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Home My WebLink About20260511Staff Comments.pdf RECEIVED May 11, 2026 KELSEA E. ROSS IDAHO PUBLIC DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION IDAHO PUBLIC UTILITIES COMMISSION PO BOX 83720 BOISE, IDAHO 83702 (208) 334-0318 IDAHO STATE BAR NO. 12050 Attorney for the Commission Staff BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF AVISTA ) CORPORATION AND FORD HYDRO ) CASE NO. AVU-E-26-03 LIMITED PARTNERSHIP'S JOINT ) PETITION FOR APPROVAL OF POWER ) PURCHASE AGREEMENT ) COMMENTS OF THE COMMISSION STAFF COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission ("Commission"),by and through its attorney of record,Kelsea E. Ross, Deputy Attorney General, submits the following comments. BACKGROUND On March 30, 2026, Avista Corporation ("Avista") and Ford Hydro Limited Partnership ("Ford Hydro") (collectively the"Parties") applied("Application")to the Commission requesting an order approving a Power Purchase Agreement ("PPA"), which will replace a prior agreement between the Parties with an expiration date of June 30, 2026. The PPA is attached to the Application as Attachment A. The contract term of the PPA is three years. Application Attachment Aat5. STAFF ANALYSIS Staff has reviewed the PPA and is concerned about Section 6.1,Exhibit E, Section 5.2, and the market prices used in implementing the 90/110 Rule. Staff recommends that the Commission approve the PPA and declare that all payments the Company makes to Ford Hydro for purchases STAFF COMMENTS 1 MAY 11, 2026 of electric energy generated by its hydroelectric facility as prudently incurred expenses for ratemaking purposes, conditioned on the Parties updating the PPA through a compliance filing by incorporating the following modifications: 1. Replacing the "Effective Date"with"March 27, 2026" in Section 6.1; 2. Updating of the statement in Exhibit E to reflect the avoided cost rates locked in based on the Legally Enforceable Obligation("LEO") date; 3. Adopting a timeframe that provides monthly estimates at least five days before the delivery month in Section 5.2; and 4. Adopting the market prices without the impacts of Washington's Climate Commitment Act("CCA"). Section 6.1 Section 6.1 of the PPA states that the applicable avoided cost rate shall be the rate approved by the Commission and in effect on the Effective Date, which is defined in Section 4 as "July 1, 2026, or such other date set by Commission order." Application Attachment A at 5 and 7. However, Staff believes the applicable avoided cost rate should be based on the date when a LEO is established, which is March 27, 2026, because it is when the Parties executed the PPA. Therefore, Staff recommends that the Commission order the Parties to update the PPA through a compliance filing to replace the "Effective Date" in Section 6.1 with"March 27, 2026." There are two categories of purchases under 18 CFR 292.304(d): (1) as-available purchases; and (2) LEO purchases. The former allows a qualifying facility ("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. Id. For this PPA, the avoided cost rates were locked in when the LEO was established. Staff believes that the LEO was established on March 27, 2026,when the Parties executed the PPA. This is based on the Idaho Supreme Court decision that upheld the Commission's finding that when there is a signed agreement,the LEO is established on the date the agreement is executed by both parties. Idaho Power Co. v. Idaho Public Utilities Com'n, 155 Idaho 780, 790, 316 P. 3d 1278, 1288 (2013) (Jones, J., Concurring). Therefore"'[w]hen a contract has been entered into by STAFF COMMENTS 2 MAY 11, 2026 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 (quoting Order No. 32635 at 13). Exhibit E Although the avoided cost rates listed in Exhibit E of the PPA are based on the LEO date, Staff believes the description of the rates may cause confusion.The exhibit states that"[t]he pricing information provided herein is based on current avoided cost rates in Idaho and is subject to change as provided in Section 6.1 of the Agreement." Application Attachment A Exhibit E. Staff recommends that the Commission order the Parties to update the PPA through a compliance filing to modify Exhibit E of the PPA to reflect that the avoided cost rates are based on the LEO date. Section 5.2 Section 6.2 of the PPA contains the 90/110 Rule as required by Order No. 29632. Application Attachment A at 7. The 90/110 Rule requires a seller of a QF to provide utilities with a monthly estimate of the amount of energy the qualifying facility expects to produce. Order No. 29632 at 20. If the seller 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. Id. If the seller 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.Id. However, Staff believes the timing of providing monthly estimates described in Section 5.2 of the PPA is not reasonable. Application Attachment A at 6. Staff recommends that the Commission order the Parties to update the PPA through a compliance filing to adopt a timeframe of providing monthly estimates at least five days before the delivery month. After the initial year of monthly estimates, and starting at the end of June 2027 (as well