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New Energy Sources are Coming Online Faster than
Idaho Utilities Can Handle Them, Frustrating Entrepreneurs

by Rocky Barker
Idaho Statesman, December 19, 2010

In the midst of an energy transition not seen since Idaho Power built its Hells Canyon dams in the 1950s and '60s, Idaho's new energy economy is evolving faster than the state's infrastructure can handle it.

But it still is not happening fast enough for entrepreneurs who are ready to risk their capital to build new wind, solar, geothermal and anaerobic digester power plants.

As late as 2006, Idaho Power Co. had just 80 megawatts of wind power in its system. Today, the utility has 472 megawatts of wind generation expected to be online by the end of the year. Idaho Power officials expect to have 1,100 megawatts of wind energy soon. That's nearly as much power as can be produced from its Hells Canyon dams, although wind can't produce a consistent flow of power at that level.

Idaho Power's efforts to reduce usage during peak times and to build a business around energy efficiency come at a time when Idaho's Republican governor campaigned for re-election by touting solar power -- just one sign of the tectonic shift that the new energy age is bringing.

"We hope to lead some of that cultural change," said Ric Gale, Idaho Power's vice president of corporate responsibility, a new position.

Idaho Power also has smaller but growing blocks of geothermal and biofuel power coming online and has one solar developer planning a major power plant near Mountain Home. These new sources of power -- along with the company's Langley Gulch natural gas plant under construction near New Plymouth -- are shifting the utility away from coal, which was how the company handled growth when demand outgrew its hydroelectric plants in the 1980s.

Wind, solar and energy-efficiency programs are now the mainstream.

"We really shouldn't call it alternative energy anymore," said John Freemuth, a Boise State University public policy professor.

The change isn't coming easy. Idaho Power Co., Avista Utilities and PacifiCorp have filed a petition with the Idaho Public Utilities Commission that they hope will curtail wind projects and make the regulatory system catch up to the changing energy markets.

Wind developers, dairy farmers and contractors who produce power from municipal waste worry the petition will make it harder for them to sell the power they produce.


In 1978, Congress passed the Public Utility Regulatory Policies Act, known as PURPA, to promote renewable energy development to replace fossil fuels. The law requires utilities to buy electricity from small producers at a rate based on what it would cost to produce that power at a new plant.

Part of the goal was to boost smaller producers. But the utilities say the bulk of wind projects today are large-scale wind farms often installed by huge corporations, such as the General Electric-backed facility under construction near Bliss.

Some energy developers keep their projects a mile apart so they qualify for PURPA's small-producer rate, which can be higher than what the power would fetch on the open market.

The utilities want the Public Utilities Commission to drastically reduce -- down to 100 kilowatts -- the amount the companies are required to purchase at the set rate. They argue that they have so many wind projects coming on line that they could end up having more power than they can use or sell at some times of the year.

Idaho Power officials hope the petition will help the utilities and the commission develop a better system for everyone.

"It gives most parties the incentive to come up with creative solutions to these problems," said Donovan Walker, Idaho Power senior counsel.

Some wind generators have negotiated a comparable rate with Idaho Power that works for both sides. Idaho Power wants that to be the norm.

"Any time I've worked with Idaho Power, it's been cordial, productive and pleasant," said Glenn Ikemoto, a California-based wind developer who has 180 megawatts of wind power under contract in Idaho.

The Northwest and Intermountain Power Producers Coalition said the current system has brought rural development to Idaho -- and the utilities' proposal threatens to slow or halt it. The system has not increased costs for Idaho Power customers, the group says.

"The policy in place right now is successful in my view," said Peter Richardson, a Boise attorney who represents the coalition.


Historically, Idaho Power and utilities across the country made money for their investors by building power plants and the infrastructure for delivering power. But with changes in the energy markets, the business is evolving, Ikemoto said.

"You don't just built power plants and turn the throttle up when you need electricity," said Ikemoto.

But rather than getting ahead of the changes, both regulators and utility managers have been following behind. Observers say that's natural, since a regulated monopoly is inherently a conservative business.

Success in the new system will come when utilities no longer have to build their own power plants to make money, and turn instead to the more innovative renewable energy developers, Richardson said.

"I would love to see them make a profit on renewables," said Ikemoto.


Idaho Power's Gale is looking at energy efficiency programs as a new business for Idaho Power. The seed of this effort has been a program to recover the fixed costs of producing power, regardless of how much money the company makes from selling that power each year.

This decoupling means that if the company has a banner year, the rate for residences and small businesses would go down. If the company doesn't sell much, the rate would go up.

Eventually, Idaho Power would be able to develop programs where it can make a profit as it helps customers use less electricity -- in part because it would eliminate pressure for the company to continually build new power plants to meet the demands of growth.

"We think energy efficiency is as important as anything we do in business," Gale said.

Richardson acknowledges that Idaho Power has been changing, in part in response to stockholders who last year asked the company to respond to potential programs to limit greenhouse gases that cause climate change.

He said the latest PUC petition, though, is "shades of the old Idaho Power, which we had hoped had gone by the wayside."

Rocky Barker
New Energy Sources are Coming Online Faster than Idaho Utilities Can Handle Them, Frustrating Entrepreneurs
Idaho Statesman, December 19, 2010

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