20180924Supplemental Comments.pdf

EDWARD JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 10446
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Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSTON
IN THE MATTER OF'THE JOINT PETITION
OF AVISTA AND THE CITY OF COVE,
OREGON, TO APPROVE POWER PURCHASE
AGREEMENT SUPPLEMENTAL 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
Extended Comment Period issued in Order No. 34140 on September 10, 2018, in Case No.
AVU-E-18-05, submits the following comments.
BACKGROUND
On June 19,2018, Avista Corporation dba Avista Utilities ("Avista") and the City of
Cove, Oregon, jointly petitioned the Commission for an order approving their Power Purchase
Agreement ("PPA" or ooAgreement") for an 800 kW hydroelectric generating facility in or
around Cove, Oregon. The facility is a qualifying facility ("QF") under the Public Utility
Regulatory Policies Act of 1978.
On August 15, 2018, Staff filed comments based on its review of the original
Agreement along with Amendments No. I and No. 2. The rates included in the Agreement were
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CASE NO. AVU-E.18-05
STAFF SUPPLEMENTAL COMMENTS I SEPTEMBER 24, 2018
not the rates that were effective at the time the Agreement was signed by both parties. Thus,
Staff recommended authorization contingent upon updating the Agreement with published rates
that were in effect when both parties signed and when the Legally Enforceable Obligation
("LEO") was established.
On August 24,2018, two days after the comment reply period expired, Avista filed
Amendment No. 3 to the PPA, which updated the avoided-cost rates in the Agreement to those
that were in effect when the Agreement was signed by both parties. Avista also included Exhibit
H (Estimated Security Deposit by Year) in Supplement to Amendment No. 3, which was
referenced but missing in the original Application. However, the seasonal non-levelized rates
used to calculate the security deposit did not match the approved rates in the Surrogate Avoided
Resource ("SAR") model.
On August 31,2018, Staff recommended that the Commission extend the comment
period to allow public comment on the PPA as amended. Avista concurred with Staff s
recommendation. The Commission found it was in the public interest to extend the comment
period to secure an efficient and fair determination of the issues.
On September 13, 2018, Avista filed Supplement to Amendment No. 4 to update
Exhibit H in the Agreement so that the seasonal non-levelized rates used to calculate the security
deposit match the seasonal non-levelized rates contained in the most recently approved SAR
model.
STAFF ANALYSIS
Following the submission of Staff s initial comments in this case, Avista submitted two
additional amendments to its Power Purchase Agreement: Supplement to Amendment No. 3,
which updated the levelized avoided cost rates to the effective rates, and Supplement to
Amendment No. 4, which corrected the seasonal non-levelized rates used to calculate the
security deposit. Staff reviewed the updated rates and the collection amounts for the security
deposit and confirms they are correct.
Staff s comments submitted on August 15,2018, identified that the rates included in the
Agreement were not the authorized rates in effect at the time the original Agreement was signed
by both parties and when the LEO was first established. Subsequently, the Company submitted
Supplement to Amendment No. 3, which updated the Agreement with the currently authorized
rates.
STAFF SUPPLEMENTAL COMMENTS 2 SEPTEMBER 24,2018
Because the Agreement is based upon levelized rates, payments to the QF are front-
loaded as compared to an agreement that uses non-levelized rates. This presents a risk that the
QF could economically walk away from the project and keep overpayment amounts that occur in
the early years of the contract. The Commission, through Order No. 21690, requires the
Company to mitigate this risk. The Company and the City of Cove have agreed to a security
deposit that will be collected from the QF to cover overpayment amounts that will occur
approximately during the first seven years of the Agreement. Staff reviewed the deposit amounts
included in the Supplement to Amendment No. 4 and confirms that they are correct.
All other terms and conditions contained in the proposed Agreement are consistent with
prior Commission orders.
RECOMMENDATION
Staff recommends that the Commission approve the Agreement inclusive of the
Amendment and Supplement to Amendment Nos. I through 4, and declare that all payments
made by Avista to City of Cove for purchase of energy under the Agreement will be allowed as
prudently incurred expenses for ratemaking purposes.
Respectfully submitted this
n.r#-(/ I day of September 2018
Edward J
Deputy Attomey General
Technical Staff: Yao Yin
Rachelle Farnsworth
i :umisc:comments/avue I 8. 5ejyyrf comments2
STAFF SUPPLEMENTAL COMMENTS 3 SEPTEMBER 24, 2018
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF SEPTEMBER 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 WA99220-3727
E-mail: [e-mail]
DONNA N LEWIS
CITY OF COVE
PO BOX 8
covE oR97824
E-mail : cityadmi n@.cityofcove.org
MICHAEL G ANDREA
SENIOR COUNSEL
AVISTA CORPORATION
PO BOX3727
SPoKANE W A 99220-3727
E-mail : [e-mail]
SECRET
CERTIFICATE OF SERVICE