20220706Comments.pdf

CLAIRE SHARP
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
(208) 334-03s7
IDAHO BAR NO. 8026
Street Address for Express Mail:
1 1331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF JOINT PETITION OF
AVISTA CORPORATION AND FORI)
IIYDRO LIMITED PARTNERSHIP
cAsE NO. AVt -E-22-07
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission ("Staff'), by and through its Attomey
of record, Claire Sharp, Deputy Attorney General, submits the following comments.
BACKGROUND
On May 11,2022, Avista CorporationdlblaAvista Utilities ("Company") and Ford
Hydro Limited Partnership ("Seller") (collectively, "Parties") executed a Power Purchase
Agreement ("PPA"), conceming the sale of energy from the Seller's hydroelectric generating
unit near Weippe, Idaho (the "Facility"). The Facility is a qualiffing facility ("QF") under the
Public Utility Regulatory Policies Act of 1978 ("PURPA"). The proposed PPA will replace a
prior contract executed in 1985 ("1985 Contracf'), which expires on June 30,2022.
On the same day, the Parties frled the PPA with the Commission for approval.
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STAFF COMMENTS ruLY 6,2022
On June 23,2022, the Parties filed an Amended and Restated Power Purchase Agreement
("Amended PPA") with the Commission for approval, amending the contract term from one year
to two years and providing avoided cost rates for two years.
STAFF REYIEW
Staffls review focused on the Contract Term, Capacity Size, Capacity Payment
Eligibility, Monthly Generation Estimates, Advanced Notice for Adjusting Monthly Generation
Estimates, Maximum Annual Amount, Potential Modifications to Facility, Section 24, Signature
Page, Avoided Cost Rates, Legally Enforceable Obligation ("LEO") Clarification Paragraph, and
Lapse Contract Period. Staff recommends that the Parties further amend the Amended PPA to
reflect the following:
l. Inclusion of the monthly generation estimates in Table No. 1;
2. Wording changes clarifuing provisions in Section 6.3.2 of the Amended PPA;
3. Inclusion of provisions to address potential modifications to the Facility that may
require Commission approval;
4. Modification of Section24 to reflect the need for Commission approval before an
amendment to the Amended PPA is valid;
5. When the Parties update the Amended PPA, both parties need to sign and date the
PPA before submitting to the Commission for approval;
6. Use of Staff s proposed avoided cost rates in Table No. 2;
7. Modification of the LEO clarification paragraph to reflect the different timing
establishing the LEO for the first year and second year of the Amended PPA; and
8. Use of Staff s proposed avoided cost rates for the first year of the lapse contract
period.
Contract Term
The PPA was a one-year contract. However, the Parties amended the contract term to
two years in the Amended PPA. Staff believes this mutually agreed-upon change is acceptable.
2STAFF COMMENTS ruLY 6,2022
Capacity Size
The 1985 Contract stated that the capacity size was 1,500 kilowatts ("kW"), but the
Amended PPA states that the capacity size is 1,499 kW. Response to Staff s Production Request
No. 2 states that the 1,499 kW is the current capacity provided by Project Developer, and the
Company is not clear why the 1985 Contract stated 1,500 kW. Because the actual capacity size
in the Amended PPA is smaller than that stated in the 1985 Contract, it does not create any
issues. Accordingly, the maximum hourly scheduled amount of Net Delivered Output is set at
1.499 megawatt ("MW"). Staff believes this is reasonable and reflects the actual capacity size.
Capacitv Payment Elieibilitv
Staff believes that the Facility should be granted immediate capacity payments for the
full term of the Amended PPA. In Order No. 32697, the Commission stated that, "if a QF
project is being paid for capacity at the end of the contract term and the parties are seeking
renewal/extension of the contract, the renewal/extension would include immediate payment of
capacity." Because the 1985 Contract contained capacity payments, Staff recommends
immediate capacity payments for the full term.
Monthly Generation Estimates
The Amended PPA does not include monthly generation estimates for the purpose of the
90/110 Rule; therefore, Staff recommends its inclusion. The 90/110 Rule requires a QF to
provide utilities with a monthly estimate of the amount of energy the QF expects to produce. If
the QF delivers more than 110 percent of the estimated amount, then the utility must buy the
excess energy for the lesser of 85 percent of the market price or the contract price. If the QF
delivers less than 90 percent of the estimated amount, then the utility must buy total energy
delivered for the lesser of 85 percent of the market price or the contract price. See Order No.
29632. However, the monthly generation estimates are not provided in the Amended PPA.
Response to Staff s Production Request No. 8 provides the monthly generation estimates below.
