Developers of small-power projects are entitled to a rate – now about $61 per megawatt-hour – that is determined and then published by the commission as required by the Public Utility Regulatory Policies Act of 1978, or PURPA. The federal act requires electric utilities to offer to buy power from qualifying small producers of renewable energy projects. The published rate to be paid developers is called an “avoided-cost rate” – equal to the cost the utility avoids if it would have had to generate the power itself or purchase it from another source.
Because wind output is not predictable (non-firm), the commission in 2004 approved a “90/110 performance band,” that allows utilities to pay developers less than the published rate when output from wind projects is less than 90 percent or more than 110 percent of projections. In that 2004 case, utilities argued for a lesser rate because when output is less than 90 percent, utilities must then find power from other sources that can be more expensive. When output is more than 110 percent, utilities said they might have to sell the energy in the surplus market or reduce output at a more economic generation plant.
The commission ruled that energy purchases that fall outside the performance band should be paid 85 percent of the market price available at the time at a Northwest regional trading hub. All of Idaho Power’s purchase agreements with small, non-firm wind projects include that provision. Magic Wind is asking the commission to issue a declaratory order that requires Idaho Power to pay Magic Wind for surplus energy under a different formula than 85 percent of market price. Instead, Magic Wind wants to be paid for surplus energy under a formula similar to the one adopted in a sales agreement between PacifiCorp and the Schwendiman wind project in eastern Idaho. In the Schwendiman case, the commission approved an alternate mechanism for nonconforming energy that includes the use of the commission’s already published avoided-cost rate along with an approximate 14.5 percent discount that would be applied to nonconforming energy.
Idaho Power states that Magic Wind’s proposed sales agreement fails to acknowledge the role market prices play in determining the cost Idaho Power is likely to incur should Magic Wind fail to meet projected output. Idaho Power maintains that elimination of market prices from consideration shifts costs and risks that should be borne by Magic Wind to customers of Idaho Power. Further, the pricing mechanism used in the Schwendiman case was not a precedent for other wind projects, according to Idaho Power.
Because Magic Wind’s petition for a declaratory order could have ramifications for other utilities, the commission served copies of the notice to Avista Utilities in northern Idaho and PacifiCorp, which does business in eastern Idaho as Rocky Mountain Power (formerly Utah Power).
Those wishing to submit comments must do so by no later than June 26. Comments are accepted via e-mail by accessing the commission’s homepage at www.puc.idaho.gov and clicking on "Comments & Questions." Fill in the case number (IPC-E-05-34) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.
A full text of the commission’s order, along with other documents related to this case, are available on the commission’s Web site. Click on “File Room” and then on “Electric Cases” and scroll down to the above case number.