20200407Petition.pdf

j,issra
Avista Corp.
141 1 East Mission P.O. Box3727
Spokane. Washington 99220-0500
Telephone [phone]
TollFree 800-727-9170
RECEIVED
2020 April TAMIl:57
IDAHO PABLIC
UTILITIES COMMISSION
AVU-G-20-02
Apil7,2020
Diane Hanian, Secretary
Idatro Public Utilities Commission
11331W. ChindenBlvd
Building 8, Suite 201-A
Boise, D 83714
Via Electronic Mail: [e-mail]. eov
RE:IN THE MATTER OF AVISTA CORPORATION'S PETTTION FORAPPROVAL OF A
SETTLEMENT AGREEMENT BETWEEN CLEARWATER PAPER CORPORATION
AND AVISTA CORPORATION
Dear Ms. Hanian:
Enclosed for filing with the Commission is Avista's Petition for Approval of a Settlement
Agreement between Clearwater Paper and Avista Corporation. Given current back office
limitations related to the COVID 19 pandemic, Avista is only able to provide this frling in
electonic format. Please direct any questions regarding this filing to Michael Andrea at (509)
495-2564 or [e-mail] and Patrick Ehrbar at [phone] or
patrick. ehrbar@ avistacorp. com.
Sincerely,
/s/ Patrick Ehrbar
Patrick Ehrbar
Director of Regulatory Affairs
Terry Borden, Clearwater Paper Corporation
Malisa Maynard, Clearwater Paper Corporation
Cc:
Michael G. Andrea (ISB No. 8308)
Senior Counsel
Avista Corporation
l4l I East Mission, MSC-I7
Spokane, WA99202
Phone: [phone]@
Facsimile: [phone]
RECEIVED
2020 April TAM|l:57
IDAHO PABLIC
UTILITIES COMMISSION
BEFORE THE IDAHO PT]BLIC UTILITIES COMN4ISSION
IN THE MATTER OF AVISTA
CORPORATION'S PETITION FOR
APPROVAL OF A SETTLEMENT
AGREEMENT BETWEEN CLEARWATER
PAPER CORPORATION AND AVISTA
CORPORATION
CASE NO. AV[J-G,2O.OL
Pursuant to Idaho Public Utilities Commission Rule of Procedure 53, Avista Corporation
("Avista" or "Company") petitions the Idaho Public Utilities Commission ("Commission") for
approval of a Settlement Agreement with Clearwater Paper ("Clearwater") that resolves a disputed
penalty that arose under Avista's Idaho Natural Gas Tariff ("Tariff'). The Settlement Agreement
is attached hereto as Exhibit A. This Settlement Agreement fully and finally resolves all issues
associated with any entitlement penalties that were or could have been levied by Avista against
Clearwater for exceeding its nominated natural gas volumes during the period between February
7,2019 and March 4,2019.
During the period February 7,2019 to March 4,2019, the penalties for Clearwater's
unauthorized volumes during overrun entitlements were calculated tobe$926,202 ("penalty"). As
discussed herein, under the unique circumstances that gave rise to the Penalty, the full penalty
amount was unduly burdensome. Under the terms of the Settlement Agreement, Avista and
Page - I AVISTA coRPoRATIoN's PETITIoN FoR APpRovAL oF SETTLEMENT
AGREEMENT
)
)
)
)
)
Clearwater agreed to settle the Penalty for a total of $500,000. Clearwater has authorized Avista
to represent that Clearwater supports this Petition.
Communications in reference to this Application should be addressed to:
Michael G. Andrea
Senior Counsel
Avista Corporation
1141 E. Mission Ave., MSC 17
P.O.Box3727
Spokane, WA99220-3727
(s0e) 49s-2564
michael. andr ea@av istacorp. com
Patrick D. Ehrbar
Director of Regulatory Affairs
Avista Corporation
1411 E. Mission Ave, MSC 27
P.O.Box3727
Spokane, WA 99220-3727
Phone: [phone]
Patrick. Ehrbar@avistacorp. com
I. Clearwater Paper's Special Contract with Avista
Based on Clearwater's unique ability to bypass Avista's distribution facilities and take
service directly from Northwest Pipeline, Avista and Clearwater entered into a special contract
("Contract").1 The initial term of the Contract was l0 years ending November 30, 2016, and
continuing in effect from year-to-year thereafter unless canceled twelve-months prior by written
notice by either party. The Contract remains in effect today. Pursuant to section 7 of the Contract,
Clearwater shall be responsible for imbalance charges or penalties as set forth in Avista's tariff.
