20150409Clearwater to Staff 1-7.pdf

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lii l:: L3Peter J. Richardson (lSB No. 3195)
Gregory M. Adams (lSB No. 7454)
Richardson Adams, PLLC
515 N. 27n Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone] I
Fax: [phone]
petcr(4ri ch ardsonadam s.com
gr a g(Qriahardso nad am s. oo m
Attorneys for Clearwater Paper Corporation
IN THE MATTER OF IDAHO POWER
COMPANY'S PETITION TO MODIFY
TERMS AND CONDITIONS OF PURPA
PURCHASE AGREEMENTS
IN THE MATTER OF AVISTA
CORPORATION'S PETITION TO MODIFY
TERMS AND CONDITIONS OF PURPA
PURCHASE AGREEMENTS
tN THE MATTER OF ROCKY MOUNTAIN
POWER COMPANY'S PETITION TO
MODIFY TERMS AND CONDITIONS OF
PURPA PURCHASE AGREEMENTS
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-I5-OI
CASE NO. AVU-E-I5-OI
CASE NO. PAC-E-I5-03
CLEARWATER PAPER
CORPORATION'S RESPONSES AND
OBJECTIONS TO THE FIRST
PRODUCTION REQUEST OF THE
COMMISSION STAFF
Clearwater Paper Corporation hereby provides the following responses and objections to
the Stafls First Production Request:
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE I
REQUEST NO. 1: Please explain why Clearwater has never negotiated a 2O-year term
for any of its prior PURPA contracts with Avista.
RESPONSE TO REQUEST NO. I
Clearwater objects to this question because it violates federal law, l6 U.S.C. $ 824a-3(e)
and l8 C.F.R 5 292.602, and it seeks information that is not relevant or likely to lead to the
discovery of admissible evidence. Without waiving this objection, Clearwater and Avista have
had periodic conversations over the last five years about the viability of siting a large
cogeneration project at Clearwater's Lewiston facility. Given the large and nearly constant
steam demand at the Lewiston site, this facility could support a base-load plant of an incremental
75 to 125 MW that would approach 70%othermal efficiency depending on the sizes and types of
prime movers selected for the project. The net impact of this project would be an incremental
lowering of greenhouse gas emissions for the western U.S. as it would displace base load coal
plants and assist the State of Idaho to comply with the E.P.A.'s recently proposed, and likely
promulgated, Section I I l(d) carbon reduction rule. The expected economics of such a project
would likely require non-recourse financing with terms of at least l5 years, with 20 years being a
more feasible term. A limitation of a five-year power purchase agreement takes this type of high
efficiency, greenhouse gas reducing, project off the table as an option at Lewiston. Clearwater
does not think this artificial limitation is in the best interest of ratepayers of ldaho.
In accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Marv Lewallen. Marv Lewallen is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 2
REQUEST NO. 2: Has Clearwater ever signed a2D-year fixed price contract for any of
the following for any of its facilities in the U.S.:
a. purchase of electricity;
b. sale of electricity;
c. purchase of natural gas or other non-electric fuels; and
d. purchase of any raw materials used for production, supplies, labor, or transportation.
If the answer to any of the above is "yes," please describe the general terms of the
contracts.
RESPONSE TO REQUEST NO.2
a. Clearwater is not aware of any recent retail energy contracts that provided
Clearwater with a fixed price for 20 years. Clearwater purchases electricity at retail rates set by
the Commission and the Commission Staff therefore possesses all such ldaho contracts and
tariffs responsive to this request. Under the Commission's recent implementation of Idaho law,
Avista has not offered a2O-year fixed-price rate for retail electricity rates, and instead Avista
reserves the right to ensure that the level of retail rates paid by Clearwater allows Avista to earn a
return on its investment in electrical plant.
The rates in PURPA contacts have historically been fixed for a2D-year term in ldaho,
which means the costs Avista's ratepayers are obligated to reimburse Avista for its payments to
those PURPA projects never increases over the life of the contract. By way of contrast,
Clearwater has not been allowed to enjoy fixed retail rates from its monopoly utility service
provider. In fact, according to the PUC's most recent Annual Report to the Legislature (on file
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 3
at the PUC) Avista has raised its base rates over just the last l0 years six times:
2004 l.9olo increase
2008 ll.9% increase
2009 5.7o/o increase
2010 9.25o/o inqease
201I l.lolo increase
2013 1.97o increase
The benefits of the fixed-cost power supply provided by PURPA projects have not apparently
been sufficient to prevent persistent and significant retail rate increases. Furthermore, Avista has
just recently filed a Notice of Intent to file another general rate case, potentially increasing
Clearwater's retail rates yet again.
