20061027final_order_no_30158.pdf

Office of the Secretary
Service Date
October 27, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
THOMPSON RIVER CO-GEN, LLC,
Colorado Company,CASE NO. A VU-05-
COMPLAINANT,
vs.
ORDER NO. 30158
VISTA CORPORATION dba A VISTA
UTILITIES, a Washington Corporation,
RESPONDENT.
On August 30, 2005 , Thompson River Co-Gen, LLC (Thompson River; TRC) filed a
Complaint against Avista Corporation dba Avista Utilities (Avista; Company) with the Idaho
Public Utilities Commission (Commission). TRC is a cogeneration facility located in Thompson
Falls, Montana. TRC represents itself to be a self-certified qualifying facility (QF) as defined by
the Public Utility Regulatory Policies Act of 1978 (PURP A) and the implementing regulations of
the Federal Energy Regulatory Commission (FERC). TRC requested an Order requiring Avista
to immediately complete the purchase of TRC's energy at the published non-levelized rate for
fueled projects that under normal and average design conditions generate no more than 10 aMW
in any given month.
On March 13, 2006, the Commission was apprised by Staff that pursuant to
settlement discussions A vista and Thompson River had reached an agreement in principle on the
substantive terms of a power purchase contract. A scheduled technical hearing was vacated.
On August 31 , 2006, Avista and Thompson River filed a Joint Petition in Case No.
A VU-05- 7 requesting approval of a negotiated 20-year Power Purchase and Sale Agreement
(Agreement) dated August 25, 2006.
TRC is a Montana corporation that operates a thermal wood waste/coal generation
facility power plant located at Thompson Falls, Montana. The TRC facility is capable of
generating up to approximately 13 MW of energy. Avista will be the sole purchaser of TRC'
Net Delivered Output. Agreement'jf6.1. The maximum annual amount of electric power that
Avista is obligated to purchase under the Agreement is 105 000 MWh (11.99 aMW per year).
ORDER NO. 30158
Agreement'jl6.2. TRC has entered into an interconnection agreement with Northwestern Energy
to provide firm transmission of power to Avista s Burke substation in Idaho.
For all Net Delivered Output received by Avista that is not Surplus Energy, Avista
shall pay $58.50 per MW hour. Agreement 'jIll.l. Surplus Energy is energy that falls outside
the 90/110 percent band established in Commission Order No. 29632. Agreement 'jI1.27. For
all Surplus Energy, Avista shall pay the current month's Market Energy Cost per MW hour or
the Net Delivered Output purchase price, whichever is lower. Agreement 'jI 11.2. The power
purchase rates are negotiated as a reasonable compromise to resolve their dispute and do not
represent a levelized rate calculated from published avoided cost rates.
On September 7, 2006 , the Commission issued Notices of Contract Filing and
Modified Procedure in Case No. AVU-05-7. The deadline for filing written comments was
October 6, 2006. Timely comments were filed by Thompson River Lumber Company of
Montana, Inc. (the steam host), Women s Voices for the Earth, the NW Energy Coalition
Commission Staff and interested parties from Montana and Idaho. Reply comments by TRC
were also filed with the Commission.
Thompson River Lumber Company of Montana, Inc.
Thompson River Lumber (TRL) notes that its contractual relationship with TRC has
not been finalized. TRL is the owner of the adjacent lumber mill and leases the project site to
TRC (Lease Agreement). TRL apprises the Commission that it is also party to a Power and
Steam Supply Agreement (PSSA) whereby TRC is to provide the lumber mill with electricity
and steam. The maximum amount of electricity TRC is obligated to deliver to TRL is 2 MWh
during any hour or 15 million kWh during any year. Accord Agreement 'jI1.14 - Definition
Net Available Output. TRL in filing comments also apprises Avista of its intent to preserve its
rights to receive continued power and steam, and lease payments should A vista exercise its
Agreement 'jI7.4 step-in rights.
Women s Voices for the Earth
Women s Voices for the Earth is an environment health advocacy organization based
in Missoula, Montana with staff in Bozeman, Montana and Boise, Idaho. It works to reduce and
where possible, eliminate persistent toxic pollution which disproportionately affects women and
children health. It is very concerned about the impacts of the TRC project on the
environmental and public health of the Thompson River area. The proposed plant will bum
ORDER NO. 30158
predominantly coal that will add to the local and regional mercury contamination. Particulate
pollution from TRC is also a serious concern. For these and other reasons cited in its comments
it opposes approval of the Agreement.
