20140530final_order_no_33048.pdf

Office of the Secretary
Service Date
May 30.2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION FOR )CASE NO.AVU-E-14-03
APPROVAL OF PROPOSED REVISIONS TO )
SCHEDULE 62.)ORDER NO.33048
________________________________________________________________________________________
)
On March 28,2014,Avista Corporation filed an Application proposing revisions to
its tariff Schedule 62,Cogeneration and Small Power Production Schedule.Avista asked that its
Application be processed by Modified Procedure.The Company also requested that its proposed
changes be effective as of May 5,2014.The Commission issued a Notice of Application and
Notice of Modified Procedure on April 24,2014.Order No.33028.The Commission suspended
Avista’s proposed May 5,2014,effective date and set a comment deadline of May 15,2014.
Several interested persons filed comments on or before May 15,2014.Avista filed a
reply on May 23,2014.By this Order,we approve the Company’s Schedule 62 as more fully
described herein.
BACKGROUND
Avista’s Application was submitted in response to workshops held between parties to
the GNR-E-1 1-03 case.The Commission’s final Order in GNR-E-1 1-03 noted that multiple
parties to the case submitted proposals regarding Commission approval of contracting
procedures and rules for utilities and QFs.The Commission stated that a fair and consistent set
of rules “would reduce confusion and provide more certainty regarding the expectations of all
contracting parties.”Order No.32697 at 48.The Commission directed the parties to participate
in workshops in order “to begin to form a structure for fair and reasonable contracting
procedures and rules.”Id.The parties collaborated and,ultimately,submitted a draft tariff to the
Commission that utilities could use as a model in the creation of a utility-specific tariff.
THE APPLICATION
Avista maintains that its proposed tariff revisions provide procedures to be used by
Avista and QF developers in negotiating and entering into power purchase agreements for the
sale of the electrical output of QFs to Avista under PURPA at avoided cost rates.
ORDER NO.33048
Avista asserts that the proposed procedures generally (I)detail the information QF
developers are to provide to the Company;and (2)provide timelines for both QF developers and
Avista to follow in the process for negotiating and entering into a power purchase agreement.
n addition to proposing procedures for negotiating and entering into PURPA
contracts,Avista proposes to change the definition of “Market Energy Rate”to reference the
PowerDex hourly Mid-Columbia (“Mid-C”)index instead of the Intercontinental Exchange
(“ICE”)non-firm energy index.
COMMENTS
C’oinmission Staff
Staff filed comments on May 15,2014.Staff noted that Avista’s Application and
proposed Schedule 62 accurately reflect the outcome of the GNR-E-11-03 workshops on all
issues where consensus could be reached.Staff,therefore,focused its comments on areas where
the parties could not agree.
Staff maintained that the question of how long a utility’s indicative pricing should he
effective was the subject of much debate at the workshops.Section D(ii)b of the “Contracting
Procedures”section of Avista’s proposed Schedule 62 requires that as one condition for making
indicative pricing binding on the parties,in the event the parties do not agree to execute a
contract,the QF must file a meritorious complaint with the Commission alleging a legally
enforceable obligation has arisen and be able to deliver its electrical output within 180 days of
such determination.
Staff argued that a balance must be struck between a utility’s need to prevent “stale”
pricing of QF agreements and a QF’s need for certainty in rates in order to secure financing and
complete construction.Staff conducted an analysis of all past PURPA contracts in order to
examine the time difference between when a contract was signed and the QF’s scheduled
operation date.The results showed that approximately 50 percent of projects specify an on-line
date within 365 days (one year)of contract signing.Approximately 90 percent specify an on
line date within two years.Based on this analysis,Staff proposed that a QF be able to deliver its
electrical output within 18 months,rather than the 180 days proposed by Avista.Staff argued
that 18 months represented a fair compromise between rate staleness and rate certainty.
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Staff does not oppose Avista’s proposal to utilize the PowerDex hourly index in a
determination of what constitutes a “Market Rate.”Staff recommended that Avista’s revised
Schedule 62 be effective June 1,2014.
