**Website: www.puc.idaho.gov**

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**Idaho Power proposes change in PURPA formula**

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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 www.puc.idaho.gov
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.