HomeMy WebLinkAbout20200316Reply Comments.pdf^li,',itnsta
Avista Corp.
141 1 East Mission P.O. Box 3727
Spokane, Washington 99220-0500
Telephone 509-489-0500
Toll Free 800-727-9170
March 16,2020
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd
Building 8, Suite 201-A
Boise,ID 83714
Re: Stimson Lr.mber Company PPA (AmendmentNo. 1)
Case No. AW-E-19-16
Dear Ms. Hanian
Pursuant to the Notice issued by the Idatro Public Utilities Commission on February 25,
2020, Avista Corporation respectfully submits the following reply comments in response to the
Amended Comments of Commission Staffsubmitted in the above-captioned proceeding on March
10,2020. As discussed herein, Avista respectfully requests that the Commission approve the
Power Purchase Agreement between Avista and Stimson Lumber Company as amended by
Amendment No. I without modification with an effective date of January 1,2020.
Please direct any questions regarding this filing to (509) 495-2564 or Michael.andrea@avistacorp.com
Sincerely,
/s/ Paul Kimball
Paul Kimball
Manager of Compliance & Discovery
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MICHAEL G. ANDREA (ISB No. 8308)
Avista Corporation
l4ll E. Mission Ave., MSC-17
Spokane, WA99202
Telephone: (509) 495-2564
mi chael. andr ea@av istacorp. com
IN THE MATTER OF THE JOINT PETITION
OF AVISTA CORPORATION AND
STIMSON LUMBER COMPANY FOR
APPROVAL OF POWER PURCHASE AND
SALE AGREEMENT
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. AW.E-19-16
REPLY COMMENTS OF AVISTA
CORPORATION
Pursuant to the Notice issued by the Idaho Public Utilities Commission ("Commission")
on February 25,2020 ("Notice"), Avista Corporation ("Avista") respectfully submits the
following reply comments in response to the Amended Comments of Commission Staff
submitted in the above-captioned proceeding on March 10,2020 ("Amended Comments"). As
discussed herein, Avista respectfully requests that the Commission approve the Power Purchase
Agreement between Avista and Stimson Lumber Company ("Stimson") as amended by
Amendment No. 1 without modification with an effective date of January 1,2020.
I. Background
On December 31, 2019, Avista and Stimson filed a joint petition requesting an order
approving a Power Purchase Agreement ("Agreement") under which Avista continues to
purchase the output from Stimson's wood waste small power electric generation plant
("Facility") pursuant to the Public Utility Regulatory Policies Act of 1978 ("PURPA"). The
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proposed effective date of the Agreonent was January 1,2020. The proposed term of the
Agreement was for one year.
On February 7 ,2020, Staff submiued Comments on the Agreement. Among other things,
Staffrecommended modiffing the Agreement in two material ways ("Recommendations")t: (l)
modifuing the contract price during the period between January I and the date of the
Commission's approval ("Lapsed Period") such that the price during that period would be the
lesser of the avoided cost rates approved by the Commission for the Agreement or the Market
Energy Cost, which would be 85 percent of the non-firm market energy price for each month,
and (2) because the Agreement was for a one-year term, modiffing the avoided cost rates for the
remainder of the term so that the avoided cost rates would not include capacity payments.2
Applytng a different avoided cost rate for the Lapse Period is unprecedented at the
Commission is also inconsistent with Federal Energy Regulatory Commission ("FERC")
regulations.3 Also, because Stimson was renewing a contract under which Stimson received a
capacity payment, modiffing the avoided cost rates to remove the capacity payment for
Stimson's Facility because Stimson requested a one-year term is also inconsistent with
Commission precedenta and FERC regulations. Nevertheless, in an attempt to sidestep the issues
of whether Stimson was or was not entitled to a capacity payment under the Agreernent, Stimson
agreed to amend the term of the Agreernent to two years.
I Staffalso recommended (i) applying the 82.4 percent discount rate to the lntercontinental Exchange firm energy
index to determine the non-fimr market price for the 90/l l0 rule and (ii) correcting the date on the Replacement
Exhibit E. Staff Comments at 2. Avista made these changes in the Amended Agreement and, therefore, these
recommendations are not addressed in these reply comments.
