20070112Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:JANUARY 11 2007
SUBJECT:CASE NO. A VU-06-10 (Avista)
POWER PURCHASE AND SALE AGREEMENT - STIMSON LUMBER
COMP ANY
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 A vista Corporation (A vista; Company) dated October
, 2006. Also included is a Generator Interconnection Agreement (GIA) between A vista and
Stimson.
Stimson Lumber Company operates a thennal wood waste small power electric
generation plant at Plummer, Idaho. Stimson s facility is capable of generating up to
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 tenns on September
, 2006. Stimson and Avista both desired that energy deliveries from the facility to Avista
continue without interruption following tennination of the HaleyWest LLC Agreement.
The Stimson Purchase and Sale Agreement is for a tenn 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
DECISION MEMORANDUM
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
A vista is obligated to purchase is 56 940 MWh in any operating year that is a non-leap year;
(57 069 MWh leap year).
Petitioners are not requesting retroactive approval of the Agreement. The Agreement
allows for energy deliveries and payments by A vista 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 tenninate. In such event, Stimson shall refund certain amounts to A vista.
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 A vista 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 A vista for purchasing capacity and energy from Stimson are legitimate expenses.
The parties request approval of the Agreement as satisfaction of the entirety of Avista
obligations under PURP A with regard to the facility.
The Agreement originally submitted in this case included a definition for "Market
Energy Cost" defined in part as "eighty five percent (85%) of the weighted average of the daily
On-Peak and Off-Peak Dow Jones Mid-Columbia Index (Dow Jones Mid-C Index) prices for
finn 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-finn energy in accordance with Schedule 62.
On December 22, 2006, the Commission issued a Notice of Application and
Modified Procedure in Case No. A VU-06-1 O. The deadline for filing written comments was
DECISION MEMORANDUM
January 11 , 2007. The Commission Staff was the only party to file comments. Staff
recommends approval of the Stimson Agreement and the first amendment to the Agreement.
COMMISSION DECISION
Submitted for Commission approval in Case No. AVU-06-10 is a Power Purchase
and Sale Agreement between Stimson Lumber Company and Avista, a First Amendment and a
related Generator Interconnection Agreement. The Agreement comports with Commission
Orders and requirements and contains current approved avoided cost rates.The rates are
seasonally adjusted and are also adjusted for on-peak and off-peak generation based on a daily
shape adjustment of$5.00 per MWh. Staff recommends that the Agreement be approved. Does
the Commission continue to find Modified Procedure appropriate? Does the Commission find it
reasonable to approve the amended Agreement and related Interconnection Agreement?
Scott Woodbury
bls/M:AVU-O6-10 sw2
DECISION MEMORANDUM