Getting charged up over energy in Idaho

Jul 14 - Idaho Statesman (Boise)

July 14--The new energy revolution won't be decided in the board rooms of IdaCorp, Idaho Power's parent company.

Increasingly, the size of your electric bill, the services you get and how you control your electrical destiny will be in your hands, not the power company's.

This change will require customers to be sophisticated and involved.

"As the prices rise -- and they will rise, and they are rising -- I think more of the public will be interested in being actively engaged in how they are using energy," Public Utilities Commissioner Marsha Smith said.

The Idaho Public Utilities Commission's decision last week on solar power generation and use along with PUC workshops demonstrate how the public and regulators are setting the course for energy policy in the state.

The three-member PUC is not just a rubber stamp. That was seen in the PUC's sharp slapdown of Idaho Power's proposal to raise costs on solar and wind customers who sell power back to the grid. It was seen as an effort to bring energy stakeholders together. And it was seen when Idaho Power decided to seek advanced approval from the PUC on whether it should spend $130 million for its share of pollution-control upgrades at coal plants in Wyoming.

Commissioners will tell you that the Legislature, not the commission, sets energy policy for the state. Lawmakers do have the final say, and regularly update the state plan and oversee the commission and other agencies that craft policies. But it usually defers to the commission, made up of attorneys Marsha Smith and Mack Redford, and Gov. Butch Otter's former energy chief Paul Kjellander, who serves as the commission president.

"There's a dramatic difference between public opinion and the public interest," said Kjellander, a former legislator. "It's the commission's job to find the line that represents the public interest."

Smith, a former staff attorney for the commission, has served four six-year terms. She's become a national leader, especially on power transmission issues. Her term is up in 2015. Smith said she hasn't made a final decision, but noted that the governor decides appointments to the commission.

Peter Richardson, an attorney who represents industrial customers, wind developers and others before the PUC, worked with Smith as a staff attorney for the commission years ago. Smith has ruled on many cases where he's been a party -- and often not in his favor.

"We've disagreed on a lot of stuff, but I have the utmost respect for her and her ability ... to do the right thing in difficult times," Richardson said. "She may well leave her mark on the renewable energy industry."

The commission, which acts in a quasi-judicial framework, has an inherently adversarial process. But Smith said the commissioners prefer that the parties get together to work out their differences.

"You get better outcomes and proposals when everyone understands everyone else," she said.

MANAGING DEMAND

The commission is holding workshops now through August to determine the future of three Idaho Power demand-response programs. The programs offer incentives to customers to reduce electric demand during peak periods such as early July's heat wave when power demand hit new highs -- 3,402 megawatts on July 1 and 3,407 on July 2.

Last month, the commission allowed Idaho Power to temporarily suspend two of the programs and modify another. So, when farmers turned their pumps on high to water thirsty crops, and homes and businesses cranked up their air conditioners, Idaho Power was able to cut demand by only 35 megawatts through its commercial FlexPeak demand-response program. The company even had to turn on its natural gas "peaker plants" near Mountain Home, the most expensive power it produces.

ENERGY OPTIONS

But managing demand will be an important part of Idaho's -- and Idaho Power's -- future.

Energy experts say that Idaho Power has sophisticated new information technology and has given customers new smart meters, which can turn thermostats on and off, and regulate power use to save customers money.

These changes don't necessarily fit the business plans of Idaho Power or other utilities. Idaho Power makes its return on its investment when it spends money.

That means building transmission lines, generating plants and providing services. That's where the public and regulators come in.

The technological changes in the electrical system provide both opportunity and challenges for utilities and regulators. Eventually, the changes coming will offer people efficiency and choice -- but the commission must ensure that customers don't pay more than they have to and that the utility is fairly compensated for its investments.

Idaho Power's hydropower is cheap because the capital was invested years ago and because its "fuel" is free. Hydropower is essentially stored in reservoirs so it can be called upon at any time, acting like a huge battery.