As noted in subsection 1l of the Contract, "lncorporated Terms", except as provided in the
I See Case No. AVLI-G-07-01
Page - 2 AVISTA CORPORATION'S PETITION FOR APPROVAL OF SETTLEMENT
AGREEMENT
Contract, all terms and conditions set forth in Avista's Tariffare incorporated in the Agreement.
Accordingly, the terms set forth in the Tariffare applicable to Clearwater.
II. Wholesale Natural Gas Prices and Entitlements
On October 9,2018,the Enbridge-owned West Coast Pipeline experienced a rupture which
greatly reduced natural gas flows to the Sumas natural gas trading hub for the entire 2018-2019
winter time period. That rupture, coupled with Jackson Prairie system maintenance and outages,
resulted in unusually high prices and volatility at Sumas. In the February and March 2019
timeframe, 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 certain entitlement notices
requiring shippers on their pipeline to stay within a certain percentage of their nominated natural
gas supplies. Avista, for its part, issued the same entitlement notice to those customers on Avista's
distribution system who purchase their own natural gas, and procure their own natural gas
transportation. Clearwater is one of those "transportation" customers. ln spite of these
notifications from Avista, and without passing judgement as to why, Clearwater exceeded its
nominated natural gas volumes eight times between February 7,2019 and March 4,2019. Those
eight exceedances, pursuant to the Company's tariff, led to the issuance of entitlement penalties.
The average price for natural gas at various non-Sumas trading hubs during those
exceedances was $6.46 per dekatherm. The average price at Sumas, however, was $35.98 per
dekatherm, including a high price of $159.27 per dekatherm (or $15.93 per therm). As set forth in
Idaho Schedule l46,the entitlement penalty was the greater of $10 per dekatherm or 150% of the
highest price basin. Given that the price of natural gas at Sumas exceeded $10 per dekatherm, the
*l50oh of the highest price basin" became the penalty. Ultimately, using that penalty methodology
Page - 3 AVISTA CORPORATION'S PETITION FOR APPROVAL OF SETTLEMENT
AGREEMENT
and the volumes that exceeded the nominations, the resulting penalty for Clearwater is $926,202.
In Avista's (and Clearwater's) view, that level of penalty may be unduly burdensome. Despite the
regional supply constaints, and entitlements put on Avista by Northwest Pipeline, Avista at no
time was forced to buy more natural gas to make up for the natural gas Clearwater used in excess
of the various entitlements. As such there was no financial harm to any of Avista's core customers,
nor was Avista penalized by Northwest Pipeline.
III. Commission Approval of a Request for Limited Waiver of Schedule 146 of Avista's
Tariff
On November 14,2019, Avista petitioned the Commission to grant a limited waiver of
certain penalty provisions in Schedule 146 of Avista's tariff, seeking authorization to enter into
settlement discussions with Clearwater. On February 7,2020, the Commission approved Avista's
Petition in OrderNo. 34549 (Case No. AVU-G-19-08)
We approve a limited waiver of Schedule 146's penalty provisions, understanding that the
Company will negotiate with Clearwater to establish a less burdensome psnalty. This
limited waiver does not authorize the Company to forgive the penalty or to negotiate a
nominal penalty. Clearwater agreed to follow Schedule 146 and failed to do so. Under
different circumstances, Clearwater's exceedances could have subjected Avista to
entitlement penalties from Northwest Pipeline. Entitlement orders are designed for
circumstances like the Enbridge pipeline rupture, and such orders need meaningful teeth.
We approve the limited waiver here for one reason-no one appears to have been harmed
by Clearwater's exceedances. Avista was not penalized byNorthwest Pipeline, and no other
transportation customers appear to have been harmed. Considering these facts, we find it
fair, just, and reasonable to waive the penalty provisions in Schedule 146 to allow the
Company to negotiate a less burdensome penalty.