Sagebrush Energy,LLC
Sagebrush Energy filed comments on May 15,2014.Sagebrush generally agreed that
contract milestones and procedures would be beneficial to all parties.However,Sagebrush took
exception to some of Avista’s proposed revisions.First,Sagebrush argued that Avista’s proposal
regarding short-term rates should apply to all QFs,regardless of size.In addition,Sagebrush
recommended that Avista provide a “standard”short-term,as available tariff contract “to
facilitate execution of market based pricing sales.”Comments at 3.
Next,Sagebrush argued the tariff should specify that QF projects not eligible for
published rates may obtain rates based on the utility’s integrated resource planning methodology.
Sagebrush further disagreed with several of the provisions contained in Avista’s proposed
indicative pricing and draft contract language.Sagebrush also recommended changes to the
proposed timelines for contract negotiations and the requirements for completion of
interconnection studies.With regard to the proposed timelines,Sagebrush suggested that Avista
could respond more quickly to a QF’s requests during negotiations,but that a QF project
required more time than proposed in order to execute a contract.
Finally,Sagebrush maintained that “Avista has proposed to create a new set of
criteria for how a QF may create a legally enforceable obligation (‘LEO’)under 18 C.F.R.§292.
304(d)(2),”Comments at 7.Sagebrush argued that the proposed tariff language of Section D
requiring the QF to demonstrate its ability to deliver power within 180 days would “constitute a
major policy change in the Commission’s implementation of PURPA and determination of how
a QF may create a LEO.”Id.at 8.Consequently,Sagebrush recommended that language
referring to a QF’s ability to deliver within 180 days be deleted.
In addition to filing comments,Sagebrush Energy also petitioned to intervene on May
15,2014,pursuant to the IPUC Rules of Procedure 71 through 75.IDAPA 31.01.01.071-.075.
The Commission did not find it necessary to explicitly define an intervention deadline for this
case.However,to the extent that Sagebrush believes it needs to intervene in order to fully
participate as a party,we grant its Petition.
ORDER NO.33048 3
idaho conservation League
The Idaho Conservation League (ICL)filed comments on May 15.2014.ICL
generally agreed with Avista’s proposed changes with a few exceptions.As with Sagebrush
Energy,ICL noted that the tariff did not contain provisions for rates for non-published rate
contracts.ICL recommended that Schedule 62 include contracts with rates calculated using the
IRP methodology.ICL also suggested several changes that it believed would clarify and
streamline the contracting process,including shortening some of the timeframes for utility
response and lengthening the timeframes for QFs.
TCL argued that ‘Subsection D imposes a new standard to creating a binding legal
obligation between Avista and Qualifying Facilities.”ICL recommended that the requirement
for a QF to ensure energy delivery within 180 days of approval of a power purchase agreement
be struck from the tariff.
Public Comment
One public comment was received in response to Avista’s proposed tariff revisions.
The Avista customer encouraged the Commission to carefully consider the Application in order
to avoid ‘squeez[ing1 out alternative energy systems either by low pricing or
unnecessary/unrealistic requirements.”
A vista ‘S Reply
Avista filed reply comments on May 23.2014,directly addressing the concerns of the
commenters to this case.Avista agreed that Schedule 62 should reference and include contracts
entered into based on IRP methodology pricing.Avista also agreed to revise the limiting
language (“but not limited to”)of some of its requirements within the contracting procedures.
The Company further agreed to eliminate the language regarding requirements for
interconnection studies.Avista also agreed to change some of the timelines for responses,but
supported the need for the proposed timelines in other instances.
