20230331Application.pdf

Avista Corp.
1411 East Mission P.O. Box 3727
Spokane, Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170

March 31, 2023

Jan Noriyuki, Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd.
Bldg. 8, Suite 201-A
Boise, Idaho 83714

Re: Case No. AVU-E-23- - Avista Corporation Application for an Accounting Order

Dear Ms. Noriyuki:

Avista Corporation, dba Avista Utilities (Avista or the Company) hereby provides the
enclosed application for an order for approval to include in the Company’s Power Cost Adjustment
(“PCA”) mechanism FERC Account 509, Allowances, due to (1) the costs of purchasing carbon
allowances pursuant to the Washington Climate Commitment Act (“CCA”) to cover Idaho’s share
of the Company’s Boulder Park natural gas generation plant dedicated to serving its Idaho
customers, and (2) the costs of purchasing carbon allowances for Idaho’s share of surplus sales
delivered to the Mid-Columbia (“Mid-C”) trading hub that require an associated carbon allowance.
Please direct any questions related to this filing to Pat Ehrbar at 509-495-8620 or me at 509-495-
2782.

Sincerely,

/s/Shawn Bonfield

Shawn Bonfield
Sr. Manager of Regulatory Policy & Strategy
[e-mail]
RECEIVED
Friday, March 31, 2023 12:53:30 PM
IDAHO PUBLIC
UTILITIES COMMISSION
CASE NO. AVU-E-23-04
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
[e-mail]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION, D/B/A AVISTA
UTILITIES, REQUESTING AUTHORITY TO
MODIFY ITS POWER COST ADJUSTMENT
MECHANISM TO ACCOUNT FOR COSTS
ASSOCIATED WITH WASHINGTON’S
CLIMATE COMMITMENT ACT ALLOWANCES
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CASE NO. AVU-E-23-___
APPLICATION OF AVISTA CORPORATION
04

Application of Avista Corporation
Case No. AVU-E-23-___ Page 1
I. INTRODUCTION

1. Avista Corporation, doing business as Avista Utilities (hereinafter “Avista” or
“Company”), at 1411 East Mission Avenue, Spokane, Washington, pursuant to Section 61-524
Idaho Code and Rule 52 of the Idaho Public Utilities Commission (“Commission Rules of
Procedure”), hereby applies to the Commission for approval to include in the Company’s Power
Cost Adjustment (“PCA”) mechanism FERC Account 509, Allowances, due to (1) the costs of
purchasing carbon allowances pursuant to the Washington Climate Commitment Act (“CCA”) to
cover Idaho’s share of the Company’s Boulder Park natural gas generation plant dedicated to
serving its Idaho customers, and (2) the costs of purchasing carbon allowances for Idaho’s share
of surplus sales delivered to the Mid-Columbia (“Mid-C”) trading hub that require an associated
carbon allowance. The Company requests that this filing be processed under the Commission's
Modified Procedure rules through the use of written comments with an order issued no later than
June 1, 2023.
2. Avista is a utility that provides service to approximately 406,000 electric customers and
373,000 natural gas customers in a 26,000 square-mile area in northern Idaho, eastern Washington,
and Oregon. The largest community served by Avista is Spokane, Washington, which is the
location of its corporate headquarters. Communications in reference to this Application should be
addressed to:
David J. Meyer, Esq. Patrick Ehrbar
Vice President and Chief Counsel for Director of Regulatory Affairs
Regulatory & Governmental Affairs Avista Corporation
Avista Corporation 1411 E. Mission Avenue, MSC 27
1411 E. Mission Avenue, MSC 13 Spokane, Washington 99220-3727
Spokane, Washington 99220-3727 Telephone: [phone]
Telephone: [phone] E-mail: [e-mail]
E-mail: [e-mail] E-mail: [e-mail]

Application of Avista Corporation
Case No. AVU-E-23-___ Page 2
A table of contents for this Application follows:

Description Page
I. Introduction 1
II. Background 2
III. CCA Impacts on Idaho 3
IV. Need for Changes to PCA 4
V. Request for Relief 5

II. BACKGROUND
3. During its 2021 legislative session, the Washington legislature passed, and its Governor
approved, the CCA (RCW 70A.65).1 The CCA is effectively a “cap-and-trade” program, with a
goal to eliminate Washington economy-wide carbon emissions by 95 percent by 2050. Its
provisions commenced on January 1, 2023. All Washington-based electric utilities, including
multijurisdictional utilities such as Avista, must secure enough allowances to cover the carbon
emissions of imported power and generation from Washington based sources emitting 25,000
metric tons or more annually. Specific to Avista, the new law covers carbon emissions generated
by the following:
• Boulder Park natural gas generating plant located in Washington (Kettle Falls
Generating Station and Northeast Combustion Turbine are exempt from the CCA as
they emit fewer than 25,000 metric tonnes of carbon equivalent annually);
• Washington’s jurisdictional share of thermal plants located outside of Washington
State used to serve Washington customers;
• Carbon-emitting thermal generation imported into Washington with a final point of
delivery in Washington, both for Washington retail load service and surplus market
sales; and,
• All non-specified electricity imported into Washington with a final point of delivery in
Washington, both for Washington retail load service and surplus market sales.

