200601312nd amended answer.pdf

David J. Meyer
Vice President and Chief Counsel for
Regulatory & Governmental Affairs
A vista Corporation
1411 E. Mission Avenue, MSC-
PO Box 3727
Spokane, W A 99220-3727
[phone]
Idaho Pub
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JAN 3 0 2006
Boise, Idaho
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
THOMPSON RIVER CO-GEN, a
Colorado Company,
Complainant
CASE NO. A VU-05-
vs.
A VISTA CORPORATION, a Washington
Corporation
SECOND AMENDED ANSWER OF
A VISTA CORPORATION
Respondent.
A vista Corporation ("A vista ) answers the Complaint of Thompson River Co-Gen, LLC
(hereinafter "TRC") as follows:
SPECIFIC RESPONSES TO TRC'S COMPLAINT
With respect to allegation 1 of TRC's Complaint, A vista admits that a facility
owned by TRC is located at Thompson Falls, Montana, and such facility may be operated as a
cogeneration facility in conjunction with a neighboring lumber mill owned by Thompson River
Lumber Company.
With respect to allegation 2 of TRC's Complaint , A vista admits that TRC has
filed a notice of self-certification with the Federal Energy Regulatory Commission ("FERC"
the contents of which are a matter of public record.
AMENDED ANSWER OF
AVISTACORPORATION - 1
With respect to allegation 3 of TRC's Complaint , A vista denies the same.
With respect to allegation 4 of TRC's Complaint , A vista denies the same.
With respect to allegation 5 of TRC's Complaint , A vista is without sufficient
information to form an opinion, and therefore denies the same.
With respect to allegation 6 of TRC's Complaint , A vista admits the same.
With respect to allegation 7 of TRC's Complaint, A vista admits the same.
With respect to allegation 8 of TRC's Complaint , A vista admits the same.
With respect to allegation 9 of TRC's Complaint , A vista admits the same.
10.With respect to allegation 10 of TRC's Complaint, A vista admits that TRC has
contended that it has a right to a contract with A vista at the published avoided cost rates
applicable to ten megawatt or less projects.
11.With respect to allegation 11 of TRC's Complaint, A vista admits the same.
12.With respect to allegation 12 of TRC's Complaint, A vista admits that it believes
that TRC's project does not qualify for the published avoided cost rates applicable to ten
megawatt or less projects.
13.With respect to allegation 13 of TRC's Complaint, A vista denies the same.
14.With respect to allegation 14 of TRC's Complaint, A vista denies that it has
disregarded orders of this Commission. A vista also denies TRC's characterization of prior orders
of the Commission.
15.With respect to allegation 15 of TRC's Complaint , A vista denies the same.
16.With respect to allegation 16 ofTRC's Complaint, Avista denies the same.
17.With respect to allegation 17 of TRC's Complaint, A vista is without sufficient
information to form an opinion, and therefore denies the same.
AMENDED ANSWER OF
AVISTACORPORATION - 2
18.With respect to allegation 18 of TRC's Complaint. A vista denies the same.
19.With respect to allegation 19 ofTRC's Complaint , Avista denies the same.
20.With respect to allegation 20 of TRC's Complaint , A vista admits that TRC and
A vista disagree about the qualification of TRC for published avoided cost rates applicable to ten
megawatt or less projects.
21.With respect to allegation 21 of TRC's Complaint , A vista restates its answer to
allegation 20.
22.With respect to allegation 22 of TRC's Complaint , A vista admits that it informed
TRC the week of August 22, 2005 of its understanding based upon the facts that TRC's project
did not qualify for published avoided cost rates applicable to ten megawatt or less projects.
23.With respect to allegation 23 of TRC's Complaint , A vista restates its answer to
allegation 20, but denies giving specific advice to TRC as to how a resolution of disputed issues
might be accomplished.
24.A vista denies all allegations or portions thereof, not admitted herein.
II.
AFFIRMA TIVE DEFENSES
General Alle2ations of all Affirmative Defenses
In 2002 and 2003 , TRC filed for approval with the Federal Energy Regulatory
Commission ("FERC") a power sales contract under which TRC agreed to sell power to
NorthWestern Energy ("NorthWestern ) for a duration of ten years with an option to extend for
five years , from its project near Thompson Falls. Montana. The power would be sold to
NorthWestern at approximately $40.00 per megawatt hour for the first 13 megawatts for each
AMENDED ANSWER OF
AVISTA CORPORATION - 3
hour and the Mid-Columbia index price minus $3.00 per megawatt for amounts in excess of 13
megawatts for each hour. The project was characterized as a 16 megawatt project.
In January, 2005, Avista received a communication from Mr. Mark Thompson
known to be an employee or representative of NorthWestern, a utility that provides retail electric
service in Montana, to the effect that NorthWestern was assisting TRC in its efforts to sell power
from the TRC facility to a party other than NorthWestern. Mr. Thompson represented that he
was acting as a consultant for TRC. In more recent discussions, TRC has been represented by
persons other than Mr. Thompson.
