20240711Staff Comments.pdf

RECEIVED
Thursday, July 11, 2024 10:13:29 AM
IDAHO PUBLIC
UTILITIES COMMISSION
MICHAEL DUVAL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 11714
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION AND FORD HYDRO ) CASE NO. AVU-E-24-06
LIMITED PARTNERSHIP'S JOINT )
PETITION FOR APPROVAL OF A POWER )
PURCHASE AGREEMENT ) COMMENTS OF THE
COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Michael Duval, Deputy Attorney General, submits the following
comments.
BACKGROUND
On May 16, 2024, Avista Corporation d/b/a Avista Utilities ("Avista") and Ford Hydro
Limited Partnership ("Ford Hydro") (collectively, "Parties") submitted a joint petition to the
Commission for approval of a Power Purchase Agreement("PPA")that would authorize the sale
of energy from Ford Hydro's hydroelectric facility("Facility")to Avista("Petition"). The
previous contract expired on June 30, 2024.
STAFF COMMENTS 1 JULY 11, 2024

STAFF ANALYSIS
Staff s review focused on the fourth recital of the PPA, the rolling window of Delivered
Net Output estimates, renewable energy credits ("RECs"), the Facility's technology type,
provisions of modifications to Facility in Section 10.6, eligibility for capacity payments, the
90/110 Rule and the associated 5-day advance notice, avoided cost rates, and the lapsed contract
period.
Specifically, Staff recommends that the Commission order the Parties to update the PPA
through a compliance filing incorporating the following modifications:
1. Correction of the expiration date in the fourth recital of the PPA;
2. Correction of the duration of the rolling window in Section 5.2;
3. Specification of the Facility's technology type;
4. Reference of Section 22 in Section 10.6;
5. Replacement of"not Surplus Energy"with "not Surplus Energy or Shortfall Energy"
in Section 6.1;
6. Replacement of"the Effective Date"with"May 15, 2024" in Section 6.1; and
7. Replacement of Section 11.1 with Section 6.1 in Exhibit E.
Staff also recommends that, if the Facility is modified, only the net power supply expense
that reflects the proper authorized rate for all energy delivered as of the first operation date of the
modified Facility be included in the Company's Power Cost Adjustment, regardless of the
compensation paid to the modified Facility.
Lastly, Staff recommends an Effective Date of July 1, 2024, for the PPA.
Fourth Recital
The fourth recital of the PPA mistakenly states that the previous contract will expire on
June 29, 2024. However, the correct expiration date is June 30, 2024. See Response to Staff
Production Request No. 1. Staff recommends that the expiration date be corrected in the fourth
recital.
Rolling Window of Delivered Net Output Estimates
The Parties intended to adopt a three-month rolling window of Delivered Net Output
estimates. See Response to Staff Production Request No. 3. However, Section 5.2 of the PPA
STAFF COMMENTS 2 JULY 11, 2024

mistakenly stated a six-month rolling window. Staff recommends that the mistake be corrected
in Section 5.2.
RECs
Section 7.1 of the PPA states that "[t]o the full extent allowed by applicable laws or
regulations, Avista shall own or be entitled to claim fifty percent of the Environmental Attributes
associated with the Net Delivered Output." The Company clarified in Response to Staff
Production Request No. 9 that"applicable laws or regulations"included Order No. 32802, which
assigned 100% of RECs to qualifying facilities ("QFs") that used published avoided cost rates.
Because Section 7.1 recognizes and complies with the prior Commission order, Staff believes
this provision is reasonable.
Technology Type
The Facility is a non-seasonal hydro project,but the PPA does not explicitly specify the
technology type. See Response to Staff Production Request No. 6. In order to avoid confusion
and distinguish the Facility from seasonal hydro projects, Staff recommends that the Facility's
technology type be specified in the PPA.
Section 10.6 (Modifications)
Section 10.6 (Modifications)mistakenly states that any material modifications to the
Facility will require a review and amendment of the Agreement, subject to Section 21 of the
Agreement. Section 22 (Amendment) should be referenced, instead of Section 21 (Non-waiver).
See Response to Staff Production Request No. 7. Staff recommends that Section 22 be
referenced in Section 10.6.
If the Facility is modified, Staff recommends that only the net power supply expense that
reflects the proper authorized rate for all energy delivered as of the first operation date of the
modified Facility be included in the Company's Power Cost Adjustment, regardless of the
compensation paid to the modified Facility. This treatment is consistent with the Commission
direction in Order No. 35705.
STAFF COMMENTS 3 JULY 11, 2024