Staff recommends inclusion of the estimates in the Amended PPA:
aJSTAFF COMMENTS ruLY 6,2022
Table l. Monthly Generation Estimates
Month Amounts in kWhs
January 438,000
February 520,000
March 648,000
April 664,000
May 248,000
June 75,000
July 0
August 0
September 0
October 0
November 0
December 180,000
Advanced Notice for Adjusting Monthly Generation Estimates
Staff believes the timeframes of advanced notice for adjusting monthly generation
estimates are reasonable. Section 6.3.2 describes a timeframe of at least one-month in advance
to adjust monthly generation estimates, and Section 6.3.5 describes an additional timeframe of
three months in advance to adjust monthly generation estimates. Because both timeframes were
allowed by the Commission in the past (see Order Nos. 29632 and 33103), Staff believes it is
acceptable to use both when the Parties prefer the combination of the two timeframes. However,
Staff recommends language improvements for Section 6.3.2, which states:
Prior to the end of the first month following the Effective Date, and qlor1p the
end of every month thereafter, Project Developer may provide to Avista updated
monthly Net Delivered Output estimates for the month following the next
month...Project Developer may provide such monthly Net Delivered Output
estimates to Avista by written notice in accordance with Section 29, no later than
5:00 p.m. of the last business day of the month durinq which they are required to
be provided.
4STAFF COMMENTS ruLY 6,2022
Staff recommends that"during" be replaced with "by" in Section 6.3.2. Because the
Project Developer is allowed to provide the updates in earlier months glor1p the final deadline,
it is not accurate to state that the estimates are required to be provided durinq the last month.
Maximum Annual Amount
The Parties agreed to a maximum annual generation amount of 5,000 megawatt-hours
("MWhs"). Staff believes it is acceptable when the Parties mutually agree to a maximum annual
generation, as long as the Facility will not generate more than 10 average MW in any given
month. Order No. 29632 states:
By way of eligibility criteria, we find it reasonable for the utility to make an initial
capacity determination and require that the QF demonstrate that under normal or
average design conditions the project will generate at no more than 10 aMW in
any given month. To provide further definition and sideboards, we also find it
reasonable to cap the maximum monthly generation that qualifies for published
rates at the total number of hours in the month multiplied by 10 MW.
Order No. 32697 further states that published avoided cost rates for resources
other than wind and solar are available for projects up to 10 aMW. Therefore, the
monthly generation is capped at7,440 MWhs, if a month has 31 days, or at7,200 MWhs,
if a month has 30 days. Given the fact that the maximum hourly output is set at 1.499
MW, which results in a maximum monthly output of 1,115 MWhs (31 days) or 1,079
MWhs (30 days), the cap of 10 aMW in a month will not be challenged. Therefore, Staff
believes the maximum annual generation amount of 5,000 MWhs is acceptable.
In terms of the purpose of the mutually agreed-upon maximum annual amount, the
Company explains that it would allow for an above-normal water and generation year while
providing a cap to avoid significant generation increases due to unanticipated operational
changes as a result of facility upgrades.l See Response to Production Request No. 9. The
response also explains why the same cap is used for both Leap and non-Leap years: the amount
is flexible enough to not be affected by one day's generation.
I The Amended PPA does not contain any provision that requires amendment to the PPA when modifications to the
Facility occur.
5STAFF COMMENTS ruLY 6,2022
Potential Modifications to Facility
The Amended PPA does not contain any provisions that address potential modifications
to the Facility. Staff recommends that the Parties further amend the Amended PPA to include
such provisions. Although Section 24 states that "[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 "change, amendment or modification of any
provision" is not equivalent to a change in the Facility. For example, a QF could modifu its
facility, increasing its capacity and its output without modifuing its contract. This would result
in overpayments to the QF by allowing it to receive compensation for potential increases in
output due to facility upgrades prior to the Company's need for additional capacity.
Potential modifications to the Facility for the Parties to consider include, but are not
limited to, nameplate capacity changes, generation output changes,2 QF categories3 (Small Power
Production Facilities vs. Cogeneration Facilities), changes to the primary energy sources (non-
seasonal hydro, seasonal-hydro, wind, solar, and others), and changes to the generator fuela
(which could lead to the options of Fueled Rates vs Non-Fueled Rates).
Generally, there are two types of modifications to a facility. The first type happens when
a project is first built, and the completed project deviates from what was approved in the
contract. The second type happens during the contract term after the project is built where
modifications are made to the originally-built project. In order to address the first type of
modifications, the Commission issued Order No. 35239 requiring new QFs to submit an "as-
built" description of their facilities by the first operation date. If the "as-built" description does
not match the description in the original, approved contract, the contract should be amended to
reflect the "as-built" description. For the second type of modifications, Staff believes there are
two options. The first requires an "as-built" descriptions in the contract and a provision that any
major modifications causing the project to deviate from the "as-built" description will trigger an
amendment to the contract requiring Commission approval. The second solution does not
2 Generation output changes are not necessarily correlated with nameplate capacity changes; generation output can
change with the nameplate capacity staying the same.
