20220503Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9917
' r.it n 4^-; Ii; -lr C rJ
Street Address for Express Mail:
I1331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, ID 837I4
Attomey for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA AND THE
I]NIVERSITY OF IDAHO'S JOINT PETITION
FOR APPROVAL OF A POWER PURCHASE
AGREEMENT (STEAM FACILITY)
CASE NO. AVU-8.22-03
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On February 23,2022, Avista Corporation ("Avista") and the Regents of the University
of Idaho ("University") jointly petitioned the Commission for an order approving a power
purchase agreement (o'Agreement") between Avista and the University for the excess energy
generated by the University's three micro-steam turbine-generator sets ("Facility") with a total
generating capacity of 825 kilowatts ("kW") after meeting the University's load. The Parties
requested a Commission order approving the Agreement's effective date of February 16,2022.
The University's Facility is located in Moscow, Idaho and is connected to Avista's
electrical system. The University intends to use the output from the Facility to serve its load first
and if the Facility's output exceeds the University's load, the excess energy will be delivered and
sold to the Company at the avoided costs calculated at the time of delivery. For any energy
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ISTAFF COMMENTS MAY 3,2022
delivered from the Facility to the Point of Delivery in any hour, the avoided cost will equal the
Market Energy Price for the hour expressed in $/kilowatt-hour ("kwh") multiplied by the total
kWh delivered in that hour. The Parties have agreed to a term of 20 years from February 16,
2022.
STAFF REVIEW
Staff reviewed the Agreement focusing on the Public Utility Regulatory Policies Act of
1978 ("PURPA") purchasing category, the proposed avoided cost rates associated with the
category, the nameplate capacity size, the potential for a lapsed contract period, the Renewable
Energy Certificatesl 1"RECs"), and Article 21. Based on the review, Staff recommends the
following changes to the Agreement:
1. Remove the option of other mutually agreed-to index in the Agreement;
2. Set avoided cost rates in this Agreement at 85Yo of the PowerDex hourly Mid-
Columbia ("Mid-C") index price;
3. Correct the mistaken Nameplate Size in Attachment 2 of Exhibit D;
4. Use 85% of the PowerDex hourly Mid-Columbia ("Mid-C") index price as avoided
cost rates for the potential of a lapsed contract period; and
5. Update Article 21 in the Agreement to ensure any amendment or modification does
not become valid without Commission authorization.
Categories of PURPA Purchases: As-available Purchases vs. Leeally Enforceable Obligation
("LEO") Purchases
The power purchases contemplated in this Agreement fall under the category of LEO
Purchases calculated at the time of delivery because the terms of purchase are made through a
contract between the Parties. There are two categories of purchases under PURPA: (1) as-
available purchases; and (2) LEO purchases. The former allows a qualifuing facility ("QF") to
provide energy whenever it is available and use avoided costs calculated at the time of delivery,
while the latter requires a QF to provide energy or capacity pursuant to a LEO for the delivery of
energy or capacity over a specified term, using either the avoided costs calculated at the time of
delivery, or the avoided costs calculated at the time the obligation is incurred. See l8 CFR $
I Also known as Renewable Energy Credits.
2STAFF COMMENTS MAY 3,2022
292.304 (d). The Parties in this case entered into a LEO on February 16,2022, with a specified
contract term of20 years.
Avoided Cost Rates
The Agreement proposes a market-based rate that is not currently covered as a LEO
purchase within Avista's Schedule 62 Cogeneration and Small Power Production Schedule.
However, Staff believes the terms are acceptable if "other mutually agreed-to index" besides
PowerDex is removed from the language in the contract and if an 85% adjustment factor is
applied to the PowerDex hourly Mid-Columbia ("Mid-C") index price.
