20130614Comments.pdf

,—
NEIL PRICE
DEPUTY ATTORNEY GENERAL 7fl;3J’r i,.
IDAHO PUBLIC UTILITIES COMMISSION
POBOX$3720 iDHu U::;
BOISE,IDAHO 83720-0074 LtT1[;;JO;
(20$)334-0314
IDAHO BAR NO.6864
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 APPLICATION )
OF AVISTA CORPORATION FOR )CASE NO.AVU-E-13-02
APPROVAL OF ITS ELECTRIC SERVICE )
AGREEMENT WITH CLEARWATER )COMMENTS OF THE
PAPER CORPORATION.)COMMISSION STAFF
_____________________________________________________________________________________)
The Staff of the Idaho Public Utilities Commission,by and through its Attorney of Record,
Neil Price,Deputy Attorney General,in response to the Notice of Application,Notice of Modified
Procedure,and Order No.32622 issued on April 30,2013,submits the following comments.
BACKGROUND
On April 15,2013,Avista Corporation (“Avista”or “Company”)and Clearwater Paper
Corporation (“Clearwater”),collectively referred to as the “Parties,”filed a Joint Petition seeking the
Commission’s approval of their new Electric Service Agreement (“ESA”).The Parties’current ESA,
approved by the Commission in Case No.AVU-E-03-07,Order No.29418,began on July 1,2003,
and is set to expire on June 30,2013.
Clearwater is a corporation operating,among other things,a paper manufacturing facility
located in Nez Perce County,Idaho (the “facility”).Clearwater owns and operates a generation
system at the Facility that is capable of generating approximately 132.2 megawatts of energy
(hereinafter “Generation”).
STAFF COMMENTS 1 JUNE 14,2013
The Parties’new ESA is for a five-year term beginning on July 1,2013.The ESA provides
for the sale of energy to serve Clearwater’s load at the Facility and addresses Clearwater’s
generation.
The following is a synopsis of the essential terms of the Parties’new ESA:
1.The ESA will continue after the initial term on a year to year basis unless either Party
elects to terminate it with 90 days prior written notice to the other Party;
2.The ESA is conditioned upon approval by the Commission of the ESA as a settlement
of all known existing disputes between the Parties,without precedential value and without prejudice
to the Parties’positions on similar issues in the future;
3.Clearwater’s Generation shall be metered,consistent with Paragraphs 4(B)(ii)and 5 of
Schedule 63 of Avista’s Idaho tariff,such that Clearwater shall use the Generation to serve its load at
the Facility;
4.Clearwater shall purchase and receive from Avista all of the electric power
requirements at the Facility that exceed the electric power generated by Clearwater’s Generation.
Avista will continue to serve Clearwater’s additional power requirements under Avista’s “Extra
Large General Service To Clearwater Paper’s Facility”Schedule 25P rates,including all applicable
rate adjustments,unless the Commission issues an order in the future authorizing different billing
rates;
5.The Parties agree that all energy (kWh)consumption under the terms of this ESA will
be billed at Schedule 25P rates.For purposes of capacity/demand (“kVA”),all kVA billed above
55,000 kVA (“2nd Demand Block”)will be billed at an initial rate of $2.00 per kVA.The first 3,000
kVA will continue to be covered under a monthly flat rate (currently $12,500 per month),and the
next 52,000 kVA (“1st Demand Block”)will be billed at the current volumetric demand rate
(currently $4.50 per kVA);
6.If Clearwater generates electric power in excess of the electric power requirements of
the Facility,Clearwater will be credited for the excess kWh generated during the billing period in a
manner consistent with Paragraphs 4(B)(ii)and 5 of Schedule 63 of Avista’s Idaho tariff;
7.Clearwater is permitted,after 90 days written notice to Avista of its intent to terminate
the ESA,to sell the output of the Generation to any third party.Clearwater would be responsible for
making all necessary arrangements to facilitate the sale of the output of the Generation to any third
party.Once Clearwater begins selling the Generation to a third party,the 2nd Demand Block would
no longer be applicable and all kVA above 3,000 would be billed at the 1st Demand Block rate.
