20020125_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
BILL EASTLAKE
TONYA CLARK
DON HOWELL
DAVE SCHUNKE
RICK STERLING
RANDY LOBB
LYNN ANDERSON
GENE FADNESS
WORKING FILE
FROM:
DATE:
JANUARY 25, 2002 RE: CASE NO. AVU-E-01-16 (Avista)
TARIFF SCHEDULE 95—OPTIONAL WIND POWER RATE

On December 3, 2001, Avista Corporation dba Avista Utilities (Avista; Company) filed an Application with the Idaho Public Utilities Commission (Commission) for approval of an Optional Wind Power Rate under proposed Tariff Schedule 95.
Avista’s wind power option is priced in increments, or “blocks”, of $1.00. Each $1.00 block of wind purchased by customers equals 55 kilowatt hours (kWh). Under this “buck-a-block” pricing, customers may consider one of two purchase approaches. Some customers may elect to purchase wind power in one or two dollar monthly amounts with no linkage to their energy usage. These customers, the Company states, may view this payment as a contribution to support alternative energy production. Alternatively, customers can calculate and buy a selected percentage to serve their average monthly load, e. g., a customer who wishes to have half of his or her 1,100 kWh average monthly load served by wind power would pay an incremental $10 per month (i.e., 10 blocks at 55 kWh per block multiplied by $1.00). The optional wind power charge is in addition to all other charges contained in a customer’s applicable tariff schedule. Avista represents that wind power will be delivered to the Company within one year of when the energy was purchased by a customer under this schedule.
Avista states its intention to have its offering “certified” as renewable energy by the regional entity providing such endorsements, Renew 2000. Such certification would support the Company’s marketing efforts and would aid allied marketing by environmental organizations. Renew 2000’s board of directors, as reported by the Company, has indicated that the utility’s minimum 55 kWh block “was ‘certifiable’ if, on average, participating residential customer usage averaged greater than 150 kWh.”
As reflected in the Company’s Application, Avista Utilities is in the process of contracting with PacifiCorp to purchase output from its Stateline Wind Facility on the Oregon-Washington border. The sales agreement would specifically provide for the delivery of wind power to Avista Utility’s system to support customer purchases under Tariff Schedule 95.
All customer classes are eligible to participate in this program. Because the tariff is optional, the rate change associated with this filing is voluntary. The Company estimates that approximately $150,267 (system) in incremental revenue will result from this offering. All incremental revenue will be applied to program costs. The Company represents that there are no earnings associated with this program.
The Company requests that the Commission approve the proposed Schedule 95 Optional Wind Power Rate for an effective date of February 1, 2002.

