Case No. IPC-E-05-20, Order No. 29852
August 23, 2005
Contact: Gene Fadness (208) 334-0339
Idaho Power can sell surplus emission allowances
The Idaho Public Utilities Commission is granting Idaho Power Co. blanket authority to sell its surplus sulfur dioxide allowances, but wants to review each sale to ensure it benefits both the company and its customers. The commission also directed its staff, the company and interested parties to conduct workshops as soon as possible to discuss if and how proceeds from the sales could be shared with customers.
An amendment to the 1990 Clean Air Act establishes a national program for the reduction of acid rain. Scientists have determined that sulfur dioxide (SO2) and nitrogen oxide (NOx) are the primary causes of acid rain. In the United States, about two-thirds of all SO2 and one-fourth of all NOx comes from thermal (coal and natural gas) electric generating plants.
Under the federal program, thermal power plant owners are issued limited allowances for their plants’ sulfur dioxide emissions based on a specific plant’s past emissions and a nationwide cap placed on the total amount of SO2 that can be emitted.
Each allowance authorizes the utility to emit one ton of SO2. At the end of each year, a utility generating unit must hold allowances equal to its allotted annual SO2 emissions. A utility that holds over its annual requirement is considered to have surplus allowances that can be sold on an open market through auctions sponsored by the Environmental Protection Agency.
Idaho Power has an ownership interest in three coal-fired plants: Jim Bridger in Wyoming, North Valmy in Nevada and Boardman in Oregon. After building up what it calls a “cushion” in allowances to allow for changes or contingencies in the program, Idaho Power says it is in a position to sell its surplus allowances. Commission approval to participate in the market is needed, Idaho Power claims, to satisfy prospective purchasers that there will not be a “regulatory cloud” over the transactions.
The commission opted to give the company blanket authority – without prior commission approval – to sell its emissions as long as each sale is reviewed. Allowing Idaho Power blanket authority to sell its emissions, the commission said, would allow Idaho Power to be able to react quickly to changes in the price of SO2 allowances and obtain the highest prices available.
Under the commission’s order, Idaho Power will record the proceeds from such sales in a special account. The company proposed to provide a report to the commission within 60 days of receiving proceeds from an SO2 sale. However, the commission ruled that instead of waiting 60 days, that commission staff, Idaho Power and other interested parties proceed quickly with workshops to determine the appropriate ratemaking treatment of proceeds acquired by the company from the sale of the allowances.
A full text of the commission’s order, along with other documents related to this case, are available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to Case Number IPC-E-05-20.