20230717AVU to Staff 5_7_10 - Revised.pdf

AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION JURISDICTION: IDAHO DATE PREPARED: 07/13/2023 CASE NO: AVU-E-23-04 WITNESS: Clint Kalich
REQUESTER: IPUC RESPONDER: Annette Brandon
TYPE: Production Request DEPARTMENT: Energy Resources REQUEST NO.: Staff-005 Revised TELEPHONE: [phone]
REQUEST:
Please provide Idaho's monthly Climate Commitment Act ("CCA") costs since the implementation of the CCA and explain how each month's CCA costs are calculated. Please provide workpapers with all formula intact.
REVISED RESPONSE:
The total amount of costs incurred on behalf of Idaho customers through May 2023 is approximately $340K. The information below is provided for additional context. Please see the following attachments:
• Staff_PR_005C Confidential Attachment A for the memo to Avista Accounting confirming
acceptance of lesser than methodology.

• Staff_PR_005C Confidential Attachment B for the May journal which recorded the reversal of January through April expenses incurred on behalf of Idaho customers and the May year-to-date expense.
• Staff_PR_005C Confidential Attachment C for the detailed calculations, including formulas. Please see the tab “May electric CCA calculation” for step-by-step procedure
for application of lesser-than methodology. During its 2021 legislative session, the Washington legislature passed, and the Governor approved, the Climate Commitment Act (CCA). Effective January 1, 2023 all electric utilities must secure enough allowances to cover the carbon emissions of imported power and generation from sources
emitting 25,000 metric tons or more annually. In order to mitigate the cost burden associated with
the Climate Commitment Act on Avista’s Washington electric customers, free allowances would be distributed based on a forecast approved by the Washington Utilities and Transportation Commission. The intent of this distribution of free allowances was to avoid double-counting as the Clean Energy Transformation Act is the applicable legislation for reducing of greenhouse gas
emissions for electric utilities. Avista allocates expenses between jurisdictions based upon an
approved Production/Transmission Ratio (PT Ratio). The approval of the lesser than methodology will not change this practice. In order to ensure consistency among entities impacted by CCA, the Western Power Trading
Forum (WPTF) requested clarification from the Washington Department of Ecology (Ecology)
and provided a proposed methodology in the form of a white paper “Consideration of Electricity Imports and Determination of the Electricity Importer Under the Climate Commitment Act”. This whitepaper was filed on March 1, 2023.
RECEIVED
2023 JULY 17, 2023 1:41PM
IDAHO PUBLIC
UTILITIES COMMISSION
Effective January 1, Avista incurred an obligation when off-system sales were executed or a
generation plant was utilized that exceeded the 25,000 metric tons requirement. As such, an expense was recorded to recognize 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. Note that this expense did not flow through the Purchase Cost Adjustment, however, the revenue associated with this sale was recorded to account 447 sales for resale. These transactions are not entered into unless the cost associated with the transaction is less than the cost of the sale.

The lesser than methodology was approved by the Department of Ecology on May 24, 2023. The implementation of the methodology will significantly reduce the emissions obligation of Idaho customers due to the ability to offset all sales with Avista aggregated “hub resources” (please see the Company’s response to Staff_DR_007 for additional explanation of “hub resources”). With
the approval by Ecology, the total recalculated expense is approximately $950K for January-May,
allocated between Washington ($610K) and Idaho ($340K) based on the current production transmission (PT) ratio. This amount represents emissions primarily from Boulder Park, which is located within Washington State and exceeds the 25,000 metric tons requirement.
RESPONSE: Please see Avista's response Staff_PR_005C, which contains TRADE SECRET, PROPRIETARY or CONFIDENTIAL information and exempt from public view and is separately filed under IDAPA 31.01.01, Rule 067 and 233, and Section 9-340D, Idaho Code.

The total amount of costs incurred on behalf of Idaho customers through May 2023 is approximately $340K. The information below is provided for additional context. Please see the following attachments:
• Staff_PR_005C Confidential Attachment A for the memo to Avista Accounting confirming
acceptance of lesser than methodology.

