20120430AVU to Clearwater 11-16.pdf

Jean Jewell
From: Kimball, Paul [Paul. KimbaIlavistacorp.com ]
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Subject: Avista's Responses to Clearwater Paper Corporation Production Requests
Attachments: GNR_11-03 — CW PR_1 1 .pdf; GNR_11-03 _CWPR_1 2.pdf; GNR_1 I -03_CW_PR_1 3.pdf;
GNR_1 1-03_CW_PR_14.pdf; GNR_1 I-03_CW_PR_15.pdf; GNR_1 1-03_CW_PR_16.pdf;
Rea rdan_CostsThru_Mar_201 2 xIs
April 30, 2012
Richardson & O'Leary, PLLC
515 N. 27t1 Street
Boise, ID 83702
Attn: Peter Richardson
Gregory Adams
: Production Request of Clearwater Paper Corporation in Case No. GNR-E-11-03
Attached are Avista's responses in connection to Clearwater Paper production requests in the above referenced
docket. Included in this email are Avista's responses to the following Production Requests: 11 through 16.
Hard copies of Avista's responses were mailed today, 04/30/12.
If there are any questions regarding the information, please contact Michael Andrea at [phone] or via e-
mail at [e-mail]
Thank you,
Paul Kimball
Senior Regulatory Analyst
State & Federal Regulation
Avista Corporation
1411 E. Mission Ave, Box 3727
Spokane, WA 99220-3727
[phone] direct
[phone] cell
[e-mail]
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
GNR-E-1 1-03
Clearwater
Production Request
CW-1 1
DATE PREPARED:
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
4/30/2012
Clint Kalich
Clint Kalich
Energy Resources
[phone]
REQUEST:
Please provide all studies, analysis, or documents used to develop this $4 5/kw amount.
RESPONSE:
The $45/kW delay security amount is intended to create a source of liquid funds which the utility
can draw upon in the event that damages are incurred if a new project does not meet its online date.
A PURPA contract for Clearwater Paper's facilities do not require delay liquidated damages, as its
facility already is operating and Avista does not presently require its PURPA contracts to contain
delivery term or operating security.
In 2009, Avista commissioned a survey of utilities and their required delay (also referred to
"development") security amounts for renewable projects. The results are as follows:
Utility Security Level and
Structure
Security
Requirements Based
on One Year or
Revenues, if
applicable
Operating Period
and/or Development
Security
Requirements ($/kW
equivalent)
PG&E 2009 RFO Development period $50/kW Development
security is 515/kW Security Minimum
upon contract
execution.
Development security
is $1001kW times the
capacity factor
(minimum of $50/kW)
once the contract is
approved by the CPUC
Delivery term security
is equal to 12 months
of revenue for a 20
year contract.
Southern California Edison Development period 5301kW Development
2009 RFP security is equal to Security
$30/kW for
intermittent resources.
Delivery term security
is equal to 5% of the
value of the total
energy payments in the
Page 2
contract.
San Diego Gas and Electric Two times estimated $7,884,000 $78.84/kW
2007 RFP annual production
times $1 5/MWh in
place for the entire
term of the contract
Public Service of Colorado $75/kW of design $7,500,000 $75/kW
(2003) maximum output
Public Service of $75/kW of design $7,500,000 $75/kW
Oklahoma/Southwestern maximum output
Electric Power Company
Southwestern Public Service Fixed amount of $3,965,000 [or $49.57/kW
Company and Llano $3,965,500 for 80 MW $4,957,000 per 100
Estacado Wind LP contract contract MW]
(12/2001)
Arizona Public Service $75/kW for both $7,500,000 $75/kW
Company development period
and operating period
security
Delmarva Power (second lien $80/kW $8,000,000 $80/kW
also required) (2007)
Hawaiian Electric Company Development period $30/kW Development
2008 Renewable RFP security is $30/kW and Security
Operating Period
Security is $40/kW
Further, both Idaho Power and Avista presently include delay liquidated damage security deposits
of $45/kW. Rocky Mountain Power requires a delay liquidated damage deposit equal to the
greater of $45/kW, or the full value of the first 3 months of expected electricity deliveries. Avista
understands that a similar delay liquidated damages provision is defined for PURPA projects
selling power into Oregon. Therefore it would appear that it is common practice to 1) apply
liquidated damages to PURPA contracts and 2) a $45/kW level is reasonable, as is evidenced by
practice in Idaho and other jurisdictions.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/30/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-12 TELEPHONE: [phone]
REQUEST:
Please explain the basis for choosing the $45/kw amount. Please include explanation of whether
this amount is a reasonable amount because it will provide the proper incentive for QFs to
develop their projects as scheduled.
