20030213Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:FEBRUARY 13, 2003
RE:CASE NO. A VU-02-(A vista)
POTLATCH COMPLAINT
CO MPLAINT
On December 24, 2002, Potlatch Corporation (Potlatch) filed a Complaint with the
Idaho Public Utilities Commission alleging that A vista Corporation dba A vista Utilities has
failed and refused, and continues to fail and refuse, to purchase the cogeneration output of
Potlatch's qualifying facilities (QFs) at its Lewiston facility. Reference Public Utility
Regulatory Policies Act of 1978 (PURP A).
Potlatch is a forest products company that operates wood pulp, paper board, tissue
and wood products manufacturing plants at Lewiston, Idaho. Potlatch states that it owns and
operates four separate qualifying facilities at its Lewiston facility capable of generating
approximately 95 MW of energy. From 1991 through December 31, 2001 , Potlatch sold the
electric energy produced by its QFs to Avista pursuant to the provisions of an Electric Service
and Purchase Agreement between Potlatch and Avista dated January 3, 1991. Reference Case
No. WWP-91-, Order No. 23858.
On October 2, 2001 , Potlatch contends that it filed with Avista, in the manner
required by applicable Commission Orders, its written request for a firm quote for A vista
purchase of its qualified facility s generation after the expiration of the 1991 Agreement. The
parties have been unable to negotiate a PURP A contract. The meetings between the parties
Potlatch contends, have served only to establish the fact that Potlatch and Avista have
fundamental and irreconcilable differences that will not be resolved through further negotiations.
DECISION MEMORANDUM
Potlatch contends that A vista has failed and refused to offer Potlatch a PURP A
contract that complies with PURP A's requirements and this Commission s Orders. Specifically,
it states, the purchase power rates proposed by A vista are well below A vista s avoided costs as
defined in 18 C.R. ~ 292.101 and the Commission s Order establishing a methodology for
avoided cost rate negotiations for QFs larger than 1 MW. In addition, Potlatch contends that
A vista is attempting to impose unreasonable contract terms and conditions as a prerequisite to
any purchase from Potlatch.
ANSWER
On January 27, 2003 , Avista filed an Answer, affirmative defense, and Request for
Deferral of Hearing. A vista contends that Potlatch has never unconditionally offered a quantity
of power to A vista that it desired to supply, the period of time that it desired to supply such
power or the non price-related features of the contract that it desired. A vista contends that
Potlatch has not been "ready, willing, and able" to enter into a contract for the sale of power that
sets forth specific obligations of the parties and that conforms with the requirements of the
Commission.
REQUEST FOR DEFERRAL OF HEARING
A vista requests that the Commission defer any action on the Complaint for a period
of 90 days and encourage the parties to engage in further settlement discussions, with Staff s
active participation. In support of its request, A vista submits that there have been no substantive
communications for nearly a year respecting the possible sale of power by Potlatch to A vista.
Furthermore, A vista contends that wholesale market conditions have changed subsequent to the
last discussion, which may improve the opportunity for A vista and Potlatch to reach agreement
on a sale of power from the Lewiston facility. If the Commission defers action upon the
Complaint, A vista states that it will endeavor to initiate settlement discussions with Potlatch for
the purpose of attempting to resolve disputed matters without the necessity of hearing. A vista
notes that it has requested the participation of the Commission Staff to help facilitate settlement
discussions, and Commission Staff has agreed to participate.
On February 7, 2003, Potlatch filed a response to Avista s Request for Deferral of
Hearing. Potlatch opposes Avista s request. Potlatch contends that despite roughly two years of
off and on negotiations, the parties have been unable to come to any type of meeting of the
minds regarding the sale of Potlatch's cogeneration to Avista. Without debating the merits of its
DECISION MEMORANDUM
case, Potlatch contends that all of Avista s purchase proposals essentially amount to little more
than an offer to purchase Potlatch's output at short-term market prices. This Potlatch contends
is unacceptable. Potlatch concludes that the parties are at an impasse that can only be resolved
by a Commission decision.
With respect to Avista s argument that proceedings should be continued to allow
further negotiations in the light of recent conditions, Potlatch states that it is always willing to
entertain a legitimate and reasonable proposal. The suggestion that such a proposal might be
forthcoming is not, however, Potlatch contends, a reasonable ground for delaying these
proceedings. If A vista has a new proposal to make to Potlatch, Potlatch contends that it should
submit it in writing and Potlatch will respond in good faith. In the meantime, Potlatch contends
that there is no reasonable basis for delaying these proceedings.
Commission Decision
Potlatch has filed a PURP A complaint against A vista regarding the cogeneration
output of its Lewiston facility. The attorney for Potlatch requests a scheduling Order for
discovery, testimony pre file and hearing. Staff intends to contact counsel for both Avista and
Potlatch to develop a schedule that is mutually agreeable. Does the Commission concur with the
proposed procedure for processing this case?
Scott Woodbury
Vld/M:A VU-O2-
DECISION MEMORANDUM