Opinion ID: 1172988
Heading Depth: 2
Heading Rank: 2

Heading: Fixed Rates

Text: The contract approved by the Commission provided that the Commission could only modify the terms and/or conditions thereof if such was necessary in the public interest. The public interest test approved by the Commission is the standard set forth by this Court in Agricultural Products Corp. v. Utah Power & Light Co., 98 Idaho 23, 557 P.2d 617 (1976), pursuant to which contractually established rates may be superseded by the Commission. The Court in Agricultural Products held that although the Commission could supersede contract rates between utilities and their customers pursuant to the state's police power, such power was limited by the requirement that such be in the public interest. To justify state interference with the utility contract, there must be a finding that the rate `is so low as to adversely affect the public interest  as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.' Id. at 29, 557 P.2d at 623 (quoting Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956)). The public interest standard approved by the Commission in this case is merely the standard pursuant to which any rate contract may be superseded by later Commission orders. Idaho Power proposed to amend the contract to provide that: The rates, terms and conditions set forth in this agreement are subject to the continuing jurisdiction of the Idaho Public Utilities Commission. The rates, terms and conditions under this agreement are subject to change and revision by order of the Commission upon a finding, supported by substantial competent evidence, that such rates, terms or conditions, change or revision is just, fair, reasonable, sufficient, nonpreferential and non-discriminatory. R., p. 81 (emphasis added). Idaho Power argues that the Commission is required pursuant to I.C. § 61-502 [10] to determine the just, reasonable and sufficient rates to be paid the CSPP, which rates of necessity must be subject to change as conditions do and that by approving a contract which sets forth the more stringent public interest standard for modification of rates, the Commission has abdicated its responsibility of reviewing and ensuring that utility rates remain just, reasonable and sufficient under this provision. In making this argument, Idaho Power ignores the express provisions of PURPA, its legislative history and its implementing FERC regulations. PURPA § 210(b) provides that: The rules prescribed under subsection (a) of this section shall insure that in requiring any electric utility to offer to purchase energy from any [CSPP], the rates for such purchase  (1) shall be just and reasonable to the electric consumers of the electric utility and in the public interest, ... . The House and Senate conferees explicitly stated in their report on the PURPA bill that this language was not to be interpreted to permit pervasive regulation by state utility commissions over the avoided cost rates paid CSPPs by utilities: The conferees intend that the phrase `just and reasonable to the electric consumers of the utility' be interpreted in a manner which looks to protecting the interests of the electric consumer in receiving electric energy at equitable rates. It is not the intention of the conferees that cogenerators and small power producers become subject, by virtue of this language, and the rules promulgated under this section, to the type of examination that is traditionally given to electric utility rate applications to determine what is the just and reasonable rate that they should receive for their electric power. The conferees recognize that cogenerators and small power producers are different from electric utilities, not being guaranteed a rate of return on their activities generally or on the activities vis a vis the sale of power to the utility and whose risk in proceeding forward in the cogeneration or small power production enterprise is not guaranteed to be recoverable. The conferees wish to make clear that cogeneration is to be encouraged under this section and therefore the examination of the level of rate which should apply to the purchase by the utility of the cogenerator's or small power producer's power should not be burdened by the same examination as are utility rate applications, but rather in a less burdensome manner. The establishment of utility type regulation over them would act as a significant disincentive to firms interested in cogeneration and small power production.  1978 U.S. Code Cong. & Ad. News 7831-32 (emphasis added). The contractual language proposed by Idaho Power would result in utility-type regulation over CSPPs, a result clearly rejected by Congress when it enacted PURPA. The FERC regulations implementing PURPA similarly do not contemplate utility-type regulation over rates paid to CSPPs. 18 C.F.R. § 392.602(c) provides that any qualifying facility shall be exempted ... from State law or regulation respecting: (i) The rates of electric utilities; and (ii) The financial and organizational regulation of electric utilities. 18 C.F.R. § 292.304(d) provides that CSPPs have the option of having their power purchased under two types of rate schedules: (i) The avoided costs calculated at the time of the delivery; or (ii) The avoided costs calculated at the time the [legally enforceable obligation for the delivery of energy or capacity over a specified term] is incurred.  [11] (Emphasis added.) FERC's comments make it clear that if the CSPP chooses to exercise its option to receive avoided costs calculated at the time the obligation is incurred, that rate is to be maintained for the duration of the contract: Paragraph (b)(5)[ [12] ] addressed the situation in which a qualifying facility has entered into a contract with an electric utility, or where the qualifying facility has agreed to obligate itself to deliver at a future date energy and capacity to the electric utility. The import of this section is to ensure that a qualifying facility which has obtained the certainty of an arrangement is not deprived of the benefits of its commitment as a result of changed circumstances. This provision can also work to preserve the bargain entered into by the electric utility; should the actual avoided costs be higher than those contracted for, the electric utility is nevertheless entitled to retain the benefit of its contracted for, or otherwise legally enforceable, lower price for purchases from the qualifying facility. This subparagraph will thus ensure the certainty of rates for purchases from a qualifying facility which enters into a commitment to deliver energy or capacity to utility. 45 Fed.Reg. 12224. Thus we reject Idaho Power's argument that the Commission does not have any authority to establish an avoided cost rate which is fixed for the duration of the contract and which is not subject to the Commission's continuing jurisdiction. It is clear that both Congress and FERC, through its implementing regulations, intended that CSPPs should not be subjected to the pervasive utility-type regulation which would result if the contract language proposed by Idaho Power were approved by the Commission. In fact, one of Congress' main objectives in enacting PURPA was to encourage cogeneration and small power production by exempting CSPPs from pervasive state rate regulation. Congress was aware that such regulation presented a strong disincentive for CSPPs to engage in power production where the financial risks were great and the returns were not guaranteed to be recoverable. The Commission, in refusing to adopt Idaho Power's proffered language was merely carrying out the directives imposed by PURPA and the implementing FERC regulations.