20230705AVU to Staff 5 Attachment A.pdf

Interoffice Memorandum
Energy Resources
DATE: June 6, 2023
TO: John Wilcox, Director of Accounting
Amy Parsons, Manager of Resource Accounting
FROM: Kevin Holland, Director of Energy Resources
CC:
SUBJECT: Washington Climate Commitment Act Lesser Than Methodology
Approval from Washington Department of Ecology
The Climate Commitment Act in the State of Washington was effective on January 1, 2023. This
is complicated legislation with numerous components and assumptions. To help ease some of this
confusion, on March 1, 2023 a letter was sent to Luke Martland, Manager of the Climate Commitment Act
Implementation for the Department of Ecology (Ecology) requesting formal reporting guidance for Electric
Power Entities under the Climate Commitment Act. This letter was submitted by the Western Power
Trading Forum and jointly signed by several utilities and other entities, including Avista Utilities. The letter
included a white paper “Consideration of Electricity Imports and Determination of the Electricity Importer
Under the Climate Commitment Act” (Lesser Than Methodology”). The paper proposes an approach for
determining when the carbon obligation for electricity imports occurs. In essence, the methodology
provides an avenue for those entities who transact at the Mid-Columbia trading hub to offset net
purchases and sales with clean generation either at that same location or imported to that location from
another source in the supplier’s system, thus significantly reducing the carbon obligation as the first
jurisdictional importer.
The lesser than methodology was approved by the Department of Ecology on May 24, 2023.
However, given the CCA was effective January 1, an expense was recorded to recognize the obligation
associated with being the first jurisdictional importer gross sales at Mid C and for generation from Boulder
Park which is located in Washington State. Approximately $5.7M in expense was recorded for January –
April of 2023. The expense was Idaho’s allocation of the aforementioned obligation as the understanding
was that all portfolio transactions for Washington would be covered by free carbon allowances. With the
approval by Ecology, this expense can now be reversed and replaced with an expense based on the
accepted lesser than methodology. The total recalculated expense is approximately $950K for January-
May, allocated between Washington and Idaho based on the current production transmission (PT) ratio.
That said, conversations are still ongoing with Ecology with regard to further rule clarification.
The intent of this legislation was to not result in a cost burden for Washington electric customers, and
allowances are to be allocated to help mitigate these cost increases. The Clean Energy Transformation
Act is intended to be the regulating legislation for the clean energy transition. Updates will be provided
when available.
Staff_PR_005 Attachment A Page 1 of 1