IV. Settlement between Avista and Clearwater
On February 21,2020, and again on March 2,2020, Avista and Clearwater representatives
met to discuss a potential settlement related to the entitlement penalty. Understanding the
Commission's directives that the penalty should be (l) less burdensome, (2) not zero or nominal
Page - 4 AVISTA CORPORATION'S PETITION FOR APPROVAL OF SETTLEMENT
AGREEMENT
in nature, and (3) that the penalty should have "meaningful teeth", Avista and Clearwater agreed
to a $500,000 penalty, a reduced level from $926,202 as calculated pursuant to Avista's
Commission approved tariff,
The agreed-upon penalty strikes a reasonable balance whereby the penalty is still a sizeable
amount at $500,000 and provides meaningful teeth, but at the same time is not so high that the
penalty is unduly burdensome. The agreed-upon penalty is large enough to deter future entitlement
violations. Finally, Avista has reviewed the circumstances that gave rise to Clearwater's Penalty.
Under the circumstances that gave rise to Clearwater's Penalty, the agreed-upon penalty amount
is appropriate. Importantly, Avista has determined that other customers were not harmed by
Clearwater's entitlement violations.
The turmoil in the natural gas markets that ultimately led to the entitlement penalty in itself
resulted in significant burden to Clearwater as it relates to the cost of natural gas. Clearwater
absorbed higher natural gas costs that exceeded $8 million during the same time period. Under
the circumstances, imposing the full amount of the Penalty would be unduly burdensome.
V. Communication to Avista's Idaho Transportation Customers
In Order No. 34549, the Commission stated that "Additional notice of the settlement shall
be given to Avista's Idaho tansportation customers by the date the settlement agreement is frled
with the Commission." Simultaneous with the filing of this Settlement Agreement, Avista
provided a copy of this Petition and Settlement to Avista's other Idaho transportation customers.
A copy of that notice is Attached as Exhibit B.
Page - 5 AVISTA CORPORATION'S PETITION FOR APPROVAL OF SETTLEMENT
AGREEMENT
CONCLUSION
WHEREFORE, based on the foregoing, Avista hereby roquests that the Commission
approve the Settlement Agreement attached as Exhibit A. The Company requests that the matter
be processed under the Commission's Modified Procedure rules througb the use of wriuen
comments.
Dated at Spokane, Washingtonthis 7th dayof April2020.
AVISTA CORPORATION
By lslMichael G. Andrea
Michael G. Andrea
Senior Cormsel
Page - 6 AVISTA COFOORATION'S PETIUON FOR APPROVAL OF SETTLEMENT
AGREEMENT
Exhibit A
S E'fI'LIt M IrINT AG RI,tIiM I,lN'f
'l'his Settlcntent Agreentent is cntercd into on April 2, 2020, betwcen Avista corporation("Avisla") and Cleatwater Papcr Corporation ("Clearwater")'(indivicluulty u .;nu,ty" uiacollcctively, lhe "Panies") to fully and finally iesolve all issues associate<l with ariy 6;iii,t"n
"u,penalties llmt werc levied by Avista against clearwater for exceecling its nominar"a nui.,rut g.,volumes during the period between liebruary 7,2019 and March q,iotg (,.Entitlemcnt [ssue,,).
