20030828Final Order No 29329.pdf

Office of the Secretary
Service Date
August 28, 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
ACIFICORP FOR APPROVAL OF A NEW
RENEWABLE ENERGY TARIFF, I.E.,
ELECTRIC SERVICE SCHEDULE NO. 70-
NEW WIND, GEOTHERMAL & SOLAR
POWER RIDER-OPTIONAL.
CASE NO. P AC-03-
ORDER NO. 29329
On July 11 , 2003, PacifiCorp dba Utah Power & Light Company (PacifiCorp,
Company) filed a request with the Idaho Public Utilities Commission (Commission) for approval
of a new renewable energy tariff, Schedule 70 - New Wind, Geothermal & Solar Power Rider.
The Company has requested a September 1 , 2003 , tariff effective date. Under the proposed
program, residential and non-residential customers can purchase newly developed wind
geothermal and solar power energy at a premium of $1.95 per 100 kilowatt-hour block. The
Company has recommended an effective date of September 1 , 2003. The premium is in addition
to the normal billed rate which includes but is not limited to a basic charge as well as energy and
delivery charges. The premium covers the costs of the program. These costs include the
incremental costs of the new renewable energy, marketing costs and program administration.
Under the proposed Schedule 70 tariff, consumers can choose the number of blocks to purchase
which is not dependent on the amount of energy used.
Currently PacifiCorp offers this option, called Blue Sky, to consumers in four other
states - Oregon, Utah, Washington and Wyoming. The Company s Blue Sky enrollment roster
includes over 11 500 customers. Qualified customers may apply for or terminate from Schedule
70 anytime during the year. The Company will not accept enrollments for customer accounts
that have a time payment agreement in effect or have received one or more disconnect notices or
have been disconnected within the last 12 months.
Under the Company s proposed tariff, PacifiCorp plans to purchase tradable
renewable credits (green tags) and/or bundled power to satisfy the requirements. Including both
purchase options, the Company states, is beneficial to customers as it allows the Company to
pass along lower prices. In addition, it is beneficial to the Company, as it allows for the more
efficient balancing of purchases and sales and will minimize the risk of not achieving a zero net
ORDER NO. 29329
gain or loss at the program life. Green tags represent an amount of renewable kilowatt/hours
sent to grid, displacing less environmentally friendly energy.
As set forth in the tariff Schedule, new wind, geothermal or solar power energy will
be delivered within two years of when the energy is purchased by the customer. Tradable
renewable credits will be delivered within 18 months of when energy is purchased by the
customer. PacifiCorp will keep interested parties informed of purchases for the program on a
twice per year basis. If there is not availability at the right price to purchase at a level (capped
within the $1.95 retail price) then PacifiCorp will attempt to make purchases at the next level.
The reports will summarize purchases and note reasons for choosing a "tier" and, if applicable
foregoing more preferred options in light of available tag supply.
As reflected in its filing, PacifiCorp states that several environmental organizations
including Renewable Northwest Projects and the Land" and Water Fund of the Rockies endorse
the Company s program which meets Renew 2000 standards. Renew 2000 standards were
established by a collaboration of interested regional utilities and environmental organizations to
ensure that optional renewable energy products offered to consumers in the Northwest met
minimum content standards, thus protecting and assuring consumers that such products provide
benefit to the environment.
The wind energy purchased on behalf of the Company s Blue Sky customers is in
addition to renewable energy investments PacifiCorp has made to serve all its customers.
Currently, Blue Sky wind energy purchases come from Foot Creek IV in Wyoming; from wind
farms in Condon and Klondike, Oregon; and from the Stateline Wind Facility on the Oregon-
Washington border. All renewable energy generation linked to the program at minimum will
come from facilities that went online post-January 2000.
On July 25, 2003 , the Commission issued Notices of Application and Modified
Procedure in Case No. PAC-03-09. The deadline for filing written comments was August 14
2003. Comments were filed by the Commission Staff and Mr. Mike Settell. Staff recommends
approval of PacifiCorp s proposed Schedule 70 tariff with an effective date of September 1
2003. As reflected in Staff comments, PacifiCorp first proposed a "green tariff' program on
March 10 2000 in Case No. PAC-OO-1. On May 18, 2000, the Commission issued final Order
No. 28380 in Case No. PAC-OO-l denying the Company s Application. In its Order, the
Commission stated:
ORDER NO. 29329
The Company s filing is a follow-up to a commitment made in the
ScottishPower merger proceedings. Although the submitted tariff is
structured in such a way that all program costs are paid by
participants-marketing costs, program administration, and incremental cost
of new energy, we will not approve it at this time.
