20180815Comments.pdf

EDWARD JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03t4
IDAHO BAR NO. 10446
FqICEIVED
ille ,tut tS pit 12: S0
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT PETITION
OF AVISTA AND THE CITY OF COVE,
OREGON, TO APPROVE POWER PURCHASE
AGREEMENT COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Edward Jewell, Deputy Attorney General, and in response to the Notice of
Petition and Notice of Modified Procedure issued in Order No. 34115 on July 25, 2018, in Case
No. AVU-E-18-05, submits the following comments.
BACKGROUND
On June 19,2018, Avista Corporation dba Avista Utilities, and the City of Cove, Oregon,
("Petitioners"), jointly petitioned the Commission for an order approving a Power Purchase
Agreement ("PPA"). The PPA will expire on its own terms if the Commission does not issue a
final order approving the PPA by October 29,2018.
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CASE NO. AVU-E-18-05
STAFF COMMENTS AUGUST 15,20I8
SSiCir
1
The PPA relates to a City of Cove-owned and operated 800-kW, non-seasonal
hydroelectric project. The facility is a qualifying facility ("QF") under the Public Utility
Regulatory Policies Act ("PURPA").
Under the PPA, Avista will buy the QF's output at the applicable Avoided Cost Rates For
Non-Fueled Projects Smaller than Ten Average Megawatts - Levelized. If approved, the PPA's
term will run through June 12, 2038.
The Parties jointly request that the Commission issue an order accepting the PPA,
without change or condition, and declaring that all payments made by Avista for purchases under
the PPA be allowed as prudently incurred expenses for ratemaking purposes.
On July 13,2018, the Petitioners filed Amendment No. I to attempt to correct their
misunderstanding of the 90/110 rule and the timeframe for updating monthly net output
estimates in the original Agreement.
On July 20,2018, the Petitioners filed Supplement to Amendment No. 1 to specify that
the rates for the project are non-seasonal hydro.
On August 3,2018, the Petitioners filed Amendment No. 2 to clarify their comparison
between 85% of the market price and the contract price for the purpose of complying with the
90/1 l0 rule, and change the effective date of the Agreement, Amendment No. 1 , and
Amendment No. 2 to July 31,2018, or such other date as may be set by the Commission.
STAFF ANALYSIS
Staffconducted an analysis ofthis case, focusing on: (l) a correct reading ofthe 90/l 10
rule; (2) the proper market energy rate when the QF falls outside of the 901110 band; (3) the
timeframe for updating monthly generation estimates; (4) the delivery schedules for system
balancing; and (5) when the legally enforceable obligation is established to determine which
avoided cost rates should be included in the Agreement. As a result of its analysis, Staff was
able to work with the Company to amend all issues it discovered in the initially submitted
Agreement, except one. The Petitioners have not made changes to update the rates to the
authorized published rates that were in effect at the time that the Agreement was signed by both
parties.
2STAFF COMMENTS AUGUST I5,2018
90/110 Rule
When falling outside the 90/110 band, the original submitted Agreement stipulated that
the QF would always receive the discounted market price. However, the 90/110 rule as
approved in Order No. 29632 orders utilities to pay "85oh of the market price or the contractrate,
whichever is less." The Petitioners amended the Agreement as reflected in Amendment No. 2 to
comply with the Commission order.
Market Enersy Price Outside the 90/110 Band
The Petitioners originally proposed using a "Market Energy Price" that was too low for
actual monthly generation that falls outside of the 90/110 band. "Market Energy Price" for these
comments is generally defined as 85% of non-firm market energy prices. However, the
Petitioners inadvertently applied the 85% factor twice. Petitioners amended the Agreement so
that the correct "Market Energy Price" will be applied, as reflected in Amendment No. 1 of the
Agreement.