' A QF can switch from a small power production facility to a cogeneration facility. See example of Case No. IPC-
E-19-39.u A QF can also switch from non-fueled rates to fueled rates. See example of Case No. IPC-E-19-39.
5 Staff notes that Exhibit D of the Amended PPA includes a description of the Facility, but the description does not
describe the capacity size of 1.499 MW.
6STAFF COMMENTS ruLY 6,2022
require an o'as-built" description, but instead lists in the contract all the items that can trigger an
amendment to the contract and subsequently require approval from the Commission, such as the
items listed in the previous paragraph.
Because the Amended PPA includes a description of the Facility in Exhibit D, Staff
recommends that the Parties use the first option and include provisions that:
l. Restrict the Seller from modifuing the Facility from the as-built description of the
Facility included in Exhibit D or from the capacity size of L499 MW without promptly
notifuing the Company of that intent.
2. With notification, Seller provides planned modifications to the as-built description and
any resulting increases to the capacity size of the Facility.
3. Once the Company verifies commitment of the Seller's intent and concurs that the
Seller is capable of providing such increases to the capacity size of the Facility, the
incremental net output may not be at the rates approved by the Commission, but
instead will be priced at the appropriate avoided cost rates in effect at the time a new
LEO is established for such increases. As such, the Company will be required to file
an amendment to the contract for approval by the Commission with then-current
pricing for the incremental net output.
4. If planned modifications to the Facility, as reflected in the proposed, new as-built
description of the Facility, results in an additional project such that the Facility
combined with the additional project would still be deemed a single QF or on the
same site under FERC regulations, Seller may not require the Company to purchase
and the Company will have no obligation to purchase pursuant to this Agreement, the
output of any such additional facility under the terms, conditions, and prices in the
Agreement. Instead, Seller may exercise any rights to enter into a new agreement for
the sale of such incremental energy from the additional facility that is a QF under
then-applicable laws and regulations.
5. If the actual modification deviates from the proposed modification, the Parties need to
amend the Agreement again to reflect the actual modification and seek approval from
the Commission.
6. The Seller will be in default if it does not adhere to any of the above.
7STAFF COMMENTS ruLY 6,2022
Section 24
Section 24 of the Amended PPA states that "[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 any modification becomes valid. For example, the statement can
be updated as follows: No 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 and subsequently approved by the Commission.
Signature Pase
The signature page of the Amended PPA shows that Ford Hydro signed the contract on
Jlurne21,2022. However, the Company's signature was not dated. Staff recommends both
Parties sign and properly date when the Parties update the Amended PPA.
Avoided Cost Rates
The original PPA filed with the Commission was executed on May 11,2022, for a one-
year term, but the Parties proposed to use avoided cost rates effective after June 1,2022. The
Amended PPA was executed after June 1,2022,6 for a two-year term, and the Parties proposed to
use avoided cost rates effective after June l, 2022, for both years. However, Staff recommends
using avoided cost rates contained in Table 2that include the rates effective before June I ,2022,
for the first year of the contract and the rates effective after June I ,2022, for the second year of
the contract. Staff believes this treatment reflects the applicable avoided cost rates when a LEO
is established and is also consistent with Commission's decision in Order No. 34692 in Case No.
AVU-E-19-16.
6 Ford Hydro signed the Amended PPA on June 21, 2022, and the Company's signature was not dated.
8STAFF COMMENTS ruLY 6,2022
Period
Season l($/MWh)Season 2($/MWh)
Heavy
Load
Hour
Light
Load
Hour
Healy
Load
Hour
Light
Load
Hour
Year 1 July I ,20Z2-December 31,2022 60.27 54.87 46.88 42.68
Year I January l, 2023 -June 30, 2023 59.66 s4.26 46.41 42.21
Year 2 July l, 2}23-December 31,2023 64.75 59.35 50.36 46.t6
Year 2 January l, 2024-June 30, 2024 63.t2 57.72 49.09 44.89
Table 2. Staffs Proposed Avoided Cost Rates
In terms of a LEO, Staff s recommendation is based on the Commission's decision in
Order No. 34692 in Case No. AVU-E-19-16 (the Stimson Lumber case). In that case, the
original agreement proposed a one-year term, and later amended the agreement, extending the
term to two years, but the avoided cost rates had changed before the amended agreement was
executed. Order No. 34692 states:
When the parties' one-year contract was executed and the initial Application and
Agreement was filed with the Commission, the Seller was eligible for published
avoided cost rates set by Order No. 34350. At the time the parties amended the
Agreement, new published avoided cost rates had taken effect. See Order No.
