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Power Buy-back Case Unresolved by Dave Wilkins, Idaho Staff Writer Capital Press, May 7, 2004

Three years after its irrigation buy-back program, Idaho Power Co. is still fighting to recover “lost revenue,” denied it by state regulators.

The Idaho Public Utilities Commission has allowed Idaho Power to recover $74 million in direct costs related to the 2001 program. But the panel has denied recovery of $12 million in so-called “lost revenue,” funds that the company maintains it would have earned from irrigators had the buy-back program not been in place.

Idaho Power appealed to the state Supreme Court, and on March 30, the court ruled in the company’s favor, finding that a March 2001 PUC order authorized Idaho Power to recover reduced or lost revenue.

Last month, state regulators asked the Idaho Supreme Court to rehear the case.

The lost revenues “were not an actual cost of service that should be borne by ratepayers,” the PUC argued in a petition filed with the court.

It would be unreasonable to force Idaho Power customers to pay for power that “they didn’t purchase, consume or benefit from,” the commission said.

Idaho Power contends that an earlier PUC order authorized the recovery of lost revenues.

The March 2001 order said that “the direct costs and lost revenue impacts of this program may be treated as a purchased power expense in the power cost adjustment.”

The use of the word “may” wasn’t intended to be mandatory or to mean “shall” or “must,” the PUC said in the petition.

During the buy-back program, Idaho Power paid irrigators to reduce their electric use in an effort to reduce expensive wholesale power purchases. That prevented Idaho Power from having to go to the wholesale market to buy power that, at the time, was predicted to be 30 cents per kilowatt hour during peak irrigation summer months.

Unlike direct costs, which Idaho Power was allowed to recover, lost revenues were an estimate of revenue the company might have received from the sale of power to irrigators without the program, the PUC said.

“To charge ratepayers for lost revenue is unreasonable in the context of the crisis that existed,” the commission said.

In an August 2002 order, the PUC said its findings “did not guarantee that Idaho Power was entitled to recovery of alleged reduced/lost revenue that resulted from this program. Rather, the commission merely recognized that the issue of recovery of these amounts would be considered.”

The PUC’s order approving the program directed the company to record the “direct costs and lost revenue impacts,” so that accounts could be reviewed later to determine if recovery from customers was proper, according to the petition.

“In addition, it would be inconsistent with the commission’s duties if it were to issue a blank check to the company before knowing whether any cost was actually incurred by the company,” the commission said.