Rosebud Enterprises, Inc. v. Idaho Public Utilities Com'n

• Decision Date: 30 May 1996
• Docket Number: No. 21964,21964
• Citation: 917 P.2d 766,128 Idaho 609
• Court: Idaho Supreme Court
• Parties: , Util. L. Rep. P 26,535 ROSEBUD ENTERPRISES, INC., Complainant-Appellant-Cross Respondent, v. IDAHO PUBLIC UTILITIES COMMISSION, Respondent-Cross Respondent, and PacifiCorp, dba Utah Power & Light Company, Respondent-Cross Appellant. . Boise, December 1995 Term

Page 766

917 P.2d 766

128 Idaho 609, Util. L. Rep. P 26,535

ROSEBUD ENTERPRISES, INC., Complainant-Appellant-Cross Respondent, v. IDAHO PUBLIC UTILITIES COMMISSION, Respondent-Cross Respondent and PacifiCorp, dba Utah Power & Light Company, Respondent-Cross Appellant.

No. 21964.

Supreme Court of Idaho.

Boise, December 1995 Term.

May 30, 1996.

Orndorff & Trout, Boise, for appellant. Owen H. Orndorff argued.

Alan G. Lance, Attorney General; Scott D. Woodbury, Deputy Attorney General (argued), Boise, for Idaho Public Utilities Commission. Stoel, Rives, Boley, Jones and Grey, Portland, OR, for PacifiCorp. James F. Fell argued.

SCHROEDER, Justice.

This is an appeal by Rosebud Enterprises, Inc. (Rosebud) from those portions of Idaho Public Utilities Commission (IPUC) Orders No. 25870 and 25922 which approved PacifiCorp's proposed adjustments to the base avoided cost rate for the purchase of electric capacity and energy from Rosebud's proposed

[128 Idaho 613] electric generating facility. Rosebud also requests an award of attorney fees, witness fees, expenses and costs pursuant tosection 12-117 of the Idaho Code and Idaho Appellate Rule 40. PacifiCorp cross-appeals those portions of Orders No. 25870 and 25922 in which the IPUC granted Rosebud "grandfathered" status for calculating rates for firm capacity and energy based on the established methodology in place before January 14, 1994.

I. BACKGROUND AND PRIOR PROCEEDINGS

A. The Parties

Rosebud is the developer of a small power production plant which is classified as a "qualifying facility" (QF) under the Public Utility Regulatory Policies Act of 1978 (PURPA). Pub.L. No. 95-617, 92 Stat. 3117 (1978). See PURPA §§ 201, 210; 18 C.F.R. §§ 292.203(a), .204 (1994). Rosebud proposes to develop a 40 megawatt (MW) electric generating facility near Montpelier, Idaho, that will burn high sulphur, waste petroleum coke. Rosebud proposes to sell the electrical output of the Montpelier facility to PacifiCorp, an Oregon-based electric corporation doing business in eastern Idaho as Utah Power and Light.

As a public utility operating in Idaho, PacifiCorp is subject to state regulation under Idaho's Public Utilities Law. I.C. §§ 61-104, -119, and -129 (1994). PacifiCorp is also a state regulated utility within the meaning of PURPA. See PURPA §§ 3(4), (17), and (18); 16 U.S.C.A. § 2602(4), (17), (18) (West 1985).

The IPUC has regulatory authority over PacifiCorp pursuant to the Idaho Public Utilities Law and PURPA. See I.C. § 61-501 -540 (1994); PURPA, §§ 3(16), (17); 16 U.S.C.A. § 796(15), (21) (1985). The IPUC has authority under PURPA and implementing regulations of the Federal Energy Regulatory Commission (FERC) to set "avoided costs," ¹ to order electric utilities to purchase power from small power producers, and to implement FERC rules. PURPA §§ 210, 210(a), and 210(f); 16 U.S.C.A. § 824a-3(a), (f) (West 1985 & Supp.1995); See also, Afton Energy, Inc. v. Idaho Power Co., 107 Idaho 781, 693 P.2d 427 (1984).

B. The Rules

1. Federal

Congress passed PURPA in 1978 in response to the prevailing energy crisis. Its purpose was to encourage the promotion and development of renewable energy technologies as alternatives to fossil fuels and the construction of new generating facilities by electric utilities. Section 210 of PURPA requires that electric utilities offer to purchase power produced by cogenerators or small power producers that obtain qualifying facility (QF) status under section 201. 16 U.S.C. § 824a-3(a)(2). However, under PURPA section 210(b) the rate to be paid for such power is not to exceed the "incremental cost to the utility of alternative electric energy." Id. at § 824a-3(b), (d).

