20150527Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER RAPER
COMMISSION SECRETARY
COMMISSION STAFF
DAPHNE HUANG

FROM: DON HOWELL
DEPUTY ATTORNEY GENERAL

DATE: MAY 27, 2015

SUBJECT: AVISTA AND CLEARWATER PAPER’S PETITION TO AMEND THEIR
ELECTRIC SERVICE AGREEMENT, CASE NO. AVU-E-15-05

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 request that their Petition be processed under Modified
Procedure and seek an effective date of August 1, 2015.1
BACKGROUND
Clearwater operates a paper manufacturing facility located in Lewiston, Idaho. Clearwater
owns and operates several generating units that are capable of generating approximately 132.2 megawatts
(MW). Joint Petition at 2. Clearwater maintains that its four generating units are qualifying cogeneration
facilities (QFs) under the Public Utility Regulatory Policies Act (PURPA). Id. Clearwater’s plant is
located in Avista’s Idaho service territory. The current Agreement is a non-PURPA contract.
By its terms, the current Agreement terminates on June 30, 2018. Joint Petition at 2. The
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.” Id. Avista serves Clearwater’s additional power needs under Avista’s Schedule
25P rates (Extra Large General Service).

1 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.
DECISION MEMORANDUM 2
FIRST AMENDMENT TO THE AGREEMENT
As noted above, the Parties have agreed upon two modifications to their Agreement. First,
while Clearwater uses its own generation to meet some 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 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 rates 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
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), the Parties maintain that the three-year extension allows them to plan for both generation
by Clearwater and meeting customer demand by Avista.
STAFF RECOMMENDATION
Staff agrees with the Parties’ recommendation that this matter be processed under Modified
Procedure. The Staff anticipates propounding some discovery. Consequently, Staff recommends that
comments in this case be due no later than July 17, 2015, and reply comments due no later than July 22,
2015.
COMMISSION DECISION
1. Does the Commission find that it is reasonable to process this Petition seeking an
amendment to the Parties’ contract via Modified Procedure?
2. Does the Commission find that the proposed comment schedule is reasonable?
3. Anything else?

Don Howell
Don Howell
Deputy Attorney General

bls/M:AVU-E-15-05_don