20200310Amended Comments.pdf

JOHN R. HAMMOND, JR.
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720.0074
(208) 334-03s7
IDAHO BAR NO. 5470
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Street Address for Express Mail:
1 1331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT PETITION
OF AVISTA CORPORATION AND STIMSON
LUMBER COMPANY FOR APPROVAL OF
POWER PURCHASE AND SALE
AGREEMENT
CASE NO. AVU-E.19.16
AMENDED COMMENTS OF
THE COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission ("Staff') submits the following
comments regarding the above referenced case.
BACKGROUND
on December 31, 2}lg,Avista Corporation ("Avista" or "company") asked the
Commission to approve or reject a proposed Power Purchase Agreement ("Agreement") with
Stimson Lumber Company ("Stimson" or o'Seller") for the energy generated by a thermal wood
waste small power electric generation plant operated by Stimson in Plummer, Idaho ("Facility")
The Facility is a qualifuing facility ("QF") under the Public Utility Regulatory Policies Act of
1978 ("PURPA").
Staff filed comments on February 7,2020. On February 14,2020, Avista filed
Amendment No. I to the proposed Agreement that proposes to extend the contract term to
December 3l,202l,two years from the proposed effective date of January I ,2020.
AMENDED STAFF COMMENTS MARCH IO,2O2O
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STAFF ANALYSN
Staff recommends approval of the proposed Agreement and Amendment No. I
conditioned on the parties making two modifications: (1) modifuing prices for the lapsed contract
period to be the lesser of the avoided cost rates without capacity payment and 85% of the non-
firm market energy price for each month; and (2) modiffing avoided cost rates for the second
year of the Agreement based on the new published rates for Avista effective on February 7,2020
in Order No. 34547.
The Company has addressed three of the four recommended modifications Staff proposed
in its original comments through Amendment No. 1. The Company corrected the definition of
Market Energy Cost as it pertains to 90lll0, extended the Agreement term from one year to two
years to address Staffls concern with capacity payments, and deleted the mistaken date in
Amended Exhibit E. However, the Company has not addressed Staff s recommendation to
modi$ the prices that should be paid during the lapsed contract period. Staff recommended in its
original comments filed on February 7,2020, that the prices should be the lesser of the avoided
cost rates without capacity payment andS5Yo of the non-firm market energy price for each month.
In addition, Staffhas discovered a new issue as a result ofthe proposed contract term
extension. This issue is that published rates changed on February 7,2020, which fell between
when the original Agreement was signed on December 23,2019 and when Amendment No. 1 was
entered into by the parties that extended the Agreement from one to two years. (Amendment
No. I did not state when exactly parties signed the amendment; it only stated the amendment will
become effective on February 14,2020. However, it is reasonable to believe they signed after
Staff filed its comments on February 7,2020.)
Prices for the Lapsed Csltraqtleuad
As discussed in Staff s original comments, Staff believes that there is no obligation set
forth by Commission order or by the Federal Regulatory Commission to guarantee a specific rate
for a period when a project continues to operate but with a lapsed contract. Staff continues to
believe that a lapsed contract period is avoidable and should be discouraged. Staff proposed to
use the lesser of the avoided cost rates without capacity payment reflected in the following table
and 85% of the non-firm market energy price for each month.
2AMENDED STAFF COMMENTS MARCH IO,2O2O
Contract Term Heavy Load Hours ($/MWh)Light Load Hours ($/MWh)
January to February of 2020 32.88 27.48
March to June of 2020 25.57 2t.37
July to December of 2020 32.88 27.48
Contract Term Extension
Because the facility was receiving capacity payments at the end of the previous contract
and because the parties amended the contract extending it to two years, Staff believes the facility
can account for avoided capacity through the Company's resource planning cycles and should
receive capacity payments from the approval date through the length of the amended term of two
years. However, new published avoided cost rates were authorized by the Commission on
February 7,2020, and the amended contract extending the contract term by one year was not
signed until after February 7,2020. Staff believes the second year of the contract should use the
new published avoided cost rates.
Staff examined three rate structure options illustrated in the table below. In Option 1,
rates that were authorized prior to February 7,2020 are applied to both years. This is the option
that the party's submitted in their Amendment No.l
Staff believes Option 2 is consistent with past Commission Orders and recommends it for
determining contract rates. Staff s rationale is based on when the commitment for each year was
made and which rates were in effect at the time. A commitment for the first year of the contract
was signed in the original contract prior to February 7,2020, before the new rates went into
effect. The second-year commitment was made when the amended contract was signed, which
Staff believes happened after February 7,2020, a time when the new rates were in effect.
Option 3 applies new published avoided cost rates to both years. Staff does not believe
this option is reasonable because the original contract was signed before February 7,2020, and
the commitment by the parties for the first year was made when the former rates were still in
effect.
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Published Rates Before Feb 7,2020 Published Rates After Feb 7,2020
Option I Year 1 and Year 2
Option 2 Year 1 Year 2
Option 3 Year I andYear2
AMENDED STAFF COMMENTS MARCH IO,2O2O
Amendment No. I Rates ($/IvIWh)Staff s Proposed Rates ($/I4Wh)
2021Jan-Feb 54.20 48.80 53.75 48.35
2021 Mar-Jun 42.t5 37.95 41.81 37.61
2021 Jul-Dec 54.20 48.80 s3.75 48.35
Therefore, Staff proposes a modification to the rates applied to the second year based on
the new published avoided cost rates shown in the following table.
STAFF RECOMMENDATION
Staff recommends approval of the Agreement and Amendment No. I between Avista and
Stimson conditioned on the parties making two modifications: first, modiffing prices for the
lapsed contract period to be the lesser of the avoided cost rates without capacity payment for the
agreement and85% of the non-firm market energy price for each month; and second, modifuing
avoided cost rates for the second year of the contract based on the new published rates for Avista
effective on February 7,2020 in OrderNo. 34547. Staff also recommends the Commission
declare Avista's payments to Stimson Lumber Company for the purchase of energy generated by
the Stimson project be allowed as prudently incurred expenses for ratemaking purposes.
Respectfully submitted this
t -1.1--/-/o' day of March2020.
Hammond, Jr.
Attorney General
Technical Staff: Yao Yin
i:umisc:comments/avuel9. l6jhklssdr$y amended comments
J
4AMENDED STAFF COMMENTS MARCH IO,2O2O
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS l0th DAY OF MARCH 2020,
SERVED THE FOREGOING AMENDED COMMENTS OF THE COMMISSION
STAFF, IN CASE NO. AVU-E-19-16, BY MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
MICHAEL ANDREA
SENIOR COUNSEL
AVISTA CORPORATION
PO BOX 3727
SPoKANE W A 99220-3727
E-mail : michael.andrea@avistacorp
LISA ZENTNER
DIRECTOR OF PURCHASING
STIMSON LUMBER CO
520 SW YAMHILL STE 7OO
PORTLAND OR 97204
E-mail : lzentner (d.stimsonlumber. com
KEVIN HOLLAND
WHOLESALE MARKETING MGR
AVISTA UTILITIES
PO BOX3727
SPOKANE WA9922O
E-mail: [e-mail]
DANIEL MCFALL
COO/CFO
STIMSON LUMBER CO
520 SW YAMHILL STE 7OO
PORTLAND OR 97204
Y
CERTIFICATE OF SERVICE