Idaho Public Utilities Commission
Case No. IPC-E-08-21, Order No. 30748
March 17, 2009
Contact: Gene Fadness (208) 334-0339, 890-2712
Agreement with large, new industrial customer approved
The Idaho Public Utilities Commission has approved a unique energy sales agreement with Hoku Materials, Inc., a polysilicon production facility in Pocatello.
Because of constraints on its power supply and transmission, Idaho Power is unable to meet Hoku’s request of 82 megawatts of year-round capacity. Because of that constraint, the four-year seasonally-shaped contract requires Hoku to reduce its demand during the peak summer months through 2012, the year Idaho Power expects to have enough power supply and transmission to serve Hoku at full capacity. During those peak months, Hoku would reduce its demand by performing annual maintenance on its systems.
Idaho Power’s rate schedule requires that large power service customers whose demand exceeds 25 MW make special contract arrangements with the company. Contracts for large-load customers provide protection to the company and other retail customers from system impacts that some large loads could impose because of their sheer size or operating characteristics.
Under the agreement, the rates Hoku will pay Idaho Power are divided into two blocks. The first block of energy (all use over 25 MW) will be priced at the commission’s published avoided-cost rate used for small-power (PURPA) projects for a four-year levelized contract, or $61.66 per megawatt-hour. The second block (up to 25 MW) will be priced at the traditional embedded cost rate for Idaho Power’s large special contract customers.
The published PURPA rate, rather than a market rate, was chosen because it gives Hoku the certainty of a fixed-price during the four years of the contract. The second-block rate, the standard embedded rate, was chosen because of the belief Hoku should be entitled to the benefit of paying the rate similar to other large customers for at least a portion of its load. Charging Hoku the embedded rate for the entire load would likely place upward pressure on all of Idaho Power’s customer rates, commission staff said. “In staff’s opinion, existing customers should not have to bear the burden of a rate increase just because of a single large new customer.”
The four-year contract gives Idaho Power adequate time to incorporate the new load into its system. After the four-year contract is expired and if Idaho Power has completed the necessary transmission and generation expansion to serve Hoku at year-round capacity, the utility will recommend that Hoku be treated just like all other special-contract customers for ratemaking purposes.
The commission said the mixed pricing structure of the contract is a “reasonable approach toward enabling the integration of high-load customers such as Hoku into Idaho Power’s customer base.”
The contract requires Hoku to “take or pay” for a certain amount of energy from Idaho Power every month. However, Hoku will be allowed to request a release from that commitment if it notifies Idaho Power in advance. The utility would then make a commercially reasonable effort to absorb or resell the released energy and provide a credit to Hoku.
If Hoku desires to take energy beyond what Idaho Power can provide during the summer, the contract states that Idaho Power would make a reasonable effort to obtain proposals to supply Hoku’s request from other energy providers. If power is available, the additional purchase would be contingent on Idaho Power’s ability to deliver the power and upon Hoku’s acceptance of the price of the available power. Hoku would be responsible for the full cost of the power purchase as well as delivery to the plant.
Hoku is paying the costs for Idaho Power to build the transmission and substation upgraded needed to enable delivery of energy to Hoku’s facilities.
A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to Case No. IPC-E-08-21.