20040331Court Opinion.pdf

March 30, 2004
FOR IMMEDIATE RELEASE THIS IS NOT AN OFFICIAL
STATEMENT OF THE COURT
BUT IS INTENDED SOLELY
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THE PRESS.
IN THE SUPREME COURT OF THE STATE OF IDAHO
2004 Opinion No. 32
IDAHO POWERCOMP ANY
Applicant-Appellant,
Docket No. 29016
IDAHO PUBLIC UTILITIES
COMMISSION,
Respon den t.
Appeal from the Idaho Public Utilities Commission of the State of Idaho
Commissioner Paul Kjellander presiding.
The judgment of the district court is vacated and remanded
Larry D. Ripley, Boise, for appellant. Larry D. Ripley argued.
Hon. Lawrence G. Wasden, Idaho Attorney General, Boise, for respondent. John
R. Hammond Jr. argued.
This case came to the Idaho Supreme Court from the Idaho Public Utilities
Commission s (Commission) final order denying Idaho Power the recovery oflost
revenue resulting from its Irrigation Buy-Back Program (Program), a program designed
to encourage Idaho Power s large irrigation customers to reduce their energy
consumption during the 2001 growing season.
In February 2001 , Idaho Power applied to the Commission for approval of the
Program, which was to be implemented during the 2001 growing season. Idaho Power
sought approval for the Program because of the low streamflows in the Snake River and
the high cost of electricity in the Western United States' energy market during 2001.
The Commission approved the Program and instructed Idaho Power to submit
another application at the end of the growing season, listing the costs and lost revenue
resulting from the Program. At the end of the 2001 growing season Idaho Power
Idaho Power Company v. Idaho Public Utilities Commission
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submitted the required application, listing the direct costs and lost revenues incurred as a
result ofthe Program.
The Commission allowed Idaho Power to recover the direct costs of the Program.
However, the Commission denied Idaho Power s request to recover its lost revenue from
the Program. Idaho Power asked the Commission for a review of the decision denying
the recovery oflost revenue. On review, the Commission affirmed its earlier decision
again denying the recovery of lost revenue.
Idaho Power appealed to this Court for a determination as to whether the
Commission s decision denying Idaho Power s request to recover its lost revenue from
the Program was supported by the evidence. This Court vacates and remands the Order
of the Commission denying Idaho Power recovery of lost revenue because a reasonable
reading of Commission Order 28699 is that lost revenue would be included in the PCA.
The PUC's authority to require DSM programs is a broad public policy issue and beyond
the scope of issues raised on appeal. Costs to Appellants.
IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 29016
IDAHO POWER COMPANY,
Applican t- Appellan t
Boise, December 2003 Term
2004 Opinion No. 32
Filed: March 30, 2004
IDAHO PUBLIC UTILITIES
COMMISSION,Frederick C. Lyon, Clerk
Respondent.
Appeal from the Idaho Public Utilities Commission of the State of Idaho, Commissioner
Paul Kj ellander presiding.
The judgment of the district court is vacated and remanded
Larry D. Ripley, Boise, for appellant. Larry D.Ripley argued.
Hon. Lawrence G. Wasden, Idaho Attorney General, Boise, for respondent. John R.
Hammond Jr. argued.
KIDWELL, Justice
This is an appeal from a fmal Order of the Idaho Public Utilities Commission
(Commission) denying Idaho Power Company s (Idaho Power) request to recover "lost revenue
from the implementation of Idaho Power s Irrigation Buy-Back Program (program) during the
2001 growing season. Idaho Power argues Commission Order 28699 authorized the recovery of
lost revenue and the Commission s subsequent order denying the recovery of lost revenue
conflicts with this earlier order. Because this Court finds Order 28699 did authorize the recovery
of lost revenue, the Order of the Commission denying Idaho Power recovery of lost revenue is
vacated and remanded.