TRC initially represented to A vista that the project was a 13 megawatt facility and
that power generated by the project in excess of the combination of the 10 megawatt amount
proposed for delivery to A vista, station service load, power to serve the Thompson River Lumber
Company load, and transmission losses associated with delivery of power to A vista in the state
of Idaho, would be sold to NorthWestern. Also, as part of the proposed sale of PURP A power to
A vista, Mr. Thompson indicated that electric energy output from TRC's project would be
firmed-up" by power from NorthWestern s system.
On March 11 , 2005 , Mr. Michael Underwood, a principle of TRC, furnished a
letter to A vista, expressing interest in obtaining a contract for the sale of power to A vista at
avoided cost rates applicable to fueled 10 megawatt or less projects.
On May 12, 2005, in a meeting with A vista, TRC proposed the following set of
energy sales arrangements:
TRC proposes wholesale electricity contracts with A vista Corp and
NorthWestern
20 year PURPA (Qualifying Facility) contract with Avista Corp. (76% of
TRC Output.)
10 MW firm, base-load contract, delivered by NorthWestern, as
scheduling agent.
AMENDED ANSWER OF
A VISTA CORPORATION - 4
20 year PPA with NorthWestern for Surplus Energy (18% ofTRC Output).
NorthWestern is the Scheduling Agent and Transmission Provider;
NorthWestern firms, shapes and delivers energy to Avista Corp.
NorthWestern purchases excess energy.
Thermal and Electric Sales to Thompson River Lumber
TRC has a 45-year agreement with Thompson River Lumber (TRL) to
provide the mills electric requirements. Average busbar netback of $40.00 per
MWH. (6% ofTRC Output).
In a response to a Compliance Order issued by FERC on May 31 2005 , TRC
filed with FERC an updated market analysis dated July 22, 2005 (FERC Docket No. ER02-298-
003). In its filing TRC represented to FERC that it operated in the Montana market, that its
contract to sell to NorthWestern was for a period of ten years, and that its project would be a
twelve megawatt name-plate wood and coal-fired plant. TRC further represented that
NorthWestern would resell that power to its own default customers.
In August 2005 , TRC represented to A vista that TRC's contract with
NorthWestern was subject to various amendments. Via an email from Mark Thompson on
September 19 , 2005 , NorthWestern represented that the TRC contract with NorthWestern is no
longer in effect having terminated under its own terms in May 2004, because of the failure of the
facility to achieve certain milestones. However, upon due diligence, A vista has been unable to
discover on file with FERC any filing that reports amendments to the TRC contract with
NorthWestern or reports a termination or withdrawal ofTRC's FERC approved market rate
based tariff or sale obligation under the Federal Power Act. As a result, A vista is uncertain of
the legal relationship and obligations owed by TRC to NorthWestern, except that based upon the
public record, TRC has committed to sell the output of its project to NorthWestern, pursuant to a
contract that is subject to the jurisdiction of FERC. A vista has not received assurances that
TRC's power, that is currently being used by NorthWestern to serve its retail customers, can now
AMENDED ANSWER OF
A VISTA CORPORATION - 5
be sold to retail customers in Idaho at a higher price than that stated in TRC's contract with
Northwestern.
Avista reasonably determined that TRC qualified for avoided costs applicable to
larger than 10 megawatt facilities. Therefore, in July 2005 , A vista provided TRC with a draft
term sheet, including proposed pricing based upon Avista s Integrated Resource Plan. In early
August 2005, A vista prepared and extended a written draft contract for consideration to TRC, in
which the purchase rates were again based upon A vista s Integrated Resource Plan.
A vista s draft contract excluded the long-term firming and shaping service that
Mark Thompson had proposed to be provided by NorthWestern. Avista s draft contract instead
proposed that NorthWestern provide an hourly schedule firming and near-term balancing service.
10.In response to Avista s draft contract, TRC produced and delivered to Avista its
own contract draft. In addition to proposing that the contract rates be based upon the "fueled"
published avoided cost rates applicable to ten megawatt or less projects, various other material
changes from A vista s draft were proposed. There are many issues unresolved between the
Parties. Among the more serious issues are the following:
TRC would not give contract assurances to Avista that any contract
obligation to deliver power to NorthWestern had ceased or would cease;
TRC would not agree to A vista s proposals for insurance and second lien
provIsIons;
TRC would not agree to transmitting its power to alternative delivery
points in the event that the transmission lines near Burke, Idaho that connect
NorthWestern s electric system in Montana with Avista s system in Idaho are unavailable
AMENDED ANSWER OF
A VISTA CORPORATION - 6
to transmit power from Montana to Idaho due to planned or unplanned operational
reasons;
TRC desired to be compensated by A vista for the output of its project at
those times that A vista was unable to receive the output from the project due to planned
or unplanned operational problems with the transmission lines near Burke, Idaho;
TRC would not agree to undertake proceedings before the Idaho Public
Utilities Commission to have all costs of the purchase contract attributed to A vista s retail
rates in Idaho, in the event that such costs were not approved to be a part of A vista s retail
rates in the state of Washington;
TRC would not agree that water would not be appropriated from the Clark
Fork River for use at its project in violation of Avista s down-stream Montana water
rights for the Noxon Dam;
TRC requires that Avista provide notice and allows Thompson River Co-
Gen a period of time in which to cure its default prior to A vista exercising its right to
terminate the agreement for failure to operate the Facility in accordance with certain
minimum critieria;
TRC would not agree to an A vista right to terminate the agreement for
failure to maintain a firm transmission path to a primary delivery point; and
TRC limited its liability for losses that it might owe to third party
transmission providers to 4%, which would have the effect of displacing part of its
liability for transmission losses to A vista s customers.
