Idaho biomass project scores PPA approval

By Anna Austin | November 16, 2010

The Idaho Public Utilities Commission has approved a power purchase agreement (PPA) between Idaho Power Co. and a proposed biomass cogeneration plant, after determining what rate the project was eligible for under the Public Utilities Regulatory Policies Act.

According to the commission, the project has been grandfathered in to receive a 15 percent higher rate than what similar-sized renewable energy projects are now eligible for under PURPA, which requires regulated electric utilities to buy power from qualifying small-power producers or co-generators. The “avoided cost rate” the utility pays power project developers is determined by the commission and must be equal to the cost the electric utility avoids if it would have had to generate the power itself or purchase it from another source. Costs of PURPA projects are included in customer rates.  

The commission was hesitant to approve the project because there wasn’t any written evidence of an agreement before March, when the old rates expired. Yellowstone Power Inc., which is building the $6 million facility at Emerald Forest Sawmill in Idaho’s Gem County, and Idaho Power both maintain that a deal was met before the old rates expired, as the parties were negotiating throughout 2009. Yellowstone had also completed purchase of property and was issued a permit to construct by the Idaho Department of Environmental Quality.

Previous rates were lowered, according to the commission, because of a key factor it uses in calculating the avoided-cost rate—the long-term natural gas forecast issued by the Northwest Power and Conservation Council. If the forecast changes, published avoided cost rates are automatically recalculated, so when the NPCC issued an updated forecast in March, the result was a lower rate that the company must pay developers because of declining natural gas prices.

Under the contract, Yellowstone will provide 10 megawatts to Idaho Power for 15 years. It will also provide heat and power to the sawmill.

The commission said that in the future it expects Idaho Power and other regulated utilities to document oral communications and to “assist the commission in its gatekeeper role of assuring that utility customers are not being asked to pay more than the company’s avoided cost,” in PPAs.