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Yet Another “Territorial War” in Idaho

Kim Trout

Idaho has a rich history of conflict between those seeking their fortune and those seeking to maintain the status quo.

An early Idaho explorer, U.S. Army Captain Benjamin Bonneville, reached a high point overlooking Boise in 1833 and marveled at the beauty and opportunity of the flowing river. Likewise, water was the opportunity that enticed fur trappers like Donald McKenzie, sparking the settlement of Idaho in 1860 and the discovery of gold. Gold brought an influx of people seeking their fortune and led to the organizing of Idaho as a territory on July 10, 1863. Idaho’s population growth and settlement, and the resulting pressure on Indian hunting and fishing grounds, led to the Nez Perce War and Chief Joseph’s ultimate surrender in 1877.

Water, specifically the water in the lower Snake River, and its hydroelectric potential was the subject of a war of monumental proportions in the 1950’s. In 1947, Idaho Power Company fired the opening salvo by submitting its application to the Federal Power Commission (now the Federal Energy Regulatory Commission or FERC) to build the three-dam Hells Canyon Complex. Eight years later, Idaho Power won the right to a license and the first of the three dams, Brownlee, was completed in 1958. However, a federal plan for a ‘high dam’ in Hells Canyon spurred competing power companies to build yet another major dam. The resulting conflict prompted the Department of Interior to sue another arm of the government, the Federal Power Commission. The resulting U.S. Supreme Court ruling in Udall v. Federal Power Commission paved the way for environmental, fish, and wildlife considerations on any public lands project.

Oxbow Dam was completed in 1961 and Hells Canyon Dam was finished in 1967. Idaho Power’s successful acquisition of these two resources, plus the Brownlee Dam, and its subsequent economic success as one of the nation’s lowest cost utility power producers solidified Idaho Power’s economic and political clout in the region. Some in the industry laugh that Idaho is the only state that was named after a power company.

Today, the new ‘territorial war’ pits Idaho Power against those seeking to develop wind energy in Idaho. In 2010, the Idaho Public Utilities Commission (IPUC), at the request of Idaho Power and others, effectively made wind energy projects more difficult to develop by altering the power pricing scheme available to alternative energy producers under a federal law known as the Public Utility Regulatory Policy Act or PURPA. PURPA, passed by Congress as a means of encouraging development of smaller energy projects, requires that monopolistic utilities such as Idaho Power purchase energy from these alternative energy producers at Idaho Power’s avoided cost rates. These rates, and other terms of Power Purchase Agreements, are subject to the final approval of the IPUC.

On April 12, 2012, and for the second time within a year, FERC ruled that the IPUC, acting at Idaho Power’s request, failed to follow the federal mandate of PURPA when the IPUC rejected the pending contracts of yet another wind developer, Rainbow Ranch Wind, LLC and Rainbow West Wind, LLC. This lawsuit before FERC is but one battle in a series of cases that match Idaho Power against wind developers. As the legal entanglements rage on, the political power struggle is fueled by Idaho Power’s annual power cost adjustment filing, which is pending before the same IPUC whose conduct was recently admonished by FERC.

The crux of the debate is how much wind projects, under PURPA, should receive in payment for the power produced. Complicating this extraordinarily technical debate are base rate increases sought by Idaho Power to cover the costs of its own $398 million dollar natural gas plant known as the Langley Gulch Project.

What piqued my interest was a “Special Edition” billing stuffer that my household recently received from Idaho Power. The stuffer appears to assert that rising rates are solely due to PURPA projects, yet nothing is mentioned about Idaho Power’s Langley Gulch Project. The stuffer contains a space for a customer opinion survey with pre-patterned choices reflecting the negative PURPA arguments made by Idaho Power in its “Special Edition.” The survey is to be sent to Idaho Power’s Corporate Communications department.

Unlike other territorial wars in the history of Idaho, it appears that this one will end up positioning the power of federal enforcement via rulings by FERC against the economic and political power of those involved in the power industry. Only time will tell if there’s any winner in this new territorial debate.

Kim J. Trout is a partner at Trout Jones Gledhill Fuhrman Gourley, P.A. Kim specializes in guiding all levels of clients through their business ventures and litigation. ktrout@idalaw.com

 

 

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One comment

  1. Good to see that someone outside Idaho Power recognizes what this company is up to. As you point out, they have been able to skirt federal law with the help of local regulators and cover up their true intent with public relations, including the “special mailer” you mentioned. Wind and other renewable energy sources will play a greater role in the future. A for-profit utility with a focus on today’s profit level and employee bonus level is not the best judge of what is best for the consumer. Too bad Idaho’s utility regulators don’t understand who they really work for.