20120113final_order_no_32436.pdf

Office of the Secretar
Service Date
Januar 13,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT )
APPLICATION OF AVISTA CORPORATION ) CASE NO. AVU-E-ll-06
AND STIMSON LUMBER COMPANY FOR )
APPROVAL OF A POWER PURCHASE ) ORDER NO. 32436AGREEMENT. )
On November 25, 2011, Avista Corporation and Stimson Lumber Company (the
Paries) filed a Joint Application with the Commission requesting approval of a five-year Power
Purchase Agreement (Agreement, proposed Agreement) between Avista and Stimson Lumber
dated November 16,2011. The Application states that Stimson Lumber operates a thermal wood
waste small power electric generation plant located at Plummer, Idaho. Stimson Lumber is a
qualifying facility under the applicable provisions of the Public Utility Regulatory Policies Act
of 1978 (PURPA) and is capable of generating up to 6.5 megawatts (maximum capacity,
nameplate) of energy. The Paries asked that the Commission approve the Agreement with an
effective date of December 1,201 L
On December 15, 2011, the Commission issued a Notice of Application/otice of
Modified Procedure setting a comment deadline of December 30, 2011. Staff was the only pary
to fie comments. By this Order, the Commission approves the Agreement between Avista and
Stimson Lumber effective Januar 15, 2012, without change or condition and declares that all
payments made by A vista to Stimson Lumber be allowed as prudently incured expenses for
ratemaking puroses.
THE AGREEMENT
The Application states that, upon its effective date, the Agreement wil replace the
power purchase agreement (Original Agreement) between the Parties originally approved by the
Commission in Order No. 30224, issued on Januar 19,2007. The Original Agreement expired
on September 30,2011. The Commission approved an Amendment to the Original Agreement,
extending the term "until either the effective date of a new power purchase agreement executed
between the Paries or Januar 2, 2012, whichever is earlier" in order to allow the Paries
additional time to complete their negotiations and execute a new agreement. Order No. 32382 at
2. The Amendment utilzes the published avoided cost rates applicable to PURP A contracts
entered into on or after August 30, 2011.
ORDER NO. 32436 1
The Application states that the Paries have now completed their negotiations and
have executed an Agreement. The Paries request that the Commission approve the Agreement
without change or condition, with an effective date of December 1, 201 i, and declare that all
payments made by A vista for purchases of energy under the Agreement be allowed as prudently
incured expenses for ratemaking purposes.
STAFF COMMENTS
Several minor changes were made between the Original Agreement and the proposed
Agreement. Market energy cost has been re-defined in the proposed Agreement to now
reference daily firm Mid-C on-peak and off-peak index prices reported by the Intercontinental
Exchange (ICE), rather than non-firm prices reported by Dow Jones. Staff believes that the
practical effect of the change in indexes wil be very minor. Under additional terms in the
proposed Agreement, Stimson is required to pay $790 per month for sole use of facilties
installed, owned, operated and maintained by A vista. While facilties charges were inadvertently
omitted in the 2006 power purchase agreement, facilties charges for these dedicated facilities were
included in the 2003 power purchase agreement. A vista rebuilt its Plummer Substation in March
2009 and the facilties charges included in the current Agreement reflect the cost of the upgraded
dedicated facilties. Staff believes facilities charges are appropriate in this instace because they
compensate A vista for Stimson's use of dedicated facilties.
The Original Agreement made no reference to Renewable Energy Credits (RECs;
Environmental Attributes). The new Agreement defines them, but simply states that ownership
of RECs "shall be determined consistent with applicable State and Federal law." Staff believes
this is reasonable. Finally, under the new Agreement, Stimson is required to car and maintain
comprehensive general liability insurance of not less than $2 milion per occurence. This is an
increase from $1 milion in the Original Agreement. Order No. 29482 requires that general
liabilty insurance of at least $1 milion be carred by owners of PURP A projects. A vista
negotiated a higher minimum insurance requirement because it believes the $1 milion insurance
requirement of the Original Agreement may no longer be suffcient to cover the potential cost of
current industry claims. Staff does not oppose the $2 milion amount in the new Agreement since
it was mutully agreed upon by the Paries and exceeds the minimum requirement in Order No.
29482.
ORDER NO. 32436 2
Staff maintained that the only signficant difference between the proposed Agreement
and the Original Agreement is that the rates have been updated. Rates in the proposed
Agreement are the curent non-Ievelized rates from Order No. 32337. These rates are
approximately 12-14 percent less than the rates in the Original Agreement, due primarily to
lower natural gas prices. Staf recommended approval of the proposed Agreement without
change or condition, with an effective date of Januar 15,2012.
FINDINGS AND CONCLUSIONS
The Idaho Public Utilties Commission has jurisdiction over A vista, an electric
utilty, and the issues raised in this matter pursuant to the authority and power granted it under
Title 61 of the Idaho Code and the Public Utilty Regulatory Policies Act of 1978 (PURPA). 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 utilties to enter
into fixed-term obligations for the purchase of energy from qualified facilties (QFs) and to
implement FERC rules.
The Commission has reviewed the record in this case, including the Application, the
Agreement, and the comments of Staff. Based on the record, we find that the proposed
Agreement submitted in this case contains acceptable contract provisions including the curent,
non-Ievelized published avoided cost rates approved by the Commission in Order No. 32337.
We fuher find that the modifications regarding market energy cost, facilities charges, general
liabilty insurance and treatment of RECs are reasonable, negotiated terms between the Paries.
The proposed Agreement provides that "this Agreement shall be effective at 0000
hours on December 1, 2011, or such other date as ordered by the IPUC, ("Effective Date");
provided the Agreement is executed by the Paries on or prior to the (sic) December 1, 2011."
Agreement iì 5.1. The Commission finds that the Agreement shall become effective Januar 15,
2012. Regardless of any stated effective date, the published avoided cost rates do not change
between the Amendment approved by the Commission on October 13, 2011, and the proposed
Agreement. We also find it reasonable to allow payments made under the Agreement as
prudently incurred expenses for ratemaking puroses.
ORDER NO. 32436 3
ORDER
IT is HEREBY ORDERED that the Power Purchase Agreement executed between
Avista Corporation and Stimson Lumber Company on November 16,2012, is approved without
change or condition, effective Januar 15,2012.
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 ths Order. Within seven (7)
days afer any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilties Commission at Boise, Idaho this /3t*
day of Janua 2012.
PAULKJE
~Ak
MACK A. REDFORD, COMMISSIONER
~d~
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~tÆJ. D. Jew
Commission Secretary
O:A VU-E- i i -06 ks2
ORDER NO. 32436 4