RESPONSE:
Please refer to the Company's response to PR- 11, and the testimony of Clint Kalich at page 32,
lines 5-10.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/30/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich REQUESTER: Clearwater RESPONDER: Clint Kalich TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-13 TELEPHONE: [phone]
REQUEST:
Has Avista approximated its likely actual damages in the event that a QF were to delay its
projected online date beyond the 180 day limit specified in the testimony? Please identify all
likely costs and provide all work papers and analysis performed.
RESPONSE:
No. Such calculation would depend on the market conditions at the time of the contract.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/30/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-14 TELEPHONE: [phone]
REQUEST:
Has Avista ever guaranteed the online date of any of its utility-owned generation facilities, and
promised to issue a rate payer refund, or otherwise reduce rates for the amount of estimated
damages set at $45/kw or otherwise? If so, please explain the circumstances. If not, please
explain why QFs need to provide such ratepayer protections but the utility does not
RESPONSE:
Please refer to the answer to PR 15(e).
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/30/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-15 TELEPHONE: [phone]
REQUEST:
Reference IPUC Order No. 30611, at p.2, approving CWIP and AFUDC for the Reardan wind
farm, which Avista intended to reach commercial online status by year end 2011, and stating
"Avista believe[d] it [wa]s cost effective and prudent to secure land rights and equipment now,
even though actual construction will not begin until 2011."
(a)Please explain the status of the Reardan wind farm, whether it came online as projected in
2011, its approximate online date, and the reason for any delays.
(b)Please identify and provide the costs spent by Avista on the Reardan project to date.
Please identify any costs included in Avista's retail rates implicitly or explicitly.
(c)Please explain how Avista was able to change its plans for Reardan's projected online
date without compromising Avista's need to acquire RPS compliant generation to meet
Washington RPS targets. Did Avista acquire another RPS compliant resource instead of
Reardan?
(d)What were Avista's actual costs incurred in the delayed or permanently deferred online
date for Reardan? Please provide all supporting work papers and an explanation.
(e)Will Avista provide rate payers a $45/kw delay damages refund if Reardan is not online
within 180 days of year end 2011, as projected in the application in Case No. AVU-E-08-04?
Please explain why or why not.
RESPONSE:
(a)Avista has delayed plans for construction of the Reardan wind project. The recent
acquisition of the Palouse Wind Farm through a competitive RFP meets our needs through
at least 2019. The Company continues to maintain the permitted Reardan wind project as
an option for future development and continues to collect data at the site.
(b)Please see the attached spreadsheet entitled "Reardan_ Costs _Thru_ Mar _20 1 2.xlsx." No
costs are currently included in retail rates related to the Reardan Wind Farm.
(c)Avista was able to change plans through the acquisition of the Palouse Wind Project that
meets our immediate needs for RPS resources.
(d)Please see response (b).