The best solution to the monopolistic provision of electric service is for the State of ldaho
to implement open retail access to electric markets such as Clearwater enjoys in some of the
other states in which it operates.
b. Clearwater does not sell electricity to retail consumers. To the extent it, or its
predecessor Potlatch, has sold electricity for resale in Idaho, those sales were made pursuant to
Commission-approved contracts that are on file at the Commission. The Commission Staff
therefore possesses all such ldaho contracts and tariffs responsive to this request.
c. Clearwater objects to this question because it seeks information that is not
relevant or likely to lead to the discovery of admissible evidence, and also because obtaining,
reviewing and providing all contracts related to the purchase of natural gas or other non-electric
fuels Clearwater has "gygl" purchased at "any of its faciliti " would impose an
undue burden.
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 4
l/
d. Clearwater objects to this question because it seeks information that is not
relevant or likely to lead to the discovery of admissible evidence, and because obtaining,
reviewing and providing all contracts related to ooraw materials used for production, supplies,
labor, or transportation" that Clearwater has '6ever" had at "any of its facilities in the U.S." would
impose an undue burden.
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Marv Lewallen. Marv Lewallen is the person who would be able to answer questions about
or sponsor factual mafiers in the answer at hearing.
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 5
REQUEST NO.3: Please describe how Clearwater finances the construction of new
plants or major plant expansions. Specifically discuss whether a contractual 2O-year fixed
revenue stream is necessary in order to secure outside financing for major capital projects.
RESPONSE TO REQUEST NO.3:
Clearwater objects to the first part of this request on the grounds of relevance.
Without waiving that objection, see Response to Request No. l.
Clearwater finances construction of new plants with funds, the source/cost of which are
not relevant to this proceeding. Unlike state-sanctioned monopolistic utilities, if a Clearwater
investment sits idle it doesn't continue to earn a return on that investment. The question of
whether aZ0-year fixed revenue stream is necessary to invest in a major capital investment that
is not related to the generation of electricity for sale to another entity is not relevant to whether
Clearwater or any prospective qualifying facility project would need 20 years of fixed prices to
support an electrical generation plant. Unlike sales of paper products produced by the capital
investments at Clearwater's facilities, state law bars Clearwater from selling electricity at retail
to any customer. Additionally, there is no wholesale market for the sale of electricity that meets
the minimum requirements of Section 210(m) of PURPA in this region. Thus, Clearwater's
decision to invest in a capital project to produce paper products it is entitled to sell in a free and
open market is entirely different from investment in electricity generation facilities from which
the product may not be sold at retail by Clearwater and for which there is no free and open
wholesale market in this region of the country.
The second part of this request is too vague and speculative to respond to, and it is not
relevant or likely to lead to the discovery of admissible evidence. Therefore, Clearwater objects
to this aspect of the request on those grounds. In addition, to the extent the second part of the
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 6
request seeks information specific as to how Clearwater finances major capital projects, it
violates federal law, l6 U.S.C. $ 824a-3(e) and l8 C.F.R 5292.602, which bars detailed
financial and regulatory inquiries into the finances and operations of QFs. Clearwater objects to
that aspect ofthe request on that ground.
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Marv Lewallen. Marv Lewallen is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 7
REQUEST NO. 4: Does Clearwater have 2}-year contracts at fixed prices for purchase
by customers of any of its products? If not, please explain why Clearwater believes it should be
entitled to 20-year contracts at fixed prices for its PURPA generation.
RESPONSE TO REQUEST NO.4:
Clearwater objects to the request on the grounds of relevance and undue burden because
Clearwater has not conducted the requested study of all of its contracts to ascertain if any meet
the parameters specified in the request.
Without waiving this objection, see Response to Request No. l.
Clearwater agrees with the commission that the viability of fixed price contracts is
limited, however long-term contracts are widely used in our industry. There are many intemal
examples of commercial contracts being continually in-place in excess of twenty years. To
artificially limit a contract term to five years represents a "restraint of trade" concern to our
Company.
However, to the extent Clearwater may lack any 20-year contracts at fixed prices for sale
of any paper products it produces, that fact would be irrelevant to the appropriate term to set for
sale of electricity under PURPA.
Because Clearwater is not entitled to a paper products monopoly under the law, it sells
products, not to ratepayers, but to customers who are free to choose with whom they do business.
The market in which Clearwater sells its products (aside from electricity) is a free and open
market in which Clearwater is legally entitled to compete. Thus, investments in facilities to
produce products for sale in such free markets are supported by the fact that there is a market that
anti-trust laws ensure willbe free and open. However, unlike sales of paper products produced
by the capital investments at Clearwater's facilities, state law bars Clearwater from selling
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 8
electricity at retail to any customer. Similarly, neighboring states' laws largely bar Clearwater
from selling electricity at retail in those neighboring states to which the electricity may be
delivered. Additionally, there is no wholesale market for the sale of electricity that meets the
minimum requirements of Section 210(m) of PURPA in this region. Thus, in the absence of any
legal and economically viable retail or wholesale market in which QFs may sell electricity,
Congress enacted PURPA to provide a market for QF electricity.
