20150227Kalich Direct.pdf

MICI{AEL AIiIDREA
SENIOR COUNSEL
AVISTA CORPORATION
P.O. BOX 3727
1.41.L EAST MISSION AVENUE
SPOI(ANE, WASHINGTON 99220 -3727
TELEPHONE: [phone]
EIqAIL: michael. andrea@avistacorp. com
BEFORE THE IDAIIO PT'BI,IC UTII,ITIES COMMISSTON
IN THE IUATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR A
PETITION TO MODIFY TERMS AND
CONDITIONS OF PROSPECTTVE PURPA
AGREEMENTS
cAsE NO. AVU-E-l.5-Ol
DIRECT TESTIMONY
OF
CLINT KALICH
FOR AVISTA CORPORATION
(ELECTRIC)
1
2
3
4
5
6
7
I
9
1_0
t- t-
1,2
l_3
1,4
15
15
t7
t_8
1,9
20
2L
22
23
I. IMTRODUCTION
O. Please state your nErme, the
employer, and your buEiness addrees.
A. My name is C1int Kalich. I
Avista Corporati-on at 141-1 East Mission
of your
am employed by
Avenue, Spokane,
I{ashington.
A. In what capacity are you employed?
A. f am the Manager of Resource Planning & Power
Supply Analyses in the Energy Resources Department of
Avista Utilities.
A. Please state your educational background and
prof essional experience.
A. I graduated from Central hlashington Universj-ty
in L991- with a Bachelor of Science Degree in Business
Economics.Shortly after graduation, I accepted an
analyst position with Economic and Engineering Services,
Inc. (now EES Consulting, Inc.), a Northwest management-
consulting firm located in Be11evue, Washington. Wh11e
employed by EES, I worked primarily for municipalities,
public utility districts, and cooperatives in the area of
electric utility management. My specific areas of focus
were economic analyses of new resource development, rate
case proceedJ-ngs involving the Bonneville Power
Kalich, Di 1
Avista Corporation
l_
2
3
4
5
6
7
8
9
l_0
1l_
1,2
13
1,4
15
t6
l7
r_8
t9
20
21,
22
23
24
Administration,integrated ( least-cost)resource
planning, and demand-side management program development.
In late L995, I left Economic and Engineering
Services, Inc. to join Tacoma Power in Tacoma,
Washington. I provided key analytical and policy support
in the areas of resource development, procurement, and
optimization, hydroelectric operations and re-Iicensj-ng,
unbundled power supply rate-making,contract
negotiations, and system operations. I helped develop,
and ultimately managed, Tacoma Power's industrial market
access program serving one-quarter of the company's
retail 1oad.
In mid-2000 I joined Avista Utilities and accepted
my current position assisting the Company in resource
analysis, dispatch modeling, resource procurement,
integrated resource planning (IRP), and rate case
proceedings. Much of my career has involved resource
dispatch modeling of the nature described in this
testimony.
a. What relief is the Company requesting in this
proceeding?
A. Avista reguests the Commission provide the
Company the same relief granted Idaho Power in Order No.
33222, namely to limit the maximum required contract
Kalich, Di 2
Avista CorporatJ-on
1
2
3
4
5
6
7
8
9
10
11
L2
13
1,4
15
1,6
t7
18
1,9
20
21,
22
23
24
terms for "IRP Methodology" wind and solar PURPA
contracts to five (5) years. A term beyond five (5)
years should be an option for the utility in the event a
very favorable PURPA opportunity arises. Avista also
requests that the Commission provide the Company with any
other interim or final relief granted to any oEher
utility subject to PURPA in the State of fdaho.
a. Why ie Avigta requeeting relief?
A. Developers generally look for the highest
returns on their projects, including the certainty of
long-term fixed-price contracts. QF developers appear to
prefer longer-term contracts. This may be because the
long-term price certainty makes it easier to finance
their projects. The ldaho experience with wind, and now
so1ar, bears this out. Developers have consistently
favored Idaho Power, the utility with the highest
calculated avoj-ded cost rates for PURPA projects ("QFs")
that gualify for such rates. Accordingly, if Avista is
required to enter into QF contracts with a longer term
than Idaho Power is reguired to enter, QF developers may
choose a longer-term contract with Avista rather than a
five-year contract with Idaho Power.
a. Can you provide a apecific example illuetrating
how a PTRPA developer might chooee a 20-year contract
Kalich, Di 3
Avista Corporation
1
2
3
4
5
6
7
8
9
l-0
L1
1,2
13
l4
15
15
t7
r-8
1,9
20
2t
22
23
from Avista rather than a five-year contract from Idaho
Power?
A. Yes.Kootenai Electric Cooperative
("Kootenai"), located in the state of fdaho, requested an
Oregon 20-year PURPA contract from Idaho Power for its
Iandfi11 gas project. This was rational economic
behavior because the terms of Idaho Power's Oregon PURPA
contract were, even with some additional transmissj-on
costs, more favorable at that time than the alternatj-ves,
including a long-term contract with Kootenai's
neighboring utility, Avista.
Due to a dispute over the delivery point, Kootenai
decided that during the dispute it would deliver the
output from its QF to Avista under a short-term QF
contract. Again, this decision demonstrated rational
economic behavior because, while Avista's long-term rates
were much lower than Idaho Power's, Avista's short-term
rates were similar to Idaho Power's short-term rates. By
selling to Avj.sta under a short-term QF contract,
Kootenai was able to retain flexibility to enter into a
long-term Oregon QF contract with Idaho Power if it
prevailed in its dispute and, in the interim, could
obtain a rate from Avista similar to Idaho Power's.
Kalich, Di 4
Avista Corporatj-on
L
2
3
4
5
6
7
I
9
l_0
11
1,2
13
l4
l_5
1,5
l7
t-8
L9
20
2t
22
23
24
O. Did Kootenai make any other decisions that, in
your opinion, demonstrate the tendency of PITRPA
developers to seek the best overall prices and terms for
their output?
A. Yes. Though Kootenai's project was located in
Idaho, it chose to se11 its output to Idaho Power in
Oregon where the terms of Idaho Power's PURPA contracts
were even more favorable than in the state of Idaho. In
fact, in order to obtain an oregon QF contract from Idaho
Power, Kootenai took the issue regarding whether its
output would be delivered to Idaho Power in Idaho or in
Oregon to the Federal Energy Regulatory Commj-ssion
("FERC"). Kootenai ultimately obtained a ruling that its
output would be delivered to Idaho Power in Oregon. This
later step demonstrates just how sophisticated and
motivated PURPA developers are to identify and obtain the
PURPA contract with the most favorabLe terms.
O. Do you think that PTRPA developers might find a
2O-year PITRPA contract with Avista more favorable than a
five-year contract with Idaho Power?
A. Yes. As explalned above, developers look for
the PURPA contract with the terms that are most favorable
to them. PURPA rates for a 2O-year term are generally
higher than PURPA rates for a S-year term. Therefore, in
Kalich, Di 5
Avista Corporation
L
2
3
4
5
the absence of the ability to
Power PURPA contract, wind and
will pursue longer-term contracts
O. Doea this conelude your
A. Yes
obtain a 20-year Idaho
solar developers 1ike1y
with Avista.
testimony?
Kalich, Di 6
Avista Corporation