HomeMy WebLinkAbout20010214.min.docMINUTES OF DECISION MEETING
FEBRUARY 14, 2001 - 1:30 PM
In attendance were Commissioners Dennis Hansen, Marsha Smith, and Paul Kjellander.
Commissioner Hansen called the meeting to order. The first order of business was APPROVAL OF MINUTES FROM PREVIOUS MEETINGS. Commissioner Hansen stated the minutes to be approved were for the meetings on January 16th and 22nd. He moved for approval of the minutes. A vote was taken and the motion carried unanimously
The next order of business was approval of items 2-8 on the CONSENT AGENDA. Commissioner Smith requested that item 4 be removed from the Consent Agenda and be considered at the conclusion of the meeting. A vote was taken and all agreed to move the item. There were no questions or discussion on the remainder of the Consent Agenda items. Commissioner Hansen made a motion to approve items 2, 3, 5, 6, 7 and 8 with Staff's recommendations. There was no discussion on the motion. A vote was taken and the motion passed unanimously.
The next order of business was MATTERS IN PROGRESS:
Rick Sterling and Scott Woodbury's February 9, 2001 Decision Memorandum Re: Idaho Power Proposed Schedule 62—Green Energy Purchase Program. Case No. IPC-E-00-18.
Mr. Sterling reviewed his Decision Memorandum. Commissioner Hansen asked Ric Gale of Idaho Power if he wanted to make any additional comments before the matter was opened up for discussion. Mr. Gale reiterated that at this time the program is customer-driven, customer-chosen and every dollar will go to the product. He said Idaho Power will administer and market the program on its dime and it stands ready to go ahead and make the initial purchase ahead of the customers coming to the table. He stated the company is interested in having the program succeed and is fully supportive of it.
Commissioner Kjellander asked Mr. Gale what type of price Idaho Power was looking at for an average megawatt under the Green Energy program. Mr. Gale stated he believed they were buying the tag or the differential. Rick Sterling stated that he recalled from earlier conversations with Idaho Power the price was $15 per megawatt hour in the first year and it would likely be in the range of $20 per megawatt hour in the second year, the price premium above the standard price of energy.
Commissioner Hansen stated he wanted to compliment the company for coming forth with the proposal and giving interested customers the opportunity to participate in the program at the lowest cost possible. He said the company's intention to focus on wind and solar energy with BEF administering the program is a good first step that will keep the costs down. He acknowledged there are some who would like to see the program begin at a faster pace and that in the past the Commission has rejected a proposal from another utility company, but rather than reject this proposal, he stated he is in favor of starting it and getting it off the ground.
Commissioner Kjellander stated he was also in support of getting it off the ground, but on a going forward basis past the first year he has some concerns about the exclusive use of BEF, especially at the exclusion of any possible Idaho resources that might be developed to be put into the mix. He acknowledged it makes good sense to take advantage of a program that already exists and to take advantage of some of their marketing tools to help keep costs down, but for the second stage of the program, he would like a report about other options including some of the Idaho-based options. He said if this suggestion could be added, he would be in support of getting it started.
Commissioner Hansen stated he agreed. Commissioner Smith said she agreed, also, with everything that had been said. She noted the company has a good resource in all the commenters who had excellent ideas that ought to be followed up on and that she, too, supported the program as an initial first step and would expect the program to grow. She acknowledged the company has other concerns right now but over the next few months she would expect to see some of the suggestions by commenters taken up or at least discussed to see how the program could be improved and enlarged.
Commissioner Hansen made a motion to approve the proposal by Idaho Power with the addition of Commissioner Kjellander's suggestion that we revisit the use of BEF in one year, at which time Idaho Power will hopefully come forth with additional proposals and program expansion. A vote was taken on the motion and it carried unanimously.
John Hammond's February 12, 2001 Decision Memorandum re: In the Matter of the Application of Idaho Power Company for Authority to Acquire Reductions in Electrical Demand and Associated Consumption of Electrical Energy from Irrigation Customers. Case No. IPC-E-01-03.