Eli ig bili . for Capacity Payments
Staff believes the Facility is eligible for immediate capacity payments because it is paid
for capacity at the end of the previous contract. In Order No. 32697, the Commission stated that
"if a QF project is being paid for capacity at the end of the contract term and the parties are
seeking renewal/extension of the contract, the renewal/extension would include immediate
payment of capacity."
In addition, the previous contract listed the nameplate capacity at 1.8 megawatts ("MW"),
and the proposed PPA lists the nameplate capacity at the same amount. Therefore, Staff believes
the Facility should be granted full capacity payments without any adjustments. In several prior
cases where the nameplate capacity in the original contract was less than the nameplate capacity
in the renewal contract, the Commission ordered the use of a bifurcated rate. Order Nos. 34956,
35262, and 35223.
Lastly, the Facility will continuously operate after the expiration date of the previous
contract, even though the anticipated hydro generation amounts will be zero until December due
to lack of water flow. See Response to Staff Production Request No. 2 and Supplemental
Response to Staff Production Request No. 2. Also see Exhibit E of the PPA. Previously, the
Commission expressed that lack of continuous operation could affect capacity payments. Order
Nos. 33357, 34692, 34887, and 35303. Because the Facility will continuously operate after the
expiration date and because the potential lack of generation is due to the expected lack of water
flow, Staff believes the situation should not affect the Facility's eligibility for capacity payments.
90/110 Rule and the associated 5-Day Advanced Notice
Staff confirmed the PPA contains the 90/110 Rule as required by Commission Order
No. 29632. The 90/110 Rule requires a QF to provide utilities with a monthly estimate of the
amount of energy the QF expects to produce. If the QF delivers more than 110 percent of the
estimated amount, then the utility must buy the excess energy for the lesser of 85 percent of the
market price or the contract price. If the QF delivers less than 90 percent of the estimated
amount, then the utility must buy total energy delivered for the lesser of 85 percent of the market
price or the contract price.
Staff also confirmed the PPA requires the Seller to give the Company at least five-day
advanced notice if the Seller plans to adjust its Delivered Net Output Estimates for purposes of
STAFF COMMENTS 4 JULY 11, 2024

complying with the 90/110 Rule. Five-day advanced notice has been authorized in prior
Commission orders such as Order Nos. 34263, 34870 and 34937.
Avoided Cost Rates
Staff verified that the proposed avoided cost rates are correct and are based on the
authorized rates effective when the Parties signed the PPA. The rates also correctly reflect the
non-seasonal hydro technology type of the Facility. However, several provisions related to the
avoided cost rates are incorrectly stated. Each provision is discussed below.
a. Omission of Shortfall Energy in Section 6.1
Section 6.1 mistakenly states that"the applicable rate for Net Delivered Output that is not
Surplus Energy shall be the Avoided Cost Rates for Non-Fueled Projects Smaller Than Ten
Average Megawatts per month -Non-Levelized that are approved by the Commission and in
effect on the Effective Date" (emphasis added). This statement is intended to express that the
applicable rate for energy within the 90/110 Rule band should be the Avoided Cost Rates for
Non-Fueled Projects Smaller Than Ten Average Megawatts per month -Non-Levelized.
Therefore, "not Surplus Energy" should have been"not Surplus Energy or Shortfall Energy"to
indicate the energy within the 90/110 Rule band. See Response to Staff Production Request No.
4 (a). Staff recommends that"not Surplus Energy"be replaced with"not Surplus Energy or
Shortfall Energy".
b. Mistaken Date in Section 6.1
The same quote mentioned above is also mistaken about time when the avoided cost rates
were locked in by the Parties: "the applicable rate for Net Delivered Output that is not Surplus
Energy shall be the Avoided Cost Rates for Non-Fueled Projects Smaller Than Ten Average
Megawatts per month -Non-Levelized that are approved by the Commission and in effect on the
Effective Date" (emphasis added). Effective Date is defined in Section 4.1 as July 1, 2024, or
such other date set by Commission order. However, Staff believes avoided cost rates in effect
should be based on when a Legally Enforceable Obligation("LEO") is established, and the LEO
for this PPA was established on May 15, 2024, when the Parties executed the PPA. Therefore,
Staff recommends that"the Effective Date"be replaced with"May 15, 2024".
STAFF COMMENTS 5 JULY 11, 2024

