20180221final_order_no_33992.pdf

Ofñce of the Secretary
Service Date
February 21,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT )CASE NO.AVU-E-18-01
APPLICATION OF AVISTA CORPORATION )AND CLARK FORK HYDRO LLC FOR )APPROVAL OF A POWER PURCHASE )ORDER NO.33992
AGREEMENT )
On January 9,2018,Avista Corporation dba Avista Utilities and Clark Fork Hydro
LLC (collectively,"the Parties")jointly applied to the Commission for an order approving their
Power Purchase Agreement (PPA),with a requested effective date of January 1,2018.
Application at 1.The PPA is for the purchase by Avista of energy from Clark Fork's 250-kilowatt
(kW)Derr Creek Hydroelectric Project,a "qualifying facility"(QF)under the Public Utility
Regulatory Policies Act (PURPA).Id.at 2.The Commission issued a Notice of Application and
Notice of Modified Procedure setting comment and reply deadlines.Order No.33972.
Commission Staff timely filed comments;no other comments were received.The Commission
now issues this Order approving the PPA.
BACKGROUND
PURPA was enacted in 1978 "to lessen the country'sdependence on foreign oil and to
encourage the promotion and development of renewable energy technologies as alternatives to
fossil fuels."Order No.32580 at 3,citing FERC v.Mississippi,456 U.S.742,745-46 (1982).
PURPA and its implementing regulations require electric utilities to purchase the power produced
by QFs.16 U.S.C.§824a-3(b);18 C.F.R.§292.303(a).
The rate that a QF receives for the sale of its power to a utility,called the "avoided
cost"rate,is approvedby the Commission,and represents "the 'incremental cost'to the purchasing
utility which,but for the purchase of power from the QF,such utility would either generate itself
or purchase from another source."Order No.33419 at 3,citing Rosebud Enterprises v.Idaho
PUC,128 Idaho 624,627,917 P.2d 781,784 (1996);18 C.F.R.§292.101(b)(6)(defining "avoided
cost").
'Although Avista and Clark Fork Hydrostyled their filing as a "Petition,"the Commission indicated it would treat
the filing as an Application.Order No.33972.
ORDER NO.33992 1
For QFs generating less than 10 average megawatts (aMW)of energy,the Commission
calculates and publishes rates with a Surrogate Avoidable Resource methodology,using long-term
natural gas price forecasts.Order No.31092 at 3.These published avoided cost rates are
periodically updated as new natural gas price forecasts are issued.Id at 9.
In calculating avoided costs,the Commission has found it "reasonable,appropriate and
in the public interest to compensate QFs separately based on a calculation of not only the energy
they produce,but the capacity that they can provide to the purchasing utility."Order No.32697
at 16.In calculating capacity,the Commission considers "each utility'scapacity deficiency based
on load and resource balances found in each utility's [Integrated Resource Plan]IRP,"as well as
"a QF's ability to contribute to a utility'sneed for capacity."Id at 16,21.
THE APPLICATION
The Parties explained that Clark Fork is the developer of the Derr Creek Hydroelectric
Project,a 250 kW QF under PURPA.Application at 2.Under the PPA,Avista will buy the QF's
output at the applicable non-levelized rates for non-seasonal hydro projects smaller than 10
average megawatts.Id at 3.The PPA has a 20-year term.See id at 4.
According to the PPA,the Parties had a prior agreement under which Avista purchased
the output from the QF,which expired on December 31,2017.PPA at 3.The Parties signed the
proposed PPA so Avista could continue to purchase the output from the QF.Id
On January 25,2018,the Parties submitted an amendment to section 5.3 of the
proposed PPA.That section originally stated that if the Commission did not approve the PPA by
January 30,2018,the Parties would have no further obligations to purchase or sell power,and the
PPA would terminate.With the Parties'amendment,the January 30,2018 date has been changed
to February 28,2018.Section 5.3 now states that if the Commission fails to approve the PPA by
February 28,2018,the Parties shall have no further obligations to purchase or sell power,and the
PPA shall terminate.See Amendment No.1 to PPA.
In sum,the Parties jointly requested that the Commission issue an order accepting the
PPA,without change or condition,with an effective date of January 1,2018,and declaring that all
payments made by Avista for purchases under the PPA be allowed as prudentlyincurred expenses
for ratemaking purposes.Application at 4.
R NO.33992 2
STAFF'S COMMENTS
Staff reviewed the proposed rates and confirmed they are correct and that all other
terms contained in the proposed PPA are consistent with prior Commission Orders.Staff
Comments at 2.Because the Company is seeking approval of the new PPA after the expiration of
the prior contract,Staff's understandingis that,if the Commission approves the PPA,the Company
will retroactively pay the QF for the output of the facility at the rates in the Agreement from
January 1,2018 moving forward.Id.Staff thus recommends the Commission approve the PPA
and declare that all payments made by Avista for purchases of energy under the PPA will be
allowed as prudentlyincurred expenses for ratemaking purposes.Id.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdictionover this matter under Idaho Code §§61-502 and 61-
503.The Commission has the express statutory authority to investigate rates,charges,rules,
regulations,practices,and contracts of public utilities and to determine whether they are just,
reasonable,preferential,discriminatory,or in violation of any provision of law,and may fix the
same by order.Idaho Code §§61-502 and 61-503.In addition,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 and to implement FERC rules.The Commission may
enter any final order consistent with its authority under Title 61 and PURPA.
The Commission has reviewed the record,includingthe Application,the PPA,and the
comments and recommendations of Commission Staff.We find that the Derr Creek Hydroelectric
Project is qualified to receive the non-levelized,non-seasonal hydro published avoided cost rates
contained in the PPA.We further find that the PPA contains acceptable contract provisions
consistent with PURPA,FERC regulations,and this Commission's prior orders.We therefore
approve the PPA without change or condition.Finally,we find it reasonable to allow payments
made under the Agreement as prudentlyincurred expenses for ratemaking purposes.
ORDER
IT IS HEREBY ORDERED that the PPA between Avista and Clark Fork is approved,
effective January 1,2018.
IT IS FURTHER ORDERED that all payments made by Avista for purchases of energy
under the PPA are allowed as prudentlyincurred expenses for ratemaking purposes.
ORDER NO.33992 3
THIS IS A FINAL ORDER.Any person interested in this Order 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
day of February 2018.
P ÛL KJEIiA D R,PRESIDENT
KRI TINE RAPER,CÒMMIŠSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\LegahLORDERSìAVUE1801cc final order doex
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