The Company responded to comments regarding the final and binding nature of
pricing by stating that “the QF contracting procedures being proposed in this filing are intended
to all but eliminate the necessity of exercising this provision.Where both parties bargain in good
faith and are responsive within the timelines proposed in the revised tariff,the QF should have a
defined schedule to obtain pricing that can be used in their project plans.”Reply at 3.Avista
expressed a willingness to consider something more than 180 days to ensure the delivery of
ORDER NO.33048 4
energy,but “believes a balance is necessary between providing a QF long-term put option’with
enough optionality to complete most or all of the tasks associated with developing a new
resource,and contract pricing becoming stale to the disadvantage of utility customers.”Id.at 4.
Avista recommended that the 180 days in Section D(ii)(b)be revised to allow a QF 365 days to
deliver its electrical output from a determination that a legally enforceable obligation has arisen.
FINDINGS AND CONCLUSIONS
The Idaho Public Utilities Commission has jurisdiction over Avista,an electric and
gas utility,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 Utility Regulatory Policies Act of 1978
(PURPA).The Commission has authority under PURPA and the implementing regulations of
the Federal Energy Regulatory Commission (FERC)to set avoided costs,to order electric
utilities to enter into fixed-term obligations for the purchase of energy from qualified facilities
(QFs)and to implement FERC rules.
The Commission has reviewed the record,Avista’s Application,and the comments of
the persons and parties to the case.Avista is the first electric utility to respond to this
Commission’s determination that both utilities and QFs would benefit from a fair and consistent
set of rules and contracting procedures in negotiating a PURPA agreement.See generally GNR
E-l 1-03,Order No.32697.We encourage the remaining electric utilities to consider the
progress made through the workshops and contemplate submission of a similar tariff that might
eliminate or reduce the uncertainty that is somewhat inherent in negotiations between utilities
and QFs.
We appreciate the thoughtfulness of the commenters’suggested changes.We also
commend Avista for its responsiveness on reply to the comments filed in this case.We find it
fair,just and reasonable to approve the redlined version of Avista’s proposed tariff submitted by
the Company on May 23,2014,in its reply.
The approved tariff addresses and corrects nearly all of the concerns voiced by
commenters.Section D regarding whether and when indicative pricing becomes stale does not
insert new language or requirements for a legally enforceable obligation.The determination of a
legally enforceable obligation is a separate and distinct ruling to be made by this Commission.
The intent of creating rules and timelines to guide the negotiations process for PURPA projects,
as discussed in great depth through the workshops,is to create more certainty for both parties,to
ORDER NO.33048 5
ensure that both parties are bargaining in good faith,and to prevent avoided cost rates from
becoming stale.PURPA,FERC regulations,and this Commission’s precedent require that the
avoided cost rates paid to a QF are an accurate reflection of the costs that the utility avoid by
purchasing the QF energy.Stale rates are not an accurate reflection of the utility’s true avoided
costs.
We find it reasonable and just to allow a QF 365 days to deliver its electrical output
from a determination that a legally enforceable obligation has arisen.Based on the analysis of
Staff,approximately half of all QF projects in Idaho have been negotiated,built and operational
within that timeline.Moreover,avoided cost rates are updated annually.Implicit within that
function is the recognition that significant changes can occur within a 365-day period that can
affect rates.We recognize that a QF requires some assurance regarding the rate that it will be
paid for the energy it produces.However,that assurance cannot he indefinitely provided to the
ultimate detriment of the utility’s ratepayers.
We further find it reasonable for Avista’s approved tariff to become effective on June
1,2014.
ORDER
IT IS HEREBY ORDERED that the Application of Avista Corporation proposing
revisions to Schedule 62 is approved,as more fully described herein.
IT IS FURTHER ORDERED that the approved changes be effective June 1,2014.
IT IS FURTHER ORDERED that the Petition to Intervene filed by Sagebrush
Energy,LLC,is granted.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (2 1)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §6 1-626.
ORDER NO.33048 6
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 3O’
day of May 2014.
ATTEST:
MACK A.REDFRD,COMMISSIONER
MARSHA H.SMITH,COMMISSIONER
/1 /1 n
Jean D Jewell
Cmmission Scretary
O:AVU-E-1 4-03ks2
ORDER NO.33048 7