2 StaffComments at 2
3 See l8 C.F.R. S 292.304.
a See Order No .32697 at 2l; l8 C.F.R. S 292.304.
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On February 14,2020, Avista filed Amendment No. I to the Agreement ("Amendment
No. l")5 to, among other things, amend the term of the Agreement so that the term would be two
years. After the Agreement was executed, but prior to execution of Amendment No. l, Avista's
published avoided cost rates were updated in Order No. 34547 effective February 7,2020. T\e
avoided cost rates in the new Exhibit E submitted with the Amendment are based on the avoided
cost rates that were in effect when the Agreernent was originally executed and are to apply from
the requested January 1,2020 effective date through the term of the Agreement.
On March 10,2020, Commission Staff submitted its Amended Comments. ln the
Amended Comments, Staff recommended two modifications. First, Staffagain recommended
that the avoided cost rates for the Lapsed Period be the lesser of the avoided cost rates without
capacity payment and 85 percent of the non-firm market energy price for each month.6 Second,
Staffrecommended that the avoided cost rates for the second year of the Agreonent should be
based on the new published rates for Avista that became effective on February 7,2020 in Order
No. 34547. Avista submits this reply to the Amended Comments.
II. Reply Comments
A. The Avoided Cost Rate for the Lapse Period Should be the Published Rate in
Effect at the Time the Legally Enforceable Obligation was Established
As discussed above, Staff recommends that the avoided cost rate for the Lapsed Period be
the lesser of the avoided cost rates without capacity payment and 85 percent of the non-firm
market energy price for each month.T Staffs recommendation is based on its view that (i)
neither FERC nor the Commission require a specified rate for a period when a project continues
to operate with a lapsed contract, and (ii) a lapsed contract period is avoidable and should be
5 The Agreement as amended by Amendment No. I is referred to herein as the "Amended Agreement."
6 Amended Comments at 2.
7 Amended Comments at 2.
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discouraged. This recofilmendation is inconsistent with FERC's regulations and Avista's
Commission-approved Schedule 62. ln addition, Staff s recommendation appears to be
inconsistent with this Commission's precedent.
FERC's regulations provide that the Qualifuing Facility ("QF") has the option to provide
energy or capacity pursuant to a legally enforceable obligation ("LEO"), exercised prior to the
beginning of a specified term based on "[t]he avoided costs calculated at the time the obligation
is incurred."s FERC also requires standard rates for small QFs. The Commission requires
standard rates for QFs, other than wind and solar QFs, up to 10 aMWs. Stimson's Facility is 6.5
MW facility that is eligible for standard rates.
With regard to the Lapsed Period, the Agreernent included the applicable standard
avoided cost rates required under Avista's Schedule 62 in effect at the time the Agreement was
executed. The Amended Agreement similarly included the applicable standard avoided cost rate
for the Lapsed Period. Under Avista's Schedule 62,the avoided cost rates in the Agreement
were binding on Avista at the time that the Agreement was executed, subject only to
Commission approval.e Avista agrees that contracts should generally be finalized and submitted
to the Commission in time for the Commission to approve before the prior contract lapses.
However, if such a Lapse Period does occur, Avista's Schedule 62 does not provide for a
reduced rate to apply between the time a contract is executed and the time that the Commission
approves such contract; rather, Avista is bound by its Schedule 62 to provide to provide the
applicable published avoided cost rate. Revising the rates for the Lapsed Period is inconsistent
with Avista's Schedule 62.
8 l8 c.F.R. $ 292.304(d)(2xii).
e Schedule 62, Contracting Procedures (l)D(i).
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Stimson's Facility is a QF that is eligible for a standard rate under the Commission's
established policy. Commission Staffrecommends modiffing the avoided cost rate for the
Lapsed Period to the lesser of the avoided cost rates without capacity payment and 85 percent of
the non-firm market energy price for each month. Staff s proposed avoided cost rate for the
Lapsed Period is not a standard rate under Avista's Schedule 62 and, therefore, Avista did not
have the option to include that rate in the Amended Agreement. The standard avoided cost rate
that was in effect at the time the Agreernent was signed by the parties should apply to the Lapsed
Period.
