20120720Legal Brief.pdf

Avista Corp.
1411 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170
RECEIVED
2012JUL20 AMIO:31
tDAHO PLL QC.---- JTLTIS
AviSm'
Corp.
July 19, 2012
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
RE: GNR-E-1 1-03 - Brief of Avista Corporation
Dear Ms. Jewell:
Enclosed please find a Brief of Avista Corporation, submitted for filing in the above-referenced
docket on behalf of Avista Corporation. Per the Commission's Rules of Procedure, we have
enclosed and original and seven (7) copies.
If you have any questions regarding this filing, please contact Michael Andrea at 509.495.2564
or me at 509.495.4584.
Sincerely,
Paul Kimball
Regulatory Analyst
Enclosures
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have served Avista Corporation's Brief in GNR-E-1 1-03, by
electronic mail to the following:
Daniel E. Solander
PacifiCorp/ dba Rocky Mountain Power
201 S., Main St., Suite 2300
Salt Lake City, UT 84111
[e-mail]
Donovan E. Walker
Jason B. Williams
Idaho Power Company
P0 Box 70
Boise, ID 83707-0070
[e-mail]
[e-mail]
Robert D. Kahn
Executive Director
Northwest and Intermountain Power
Producers Coalition
117 Minor Ave., Suite 300
Seattle, WA 98101
rkahn(nippc.org
Robert A. Paul
Grand View Solar II
15690 Vista Circle
Desert Hot Springs, CA 92241
Robertapau108(gmail.com
Ronald L. Williams
Williams Bradbury, P.C.
1015 W. Hays Street
Boise, ID 83702
[e-mail]
C. Thomas Arkoosh
Capital Law Group, PLLC
205 N. 10th St., 0 Floor
Boise, ID 83701
tarkooshcapita1lawgroup.com
Donald 1. Howell, II
Kristine A. Sasser
Deputy Attorneys General
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702-0074
don.howel1(nuc.idaho. ov
kris.sasser(puc.idaho.gov
Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
P0 Box 7218
Boise, ID 83702
oeter(richardsonandolearv.com
greg(richardsonandoleary.com
Don Sturtevant
J.R. Simplot Company
P0 Box 27
Boise, ID 83707-0027
[e-mail]
James Carkulis
Exergy Development Group of Idaho, LLC
802 W. Bannock St., Suite 1200
Boise, ID 83702
i carkulis(exergydevelopment.com
Dr. Don Reading
6070 Hill Road
Boise, ID 83703
dreading(mindspring.com
Don Schoenbeck
RCS
900 Washington St., Suite 780
Vancouver, WA 98660
[e-mail]
Page I 1
John R. Lowe, Consultant R. Greg Ferney
Renewable Energy Coalition Mimura Law Offices, PLLC
12050 SW Tremont St. 2176 E. Franklin Rd., Suite 120
Portland, OR 97225 Meridan, ID 83642
[e-mail] greg(2mimuralaw.com
Bill Piske Dean J. Miller
Interconnect Solar Development, LLC Chas F. McDevitt
1303 E. Carter McDevitt & Miller, LLP
Boise, ID 83706 P0 Box 2564
[e-mail] Boise, WA 83701
[e-mail]
[e-mail]
Lori Thomas M.J. Humphries
Capital Law Group, PLLC Blue Ribbon Energy LLC
P0 Box 2598 4515 S. Ammon Road
Boise, ID 83701-2598 Ammon, ID 83406
lthomascapital1awgroup.com blueribbonenergv(gmail.corn
Wade Thomas Arron F. Jepson
General Counsel Blue Ribbon Energy LLC
Dynamis Energy. LLC 10660 South 540 East
776 W. Riverside Dr., Suite 15 Sandy, UT 84070
Eagle, ID 83616 arronesg(ao1.com
[e-mail]
Brian Olmstead Ted Diehl
Twin Falls Canal Company North Side Canal Company
P0 Box 326 921 N. Lincoln St.