FACTUAL AND PROCEDURAL BACKGROUND
This case arises from the latter of a two-case proceeding before the Commission. The
first case (IPC-01-03) started on February 7 , 2001 , when Idaho Power submitted a formal
application to the Commission requesting permission to implement an energy conservation
program called the Irrigation Buy-Back Program (program). The Program offered monetary
incentives in the form of payments to its large irrigation customers to encourage them to reduce
their electrical demand and associated consumption of energy during the 2001 growing season.
The Program was in response to the "current projections of below-normal streamflows in the
Snake River and its tributaries, coupled with the volatile wholesale energy market in the Western
United States." Idaho Power believed these factors created a situation where it would be more
cost-effective for Idaho Power to undertake the Program. Because the Program would result in
Idaho Power expending large sums (hereinafter "direct costs ) in payments to eligible customers
and foregoing substantial amounts in revenue (hereinafter "lost revenue ), Idaho Power sought
an Order of the Commission that would permit Idaho Power to treat "payments to customers and
lost revenue associated with the Program as purchased power expenses eligible for recovery in
retail rates by passing them through the Company s Power Cost Adjustment ("PCA"
mechanism. "
On February 20, 2001 , the Commission issued Order 28647 approving Idaho Power
application for the sole purpose of authorizing Idaho Power to solicit competitive bids from its
irrigation customers to reduce their energy consumption during the 2001 growing season. The
Commission also noted in its "fmdings" that Idaho Power remarks that its willingness to proceed
with the Program was "dependent upon Commission assurances" that Idaho Power would be
able to recover through its PCA mechanism direct costs and lost revenue resulting from the
Program. The Order also required Idaho Power to seek future authorization before proceeding
further with the Program. Future authorization had to be obtained on or before March 9, 2001.
On February 27 and 28 2001 , Astaris LLC, the Land and Water Fund ofthe Rockies, the
Industrial Customers of Idaho Power Company (ICIP), the J.R. Simp lot Company, and Jeffrey C.
Brooks filed written comments in response to Idaho Power s Program and their request to
recover expenses resulting from the Program. The majority of the commentators supported the
implementation of the Program, but not all were in agreement regarding the recovery of lost
revenue.
On March 5, 2001 , the Commission scheduled a public hearing for March 13 , 2001 , to
review whether Idaho Power s Program should continue, and to receive testimony and comments
regarding lost revenue, the cost-effectiveness of the Program, and any other concerns of
interested persons or parties.
On March 7 2001 , in compliance with Commission Order 28647, Idaho Power submitted
its request for authority to accept bids from irrigators in the Program. In its submission to the
Commission, Idaho Power also reiterated its concern regarding its ability to recover "lost
revenue." On March 12, 2001, the Commission s Staff and the Farm Development Corporation
filed comments pertaining to Idaho Power s request for the recovery of lost revenue from the
Program. On March 13 2001 , the Commission held its public hearing and took the testimony of
four intervenors and several members of the public regarding Idaho Power s Program and issues
regarding the recovery of costs and lost revenue.
On March 14, 2001 , the Commission entered Interlocutory Order 28676, which approved
Idaho Power s request to implement the Program. The Order acknowledged that Idaho Power
voluntarily proposed and entered into the Program and stated that Idaho Power "may" treat the
revenue impacts of the Program as a purchased power expense in the Company s PCA
mechanism.
On March 25 2001, the Commission issued Order 28699. This Order summarized many
of the comments provided by interested parties and reviewed the procedural history up to that
point in the proceedings, which included Idaho Power s concern regarding the recovery of lost
revenue, the voluntary nature of the Program, and the manner in which direct costs and lost
revenue of the Program were to be treated in the PCA mechanism. The Order also required
Idaho Power to develop and present a proposal to the Commission recommending a procedure to
calculate the appropriate amount of lost revenues that should be passed through the Company
PCA mechanism prior to actual recovery in rates.
On October 18, 2001 , Idaho Power filed its application seeking an order of the
Commission "approving the costs to be included in the 2002/03 Power Cost Adjustment year
for the Program. The application was docketed as Case No. IPC-01-, the second part of the
two-case proceeding before the Commission.