34547. The Commission thus finds it reasonable that the Company pays the
Seller for capacity and energy deliveries during the Amended Agreement's first
year at the published avoided cost rates established by Order No. 34350. For the
second year of the Amended Agreement, it is appropriate for the Company to pay
the Seller for capacity and energy deliveries at the published avoided cost rates set
by Order No. 34547.
Staff believes the proposed treatment of basing the rate on the date of contract execution is
consistent with Stimson Lumber.
In Response to Staff s Production Request No. 7, the Company argued that the Effective
Date of the proposed PPA is July l, 2022, and that the Parties can mutually agree the LEO arises
at some date other than the date of execution. Staff disagrees with the Company, because the
Commission based the rate on the date of contract execution in Stimson Lumber, and there is no
need for a determination regarding any other LEO when a contract has been entered into by the
parties and submitted to the Commission for approval.
9STAFF COMMENTS ruLY 6,2022
Therefore, Staff believes the Parties should use the avoided cost rates effective on May
11,2022, for the first year. Additionally, the main purpose of the Amended PPA is to extend the
contract term and include a second year. Staff does not believe the execution of the Amended
PPA should affect the LEO established for the first year.
LEO Clarifi cation Paragraph
The Amended PPA includes a LEO clarification paragraph that states:
WHEREAS, the Parties have agreed to revise the May l1 Agreement to
provide for a two-year term commencing on July 1,2022, and to clarifr
that the Legally Enforceable Obligation under this AgreementT shall be the
date upon which the Parties execute this Agreement.
Staff believes that the LEO for the first year was established on May I 1,2022,
when the PPA was executed and that the LEO for the second year was established after
June I ,2022, when the Amended PPA was executed. Therefore, Staff recommends that
the Parties modiff the LEO clarification paragraph to reflect the different timing.
Lapse Contract Period
The 1985 Contract expired on June 30,2022, and the Amended PPA's Effective Date is
July 1, 2022, or such other date as ordered by the Commission. Assuming the Commission
decides to adopt Staff s recommendations and requires the Parties to file an updated Amended
PPA, Staff recommends that the QF be paid for energy and capacity during the period between
July I ,2022, and the Commission's final approval of the updated Amended PPA ("Lapse
Contract Period") based on Stafls proposed avoided cost rates for the first year. This is
consistent with the Commission's decision in Order No. 34692.
STAFF RECOMMENDATIONS
Staff recommends Commission approval of the Amended PPA if it is updated to reflect
the following:
1. Inclusion of the monthly generation estimates in Table No. I included in these
comments;
7 The "Agreement" refers to the Amended PPA, which was executed after June 1,2022.
STAFF COMMENTS 10 ruLY 6,2022
2. Implement Staff s wording changes clarifuing provisions in Section 6.3.2 of the
Amended PPA;
3. Inclusion of provisions to address potential modifications to the Facility that may
require Commission approval;
4. Modification of Section24to reflect the need for Commission approval before an
amendment to the Amended PPA is valid;
5. When the Parties update the Amended PPA, both parties need to sign and date the
PPA before submitting to the Commission for approval;
6. Use of Staff s proposed avoided cost rates in Table No. 2;
7. Modification of the LEO clarification paragraph to reflect the different timing
establishing the LEO for the first year and second year of the Amended PPA; and
8. Use of Staff s proposed avoided cost rates for the first year for the lapse contract
period.
If the Commission approves StafPs recommendations, the Parties should file an updated
Amended PPA as a compliance filing to reflect StafPs recommended changes.
Respectfully submitted this day of July,2022.
)\
Ayt-L
Claire
Deputy Attorney General
Technical Staff: Yao Yin
i: umisc/commen*lavw22.7 csyy comments
STAFF COMMENTS l1 ruLY 6,2022
CERTIFICATE OF SERYICE
I HEREBY CERTIFY THAT I HAVE THIS 6TH DAY OF JULY 2022, SERVED
THE FOREGOING COMMENTS OF TI{E COMMTSSION STAFF, IN CASE NO.
AVU-E-22-07, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
KEVIN HOLLAND
WHOLESALE MARKETING MANAGER
AVISTA CORPORATION
POBO){3727
SPOKANE WA99220-3727
E-mail : [e-mail]
dockets@avi stacorp.com
BRENDA J FORD PRESIDENT
FORD HYDRO,INC
PO BOX 1432
LEMSTON,ID 8350I
MICHAEL G. ANDREA
SENIOR COUNSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE W499220-3727
E-mail : [e-mail]
-ln ilr,*"
SECRETARY I
CERTIFICATE OF SERVICE