20111230Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
Dec E!"L ¡i \.L.,J t~' ,"c'_" f...
iot ¡ DEC 30 PM 3: 29
Street Address for Express mail
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF A VISTA CORPORATION
AND STIMSON LUMBER COMPANY FOR
APPROVAL OF A POWER PURCHASE
AGREEMENT.
)
) CASE NO. A VU-E-1l-6
)
) COMMENTS OF THE
) COMMISSION STAFF
)
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 32412 on December 15,
201 1, submits the following comments.
BACKGROUND
On November 25,2011, Avista Corporation and Stimson Lumber Company (the Parties)
fied a Joint Application with the Commission requesting approval of a five-year Power Purchase
Agreement (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 (QF) 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 Application states that, upon its effective date, the Agreement wil replace the power
purchase agreement (Original Agreement) between the Paries originally approved by the
STAFF COMMENTS DECEMBER 30,2011
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 Parties
or January 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.
The Paries have now completed their negotiations and have executed an Agreement
which is presented for Commission approval.
STAFF ANALYSIS
The new Agreement differs from the Original Agreement in several ways. Each of these
differences is discussed below.
Rates
Undoubtedly, the most significant difference between the new Agreement and the
Original Agreement is that the rates have been updated. Rates in the new Agreement are the
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.
Market Energy Definition
Market Energy Cost has been redefined in the new 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. ICE daily on-peak and off-peak prices are
not equivalent to non-firm Dow Jones prices, nevertheless, the differences are relatively small.
ICE prices are much more readily available than Dow Jones prices, and are more commonly used
in the Northwest. In addition non-firm energy is now very thinly traded on Dow Jones, making
Dow Jones prices no longer a very representative index for valuing surplus energy in PURP A
contracts. Staff believes that the practical effect of the change in indexes wil be very minor.
STAFF COMMENTS 2 DECEMBER 30, 2011
Renewable Energy Credits
The Original Agreement made no reference to Renewable Energy Credits (RECs;
Environmental Attributes). The new Agreement defines them, but simply states that ownership
ofRECs "shall be determined consistent with applicable State and Federal law." Both parties
agree that the facility has the potential to generate RECs and that those RECs may have some
value either in satisfying future state or federal requirements or as a marketable commodity.
However, both paries are apparently amenable to leaving the disposition ofRECs up to some
future determination given that REC ownership is curently undecided in Idaho. Staff also
believes this is reasonable.
General Liabilty Insurance
Under the new Agreement, Stimson is required to cary and maintain comprehensive
general liabilty insurance of not less than $2 milion per occurrence. This is an increase from
$ 1 milion in the Original Agreement. Order No. 29482 requires that general liability insurce
of at least $ 1 milion be carried by owners of PURP A projects. A vista negotiated a higher
minimum insurance requirement because it believes the $1 millon insurance requirement of the
Original Agreement may no longer be suffcient to cover the potential cost of current industry claims.
Staff has no objection to the $2 milion amount in the new Agreement since it was mutually
agreed upon by the parties and exceeds the minimum requirement in Order No. 29482.
Facilties Charges
Stimson is required under the new Agreement to pay $790 per month for sole use of
facilities installed, owned, operated and maintained by A vista. While facilties charges were
inadvertently omitted in the prior power purchase agreement dated October i, 2006, facilities charges
for these dedicated facilties were included in the previous power purchase agreement dated
July 1,2003. Avista rebuilt its Plummer Substation in March 2009 and the facilities charges
included in the current Agreement reflect the cost of the upgraded dedicated facilities. Staff believes
facilities charges are appropriate in this instance because they compensate A vista for Stimson's
use of dedicated facilties.
STAFF COMMENTS 3 DECEMBER 30,2011
Staff believes that the only significant difference between the new and Original
Agreement is the revised rates. The rates in the new Agreement conform with the current rates
contained in Order No. 32337. All of the other differences are either minor or are mutually
acceptable to both paries.
RECOMMENDATION
Staff recommends that the Commission approve the Agreement without change or
condition, with an effective date of January 15,2012, and declare that all payments made by
A vista for purchases of energy under the Agreement be allowed as prudently incurred expenses
for ratemaking puroses.
Respectfully submitted this ?: cy day of December 201 1.
~L..d. ~A"t; A. Sasser -=
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:comments!avue i i .6ksrpscomments.doc
STAFF COMMENTS 4 DECEMBER 30, 2011
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 30TH DAY OF DECEMBER 2011,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-E-II-06, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
STEVE SILKWORTH MGR
A VISTA CORPORATION
1411 E MISSION AVE MSC-7
SPOKANE WA 99202
E-MAIL: steve.silkworth(Ðavistacorp.com
JEFF WEBBER
VP - MANUFACTURING
STIMSON LUMBER
520 SW YAMHILL STE 700
PORTLAND OR 97204
E-MAIL: jwebber(Ðstimsonlumber.com
MICHAEL G ANDREA
A VISTA CORPORATION
141 IE MISSION AVE MSC-23
SPOKANE W A 99202
E-MAIL: Michael.andrea(Ðavistacorp.com
PRESIDENT & CEO
STIMSON LUMBER
STE 700
520 SW YAMHILL
PORTLAND OR 97204
JJ~~.~
SECRETARY
CERTIFICATE OF SERVICE