There are two categories of purchases under 18 CFR 292.304(d): (1) as-available
purchases; and(2) LEO purchases. The former allows a QF to provide energy whenever it is
available and use avoided costs calculated at the time of delivery, while the latter requires a QF
to provide energy or capacity pursuant to a LEO for the delivery of energy or capacity over a
specified term,using either the avoided costs calculated at the time of delivery, or the avoided
costs calculated at the time the obligation is incurred. For this PPA, the avoided cost rates were
locked in when the LEO was established.
Staff believes that the LEO was established on May 15, 2024, when the Parties executed
the PPA. This is based on the Idaho Supreme Court decision resulting from appeals of Case
Nos. IPC-E-10-61 and IPC-E-10-62. See Idaho Power Co. v. Idaho Public Utilities Com'n, 155
Idaho 780, 316 P.3d 1278 (2013). In its decision, the Court upheld the Commission's finding
that when there is a signed agreement, the date the LEO arises is the same date that the
agreement is executed by both parties. Therefore "[w]hen a contract has been entered into by the
parties and submitted to the Commission for approval, there is no need for a determination
regarding any other legally enforceable obligation." Id. at 793.
c. Mistaken Reference of Section 11.1
Exhibit E (Purchase Prices) states that "[t]he pricing information provided here is based
on current avoided cost rates in Idaho and is subject to change as provided in Section 11.1 of the
Agreement." This statement mistakenly references Section 11.1, which does not exist in the
PPA. Exhibit E is intended to reference Section 6.1 (Net Delivered Output Cost). See Response
to Staff Production Request No. 5. Therefore, Staff recommends that Section 11.1 be replaced
with Section 6.1 in Exhibit E.
Lapsed Contract Period
The previous agreement expired on June 30, 2024. Unless the Commission approves the
proposed PPA retroactively with an Effective Date of July 1, 2024, the Facility is and will be
operating without a valid contract until the Commission issues a final order. Section 4 of the
PPA states that the Effective Date is July 1, 2024, or such other date set by the Commission
order. Staff recommends that the Commission retroactively set the Effective Date for July 1,
2024, and pay the Seller the proposed avoided cost rates starting at that time. The Commission
STAFF COMMENTS 6 JULY 11, 2024

has historically set effective dates for other QF contracts either the day following the end of the
previous contract term(e.g. Order Nos. 34792, 35123, 35383, and 36139) or after the
Commission's approval (e.g. Order Nos. 35303 and 35486). Regardless of when the effective
date was set by the Commission in those examples, the retroactive rates for the lapsed contract
period were the avoided cost rates established in the approved contract. Using the Effective Date
of July 1, 2024, in this case, will allow the Parties to use the avoided cost rates established in the
approved contract, while implementing related provisions associated with the avoided cost rates,
such as the 90/100 Rule.
In addition, Staff echoes the Commission's past concerns regarding late-filed renewal
contracts that result in a lapsed contract period and a lack of contractual commitment. This lack
of commitment can create uncertainty for the Company's resource planning. The Commission
has clearly stated it expects renewal QF contracts to be filed well before an existing contract
expires to avoid these situations. Order Nos. 35067 at 4 and 35060 at 4.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the PPA and declare that Avista's
payments to Ford Hydro under the PPA will be allowed as prudently incurred expenses for
ratemaking purposes, if the Parties update the PPA through a compliance filing incorporating the
following modifications:
I. Correction of the expiration date in the fourth recital of the PPA;
2. Correction of the duration of the rolling window in Section 5.2;
3. Specification of the Facility's technology type;
4. Reference of Section 22 in Section 10.6;
5. Replacement of"not Surplus Energy"with "not Surplus Energy or Shortfall Energy"
in Section 6.1;
6. Replacement of"the Effective Date"with "May 15, 2024" in Section 6.1; and
7. Replacement of Section 11.1 with Section 6.1 in Exhibit E.
Staff also recommends that, if the Facility is modified, only the net power supply expense
that reflects the proper authorized rate for all energy delivered as of the first operation date of the
modified Facility be included in the Company's Power Cost Adjustment, regardless of the
compensation paid to the modified Facility.
STAFF COMMENTS 7 JULY 11, 2024

Lastly, Staff recommends an Effective Date of July 1, 2024, for the PPA.
Respectfully submitted this 1 lth day of July 2024.
Michael Duval
Deputy Attorney General
Technical Staff: Yao Yin
I:\Utility\UMISC\COMMENTS\AVU-E-24-06 Comments.docx
STAFF COMMENTS 8 JULY 11, 2024

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS DAY OF JULY 2024,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-E-24-06, BY E-MAILING A COPY THEREOF TO THE FOLLOWING:
CHRIS DRAKE MICHAEL G ANDREA
MANAGER RESOURCE OPTIMIZATION SENIOR COUNSEL
AVISTA CORPORATION AVISTA CORPORATION
PO BOX 3727 PO BOX 3727
SPOKANE WA 99220-3727 SPOKANE WA 99220-3727
E-MAIL: chris.drake(c avistacon?xom E-MAIL: rnichael.andrea('avistacom.com
BRENDAJFORD
FORD HYDRO LIMITED PARTNERSHIP
PO BOX 1432
LEWISTON ID 83501
E-MAIL: brendaLawestford.co
jx&aA-
PATRICIA JORDA , SECRETARY
CERTIFICATE OF SERVICE