• Staff_PR_005C Confidential Attachment B for the May journal which recorded the reversal of January through April expenses incurred on behalf of Idaho customers and the May year-to-date expense.
• Staff_PR_005C Confidential Attachment C for the detailed calculations, including formulas. Please see the tab “May electric CCA calculation” for step-by-step procedure
for application of lesser-than methodology. During its 2021 legislative session, the Washington legislature passed, and the Governor approved, the Climate Commitment Act (CCA). Effective January 1, 2023 all electric utilities must secure enough allowances to cover the carbon emissions of imported power and generation from sources emitting 25,000 metric tons or more annually. In order to mitigate the cost burden associated with
the Climate Commitment Act on Avista’s Washington electric customers, free allowances would be distributed based on a forecast approved by the Washington Utilities and Transportation Commission. The intent of this distribution of free allowances was to avoid double-counting as the Clean Energy Transformation Act is the applicable legislation for reducing of greenhouse gas
emissions for electric utilities. Avista allocates expenses between jurisdictions based upon an
approved Production/Transmission Ratio (PT Ratio). The approval of the lesser than methodology will not change this practice. In order to ensure consistency among entities impacted by CCA, the Western Power Trading
Forum (WPTF) requested clarification from the Washington Department of Ecology (Ecology)
and provided a proposed methodology in the form of a white paper “Consideration of Electricity Imports and Determination of the Electricity Importer Under the Climate Commitment Act”. This whitepaper was filed on March 1, 2023.
Effective January 1, Avista incurred an obligation when off-system sales were executed or a
generation plant was utilized that exceeded the 25,000 metric tons requirement. As such, an expense was recorded to recognize 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. Note that this expense did not flow through the Purchase Cost Adjustment, however, the revenue associated with this sale was recorded to account 447 sales for resale. These transactions are not entered into unless the cost associated with the transaction is less than the cost of the sale.

The lesser than methodology was approved by the Department of Ecology on May 24, 2023. The implementation of the methodology will significantly reduce the emissions obligation of Idaho customers due to the ability to offset all sales with Avista aggregated “hub resources” (please see the Company’s response to Staff_DR_007 for additional explanation of “hub resources”). With
the approval by Ecology, the total recalculated expense is approximately $950K for January-May,
allocated between Washington ($610K) and Idaho ($340K) based on the current production transmission (PT) ratio. This amount represents emissions primarily from Boulder Park, which is located within Washington State and exceeds the 25,000 metric tons requirement.

AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 07/13/23 CASE NO: AVU-E-23-04 WITNESS: Clint Kalich REQUESTER: IPUC RESPONDER: Annette Brandon TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: Staff-07 Revised TELEPHONE: [phone]
REQUEST:
Please respond to the following regarding the Lesser-of Analysis that allows netting of non-
emitting resources at the Mid-C trading hub for off-system sales: a. Please clarify whether this method _only allows Mid-C hydro generation contracts to offset off-system sales. b. Response to Staff Production Request No. 4 states that in-Washington generation can be
used to offset wholesale sales and that in-Washington generation does not have to be
renewable energy. Please explain what other energy sources can be used to offset off-system sales, besides Mid-C hydro generation. c. Please explain whether this method of netting only pertains to off-system sales through the Mid-C trading hub.
d. Please provide a list of current Mid-C hydro contracts.
e. Please explain in detail how the Company plans to implement the netting method. f. Does the Company plan to implement the netting at the monthly level? g. Please provide an example using actual data to illustrate the netting process.
REVISED RESPONSE: The Company understands this question to be in regard to the applicability of resources which may be utilized to off-set carbon emissions for net off-system sales at a trading “hub” including the
Mid-C. A trading hub represents a composite point of receipt/delivery which comprises the output
of many resources. As such, electricity in this point of receipt is considered to be a combination of resources both inside/outside of Washington State. Avista has two such “hubs” MIDC and AVA.SYS.
With that understanding, please see the following:

a. The lesser than methodology utilizes both MidC and AVA.SYS to support off-system sales. b. Washington In-State Generation (with the exception of Boulder Park) is comprised of clean resources including Spokane River hydroelectric generation, wind, and small PURPA generation sources. This generation is able to offset any generation remaining after netting MidC purchases with MidC generation.

