20200107Comments.pdf

MATTHUNTER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BARNO. 10655
5stoN
Street Address for Express Mail:
I I331 W CHINDEN BLVD, BLDG 8, SUITE 20I-A
BOISE, ID 83714
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA
CORPORATION'S PETITION FOR LIMITED
WAIVER OF PENALTY TERMS SET FORTH IN
ITS NATURAL GAS TARIFF
cAsE NO. AVU-G-I9-08
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and rhrough its
attomey of record, Matt Hunter, Deputy Attomey General, and in response to the Notice of
Petition and Modified Procedure issued in Order No. 34500 on December 4, 2019, in Case
No. AVU-G-19-08, submits the following comments.
BACKGROUND
On November 14,2019, Avista Corporation ("Avista" or "the Company") petitioned the
Commission to grant a limited waiver of certain penalty provisions in Schedule 146 of Avista's
tariff, and authorize settlement discussions between Clearwater Paper ("Clearwater") and Avista
to resolve a disputed penalty that arose from Schedule 146.
The Company explains it has a contract with Clearwater to provide Clearwater with
natural gas transportation. Schedule 146 is incorporated into the contract.
Schedule 146-Transportation Service for Customer-Owned Cas-provided the terms
under which Avista provided natural gas transportation services to commercial and industrial
customers with requirements exceeding 250,000 therms ofgas per year. Under Schedule 146,
)
)
)
)
)
)
JANUARY 7,2020
RECEIVED
, u2! JllH -7 Pl{ l: 38
Attomey lbr the Commission Staff
1STAFF COMMENTS
Avista may issue an entitlement order prescribing a maximum amount of gas to be used by a
customer per day. Cas used over the prescribed entitlement is subject to an entitlement penalty.
Natural gas prices during the winterof20l8-2019 were volatile because ofthe Prinoe
George Enbridge ("Enbridge") 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 notices requiring shippers on its pipeline to stay within a certain percentage oftheir
nominated natural gas supplies. In response to these notices, Avista issued entitlement notices to
those customers on its distribution system that purchase their or,,n natural gas and procure their
own natural gas transportation, of which Clearwaler is one.
The Company states Clearwater exceeded its nominated natural gas volumes eight times
between February 7,2019 and March 4, 2019. Avista issued entitlement penalties for the eight
exceedances under Schedule 146. The entitlement penalty in Schedule 146 is calculated by the
greater of $1.00 per therm or l50Yo ofthe highest midpoint price at one of a select number of
natural gas trading hubs. Avista states that, while thc average natural gas price at various non-
Sumas trading hubs during the exceedances was $0.65 per therm, the average price at Sumas
during the same period was $3.59 per therm, with a high price of $ 15.93 per therm. Avista states
the resulting entitlement penally against Clearwater is $926,202.
Clearwater and Avista agree that the entitlement penalty is unduly burdensome. Avista
states it was never forced to buy more natural gas to make up for excessive natural gas use by
Clearwater. Avista notes "there was no financial harm to any of Avista's core customers, nor
was Avista penalized by Northwest Pipeline."
Avista states Clearwater wishes to engage in settlement negotiations to determinc
whether and by what amount the entitlement penalty should be reduced. Avista cannot reduce a
schedule-derived penalty without the Commission's authorization. Therelbre, the Company asks
the Commission to grant a limited waiver of Schedule 146.
If the Commission authorizes a limited waiver and Clearwater and Avista agree to a
modified entitlement penalty, they will jointly file a settlement agreement with the Commission
for approval or rejection.
2STAFF COMME,NTS JANIJARY 7, 2O2O
STAFF ANALYSIS
The Company is requesting the Commission's authorization to offer a limited waiver of
tarifT entitlement penalty provisions under Schedule 146 for reasons described above and to
allow Avista and Clearwater to enter into settlement negotiations to determine whether, and by
what amount, the entitlemcnt penalty should be reduced. Through Staffs analysis ofthe
mitigating circumstances surrounding the tarifT violations, Staff believes it is appropriate to
authorize the limited waiver and allow the Company to enter into settlement negotiations. Staff
also believes a penalty should be substantial enough to ensure compliance with future
entitlement orders.
Staff reviewed the Company's Application, Tariff Schcdule 146, Tariff Schedute 182.
and production requests. Staff believes that: (l) the penalty of $926,202 calculated by the
Company was correct; (2) Clearwater violated the entitlemenl terms defined in Tariff Schedule
146; arrd (3) the Company responded appropriately to pipeline restraints caused by the Enbridge
pipeline rupture when it issued the entitlement order.
The entitlement penalty in Schedule 146 is calculated by the greater of $1.00 per therm
or l50o/o of the highest midpoint price at one of a select number of natural gas trading hubs.
Because ofthe events surrounding the Enbridge pipeline rupture culminated in anomalous spikes
in the price ol gas at Sumas, the penalty applied to Clearwater is unduly burdensome. The
highest midpoint price at Sumas during the entitlement orders was $15.93 per therm while the
average natural gas price at various non-Sumas trading hubs during the cxceedances was $0.65
per therm. Though the exceedance penalty was calculated correctly based on the terms of
Schedule 146, it would be much less under most circumstances.
To ensure that the Company's request is properly limited to Clearwater and should not
apply to other Idaho Avista transportation customers, Staffverified Clearwater was the only
transportation customer in Idaho that violated entitlement orders and incurred a penalty. Avista's
other Idaho transportation customers who werc issued entitlement orders complied with those
orders. Staff believes that if the Commission authorizes a limited waiver those Idaho
transportation customers who may have been impacted by compliance with the issued
entitlement orders should be given additional notice by Avista so they may determine if they
want to file comments in the case requesting approval of the settlement agreement.
In its Application, the Company stated that no core customers w'erc financially harmed
nor was the Company penalized by Northwest Pipeline. Staff verified that during the Enbridge
-)STAFF COMMENTS .IANUARY 7,2O2O
pipeline event, the Company had a favorable cumulative imbalance on Northwest Pipeline and
was able to accommodate the impact of Clearwater's overuns. Staff believes the Company
responded appropriately in complying with Northwest Pipeline's entitlement request and
therefore did not incur any penalties from the pipeline operator.
STAFF RECOMMENDATIONS
Staffrecommends the Commission allow a limited waiver of the penalty terms in Gas
Tariff Schedule 146 and allow parties to negotiate a possible penalty reduction. Staff also
recommends the Company be required to file for Commission approval of any settlement
agreement.
Respectfully submitted this 114 day of January 2020.
Matt Hunter
Deputy Attomey General
Technical Staff: Travis Culbertson
Kevin Keyt
i rumisc:comments/avug l9. Smhtnckk commenls
4STAFF COMMENl'S JANUARY 7,2020
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS TTII DAY OF JANUARY 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-G-I9.08, BY MAILINC A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
PATRICK EHRBAR
DIRECTOR REGULATORY AFFAIRS
AVISTA CORPORATION
POBOX3727
SPoKANE WA99220-3727
E-mail: patrick.ehrb istacom.com
SECRET
CERTIFICATE OF SERVICE
MICHAEL G ANDREA
SENIOR COUNSEL
AVISTA CORPORATION
PO BOX 3727
SPOKANE WA99220-3727
E-mail: [e-mail]