Clearwater believes it should be entitled to 20-year fixed-rate PURPA contracts for,
alia, the same reasons this Commission believes Clearwater is entitled to 20-year fixed-rate
PURPA contracts. In Order No. 32697, issued in December 2012, the Commission explained
why Clearwater, and other PURPA developers, should be entitled to 2O-year contracts at fixed
prices:
We find that a Z}-year contract length, along with other factors, has been beneficial in
encouraging PURPA development in ldaho. We continue to believe that2}-year
contracts better coincide with the useful life of the renewable/cogeneration resources.
While it is not this Commission's responsibility to ensure a contract length that allows a
QF to obtain financing, we find that reducing maximum contract length to five years
would unduly hinder PURPA development. That is not the Commission's objective. We
believe that, by utilizing other tools to ensure an accurate and up-to-date avoided cost
valuation, we can continue to encourage the types of projects that were envisioned by
PURPA while maintaining the transparency for ratepayers as PURPA requires.
Therefore, we find that a maximum contract length of 20 years is appropriate. The parties
to a power purchase agreement are free to negotiate a shorter contract if that would be
most suitable for the project. As in the past, this Commission will consider contracts of
more than 20 years on a case-by-case basis.
Thus, it is apparent that the Commission, in deciding this issue, was not attempting to mimic the
contracting practices of an entity (unlike the utility parties to this case) that is subject to the rigor
and discipline of the free market.
Additionally, it is important to note that when utilities build electricity generation
facilities, Idaho law essentially guarantees them recovery of their investment, plus a return on
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 9
that investment, for the entire life of the facility. In the absence of grossly negligent
mismanagement of those facilities, there is no cap on the amount that a utility may recover.
Twenty years is a reasonable period to, according to the Commission's order No. 32697, "ensure
a contract length that allows a QF to obtain financing" and that will "better coincide with the
useful life of the renewable/cogeneration resources" and that will "encourage the types of
projects that were envisioned by PURPA."
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Marv Lewallen. Marv Lewallen is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE IO
REQUEST NO. 5: As a retail customer of Avista, does Clearwater believe retail rates
should increase as a result of the utility signing PURPA contracts instead of generating the
power itself or obtaining it from another source?
RESPONSE TO REQUEST NO.5:
No. As the Commission explained in Order No. 32697:
The legal standard for an appropriate determination of avoided cost rates is clearly
defined by PURPA. Rates for purchases from a QF shall "(i) be just and reasonable to
the electric consumer of the electric utility and in the public interest; and (ii) not
discriminate against qualifying cogeneration and small power production facilities."
18 C.F.R. 529230a@Xl). "Nothing in this subpart requires any electric utility to pay
more than the avoided costs for purchases." Id. at * 292.304(a)(2). Avoided costs are
those costs which a public utility would otherwise incur for electric power, whether
that power was purchased from another source or generated by the utility itself. 18
C.F.R. g 292.101(bX6). PURPA allows QFs to obtain a rate equivalent to the utility's
avoided cost, a rate that holds utility customers harmless . . .
Clearwater agrees with the Commission's finding that "avoided costs are those costs which a
public utility would otherwise incur for electric power" and that the rate ought to be one that
"holds utility customers harmless."
In accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Marv Lewallen. Marv Lewallen is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE I I
REQUEST NO. 6: Please describe in detail each "Qualifying Facility" (QF) or electric
generating unit operating at Clearwater's Lewiston facility including the following information:
a. type of QF;
b. type offuel used;
c. nameplate output in megawatts (MW);
d. year constructed;
e. date(s) obtained initial and any subsequent certification as a QF; and
f. the amount of energy generated that is either self-generated for Clearwater's own use,
or sold to Avista Corporation under the "Electric Service Agreement" with an "Execution
Date" of April 11,2013, with an ooEffective Date" of July 1,2013.
RESPONSE TO REQUEST NO.6
As to parts a.-e., this information is contained in Clearwater's FERC Form 556s that were
served to the Commission when Clearwater recertified its four qualifying facilities with FERC
on or about September 4,2013, in FERC docket numbers QF83-142, QF83-143, QF83-144, and
QF92-64. These documents are publicly available on FERC's elibrary online at:
http ://w,u,u,,. le rc. gov/d ocs- fi I i n g/e I i brary'. asp .
As to subpart I the "Electric Service Agreement" is on file with the Commission. It
details the amount of energy generated by Clearwater and how it is used on site or fed back into
the grid.
ln accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Marv Lewallen. Marv Lewallen is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE 12
REQUEST NO. 7: Has Clearwater issued any notice or received any notice regarding
the termination of the Electric Service Agreement with the "Execution Date" of April 11,2013,
pursuant to Section 2 ("Term of Agreement") on page2 of 6?
