20120208Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
RECEIVED
2012 FEB -8 AM 10: 17
IDAHO PUBLiC
UTiLITIES COMMIŠS10N
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT )
APPLICATION OF A VISTA CORPORATION )
AND KOOTENAI ELECTRIC COOPERATIVE )
FOR APPROVAL OF A POWER PURCHASE )AGREEMENT. )
)
CASE NO. A VU-E-12-01
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties 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. 32438 on Januar 18,2012,
in Case No. A VU-E-12-0 1, submits the following comments.
BACKGROUND
On January 9, 2012, Avista Corporation and Kootenai Electric Cooperative (Kootenai
Electric) (collectively, the Paries) fied a Joint Application with the Commission requesting
approval of a Power Purchase Agreement (Agreement) between A vista and Kootenai Electric.
Kootenai Electric is an electric cooperative, not regulated by the Commission, that proposes to own
and operate a landfill gas electric power generating facilty (the Project) located at the Kootenai
County Fighting Creek Solid Waste Facility near Bellgrove, Idaho. The Project is a qualifying
facility under the applicable provisions of the Public Utilty Regulatory Policies Act of 1978
STAFF COMMENTS 1 FEBRUARY 8, 2012
(PURPA) and is capable of generating up to 3.2 megawatts (maximum capacity, nameplate) of
energy.
STAFF ANALYSIS
Kootenai Electric initially approached Avista seeking to sell the output of the Facilty on a
long-term basis at a point of delivery within Idaho. However, Kootenai maintains that A vista would
not agree to disclaim ownership of the environmental attributes associated with generation by the
Facility (also known as renewable energy certificates or RECs), or to provide compensation for
such attributes. Rather than engage in protracted litigation over environmental attribute ownership
with A vista, Kootenai states that it decided to attempt to sell instead to the nearest investor-owned
utilty in the State of Oregon because the Oregon Public Utilties Commission requires its investor-
owned utilties to disclaim ownership of environmental attributes. Kootenai believes that Idaho
Power Company is the nearest utilty in another state to which it can most easily wheel the output
without operating at a substantial loss. Reference generally IPC-E-II-23, Kootenai Electric
Cooperative, Inc.'s Answer and Motion to Dismiss Idaho Power's Petition for a Declaratory Order.
Kootenai Electric is currently engaged in negotiations with Idaho Power to sell the output of
the Project on a long-term basis. Kootenai proposes that the Project wil interconnect with its own
electrical distribution system and then deliver the output to A vista. Kootenai Electric then proposes
to wheel the generation across Avista's system for delivery to Idaho Power. Idaho Power has fied
a Petition for a Declaratory Order asking that the Commission assert primar jurisdiction over the
proposed sale to Idaho Power and require that a power sales agreement between Kootenai and Idaho
Power be subject to Idaho's rates, rules and regulations. Reference Case No. IPC-E-II-23.
The purpose of this Agreement is to enable Kootenai Electric to sell the output produced by
the Project to A vista on a short-term basis, while Kootenai Electric pursues a long-term power sales
agreement with Idaho Power and while the parties try to resolve the issues in dispute in Case No.
IPC-E-II-23. The Agreement is proposed to extend for less than one year, until December 31,
2012, unless terminated earlier by the parties.
The Agreement states that Kootenai Electric wil generate and deliver and A vista wil
purchase the net output of the Project on an as-available basis. The Application outlines that Avista
wil purchase the Project's net output pursuant to Schedule 62 of its Idaho tarff at the lesser of (i)
85% of the weighted average of the daily on-peak and off-peak Dow Jones Mid-Columbia (Mid-C)
Non-Firm Index, or (ii) the applicable rate based upon the on-peak or off-peak published avoided
STAFF COMMENTS 2 FEBRUARY 8, 2012
cost rates for non-fueled projects smaller than ten average megawatts - non-Ievelized (avoided cost
rates) in effect on the effective date of the Agreement. Application at 3. Avista's Schedule 62 is a
tariff that reflects Idaho's published avoided cost rates for PURP A projects. Given that Mid-C
electric market prices are currently far below published avoided cost rates and that market prices are
forecasted to remain low for the remainder of 20 12, it is highly likely that the prices to be paid to
Kootenai wil be 85% of Mid-C non-firm rates rather than published rates.
Although very short-term, the proposed Agreement contains nearly the same terms and
conditions as A vista's recent contracts for other PURP A projects. Staff has carefully reviewed all of
the terms and conditions contained in the Agreement and believes they are fair, reasonable, and not
in conflct with prior Commission orders.
The Parties ask that the Commission approve the Agreement with an effective date of
Januar 5, 2012. However, the Agreement was not fied with the Commission until Januar 9,
2012. Consequently, because this is a new Project and a new Agreement, Staff recommends that
the Agreement commence on the effective date of the Commission Order approving the Agreement,
not on January 5, 2012 as requested.
RECOMMENDATIONS
Staff recommends that the Commission approve the Agreement without change or
condition, with an effective date commencing on the date of Commission approval. Staff further
recommends that the Commission declare that all payments made by A vista for purchases of energy
under the Agreement be allowed as prudently incurred expenses for ratemaking puroses.
ç,.IRespectfully submitted this 0 day of February 2012.
~;'QJtJ . ~~A. AKri A. Sasser ~
Deputy Attorney General
Technical Staff: Rick Sterling
i :umisc:comments/avue i 2. i ksrps comments
STAFF COMMENTS 3 FEBRUARY 8, 2012
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF FEBRUARY 2012,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-E-12-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
STEVE SILKWORTH MGR
AVISTA CORPORATION
1411 E MISSION AVE MSC-7
SPOKANE W A 99202
E-MAIL: steve.silkworth(iavistacorp.com
GREG ADAMS
RICHARDSON & O'LEARY
515 N 27TH ST
BOISE ID 83702
E-MAIL: greg(irichardsonandoleary.com
MICHAEL G ANDREA
A VIST A CORPORATION
1411 E MISSION AVE MSC-23
SPOKANE W A 99202
E-MAIL: Michael.andrea(iavistacorp.com
DOUG ELLIOTT
GENERAL MANAGER
KOOTENAI ELECTRIC CO-OP
2451 W DAKOTA AVE
HAYDEN ID 83835~0278
E-MAIL: dellott(ikec.com
SECrl~
CERTIFICATE OF SERVICE