Mr. Hammond reviewed his Decision Memorandum. Commissioner Hansen stated he would like to hear from people who wanted to make comments on Idaho Power's proposal. He stated the Commission has received on record letters of support from the Potato Grower's of Idaho, Idaho Grain Producers Association, Terry Miller of Miller Research, Inc., Idaho Irrigation Pumpers Association, as well as a letter from Senator Laird Noh requesting the Commission hold the matter until February 21st so more information can be gathered. Commissioner Hansen then asked if there was anyone present who wanted to make a statement on the matter.
Duane Grant, the president of the Idaho Grain Producers Association, stated they are in favor of the program and urged that Idaho Power be allowed to purchase from Idaho pumpers, which will allow the money to stay in Idaho and flow through our communities in much the same manner as if the crop had been grown and the pumps had not been turned off. He said there will be some other side benefits such as seeing reduced acres for certain crops and perhaps a stronger economy in those crops. He said another main point he wanted to make to the Commission is that it is imperative from the producers' standpoint that decisions be made in an expedited manner because growers will be in the fields in the western side of the state in the next two weeks, in the central side of the state in three weeks, and in the Magic Valley they will be in the fields in three to four weeks. He stated they will need to have information to make their production decisions so he encouraged the Commission to continue in an expedited manner. He said as far as values that can be assigned to kilowatt hours and whether we should proceed on a bid basis or a flat rate plus a percentage of the increase basis, their membership feels a flat rate plus a percentage of any increase is more appropriate and would be more successful. He said if it is unworkable, however, the bid process will suffice.
Commissioner Kjellander noted the volatility in the marketplace and the fact there could be some attempt by the federal government or maybe some success in California that would cause the spot market price to come down. He asked Mr. Grant if he would be willing to accept a percentage of the loss or the decrease if the spot market price were to come down, assuming the flat rate basis is used. Mr. Grant replied they would not be willing to do that and they had to have a certain level to work into their calculations to allow them to make the decision whether it is economically feasible to turn the pump off or not. He noted that once they pass the planting window, there is no opportunity for second guessing, and unlike a commercial user, they can't simply fire back up. He said once they pass April 15th for planting grain there is not an opportunity to bring the pump back into production. Commissioner Kjellander asked if the ultimate concern was certainty in whatever price the farmer would end up getting. Mr. Grant replied that certainty at the minimum level is what they are looking for. He noted farmers are risk takers at heart and if they have an opportunity to potentially participate in the increase that will bring more takers to the table, but all farmers shared the need to have certainty at the minimum price so they can make their own economic decisions. Commissioner Kjellander stated that it is very clear producers don't want to share in any losses that might occur as a result of a swing in the other direction in the marketplace. Mr. Grant confirmed that was the case.
Commissioner Hansen stated a concern has been raised about the impact the program could have on other businesses in small communities. He asked Mr. Grant if he thought the program would have a negative impact on other businesses, causing them to go out of business. Mr. Grant replied that it was a tough question and he thought it would be irresponsible for him to declare absolutely that it will not have an effect on our communities because they aren't sure how it will play out. He said they have had extensive discussions and it gets down to what value is placed on the kilowatt hour, which will determine how many acres come out of production in an individual community. He said that if the choice is made to purchase the power through conservation they believe there will be less of a disruption of the economic infrastructure than if the power is purchased from out-of-state generators at what could potentially be an exorbitant spot price, which would be reflected in their rates the next year. He stated they believed that if the power is purchased from their pumpers, their communities will be healthier in the long run than if they were to get saddled with exceptionally higher rates if Idaho Power has to purchase high-cost power on the spot market.