On November 30, 2001, the Idaho Irrigation Pumpers Association and the Commission
staff filed written comments in response to Idaho Power s application for a Commission order
approving the costs from the Program. Both parties concluded Idaho Power should be able to
recoup a portion of its lost revenues. However, many written comments received from the public
indicated they did not think Idaho Power should recover its lost revenue from the Program. On
December 28 2001 , Idaho Power filed a response to the public, Commission staff and Irrigation
Pumpers Association s comments regarding, inter alia Idaho Power s request for lost revenues.
On April 15 , 2002, the Commission issued Order 28992, which authorized Idaho Power to
include the direct costs it accrued through the Program into the 2002/03 PCA year. However, the
Commission denied Idaho Power s request for recovery of its lost revenue alleged to have been
incurred by Idaho Power through the Program.
On May 2, 2002, Idaho Power filed a timely Petition for Reconsideration. Idaho Power
requested the Commission reconsider its denial of the recovery of lost revenue from the
Program. On May 30, 2002, the Commission, for the limited purpose of ensuring that it had
adequate time to review the entire record in this matter, granted Idaho Power s Petition. On
August 29, the Commission issued Order 29103 , which reaffirmed the Commission s denial of
lost revenue in accordance with Order 28992. Idaho Power appealed to this Court.
II.
STANDARD OF REVIEW
The Idaho Constitution provides that the Idaho Supreme Court shall have jurisdiction to
review on appeal any order of the Idaho Public Utilities Commission. IDAHO CONST. art. V
, 9
9; Indus. Customers of Idaho Power v. Idaho PUC 134 Idaho 285 , 288, 1 P.3d 786, 789 (2000).
The scope of this Court's review is limited and defined by LC. 9 61-629 which provides, in
relevant part:
No new or additional evidence may be introduced in the Supreme Court, but theappeal shall be heard on the record of the commission as certified by it. Thereview on appeal shall not be extended further than to determine whether thecommission has regularly pursued its authority, including a determination of
whether the order appealed from violates any right of the appellant under the
constitution of the United States or of the state ofIdaho.
Lc. 9 61-629. Hulet v. Idaho PUC 138 Idaho 476, 478 , 65 P.3d 498, 500 (2003); Indus.
Customers 134 Idaho at 288 , 1 P.3d at 789.
III.
ANALYSIS
A. Commission Order 28699 Authorized Idaho Power To Recover Reduced/LostRevenue From The Irrigation Buy-Back Program.
On appeal, Idaho Power argues the language used in Commission Order 28699
authorized the recovery of reduced/lost revenues from the Program. Specifically, Idaho Power
argues the use of the word "may" in Order 28699 authorized Idaho Power to recover reduced/lost
revenue from the Program. Idaho Power focuses on the Commission s use ofthe word "may" as
used in the "Commission Findings" and "Order" portion of Order 28699. The "Commission
Findings" portion of Order 28699 reads, in relevant part:
The Commission further finds that the direct costs and lost revenue impacts of
this Program may be treated as a purchased power expense in the Company
Power Cost Adjustment ("PCA") mechanism. Idaho Power, and the parties shall
develop and present a proposal to the Commission recommending a procedure to
calculate the amount of revenue impact that should be passed through the
Company s PCA mechanism. (emphasis added).
The Commission s "Order" section from Order 28699 reads, in relevant part:
IT IS FURTHER ORDERED that the direct costs and lost revenue impacts of this
Program may be treated as a purchased power expense in the Power Cost
Adjustment. The Commission also finds that Idaho Power and the parties shall
develop and present a proposal to the Commission recommending a procedure to
calculate the appropriate amount of lost revenue that should be passed through the
Company s Power Cost Adjustment mechanism prior to actual recovery in rates.(emphasis added).
IT IS FURTHER ORDERED that Idaho Power record the purchase cost paid to
irrigators and any calculated lost revenue in separate Purchased Power
subaccounts. The separate subaccount detail with all supporting documentation
should be such that the costs for the buy-back program and any lost revenue
amounts will be easily identified for audit. The PCA filing should also include a
separate line to identify these costs.
