20150730final_order_no_33350.pdf

Office of the Secretary
Service Date
July 30,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT )
PETITION OF AVISTA CORPORATION )CASE NO.AVU-E-15-06
AND CLEARWATER PAPER )
CORPORATION FOR APPROVAL OF )
AMENDMENT NO.1 TO THE ELECTRIC )ORDER NO.33350
SERVICE AGREEMENT )
On May 13,2015,Avista Corporation and Clearwater Paper Corporation (collectively
the “Parties”)filed a Joint Petition requesting that the Commission approve an amendment to
their Electric Service Agreement (“Agreement”)approved by the Commission in June 2013.See
Order No.32841.In their amendment dated May 4,2015,the Parties agreed to make two
modifications to their Agreement outlined in greater detail below.The Parties requested that
their Petition be processed under Modified Procedure with an effective date of August 1,2015.’
On June 3,2015,the Commission issued a Notice of Petition and Modified Procedure
requesting public comment on the Petition no later than July 17,2015.Commission Staff was
the only party to comment and recommended the Commission approve Amendment No.1.
BACKGROUND
The Parties’current Agreement provides that Clearwater will utilize its own
generating units to serve its load and that all electric power requirements in excess of the power
generated by Clearwater “shall be purchased and received from Avista.”Joint Petition at 2.
Avista serves Clearwater’s additional power needs under the utility’s Schedule 25P rates (Extra
Large General Service).By its terms,the current Agreement terminates on June 30,2018.Id.
AMENDMENTS TO THE AGREEMENT
As noted above,the Parties proposed two modifications to their Agreement.First,
while Clearwater uses its own generation to meet a portion of its energy needs,“it has additional
generating capacity that generally is not economical given current energy rates and wholesale
market conditions Joint Petition at 3.However,at certain times,the Parties contemplate
that wholesale energy prices may increase to a level that would make Clearwater’s ability to
produce additional capacity economical.During such periods,Avista may require additional
The Parties had initially asked for an effective date of July 1,2015.but subsequently agreed to Staff’s request to
extend the proposed effective date to August 1,2015.
ORDER NO.33350 1
generation “in order to meet its system load requirement,and in lieu of purchasing energy in a
higher price wholesale market,would instead purchase from Clearwater such ‘Incremental
Energy’at a mutually agreed upon price.”Id,The rate for the purchase of such Incremental
Energy is not set out in the amendment but will be “a mutually agreed upon price”at the time the
Parties agree to sell/purchase the Incremental Energy.The Parties maintain that the ability to
purchase such Incremental Energy would benefit both Clearwater and Avista by providing a
lower cost alternative to making market purchases.
Second,the Parties have agreed to extend the length of their existing Agreement by
three years,to now terminate on June 30,2021.Instead of continuing the existing Agreement on
a year-to-year basis (see Section 2 of the Agreement),the Parties maintain that the three-year
extension allows them to plan for both generation by Clearwater and meeting customer demand
by Avista.
STAFF COMMENTS
Staff recommended the Commission approve the proposed changes to the Parties’
current Agreement.Staff observed that Avista will be able to call upon Clearwater to provide
Incremental Energy at times when it is needed by Avista,and Clearwater will receive additional
revenue when it is able to deliver Incremental Energy.Staff noted that Avista must first request
that Clearwater generate the Incremental Energy and the Parties must agree upon a price for such
Incremental Energy.
Incremental Energy
Staff expected the production of Incremental Energy to occur only under two
circumstances.First,the price of Incremental Energy must be advantageous to Avista when
wholesale market prices are higher than the cost of Clearwater’s additional generation.Second,
extremely low natural gas or biomass fuel prices would probably have to exist,making the
generation of Clearwater’s Incremental Energy below wholesale market prices.Comments at 3.
Excess Energy
Also under the current Agreement,Clearwater is permitted to generate “Excess
Energy.”Excess Energy is a condition where Clearwater generates more electric power than is
required to meet its own obligations.Id.Under the terms of the present Agreement,Avista
credits Clearwater for any excess power generated during a billing period in a manner consistent
with its Net Metering Schedule 63.Avista reported in a response to Staff Production Request
ORDER NO.33350 2
No.4 that Clearwater has not produced a single hour of Excess Energy between 2005 and the
present.Id.at 4.
Contract Extension
Finally,Staff also supported the Parties’Amendment to extend the current contract
by three years,or until June 30,2021.All other provisions of the current Agreement will remain
the same.Id.Consequently,Staff recommended the Commission approve Amendment No.1 to
the Electric Service Agreement between Avista and Clearwater without change or condition.
DISCUSSION AND FINDINGS
Based upon our review of the Parties’Petition,the Amendment,and Staff comments,
we approve the two amendments to the Parties’Electric Service Agreement with one additional
condition.Generally,we find that Avista’s ability to purchase Incremental Energy from
Clearwater in certain conditions would be beneficial to both parties and ratepayers.In addition,
we adopt the Parties’proposal to extend their existing Agreement by three years to now
terminate on June 30,2021.
The Commission finds that one additional condition is appropriate.Idaho Code §
61-502 and 61-503.The Parties acknowledge that the rates for the purchase for such Incremental
Energy is not set out in the Amendment.Section 1.2 simply states that Avista and Clearwater
will “mutually agree upon [the]price in writing....“We understand the costs of such
Incremental Energy will be included in its net power supply costs and normally recovered
through Avista’s annual Power Cost Adjustment (PCA)mechanism.If the Parties agree to the
generation and purchase of Incremental Energy,then Avista will report such purchase of
Incremental Energy to the Commission Secretary showing the details of such purchase within 14
days of such purchase.This reporting requirement will allow Staff to track the purchase of
Incremental Energy as part of Avista’s annual PCA mechanism.
ORDER
IT IS HEREBY ORDERED that Amendment No.1 to Avista and Clearwater’s 2013
Electric Service Agreement is approved as conditioned below.
IT IS FURTHER ORDERED that when Avista purchases Incremental Energy from
Clearwater under the terms of the amended Agreement,Avista shall report such purchases to the
Commission Secretary within 14 days of the purchase transaction and provide the details of the
transaction.
ORDERNO.33350 3
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)or in interlocutory Orders previously issued in this Case No.AVU-E-15-
06 may petition for reconsideration within twenty-one (21)days of the service date of this Order
with regard to any matter decided in this Order.Within seven (7)days after any person has
petitioned for reconsideration,any other person may cross-petition for reconsideration.See
Idaho Code §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 3O
day of July 2015.
PAiJL KJE L DE ,PRESIDT
K STINE RAPER,COMMISSIONER
ATTEST:
D.Jewel]l
Cbmmission secretary
bls/O:AVU-E-I 5-O6don2
ORDER NO.33350 4