Case No. IPC-E-07-15

October 9, 2007

Contact: Gene Fadness (208) 334-0339, 890-2712




Idaho Power proposes change in PURPA formula


Idaho Power Co. is asking state regulators to modify a formula used to determine what it must pay small-power developers under provisions of the Public Utility Regulatory Policies Act of 1978 or PURPA.


PURPA requires regulated electric utilities to buy power from qualifying generators of renewable power at a rate determined by state utility commissions. The Idaho Public Utilities Commission establishes that rate, called an “avoided cost rate,” which is to be equal to the cost the utility avoids if it would have had to generate the power itself or purchase it from another source.


Idaho Power is asking the Idaho Public Utilities Commission to modify the method it uses to calculate the fuel component of the overall avoided cost rate.


The fuel component of the avoided cost rate varies as wholesale prices for natural gas fluctuate. Under the current method, the fuel component for avoided-cost is determined by using a 20-year forecast of natural gas prices issued by the Northwest Power and Conservation Council (NWPC). The Idaho PUC averages the first three years of that forecast and also includes a fixed 20-year escalation rate when determining the fuel-cost component of the avoided cost rate. For example, under the current formula, small-power producers are paid $36.21 per megawatt hour for the fuel component of the total $62.40 per megawatt-hour of power generated. The annual fuel escalation rate is 2.3 percent.


Idaho Power contends that by using an average of the first three years of the NWPC forecast and a fixed escalation rate over 20 years, the downward trend in natural gas prices forecast in future years is not taken into account resulting in a rate that is higher than avoided cost. Idaho Power proposes using an average of the entire 20-year forecast and eliminating the escalation rate. Under Idaho Power’s proposal, a small-power producer who signs a contract this year would be paid $67.77 per MWh, compared to $72.22 per MWh under the current formula.


The commission is taking public comment on Idaho Power’s proposal through Oct. 23. Comments are accepted via e-mail by accessing the commission’s homepage at and clicking on "Comments & Questions." Fill in the case number (IPC-E-07-15) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.