IDAHO PUBLIC UTILITIES COMMISSION

Case No. IPC-E-07-18, Order No. 30495

February 5, 2008

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

Website: www.puc.idaho.gov

 

Customer input sought on how to treat emission sale revenues

 

The Idaho Public Utilities Commission is seeking public comment through Feb. 25 on how revenue from Idaho Power Company’s sale of sulfur dioxide emission allowances might best benefit customers.

 

Idaho Power sold 35,000 sulfur dioxide (SO2) emission allowances during 2007 for $19.6 million less brokerage fees. The share allocated to Idaho is about $10.1 million, after discounting income taxes and the share that goes to Idaho Power’s Oregon customers.

 

In 2006, about $69 million in SO2 sales proceeds was used to offset the company’s power purchase costs, with 90 percent of the proceeds going to customers and 10 percent to company shareholders.

 

That is one of the options again this year. If the proceeds were included in the company’s annual Power Cost Adjustment (PCA) process, SO2 revenues of $16 million, when adding tax benefits, could be applied against the company’s power supply expense, which now stands at about $90 million. By applying the revenue against the PCA amount, the size of the customer surcharge likely to be implemented in June would be reduced. This option is favored by commission staff, the Industrial Customers of Idaho Power and Micron.

 

A second option is to use the revenue to buy green tags from owners of small-wind projects or other renewable projects that have entered into sales contracts with the utility. If state or federal renewable portfolio standards (RPS) were enacted, which would require Idaho Power to acquire a certain percentage of its generation from renewable sources, the utility would likely have to buy green tags at prices expected to be higher than today’s prices. If Idaho Power were to buy green tags before an RPS mandate, the company could sell the green tags on a short-term basis and flow the proceeds to customers through the PCA.

 

A third option is to allow Idaho Power to enter negotiations or solicits bids to buy a wind project’s development rights. In essence, the company would be purchasing a wind project with capital – proceeds from the S02 sales – contributed by customers. This would result in a reduction in the company’s rate base. Wind developers favor this option and Idaho Power favors either this option or the second option.

 

A fourth option, favored by the Idaho Energy Project, proposes that about $500,000 could be used to develop classroom education programs about energy efficiency. The remaining balance would be directed toward other energy efficiency operations.

 

Idaho Power customers are invited to comment on any of these options or propose other possibilities.

An amendment to the 1990 Clean Air Act establishes a national program for reducing acid rain. 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 the open market or 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.

Those wishing to submit comments must do so by no later than Feb. 25. 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-07-18) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.