Case No. IPC-E-07-15, Notice of Additional Comment Period

November 13, 2007

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



Commission seeks further input on proposed PURPA changes


State regulators are extending the comment period on a proposal by Idaho Power Co. 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.


As a result of the comment period ending Oct. 23, several parties including wind developers and Idaho Public Utilities Commission staff have made proposals for which the commission now seeks comment through Nov. 26.


Federal PURPA provisions require regulated electric utilities to buy power from qualifying generators of renewable power at a rate determined by state utility commissions. The Idaho 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 commission to modify the method it uses to calculate the fuel component of the overall avoided cost rate.


The fuel component varies as wholesale prices for natural gas fluctuate. Under the current method, the fuel component 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. 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. Instead, 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. Idaho Power claims the higher rate negatively impacts its customers since costs for PURPA contracts are passed on to customers.


Commission staff, Avista Utilities and Rocky Mountain Power propose to use each year of the council’s forecast, rather than an escalated average of the first three years. Some groups propose no change, while others propose a re-examination of the entire PURPA formula. Idaho Power says the commission staff proposal is better than the current method but fears it will cause greater swings in the cash flows of small-power developers and thus impact project financing.


Following the Nov. 26 comment deadline, Idaho Power will have until Dec. 5 to file a reply.


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.