All parties note that the tariff premium (4.75~/kWh) exceeds the cost of other
regional programs. The Company cautions us in making such a comparison
however, that we do not know whether the renewable premium rates of the
other regional energy providers are cost-based, inferring that they may be
subsidized. The Company may be right. The fact remains that the cost
appears to be too high. Nearly one-third of the proposed premium is
apparently for program administration and marketing. The commenting
parties are concerned that the Company s focus appears to be more on
marketing and promotion than on actual renewable resource development.
While marketing and promotion are necessary, resource development should
have the benefit of the majority of premium dollars provided by customers.
In the merger case, the overriding customer sentiment in the Company
southeast Idaho service territory was a desire for lower cost electricity.
Geographically, the Company s Idaho customers are uniquely situated
surrounded by municipal, cooperative and investor-owned utilities all
providing lower cost power. The Company in this case presents us instead
with a higher cost resource. In a separate case, also pending, it presents a rate
increase related to the elimination of the BP A exchange credit (Case No.
UPL-OO-l). We cannot ignore that while the Company forecasts a
penetration rate of 2.75% on a system-wide basis for its new green tariff, it
expects to achieve only half of that penetration rate in Idaho. The
Commission finds that regardless of the voluntary nature of the submitted
program, we must consider customer acceptance and we have a responsibility
to assure fair pricing. While this Commission supports the development of
renewable resources, we believe that the Company needs to refine its
proposal. Perhaps experience gained in other states will result in program
improvements. We encourage the Company to file a "green tariff' for UP&L
that supports deployment of renewable resources and is priced to foster
customer acceptance.
On May 26, 2000, the Company filed a Petition for Reconsideration with the
Commission requesting reconsideration of the Commission s Order No. 28380. In its Petition
the Company asked the Commission to consider the following:
A. A future renewable resource program will likely be more costly than the
current proposed program due to the expiration of federal tax credits;
B. Customers have indicated a desire to p::"ticipate in renewable resource
programs;
ORDER NO. 29329
C. The currently offered program benefits from economies of scale.
Designing a program for the estimated 800 PacifiCorp customers in Idaho
that are expected to participate would be prohibitively costly.
D. Marketing expenditures have been mischaracterized as representing a high
percentage of program costs.
The Commission, in Order No. 28406 denied the Petition, stating:
PacifiCorp in its petition for Reconsideration proposes no changes in its tariff
offering and offers to provide no additional information or facts that would
cause us to change our prior decision. The Company continues to offer a
higher priced choice to a customer base that wants lower cost energy. We
continue to find that the tariff the Company proposed for its southeast Idaho
service territory is not priced at a level that would foster customer acceptance.
PacifiCorp should not interpret our decision in this case as opposition to
renewable resource programs. The Company-estimated number of Schedule
70 participants in southeast Idaho is extremely small, a much lower expected
participation rate than in any of the Company s other jurisdictional service
areas. We do not believe the current proposal is the best that can be offered.
We expect that the Company will learn from its experience in those states that
have approved the tariff and that advances in technology will continue to
make wind power and other renewable generation resources more
competitive. We find that it is also reasonable in this time of increasing costs
for fossil-based fuels to expect that the federal tax credits for renewable
energy will not expire but be re-authorized or extended. We encourage the
Company to continue to design its renewable energy program based on its
experience in other states and refile an improved program in the future. It
will be easier for the Company to demonstrate market acceptance with a
proven track record. The Commission finds that the Company s Petition for
Reconsideration should be denied and Order No. 28380 is reaffirmed.
Staff states that the Company s current proposal is to implement the same renewable
energy program (Blue Sky) in Idaho that has been offered since 2000 in Oregon, Utah
Washington and Wyoming. The one key difference from the tariff that was initially proposed in
Idaho is the price per 100 kWh block. In the Company s earlier proposal in 2000, PacifiCorp
proposed a price of $4.75 per 100 kWh block. That price has now been reduced to $1.95 per 100
kWh block. The reduced price was implemented in Oregon, Utah, Washington and Wyoming
beginning in April 2003. The reduced price is the result of substantially lower cost for green
energy and lower overall administrative and marketing costs. Staff contends that the proposed
ORDER NO. 29329
premium is now more in line with the price premiums charged by other utilities in the region
with green energy tariffs, and in fact, is lower than many.