Today, the 675 megawatts of wind power on Idaho Power's grid also comes with free fuel -- but the utility buys that power on contract from other generators. The intermittent nature of wind makes it less valuable to the utility.

When Idaho Power demand peaked in early July, just 70 megawatts came from wind.

Solar power's reliability also challenges utility managers. Solar collectors could be producing large amounts of power hot, sunny days. But a dark cloud can sharply reduce power production, meaning utilities need readily available backup power.

Idaho Power Co. President Darrel Anderson said he and his peers in the western utility industry talk regularly about the role of solar and wind in the future. He sees technologies that could lead to storage breakthroughs.

"If we could store this wind energy, what a great place we'd be today," Anderson said.

IDAHO POWER'S POWER

John Gardner, director of the Boise State University-based Energy Efficiency Research Institute, says that day is already here. The smart meters Idaho Power installed -- thanks in part to federal stimulus funding in 2009 -- allow Idaho Power to turn equipment that uses electricity on and off.

Being able to adjust thermostats in buildings throughout the grid by just a half-degree up or down essentially means "every single building is a thermal battery," Gardner said. That's enough for Idaho Power to more than compensate "for the variability the renewable generators have."

Anderson is open to considering new ways of doing things. But the incentives of a regulated utility are such that Idaho Power benefits when it is ordered to take such action and not by jumping ahead of the PUC. The PUC, for instance, can decide that the utility gets paid for its return on investment of plants it no longer would operate if, for example, it stops using its coal plants.

Idaho Power Co. shaped the future of the company and the state in the 1950s, when then-President Thomas Roach led the effort to build three dams in Hells Canyon. The company took a calculated risk by creating an energy surplus: It sold extra power to Utah and encouraged farmers to irrigate hundreds of thousands of acres of new croplands with electric pumps, moves the commission at the time approved with little controversy.

That cheap hydropower allowed Idaho to grow into the 1970s. But beginning with coal plants in the 1970s, every new source of power -- including the new Langley Gulch natural gas plant near New Plymouth -- costs far more than legacy hydropower.

In the 1970s, when Idaho Power began to need more power than its dams could provide, the company proposed the 1,000-megawatt Pioneer Coal Plant between Mountain Home and Boise. The PUC, led by the dynamic Perry Swisher, denied the plant, saying it would mean excessive rate increases and air pollution in Boise.

That denial kept Idaho Power from overbuilding, which most utilities in the Pacific Northwest did, and saved customers from paying millions of dollars in "stranded costs" for an unneeded power plant.

At the same time, farmers sued the company to protect water rights at the Swan Falls Dam.

A small band of farmers recognized that if Idaho Power was going to build new plants, the company would add those costs to the irrigators' electrical bills. After the farmers won their case in court, Idaho Power sued its long-time irrigation partners, resulting in a court victory for Idaho Power that reshaped Idaho water law and management.

That Swan Falls decision set a minimum streamflow on the Snake River, protecting Idaho Power's water for hydrogeneration. It also forced water users to prove how much water they needed for farming, residential and industrial uses, and encouraged water conservation.

PURPA WARS

The PUC also developed the regulatory structure for meeting the federal Public Utility Regulatory Policy Act, so that small hydro and, later, wind, solar, biomass and other renewable energy developers had access to Idaho Power's grid. In the years when federal tax policy favored wind development, large corporations and investors used PURPA to add hundreds of megawatts of wind power, making Idaho Power -- against its will -- the utility with one of the largest portfolios of new renewable energy in the region.

The utility fought to change PURPA in Idaho and the PUC agreed, at least partly. That prompted the Federal Energy Regulatory Commission to side with the wind developers. The looming outcome of the court fight between FERC and the PUC could force Idaho Power to make even more changes.

FERC's involvement and the national interest in the commission's solar decision shows that other states wrangling with the same issues are looking at what path Idaho regulators and the public carve out for Idaho Power and other utilities.

"The entire nation is watching what Idaho is going to do," Richardson said.

Rocky Barker: 377-6484

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