When the 90/110 band was first approved, the "Market Energy Price" was defined as
85% of the weighted average Intercontinental Exchange (ICE) daily on and off peak non-firm
energy index prices at the Mid-Columbia hub (Mid-C). The 85% factor is an adjustment to
account for wheeling charges that a utility would incur if the utility resells or buys non-firm
energy to or from the market. Order No. 29093 at2. Later, the ICE non-firm energy index was
discontinued, and utilities started to use alternative indices to represent market prices. Avista
switched to the PowerDex hourly Mid-C index that was approved by the Commission in Order
No. 33048. As discussed in Staff s comments in that case (see AVU-E-14-03), the use of the
PowerDex hourly Mid-C index was determined to be a reasonable proxy to the ICE non-firm
index. Consequently, for Avista avoided cost rates outside of the 90/110 band, the Commission
approved the "Market Energy Price" definition as "85 percent of the PowerDex hourly Mid-
Columbia ("Mid-C") index."
In their original submitted Agreement, Petitioners applied 85Yo to the "Market Energy
Price." Since the "Market Energy Price" already took 85% of the PowerDex index, it effectively
applied the 85% factor twice. This would have been in contradiction to the method for
determining the "Market Energy Price" approved in Commission Order No. 33048, and would
have potentially reduced the price the QF would receive when falling outside of the 90/110 band.
aJSTAFF COMMENTS AUGUST 15,2018
Timeframe for Updating Monthlv Generation Estimates
The original submitted Agreement allowed the City of Cove to provide updates to their
monthly generation estimates up to the day prior to the delivery month being estimated. Staff
believes that the Commission's previous Orders require QF's to submit generation estimates at
least one month prior to the month of delivery.
As stated in Commission Order Nos. 3 3 102, 331 03 (Case Nos. IPC-E -14-07 ,
IPC-E-14-06): "The intent of a QF providing generation estimates has always been to assist the
utility in forecasting and operational planning so that the utility can provide the most reliable
service possible to its customers. We find that a provision allowing for monthly generation
estimateupdatesisconsistentwiththatpurpose." OrderNo.33l02at6; OrderNo.33l03at7.
However, there is nothing explicit in the Order that requires at least one month lead time for
providing generation estimates.
At issue in Case Nos. IPC-E-14-06 and IPC-E-14-07 was the timing of providing
generation estimate updates for purposes of complying with 90/l10, which included both the
frequency of updates and the minimum lead time for providing estimates prior to the month that
generation is to occur. See generally Staff Comments and the Amended Application in Case No.
IPC-E-14-06. Prior to the IPC-E-14-06 and IPC-E-14-07 cases, the Commission required any
QF revisions to be submitted no sooner than "the end of month three and every three months
thereafter." Order No.29632 at 23. This prior Order effectively set a three-month minimum
lead time requirement for generation estimate updates. Because the Commission approved the
agreed upon Energy Sales Agreement (ESA) in the IPC-E-14-06 case, which sets a one-month
minimum lead time and because this requirement relaxes the previous requirement, Staff
believes that it was the Commission's intent to allow a one month minimum lead time for QFs to
provide generation estimate updates for 90/110 moving forward.
In addition, in Commission Order No. 29880, in reference to the 90/110 performance
band, the Commission stated that: "The Commission develops its PURPA contract standards and
requirements in generic methodology, ratesetting and complaint cases." See Rosebud
Enterprises v. Idaho Public Util. Comm'n,128Idaho 609 at 615 (1996). It is reasonable for
QF's to expect that the contract requirements of Idaho regulated electric utilities will be similar
and that a QF will not be disadvantaged by choosing to sell to one utility rather than another."
Order No. 29880 at 10. With this, Staff understands that as the Commission settles issues for
4STAFF COMMENTS AUGUST I5,2018
individual ESAs, those settled issues and resulting requirements should generally apply on a
prospective basis for all electric utilities.
Despite the City's preference to update their generation estimates with as little as one day
of lead time, the Petitioners have amended the Agreement to effectively require a one month
minimum lead time. See Amendment No. I to the Agreement. Staff believes the new schedule
gives the utility a reasonable amount of time for planning and is compliance with Order No.
33103.