It has been uniformly held that words denote their ordinary meaning unless a different
intent is clearly indicated. Intermountain Health Care, Inc. v. Bd. of Comm 'ns of Blaine County,
109 Idaho 412 , 414, 707 P.2d 1051 , 1053 (1985). In construing the meaning of a document, this
Court looks fIrst to the documentitself. See Storrer v. Russo 123 Idaho 442, 444, 849 P.2d 115
117 (Ct. App. 1991).
We determine from Order 28699 that the Commission made a policy decision to include
lost revenue in the PCA. As used here, a reasonable reading of "may" shows the Commission
intent to allow Idaho Power to include lost revenue in the PCA. Normally, "may" denotes
permissibility. Therefore, Idaho Power may get lost revenues if Idaho Power seeks them.
Additionally, the record shows Idaho Power relied on the Commission s decision when it
entered into this Program. Indeed, one of the key concerns of Idaho Power prior to entering into
the Program was whether they could recover their lost revenue through the PCA once the
Program ended. To this, the Commission responded in Order 28699 that "the direct costs and
lost revenue impacts of this Program may be treated as a purchased power expense in the Power
Cost Adjustment." (emphasis added). The only question left to be resolved at the end of the
Program was a determination of how those lost revenues would be computed. Commission
Order 28992, which later denied the recovery of lost revenue to Idaho Power, and Commission
Order 29103, which reaffirmed Order 28992, are inconsistent with the Commission s earlier
policy decision in Order 28699 allowing lost revenue to be included in the PCA for this specific
Pro gram.
Therefore, based on the record before this Court, a reasonable reading of Commission
Order 28699 is that the recovery of reduced/lost revenues would be part of the PCA and, thus
recoverable to an extent to be determined at the conclusion of the Program.
B. Whether The Commission Has The Authority To Authorize Demand-Side
Management Programs Is A Broad Public Policy Issue That Lies Beyond The ScopeOf This Appeal.
On appeal, Idaho Power argues the Idaho Public Utilities Commission (PUC) does not
have the authority to require the institution of demand-side management (DSM) programs like
the Irrigation Buy-Back Program. This Court need not address whether the PUC has the
authority to require DSM programs because it is a broad public policy issue and is beyond the
scope of issues raised on appeal.
IV.
CONCLUSION
The Order of the Commission denying Idaho Power recovery of lost revenue is vacated
and remanded. A reasonable reading of Commission Order 28699 is that lost revenue would be
included in the PCA. The PUC's authority to require DSM programs is a broad public policy
issue and beyond the scope of issues raised on appeal. Costs to Appellants.
Justices SCHROEDER, EISMANN, and BURDICK CONCUR.
Chief Justice TROUT DISSENTING:
As established by statute and case law, the power of this Court to review decisions of the
Public Utilities Commission is limited to "whether the Commission regularly pursued its
authority and whether the constitutional rights of the appellant have been violated by the
Commission s action.A. W Brown Co., Inc. v. Idaho Power Co.121 Idaho 812, 815, 828 P.2d
841 , 844 (1992). This pursuit of authority is valid so long as the PUC "has not abused or
exceeded its authority or made findings unsupported by substantial evidence or improperly
employed its own methods of rate determination.Intermountain Gas Co. v. Idaho Public
Utilities Comm '97 Idaho 113, 127 540 P.2d 775, 789 (1975).
I dissent from the Court's opinion because I believe it is the duty of the PUC, not this
Court, to determine what the PUC meant in its first order. Though Idaho Power strongly argues
that the PUC ultimately misstated its intent in its first order when it stated that Idaho Power
may" treat the lost revenue as a purchased power expense in the Power Cost Adjustment, I do
not believe it is the responsibility of this Court to determine what the PUC meant when it said
may." That is a determination best left to the PUC, which made the finding in the first place.
