200126_dh.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
BILL EASTLAKE
LOU ANN WESTERFIELD
RANDY LOBB
DAVE SCHUNKE
LISA NORDSTROM
RICK STERLING
BEV BARKER
TONYA CLARK
WORKING FILE

FROM: DON HOWELL

DATE: FEBRUARY 6, 2001

RE: APPLICATION TO APPROVE A SERVICE TERRITORY AGREEMENT BETWEEN AVISTA AND KOOTENAI ELECTRIC COOPERATIVE, CASE NO. AVU-E-01-2

On January 30, 2001, Avista filed an Application for approval of a service territory agreement between the Company and Kootenai Electric Cooperative, Inc. The Application notes that the Idaho Legislature amended portions of the Idaho Electric Supplier Stabilization Act (ESSA) in special session on December 8, 2000. In its special session, the Legislature enacted House Bill No. 1 (HB 1) which provides that all service agreements which allocate territory or customers be filed with the Commission. In particular, HB 1 amended Idaho Code § 61-333 and provides in pertinent part that
the commission, shall after notice and opportunity for hearing, review and approve or reject [such] contracts . . . between cooperatives and public utilities. . . . The commission shall approve such contracts only upon finding that the allocation of territories or consumers is in conformance with the provisions and purposes of this act.

Idaho Code § 61-333(1)(amended 2000).

HB 1 was effective on December 8, 2000 and will sunset (unless extended) on March 1, 2001. See HB 1, § 22. Legislation (HB 142) has been introduced in the Idaho House of Representatives to remove the sunset provision.
In its Application, Avista asserts that the service territory agreement is in conformance with the purposes of the ESSA. In particular, Avista maintains that the agreement reduces the duplication of electric service and capital expenditures of the parties. In addition, the Application also notes that “this agreement should reduce the possibility of disputes arising between Avista and Kootenai. . . .” Application at 2.
Following inquiries from the Staff, Avista submitted an “Addendum” to the service territory contract on February 6, 2001. The Addendum, executed on or about August 7, 1991, further defined the terms “development” and clarifies the “rules” for determining which party may serve new residential customers.
THE SERVICE CONTRACT
The Initial Contract. The service contract submitted for the Commission’s review was executed on February 15, 1991. In the contract, Avista and Kootenai agreed on a methodology to provide electrical service to residential developments consisting of “six or more residential lots or parcels, connected by a common street or road system, and platted on a common plat(s).” Agreement § 1.A. The contract provides that the answer of which supplier will provide electric service to a residential development shall be determined by the provisions for serving a new customer contained in Idaho Code § 61-332C. Agreement § 6. The parties agreed that electric service to the entire residential development and subsequent additions to the original development shall be determined by which supplier serves at least one lot of the subdivision, where “one of the parties has entered into a signed contract for the provision of electric service to the subdivision and within three (3) years of the date of such contract that party provides service to first residential building to be constructed within the subdivision.” Id. § 4. After one of the parties undertakes to serve one or more lots within the development, then the parties agree “that the remainder of that particular development shall be served solely by that initial serving utility.” Id. § 6.
However, if the subsequent construction of a residential development intersects another supplier’s electric service line which was in existence at the time the development’s plat was first filed with the city or county, then
service to the development beyond the line of the competing company’s service line, will not be determined by this agreement. Instead, the determination as to which utility will serve the area of a continuation of the development will be first decided by application of [the ESSA rules regarding service to new customers]. Upon determination as to which electric supplier will serve the first service entrance within the continuation of the subdivision, then the remainder of that continuation shall be served solely by that determined utility.

Id. § 7.
The duration of the initial contract was for a period of 10 years from the effective date of February 15, 1991. The contract also provides that it “shall be extended automatically for successive periods of ten (10) years upon the same terms and conditions set forth in this agreement unless one of the parties notifies the other not less than sixty (60) days before the end of the initial, or renewal, term of the intent not to renew the agreement.” Id. § 3. It is Staff’s understanding that Kootenai has not provided notice of its desire to terminate the contract.
The contract also contains other provisions that address: breach of the contract, severability, and other standard contract conditions.
The Addendum. On February 6, 2001, Avista supplemented its Application by filing the Addendum to the service contract executed on or about August 7, 1991. The Addendum further clarifies several terms and conditions in the initial contract. First, the term “development” is construed to include existing residential subdivisions “so that a party already serving a subdivision shall, in accordance with the provisions of this Agreement, continue to serve such subdivision.” Addendum at 1, § 1.A. The Addendum further provides that if both parties were serving one or more residential customers in the same development,
then this Agreement shall not apply in determining which party is entitled to serve a new service entrance within the development, or any subsequent expansion or additions of the development, but rather the parties shall be governed solely by the provisions of the Idaho Electric Supplier Stabilization Act (Idaho Code 61-332 et seq.).

Id. at 2.

The Addendum also contains a mechanism that would allow the “entitled electrical supplier” to offer the other party the opportunity “to serve a consumer(s), or section of a subdivision. Id. at 2, § 6. If the entitled supplier believes it is in the best interest of either of itself or the consumer(s), the other party may
but is not obligated to, serve the consumer(s) so designated by the entitled party. It is specifically agreed that the party who is the recipient of such consent, shall not be entitled to any further rights or entitlement to serve any other consumer or section of such a development beyond the terms of the consent provided.

It is agreed by and between the parties hereto that all such consents to permit service to consumers or sections of a development, as indicated above, shall be in accordance with the terms of the Electric Supplier Stabilization Act.

Id.

STAFF RECOMMENDATION
Pursuant to the recently enacted amendments to the Electric Supplier Stabilization Act found at Idaho Code § 61-333, the Commission Staff recommends that the Commission process this Application by Modified Procedure. Staff recommends that the Commission issue its notice of Modified Procedure requesting comments within the standard 21-day comment period.

Donald L. Howell, II

bls/M:avue012_dh
DECISION MEMORANDUM 1