RESPONSE TO REQUEST NO.7
No.
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Marv Lewallen. Marv Lewallen is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
DATED: April9,2015.
zuCHARDSON ADAMS, PLLC
CLEARWATER PAPER CORPORATION'S RESPONSES AND OBJECTIONS TO
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
PAGE I3
CERTIFICATE OF SERVICE
I HEREBY CERTIFY, that, in accordance with IPUC Order 33253, on the 9th day of
April, 2015, a true and correct copy of the within and foregoing CLEARWATER PAPER
CORPORATTON'S RESPONSES AND OBJECTIONS TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF was served as one printed copy upon the
Commission and by electronic mail to the following individuals:
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472West Washington
Boise,Idaho 83702
j ean j ewe I I (4)puc. idaho. gov
Donald L. Howell, II
Daphne Huang
Idaho Public Utilities Commission
472West Washington
Boise, tdaho 83702
dg! howell(@puc.ida
daghne. hueur er:@p uc. i daho. eo v
C. Tom Arkoosh
Twin Falls Canal Company
North Side Canal Company
American Falls Reservoir District #2
Arkoosh Law Oflices
802 W Bannock Ste 900
Boise ID 83702
to m. a rk o o sfu@a*99$-q9!r
Erin Cecil (Electronic Copies Only)
erin.cec i I('@arkoosh.com
Ben Otto
Idaho Conservation League
710 N 6th
Boise ID 83702
bo tto(@ idahocon servat i o n. o r g
X Hand Delivery
_U.S. Mail, postage pre-paid
_ Facsimile
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J.R. SIMPLOT COMPANY'S SECOND PRODUCTION REQUEST
IPC-E-15-01
PAGE I
Matt Vespa
Sierra Club
85 Second St., 2'd Floor
San Francisco, CA 94105
matt. r, espaL4si errac I ub. o rg
Leif Elgethun, PE, LEED AP
Intermountain Energy Partners, LLC
PO Box 7354
Boise,ID 83707
le i figrs itebasedenerqy.com
Dean J Miller
McDevitt & Miller LLP
PO Box 2564
Boise ID 83702
i oeirlmcdel itt-rni I ler.co r!
Daniel E Solander
Rocky Mountain Power
201 South Main Street Ste 2400
Salt Lake City UT 841l1
dan ie l. so I ander(gtrrac i licorp. com
datareq ucst, g.,p!Lci fi corp.com
Ted Weston
Rocky Mountain Power
201 South Main Ste 2300
salt Lake city UT 841l1
ted. w cstonr(gpacif tcorp.conr
Kelsey Jae Nunez
Snake River Alliance
PO Box l73l
Boise ID 83701
knU:_ezi4)s
Donovan E. Walker
Idaho Power Company
1221 West Idaho Street
Boise,lD 83702
d w'al kerig; idahopower. co nt
doc kets (ii.r idahopowe r. c o rn
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J.R. SIMPLOT COMPANY'S SECOND PRODUCTION REQUEST
IPC-E-15-01
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Clint Kalich
Avista Corporation
l4l I E Mission Ave MSC-7
Spokane WA99202
c I int. kal i c h i4rar i s!4!alp.t_el1
Michael Andrea
Avista Corporation
l4l1 E Mission Ave MSC-23
Spokane WA99202
m ichae l.andreal4, av i stacorp. com
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey, Ch.
PO Box l39l
Pocatello, tD 83204-l 39 I
elo(@racinelAte.11q1
Anthony Yankel
29814 Lake Road
Bay Village, OH 44140
ts:u@J4lteLncl
Ronald L. Williams
Williams Bradbury, PC
1015 W. Hays
Boise, ID 83702
roni.{lrwi I I i amsbraclbur_l.g9m
lrion Sanger
Sanger Law, PC
l1l7 SW 53'd Ave
Portland, OR 97215
!Iie11(gg4!tg9l !_a\\ . 0o n1
_ Hand Delivery
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J.R. SIMPLOT COMPANY'S SECOND PRODUCTION REQUEST
IPC-E-15-01
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Andrew Jakura
Camco Clean Energy
9360 Station St, Suite 375
Lone Tree, CO 80124
andrew j akura@ camcosleaneners.v.com
Frederick J. Schmidt (Electronic Mail)
Holland & Hart
377 S Nevada St.
Carson City, NV 89703
[e-mail]
Richard Malmgren
800 South Federal Way
Boise, ID 83716
[e-mail]
Scott Dale Blickenstaff
l95l S. Saturn Way, Ste. 100
Boise,ldaho 83702
sb I i cken staff@am alsu gar.com
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Facsimile
Electronic MailT
J.R. SIMPLOT COMPANY'S SECOND PRODUCTION REQUEST
rPC-E-ls-01
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