20060629final_order_no_30078.pdf

Office of the Secretary
Service Date
June 29, 2006
BEFO RE THE ID AM 0 PUBLIC UTILITIES CO MMISSI 0 N
IN THE MATTER OF THE ANNUAL
REVISION OF QF VARIABLE ENERGY
PRICES IN ACCORDANCE WITH TERMS
OF THE 1992 AMENDMENTS TO POWER
PURCHASE AGREEMENTS BETWEEN
IDAHO QFs AND P ACIFICORP
CASE NO. P AC-06-
ORDER NO. 30078
On July 1 2003 , PacifiCorp dba Utah Power & Light Company (Company) in Case
No. P AC-03-1 0 sent a letter notifying the Idaho Public Utilities Commission (Commission) of
a July 1 , 2003 , revision to the variable energy price for Qualifying Facilities (QFs) holding
certain power sales contracts with the Company. Thirteen QFs haye PURP A contracts with
PacifiCorp that include a Commission approved 1992 Amendment that outlines a methodology
that is to be used for determining the variable energy price component of the avoided cost rate.
As stated in the 1992 contract Amendment:
Beginning July 1 , 2003 and continuing throughout the term of the power
purchase agreement, including any extensions, the variable energy rate shall
be calculated in accordance with the following methodology:
a) the variable energy rate shall be the sum of the Buyer s (PacifiCorp) fuel
cost and the variable O&M cost.
b) Buyer s fuel cost shall be the average cost of fuel consumed in Buyer
Utah Division, specifically the Carbon, Hale, Naughton, Huntington and
Hunter generating plants. If any of the specified plants does not operate in
any calendar year, such plant shall be excluded from the calculation of the
average cost of fuel. The average cost of fuel shall be calculated using the
data reported in Buyer s FERC Form 1. For 1990, Buyer s fuel costs are
reported at pages 402-403, lines 12 and 21 ofthe FERC Form 1. In the event
that the FERC Form 1 ceases to include the cost of fuel or net generation
data, comparable data based upon Buyer s normal accounting practices shall
be used.
c) Buyer s variable O&M cost shall be calculated using the methodology
adopted by the Idaho Public Utilities Commission in Order No. 23738 for
determining the variable avoided O&M cost of the Surrogate Avoidable
Resource, excluding the State of Montana generation tax and the line loss
adjustment.
ORDER NO. 30078
Order No. 29316.
The variable energy component is composed of two parts, fuel costs for PacifiCorp
Utah thermal plants and variable O&M costs. Commission Order No. 28708 clarified how each
of these two parts to the variable energy component is to be calculated:
For those PacifiCorp contracts with 1992 Addendum language, we note by
way of clarification, that the fuel component calculation is to remain
unchanged, i.
, "
average fuel costs as reported in FERC Form 1 for
PacifiCorp Carbon, (Hale-presently out of service), Naughton Huntington
and Hunter plants." The variable O&M under the PacifiCorp QF contracts
while presently fixed, is to be tied to Colstrip beginning in 2003. The
Commission notes that pursuant to the '92 Addendum language in the
PacifiCorp QF contracts, generation taxes and a line loss adjustment are
specifically excluded from the calculation of any variable O&M. It is not our
intention to change this contract term. The Commission notes, as calculated
by Staff, that the exclusion of line loss (5%) and generation tax (20t/MWh)
from the variable Colstrip calculation for affected PacifiCorp contracts
(beginning in 2003) results in an adjusted O&M figure of$1.511 MWh.
In Commission Order No. 29316 in Case No. PAC-03-10 the Commission
authorized and approved a new variable energy rate for PacifiCorp/QF contracts with approved
1992 amendment language and ordered the Company as follows:
Recognizing the variable rate change we approve today is the first of what
will be an annual change in the variable rate for PacifiCorp/QF contracts with
92 Amendment language, IT IS FURTHER ORDERED and the Commission
does hereby direct PacifiCorp to make an annual filing with the Commission
on or before June 1 of each year showing its computation of the revised
variable energy costs for these contracts.
Order No. 29316.
In accordance with Order No. 29316, the adjustable portion of the avoided cost rate for
existing PacifiCorp contracts with year 1992 amendments has been recomputed. Beginning
July 1 , 2003, the adjustable portion for these contracts was ordered to be equal to the average
cost of fuel for the Carbon, Hale, Naughton Huntington and Hunter generating plans, including a
variable O&M component of $1.51 but exclusive of generation taxes and a line loss adjustment.
The variable energy rate applicable to deliveries commencing July 1 , 2006 extending through
June 30 , 2007 has been computed by PacifiCorp to be $ 12.03/MWh, an increase from $11.55 last
year.
ORDER NO. 30078
Commission Findings
The Commission has reviewed and considered the filings of record in Case No. PAC-
06-6 and the proposed revision of the adjustable portion of the avoided cost rate for PacifiCorp
QF contracts with 1992 amendment language. We have reviewed the Company s supporting
workpapers and have also considered the recommendations of Commission Staff.
The methodology that this Commission has approved for determining the variable
energy cost for these affected PacifiCorp QF contracts is similar to our annual revision of the
variable avoided cost rate associated with Colstrip and is a relatively simple arithmetic re-
calculation that is based on data contained in PacifiCorp FERC Form 1 filings. We find the
annual revised variable energy cost calculation, as computed by PacifiCorp, for existing QF
power purchase contracts with the 1992 amendment to be correct. We find the resulting
adjustable rate to be fair, just and reasonable and we find it reasonable to approve same for an
effective date of July 1 2006.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Utah
Power & Light Company, an electric utility, pursuant to the authority and power granted it under
Title 61 of the Idaho Code and the Public Utility Regulatory Policies Act of 1978 (PURP A).
The Commission has authority under PURP A and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed term obligations for the purchase of energy from Qualified Facilities
and to implement FERC rules.
ORDER
In consideration of the foregoing, and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby authorize and approve a new variable
energy rate of $12.03/MWh for deliveries commencing July 1 , 2006 extending through June 30
2007, for those PacifiCorp/QF contracts with approved 1992 amendment language.
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 ~ 61-626.
ORDER NO. 30078
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;;J...
day of June 2006.
~~-
PAUL KJELLAN ' ER, PRESIDENT
)/~
MARSHA H. SMITH, COMMISSIONER
ATTEST:
Je D. Jewell
mission Secretary
bls/O:PAC-06-6 sw
ORDER NO. 30078