Idaho Power is engaged in a high stakes fight over the law that requires utilities to plan for 20 years.
The pricing battle will determine if Idaho has a renewable energy industry, one that has brought billions of dollars in investment and hundreds of jobs to the state. But the fight is pivotal as well for Idaho Power and its customers.
Idaho Power and the state’s two other investor-owned utilities are seeking to dramatically change how Idaho implements the Public Utility Regulatory Policies Act – PURPA.
Passed by Congress in 1978, PURPA was written to encourage small, sustainable power production and assures these companies a market and a set rate for their electricity. Public utilities like Idaho Power are a monopoly and the law was designed to provide competition.
When the law works it’s supposed to pay renewable energy producers like small hydro, wind and solar generators the same price that the utility would pay for its next generation plant. But the combination of federal subsidies and avoided cost pricing that had not kept up with the market led to what Idaho Power calls a perfect storm.
It has been forced to buy more than 500 megawatts of intermittent wind power at the price it said it would pay for its Langley Gulch natural gas generating plant that is soon to come on line. But gas prices have dropped and Idaho Power consider the avoided cost too high. And it has to integrate the wind into its system at an often high cost, Idaho Power officials say.
It wants a dramatically lower price that reflects the intermittent nature of wind and it even wants to reduce the contracts from 20 years to five. And it’s not only trying to limit wind and solar, which already have been cut back, it wants to limit even base load plants like geothermal and biomass plants.
Lisa Grow, Idaho Power vice president of power supply, says the company is fighting the PURPA fight for its customers, who are paying, she says, $85 million a year for the renewable power over market rates. The company, she said, passes through all the costs by law to the customer.
“We don’t think ratepayers should carry all the risk,” Grow said.
A bill that would require investor owned utilities like Idaho Power to disclose major capital expenditures was approved Thursday for printing and a hearing in the House Energy, Environment and Technology Committee. The Idaho Statesman ran the story Friday by the Associated Press’ John Miller.
The bill wouldn’t get much attention if it had been introduced by a consumer advocacy group or maybe a renewable energy group. But the major backer of the House bill is Monsanto Co., which mines and processes phosphate in southeast Idaho.
Monsanto is the largest Idaho customer of Rocky Mountain Power, a subsidiary of Pacificorp. Trent Clark, Monsanto’s government affairs director, testifying to the committee said Monsanto has had a hard time learning about what projects are going to be placed on the rate base for Idaho. The big one, the Gateway Transmission Line, which eventually would run more than a thousand miles but now ends at Downey, Idaho surprised Monsanto and many southeast Idaho customers he said.
Jeff Malmen, Idaho Power’s vice president for public affairs, said Idaho Power already discloses all of its major capital expenditures. He hasn’t seen the bill but he and the other utilities are expected to oppose it.
“It’s kind of a solution in search of a problem,” Malmen said.
Last year, the utilities told big customers like Monsanto the same story that Grow is telling today, PURPA wind in Idaho was costing them more money.
At the same, Clark said Rocky Mountain was investing $2 billion in wind plants of its own in Wyoming. When Monsanto found that out, Clark said, “it led us to be skeptical that their anti-wind bias was solely to protect the consumer.”
Clark isn’t arguing that the huge onset of wind the utilities were forced to buy may be costly for customers. But the issue, he said, is who I really looking out for the consumers.
“This bill was specifically designed so that the more they fight, the more they show they ought to be watched closely,” Clark said.
So the introduction of his disclosure bill Thursday is partially an educational exercise. When an independent renewable energy developer signs a contract under PURPA they are paid for the energy they produce.
If the plant breaks down, they can be sued and they have to pay the costs of fixing their plant. The risk is on the developer.
But an investor-owned utility goes to the Public Utilities Commission and gets its costs approved so that it is guaranteed a return on its investment of between 9 and 10 percent, Marsha Smith testified before the House committee earlier this week. That means even its maintenance costs are included in the rates.
“The investor owned utilities have an incentive to invest,” Clark said.
Idaho Power customers have know for several years that the utility was going to build Langley Gulch and intended to put it on the rate base. It got a Certificate for Public Convenience and Necessity in 2009 over the objections of its large industrial customers, consumer groups and renewable energy supporters.
They said the company should wait a year because the economy was down. Idaho Power argued successfully that it expected the economy to turn around fast and demand to quickly return. Renewable supporters said the stable cost of wind will make it cheaper alternative than the eventual cost of Langley and its fuel.
Idaho Power will file in the next month to place the cost of the facility on its rate base. Since 2009 the wind plants have come on board giving the company a surplus during the shoulder seasons but not when meeting its peak needs in the summer.
Increasingly, Idaho Power can address that need by reducing demand during the peak period. A new $80 million smart-grid transmission upgrade paid for partially with the same federal stimulus dollars that subsidized the wind plants, will give it a new tool to manage demand even more effectively if the company wants.
For instance, it can offer customers different rates based on demand that can help them make better choices for electricity use. Eventually it will be able to regulate its system with demand instead of by turning on and turning off coal and gas plants or hydro turbines but that’s years away.
But it will take new PUC policies to make that attractive to utilities that make their money building things.
The economy is picking up but how fast is still a question mark. The PUC can approval all of Idaho Power’s costs for Langley, some of them or none of them for the rate base.
It’s best case now is that the gas plant will allow the company to integrate the wind power more effectively and still maximize its relatively inexpensive hydro generation capacity.
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