B. Stimson Should Not be Penalized for Responding to Staffs Comments
Staff asserts that, because Amendment No. I extending the term of the Agreement for a
second year was signed after February 7,2020, the commitment for the second year was made
when the Amendment was signed. Accordingly, Staffrecommends that the published rates that
became effective on February 7,2020, should apply to the second year of the contract.
Avista generally agrees with Staffthat the commitment to sell to the utility occurs when
there is a fully executed power purchase agreement. Under that rationale, the published rates
that were in effect when the Agreement was originally signed should apply for the first year of
the Agreernent (including the Lapsed Period, as discussed above), and, because Amendment No.
I was signed after February 7,2020, the published rates that became effective on February 7,
2020, should apply to the second year of the Amended Agreement. However, under the
circumstances at issue here, it would be unfair to Stimson to apply the published rates that
became effective on February 7,2020 to the second year of the Amended Agreernent.
As discussed above, Stimson originally requested and executed the Agreonent with a
one-year term. That Agreement included the applicable published avoided cost rate and,
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consistent with Commission policy for QFs that are renewing, included a capacity payment.to In
its Comments on that Agreanent, Staffrecommended that the Commission establish a brand new
policy that an existing QF that renews for a term of one year would not receive acapacity
payment. Staffacknowledges this departure from Commission precedent in its Comments
stating: "Stimson was receiving capacity payments at the end of its previous contract; therefore,
Staffbelieves that the proposed Agreement complies with past Commission orders. However,
because the Agreement only has a one-year term, Staffbelieves that including immediate
capacity payments is not appropriate."ll
Stimson entered into Amendment No. I to extend the term of the Agreonent to two years
in response to Staff s Comments. Staffnow recommends that Stimson should receive a capacity
payment (at least for the part of the term that is after the Lapsed Period), but for the second year
of the term of the Amended Agreement, Stimson should only receive the lower avoided cost
rates that became effective on February 7,2020.
To be sure, if the Commission had an policy that QFs, including renewing QFs that
previously received a capacity payment, that elect a one-year term are not eligible for a capacity
payment, it is reasonable to assume that Stimson would have requested a longer term in the
original Agreernent. After Stimson elected a one-year term, Staffrecoillmended a change in
policy to eliminate the capacity payment on one-year contracts. Stimson acted reasonably in
choosing to extend the term to two-years rather than risk that the Commission would adopt
StafPs recommended new policy to disallow capacity payments for one-year contracts.
r0 Order No. 32697 at 2l (stating that *if a QF project is being paid for capacity at the end of the contract terrn and
the parties are seeking renewaUextension of the contract, the renewaVextension would include immediate payment
of Capacity.") The Agreement is a renewal and Stimson was receiving a capacity payment at the end the contact
term.
rr Comments at 5 (emphasis added).
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Under the unique circumstances at issue here, Stimson should not be penalized for
requesting a contract consistent with the then-current Commission precedent. Stimson should
also not be penalized for extending the term of the Agreement to two years in response to Staff s
recorlmendation to establish a new policy that would have adversely impacted Stimson. The
Commission should approve the Amended Agreement as submitted such that the avoided cost
rates in effect when the Agreanent was originally executed apply for the entire two-year term.
III. Staf?s Recommendations, if Adopted by the Commission, Would Change the
Commission's Current PURPA Policy
As discussed above, Staff s Recommendations represent a change in the Commission's
PURPA policy. Specifically, if the Commission adopts Staff s recommendations it would create
new policy that presumably would be applicable to all QFs. Specifically, Staff recommends a
new policy that would apply a discounted non-standard rate to lapse periods. Staffalso
recommends departing from established Commission precedent by recommending that capacity
payments are not available to QFs with a one-year contract even if the QF previously received a
capacity payment under its prior contract.
To the extent that the Commission revises its PURPA policy, such changes should be
made in a generic proceeding. A generic proceeding on these issues would give utilities, QFs,
and the Commission an opportunity to fully vet these proposed changes in policy. Such changes
should not be made in the context of this proceeding.
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IV. Conclusion
Avista appreciates the opportunity to submit these reply comments in response to
Commission Staffs Amended Comments. For the r@sons stated herein, Avista respectfully
requests that the Cornmission approve the Amended Agreement as filed with an effective date of
January 1,2020.
DATED this 16m day of March 2020.
lil Michael G. Andrea
Michael G. Andrea
Attorney for Avista Corporation
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