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H. Douglas Young
Contracts and Resource Administration
A vista Corporation
PO Box 3727
Spokane, W A 99220-3727
Telephone: (509) 495-4521 Facsimile: (509) 495-8856
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
In the Matter ofthe Investigation of the
Continued Reasonableness of Current
Size Limitations for PURP A QF Published
Rate Eligibility (i., 1 MW) and Restric-
tions on Contract Length (i., 5 years)
Case No. GNR-02-
COMMENTS OF
AVISTA CORPORATION
A vista Corp. submits these comments in the above-cited case. A vista has been
supportive of the Idaho Public Utilities Commission s interpretation of the Public Utility
Regulatory Policies Act ("PURP A") requirements. The Commission has recognized the
balancing needed to acquire resources at fair costs while not inhibiting the development
of small-scale power facilities. A vista s comments herein address the size and contract
length of Qualifying Facilities (QF).
Comment No.1: OF Size Can Impact A vista s System
A vista supports continuation of a one-megawatt limitation for purposes of
determining entitlement of developers to receive contracts under PURP A published
avoided cost rates.
Units with a generating capacity larger than one megawatt may have a significant
impact on Avista s electrical system. System impacts such as requirements for reserves
system voltage and scheduling can result in major costs to the company. Small units will
have relatively smaller impacts, and in effect will blend into the system. However, the
larger the resource, the greater are the impacts that must be considered by system
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planners and operators. All individual impacts of large QFs should be considered when
determining avoided cost purchase rates and other contract terms and conditions.
Raising the threshold for entitlement to published avoided cost to ten-megawatts
could result in significant additional costs to Avista s customers. Ten megawatts
represents one percent of the company s loads. The current tariff limit of one megawatt
for entitlement to published avoided cost rates alleviates the concern that large projects
will cause unique costs to Avista s customers that are not reflected in the published
avoided cost rates.
The intention of PURP A is that a utility be required to pay for a purchase from a
QF only that amount that the utility would have had to pay for power that, but for the QF
purchase, it would have had to acquire from another source. For larger units (e., over
one megawatt) this means the purchase contract's terms and conditions must be
evaluated and negotiated individually to ensure customers are not overpaying for the new
resource, and that the unique costs to the system of the large QF are adequately accounted
for when determining the purchase rates.
A vista recommends that the Commission continue with the one-megawatt or less
eligibility threshold for determining entitlement to published avoided cost rates.
Comment No.2: Competition As The Commission Envisioned Has Occurred
A vista believes that competition has occurred in the wholesale market to the
significant benefit of customers in Idaho. The western system of which Idaho is a part
supports a very robust and competitive wholesale market. New generation, whether
owned or purchased, must be competitive with market prices. Wholesale transactions
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have increased tremendously in the last few years. This has resulted from the
transparency of wholesale prices and the number of sellers in the market. The market has
supported numerous independent power plants that have been built and operated as
merchant plants solely for sale into the wholesale market. Marketers and brokers sell and
buy continuously within the market. Prices are readily obtainable for the purchase and
sale of power. Published market indexes and forward price strips enhance competition by
making market information readily available.
For all intents and purposes , wholesale electric markets are transparent with
respect to price. Almost all generating utilities and project developers sell and buy at
prices tied to the regional trading hubs.
A vista disagrees with the contention that competition has not occurred in Idaho.
An alleged and unsupported absence of competition is not an adequate basis for imposing
upon utilities and their customers an obligation to acquire power at published avoided
cost rates for long periods of time.
Comment No.3: Term Extension
A vista Corporation recommends that no requirement be imposed upon utilities to
offer contracts of a longer duration than five years , and that contracts of a longer duration
be individually negotiated and approved by the Commission. Current power markets are
focused on short-term arrangements. Generally speaking, twenty-year purchase contracts
are not available, and ten-year deals are very difficult to find. Most market transactions
are one month to five years in length. Credit risks to the purchasers and sellers are very
difficult to manage for power sale arrangements that extend beyond a fi ve-year term.
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Although , longer than five year-term arrangements are not precluded in the
current market, they require custom negotiation. In the current market, options to renew
or extend contracts may be more readily obtainable than initial long terms. Additionally,
it should be noted that the Washington Utilities and Transportation Commission currently
only approves published PURPA rates for a period of six months going forward using the
wholesale market as the surrogate price. Were this Commission to require longer than
fi ve year contracts on the basis of published avoided cost rates, A vista s task in
reconciling the requirements of Washington and Idaho would be much more difficult.
A vista submits that a short mandatory time frame for contracts pursuant to
published cost rates better reflects changing market prices and protects Avista
customers from bearing excess costs associated with mandatory long-term, non-
negotiated contracts.
Comment No.4: Ratepayer Interests
Any change to the PURP A rules should be measured against the impact to the
customer (ratepayer). The cost and quality of a resource to A vista s customers should be
similar whether from obtained from A vista, another utility, or a QF developer.
Individual power purchase contracts should not increase costs and create upward
pressure on retail rates when compared to other resource options. The upward pressure
on Avista s retail rates resulting from acquisitions from small QF's remains relatively
low. However, there could be a significant retail rate risk to customers resulting from
purchases from large QF's.
Avista submits that the Commission s existing rules implementing PURPA in
Idaho have served the needs of developers while restraining upward price pressure on
customers. The Company does not believe customers will benefit either from changing
the eligibility for published rates or the restrictions on contract length.
COMMUNICATIONS:
Communication respecting this matter should be directed to:
H. Douglas Young
Contracts and Resource Administration
A vista Corp.
PO Box 3727
Spokane, W A 99220-3727
(509) 495-4521
doug. voung CfYavistacoro.com
R. Blair Strong
Paine Hamblen Coffin Brooke & Miller LLP
717 West Sprague, Suite 1200
Spokane, W A 99201-3505
(509) 455-6000
rbstrong CfYpainehamblen.com
Respectfully submitted this 14th day of March, 2002
~;tRichard L. Storro
Manager of Wholesale Marketing
CERTIFICATE OF SERVICE
HEREBY CERTIFY that on the 14th day of March, 2002, I caused to
served a true and correct copy of the foregoing by the method indicated below, and
addressed to the following:
Ms. Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83720-0074
Mark Widmer
PacifiCorp
825 NE Multnomah, Suite 800
Portland, OR 97204
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Barton L. Kline
Idaho Power Company
O. Box 70
Boise, ID 83707
John M. Eriksson
Stoel Rives
201 South Main, Suite 1100
Salt Lake City, UT 84111-4904
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Conley Ward
Givens Pursley LLP
O. Box 2720
Boise, ID 83701-2701
William 1. Nicholson
Potlatch Corporation
244 California Street, Suite 610
San Francisco, CA 94111
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R. BLAIR STRONG
0OO22866,DOC