Twin Falls, ID 83303 Jerome, ID 83338
[e-mail] [e-mail]
Bill Brown, Chair Ted S. Sorenson, P.E.
Board of Commissioners of Birch Power Company
Adams County, ID 5203 South 11th East
P0 Box 48 Idaho Falls, ID 83404
Council, ID 83612 [e-mail]
[e-mail]
Page 12
Megan Walseth Decker
Senior Staff Counsel
Renewable Northwest Project
421 SW 6th Avenue, Suite 1125
Portland, OR 97204
megan(mp.org
Benjamin J. Otto
Idaho Conservation League
710 N. Sixth Street (83 702)
P0 Box 844
Boise, ID 83701
botto(idahoconservation.org
Mary Lewallen
Clearwater Paper Corporation
601 W. Riverside Ave., Suite 1100
Spokane, WA 99201
[e-mail]
Deborah E. Nelson
Kelsey J. Nunez
Givens Pursley LLP
601 W. Bannock Street (83702)
P0 Box 2720
Boise, ID 83701-2720
dengivenspurs1ey.com
kjn(givenspursley.com
By: July 19, 2012
Paul Kimball
Regulatory Analyst
Glenn Ikemoto
Margaret Rueger
Idaho Windfarms LLC
672 Blair Ave.
Piedmont, CA 94611
[e-mail]
Margaret(envisionwind.com
Liz Woodruff
Ken Miller
Snake River Alliance
P0 Box 1731
Boise, ID 83701
lwoodruff(snakeriveralliance.org
krniller(snakeriveralliance.org
Tauna Christensen
Energy Integrity Project
769N 1100E
Shelley, ID 83274
tauna(energyintegrityproject.Org
Page 13
MICHAEL G. ANDREA (ISB No. 8308)
Avista Corporation
1411 E. Mission Ave., MSC-23
Spokane, WA 99202
Telephone: [phone]
michae1.andreaavistacorp.com
gum
2012 JUL 20 AM 10: 31
PUBLL.. '-- UTL r
-
Attorney for Avista Corporation
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S )
REVIEW OF PURPA QF CONTRACT )
PROVISIONS INCLUDING THE )
SURROGATE AVOIDED RESOURCES )
(SAR) AND INTEGRATED RESOURCE )
PLANNING (IRP) METHODOLOGIES FOR )
CALCULATING AVOIDED COST RATES )
)
I. Introduction
CASE NO. GNR-E-11-03
BRIEF OF AVISTA CORPORATION
On September 1, 2011, the Idaho Public Utilities Commission ("Commission") initiated
this proceeding to review power purchase agreements under the Public Utility Regulatory
Policies Act of 1978 ("PURPA"), including but not limited to the surrogate avoided cost
resource ("SAR") and integrated resource planning ("1RP") methodologies. Order No. 32352 at
1-2. The Commission has certain authority under PURPA and the Federal Energy Regulatory
Commission's ("FERC") regulations to implement PURPA, including the authority to set the
avoided cost rates.1
Under PURPA, utilities are required to purchase qualifying facility ("QF") generation at a
rate equal to the utility's avoided cost.2 "Avoided costs" are the incremental costs to the electric
utility of power which, but for the purchase from the QF, such utility would generate itself or
'See, e.g., 16 U.S.C. § 824a-3(f)(1); 18 C.F.R. § 292.304.
2 18 C.F.R. § 292.304(b)(2).