The Federal Energy Regulatory Commission (FERC) promulgated rules implementing sections 201 and 210 of PURPA. Under these rules the rate a qualifying facility is to receive for the sale of its power is generally referred to as the "avoided cost" rate. Qualifying facilities have the option of selling power to a utility based on the utility's avoided costs at the time of delivery or at the time the qualifying facility's legally enforceable obligation to deliver power is incurred. 18 C.F.R. § 292.304(d) (1995). PURPA and related FERC regulations provide that the rates for qualifying facilities shall: (1) be just and reasonable to the electric utility's consumers and in the public interest; and (2) not discriminate against qualifying cogenerators or small power producers. 16 U.S.C. § 824a-3(b); 18 C.F.R. § 292.304(a)(1), (2) (1995). Thus, a balance must be struck between the local public interest of a utility's electric consumers and the national public In determining avoided costs, FERC rules require that, to the extent practicable, the availability of capacity or energy from a qualifying facility during a utility's daily and seasonal peak periods be considered, including:

[128 Idaho 614] interest in development of alternative energy sources.

(i) The ability of the utility to dispatch ² the qualifying facility;

(ii) The expected or demonstrated reliability of the qualifying facility;

(iii) The terms of any contract or other legally enforceable obligation, including the duration of the obligation, termination notice requirement and sanctions for non-compliance;

(iv) The extent to which scheduled outages of the qualifying facility can be usefully coordinated with scheduled outages of the utility's facilities;

(v) The usefulness of energy and capacity supplied from a qualifying facility during system emergencies, including its ability to separate its load from its generation;

(vi) The individual and aggregate value of energy and capacity from qualifying facilities on the electric utility's system; and

(vii) The smaller capacity increments and the shorter lead times available with additions of capacity from qualifying facilities; and

(3) The relationship of the availability of energy or capacity from the qualifying facility as derived in paragraph (e)(2) of this section, to the ability of the electric utility to avoid costs, including the deferral of capacity additions and the reduction of fossil fuel use; and

(4) The costs or savings resulting from variations in line losses from those that would have existed in the absence of purchases from a qualifying facility, if the purchasing electric utility generated an equivalent amount of energy itself or purchased an equivalent amount of electric energy or capacity.

18 C.F.R. § 292.304(e). The IPUC has specifically recognized that these factors "may be of particular importance when negotiating with extremely large suppliers." IPUC Order No. 15746.

Although FERC promulgated the general scheme and rules, it left implementation of PURPA to state regulatory authorities. FERC provides no precise formula for calculating a utility's avoided costs; however, there are two general caveats governing state regulatory agencies' implementation of PURPA: (1) electric utilities are not required to pay more than their established avoided costs for power purchases from qualifying facilities; and (2) cogenerators and small power producers are not to be subjected to pervasive, utility-type regulation in their sales to electric utilities. PURPA section 210(2), 16 U.S.C. § 824a-3(b), (e); 18 C.F.R. § 292.602(c)(1)(i)(ii) (1995).

2. IPUC Rules

IPUC Order No. 15746 sets out the general principles and framework under which Idaho electric utilities are to purchase power from qualifying facilities. Pursuant to FERC rules, published or standard avoided cost rates are required only for small qualifying facilities with a design capacity of 100 kilowatts(kW) or less. 18 C.F.R. § 292.304(c). In its discretion, the IPUC had set the design capacity limit for published rates at a higher 10 megawatt threshold at the time this matter arose. ³ Thus, Rosebud's proposed 40 megawatt Montpelier facility does not qualify for PacifiCorp's standard, published avoided cost rate. Rather, the IPUC requires that rates and contracts for larger facilities such as Rosebud's be individually negotiated, with a utility's published or filed avoided cost rates used as a starting point for negotiations. Individualized consideration IPUC's standards and requirements for implementation of PURPA are set out in its body of decisions arising from generic, rate-setting, and complaint actions. The IPUC possesses the authority and jurisdiction to engage in this case-by-case analysis pursuant to sections 61-501 to 503, section 61-129, and section 61-612 of the Idaho Code. Empire Lumber Co. v. Washington Water Power Co., 114 Idaho 191, 192, 755 P.2d 1229, 1230 (1987), cert. denied, 488 U.S. 892, 109 S.Ct. 228, 102 L.Ed.2d 218 (1988). Because each case presents a myriad of facts that distinguish it, no one case represents the law by which subsequent parties are bound. Thus, all case decisions issued by the IPUC are potentially applicable to, and may have an impact on, a qualifying facility's project. IPUC Order No. 20859.

[128 Idaho 615] is to be given to such issues as line losses, reliability, and the purchasing utility's scheduling ability, and to a project's effect on a utility's load resource balance. IPUC Orders No. 15746, 22636. The IPUC list of possible negotiated adjustments is not exclusive. It is the responsibility of the utility and the qualifying facility to determine the appropriateness of any proffered adjustments. IPUC Order No. 20859. A special hearing for IPUC approval of negotiated rates is required.

a. Published avoided cost rates for small qualifying facilities

The published rates for small qualifying facilities relevant to this case were based on the costs associated with a hypothetical coal-fired steam generation plant located in the Powder River Basin of eastern Wyoming. This hypothetical power resource is called a Surrogate Avoided Resource (SAR). IPUC Order No. 22636. A surrogate resource is used to estimate the avoided-cost value of "energy" and "capacity." ⁴ The...