20000113Comment.doc

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR APPROVAL OF SECOND AMENDMENTS TO FIRM ENERGY SALES AGREEMENTS FOR THE ROCK CREEK II, DIETRICH DROP, LOWLINE II, AND BARBER DAM HYDROELECTRIC GENERATING PROJECTS. )
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CASE NO. IPC-E-99-12

COMMENTS OF THE COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Scott Woodbury, Deputy Attorney General, in response to the Notice of Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on December 30, 1999, submits the following comments.
On December 1, 1999, Idaho Power Company (Idaho Power; Company) filed an Application seeking approval of Second Amendments to Firm Energy Sales Agreements between Idaho Power and Bonneville Pacific Corporation for the Rock Creek II, Dietrich Drop, and Lowline II Projects, and Interwest Hydro, Inc. for the Barber Dam Small Hydroelectric Generating Project. The amendments seek to modify the requirements for escrow accounts as security provisions for overpayment liability.
In Order No. 21690 in Case No. U-1006-292 (-292 Case) the Commission established security provisions for overpayment liability in contracts between Idaho electric utilities and developers of qualifying cogeneration/small power production facilities (QFs). The Commission required QF developers to establish escrow accounts with Idaho financial institutions to reserve monies for future maintenance expenses and to mitigate the risks associated with low water conditions for hydroelectric plants. In compliance with the Commission's 292 Order, escrow accounts were established for the Rock Creek II, Dietrich Drop, Lowline II, and Barber Dam hydroelectric generating projects.
Since the Commission initially established the requirement for escrow accounts in 1988, it has become increasingly difficult for QF developers to find local banks willing to provide the escrow account services of the nature required by the Commission’s Orders. The Commission recently addressed this same problem in Case No. IPC-E-98-14, wherein it approved a contract amendment for the Magic Reservoir Hydroelectric Project. Reference Order No. 27839.
As represented in this case, the owners of the four above-named projects approached Idaho Power indicating that they are experiencing the same problem Magic Reservoir had in complying with the Commission's escrow requirements. Idaho Power has agreed to amend the above-referenced contracts to permit single accounts to be established for maintenance reserve and low water reserve for each of the four projects in a manner identical to the procedure the Commission approved in Order No. 27839 for Magic Reservoir.
The proposed amendments will allow funds from the maintenance reserve account and low water reserve account to be mingled in a single account with separate accounting for each of the two reserved amounts. Authorized withdrawals from the single account will require two signatures, either by the two Idaho Power signatories or by one Idaho Power signatory and one signatory for the owner. This will allow Idaho Power to actively monitor and control disbursements from the account.

STAFF COMMENTS
As pointed out by the Commission Staff in the Magic Reservoir case, the amendments proposed for the projects in this case are some of the many that are likely to follow for other QF contracts. The alternative escrow account arrangements in the proposed Second Amendment are identical to those recently approved by the Commission in Case No. IPC-E-98-14. In that case, as in the present case, Staff believes that the alternative arrangements are superior to the original arrangements.
Under the existing arrangement, funds are disbursed from the account by the escrow account manager (bank) upon request by the project owner, subject to the owner supplying acceptable documentation of need. Under the new proposed arrangement, Idaho Power will now have some ability to control disbursements from the account. Staff views this as a preferred arrangement because it believes Idaho Power has a greater interest in insuring that funds are properly used.

STAFF RECOMMENDATION
Staff recommends approval of the proposed Second Amendments to the Firm Energy Sales Agreements for the Rock Creek II, Dietrich Drop, Lowline II and Barber Dam Hydroelectric projects.

Respectfully submitted this day of January 2000.

_____________________________
Scott Woodbury
Deputy Attorney General
Technical Staff: Rick Sterling

RS:va:word:u:umisc/comments/ipce9912.swr

COMMENTS OF THE 1 JANUARY 7, 1999
COMMISSION STAFF
IPC-E-99-12