20070111Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895
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IDAHO i:~li9.L1C ,
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT PETITION
OF A VISTA CORPORATION AND STIMSON
LUMBER COMPANY FOR APPROVAL OF A
POWER PURCHASE AND SALE AGREEMENT. )
CASE NO. AVU-O6-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on
December 22, 2006, submits the following comments.
BACKGROUND
On December 6, 2006, A vista Corporation and Stimson Lumber Company (collectively
Petitioners) filed a Joint Petition with the Idaho Public Utilities Commission (Commission) for
an Order approving a Power Purchase Agreement (Agreement) between Stimson Lumber
Company (Stimson) and Avista Corporation (Avista; Company) dated October 1, 2006. Also
included is a Generator Interconnection Agreement (GIA) between Avista and Stimson.
Stimson Lumber Company operates a thermal wood waste small power electric
generation plant at Plummer, Idaho. Stimson s facility is capable of generating up to
STAFF COMMENTS JANUARY 11 2007
approximately 6.5 MW of energy. The facility is a qualifying facility (QF) pursuant to the
Public Utility Regulatory Policies Act of 1978 (PURP A).
The Stimson facility was previously owned and operated by HaleyWest LLc. Stimson
has assumed HaleyWest LLC's obligations under a Power Sale and Purchase Agreement
between Avista and HaleyWest LLC that expired under its own terms on September 30 2006.
Stimson and A vista both desired that energy deliveries from the facility to A vista continue
without interruption following termination of the HaleyWest LLC Agreement.
The Stimson Purchase and Sale Agreement is for a term of five years. A vista will be the
sole purchaser of Stimson s generation. For all Net Delivered Output received by Avista that is
not surplus energy, Avista shall pay the published non-Ievelized avoided cost rates for non-
fueled projects smaller than 10 MW. For all surplus energy received by Avista, Avista shall pay
to Stimson the current month's market energy cost per megawatt hour or the Net Delivered
Output purchase price, whichever is lower. Stimson shall operate the facility in such a manner
that the hourly scheduled amount of Net Delivered Output does not exceed 6.5 MW in any hour.
Avista shall have the right, but not the obligation to purchase any Net Delivered Output from the
facility in excess of 6.5 MW in any hour. The maximum annual amount of electric power that
Avista is obligated to purchase is 56 940 MWh in any operating year that is a non-leap year;
(57 069 MWh leap year).
Petitioners contend they are not requesting retroactive approval of the Agreement. The
Agreement allows for energy deliveries and payments by Avista to Stimson at the published
avoided cost rates effective October 1 , 2006. In the event that the Commission does not approve
the Agreement by January 30 2007 , or approves it subject to conditions unacceptable to the
parties, the Agreement will terminate. In such event, Stimson shall refund certain amounts to
Avista. Reference Agreement ~ 5.4.
The Petitioners request Commission approval of the Agreement and the related
interconnection agreement. The Petitioners also request a Commission Order allowing deferral
and recovery of all power purchase costs subject to Avista s Power Cost Adjustment (PCA)
mechanism or as otherwise recovered by A vista through base rates, and declaring that prices to
be paid for energy and capacity are just and reasonable, in the public interest, and that the costs
incurred by Avista for purchasing capacity and energy from Stimson are legitimate expenses.
The parties request approval of the Agreement as satisfaction of the entirety of A vista
obligations under PURP A with regard to the facility.
STAFF COMMENTS JANUARY 11 2007
ANALYSIS
Although this is a new power sales Agreement, the facility has a long history of prior
power sales agreements and owners. This project initially began with a 35-year contract on
August 19, 1982 between Wood Power, Inc. and Washington Water Power to purchase energy
and capacity. Rayonier operated a timber mill adjacent to the Wood Power facility. Wood
Power provided steam to Rayonier for manufacturing purposes in exchange for which Rayonier
provided wood waste fuel to Wood Power.
On September 30, 1996, Washington Water Power entered into an agreement with Wood
Power and Rayonier terminating the power sales agreement. In exchange for Wood Power
termination of the power sales agreement, Washington Water Power agreed to pay a total of $9.
million to Wood Power because the price paid by the Company exceeded the current and
expected market prices for electric power. In accordance with Order No. 26751 , the
Commission approved deferral of the $9.5 million paid to Wood Power for termination and
approved amortization of the amount over eight years.
In addition to providing for termination of the power sales agreement and payment of the
termination amount, the termination agreement also provided that Washington Water Power had
no obligation to purchase power from the facility at avoided cost rates for a period of 10 years
but had the option to purchase from the facility at market prices less $1 per MWh. On April 10
1997, Washington Water Power exercised its option to purchase from the facility under an
agreement set to expire on September 30, 2006. Sometime after this new agreement became
effective, the facility was sold to the Coeur d' Alene tribe, who in turn leased it to Plummer
Forest Products, who in turn subleased the facility to HaleyWest.
On July 1 , 2003 Avista entered into an agreement with HaleyWest to purchase from the
facility through September 30, 2006. That agreement has now expired and is being replaced
with the new Agreement for which A vista is seeking approval in this case.
As provided in the September 30, 1996 termination agreement, Washington Water Power
(now Avista) had no obligation to purchase from the facility at avoided cost rates for 10 years.
That 10-year period ended on September 30, 2006 , the same date on which Avista s agreement
with HaleyWest expired. Thus, there is no longer any restriction on A vista purchasing from the
facility at avoided cost rates.
STAFF COMMENTS JANUARY 11 2007
The purchase rates in the Agreement are A vista s current approved avoided cost rates
from Order No. 30111 (Case No. A VU-06-4). The rates are seasonally adjusted, and are also
adjusted for on-peak and off-peak generation based on the daily shape adjustment of $5 per
MWh.
The Agreement originally submitted in this case included a definition for "Market Energy
Cost" defined in part as "eighty five percent (85%) ofthe weighted average of the daily On-Peak
and Off-Peak Dow Jones Mid-Columbia Index (Dow Jones Mid-C Index) prices for firm
energy." The reference to the Mid-firm energy price was mistaken. By First Amendment to
the Agreement filed December 26, 2006, the Market Energy Cost definition is corrected to
instead refer to the Mid-non-firm energy in accordance with Schedule 62.
RECOMMENDATIONS
Staff recommends approval of the Stimson Agreement and the First Amendment to the
Agreement. Staff further recommends that the Commission allow deferral and recovery of all
power purchase costs subject to Avista s Power Cost Adjustment (PCA) mechanism or as
otherwise recovered by A vista through base rates, and declare that prices to be paid for energy
and capacity are just and reasonable, in the public interest, and that the costs incurred by A vista
for purchasing capacity and energy from Stimson are legitimate expenses.
Respectfully submitted this 'P7 day of January 2007.
cxI~~
Scott Woodbury
Deputy Attorney General
Technical Staff: Rick Sterling
U:\rsterli\avueO6. I O.SWl1'S
STAFF COMMENTS JANUARY 11 2007
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 11TH DAY OF JANUARY 2007
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DAVID J. MEYER
SR VP AND GENERAL COUNSEL
A VISTA CORPORATION
1411 E MISSION AVE, MSC-
SPOKANE W A 99220
KELLY NORWOOD
VICE PRESIDENT - STATE & FED. REG.
A VISTA UTILITIES
1411 EMISSION AVE, MSC-
SPOKANE W A 99220
WILLIAM E PERESSINI
VICE PRESIDENT & CFO
STIMSON LUMBER CO.
520 SW Y AMHILL, SUITE 700
PORTLAND, OR 97204-1330
~~.
SECRETARY
CERTIFICATE OF SERVICE