as the end of every third month thereafter), Section 5.2 of the PPA requires the seller to provide estimates on the additional consecutive three months for which seller has not yet delivered monthly estimates to Avista, " no later than 5:00 p.m. of the last business day of the month during which they are required to be provided". Application Attachment A at 6. . For example, the deadline to provide the monthly estimates of July, August, and September of 2027 would be 5:00 p.m. of the last business day of June of 2027. Staff believes this deadline is not compatible with the timeframe set in Section 5.5 that allows the seller to revise monthly estimates at least five days in advance. STAFF COMMENTS 3 MAY 11, 2026 Id. Using the example above, the seller would be allowed to revise the monthly estimate of July by June 25. Staff believes it is not reasonable to set a deadline of providing an estimate on the last business day of a month, while also setting a deadline of revising the estimate on the 251h of the same month. When the Commission in Order No. 34263 allowed at least five days in advance to revise monthly estimates,it stated that"five days in advance will result in more useful information for the Company to use in its planning and operations."Id. at 5. Therefore, Staff recommends that the Commission order the Parties to update the PPA through a compliance filing to adopt a timeframe of providing monthly estimates at least five days before the delivery month in Section 5.2. Market Prices As discussed above,pursuant to Order No. 29632 when the energy delivered to Avista falls outside the 90/110 band, the lesser of 85 percent of the market price or the contract price is used. The market price proposed in the PPA is PowerDex hourly Mid-Columbia index("Mid-C Index"). Application Attachment A at 3. Since Washington's CCA requires carbon-emitting generators to pay for carbon emissions, Staff believes energy of such generators is transacted at a higher cost at the Mid-C hub, causing higher market prices at Mid-C. Consequently, Staff believes this will drive up the cost associated with the PPA. This belief is reflected in a price comparison between a modeling scenario with CCA and a modeling scenario without CCA in the Company's 2025 Integrated Resource Plan("IRP") included as Table No.1 below: Table No. 1: Mid-C Electric Price Forecast 20-year 20-year Levelized Levelized without with CCA CCA Metric _($/MWh) ($/MWh Deterministic $45.45 $44.37 Mean $44.11 $42.77 10th Percentile $39.56 $38.42 50th Percentile $44.13 $42.85 95th Percentile $49.71 $48.05 STAFF COMMENTS 4 MAY 11, 2026 Response to Staff s First Production Request at No. 20 (a) in Case No. AVU-E-24-13. In Order No. 36015,the Commission found that the costs of CCA should not be borne by Idaho ratepayers. Therefore, Staff recommends that the Commission order the Parties to update the PPA through a compliance filing to adopt market prices without CCA impacts. It is Staffs understanding that the Company has started making efforts to remove the impacts of CCA for various purposes. For example, the Company modeled Mid-C prices without CCA in the 2025 IRP.Response to Staff s First Production Request at No.20(a)in Case No.AVU- E-24-13. The Company also developed a Non-Washington Sink Sales Price Discount' to minimize the impacts of CCA for Idaho customers in its 2026 general rate case (Docket No. UE-260007) filed with the Washington Utilities and Transportation Commission. STAFF RECOMMENDATION Staff recommends that the Commission approve the PPA and declare that all payments the Company makes to Ford Hydro for purchases of electric energy generated by its hydroelectric facility as prudently incurred expenses for ratemaking purposes, conditioned on the Parties filing an updated PPA through a compliance filing by incorporating the following modifications: 1. Replacing the "Effective Date"with "March 27, 2026" in Section 6.1; 2. Updating of the statement in Exhibit E to reflect the avoided cost rates locked in based on the LEO date; 3. Adopting a timeframe that provides monthly estimates at least five days before the delivery month in Section 5.2; and 4. Adopting the market prices without the impacts of Washington's CCA. ' See Page 31 of Direct Testimony of Clint G.Kalich(260007-08-AVA-Exh-CGK-1T-1-16-26.pdf) https:HMigroxy.utc.wa.gov/cases/GetDocument?docID=51&year=2026&docketNumber=260007 (last visited May 6,2026). STAFF COMMENTS 5 MAY 11, 2026 Respectfully submitted this 1 lth day of May 2026. Kelsea E. Ross Deputy Attorney General Technical Staff. Yao Yin I:\Utility\UMISC\COMMENTS\AVU-E-26-03 Comments.docx STAFF COMMENTS 6 MAY 11, 2026 CERTIFICATE OF SERVICE I HEREBY CERTIFY THAT I HAVE THIS I11h DAY OF MAY 2026, SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO. AVU-E-26-03, BY E-MAILING A COPY THEREOF TO THE FOLLOWING: For Avista Corporation: CHRIS DRAKE MGR. RESOURCE OPIMIZATION& MARKETING AVISTA CORPORATION EMAIL: chris.drakegavistacorp.com TRAVIS LINDSEY SENIOR COUNSEL AVISTA CORPORATION EMAIL: travis.lindseykavistacorp.com For Ford Hydro Limited Partnership: BRENDA J. FORD FORD HYDRO LIMITED PARTNERSHIP EMAIL: brendaAwestford.co Keri J. H&vker Legal Assistant STAFF COMMENTS 7 MAY 11, 2026