Currently, for LEO Purchases, Avista's Schedule 62 Cogeneration and Small Power
Production Schedule provides six rate options: (1) Levelized Fueled Rates; (2) Non-Levelized
Fueled Rates; (3) Levelized Non-Fueled Rates; (4) Non-Levelized Non-Fueled Rates; (5) Short-
Term Rate:2 and (6) Integrated Resource Plan ("IRP")-Based Rate-none of which are purely
market-based. The Agreement proposes to use purely market-based rates as avoided cost rates:
"the PowerDex hourly Mid-Columbia ("Mid-C") index price, or other mutually agreed-to
index." See Article 1.16 and Article 5.2 of the Agreement. Staff believes that market-based
rates should be allowed for LEO purchases because the Commission has approved several Idaho
Power's PURPA contracts that used market-based rates through Uniform Agreements. See
Order Nos. 29607 and 30631.
However, Staff offers two recommended changes related to the establishment of rates in
the Agreement. First, Staff recommends that the option of "other mutually agreed-to index" be
removed from the language of the Agreement and if Parties decide to use another market price
index in the future, they should file an amendment to the Agreement so that index can be
reviewed and approved by the Commission. Second, Staff believes that the avoided cost rates
used in this Agreement for non-firm energy generation should be 85Yo of the non-firm market
2 Schedule 62 states "The Short-Term Rate shall be applicable to any Qualifoing Facility when the Customer
chooses to supply output including energy and capacity at market-based rates under contract. The Short-Term Rate
shall be the lower of the applicable Non-Levelized Non-Fueled Rate or the Market Rate. The rate is subject to a
Seasonal Factor, a Daily Shape Adjustment, and Integration Charges. The resultant rate shall be applied to all
kilowatt-hours of generation up to the Eligibility Cap for Qualifuing Facilities below the Eligibility Cap, and to all
hourly Facility output up to contracted nameplate capacity for Qualif,ing Facility exceeding the Eligibility Cap."
This rate option involves using the market-based rates in the calculation, but it is not a purely market-based rate.
aJSTAFF COMMENTS MAY 3,2022
rates, and thus recommends that an 85% adjustment factor be applied to the PowerDex hourly
Mid-Columbia ("Mid-C") index price. See Order No. 29093.
In determining the avoided cost rates for non-firm energy based on a market index, 85olo
of the non-firm market index has been used to account for costs of transmission, losses, and
transaction costs in case utilities must sell QF generation that they do not need. See Order No.
29093. For example, when a QF delivers energy outside the 90/110 band, prices for the energy
outside the band are determined at 85% of the non-firm market price, or the contract rate,
whichever is less. See Order No. 29632. Another example is Idaho Power's Schedule 86, where
85% of the non-firm3 market price is used to determine avoided cost rates for non-firm energy.
Lastly, Avista's Schedule 62 defines Market Rate as 85% of the non-firma market price to
compare against contract rates for determining the Short-Term Rate. See Application and Order
No. 33048 in Case No. AVU-E-14-03.
Because the Commission has approved the PowerDex hourly Mid-C index in lieu of the
non-firm market index, Staff believes it is reasonable to continue to use it as a non-firm market
index consistent with Order No. 33048; however, for reasons stated above, an85Yo adjustment
factor should be applied to comply with prior Orders.
Nameplate Size
Attachment No. 2 of Exhibit D states the Facility's Nameplate Size is 1,050 kW. Staff
believes that it should have been 825 kW and thus recommends the Parties correct the mistake.
First, Page I of the Agreement states that the Nameplate Capacity Rating is 825 kW. Second,
Exhibit A states that the project consists of three micro-steam turbine-generator sets, each
designed to produce 275 kW for a total design capacity of 825 kW. Third, Attachment No. 2 of
Exhibit D states that the Maximum Generation Injection at Point Common Coupling is 825 kW.
The Company's response to Staff s Production Request No. I (a) states that the Maximum
Generation Injection at Point of Common Coupling is o'equal to maximum generation capability
of the facility (a.k.a. nameplate rating)".
3 Since the discontinuation of the non-firm market index,82.4oh of Intercontinental Exchange ("lCE") daily firm
Mid-C market prices has been used by Idaho Power in lieu of the non-firm market index. See Order No. 33053.
a Since the discontinuation of the non-firm market index, PowerDex hourly Mid-C index has been used by Avista in
lieu of the non-firm market index. See Order No. 33048.