11.In addition, at various times, TRC represented that the output of TRC's project
would be an average ten megawatts or less after subtracting station service, a sale of power to the
AMENDED ANSWER OF
A VISTA CORPORATION - 7
Thompson River Lumber Company (a separately owned neighboring company) and transmission
losses associated with delivery of power to Avista s system in Idaho. However, the "net output
rule of FERC defines net output of a PURP A project to be determined at a point prior to the
interconnection with loads that are not associated with the production of the power. TRC's offer
fails to provide for the measurement of net power output prior to the delivery point at which
TRC serves the load of the Thompson River Lumber Company. The determination of
qualification of a project for filed rates for projects ten MW and less should be made on a
consistent basis that utilizes the FERC "net output" standard. The failure of TRC to
appropriately measure the "net output" as required by FERC would allow its project, in effect, to
produce greater than ten megawatts, even if measured on an average monthly basis, while
claiming an entitlement to be paid for its power as though it were a ten megawatt or less project.
First Affirmative Defense
TRC's project is a larger than ten megawatt facility, and therefore is not entitled to
avoided cost rates applicable to ten megawatt and less projects.
Second Affirmative Defense
The output of TRC's project is committed by contract and/or FERC tariff to the sale to a
retail serving utility in Montana. Therefore, TRC is not ready or able to commit to supply power
to a retail serving utility in Idaho.
Third Affirmative Defense
TRC fails to account for sales to Thompson River Lumber Company and/or
NorthWestern when determining the net output of its project. Therefore, even if measured on an
average monthly basis, the output of its project will likely exceed ten average megawatts when
measured at the appropriate point.
AMENDED ANSWER OF
A VISTA CORPORATION - 8
III.
COMMUNICATIONS
Communications respecting this matter should be addressed to::
David J. Meyer
Vice President, Chief Counsel For Regulatory
and Governmental Affairs
A vista Corporation
O. Box 3727
1411 East Mission Avenue, MSC-
Spokane, Washington 99220-3727
Telephone: [phone]
Facsimile: [phone]
Kelly O. Norwood
Vice President, State and Federal Regulation
A vista Corporation
O. Box 3727
1411 E. Mission Avenue, MSC-
Spokane, Washington 99220
Phone: [phone]
Fax: [phone]
IV.
CONCLUSION
For the foregoing reasons, Avista respectfully requests the Commission to dismiss
TRC's complaint, herein.
RESPECTFULLY SUBMITTED this:1CL aay of January, 2006.
VISTA CORPORATION
~I/
Vice President, Chief Counsel For
Regulatory and Governmental Affairs
0O393404.DOC
AMENDED ANSWER OF
A VISTA CORPORATION - 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this day of January, 2006, served the foregoing
SECOND AMENDED ANSWER OF A VISTA CORPORATION upon all parties of record in
this proceeding, by mailing a copy thereof, property addressed with postage prepaid, to:
Jean Jewell u.S. Mail, Postage Prepaid
Commission Secretary Hand Delivered
Idaho Public Utilities Commission (0'Overnight Mail
572 West Washington Facsimile
Boise, ID 83702 Electronic Mail
Email: iiewell(g)puc.state.id.
Scott Woodbury u.S. Mail, Postage Prepaid
Idaho Public Utilities Commission Hand Delivered
472 West Washington (0'Overnight Mail
Boise, ID 83702 Facsimile
Email: swoodbury(g)puc.state.id.Electronic Mail
Peter J. Richardson u.S. Mail, Postage Prepaid
Richardson & O'Leary PLLC Hand Delivered
515 N. 27th Street Overnight Mail
Boise, ID 83702 Facsimile
Email: peter(g)richardsonanddoleary.com
(~
Electronic Mail
Mike Uda u.S. Mail, Postage Prepaid
Doney, Crowley, Bloomquist, Payne Hand Delivered
& Uda P.(0'Overnight Mail
44 West 6th Avenue, Suite 200 Facsimile
Helena, MT 59601 Electronic Mail
Email: muda
(g)
doneylaw .com
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AMENDED ANSWER OF
A VISTA CORPORATION - 10