20131206Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:RICK STERLING
DATE:DECEMBER 6,2013
RE:JOINT PETITION OF AVISTA CORPORATION AND KOOTENAI
ELECTRIC COOPERATIVE,INC.FOR APPROVAL OF AMENDMENT
TO POWER PURCHASE AGREEMENT;CASE NO.AVU-E-12-01
On November 20,2013,Avista Corporation (“Avista’)and Kootenai Electric
Cooperative,Inc.(“KEC”)submitted ajoint petition seeking Commission approval of an
amendment to an existing power purchase agreement (Amendment).
KEC is an electric cooperative with its headquarters in Flayden,Idaho,that owns and
operates a landfill gas electric power generating facility located at the Kootenai County Solid
Waste Facility near Bellgrove,Idaho (‘Facility’).The Facility has a nameplate capacity of
approximately 3.2 MW.The Facility is a Qualifying Facility pursuant to the Public Utility
Regulatory Policies of Act of 1978 (“PURPA”).
Under the power purchase Agreement,KEC generates and delivers the net output of its
Facility to Avista’s electric system on an as-available basis.The Agreement was originally
approved by the Commission in OrderNo.32459 issued in Case No.AVU-E-12-01 on February
15,2012.The term of the Agreement was originally due to expire on December 31,2012.A
First Amendment extended the term of the Agreement for another year,through December 31,
2013.This Second Amendment extends the term of the Agreement for an additional year,
through December 31,2014.
On a long-term basis,Kootenai desires to sell the Facility’s output to Idaho Power,rather
than to Avista.See Case No.IPC-E-11-23,That proceeding is yet to be fully resolved,so in the
DECISION MEMORANDUM -I -DECEMBER 6,2013
meantime,Kootenal needs to extend its existing sales Agreement with Avista in order to
continue to sell the Facility’s output.
For the term of the Agreement,Avista will purchase the net output of the Facility that is
delivered to the point of delivery.Avista will purchase such net output (up to a maximum of 10
aMW)at a rate equal to the lesser of 0)85 percent of the weighted average of the daily on-peak
and off-peak Powerdex Mid-Columbia I-burly Index,or (ii)the applicable rate based upon the
On-Peak or Off-Peak Avoided Cost Rates For Non-Fueled Projects Smaller Than Ten Average
Megawatts -Non-Levelized in effect on the effective date (“Avoided Cost Rates”).
Under the terms of the original Agreement and the First Amendment,purchases by
Avista were to be made at a rate based on the Dow Jones Mid-Columbia Non-Firm Index.Under
this Second Amendment,the parties have instead based pricing on the Poverdex Hourly Index.
The change from a Dow Jones Non-Firm Index to a Powerdex Hourly Index is necessary’
because the Dow Jones Index is now published by Platts instead of Dow Jones,and Avista does
not subscribe to the Plans Index.Avista believes that the Powerdex I-burly Index is a reasonable
substitute for the Dow Jones Non-Firm Index.A comparison provided by Avista indicates that
while the two indices differ on a daily and hourly basis,they are very similar over time.Staff
believes that the Powerdex Hourly Index is a reasonable proxy for the Dow Jones Non-Firm
Index and provides a fair price for the energy product delivered by KEC.’
Staff has reviewed the Amendment to confirm that the rates contained in Exhibit D have
been properly updated to include the Commission-approved published avoided cost rates for
2014.Pursuant to the Amendment,the Agreement shall continue through December 31,2014,
unless the Agreement is terminated earlier pursuant to its terms.KEC may terminate the
Agreement at any time during the term by providing Avista written notice 30 days before such
termination.
Avista and KEC jointly request that the Commission issue an order (i)accepting the
Agreement as amended by the Amendment,without change or condition,with an effective date
The continued use of the Dow Jones Non-Firm Index for pricing non-firm energy,and the mathematical mechanics
of how the index is applied,are currently at issue in case !PC-E-13-19.Idaho Wind Partners!,LLC v.Idaho Power
Company,as well as Idaho Power TariffAdvice No.13-05,Revisions to Schedule 86-Cogeneration and Small
Power Production Non-Firm Energy.Although Staff believes that the substitution of the Powerdex Hourly Index
for the Dow Jones Non-Firm Index is appropriate for this Second Amendment,Staff does not believe that its
recommendation should set a precedent for any positions the Staff may take or any decisions the Commission may
make in either of the ongoing Idaho Power proceedings.
DECISION MEMORANDUM -2-DECEMBER 6,2013
of Januan’1.2014,and (ii)declaring that all payments made by Avista for purchases of energy
under the Agreement be allowed as prudently incurred expenses for ratemaking purposes.
STAFF RECOMMENDATIONS
Because the proposed Amendment simply extends the existing Agreement for another
year under its original terms,StafT does not believe further process or procedure is necessary.
Staff recommends approval of the proposed Amendment,without change or condition,with an
effective date of January 1,2014.Staff further recommends that the Commission declare that all
payments made by Avista for purchases of energy under the Agreement be allowed as prudently
incurred expenses for ratemaking purposes.
COMMISSION DECISION
I.Does the Commission wish to approve the amended Agreement jointly submitted by
Avisla and KEC to extend their existing power sales Agreement by one year without
change or condition,with an effective date of January 1,2014 without further
process?
2.Does the Commission wish to declare that all payments made by Avista for purchases
of energy under the Agreement be allowed as prudently incurred expenses for
raternaking purposes?
11 M
Rick Sterling
Udmcmos/avuelOj dm2O4
DECISION MEMORANDUM -3 -DECEMBER 6,2013