20040310Notice of Application.pdf

Office of the Secretary
Service Date
March 10 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
VISTA CORPORATION FOR AN ORDER
APPROVING THE SALE OF ITS INTEREST IN
THE SKOOKUMCHUCK HYDROELECTRIC
PLANT AND FOR EWG DETERMINATIONS.
CASE NO. A VU-O4-
NOTICE OF APPLICATION
NOTICE OF MODIFIED
PROCEDURE
NOTICE OF COMMENT/
PROTEST DEADLINE
YOU ARE HEREBY NOTIFIED that on February 23, 2004, Avista Corporation
(Avista; Company) filed an Application with the Idaho Public Utilities Commission
(Commission) regarding the proposed sale by Avista of its ownership interest in the
Skookumchuck dam, hydroelectric plant and related facilities (Skookumchuck). Skookumchuck
is a I-megawatt (MW) generation facility located in the vicinity of Centralia, Washington on
property adjacent to the Centralia Power Plant, a large coal-fired generating facility.
Skookumchuck is co-owned by Avista Corporation, PacifiCorp, Public Utility District No.1 of
Snohomish County, Puget Sound Energy, Inc., City of Tacoma, City of Seattle, and Public
Utility District No. of Grays Harbor County (collectively the "Owners
A vista requests Commission approval of the Company sale of its minority
ownership interest in Skookumchuck, seeks a Commission Order making certain public interest
findings required in order for Skookumchuck to qualify as an exempt facility and for the new
owner/operator to qualify as an Exempt Wholesale Generator (EWG) under Section 32
PUHCA, and seeks approval of proposed accounting treatment of the gain on the sale.
Purchase and Sale Agreement
A vista has entered into a Purchase and Sale Agreement to sell its interest in the
Skookumchuck hydroelectric plant to 2677588 Washington, LLC, a Limited Liability Company
formed by TransAlta USA Inc. (TransAlta). Washington LLC intends to operate
Skookumchuck as an Exempt Wholesale Generator (EWG) within the meaning of Section 32 of
the Public Utility Holding Company Act of 1935 (PUHCA).
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
Washington LLC is a Washington Limited Liability Company and a direct wholly-
owned subsidiary of TransAlta. TransAlta is the indirect owner of the Centralia Power Plant and
the Centralia Coal Mine. In 2000, the Owners sold the Centralia Power Plant to a direct wholly-
owned subsidiary of TransAlta, TECW A Power, Inc., and PacifiCorp sold the Centralia coal
mine to another direct wholly-owned subsidiary of TransAlta, TECW A Fuel, Inc. TransAlta
Centralia Generation LLC, a direct wholly-owned subsidiary of TECW A Power, Inc., owns and
operates the Centralia Power Plant as an EWG.
Skookumchuck is a small earth-filled dam and hydroelectric generating plant located
in the vicinity of Centralia, Washington on property adjacent to the Centralia Power Plant. The
Skookumchuck Dam was constructed in 1973 as a water storage facility for the Centralia Power
Plant. In 1991 , a generating plant with a capacity of approximately 1 MW was installed at the
dam. The project was granted an exemption from licensing as a hydropower facility by the
Federal Energy Regulatory Commission (FERC) pursuant to 16 U.C. ~ 2705(d), which allows
exemptions for facilities less than 5 MW. The project is, however, subject to dam safety
regulations by the FERC.
A vista proposes to sell and transfer to Washington LLC the dam, powerhouse, water
rights, land, easements and other assets of Skookumchuck, including certain fixtures, contracts
and other rights. The sale and transfer of Skookumchuck is governed by the Skookumchuck
Facilities Purchase and Sale Agreement between the Owners and Washington LLC, dated
November 25 2003
, ("
Sale Agreement"), which is included in Appendix 1 to the Application.
The aggregate sale price of the transaction is approximately $7.57 million, adjusted
for changes in PacifiCorp s net book value of the facilities from September 30, 2003 to the
closing date. See Section 2.3(a) of the Sale Agreement. Avista s share of this amount is 17.
or approximately $1.32 million on a system basis prior to closing costs.