c. Please see part (a). While the current expense calculation only includes MidC, we are
currently in the process of developing a process to do the same lesser-than calculation for
off-system sales which utilize the AVA.SYS hub. We do not anticipate this will have a material impact.
d. The Company currently has contracts for Mid-Columbia generation with Chelan County PUD, Douglas County PUD and Grant County PUD.
e. Please see the Company’s response to Staff_PR_005 attachment A for the lesser-than calculation for January – May 2023.

f. Transactions will be tracked on an hourly basis, and summarized on a monthly basis in
order to be utilized for accounting purposes.

g. Please see the Company’s response to Staff_PR_005 Attachment A for the actual lesser-
than calculation for January – May 2023. RESPONSE:
The Company understands this question to be in regard to the applicability of resources which may be utilized to off-set carbon emissions for net off-system sales at a trading “hub” including the Mid-C. A trading hub represents a composite point of receipt/delivery which comprises the output of many resources. As such, electricity in this point of receipt is considered to be a combination of resources both inside/outside of Washington State. Avista has two such “hubs” MID-C and
AVA.SYS. With that understanding, please see the following: h. The lesser than methodology utilizes both Mid-C and AVA.SYS to support off-system sales.

i. Washington In-State Generation (with the exception of Boulder Park) is comprised of clean
resources including Spokane River hydroelectric generation, wind, and small PURPA
generation sources. This generation is able to offset any generation remaining after netting Mid-C purchases with Mid-C generation.

j. Please see part (a).

k. The Company currently has contracts for Mid-Columbia generation with Chelan County PUD, Douglas County PUD and Grant County PUD.
l. Please see the Company’s response to Staff_PR_005 attachment A for the lesser-than calculation for January – May 2023. m. Transactions will be tracked on an hourly basis, and summarized on a monthly basis in order to be utilized for accounting purposes. n. Please see the Company’s response to Staff_PR_005 Attachment A for the actual lesser-than calculation for January – May 2023.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 07/13/23 CASE NO: AVU-E-23-04 WITNESS: Clint Kalich REQUESTER: IPUC RESPONDER: Annette Brandon TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: Staff-010 Revised TELEPHONE: [phone]
REQUEST: Please respond to the following regarding Tab "CCA Allowance Inventory New" of the excel file
"Staff PR_003C Confidential Attachment A" provided in Response to Staff Production Request
No. 3:
a. Please explain why the Company has not retired any allowances yet;
b. Please explain how the Company plans to retire allowances given the requirement that a minimum of 30% of allowances to be retired in the year that emissions occur with any balance due at the end of 2023-2026 Compliance. Specifically, when, how often, and how many allowance will the Company plan to retire at any given time and each year? and c. Column N shows "Allowance EOM Market Price". Please explain what EOM stands for, define the term, and explain how the values are determined.
REVISED RESPONSE:

a. Retirement of the minimum 30% of allowances to cover 2023 emissions is not required
until November 1, 2024. Because Avista has not been required to retire or turn in the allowances for compliance, it has not done so yet.

b. The Company has not made a final determination as to its strategy for retiring allowances each year, other than to meet the minimum requirements per the law. c. EOM stands for “end of month”. The end of month CCA allowance price is obtained from our Power Supply Department which through May was obtained from trading brokers who were showing actual bid/offers in the market as well as actual trade prices from the last day of the month. Starting in June, the CCA allowance price will be published from
Intercontinental Exchange, Inc. (ICE) an on-line trading platform used to transact these products. The ICE platform will give more transparency into the actual market prices. RESPONSE: d. Retirement of the minimum 30% of allowances to cover 2022 emissions is not required until November 1, 2024. Because Avista has not been required to retire or turn in the allowances for compliance, it has not done so yet. e. The Company has not made a final determination as to its strategy for retiring allowances each year, other than to meet the minimum requirements per the law.

f. EOM stands for “end of month”. The end of month CCA allowance price is obtained from
our Power Supply Department which through May was obtained from trading brokers who were showing actual bid/offers in the market as well as actual trade prices from the last day
of the month. Starting in June, the CCA allowance price will be published from
Intercontinental Exchange, Inc. (ICE) an on-line trading platform used to transact these products. The ICE platform will give more transparency into the actual market prices.