NW Energy Coalition
The NW Energy Coalition (NWEC) believes a more thorough examination and
public discussion is appropriate prior to final Commission action. NWEC requests a public
hearing. Issues identified by NWEC are (1) TRC's status as a self-certified PURPA QF; (2) the
capacity levels attributed to the project; (3) the rates as proposed in the Agreement; and (4)
questions about the environmental integrity of the TRC plant and its fuel source and related
environmental attributes in so far as it may impact the plant's future operations. NWEC also
cites for Commission consideration the relevance of Governor Risch's direction to Idaho DEQ to
opt out of the U.S. EPA's mercury trading program under the Clean Air Mercury Rule. Is it in
Idaho s best interest, it queries, for Idaho s regulated utilities to import power from out of state if
the power is generated under conditions that have been challenged in Idaho?
Commission Staff
Staff recommends that the A vistalTRC Agreement be approved with an effective
date of August 25 , 2006. Staff notes that the contract purchase rate ($58.50/MWh for all
generation (Net Delivered Output) that is not surplus energy) is a negotiated rate that is less than
the published non-fueled levelized avoided cost rate for a 20-year contract ($61.60/MWh for a
2006 online date), but greater than the IRP based rate calculated by the Company
($49.00/MWh). The power purchase rate, Staff notes, was negotiated as a compromise to
resolve the contract dispute between the parties. The primary disagreement was whether the
TRC project capacity exceeded 10 MW, thus making it ineligible to receive the published rates.
TRC contended that while capable of generating more than 10 MW at times, the facility would
never be consistently operated over this capacity. Avista alleged that because the facility had a
demonstrated ability to generate at a capacity of approximately 13 MW, the facility did not
qualify for published avoided cost rates.
Staff recommends that the Commission authorize deferral and recovery of power
purchase costs by A vista in accordance with Commission approved jurisdictional allocations and
PCA methodology, declaring that the prices to be paid for TRC's energy and capacity are just
ORDER NO. 30158
and reasonable, in the public interest, and that the cost incurred by A vista for purchasing
capacity and energy from TRC are legitimate expenses.
Other Comments
The remaining comments received oppose the Agreement. They address
environmental and health concerns, the TRC project developer s breach of faith and promise
with the Thompson Falls community, the bait and switch tactics of TRC with Montana
regulators, and Governor Kempthorne s two year moratorium on the building and permitting of
coal-fired power plants in Idaho.
TRC Reply Comments
TRC in reply comments states that it was "dismayed to see a flurry of baseless
inflammatory and extra-jurisdictional comments" regarding its project. Comments on the
potential environmental, social, health and economic effects (collectively societal impacts) ofthe
project, it contends, are beyond the scope ofthis Commission s jurisdiction. Citing Idaho Power
Case No. IPC-01-42 (Gamet), Order No. 28932, page 3 (2002). The TRC plant is located in
Montana, it states, not Idaho. TRC also reminds the Commission that it is a body of limited
jurisdiction. Reference WWP v. Kootenai Environmental Alliance 99 Idaho 875 , 879, 591 P.
122 (1979).
TRC does not agree that its facility is somehow environmentally deficient. TRC
states that it has received an air quality permit under the specific and rigorous protocols and
jurisdiction of the Montana Department of Environmental Quality. TRC states that it remains
committed to being an environmentally conscious member of the community.
TRC contends that "avoided cost rates are not at issue in this docket." A "belief' by
NWEC that there should be a "public discussion of the rates" is hardly, it states, a "reason for the
protest, comment or support" as required by Commission Rule of Procedure 203.
TRC maintains that its QF status is not at issue in this case. A vista and Staff, it
states, have reviewed the proposed operating characteristics of the facility. A vista has physically
inspected the project location and steam host facility. TRC maintains that its cogeneration
facility meets the FERC fuel use criteria and efficiency standards set forth in 18 C.R. ~
292.205(a)(1). The FERC, not the Idaho Commission, it contends maintains jurisdiction of
PURP A qualification. Furthermore, it notes that the Power Purchase Agreement provides that
ORDER NO. 30158
TRC's failure to maintain QF status is a material breach and default under the Agreement.
Agreement 'jI3.2 Qualifying Facility Status.
Addressing the further concerns of some commenters TRC maintains that the
secunng of all required permits by TRC although required by Agreement ('jI 4.1) prior to
commercial operation, is not a prerequisite to the execution and approval of a PURP A Power
Purchase Agreement.
TRC also provides clarifying comments on its relationship to the thermal host
Thompson River Lumber (TRL).