4. The Washington State Department of Ecology distributes CCA carbon allowances for the
sources listed above used to serve Washington electric retail customer load and for Washington’s

1 https://app.leg.wa.gov/RCW/default.aspx?cite=70A.65

Application of Avista Corporation
Case No. AVU-E-23-___ Page 3
load-share of surplus sales based on the Company’s Production/Transmission Ratio (“PT Ratio”).
To avoid paying twice (or double counting) for carbon emissions already regulated by Washington
State’s 2019 Clean Energy Transformation Act (“CETA”),2 these allowances are granted at no
cost.
5. Because Avista is a multi-jurisdictional utility serving customers in both Washington and
Idaho, Idaho customers are affected by the following CCA provisions provided earlier:
• Boulder Park natural gas generating plant located in Washington State;
• Carbon-emitting thermal generation (Colstrip, Lancaster, Rathdrum and Coyote Springs 2)
imported into Washington for surplus market sales at the Mid-C; and,
• All non-specified electricity imported into Washington with a final point of delivery in
Washington, for surplus market sales at the Mid-C.3

III. CCA IMPACTS ON IDAHO
6. Idaho customers will be responsible for an allocated percentage of carbon allowance
costs related to Washington based plants emitting above the law’s 25,000 metric ton annual
threshold (i.e. Boulder Park), and any surplus thermal generation imported for sale at the Mid-
C from Lancaster, Rathdrum, Coyote Springs 2, and Colstrip. Boulder Park’s obligation is
straight-forward given it meets both the 25,000 metric ton requirement and is located in
Washington. Avista incurs the obligation for sales made in Washington (primarily at the Mid-
C) as it is considered the “first jurisdictional deliverer” of this electricity as defined by the
CCA.4 As with other production and transmission system costs, Avista will allocate these
costs on a PT Ratio between Washington and Idaho, with approximately 35% allocated to
Idaho.

2 RCW 70A.45.020.
3 RCW 70A.65 - CCA regulates re-sold purchases only when Avista takes ownership of the electricity before it enters
the State of Washington.
4 WAC 173-446-020 Definitions

Application of Avista Corporation
Case No. AVU-E-23-___ Page 4
7. While Idaho customers are allocated a share of carbon obligations expenses, they are
likewise allocated the benefits of off-system revenues from power sales at the Mid-C. Each
day, Avista evaluates several market indicators to determine the most economic portfolio to
meet load requirements and optimize resources. Ultimately resources are only dispatched when
the economics of any such optimization transaction either meet load requirements or results in
a favorable benefit to customers inclusive of all associated costs. By netting both the sales and
expense associated with excess power sold at the Mid-C through the PCA, the net result is a
positive benefit to Idaho customers as the revenue associated with the sale is higher than the
expense associated with the carbon obligation.
8. Avista is also pursuing additional methods to reduce costs for Idaho customers. Avista
and other regional market participants are actively engaged in conversations with the
Washington State Department of Ecology to obtain clarification on two key approaches
potentially providing a pathway to significantly reduce CCA compliance costs for surplus
sales. These methods center around: (1) wheel through transactions that don’t result in energy
delivery in the State of Washington, and (2) a resource netting calculation based on a common
practice to offset purchases and sales made at the Mid-C. The results of these efforts may
substantially reduce the carbon obligation allocated to Idaho customers.

IV. NEED FOR CHANGES TO PCA

9. Avista respectfully requests to record the emission expenses related to Idaho’s
carbon allowance obligation to account 509.X, and include that account in the Company’s
Power Cost Adjustment mechanism calculation. Use of the 509.X emission expense
account is the appropriate FERC account because, in July 2022, FERC issued a “Notice

Application of Avista Corporation
Case No. AVU-E-23-___ Page 5
of Public Rulemaking” (Docket No. RM21-11-000)5 which provided preliminary
accounting guidance for renewable energy credits and emission allowances. In the
guidance, 509.X was the recommended expense FERC account. While account 509.X was
originally intended to capture expense associated with sulfur dioxide emissions, the
Notice of Public Rulemaking indicates the FERC’s intention for that account to be used
for all emission allowance expense, not just those associated with sulfur dioxide.
10. Expenses would be recorded in the period in which the corresponding off-system
sales revenue, FERC account 447.X. (Sales for Resale), is also recorded, effectively
syncing up the expense associated with the revenue. Avista believes this is appropriate
given the obligation is an adder to other generation costs which currently flow through
the PCA. These expenses are similar to any other power supply cost incurred while
serving Avista’s customers. The monthly accounting associated with recording the PCA
deferral would remain consistent, albeit including this additional expense account. These
expenses would be reviewed for prudency in the 2022-2023 annual Purchase Cost
Adjustment filing to be filed on or before July 31, 2023 (as well as in all future PCA
filings).

V. REQUEST FOR RELIEF
11. WHEREFORE, Avista respectfully requests that the Commission issue an Order
authorizing the Company to account for CCA carbon allowances as described above, including the
use of FERC Account 509 in the Company’s PCA, for all expenses incurred in 2023 and going
forward. The Company is not seeking a prudence determination of any costs allowed to be included

5 https://www.ferc.gov/media/e-3-rm21-11-000

Application of Avista Corporation
Case No. AVU-E-23-___ Page 6
in the PCA, rather approval of the Company’s application is needed to properly account for Idaho’s
share of costs associated with the CCA that the Commission can ultimately later determine if they
are appropriate to be recovered in customer rates. The Company requests that the matter be
processed under the Commission’s Modified Procedure rules through the use of written comments
with an order issued no later than June 1, 2023. For purposes of the Company’s reply comments if
this matter is processed under Modified Procedure, the Company is willing to respond within three
days, rather than the typical seven days as is usually given, in an effort to provide the Commission
as much time as possible to deliver an order by June 1st. The reason for this requested order date
is the Company’s PCA year runs from July through June. Receiving an order by June 1st would
allow the Company the necessary time to account for the changes to the PCA and prepare the
Company’s annual PCA filing, which is made by July 31st.
DATED at Spokane, Washington, this 31st day of March 2023.
AVISTA CORPORATION
By /s/ Patrick Ehrbar
Patrick Ehrbar
Director of Regulatory Affairs