20231120Comments of the Commission Staff.pdf

CHRIS BURDIN Ù
DEPUTY ATTORNEY GENERAL p bdIDAHOPUBLICUTILITIESCOMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074 MMISSiON
[phone]
IDAHO BAR NO.9810
Street Address for Express Mail:
11331 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 )CASE NO.AVU-E-23-14
OF AVISTA CORPORATION AND STIMSON )LUMBER COMPANY FOR APPROVAL OF )AMENDMENT NO.3 TO POWER )COMMENTS OF THE
PURCHASE AND SALE AGREEMENT )COMMISSION STAFF
COMMISSION STAFF ("STAFF")OF the Idaho Public Utilities Commission,by and
through its Attorneyof record,Chris Burdin,Deputy Attorney General,submits the following
comments.
BACKGROUND
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 represent that the Amendment 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,
STAFF COMMENTS 1 NOVEMBER 20,2023
throughDecember 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 represent 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 represent that
Amendment No.2 extended the Agreement throughDecember 31,2023.Id.
STAFF ANALYSIS
Staff s review focused on the need for provisions addressing potential modifications to
the Facility,Section 24 (Amendment),and the proposed avoided cost rates.Staff recommends
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.
Further,Staff has three additional recommendations not specifically tied to the content of
the proposed Amendment No.3.First,if the Seller modifies the Facility in the future,Staff
recommends 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,in the future,an 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
recommends that the Commission approve avoided cost rates in Attachment A and B for new or
renewal Surrogate Avoided Resource ("SAR")method PURPA contracts with an effective date
on or after September 1,2023.
Provisions Addressing Modifications to Facility
The Agreement does not contain provisions that address potential future modifications to
the Facility that may require a change in rates and that must be subsequently authorized by the
STAFF COMMENTS 2 NOVEMBER 20,2023
Commission.Staff recommends that the Parties include language in the Agreement as directed
by the Commission in Order No.35705.1
The intent of includingthe additional language is "to address when the Seller seeks to
modify the Facility that may require a change in rates."Order No.35705 at 3.Specifically,the
Commission was concerned "(1)that the QF is paid the proper and authorized rate as of the first
operation date after Facility modification,and (2)that the description of the Facility reflected in
the final amendment describe the Facility as actuallymodified."Id at 3.To address these two
concerns,the Commission required the followingbe included in the agreement:
Requirement 1:"Language that restricts the Seller from modifying the Facility
from the as built description of the Facility...withoutpromptlynotifying the
Company of that intent."Id at 3.
Requirement 2:"Language that requires the Seller to provide notification of
planned modifications (such as fuel change or capacity size change)to the as-built
description."Id at 3.
Requirement 3:Languagethat requires parties to "amend the contract reflecting
the facility as actuallymodified."Id at 4.
Requirement 4:Languagethat ensures that the payment structure allows payment
for only the proper authorized rates of the facility as actuallymodified and as of
the date when energy is first delivered as a modified facility.Id at 4.
In addition,if a facility is modified,the Commission required the utility to only include
NPC in the PCA that reflect rates for any energy delivered appropriate for the facility as
modified,regardless of the compensation paid to the facility.Id at 4.
Staff believes these requirements and additional amendments to the Agreement are
appropriate because the Commission previouslyfound it reasonable to include them in any new
PURPA contract or contract renewal.Order No.35254 at 4,Order No.35255 at 4,Order No.
35256 at 6,Order No.35259 at 3,and Order No.35267 at 4.In the past,the Commission has
not allowed the facility modification language to be added to PURPA contract through an
amendment.Id.However,the main purpose of proposed Amendment No.3 is to extend the
i See examples in cases IPC-E-22-28,IPC-E-23-02,IPC-23-15,and IPC-E-23-22 that followedthe direction of
Order No.35705.
STAFF COMMENTS 3 NOVEMBER 20,2023
term of the contract for an additional two years with updated pricing.Staff believes that the
Amendment should be classified as a renewal contract and recommends that similar extensions
be treated as renewal contracts in the future.
Section 24 (Amendment)
Section 24 of the Agreement 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."Agreement at 21.Staff believes this statement neglects the
significance of Commission approval and recommends that the statement be updated to reflect
the need for 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.
Avoided Cost Rates reflecting Updated Cost of Capital
Staff recommends the Commission approve the followingfor any SAR-based PURPA
contracts with an effective date on or after September 1,2023:
1.The avoided cost rates in Attachment A 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 for renewal contracts where avoided cost
of capacity starts immediately.2
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.Then,Staff re-calculated avoided cost rates for
new contracts (Attachment A)and renewal contracts (Attachment B),using the updated SAR
model.
2 If a qualifying facility is being paid for capacity at the end of the contract term,and the parties are seeking renewal
or extension of the contract,the renewal or extension includes immediate payment of capacity.Also,if a qualifying
facility has contributed to meeting a utility's need for capacity,it will be granted immediate payment of capacity.
STAFF COMMENTS 4 NOVEMBER 20,2023
Table No.1:CapitalCosts Approvedin Order No.35909
Component CapitalStructure 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 recommends that the Parties use the avoided cost rates in Table No.2 below,which
are based on Attachment B.The updated avoided cost rates are slightlyhigher 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 Light Load Hour Prices
($/MWh)($/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 recommends 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.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."
STAFF COMMENTS 5 NOVEMBER 20,2023
STAFF RECOMMENDATION
Staff recommends the following:
1.The Parties update Amendment No.3 through a compliance filing to include:
a.Additional language to address potential modifications to the Facility in
accordance with Order No.35705;
b.Modification of Section 24 (Amendment)to reflect the significance of
Commission approval;and
c.Adoption of new avoided cost rates listed in Table No.2.
2.If the Seller modifies the Facility,Staff recommends the Company only include
NPC in the PCA that reflects rates for any energy delivered appropriate for the
Facility as modified,regardless of the compensation paid to the Seller.
3.An extension of the contract term of any existing PURPA agreement be treated as
a renewal agreement,instead of an amendment.
4.The Commission approve avoided cost rates in Attachment A and Attachment B
for new or renewal SAR-based PURPA agreements with an effective date on or
after September 1,2023.
Respectfully submitted this 20th day of November 2023.
Chris Burdin *
Deputy AttorneyGeneral
Technical Staff:Yao Yin
i:umisc/comments/AVU-E-23-14 Comments
STAFF COMMENTS 6 NOVEMBER 20,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 20th DAY OF NOVEMBER 2023,
SERVED THE FOREGOING COMMENTS OF THE COMISSION STAFF TO
AVISTA CORPORATION,IN CASE NO.AVU-E-23-14,BY MAILING A COPY
THEREOF,POSTAGE PREPAID,TO THE FOLLOWING:
CHRIS DRAKE MICHAEL G.ANDREA
AVISTA CORPORATION SENIOR COUNSEL
PO BOX 3727 AVISTA CORPORATION
SPOKANE WA 99220-3727 PO BOX 3727
E-MAIL:[e-mail] SPOKANE WA 99220-3727
E-mail:michael.andrea avistacorp.com
LISA ZENTNER
STEMSON LUMBER CO
9400 SW BARNED RD
STE 530
PORTLAND OR 97225
E-MAIL:1zentner stimsonlumber.com
SECRETARY
CERTIFICATE OF SERVICE