2001316_dh.doc

DECISION MEMORANDUM

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

FROM:
DATE:
MARCH 16, 2001 RE: APPLICATION TO APPROVE THE 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 itself and Kootenai Electric Cooperative, Inc. Submission of the Application was prompted by amendments to the Electric Supplier Stabilization Act (ESSA) enacted in December 2000. In an Order dated February 16, 2001, the Commission issued a Notice of Application and a Notice of Modified Procedure. Only the Commission Staff submitted comments supporting approval of the Service Territory Agreement.

THE SERVICE CONTRACT
1. The Initial Contract. The Service Territory Agreement submitted for the Commission’s review was executed on February 15, 1991. In the contract, Kootenai and Avista 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 roadway system, and platted on a common plat(s).” Agreement at § 1.A.
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 that 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. Staff understands that Kootenai did not provide notice of a desire to terminate the contract, thus the contract has been effectively extended for another ten-year period.
2. The Addendum. On February 6, 2001, Avista supplemented its Application by filing the Addendum to the service contract. The Addendum was executed by the parties 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. Second, the Addendum 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.

Finally, the Addendum 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.
Avista asserts that its 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 notes that “this Agreement should reduce the possibility of disputes arising between Avista and Kootenai….” Application at 2.
THE STAFF COMMENTS
After reviewing provisions of the Service Territory Agreement and its addendum, the Staff recommended that the Commission approve the Service Territory Agreement. In particular, Staff noted that “the Agreement, combined with the ESSA, has provided a clear set of guidelines that can be easily followed in the majority of cases involving residential subdivision. Had the Agreement not been in place for the past ten years, Staff speculates, that there would have been many more conflicts.” Staff Comments at 6.
In its comments, the Staff observed that the standard of review to be employed by the Commission in reviewing Service Territory Agreements is set out in Idaho Code § 61-333(1). Staff concluded that the Agreement is in compliance with the intent of the ESSA. “Staff believes the Agreement has served a useful purpose, completely in conformance with the purposes of the ESSA.” Id. The Staff comments and the contract are attached for your review.
Staff Recommendation
Based upon the lack of any adverse comments and Staff’s analysis, it recommends that the February 15, 1991 Service Territory Agreement and its Addendum dated August 7, 1991, be approved.
Commission Decision
Does the Commission wish to approve the Settlement Agreement and its Addendum?

vld/M:AVU-E-01-2_dh2

Following submission of the Application, the Idaho Legislature approved and the governor signed into law HB 142. HB 142 removed the sunset provision from the ESSA amendment enacted in December 2000. In particular, Idaho Code § 61-333 was amended to read in pertinent part: “The commission shall after notice and opportunity for hearing, review and approve or reject [such] contracts…between cooperatives and utilities…. The commission shall approve such contracts upon finding that the allocation of territories or customers is in conformance with the provisions and purposes of this act.” Idaho Code § 61-333(1).

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