Commissioner Hansen asked Mr. Grant if he thought some farmers would not plant if the irrigation rates were to go up 50%, from around .04 cents to .06 cents per kWh. Mr. Grant replied the short answer is "yes" and that margins are extremely tight in production agriculture. He said their members have been dipping into equity for the past three years to stay in business and a significantly higher cost structure will force some out of business, especially in the higher lift areas or in areas where wells are deeper. He noted some of their members have pumping costs in excess of $100-$130 per acre and if they have an increase of 28% on May 16th this year plus any additional increases next year, those people won't be pumping. He said we can either pay the producers to conserve, pulling the power from in-state, or the communities will be the worse off because the pumps will be shut down permanently.
The next person to speak was Terry Miller of Miller Research. He stated he is concerned about the bidding that pits one farmer against another. He said they feel some kind of flat rate would be more acceptable than the bids. He said there are some farmers who have a single pump per farm, which does not let them set out a portion of their farm. If they are to participate, they will need to have a price that will allow them to set the whole farm out because farmers can't irrigate part of your farm if they have only a single pump. He said that unless the price is high enough and allows growers to take out sugar beets, they will not be able to participate in the program. Mr. Miller stated that in the co-op they are obligated to pay $278 per acre for every acre of beets they do not grow, and unless somehow they can recoup that cost, then that means sugar beets will have to stay in. He added that growers on a single pump can't just grow sugar beets and realize the full potential because restricting water flow in wells saves some power but not to the same extent as shutting them off. He stated they are sensitive to any impact on our rural communities because that's where they live, but they also look at the program as having a positive benefit on the price of certain commodities, particularly potatoes, and by setting aside some acres, the price of potatoes would increase, benefiting the economy. Mr. Miller noted that in a survey they took in the Burley area, the banks indicated 30% of the growers will be turned down this year, but 10% would be funded if they could restructure. He added that many growers have been working on equity for three years and for some there is no equity left, so they see the program as a win-win for growers and for Idaho Power. He said growers would like to participate in keeping the rates down because they have to farm in 2002, and unless commodity prices change, rates would be more than what many of the growers could handle.
Commissioner Kjellander stated to Mr. Miller that from his comments there seemed to be the perception that a reasonable bid won't be accepted by the company. Mr. Miller replied that they aren't sure what a reasonable bid is and in order to make the program work for a potato and grain grower, according to the calculations they have run, they would have to be paid close to 20 cents per kWh, and for sugar beet growers it would have to be close to 25 cents per kWh. Commissioner Kjellander stated that if the Commission set the rate at 15 cents per kWh, the potato growers would be out of the mix, so the bid process would allow for costs to be justified and the company could look at the bid and decide what load they were talking about based upon individual farmers' needs. He said if the Commission picked a set price, by their own decision it might be excluding some possibility that could only come out through the bid process based on certain conditions and certain loads for specific crops. Mr. Miller replied that most of their growers have a mix of crops that are generally on three to four-year rotations and the rotations aren't something they can readily change. He stated that for larger growers who have more than one pump, they can shut off part of their system, but there are a majority of the growers who have single pumps. He stated another option is for the sugar beet grower to turn his shares back into the co-op, but in doing that the grower would probably be forced into bankruptcy. Mr. Miller said they still feel like the price that could be offered should allow whole farms to participate if they chose, but the trade off is that production will be down on grounds that were set apart because when water is taken off it takes at least a year to bring the land back into full activity.
The next person to testify was Armand Eckert, representing the Magic Water Companies in the Magic Valley. Mr. Eckert said he wanted to go on record as supporting the proposal. He questioned if the 100,000 kWh minimum was at each metered location or if it was on an energy basis. He suggested that Idaho Power should pay some kind of interest on the 25% delayed payment. In relation to the Commissioners' questions about the negative influence on communities, he said he thought the program would have a positive effect, at least in the Magic Valley, where they have a number of surface irrigators who will continue to farm and who have contracts to protect. He said they farm Coors barley, sugar beets and potatoes, and the farmers will continue to protect the contracts, especially with just a one-year deal. He said the fall out from the reduction in commodities will have a positive influence on prices, affecting the farmers who will continue to farm. He said farmers will spend the money they receive from the program through debt reduction, trade-ins and repair on equipment while they aren't farming. He said if the program doesn’t happen, we will see a couple of severe bankruptcies in the next several years in the farming community.
