Even attorneys for wind developers agreed this week that Idaho Power customers have been paying too much for renewable energy since about 2010.
That’s because the method for determining the cost Idaho Power must pay under federal law did not accurately account for the record-low price of natural gas.
But that was perhaps the only thing attorneys for the utility industry and developers of wind, solar, biofuel and other renewable generation projects could agree on in a series of technical but crucial hearings before the Idaho Public Utilities Commission last week about the future of contracts for alternative energy projects.
PUC Chairwoman Marsha Smith sat patiently for three days listening to many arguments she had heard both sides make several times before. She mildly chastised both sides for forcing the commission to decide issues that will hurt the economy, one way or the other.
“(We have) been totally unsuccessful because the parties are totally incapable of working out solutions to these issues,” she said.
Now she and Commissioners Mack Redford and Paul Kjellander will make their decision but “not at the speed of light.” With legal issues about the sanctity of contracts possibly being curtailed and the taking of private property in the form of renewable-energy credits, it is likely state or federal courts may have the final word.
WHAT’S AT ISSUE?
Attorneys argued over how the state should carry out the Public Utility Regulatory Policies Act, the federal law that requires utilities with a monopoly in their service areas to buy power from small power producers at the so-called “avoided cost” rate.
This rate is the estimated cost that the utility would pay for power at its next power plant, which today would be fueled by natural gas. Attorneys for the renewable industry argued that only small changes in the methodology for setting the avoided-cost rate is necessary to ensure that electric customers are kept whole.
Rocky Mountain Power, a subsidiary of Pacificorp, which serves eastern Idaho, and Avista, which services northern Idaho, proposed more significant changes, saying the main issue is fixing the method of pricing.
But Idaho Power Attorney Donovan Walker called on the PUC to be “courageous” and restructure Idaho’s entire system for carrying out PURPA. The utility also wants the commission to shorten the length of PURPA contracts, from 20 years to five, which renewables industry witnesses said would prevent projects from getting financing.
A FIGHT OVER CREDITS
Idaho Power also wants the small producers to give up their renewable energy credits, known as RECs. The alternative energy producers can sell those for millions of dollars to utilities in states that have meet renewable-power standards. Idaho doesn’t have such standards. Idaho Power argues those credits belong to the customers who pay for electricity, not to the producers.
Finally, Idaho Power wants to stop buying wind power in times of low demand, so it can keep using its coal-fired plants that produce cheaper electricity. Idaho Power signed contracts to buy all the wind power that was produced. But last spring it turned away power from wind producers when demand ebbed, arguing that taking intermittent wind power threatened its system’s reliability.
INDUSTRY AT A CROSSROADS
The renewables industry has pumped billions into Idaho’s economy over the last decade and created hundreds of jobs even in the depth of the recession. Its attorneys say cuts in a state tax rebate and reductions in federal subsidies already slowed development of energy alternatives.
Former Public Utilities Commissioner Joe Miller called Idaho’s Power’s proposals “extreme and radical” aimed at “crippling future development and punishing existing power producers.”
Miller, who represents Ridgeline Energy, a wind farm owner, said taking its RECs and limiting contracts to five years would stop future development and hurt the financial viability of current projects. He said it was regrettable that the PUC’s own staff was backing those proposals.
Kristine Sasser, an assistant attorney general who is a part of the PUC staff, responded that the commission has the authority to carry out most of what Idaho Power proposed. She also said that the state is not required to ensure that renewable projects are financially viable.
THE 1997 PRECEDENT
Idaho’s system for administering PURPA was considered a model nationwide when it wast established in the 1980s. It allowed small hydroelectric dam developers to build projects that could compete with the price of coal plants at the time. Simplot, Boise Cascade and Potlatch also built co-generation plants that generated steam for both industrial processes and power generation.
By 1997, the electricity market was changing; industry and regulators were preparing for the deregulation of power generation. The PUC reduced the size for projects that could quality under PURPA to 1 megawatt and the length of contracts to five years – essentially shutting down the alternative industry.
But an electricity shortage in 2001, caused by manipulation of the deregulated markets, forced Idaho Power and other utilities to scramble to meet electricity demands. Idaho Power paid thousands of dollars a megawatt-hour on the spot market for power it could have bought for under $60 from renewable projects had those projects been built.