Page -1 BRIEF OF AVISTA CORPORATION
purchase from another source.3 The avoided cost rates for all QF purchases must also be just and
reasonable to utility customers and in the public interest and cannot discriminate against QFs.4
U. Argument
In its direct testimony in this proceeding, Avista did not take a position on ownership of
environmental attributes ("RECs") generated or associated with QFs. However, Commission
Staff and others submitted direct testimony on REC ownership. For example, Commission Staff
and PacifiCorp submitted testimony that REC ownership should be decided in favor of the
utilities.5 Other entities took the oppose position.6 At the time that direct testimony was filed,
the issue of REC ownership was pending before the Idaho Legislature and, therefore, Avista did
not take a position regarding REC ownership in this proceeding. The Idaho Legislature did not
act on the issue and, therefore, the issue of REC ownership remains unresolved in Idaho. To the
extent that the Commission seeks to resolve the issue in this proceeding, an underlying issue is
whether the Commission has jurisdiction to determine REC ownership. As discussed herein, the
Commission does have jurisdiction to determine ownership.
In direct testimony, Commission Staff further suggested that, if the utilities are deemed to
own the RECs associated with a QF, the avoided cost rate should be adjusted, presumably
through a payment in excess of what the payment would be absent the ownership right .7 On
rebuttal, Avista submitted testimony that adjusting the avoided cost rate to reflect RECs is
inappropriate. Specifically, Mr. Kalich stated:
to the extent the Commission chooses to assign RECs to utilities, Avista opposes
adjusting (i.e., increasing) avoided cost rates in exchange for obtaining the RECs. It is
my understanding that under PURPA it is not appropriate to include the value of RECs in
18 C.F.R. § 292.101(b)(6).
18 C.F.R. § 292.304(a)(1).
Sterling Direct at 40; Clement Direct at 6-10.
6 Reading Direct at 58-59; Schoenbeck Direct at 26-27.
Sterling Direct at 46-47.
Page 2 BRIEF OF AVISTA CORPORATION
avoided cost rates. Moreover, such an adjustment could create an opportunity for QF
developers to arbitrage the REC value to the detriment of utility customers. Further, the
market for RECs is very volatile and is not liquid or transparent.8
As discussed below, the avoided cost rate cannot be adjusted to reflect the value of RECs if the
Commission deems that RECs are owned by the utility.
A. The Commission has Jurisdiction to Determine the Ownership of RECs
Associated with PURPA Projects
A threshold issue with regard to any determination by the Commission regarding
ownership of RECs is whether the Commission has subject matter jurisdiction to determine the
ownership of RECs associated with PURPA projects. Clearly, the Commission has subject
matter jurisdiction to determine the ownership of RECs in this proceeding.
FERC has expressly disclaimed such jurisdiction and has held that states "have the power
to determine who owns the REC in the initial instance, and how they may be sold or traded."9
Moreover, FERC has expressly stated that states have the authority to "decide that a sale of
power at wholesale automatically transfers ownership of the state-created RECs, [but] that
requirement must find its authority in state law, not PUIRPA."10
The Commission's enabling statutes authorize the Commission to determine the
ownership of RECs associated with PURPA projects. The Commission has the authority to issue
declaratory orders clarifying or constructing orders, rules, and The Idaho Code
provides:
Kalich Rebuttal at 9-10.
9 American Ref-Fuel Co., etal., 105 FERC 161,004, P 23 (2003), reh 'g denied, 107 FERC 161,016
(2004), appeal dismissed sub nom., Xcel energy Serv. Inc., 407 F.3d 1242 (D.C. Cir. 2005) ("American Ref-Fuel
Co."); see also Morgantown Energy Associates, 139 FERC 161,006, P 46 (2012) ("Morgantown") (reaffirming that
states have authority to determine ownership of RECs in the initial instance).
'0 American Ref-Fuel Co. at P 24; see also Morgantown at P 46.
See 1PUC Rules of Procedure 53, 101.
