BOISE – An organization representing Idaho well irrigators considers a recent order allowing power companies to shorten contract lengths with certain renewable energy providers good news for rate payers.
Opponents of the new policy, however, fear it will quash future renewable energy development in Idaho.
Under the federal Public Utility Regulatory Policies Act, utilities must purchase any qualifying renewable power. States set contract lengths and determine how to calculate avoided costs – payments for renewable energy based on what utilities would have to invest to generate the equivalent power.
The Idaho Public Utilities Commission’s Aug. 20 order shortens the length of new PURPA contracts for solar and wind projects over 100 kilowatts from 20 years to two years. Shortened contracts also apply to other renewable power sources, such as hydro, over 10 megawatts.
Idaho Power petitioned for shorter contract lengths on Jan. 30, and PacifiCorp and Avista later signed on to the petition.
“We felt if the contract term were kept the same, the rates would be artificially increased before it was needed,” said Eric Olsen, a Pocatello attorney who represented the Idaho Irrigation Pumpers Association as intervenors in the case. “Through shortening of the contract period, I think that will appropriately regulate these types of projects into the future.”
The association hired Ohio energy expert Anthony Yankel, who testified Idaho Power is often forced to use more costly PURPA energy at the expense of its own facilities. The PUC awarded $40,000 toward intervenors’ expenses, funded by the utilities, including about $18,000 for the association.
The utilities reason they update their Integrated Resource Plans every two years, and a shorter contract affords them flexibility to revise rates based on actual market conditions.
Randy Allphin, Idaho Power’s energy contract lead coordinator, said 20-year renewable energy contracts have consistently locked in prices above market rates – a trend his company projected would continue into the future, absent change. Idaho Power anticipates it won’t need additional power capacity until 2025.
“No matter what the price would be that we paid for this PURPA energy, when we don’t have a need for it, it’s a cost that is not appropriate,” Allphin said.
Though there’s been a flood of applications in Idaho to build solar projects prior to the expiration of a federal credit at the end of 2015, Ben Otto, with the Idaho Conservation League, doubts a single project will come to fruition under a two-year contract.
Otto, whose organization intervened against the shorter contracts, said lenders insist they wouldn’t risk approving a project without long-term price assurance.
His organization’s energy expert, Tom Beach, said Idaho’s avoided cost rates are undervalued, if anything. ICL proposed a compromise contract with fixed rates for 10 years, allowing certain adjustments in ensuing years. Otto pointed out customers pay for 20 years or more when utilities build new infrastructure.
In its order, the PUC emphasized utilities are still obligated to purchase renewable power, and PURPA isn’t their only option for acquiring it. The PUC agreed 20-year contracts overestimate costs, and shorter contracts may also benefit renewable power providers if market rates increase.
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