20191122Decision Memo.pdf

DE CIS ION MEI\{ORA NDUNI
'l'( ):CONIMISSIONER KIELLANDER
CONI}IISSIONER RAPER
COMMISSIONER ANDI,]RSON
CONIMISSION SECRETARY
CONIMISSION STAFT
LEGAL
l'R0N,t:MATT HUNTER
DEPUTY ATTORNEY GT.]NI,]RA I,
DA'l'Fl: NOVEMBER 21,2019
SUBJECT: AVISTA CORPORATION'S PETITION FOR LII\IITED WAMTR OF
PENALTY TERMS SET FORTH IN ITS NATURAL GAS TARIFF; CASE
NO. AVU-G-19-08.
On November 14,2019, Avista Corporation (Avista or the Company) petitioned the
Commission to grant a limited waiver of certain penalty provisions in Schedule 146r of Avista's
tariff, and authorize settlement discussions between Clearwater Paper (Cleanvater) and Avista to
resolve a disputed penalty that arose from Schedule 146.
BACKGROUND
Schedule 146-Transportation Service for Customer-Owned Gas-provided the terms
under which Avista provided natural gas transportation services to commercial and industrial
customers with requirements exceeding 250,000 therms of gas per year. Under Schedule 146,
Avista may issue an entitlement order prescribing a maximum amount of gas to be used by a
customer per day. Gas used in excess of the prescribed entitlemcnt is subject to an unauthorized
overrun charge. As stated in the Schedule, "the unauthorized overrun charge shall be the greater
of S 1.00 per therm or 1507c of the highest midpoint price at Northwest Wyoming Pool, Northwest
south of Creen River, Stanfield Oregon, Kern River Opal. El Paso Bondad q Northwest Canadian
border (Sumas) supply pricing points. .." (Emphasis added).
THE APPLICATION
The Company petitions the Commission to grant a limited waiver to Schedule 146's
penalty provisions. Petition at l. The Company explains it has a contract with Clearwater to
rThe Commission reccntly replaced Schedule 146 in Case No. AVU-C-19-05. See Order No. 34461. Howevcr.
Schedulc 146 was in elfect when the pcnaltics at issue in this case were incuned.
DECISION MEMORANDUM
providc Clearwater rvith natural gas transportation. ld. at2. The terms and conditions in Schedule
146 arc incorporated into the contract. Zl
Natural gas prices during the winter of 2018-2019 were volatile because of the West
Coast Pipeline rupture on October 9,2018. The Company states that, in February and March 2019,
Northwest Pipeline-the main interstate pipeline that transports natural gas from Sumas south
along the I-5 corridor and east to the Rocky Mountains-issued entitlement noticcs requiring
shippers on its pipeline to stay within a certain percentage oftheir nominated natural gas supplies.
ld. at 3. ln response to these notices, Avista issued entitlement notices to those customers on its
distribution system that purchase their own natural gas and procurc their own natural gas
transportation, of which Clearwater is one. /d.
The Company states Clearwater exceeded its nominated natural gas volumes eight
times between February 7, 2019 and March 4, 2019. Id. Avista issued entitlement penalties for the
eight exceedances, under Schedulc 146. ld. As earlier noted, the entitlement penalty in Schedule
146 is calculated by the greater of $ I .00 pcr therm or l5OVo of the highest midpoint price at one
of a select number of natural gas trading hubs. Id.; see Schedule 146. Avista states that, rvhile the
avcrage natural gas price at various non-Sumas trading hubs during the exccedances was S0.65 pcr
therfil, the average price at Sumas during the same period was 53.59 per therm, with a high price
of $ l5.93 per therm. Petition at 3. Avista states the resulting entitlement penalty against Clearwater
is $926,202. Id. ar 4.
Avista notes Clearwater and Avista agree that the entitlement penalty is unduly
burdensome. /d. Avista was never forced to buy more natural gas to makc up for excessive natural
gas usc by Clearwater. Id Avista notes 'there was no financial harm to any of Avista's corc
customers, nor was Avista penalized by Northwest Natural." 1d.
Avista states Clearwater wishes to engage in settlement negotiations to determine
whether and by what amount the entitlement penalty should be reduced. Id. at 5. Avista notes it
cannot reduce a schedule-derived penalty without the Commission's authorization. Id Therefore,
the Company asks the Comn ssion to grant a Iimited waiver of Schedule 146. 1d. If Clearwater
and Avista agree to a nodified entitlenrent penalty, they will jointly file a settlement agreement
with the Commission for approval or rejection. 1d.
The Company requests its Petition be processed under Modified Procedure. Id at 6.
,)DECISION MEMORANDUM
STAFF RECOMMENDATION
Staff recomnrends the Commission issue a Notice of Petition and Notice of Modificd
Procedure setting a January 7, 2020 comment deadline, and a January 14, 2020 reply deadline.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Petition and Notice of Modificd
Procedure setting a January 7, 2020 comment deadline, and a January 14,2O2O reply deadline?
Matt Hunter
Deputy Attorney Gencral
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-tDECISION MEMORANDUM
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