We have held that our review of the ratemaking procedures ofthe PUC is very limited:
Our purpose is not to analyze each step of the rate-setting process to determine
whether the regulatory agency was correct in its decision, but to look at the
overall effect of the rate fixed to determine whether the return to the utility
reasonable and just. As the Supreme Court of the United States stated in Federal
Power Commission v. Hope Natural Gas Co.320 US. 591 , 64 S.Ct. 281 , 88
LEd. 333 (1944): "It is not theory but the impact of the rate order which counts.
If the total effect of the rate order cannot be said to be unjust and unreasonable
judicial inquiry under the Act is at an end. The fact that the method employed
reach that result may contain infirmities is not then important. Moreover, the
Commission s order does not become suspect by reason of the fact that it is
challenged. It is the product of expert judgment which carries a presumption of
validity. And he who would upset the rate order under the Act carries the heavy
burden of making a convincing showing that it is invalid because it is unjust and
unreasonable in its consequences.
Intermountain Gas Co.97 Idaho at 120, 540 P.2d at 781. As stated above, the concern of this
Court is not in the details of the PUC's decision , but in the overall effect the ratemaking order
will have on ratepayers, and in ensuring that the effect of the order will not be unreasonable or
unjust to the utility. The PUC is required to adequately explain any decision to decline a benefit
a utility requests of it. However, as long as this denial does not result in an unjust or
unreasonable return to the utility, the PUC's decision must stand.
I believe the PUC clearly and adequately stated in its third order its reasons for denying
Idaho Power the ability to include lost revenue in its PCA. Additionally, I believe the reasons
stated by the PUC are justified and persuasive. In the best interests of ratepayers, the PUC
declined to allow Idaho Power to be compensated for lost revenues because imposing the value
of lost revenues on ratepayers would defeat the underlying purpose of the program. The PUC
did allow Idaho Power to recover costs of the program, but in refusing to allow them to recover
lost revenues, the PUC did not impose any unjust or unreasonable return to Idaho Power.
Indeed, Idaho Power was seeking to recover revenues for power it would not have supplied
charging ratepayers for power that was not consumed.
The Commission explained its decision to deny Idaho Power lost revenues by stating:
In general, the Commission finds that the rates should accurately reflect the actual
costs incurred to provide service. Given the unique context that caused this
Program to be implemented, we find that lost revenue does not constitute an
actual cost of providing service that should be born by ratepayers. To allow Idaho
Power to recover lost revenue would at least partially destroy the goal of reducing
overall energy costs to all ratepayers at a time when energy costs were at all time
highs. To charge ratepayers for lost revenue is unreasonable in the context of the
crisis that existed because of the drought and the unprecedented prices in the
regional power market at that time. Requiring ratepayers to pay for energy they
did not consume, but avoided due to this Program, is also unreasonable.
Order No. 29103, p. 9. Such an explanation for denying Idaho Power lost revenues is clear
persuasive and warranted. Accordingly, it is beyond the scope of review of this Court to delve
into the particulars of the PUC's ratemaking process and to analyze the language of a prior order
in an attempt to bind the PUC to a purported guarantee that clearly goes contrary to the PUC'
mission to regulate power rates in the interest of Idaho ratepayers. "(SJo long as we determine
that the order 'may reasonably be expected to maintain financial integrity (of the utility), attract
necessary capital, and fairly compensate investors for the risks they have assumed, and yet
provide appropriate protection to the relevant public interests ' we will not set aside the order of
the Public Utilities Commission.Intermountain Gas Co.97 Idaho at 127, 540 P.2d at 789. As
cited above
, "
(iJf the total effect of the rate order cannot be said to be unjust and unreasonable
judicial inquiry... is at an end." 97 Idaho at 120, 540 P.2d at 781.
Because I believe the PUC's order was just and reasop-,~~~e:Rc~~cfrP,~k:bf~g~~ Court ofdissent. ~:: ~~a~~~~I
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entered in the above entitled cause and now on
record in my office. " .w~WITNESS I1l'Lh~d ao,\!~al of this Court
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