E-97-13
Dennis S. Hansen, Commissioner
Although I agree that many provisions of the FMC contract are appropriate, I cannot fully agree with the majority decision.
First, I am concerned that the contract permits FMC to indirectly buy and resell power on the open market. This provision may be perceived as a form of electric deregulation. With strong interest shown by the Legislature in this area, I believe that legislative input or guidance should be sought before the Commission embarks on policy changes of this magnitude, especially for one customer, which could have a dramatic affect on the entire electric industry in the future.  My explanation is as follows:
With approval of this order, there is a potential effect that the door will be opened for other special contract customers to demand the same opportunities. We know from the record that the Idaho Irrigation Pumpers Association, Inc. and Industrial Customers of Idaho Power, along with Solutia and Mayor Kirk Hansen of Soda Springs all filed public comments generally supporting approval of this proposed contract, provided the Commission allow all Idaho Power & Pacific Corp. customers who so desire to have the same opportunities and benefits. I am concerned and feel strongly that in the future, both the Commission and the Legislature will be requested to pursue these requests from other potential special contract customers desiring similar treatment. To deny others this market access may be discriminatory. We need a consistent policy across all jurisdictions.
Though pointed out by the majority that FMC’s contract is unique, in many areas, there are a number of similarities with other industries. There are questions that I think need to be considered. Does reasonable discrimination draw lines by size, or interruptible vs. firm power or from one utility to the next? How does not being interruptible and being interruptible relate to allowing market access? Can the Commission simply point out a difference between customers or suppliers and say this is enough justification for not giving one or another customer the same opportunities?
Approval of this special contract could put other large users of power in Idaho at risk to compete in their respective markets. It could also have a big impact on the future employment in other areas of our State.
Second, I do not think approval of this contract is in the public interest. The potential impact on other customers could be great if this type of special contract is extended to other large customers.  If a significant number of the larger customers have rates set by the market, Idaho Power risks achieving its revenue requirement in the event that the market price of electricity is lower than its cost based rates.
Third, this order does not put all risk with Idaho Power alone, therefore possible losses could be shifted to other customer classes.
Fourth, if after having the Commission staff track the sales and prices associated with FMC’s purchases and sales, the staff determines that such practices have a negative impact on the wholesale prices of electricity in Idaho, the order does not recommend an action for the Commission to take.
In summary, the main point here is one of policy. There are a number of factors that need to be addressed before we move toward making major policy changes in the electrical industry of Idaho, as I have stated above. This order does not assure that policy direction for all customers under our jurisdiction will be given fair and equal treatment, nor has the Commission received any legislative input on this matter. Because of the Legislature’s heavy involvement in determining electrical deregulation, their views should also be considered by the PUC as we make this type of policy change. To date we have not received any input from the Legislature.
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DENNIS S. HANSEN, PRESIDENT
FOOTNOTES
1:
    The rate at which electric energy is delivered over a set period of time as established by contract.
2:
    The ability of the company to reduce customers’ load to prevent system failures.
3:
    The Commission previously approved two other existing special contracts that have “contract standard” rates --  one between Washington Water Power and Potlatch Corp. and the other between PacifiCorp and Monsanto (Solutia, Inc.).  See Order Nos. 23858 and 22532, respectively.
4:
   Schedule 19 customers are customers with loads between 1 MW and 25 MW annually such as Hewlett Packard in Boise, the Mountain Home Air Force Base, Lamb Weston in Twin Falls, Ore-Ida Foods in Burley, Lamb Weston in American Falls, and American Micro Systems in Pocatello.
5:
¶ 4.2.3.  Second Block of Energy.  In addition to the First Block of Energy made available and/or supplied by Idaho Power in accordance with paragraph 4.2.2, Idaho Power will, in consultation with FMC and subject to its approval, supply or acquire for FMC’s account . . .  the Second Block of Energy.  . . .  At the request of FMC, the FMC Trader . . .  will obtain and provide to FMC the prices, terms, and conditions for one or more potential acquisitions of the Second Block of Energy.  If the prices, terms, and conditions are acceptable to FMC, it will authorize the FMC Trader . . . , to make the Second Block of Energy commitment in accordance with FMC’s instructions provided the service is still available when the FMC Trader . . . receives authorization.  . . .
¶ 4.2.4  Reduction in Second Block of Energy Prior to Reschedule Deadline.  At any time prior to the reschedule deadline(s) described herein, FMC may elect to reduce all or part of the Second Block of Energy commitment agreed to by Idaho Power and FMC.  FMC will provide Idaho Power with the amount of the Second Block of Energy to be reduced and Idaho Power will quote FMC a price for resale of the reduction at then prevailing market prices. When appropriate, such price will take into account an amount for any Related Services associated with the Second Block of Energy purchase or its subsequent resale.  FMC may elect to accept this price or accept the existing purchase commitments.  If the amount that Idaho Power receives for a resale is less than the amount FMC would have paid Idaho Power for the scheduled delivery, FMC will pay the shortfall.  If Idaho Power receives a resale price that exceeds the purchase price, Idaho Power will credit FMC for the original purchase and an amount equal to 75% of the excess amount.”  Excerpts from the FMC proposed Contract, emphasis added.
COMMENTS AND ANNOTATIONS
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Service Date
April 27, 1998