The Idaho Public Utilities Commission (“Idaho PUC”) is moving to take a closer look at the contract terms for power purchase agreements (“PPAs”) entered into between utilities and Qualifying Facilities (“QFs”) under the Public Utility Regulatory Policies Act of 1978 (“PURPA”) framework.  The Idaho PUC has temporarily reduced the maximum contract term for QF PPAs from twenty years to five years for each of the regulated utilities operating within the state and is also considering whether to permanently reduce the term even further. 

PURPA requires regulated utilities to buy energy from QFs at an “avoided-cost rate,” as established by state public utility commissions.  The avoided-cost rate is based on the estimated cost the regulated utility avoids paying by not having to generate or buy the energy from another source.  The state public utility commissions seek to ensure that the avoided-cost rate appropriately represents this formula, as well as make determinations about certain non-rate terms and conditions of QF contracts.

The Idaho utilities asserted in their recent petitions that the QF contract terms and conditions over which the state commission has authority include the length of the contract, as it can affect whether the avoided cost rate remains reasonable.  In particular, on January 30, 2015, Idaho Power Company (“Idaho Power”) filed a petition requesting a temporary reduction in maximum QF PPA contract tenor from twenty years to five years, and a permanent reduction from twenty years to two years.  Idaho Power explained that its petition resulted from a dramatic increase in the number and size of QFs seeking PPAs.  For example, Idaho Power stated that continuing to be required to enter into QF PPAs that have a twenty year term “places undue risk on customers at a time when Idaho Power has sufficient resources to meet customer demands.”  Idaho Power further explained that the obligation to continue to enter into such contracts results in inflation of its power supply costs and the degrading of its system’s reliability.  On February 6, 2015, the Idaho PUC granted Idaho Power’s first request, temporarily reducing Idaho Power’s maximum QF PPA term from twenty years to five years, pending further determination on the request for a permanent reduction.

On February 27, 2015, Avista Corporation (“Avista”) sought the same temporary relief, as well as any other relief (temporary or permanent) that may be provided to any other utility within the context of QF PPA obligations.  On March 2, 2015, Rocky Mountain Power Company (“Rocky Mountain Power”) filed a request for the same temporary relief provided to Idaho Power, and a request for a permanent reduction in the maximum QF PPA term from twenty years to three years.  Rocky Mountain Power also made a separate but related request to implement certain updates to its indicative avoided cost pricing process.

On March 13, 2015, the Idaho PUC issued an order: (1) granting the requests made by Avista and Rocky Mountain Power for temporary relief (i.e., contract tenor reduction from twenty years to five years), effective as of March 8, 2015; and (2) consolidating the three proceedings for purposes of considering the issue of a permanent QF contract tenor reduction for all three utilities, as well as Rocky Mountain Power’s indicative pricing update request.  The Idaho PUC intends to conduct technical and public hearings on these issues in late June.

The Idaho PUC’s March 13, 2015 order can be found here.