Page -3 BRIEF OF AVISTA CORPORATION
The public utilities commission is hereby vested with power and jurisdiction to supervise
and regulate every public utility in the state and to do all things necessary to carry out the
spirit and intent of the provisions of this act. 12
The Idaho Code further provides:
The commission shall prescribe rules and regulations for the performance of any service
or the furnishings of any commodity of the character furnished or supplied by any public
utility, and, on proper demand and tender of rates, such public utility shall furnish such
commodity or render such service within the time and upon the conditions provided in
such rules. '3
RECs are a commodity of the character furnished or supplied by any public utility. 14 The
Commission is expressly empowered by statute to "prescribe rules and regulations for the
performance of any service and the furnishings of any commodity of the character furn ished or
supplied by any public utility."5 Accordingly the Commission has subject matter jurisdiction to
determine in this proceeding the ownership of RECs associated with PURPA projects.
12 I.C. § 61-501.
13 I.C. § 61-507 (emphasis added).
14 Wheelabrator Lisbon, Inc. v. Connecticut Dep 't of Pub. Util. Control, 531 F.3d 183, 186 (2d Cir. 2008)
(affirming decision of Connecticut Department of Public Utility Control requiring transfer of RECs to electric utility
under electricity purchase agreements and noting that "[t]he energy conveyed in the [PURPA] Agreement possesses
certain renewable energy attributes that, since the signing of the Agreement, have become independently tradeable
commodities known as 'renewable energy credits' ('RECs')."); In re the Ownership of Renewable Energy
Certificates ("RECs"), 389 N.J.Super. 481, 484, 913 A.2d 825, 826 (2007) (affirming Board of Public Utilities'
decision that renewable energy certificates issued on pre-existing contracts for the sale of electricity to public
electric utility belonged to utility rather than the producer and stating that RECs are a commodity).
' I.C. § 6 1-507 (emphasis added). Avista further notes that the Commission has jurisdiction over QFs and
that such jurisdiction is sufficient to determine ownership of RECs. See I.C. § 61-129 (defining "public utility" to
include every "electrical corporation" and "where the service is performed or the commodity delivered to any
corporation or corporations, or any person or persons, who in turn, either directly or indirectly or mediately or
immediately, performs the services or delivers such commodity to or for the public or some portion thereofi.]"); I.C.
§ 61-191 (defining "electric corporation" to include, with certain exceptions not relevant here, to include "every
corporation or person, their lessees, trustees, receivers or trustees appointed by any court whatsoever, owning,
controlling, operating or managing any electric plant for compensation within this state. .. ."); I.C. § 61-118
(defining "electric plant" to include "all real estate, fixtures and personal property owned, controlled, operated or
managed in connection with or to facilitate the production, generation, transmission, delivery or furnishing of
electricity for light, heat or power, and all conduits, ducts or other devices, materials, apparatus or property for
containing, holding or carrying conductors used or to be used for the transmission of electricity for light, heat or
power."). To be sure, federal law prohibits states from regulating QFs in the same manner as other public utilities.
See 16 U.S.C. § 824a-3; 18 C.F.R. § 292.602(c). However, federal law does not prohibit all regulation of QFs by
states. See 18 C.F.R. § 292.602(c)(2); Independent Power Producers of New York, Inc., 80 FERC 161,125 (1997),
order on reh 'g and clarification, 80 FERC 161,360 (1997) (finding that state commission's requirement that QFs
comply with certain monitoring requirements was legitimate exercise of state's authority). States have the authority
to determine ownership of RECs generated by or associated with QFs in the first instance, see American Ref-Fuel
Page -4 BRIEF OF AVISTA CORPORATION
Other jurisdictions that have addressed the issue of ownership of RECs have determined
that their state public utility commissions have subject matter jurisdiction over this issue. 16 For
example, in In re The Riley Energy Corp., 17 the Connecticut Light and Power Company
("CL&P") requested that the Connecticut Department of Public Utility Control ("DPUC") issue a
declaratory ruling regarding the ownership of RECs under a pre-existing power purchase
agreement entered under PURPA. The power purchase agreement did not contemplate.
