Case No. IPC-E-11-14, Order No. 32453

February 10, 2012

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

Idaho asserts “primary” jurisdiction over wind power transactions

Idaho regulators today said they have primary jurisdiction over proposed power sales agreements between Idaho Power Company and two Idaho-based wind projects that want to sell their output to Idaho Power customers in Oregon where the developers can receive higher rates.

The projects are qualifying facilities under the provisions of the federal PURPA law, which requires regulated electric utilities such as Idaho Power to buy output from small-power producers. The amount the utility pays the developer, called an avoided-cost rate, is based on the cost the utility avoids by buying from the small-power producer and not generating the power itself or buying it from another source. All of the costs associated with PURPA power are passed on to customers.

Because Idaho Power customers (95 percent in Idaho and 5 percent in Oregon) would end up paying Oregon’s higher avoided-cost rate, Idaho Power sought a declaratory order from the Idaho Public Utilities Commission that would assert Idaho eligibility requirements and rates over the projects rather than Oregon’s. In Idaho, the projects are too large to qualify for the state published rate meaning the project developers and the utility would have to negotiate an avoided-cost rate based on a formula approved by the commission. In Oregon, the projects do qualify for that state’s published rate.

In response to Idaho Power’s petition, the commission ruled that both the Idaho commission and the Public Utility Commission of Oregon have jurisdiction over PURPA transactions, but that the Idaho commission, given the location of the projects and their desire to interconnect with Idaho Power, has primary jurisdiction. “Given the facts of this case, we find that Idaho is the more appropriate jurisdiction to exercise authority” over the transactions, the commission said. “However, we cannot and will not order the projects to submit themselves to this commission’s jurisdiction.”

State commissions cannot compel projects to sell their output to a specific utility. However, to be able to compel a utility to buy from it, a small-power producer must either sell directly to the utility it interconnects with or request that the directly interconnected utility transmit the output to any other electric utility. In this case, the developers request that the projects’ output be wheeled to the same utility, but only to its customers in Oregon, in order to qualify for that state’s higher published rate. “The projects seek to interconnect with Idaho Power in Idaho and compel the same utility to transmit the output for delivery to a substation located in another state that has preferable avoided-cost rates,” the commission said, which is not permissible under Federal Energy Regulatory Commission (FERC) regulations.

Idaho Power claimed the Boise-based developers of both projects attempted to “cherry pick” a different jurisdiction’s rates for its Idaho projects. “This is a blatant attempt to manipulate and avoid the Idaho commission’s rates, rules and regulations that are designed to implement PURPA and protect Idaho Power’s customers,” the company stated.

The developers argued the commission is prohibited by federal law from regulating qualifying PURPA projects and does not have authority to restrict the projects’ access to markets. Doing so, the developers argued, would violate the Commerce Clause by restricting the projects’ access to markets outside Idaho.

The commission disagreed, stating “sound public policy suggests that the Idaho commission should exercise primary jurisdiction over the two transactions. Western Desert and Tumbleweed are projects located within Idaho seeking to interconnect with Idaho Power’s Idaho service territory. The costs associated with PURPA transactions – regardless of the jurisdiction approving the agreements and avoided-cost rates – are borne primarily by Idaho ratepayers as compared to Oregon ratepayers.”

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-11-14. Parties to the case may petition for reconsideration by no later than March 2.

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