Friday, January 21, 2011

Changing how renewable energy is purchased


Imagine that you had to buy 10 gallons of gasoline for your car any time a gas station called and said they had some available to sell, and you had to pay a set price—let's say $4 per gallon. You have to take the 10 gallons even if you don't have room in your tank. You have to sell the gas you don't need, and other buyers are only willing to pay $2.50 per gallon. Sometimes there aren't any buyers, so you may have to pay someone to take it because you can't store it. And you have to do this for the next 20 years.

This analogy is akin to a situation that Idaho Power, along with Avista and Rocky Mountain Power, recently asked the Idaho Public Utilities Commission to examine—one that could potentially cost our customers millions of dollars a year if not addressed in a timely fashion.

Under a federal law called the Public Utility Regulatory Policies Act of 1978, Idaho Power is required to buy energy from small producers' qualified facilities. At the state level, the Public Utilities Commission sets the rates that Idaho Power pays for power produced by PURPA projects.

To determine rates in Idaho, PURPA projects fall into two buckets based on how much power they provide. Currently, projects producing below 10 average megawatts of power each month receive the "published avoided-cost rate"—a price set by the Public Utilities Commission. Projects that produce more than 10 average megawatts are paid negotiated rates based on the projects' characteristics and the "value" they provide to customers.

We strongly believe it is necessary to adjust the 10 average megawatts cutoff down to 100 kilowatts. Here's why:

First, Idaho Power—and, ultimately, our customers—is being forced to pay premium prices for large amounts of inconsistent power that we don't need. And second, adding this much of this type of power will increase our costs and may have a negative impact on how reliable our system is. You, our customers, end up paying for this, literally and figuratively.

There has been a shift in the size, number, magnitude and sophistication of PURPA qualified-facilities projects coming onto our system. Many are very large wind farms developed not by individuals or small groups of people interested in developing sustainable energy, but by large corporations. On paper, these large wind farms are then often broken up into smaller, "bite-sized" projects to qualify for the lucrative higher-set rates, while also receiving tax incentives and other benefits, including ownership of the renewable energy certificates. This practice is disingenuous and is bad for our customers in many ways.

Here's an example: As required by law, since September, Idaho Power has signed more than 575 megawatts of PURPA 20-year wind contracts. We now have a total of more than 650 megawatts in these signed contracts, in addition to 395 megawatts of wind generation already online and another 120 megawatts of PURPA wind-generated power currently in negotiation.

Wind projects are a highly inconsistent power source. If these wind projects are all built and are smaller than10 average megawatts per month, they will receive current set rates. By 2015, this will result in Idaho Power customers' paying $48 million per year more for this energy than recent market prices for more dependable energy sources. Our normal planning and procurement processes are being circumvented and independent developers are benefiting—at our customers' expense.

Lowering the published rate eligibility cap is a critical change that needs to happen now. It will not eliminate Idaho Power's obligation to purchase power from PURPA qualified facilities, but will simply modify the way the price is calculated. This will ensure the best possible way of achieving a balanced resource portfolio to serve our customers and it will better align the cost we all pay with the value we receive.


Lisa Grow is Idaho Power's senior vice president of power supply. She oversees the operations and development of the company's generation fleet, which provides energy to serve southern Idaho and eastern Oregon.

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