Avista is informed that the new owner/operator will continue operation of the Project
to provide cooling water supply to the Centralia Power Plant and to produce power from
Skookumchuck either as an EWG or as a Qualifying Facility under the Public Utility Regulatory
Policies Act of 1978. None of the electrical output of Skookumchuck will be used to serve
A vista s retail customers, except perhaps indirectly through the wholesale power markets.
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NOTICE OF MODIFIED PROCEDURE
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EWG Determinations
To qualify as an EWG, the owner/operator must be engaged exclusively in the
business of owning or operating an "eligible facility" and selling electric energy at wholesale. If
the costs of a generation facility were included in the rates of a regulated utility on October 24
1992 (the date of enactment of Section 32 of PUHCA), then in order for the facility to be
considered an "eligible facility," every state Commission having jurisdiction over such rates
must specifically determine that allowing the facility to become an eligible facility (1) will
benefit consumers, (2) is in the public interest, and (3) does not violate state law. 15 US.
~ 79z-5a(c). Thus, the Commission and each of Avista s other state regulatory commissions
must make these determinations regarding Avista s sale and transfer ofSkookumchuck.
Benefits of Transaction
A vista proposes to transfer its interest in Skookumchuck to Washington LLC because
the sale is a lower cost option than continuing to invest in and operate and maintain
Skookumchuck.
Skookumchuck has an electrical capacity of 1 MW, but because it is operated for
purposes of supplying cooling water to the Centralia Power Plant, Avista states that it has
relatively low energy output. The Company contends that the sale will not harm the public
interest because competitive markets will be unaffected by the sale. Over the last eight years, the
average annual production of Skookumchuck has been 3 013 MWh. Skookumchuck's bus-bar
cost in fiscal year 2003 (12 months ending March 31 2003) was approximately $255 per MWh.
The facility is interconnected with the distribution system ofPuget Sound Energy, Inc. (PSE) and
historically all ofthe power from Skookumchuck has been sold to PSE.
As one of the owners of Skookumchuck, A vista must pay its proportionate share of
the costs. Net plant related to Avista s share of its investment in Skookumchuck is included in
the Company s rate base. The Company contends that customers will not be harmed if the
project is sold because the cost of power generated from Skookumchuck substantially exceeds
the projected cost of market power. Hence, the Company s revenue requirement will be lower as
a result of the sale of Skookumchuck.
The proposed transaction eliminates the risk that A visa will be required to fund its
share of future expenditures for ensuring the structural integrity of the Skookumchuck Dam.
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NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
A vista contends that the benefits from the proposed sale outweigh the risks of rising costs of
continuing to own and operate Skookumchuck. Continued operation of Skookumchuck as a
hydroelectric project, the Company contends, would be uneconomic, and such operation would
not be in the public interest.
A vista contends that the transfer of Skookumchuck to Washington LLC is in the
public interest because it will benefit Avista s customers by lowering the Company s cost of
providing electrical service. In addition, the transfer will give TransAlta greater control of the
water flows in the Skookumchuck River for providing cooling water to the Centralia Power
Plant, thus increasing the electrical output of the Centralia Power Plant for the benefit of all
electricity consumers.
Because Skookuinchuck assets are located in the State of Washington, A vista
contends that Idaho s property transfer statute Idaho Code ~ 61-328, is not applicable to the
contemplated sale. Should the Commission, however, decide to exercise its authority over the
proposed sale, A vista requests that the Commission approve the sale.
Proposed Ratemaking Treatment
A vista projects that the sale of Skookumchuck will result in a small after-tax gain.
The Idaho jurisdictional share (33.01%) of the after-tax gain is projected to be approximately
$216 000. Avista proposes to allocate the after-tax Skookumchuck gain between jurisdictions
and between ratepayers and shareholders in the same manner that Avista s after-tax gain on the
sale of the Centralia Power Plant was allocated in Case No. A VU-99-Applying the
depreciation reserve method (the ratio of accumulated depreciation to gross plant) of 69.70% for
allocating proceeds to ratepayers set forth in the Order approving the sale of the Centralia Power
Plant to the estimated Idaho share of the Skookumchuck after-tax gain of approximately
$216 000 yields an allocation to ratepayers of approximately $151 000 and an allocation to
shareholders of approximately $65 000. The calculation and allocation of the estimated gain is
attached as Exhibit No.1 to the testimony of Ronald R. Peterson.