Commissioner Hansen asked Mr. Budge, who was participating via conference call, if he had any comments to make on behalf of the Idaho Irrigation Pumpers Association. Mr. Budge said their members had shown considerable interest in the program and they had been inundated by inquiries, almost all supportive. He stated there were a number of unanswered questions, however, dealing with how the bidding process will work, what the prices will be, and what some of the impacts will be. Mr. Budge acknowledged that many of the answers will come about as the bidding process goes forward and the answers can be obtained and evaluated by the Commission before final approval is given, as suggested by staff. He said that overall, they wanted the Commission to be aware they have also been working closely with Idaho Power Company on another conservation program that involves time-of-use rates, and they hoped both programs would be considered on an expedited basis without delay for the same reasons mentioned by Mr. Grant. He said they support the program and feel the opportunities are tremendous to benefit all Idaho Power ratepayers, because if it is less expensive for power supply to be obtained from its own customers through conservation mechanisms—such as this program—than can be obtained on the open market, certainly that will benefit all ratepayers. He said they also feel there is a tremendous opportunity to benefit not only individual farmers but the agricultural economy in general by keeping the dollars in Idaho and paid to Idaho farmers rather than out-of-state generators and markets. He urged the Commission to approve the program as stated in their comments without delay even if appropriate conditions need to be imposed in order to enable some questions raised by others to be answered.
The next person to speak was Morris Clements of Nampa, Idaho. He said in his conversations with some of the Idaho Power employees relative to the bidding process, he has many of the same reservations already expressed by others. He stated if the bidding process is chosen as the means of determining who will be participating in the program, he hoped the Commission and Idaho Power would consider the possibility of having a two-bid process. He said if a farmer comes in with a bid of 25 cents per kwh and he is rejected, then he should have the opportunity to come back and make a second bid. He stated it would be a fairer process if it were more like a true auction.
Jack Post of South Elmore Irrigation in Mountain Home spoke next and said he was wondering about the bid process as well. He said since Idaho Power is in the process of buying and selling power, he questioned if it wouldn't make more sense for them to bid for the power. The company knows how many kilowatts or megawatts it needs at a certain level and could place a bid on the market so the farmer could make an economic decision if it would work for him. He said pretty much everyone knows how many kilowatts per acre they need and can compute it into a dollar figure. He stated Idaho Power could start at whatever level it is comfortable with and if it didn't get enough kilowatts in the first bid, it could make another bid. He said Idaho Power would have a better idea of the power needs and prices, whereas farmers are shooting in the dark. He said different sets of economic conditions work for different farmers at different pumping levels, and it takes out a different number of acres in certain areas at certain price levels.
Mark Hensley, representing himself and other high lift pumpers in the Hagerman Valley, commented next. He said he hoped the Commission would move quickly on a decision due to the fact that bankers and seed and fertilizer salesman need to know, and they will probably be in the field within 3-4 weeks. He stated he hoped the Commission will consider the bid process and the fact that the water used by pumpers in the Blue Gulch area and Magic Water passes through two other dams, unlike water used by the Bell Rapids high lift irrigators. He said since their water passes through more dams to produce more electricity during the time of needed load, the company will be looking at his application differently. On a flat rate basis, he said he felt like his water is more valuable to the company than the water of someone who pumps out of the ground. For that reason, he said he hoped the Commission chooses the bid process.
Commissioner Smith said she sees his point about his particular operation having two benefits to the company—the first being he is not drawing power so there should be a bid process for that, and the second being he is not taking water out so it will then go on and go through turbines. She asked if he was anticipating having two prices in his bid—one to recognize each of the two factors. Mr. Hensley replied that he will probably have a high bid and low bid. He said he has already talked to Idaho Power, and the company will recognize that his water will stay in the river and will be able to pass through the turbines. Commissioner Smith said it is a given that water issues always elicit strong responses from everyone. She said that he has water rights, and he doesn't sell them, but he could sell his water to Idaho Power for a price. She asked him if that is how it will work in his bid. He said that isn't how he was going to bid and he just hoped Idaho Power will recognize the water will remain in the river and the company will be able to use it to generate more electricity, which is why his water is more valuable than someone else's down the river. Mr. Hensley said that if the Commission agrees to another rate increase from Idaho Power, and within three months Idaho Power comes back and wants more money, farmers will be out of business. He said by selling their power, they will improve commodity prices and can pay the bank. Commissioner Smith asked Mr. Hensley if the Commission had to impose a rate increase of around 50%, based on predicted low stream flows coming into the reservoirs and on the price of purchased power, would he still be pumping. Mr. Hensley replied that he would not.
The next person to speak was Mark Schroeder from Hagerman, Idaho, a farmer and high lift pumper. He said he was told there was no value to stream flow and it wouldn't be an issue. Since it was just talked about, he said he wanted the Commission to know he is in the same situation as Mr. Hensley. He said he uses a lot of energy to pump his water 500 feet up over the hill as opposed to pumping from a canal, so his energy costs are extremely different from someone who just pressurizes the line and doesn't take the kilowatt hours. He said he has been trying to find out the value of the stream flow since they told him it wasn't worth anything. He said he was glad Commissioner Smith spoke to the question, and in his opinion, it is a very valuable commodity. He said he can't get any information from Idaho Power, but he would like to know and for the Commission to take it into consideration, how much stream flow reduction there will be and in turn determine how much more will be added to stream flow projections if he turns off his pump and leaves the water in the river, which will benefit every consumer in Idaho. He stated that people who don't have a high energy cost will have to bid at a high rate on a per acre basis to generate $200-$300 per acre. He said he would like to go on record as saying that through his telephone conversations, there will be very little participation from farmers with a value lower than about $300 per acre. He said someone who uses little energy will have to bid high to generate $300 per acre, whereas he won't have to bid as high to generate $300 per acre. He said he felt Mr. Post's idea was a good one and he agreed that he didn't think it was fair that Idaho Power wants him to bid as low as he can because of fear his neighbor will bid lower.
Commissioner Hansen thanked all those who made comments. He then invited Ric Gale of Idaho Power to make comments. Mr. Gale said he appreciated Staff's comments because they do a couple things—they allow the process to continue and also provide for a way to address the concerns that they have heard at the Legislature for the last three days concerning communities and evaluating the impact on rural Idaho. He said the difficulty they have had in answering legislative committees is that they don't have the bids in and don't know what they're looking at, such as how many acres, what crops, and what areas are affected. He said if they can proceed with the process and then know what they're looking at, and there is a step before they actually conclude the transactions, that will work well for Idaho Power. He said they agree with every suggestion in Staff's comments. Mr. Gale stated the program is not an insignificant program for them or for anyone who is their customer, in particular the irrigators. He said the program has the potential of generating a ballpark figure of $60 million in power cost supply savings and can do as much as anything else they are looking at for this year, so they value it greatly. He added the savings, however, must come as a discount to market. He said that as they provide information to the farmers and irrigators about the bidding process, it is incumbent on the company to convey realistic expectations about what may or may not get there.
Mr. Gale stated that from the start Idaho Power has viewed the program as a price for a commodity, their commodity, which is electricity, and that is what they are trying to value—not crops per acres or anything else—just what they can get a kilowatt hour for as opposed to other sources. He said other sources would be purchases in the market, other demand programs from special contract customers or industrial customers or even programs they are trying to develop for small customers. He said the company's emphasis is not just on programs for farmers, although it is one program that has a lot of potential. He stated the program will have to be benchmarked against the other prices. Mr. Gale noted the commenters who had stated there will be a two-year effect made a good point. He said they are looking at significant power cost adjustments this year, and absent this program, farmers would be trying to operate in a very high energy cost year while trying to hang onto next year. Without mitigation of power supply costs, Mr. Gale noted farmers will be looking at the second high cost year, so it is a two-year effect even though it is one-year proposal. Mr. Gale added that Idaho Power is trying to make people aware that if they either reduce costs or sell surplus, the benefits will flow through electric rates 90 cents on the dollar, so customers actually have a larger share in this than the company does. He confirmed that a time-of-use program is on the horizon and said it will be filed before the week is out so irrigators will have another program to evaluate. He stated he agreed with the commenter who said Idaho Power should pay interest on the last 25%.
Mr. Gale said the company also recognizes and appreciates the fact that different individuals come to the bid process with different economics, and the company expects and hopes that irrigators will bid what it's worth to them not to farm. He said the company hopes irrigators will pencil it out and see what type of electric price they need in order not to operate, and if they got the price they were better off and if they didn’t get the price they could go about their business. He also noted the comment about the additional value of water is well taken, and he wished BPA could pay those individuals for that water and we could all benefit from it as well. He said he isn't sure what BPA will ultimately do, and if there are some piggyback economics it would be great, but right now Idaho Power's program is a kilowatt hour program not a water program, although Idaho Power recognizes the water is there. Mr. Gale said he wanted to clarify that Idaho Power will not be selling power this summer to any market and all they are trying to do is reduce purchases in an expensive market. In conclusion, he said other than the rural effect, the other thing the company has heard the most about are objections to the bidding proposal. He said the bidding is a natural tension between the buyer and the seller, no matter how you do it, and in this program, the tension here is between the irrigator and the ratepayer. He acknowledged Idaho Power has a small but not immaterial piece of the process. Mr. Gale stated that if they conduct the bids as outlined they will get the lowest price for the commodity, and neighbors will have to think about what their neighbors are going to bid and factor that in, with the overall effect being the lowest price for the ratepayer. He acknowledged that Idaho Power could suggest a price but that would be a guarantee Idaho Power would pay the most because everyone would bid right to the price. He said there may be a middle ground if they used a Dutch auction, which is the way the California PX works, where all bidders clear at the same price. He said all they are trying to do is play off the rate payer against the potential suppliers.
Following more discussion and questions, Commissioner Smith moved that Idaho Power's Application be approved and the Company be allowed to go forward with the bid process, with the provision that the company file a report with the Commission on how the information and bid-solicitation has progressed so the Commission can review the information before giving final approval to the program. After discussion, March 9 was set as the cut-off date for receiving the report from Idaho Power. A vote was taken and the motion passed unanimously.
Michael Fuss's February 12, 2001 Decision Memorandum re: In the Matter of the Application of Avista Corporation for Approval of Reinstatement of Natural Gas Energy Power Programs (Tariff Schedules 190 and 191) and a Related Surcharge. Case No. AVU-G-01-01.
Mr. Fuss reviewed his Decision Memorandum. There were no questions or discussion. Commissioner Hansen made a motion to accept the Company's filing and include all of the Staff's recommendations. There was no discussion on the motion. A vote was taken and the motion passed unanimously.
John R. Hammond's February 7, 2001 Decision Memorandum re: In the Matter of the Application of Avista Corporation dba Avista Utilities for a Deferred Accounting Order. Case Nos. AVU-G-00-8 and AVU-E-00-12.
Terri Carlock reviewed the Decision Memorandum. Commissioner Smith moved for approval of Avista's Application with the implementation of Staff's recommendations. A vote was taken and the motion passed unanimously.
Dated this _____ day of March, 2001.
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COMMISSION SECRETARY
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