4STAFF COMMENTS MAY 3,2022
Order No. 29093 limited Idaho Power's Schedule 86 tariff eligibility for non-firm energy
contracts with a capacity nameplate rating of less than 10 MW to align with the Commission's
orders in Case No. GNR-E-02-01 that increased the capacity size for eligibility of published rates
to 10 MW. Although Avista does not have a similar tariff for non-firm energy, Staff does not
believe the Facility's nameplate capacity of 825 kW challenges the Commission's size
expectation for non-firm QF.
Lapsed Contract Period
Page 5 of the Agreement states that the effective date is February 16,2022, or such other
date set by Commission order. If the final approved effective date results in a lapsed contract
period in which retroactive rates are required, Staff recommends that the Parties use 85oZ of the
PowerDex hourly Mid-Columbia ("Mid-C") index price for the energy delivered during the
lapsed contract period. As of Marchz3,2022, the project has not generated any energy sold to
Avista. See Company Response to Staff s Production Request No. 6.
RECs
The Agreement allows the University to retain and own all the RECs. Because this
contract uses neither published avoided cost rates nor IRP-based avoided cost rates, Staff
believes the arrangement is in the discretion of the Parties. The Commission has stated that a QF
being paid published avoided cost rates will retain all the RECs, and a QF that is paid IRP-based
avoided cost rates will share the RECs with the utility equally. See Order No. 32697. The
Commission has not determined REC ownership for QFs that use market-based rates.
Article 21: AMENDMENT
Article 21 of the Agreement (AMENDMENT) states "[n]o change, amendment or
modification of any provision of this Agreement shall be valid unless set forth in a written
amendment to this Agreement signed by both Parties." Staff believes that this statement neglects
the significance of Commission approval and recommends that the statement be updated to
reflect the need for the Commission approval before it becomes valid. For example, the
statement could be modified to state "[n]o change, amendment, or modification of any provision
5STAFF COMMENTS MAY 3,2022
of this Agreement shall be valid unless set forth in a written amendment to this Agreement
signed by both Parties and subsequently approved by the Commission."
STAFF RECOMMEIIDATION
Staffrecommends approval of an amended agreement contingent on including the
following changes to the Agreement:
l. Remove the option of "other mutually agreed-to index" in the Agreement;
2. Set avoided cost rates in this Agreement at85o/o of the PowerDex hourly Mid-
Columbia ("Mid-C") index price;
3. Correct the mistaken Nameplate Size in Attachment 2 of Exhibit D;
4. Use 85% of the PowerDex hourly Mid-Columbia ("Mid-C") index price as avoided
cost rates for a potential lapsed contract period; and
5. Update Article 21 in the Agreement to ensure any amendment or modification does
not become valid without Commission authorization.
If the Commission approves these changes, Staff recommends that the Parties file an
updated Agreement as a compliance filing to reflect these changes.
s*Respectfully submitted this day of May 2022.
Deputy Attorney General
Technical Staff: Yao Yin
Travis Culbertson
i:umisc/commentVavug22.3dhyytnc @mments
6STAFF COMMENTS MAY 3,2022
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 3M DAY OF MAY 2022, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO.
AVU-E-22-03, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
KEVIN HOLLAND MANAGER
WHOLESALE MARKETING &
CONTRACTS
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL : [e-mail]
[e-mail]
GREGORY M ADAMS
RICHARDSON ADAMS PLLC
5I5 N 27TH ST
BOISE ID 83702
E-MAIL: [e-mail]
MICHAEL G ANDREA
SENIOR COUNSEL
AVISTA CORPORATION
PO BOX 3727
SPOKANE W499220-3727
E-mail: [e-mail]
EDITH PACILLO SENIOR
ASSOCATE GENERAL COUNSEL
OFFICE OF GENERAL COUNSEL
322E FRONT ST 324D
BOISE ID 83702
E-MAIL: [e-mail]
[e-mail]
'J.,42^^SECRETAPtY
CERTIFTCATE OF SERVICE