COMMISSION FINDINGS
A negotiated Power Purchase and Sale Agreement has been tendered for Commission
approval by Thompson River Co-Gen, LLC and A vista. The Commission has reviewed and
considered the filings of record in Case No. A VU-05- 7 including the underlying Agreement
and the comments and recommendations of Thompson River Lumber, Women s Voices for the
Earth, the NW Energy Coalition, Commission Staff, the public and TRC.
We find the environmental and health issues raised by parties objecting to approval
of the Agreement to be issues beyond this Commission s statutory jurisdiction and issues more
appropriately raised in Montana, the project situs state. The water rights and air permits required
for TRC's operation in Montana are obtained in government processes open to the public. Public
comments and participation help to inform decision makers. Commenters in this case have noted
their involvement and participation in TRC hearings and public meetings. Persons aggrieved by
a decision in Montana should explore their administrative and statutory alternatives for relief.
Also beyond this Commission s statutory jurisdiction are issues related to TRC'
PURP A QF self-certification at FERc. Challenges to certification can be made at the FERC. A
notice of self-certification is simply a notice by the owner of the facility that it believes that it
satisfies the requirements for QF status. If a purchasing utility or someone else wishes to
challenge a self-certified facility s QF status, it may do so at FERC in the context of a petition
for declaratory order. We note also that TRC's QF status is a continuing condition of purchase.
Reference Agreement 'jI3.2. Failure to maintain its QF status is an instance of breach or default.
Despite TRC's contention to the contrary, at issue in this proceeding are the purchase
rates for the QF power. The contract rates are not the published avoided cost rates that we have
previously approved but are negotiated rates. Pursuant to Agreement, the TRC facility is
ORDER NO. 30158
designed and is to be operated in a manner such that the hourly scheduled amount of Net
Delivered Output does not exceed 13 MW in any hour. The Net Delivered Output is exclusive of
any amount contractually delivered to the steam host, Thompson River Lumber. The maximum
annual amount of electric power that A vista is obligated to purchase under the Agreement is
105 000 MWh (11.99 aMW per year). Agreement'jl6.2. The contract is for a 20-year term. The
Commission finds that the Agreement submitted in this case contains acceptable contract
provisions and comports with the terms and conditions of Order Nos. 29632 and 29682 in Case
Nos. IPC-04-8; 04-10 (i., 90/110 performance band). We find the negotiated contract rates
to be less than the published avoided cost rates and the result of an arms-length negotiation
settling contested issues. We find in this instance that it was of apparent value to TRC to deliver
and to Avista to purchase greater than 10 aMW.The parties in resolving their contract
differences have negotiated a mutually acceptable rate that is along the price continuum between
published avoided cost rates and an IRP based calculation. Based on the filings of record, we
find the resultant contract rates to be just and reasonable and in the public interest. Reference 18
R. 9292.304.
The Commission has considered the NW Energy Coalition s request for a hearing or
public discussion. We find that a hearing is not required. Avista is not engaging in a voluntary
purchase of energy from TRC. A vista is not sidestepping the Idaho moratorium on construction
and permitting of coal-fired power plants in Idaho. The purchase is mandated by federal law.
The Commission finds the record adequate and sufficient and we find it reasonable and in the
public interest to issue an Order approving the submitted Agreement based on the written
positions of the parties and commenters and without further notice, procedure or hearing.
Reference IDAPA 31.01.01.204. We find it reasonable to allow payments made under the
Agreement as prudently incurred expenses for ratemaking purposes. We further find it
reasonable to authorize deferral and recovery of TRC power purchase costs by Avistain
accordance with Commission approved jurisdictional allocations and Power Cost Adjustment
(PCA) methodology.
ORDER NO. 30158
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over A vista Corporation dba
Avista Utilities, an electric utility, pursuant to the authority and power granted it under Title 61
of the Idaho Code and the Public Utility Regulatory Policies Act of 1978 (PURP A).
The Commission has authority under PURP A and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed term obligations for the purchase of energy from qualified facilities
and to implement FERC rules. 18 C.R. Part 292 (2003).
ORDER
In consideration of the foregoing, IT IS HEREBY ORDERED and the Commission
does hereby approve the August 25, 2006 Power Purchase and Sale Agreement between Avista
Corporation dba A vista Utilities and Thompson River Co-Gen, LLC.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
ORDER NO. 30158
DONE by Order ofthe Idaho Public Utilities Commission at Boise, Idaho this 7f+.
day of October 2006.
ATTEST:
Commission Secretary
bls/O:A VU-O5-07 sw2
ORDER NO. 30158
ARSHA H. SMITH, COMMISSIONER
, COMMISSIONER