Letters from the West

Idaho regulators limit small-scale renewable energy contracts to 2 years

The Idaho Public Utilities Commission gave the state’s three major electric utilities what they asked for in limiting the length of contracts for renewable energy from independent developers.

The commission last week reduced the contracts to two years from 20 years, nearly ensuring that no new contracts under the Public Utility Regulatory Policies Act of 1978 will be signed any time soon. It’s the latest in a series of tests before Idaho’s energy regulatory body over how far the state’s utilities must go to accommodate the developers of wind, solar and other alternative energy.

PURPA, as the law is known, was written to encourage developers to come up with smaller, alternative energy projects. It requires regulated utilities to buy energy from qualifying renewable projects at rates the same as the utility would pay to generate the power or buy it somewhere else. This is called the “avoided cost.”

The Idaho PUC found that the previous 20-year contract length resulted in utilities and their customers paying unreasonable costs for renewable generation. The long-term contracts overestimate future avoided cost, resulting in higher costs, the PUC ruled, which it said is contrary to PURPA’s avoided-cost principle.

This was a major victory for Idaho Power Co., which asked in February for the shorter contracts after it said a number of solar project applications would force it to buy energy it did not need, drive up rates and threaten the utility’s ability to reliably deliver energy. At the time, the commission had approved 13 Idaho Power agreements with developers for 400 megawatts of solar energy.

Even with the 20-year contract length and federal tax credits, developers dropped four of the projects, which totaled 141 megawatts.

The PUC temporarily reduced the contract period to five years, largely drying up the 1,326 megawatts of solar-power projects Idaho Power said was flooding its system.

Idaho Power has 1,297 megawatts of renewable energy on its grid, not counting its own hydropower. That’s 40 percent of its 2014 peak load of 3,184 megawatts and 120 percent of its total minimum load of 1,073 megawatts.

PacifiCorp, operating in eastern Idaho as Rocky Mountain Power, joined the case, claiming to have projects seeking contracts totaling 275.5 megawatts in its Idaho territory. That would be a total of 465 megawatts of existing and proposed PURPA generation — on top of PacifiCorp’s 189.6 megawatts of existing Idaho PURPA contracts — enough power to supply 108 percent of PacifiCorp’s average Idaho retail load.

Renewable developers claim the short contracts will end solar and wind development in Idaho. They argued that in 1996 to 2001, when contracts were five years, Idaho Power executed just one PURPA contract.

The commission didn’t buy that argument.

“The utilities all have ample amounts of PURPA on their systems and additional renewable generation is in the queue,” it said. Utilities will still be required to purchase from qualifying renewable developers. Shorter contracts will act “as a reset for calculation of avoided costs in order to maintain a more accurate reflection of the actual costs avoided by the utility over the long term.”

Once a two-year contract is approved, the commission noted, the new plant becomes part of the utility’s resources and the contract is eligible for continuous renewal as long as the developer chooses to continue selling to the utility. The commission noted that utilities have developed non-PURPA renewable resources such as Avista’s agreement with Palouse Wind and Idaho Power’s agreement with Elkhorn Wind.

The Idaho Conservation League and others had recommended the commission set the length at 10 years, the minimum developers said they needed to attract investors. The PUC staff recommended five years. But the PUC went with the utilities argument, using the full extent of its discretion under the federal law to limit PURPA projects.