A vista is proposing that the estimated portion of the Skookumchuck after-tax gain
allocated to ratepayers of approximately $151 000 be deferred and added to the deferred gain on
the Centralia Power Plant which is currently being passed on to ratepayers through a rate credit
on Schedule 65 - Temporary Rate Adjustment.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
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Timing of Approval
The new owner/operator of Skookumchuck, the Company contends, cannot process
its EWG application with the FERC until all of the Company s regulatory commissions have
made the three determinations required by Section 32 of PUHCA. Accordingly, A vista requests
that the Commission process its Application expeditiously.
Appendices to Application
Attached to the Company s Application are the following Appendices:
(I) The Skookumchuck Facilities Purchase and Sale Agreement;
(2) The Skookumchuck Dam Management Agreement; and
(3) The prefiled direct testimony of Ronald R. Peterson, Avista Vice President of
Energy Resources and Optimization describing the proposed sale and the reasons for the sale; the
request for Commission EWG determinations; the proposed ratemaking treatment of the sale
including the allocation of the gain between ratepayers and shareholders; and the Company
proposal that the ratepayers' share of the after-tax gain be added to the balance of the deferred
gain on the Centralia Power Plant, which is currently being passed on to ratepayers.
YOU ARE FURTHER NOTIFIED that the Commission has reviewed the filings of
record in Case No. A VU-04-2. The Commission has preliminarily found that the public
interest in this matter may not require a hearing to consider the issues presented, and that issues
raised by the Company s filing may be processed under Modified Procedure, i., by written
submission rather than by hearing.Reference Commission Rules of Procedure IDAP A
31.01.01.201-204.
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or
protests with respect to Avista s Application and the use of Modified Procedure in Case
No. A VU-04-2 is Thursday, April!, 2004. Persons desiring a hearing must specifically
request a hearing in their written protests or comments.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the deadline, the Commission may consider the issue on its merits and enter its
Order without a formal hearing. If comments or protests are filed within the deadline, the
Commission will consider them and in its discretion may set the matter for hearing or may
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NOTICE OF MODIFIED PROCEDURE
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decide the matter and issue its Order based on the written positions before it. Reference IDAP A
31.01.01.204.
YOU ARE FURTHER NOTIFIED that written comments concerning Case
No. A VU-04-2 should be mailed to the Commission and the Company at the addresses
reflected below.
COMMISSION SECRETARY
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
Street Address for Express Mail:
KELLY NORWOOD
VICE PRESIDENT - STATE & FED. REG.
A VISTA UTILITIES
1411 EMISSION AVE.
PO BOX 3727
SPOKANE W A 99220-3727
E-mail Kelly.norwood~avistacorp.com
472 WWASHINGTON ST
BOISE, ID 83702-5983 DAVID 1. MEYER
SR VP AND GENERAL COUNSEL
A VISTA CORPORATION
1411 EMISSION AVE.
PO BOX 3727
SPOKANE W A 99220-3727
E-mail david.meyer~avistacorp.com
All comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.state.id.. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to the Applicant at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set, the Commission will consider this matter on its merits and
enter its Order without a formal hearing. If written comments are received within the time limit
set, the Commission will consider them and, in its discretion, may set the same for formal
hearing.
YOU ARE FURTHER NOTIFIED that the Application in Case No. A VU-04-2 can
be viewed at www.puc.state.id.by clicking on "File Room" and "Electric Cases " or can be
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NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
viewed during regular business hours at the Idaho Public Utilities Commission, 472 West
Washington Street, Boise, Idaho and at the Idaho offices of Avista.
DATED at Boise, Idaho this 0 ~ day of March 2004.
~.ell
Commission Secretary
Vld/N:A VUEO402
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE