VERIFY: Is a potential Idaho Power rate increase linked to a surplus of renewable energy?

VERIFY: Is the proposed Idaho Power rate increase linked to a surplus of renewable energy?

BOISE – You may have seen the flyer in your recent Idaho Power bill.  The utility company is asking for a rate increase.  Idaho Power says they’re asking for the rate increase because they have too much power.  If you’re raising an eyebrow after reading that, KTVB did too, which is why we set out to verify that information.

Raising power rates because there’s too much power seemed counterintuitive to us.  You would think that when there’s an oversupply of energy, rates would go down.  But surprisingly Idaho Power says the surplus of energy, specifically from wind and solar, is costing them more money, and now possibly you.

KTVB talked with three experts to learn more about the issue.  Ben Brandt is the Load Serving Operations Director at Idaho Power.  It's his job to make sure there's enough power at all times to meet the demand. Randy Lobb is with the Idaho Public Utilities Commission.  The commission regulates investor-owned or privately-owned utilities that provide services for profit.  Peter Richardson is an attorney representing wind developers and other independent power generators for nearly 30 years.

All three experts say a 39-year-old federal law, the Public Utility Regulatory Policies Act or PURPA, is a major player in the generation of power across the state.  Idaho Power cites on its customer notification that PURPA is one of the reasons for the company is asking for a rate increase.

 "Yes, PURPA is the main reason behind that," said Brandt.

So does Idaho Power really have to buy all that surplus energy?  Yes, this was verified by all of our experts.

Here's why:

The federal government enacted PURPA in 1978 during America's energy crisis, partly to encourage greater use of renewable energy.  The law requires utilities, like Idaho Power, to buy all the power generated from small, independent projects, like wind and solar, even if the utilities don't need the extra power to meet customer demand. 

Hydroelectricity is the largest single source of generation for Idaho Power.  The state's historic winter is now bringing historic spring run-off to our reservoirs and rivers.  Therefore this year, Idaho Power argues it doesn't need the extra power.

"At times, because we have so much of the solar and wind on our system available, it can make up nearly 50 percent of the energy that we're using," said Brandt.

Is there an increase in solar and wind projects?  KTVB verified the requirements of PURPA has increased the number of wind and solar projects Idaho Power is mandated to buy power from. 

Randy Lobb with Idaho Public Utilities Commission says there are currently 32 PURPA wind projects, up from 22 wind projects in 2010.  There's an additional 13 solar projects currently online, with most operating for less than a year. Lobb says the 32 wind and 13 solar projects are capable of producing 897 megawatts at full capacity.  One megawatt can serve about 650 homes, according to Idaho Power.

At that rate, the solar and wind PURPA projects could serve roughly 583,000 homes.  To put that into perspective, Idaho Power has 535,000 customers.

"Right now, no, there aren't really any limits on who can come and what kind of energy they can bring to us.  And we're required to purchase that energy if they follow all the steps and go through the process correctly," said Brandt.

Brandt says when Idaho Power receives a large amount of power generation from wind and solar, they have to compensate by backing down their generation from sources like hydro, which, partly because of the spring run-off, they say is a more low-cost operation.  They could sell the surplus of power on the open market, and they often do, but Brandt says all that water means wholesale prices are down. 

"So that means that half of the energy that we're using to supply the energy and homes of the Idaho Power customers is extremely expensive and does not reflect the prices of the wholesale market," said Brandt.

The expense could now potentially be passed on to customers.

To verify that wind and solar are more expensive, we asked Randy Lobb with Idaho Public Utilities Commission and attorney Peter Richardson.

"Compared to their embedded resources, PURPA prices are pretty high,” said Lobb. “Compared to current market prices, PURPA prices are pretty high.”

"With all due respect to Idaho Power, that's a misconception, putting it kindly," said Richardson.

Both Richardson and Lobb say Idaho Power helps set the rate they pay for solar and wind, based on their forecast.  The prices is a fixed, 20-year rate agreed upon when the utility signed the PURPA contract.  In effect, Richardson and Lobb say Idaho Power partly has themselves to blame for the higher price of wind and solar.

"So if the company doesn't like the way the prices are set for the PURPA projects, then they need to tell us what it is about their forecast of the future that causes those prices to be incorrect because it's based on their forecast," said Lobb.

"The only thing you know for sure about prediction is that it's going to be wrong,” said Richardson.  “And they're wrong often as being too low or too high.  So this 20- year fixed rate is a risk obviously.”

Richardson says PURPA has been one of the better things that's happened to the electric utility industry because it introduced competition. 

To summarize, KTVB can verify the rate increase is linked to a surplus of renewable energy this year, which could amount to $10.6 million for Idaho Power based on the increase that would be paid by all its customers.  For residential customers, the rate increase breaks down to about $7 a year. 

For those who say mandating unwanted power purchases is unfair to Idaho Power, the utility caught a break in 2012 when the Idaho Public Utilities Commission ruled to reduce the length of future PURPA contracts from 20 years to two years, meaning the utility won't be on the hook for as long of a time when prices might not benefit them.     

Richardson says the 2012 ruling effectively killed any new wind and solar developments in Idaho.

“That was one of the hallmarks of PURPA was introducing a measure of competition to the utility for construction of new resources, “ said Richardson. “And the IPUC (Idaho Public Utilities Commission) has seen fit to limit the effectiveness of that competition by reducing contract terms to only two years for wind and solar projects whereas Idaho Power can build a rate based project and recover its investment from the rate payers, guaranteed recovery, for the life of the project be it 30 or 50 years.”

If the rate increase is approved by the Idaho Public Utilities Commission, it would take effect June 1.

VERIFY: Sources

Ben Brandt, Load Serving Operations Director at Idaho Power

Randy Lobb, Administrator of Utilities Division, Idaho Public Utilities Commission

Peter Richardson, Attorney who represents wind developers and other independent power generators

VERIFY: Resources

Idaho Power's annual Power Cost Adjustment (PCA) proposal

Idaho Public Utilities Commission: Idaho Power’s application for a rate increase, all the submittal paperwork, customer notification, submission form for public comments about Idaho Power’s rate increase.

Public Utility Regulatory Policies Act (PURPA)

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