(e)No. The alignment of customer interests is different as between a PURPA fixed-priced
contract as compared to a utility-owned generation resource. As PURPA resources are
provided to a utility at a fixed contract price, that contract price does not vary based on the
actual cost of the PURPA generation project. To help ensure that fixed price benefit is
delivered, it is in customers' interest to have PURPA contract terms structured such that
Page 2
developer interests are aligned with customer interests. A utility, such as Avista, does not
provide a price guarantee for its utility-owned generation assets, but instead provides
long-term generation ownership value to customers at cost. In other words, customers
benefit from paying only actual costs over the life of a very long-term resource. In
contrast, the guarantees embedded in PURPA contracts define costs utility customers will
pay over the term of the agreement. A delay damages provision is a means to ensure that
developer and customer interests are aligned, and that customers receive the benefits from
the PURPA contract, consistent with the pricing and other terms and conditions that have
been guaranteed to the developer under the PURPA contract.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/30/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-.16 TELEPHONE: [phone]
REQUEST:
Reference Avista's Application, dated June 4, 2008, for CWIP and AFUDC for Reardan wind
farm in Case No. AVU-E-08-04, stating "intent to meet a commercial operation date by the end
of 2011," and IPUC Order No. Order No. 30611, approving CWIP and AFUDC on August 6,
2008.
If Avista expected to need over two years from time of approval of accounting treatment for its
wind plant to reach online status, please explain why it is reasonable to require QFs to achieve
online status within two years of PPA execution to obtain the fixed rates contained in the PPA, as
proposed in the Direct Testimony of Clint Kalich at page 31? Does Avista believe two years is a
reasonable time to develop a utility scale generation facility? Please identify all utility scale
generation facilities built by or under contract with Avista in the past ten years, which were
constructed within 2 years. Please include discussion of whether Reardan was constructed within
two years of the order cited above.
RESPONSE:
A fixed price contract should not occur more than two years prior to commercial operation because
it places too much price risk on utility customers. Two years following the execution of a PURPA
contract should be adequate. A developer should have accomplished enough of the development
work prior to executing a PURPA contract to be reasonably confident that the project can be
brought on line within the terms of the agreement. For example, Avista's contract with First Wind
for the Palouse Wind Farm was executed on June 28, 2011. The project is under construction and
is expected to be online by the end of 2012.
Project Transactions Accounting Period: <All> Task Number: <All> * *T ransation Data is available beginning January 2005
count'ngjTask Number:<All> Period:<M1>
Project Number Summary Exp Category Expenditure Type Transaction Amt
sum
0 Payroll Time Off loading 8,247.31
0 530 Stores/Material Loading 8,698.25
0 532 Materials Tax/Fght Loading -9.79
0 550 Company Aircraft 2,337.00
0 710 Rental Expense - Vehicle 3,525.11
o 715 Vehicle - Other 188.96
0 805 Adjustments 74,258.96
o 835 Non Vehicle Equip Repair 1,138.51
0 855 Land and Land Rights 1()953492
0 870 Lease Expense - Other _________
0 875 License Fees
0 880 Materials & Equipment
0 885 Miscellaneous (initial acquisition) 2,34i,991 .94
0 905 Permits 1,303.00
0 915 Printing 12.60
0 925 Rental Expense - Other 75.00
0 930 Right-of-Way Easements 250 00
0 005 Legal Services
O 010 General Services 300.00
0 Ol2 Combo Goods &Services 1,271.41
0 015 Construction Services 72,039.59
0 020 Professional Services 990,721.96
0 035 Workforce - Contract 35,368.32
0 205 Airfare 35880
0 210 Employee Auto Mileage 920.88
0 215 Employee Business Meals 2,890.16
0 220 Employee Car Rental 1,218.42
0 225 Conference Fees .00
0 230 Employee Lodging 789.36
0 235 Employee Misc Expenses 2,489.88
Labor 340 Regular Payroll - NU 47,011.07
0 405 Inventory Returns 3,308i58
0 415 Material Issues 441 1
0 510 Payroll Benefits loading :
0 515 Payroll Tax loading
_____________ 000 Credits for Non-Reardan Write-Downs -284,118.92
Total for 77705084 3,894,322.52
Note: Avista initially did not track wind development expenses in a separate account; therefore costs
associated with non-Reardan development are included in line items above. Later when Avista wrote off
non-Reardan expenses, credits were given to the account in the amount written off by the Company