20231208Final_Order_No_36019.pdf

ORDER NO. 36019 1
Office of the Secretary
Service Date
December 8, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE JOINT PETITION
OF AVISTA CORPORATION AND STIMSON
LUMBER COMPANY FOR APPROVAL OF
AMENDMENT NO. 3 TO POWER
PURCHASE AND SALE AGREEMENT
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CASE NO. AVU-E-23-14

ORDER NO. 36019

On September 21, 2023, Avista Corporation d/b/a Avista Utilities (“Avista”) and Stimson
Lumber Company (“Stimson” or “Seller”) (collectively “the Parties”) filed a joint petition
(“Petition”) with the Idaho Public Utilities Commission (“Commission”) requesting an order
approving Amendment No. 3 to the Power Purchase Agreement (“Agreement”) between the
Parties. The Parties represented that Amendment No. 3 extends the term of the Agreement through
December 31, 2025, and updates the Agreement to apply the current published avoided cost rates
to all power purchases by Avista under the Agreement during the period from January 1, 2024,
through December 31, 2025. The Parties request that the Commission issue an order accepting
Amendment No. 3 with an effective date of January 1, 2024.
The Parties represented that the original Agreement, as amended by Amendment No. 1,
was to expire by its terms on December 31, 2021. Petition at 3. The Parties represented that
Amendment No. 2 extended the Agreement through December 31, 2023. Id.
PARTY COMMENTS
A. Commission Staff Comments
Commission Staff’s (“Staff”) review focused on the need for provisions addressing
potential modifications to the Facility, Section 24 (Amendment), and the proposed avoided cost
rates. Staff recommended the Parties update Amendment No. 3 to reflect the following:
1. Additional language to address potential modifications to the Facility in accordance
with Order No. 35705;
2. Modification of Section 24 (Amendment) to reflect the significance of Commission
approval; and
3. Adoption of new avoided cost rates listed in Table No. 2.
ORDER NO. 36019 2
Staff had three additional recommendations not specifically tied to the content of the
proposed Amendment No. 3. First, Staff recommended that if the Seller modifies the Facility in
the future, the Company only include Net Power Costs (“NPC”) in the Power Cost Adjustment
mechanism (“PCA”) that reflects rates for any energy delivered appropriate for the Facility as
modified, regardless of the compensation paid to the Seller. Second, Staff recommended that in
the future, any extension of the contract term of any existing Public Utility Regulatory Policies
Act of 1978 (“PURPA”) agreement be treated as a renewal agreement, instead of an amendment.
Finally, Staff recommended that the Commission approve avoided cost rates in Attachments A
and B to Staff’s comments for new or renewal Surrogate Avoided Resource (“SAR”) method
PURPA contracts with an effective date on or after September 1, 2023.
Avoided Cost Rates reflecting Updated Cost of Capital
With respect to avoided cost rates, Staff recommended that the Commission approve the
following for any SAR-based PURPA contracts with an effective date on or after September 1,
2023:
1. The avoided cost rates in Attachment A to Staff’s comments for new contracts
where avoided cost of capacity does not start until the first deficit year occurs; and
2. The avoided cost rates in Attachment B to Staff’s comments for renewal contracts
where avoided cost of capacity starts immediately.
Staff explained that on August 31, 2023, the Commission issued Order No. 35909,
approving a Stipulation and Settlement with an effective date of September 1, 2023, which
contained new cost of capital parameters as shown in Table No. 1. Staff updated the cost of capital
information used in the SAR model accordingly to reflect the change. Staff then re-calculated
avoided cost rates for new contracts (Attachment A) and renewal contracts (Attachment B), using
the updated SAR model.
Table No. 1: Capital Costs Approved in Order No. 35909
Component Capital Structure Cost Weighted Cost
Total Debt 50.00% 4.97% 2.49%
Common Equity 50.00% 9.40% 4.70%
Total 100.00% - 7.19%
Avoided Cost Rates for the Agreement
Staff recommended that the Parties use the avoided cost rates in Table No. 2 below, which
are based on Attachment B. Staff explained that the updated avoided cost rates are slightly higher
ORDER NO. 36019 3
than the proposed avoided cost rates due to a slightly higher cost of capital authorized through
Order No. 35909.
Table No. 2: Updated Avoided Cost Rates
Heavy Load Hour Prices
($/MWh)
Light Load Hour Prices
($/MWh)
2024 Jan-Feb 63.04 57.64
2024 Mar-Jun 49.03 44.83
2024 Jul-Dec 63.04 57.64
2025 Jan-Feb 59.74 54.34
2025 Mar-Jun 46.47 42.27
2025 Jul-Dec 59.74 54.34
If the Commission approves the avoided cost rates contained in Attachment B with an
effective date of September 1, 2023, Staff recommended the Parties update Amendment No. 3
through a compliance filing, using the avoided cost rates contained in Table No. 2, because (1) the
Parties entered into Amendment No. 3 on September 21, 2023, which was after September 1, 2023,
and (2) the Facility should receive immediate capacity payments since the Facility is being paid
for capacity at the end of its contract term.
B. Company Comments
Avista generally supported Staff’s recommendations, and Avista intends to file an
amendment to update the Agreement consistent with Staff’s comments. Avista expects to submit
updated copies of the amendment to the Commission after the proposed edits have been reviewed
and approved by both parties to the Agreement.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over the Company’s Application and the issues in this
case under Title 61 of the Idaho Code including Idaho Code §§ 61-301 through 303. The
Commission is empowered to investigate rates, charges, rules, regulations, practices, and contracts
of all public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provisions of law, and to fix the same by order. Idaho Code
§§ 61-501 through 503.
Having reviewed the Application, the record, the comments of the parties, and all submitted
materials, the Commission finds that it is fair, just, and reasonable to approve the avoided cost
rates as contained in Attachments A and B to Staff’s comments for new or renewal SAR-based
PURPA agreements with an effective date on or after September 1, 2023. Further, the Commission
approves Amendment No. 3 subject to Staff’s recommended language modifications and adjusted
ORDER NO. 36019 4
for the newly approved avoided cost rates. The Company shall submit a compliance filing that
complies with this Order.
ORDER
IT IS HEREBY ORDERED that the Commission approves the avoided cost rates as
contained in Attachments A and B to Staff’s comments for new or renewal SAR-based PURPA
agreements with an effective date on or after September 1, 2023.
IT IS FURTHER ORDERED that Amendment No. 3 is approved subject to the language
modifications and updated avoided cost rates as provided by this Order. The Company shall submit
a compliance filing within thirty (30) days that complies with this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon this Order regarding any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. Idaho Code §§ 61-626
and 62-619.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this 8th day of
December 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER
ATTEST:

Monica Barrios-Sanchez
Interim Commission Secretary

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