Deliverv Preschedule for System Balancins
Because the City will wheel power to Avista through Bonneville Power Administration
and Oregon Trail Electric Consumers Cooperative ("Transmission Entities"), the Petitioners
agreed to a delivery schedule in which the City of Cove will be responsible for supplying day(s)-
ahead energy preschedules for each hour to Avista based on anticipated actual generation. In
addition, the City of Cove will be responsible for providing updated electric tags ("E-tags")
reflecting firm schedules at least one hour prior to each delivery hour. These will be used to
assess imbalance charges imposed on the QF by the Transmission Entities for the delivery of the
output at the point of delivery. Staff believes these requirements are reasonable.
Legally Enforceable Oblisation to Determine Avoided Cost Rates
The Agreement submitted to the Commission for approval contains Surrogate Avoided
Resource ("SAR") published rates that were in effect prior to June 1 ,2018. However, the
Commission approved new SAR-based rates effective on June 1,2078. Because the submitted
Agreement was signed by the City of Cove on June 5, 2018, and by Avista on June 13,2018,
Staff believes that a Legally Enforceable Obligation ("LEO") was not established until after the
new rates came into effect and that the Agreement be accepted by the Commission with the
currently authorized published rates effective June l, 2018.
Staff s recommendation is based on the Idaho Supreme Court case resulting from appeals
taken under Case Nos. IPC-E-I0-61 and IPC-E-10-62. See ldaho Power Co. v. Idaho Public
UtilitiesCom'n,155 Idaho780,3l6P.3dl278(2013). Inthatcase,theldahoSupremeCourt
upheld the Commission's finding that when there is a signed agreement, the date the LEO arose
is the same date that the agreement was signed by both parties. Therefore "when a contract has
been entered into by the parties and submitted to the Commission for approval, there is no need
5STAFF COMMENTS AUGUST I5,2018
for a determination regarding any other legally enforceable obligation." See id. at793. Further
the avoided cost rates in effect on the date the agreement is signed by both parties are the
applicable avoided cost rates.
Additionally, in Avista's Schedule 62, Cogeneration and Small Power Production
Schedule - Idaho (effective date June 1,2014), the Company outlines the contracting procedures
for developing ESAs. In said procedures, the parties start with "indicative pricing proposals"
and then progress to non-binding pricing terms. However, even after the proposed agreement is
submitted to the QF for review, revision of the avoided-cost rate is clearly contemplated by
Schedule 62 Contracting Procedures. See Schedule 62 $ (1)(Jxiii). There it states, "[i]n
connection with any contract negotiations between the Company and the Customer, the
Company ... shall update its pricing proposals at appropriate intervals to accommodate any
changes to the Company's avoided cost calculations, the proposed Qualifying Facility or
proposed terms of the draft power purchase agreement." Id. Staff believes this sets the
expectation that parties to QF agreement negotiations may encounter authorized changes to
avoided cost rates during the course of their negotiations, and if this occurs, they are expected to
make rate modifications prior to finalization of their agreement.
RECOMMENDATION
Staff recommends that the Commission approve the Agreement with the latest authorized
SAR-based published rates for non-seasonal hydro projects effective June 1, 2018. Staff also
recommends the Petitioners file an updated contract to include all amendments and the approved
rates.
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Respectfully submitted this /5 day ofAugust 2018.
&Edward Jewell
Deputy Attorney General
Technical Staff: Yao Yin
Rachelle Farnsworth
i :umisc:comments/avue I 8.5ejyyrf comments
6STAFF COMMENTS AUGUST I5,2018
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I5TH DAY OF AUGUST 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-E-18-05, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
STEVE SLIKWORTH'
MGR WHOLESALE MARKETING
AVISTA CORPORATION
PO BOX3727
SPOKANE W A 99220-3727
E-mail: [e-mail]
DONNA N LEWIS
CITY OF COVE
PO BOX 8
covE oR97824
E-mail : cit)[e-mail]
MICHAEL G ANDREA
SENIOR COUNSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-mail: [e-mail]
CERTIFICATE OF SERVICE
,LnA*
SECREiAY-