Despite the lower price, Staff notes that the administrative and marketing costs
continue to be responsible for the majority of the price premium. The cost of acquiring green
power accounts for only about 38% of the $1.95 price premium. As the price premium for wind
energy continues to shrink, Staff would expect that marketing and administration costs would
also shrink.
Staff notes that in the next ten years PacifiCorp has chosen to pursue acquisition of
400 MW of new renewable generation, primarily wind, out of a total new resource need of
000 MW. This is in addition to the approximately 70 MW of wind generation already a part of
the Company s existing generation portfolio. It would seem inconsistent, Staff contends, for the
Company to charge a premium for Schedule 70 customers buying wind energy while, at the same
time, justifying the acquisition of wind generation for all of its other non-participating customers
on the basis that it is the leas~ cost resource. Staff recommends that the Company continue to
evaluate the program costs and the premium on an ongoing basis to ensure that participating
customers are not paying more for the same renewable energy benefits enjoyed by all PacifiCorp
customers.
As previously expressed in comments on the Company s earlier proposal, Staff
continues to believe that the most important consideration is that non-participating customers not
be required to bear any of the program costs. As the program is structured, Staff believes that
that is indeed the case. Only those customers who voluntarily elect to participate will contribute
to the program costs, and any excess revenue generated due to program revenues exceeding
actual program costs will be used to either to reduce the price premium in the future or purchase
more green energy.
Staff notes that PacifiCorp expects the following participation levels by year for its
Idaho customers:
YEAR ARTICIP ANTS
160
250
350
415
ORDER NO. 29329
PacifiCorp serves approximately 59 554 customers in Idaho, of which approximately 47 000 are
residential customers.
Commission Findings
The Commission has reviewed the filings of record in Case No. PAC-03-9 and our
Orders in Case No. PAC-OO-1. PacifiCorp in this filing requests Commission approval of a
Schedule 70 renewable energy tariff. The Schedule 70 program we find is nearly identical to the
Blue Sky" program previously filed and rejected by this Commission in Case No. PAC-OO-
The only material difference in the two applications is a reduction in the premium price - from
$4.75/100 kWh block to $1.95/100 kWh block. Although the reduction is considerable, we note
that the reduced premium price is primarily the result .of changes in wind energy costs and not
the result of program redesign. A significant portion, nearly 60%, of the premium price is
administrative, marketing and promotion. In our earlier Order rejecting the Company s Blue Sky
program, we stated "resource development should have the benefit of the majority of premium
dollars provided by customers." Our prior admonition regarding overhead and allocation of
premium dollars appears to have fallen on deaf ears. We also note that the projected level of
program participation in Idaho remains quite small, much lower than in the Company s other
service area jurisdictions, and that no change in marketing is proposed to increase participation
levels. Additionally, there is still a two-year lapse between premium payment and renewable
energy benefit. We fail to see how this delay will foster customer acceptance.
It is therefore with some degree of disappointment and reluctance that we approve
the Company s proposed renewable energy tariff. We do so principally because we support
renewable energy choices, because the program is voluntary and because no subsidy is required
from non-participants. We do so also because as Staf~ notes, the overall price premium is now
comparable to other green tariff programs. We share Staff s concerns regarding what is a blurry
line between the Company s IRP identified resource needs (1400 MW of new renewable
generation) and the resources provided in this renewable energy tariff. We direct Staff and the
Company to periodically revisit and evaluate the program to assure that program participants are
not paying a premium for the same renewable energy benefits enjoyed by all PacifiCorp
customers.
ORDER NO. 29329
CONCLUCSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Utah
Power & Light Company, an electric utility, pursuant to the authority granted under Title 61 of
the Idaho Code and the Commission s Rules of Procedure, ID AP A 31.01.01.000 et seq.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above IT IS HEREBY ORDERED and the Commission does hereby approve PacifiCorp
proposed electric service Schedule No. 70 New Wind, Geothermal & Solar Power Rider -
Optional tariff for an effective date of September 1 2003.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;l.~""'"
day of August 2003.
Commissioner Smith Dissents Without Opinion
MARSHA H. SMITH, COMMISSIONER
ATTEST:
bls/O:P ACE0309 sw
ORDER NO. 29329