STAFF COMMENTS 2 JUNE 14,2013
The Parties propose that the change in revenues and expenses associated with the new ESA,
as compared with the revenues and expenses included in the last rate case for Clearwater,should be
tracked through the PCA at 100%.
The Parties request that the Commission direct Avista to file a revised Schedule 25P tariff
substantially similar to Exhibit B included in the ESA filing.
STAFF REVIEW
Staff has reviewed the joint Application including Exhibit A (Large Generator
Interconnection Agreement)and Exhibit B (Tariff Schedule 25P)and discussed these with Avista.
The new agreement represents the economic realities of today.As the existing agreement expires at
the end of June,Clearwater will generate into its own load because offsetting its retail rate has more
value to Clearwater than selling its generation at a lower PURPA rate.This has both PCA and base
rate implications to Idaho ratepayers.The PCA is expected to defer approximately $1.9 million per
year in lost net revenue due to the contract change.This would continue until the effects of the
proposed ESA are captured in base rates in a future general rate case.
Base rates are expected to change the next time they are established due to the changes in the
cost of serving Clearwater and the change in the Clearwater load.The cost of service study will
redistribute costs to the various customer classes,including Clearwater Paper.Attachment A to these
comments shows an estimate of the redistribution.Attachment A has three parts.The top third
shows cost of service results under the current ESA.The middle third shows expected cost of service
results under the proposed ESA with Clearwater generating into its own load.The bottom third
shows the difference between the two cost of service studies.The bottom third of Attachment A
shows an increase to the Idaho jurisdiction of approximately $1.9 million with approximately $1.4
million being assigned to Clearwater Schedule 25P.Even with this change,current Clearwater rates
remain above cost of service.All schedules except Schedules 11 and 21 move closer to cost of
service as a result of the proposed contract change.
In Staffs opinion there are three significant differences between the existing ESA and the
proposed ESA.First,Clearwater will generate into its own load instead of selling power to Avista
under a PURPA contract.Second,the proposed ESA creates a second block Demand Rate of
$2.00/kVa for monthly demands above 55,000 kVA.Under the existing ESA,demands above
55,000 kVA are included in the first block demand and billed at $4.50/kVA.Based on Avista’s
experience,it expects infrequent demand use above 55,000 kVA.Avista also believes that the
STAFF COMMENTS 3 JUNE 14,2013
negotiated $2.00/kVA rate will cover its costs.Third,Section 8 of the proposed ESA allows
Clearwater to bank generation that exceeds its monthly load and use it to offset intra-year loads for
billing purposes.Based on years of operating experience with Clearwater,Avista believes this
circumstance to be unlikely.
As Clearwater exercises its options to minimize its costs,these kinds of changes are
unavoidable.Clearwater has every right to generate into its own load.Staff believes that the new
ESA fairly represents the interests of Avista,Clearwater and Avista’s other customers.Staff believes
that the ESA should be approved.
STAFF RECOMMENDATION
Staff recommends Commission approval of the ESA,and the proposed accounting treatment,
as filed by Avista and Clearwater.Staff also recommends that Avista file a revised Schedule 25P
with an effective date of July 1,2013 as proposed in the Application.
Respectfully submitted this(ay of June 2013.
Deputy Attorney General
Technical Staff:Keith Hessing
I :umisc:comments/avue13 2npkhrps.doc
STAFF COMMENTS 4 JUNE 14,2013
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CERTIFICATE Of SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 14TH DAY OF JUNE 2013,SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF,TN CASE
NO.AVU-E-13-02,BY MAILING A COPY THEREOF,POSTAGE PREPAID,TO THE
FOLLOWING:
DAVID I MEYER MICHAEL S GADD
VP &CHIEF COUNSEL CLEARWATER PAPER CORP
AVISTA CORP 601 W RIVERSIDE AVE
POBOX3727 STE1100
SPOKANE WA 99220 SPOKANE WA 99201
[e-mail]
PETER J RICHARDSON
RICHARDSON &O’LEARY
P0 BOX 721$
BOISE ID 83702
peter@ri chardsonandoieary.corn
SECRETARY
CERTIFICATE OF SERVICE