ownership of RECs, but provided for the sale of the entire net electric output of the facility. The
DPUC found that under the power purchase agreement the RECs transferred to the utility as part
of the electrical output purchased by the utility. In reaching its conclusion, the DPUC found that
it had subject matter jurisdiction. The Connecticut Supreme Court affirmed the DPUC's
decision. 18 Notably, the court found that the issue of whether the DPUC had jurisdiction to
determine the ownership of RECs was not an issue of pure contractual intent, but "more a
question of legislative intent and public policy than a question of the intent of the parties."19
Thus, the court found that the DPUC had subject matter jurisdiction under its general enabling
statues. 20
Co. at PP 23-24, and have jurisdiction over QFs for purposes of making such determination, see I.C. §§ 61-501, 61-
129, 61-191, 61-118.
16 The public utility commissions of several states have, in various contexts, made determinations regarding
the ownership of RECs, including the public utility commissions of the states of Connecticut, Nevada, New Jersey,
North Dakota, Oregon, Pennsylvania, Utah, and Colorado.
17 2004 WL 3160409 (Conn. DPUC 2004).
IS Wheelabrator Lisbon, Inc. v. Dep 't of Pub. Util. Control, 283 Conn. 672, 931 A.2d 159 (2007). The
producers also sought relief from the DPUC's decision in federal court. Wheelabrator Lisbon, Inc. v. Dep 't of Pub.
Util. Control, 526 F.Supp.2d 295 (D. Conn. 2006), aff'd, 531 F.3d 183 (2d Cir. 2008). The federal court addressed,
among other things, whether the DPUC's decision was preempted by PURPA and whether assigning ownership of
RECs to the utility was a taking under the United States Cnstitution. The federal district court held, among other
things, that the DPUC's decision was not preempted by PURPA and that assigning the RECs to the utility was not a
taking. Wheelabrator Lisbon, Inc., 526 F.Supp.2d at 305-07. The United States Court of Appeals for the Second
Circuit affirmed the judgment of the district court. Wheelabrator Lisbon, Inc. v. Dep 't of Pub. Util. Control, 531
F.3d 183 (2d Cir. 2008).
Wheelabrator Lisbon, Inc., 283 Conn. at 687, 931 A.2d at 169-70.
20 Id. at 689, 931 A.2d at 171. Specifically, the court found that the DPUC had authority, and therefore
subject matter jurisdiction, to determine ownership or RECs in this case based on C.G.S.A. §4-176 and 16-9, which
Page -5 BRIEF OF AVISTA CORPORATION
The Commission has jurisdiction to determine ownership of RECs generated by or
associated with QFs.
B. Avoided Cost Rates Cannot Be Adjusted to Compensate for RECs.
Utilities are only required to pay QFs the avoided cost of generating power itself or of
purchasing from another source. 21 FERC recently held that a state public utility commission's
order that found that avoided-cost rates under PURPA also compensate for REC's is inconsistent
with PURPA.22 The Commission may determine that a sale of power from a QF automatically
transfers ownership of RECs to the utility. 23 The avoided cost rate, however, cannot be adjusted
to compensate for the REC.24
III. Conclusion
The Commission has jurisdiction to determine ownership of RECs generated by or
associated with QFs. The Commission may determine that such RECs transfer automatically to
the utilities with the sale of power; however, the avoided cost rate cannot be adjusted to
compensate for such RECs.
Respectfully submitted this 20th day of July 2012.
AVISTA CORPORATION
Michael G. Andrea
Senior Counsel
Attorney for Avista Corporation
authorize any person to petition the DPUC, or the DPUC to initiate on its own motion, to initiate a proceeding for a
declaratory ruling and authorizes the DPUC to rescind, reverse or amend its prior decisions. Id.
21 Morgantown at P 47.
22 Morgantown at P 47.
23 See Morgantown at PP 46-47; American Ref-Fuel Co. at PP 23-24.
24 Morgantown at P 47.
Page -6 BRIEF OF AVISTA CORPORATION