On December 18, 2001, the Commission issued Notices of Application and Modified Procedure in Case No. AVU-E-01-16. The deadline for filing written comments was January 23, 2002. Comments were filed by Commission Staff, Idaho Rivers United, the Land and Water Fund of the Rockies and a few of the company’s customers. The comments can be summarized as follows:
Commission Staff
Staff recommends that the Company’s tariff be approved for an effective date of February 1, 2002. Staff proposes no modifications to the proposed tariff.
Staff notes that the wind power tariff proposed by Avista arose initially as a result of legislation passed in the state of Washington in 2001. The legislation requires utilities in that state to have in place by January 1, 2002, a voluntary option for the retail purchase of qualified alternative energy resources by Washington customers. The tariff filed with this Commission is identical to the tariff approved by the Washington Commission on December 28, 2001.
One of the provisions of the Washington State legislation requires that “all costs and benefits associated with any option offered by an electric utility must be allocated to the customers who voluntarily choose that option and may not be shifted to any customers who have not chosen such option.” Staff presumes that since Avista has stated it intends to have the program and its associated tariff in Idaho mirror that in Washington, that the restrictions imposed by the Washington legislation will be followed in Idaho as well. Consequently, as proposed by Avista, the program will be entirely self-supporting. Only those customers who choose to participate in the program will bear its cost. Customers who do not choose to participate will not subsidize the program in any way.
The State Line Project is located on the Oregon-Washington border, about 17 miles southwest of Walla Walla, Washington. The project is touted as the largest single wind-powered renewable energy development in the world. It will ultimately consist of up to 450 wind turbines with capacity to produce up to 300 MW of electricity. FPL Energy, LLC, is the developer, owner and operator of the State Line facility. FPL Energy is the largest producer of wind power in the country with more than 1,000 MW of wind turbines in operation or construction in seven states. PacifiCorp Power Marketing, a wholly owned non-regulated subsidiary of PacifiCorp, is the sole purchaser of energy from the facility, and markets the energy to wholesale customers throughout the west. Avista will purchase energy sold under its wind energy tariff from PacifiCorp Power Marketing. Under a negotiated contract, Avista has agreed to purchase one aMW for two years, commencing January 1, 2002. Avista must purchase at least the full one aMW, regardless of the amount subscribed to by the customers. Since the total annual revenue under the program is expected to be only $150,267 system wide, any potential revenue shortfall, Staff contends, would be minimal.
The price premium for wind energy under this tariff, Staff notes, is equal to 8.1¢/kWh ($1 divided by 55 kWh). In Staff’s opinion this premium is reasonable. It appears to be one of the lowest premiums being charged in unsubsidized programs throughout the West. Marketing and administrative costs associated with the program represent 28% of the total program costs. Staff believes 28% for marketing and administrative costs is a reasonable amount, while not being excessive.
Idaho Rivers United
Land and Water Fund of the Rockies
Idaho Rivers United (IRU) and the Land and Water Fund of the Rockies (LAW Fund) recommend that Avista’s optional wind power rate program be approved. Supplying wind power to Idaho, they note, is an important way to diversify Idaho’s power base, providing greater reliability and reducing the environmental impact of energy production. IRU and the LAW Fund hope that Avista will work towards acquiring renewable energy resources as part of its rate-based portfolio. Voluntary programs, they contend, are good for a start, but they are no substitute for integrating renewable energy into the base energy supply.
IRU and the LAW Fund support the rate structure proposed by Avista. The most successful green power programs, they note, involving charging a set price for a defined amount of power. Avista has proposed such a program by setting the price of $1 for 55/kWh. However, IRU and the LAW Fund would like to see a higher minimum purchase requirement. They would also like to see customer participation tied to average electricity usage. As it is currently written, any customer may choose to participate at any financial level they choose.
Avista’s filing, the commentors note, provides little detail on how the Company intends to market the wind program. Avista, they contend, must engage in a concerted effort to market this program to its customers. They caution Avista not to target communication so narrowly so as to miss customers who may be interested in the program. In addition to any targeted marketing, Avista must at a minimum, they contend, notify all ratepayers of the program when opening an account, through bill stuffers or direct mailings twice a year, and through Avista’s web site. Avista, they contend, should work to gain media attention for the program, which provides a free medium for public information.
The parties suggest that Avista also target non-residential customers. Targeting such customers, they contend, can be a good way to leverage marketing efforts. If high profile commercial clients sign up, they may choose to advertise that fact, in effect providing free advertising for the green power program.
IRU and the LAW Fund recommend that the Commission require annual year-end reports from Avista on the wind power program. This should include the total number of customers signed up and the number signed up each year, the total blocks purchased through the program, the number of kilowatt hours bought or generated, the amount of money spent on marketing and a description of marketing efforts undertaken.
Other Commentors
Comments were received from some of the Company’s customers who look forward to the opportunity to purchase wind power.
Commission Decision
Avista has proposed an optional wind power rate available to all customer classes. The Company has requested a February 1, 2002 effective date. Does the Commission wish to approve the proposed tariff? If not, what is the Commission’s preference? If approved, does the Commission find it reasonable to require annual year-end reports?

vld/M:AVUE0116_sw

DECISION MEMORANDUM 1