I{ECITAI,S
Wl IERIIAS, On october 9, 2019, the linbridgc-owned West Coast pipeline experienceda mpturc which greatly reduced natutal gas llows to the Sunras natural gas tr.aOing hub for theentire 2018-2Olg winrcr time periocl;
wIIERIiAS, itt tltc liebruary and March 2019 timeframc, Northwest pipeline, issuedccrlain entitlement nolices rcquiring shippers on their pipeline to stay within a cefiain percentageof their norninated gas supplies; -
WIIUREAS, as a t'esult ol'Nortltwest Pipelinc's entitlement rrotices, Avista issr.redentitlernent notices to those customers on Avista's clistriburion systenr, including Clearwater,u'lto purcltase their owlt natural gas ancl procure lheir own natumt gas transportation;
WI{IIREAS, clearwatet'exceeded its nontinated natural gas volunres eight rimes betweenlrebruary 7 ,2019 alrcl Marcl't 4,2019 and, as a result, Avista issu-ed entitlementlenaities onClearwater in accordartce rvith the then-approved Schedule 146 of Avista's natriratgas tariff("Schedule 146");
WI{liRtlAS, uttder thc unique circutttstances that gave rise to Clearwater,s entitlernentpetlalties, Avis(a and (llearwater dcsired lo enter into settlenrent discussions to ensul' that theanrount of any penalty is appropriate to satis$ the intent of the entitlement penalties in Schedule146, but is nol undull, burdensonre or otherwise unjust and urueasonable;
WIJDRIiAS, Avista filed a petition fol linrited waiver of the penalty terms set forth inScheclttlc t46 ("l'etition") witlt the ldaho Public t.ltilities Corrunission (..Commission")
t'eqtrestittg a lirnitcd waiver of the prescribecl entillernent penalties in Schedule 146 and to allowAvisla lo crrgage in scttlenrent discussions with Clearwater lo resolve the disputed penaltyiutttlulll;
wlllrltHAs, in Order No. 34549, the Conrmission approved Avista's petition to allowAvisla lo lrcgotiate a less burdensome penalty, provided thai any settlement that is reached shallbc sutrnittcrl to lhe Colrunission for approval.
NOW't'lilrRDfORE, thc parties agree as follows:
SIJ'ITLEMENT AGREEMENT Page I
Nlk
AGREEML1NI'
I. Effectiv-e-Uglg, l'he Parties understand and agree that this Agreement is subject toapprovnl by the Cornrnission. T'he Agreement shalt be effective on the date first stated above or
such other date cstablishcd by the Comltrission.
2' ElltillernettllgtoltJ. Avista catculated thc entitlement penalty again.st Clearwater for
exceedirtg ils ttolninated nalural gas volumes during the period between l'ebruary 7,2019 and
Marr:h 4,2019 under Schedule 146 to be $926,202 ("Original Penalty"). Clearwater and Avista
agrce that, under tlte unique circumslarrces that existed at the time, the Original Penalty is unduly
bttrdensotne. Notably, Avista was not forccd to buy more natural gas to make up for excessive
natural gas ttsed by C)learwater, there was no financial harm to any of Avista's core custonters,
and Avista was not penaliz.ed by Norlhrvcst Pipeline. Accordingly, the Parties agrce to reduce
the Original Pcnalty such that thc tolal penalty that Clearwater will pay for the Entitlement Issue
shall he $500,000 ("settlentent Amount").
3' (lontntission Approval. The obligations of the Parties under this Agreernent are subject
to Cornnlissiott approval in accordance with its lemrs and conditions and, upon such approval,
tlte ordcr approving tltis Agrcenrcnt bcing upheld on appeal, if any, by a court of conrpetent
iuri.sdiction.
A. llpon executiott of this Agreenrent, Avista shall file this Agreement with the(lotttmission for approval. Clearwater will not oppose Avista's filing of this Agreement
alrd Clearwater shall suppofl Avista's filing to the extent such support is rcasonably
rcquested by Avista. Except as provided in section 3,8 of this Agrcenrent, neitfuer party
slull appeal a Comnrission ot'der approving the Agreernent. If this Agrecment is
challertged by any person not a party to the Agreement, each Party to this Agreement
reserves the right to [ile teslimony, cl'oss-exatnine witnesses and put on sucli case as it
deems applopriate to respond firlly to the issues presented, including the right to raise
issues that are incorpotated in the seftlentettt terms embodied in this Agreenrent;
provided, however, that all slatetnents tuade and positions taken in negotiations relating
to this Agreeurenl shall be confidential.
B. If the Cornmission rejects any parl or all of tlris Agreenrent or imposes arry
additional ntaterial conditi<lns on approval of this Agreernent, each partyrcscrves thelight, upon written ttolicc to the other Party within l4 days of the date of such action by
the (lonlmission, to withdrarv fronr this Agreernent. In such case, no Party shall be bound
or prejudiced by the tcrms of this Agreernent, and each Party shall be entiiled to seek
reconsideration of the Conlnrissiott'.s order, file testimony as it chooses, cross-cxamine
witnesses, and do all otlrer tlriltgs necessary to put on srrch case as it deems appropriate.
4' Settlerttent Paynrent. Upon Conuuission approval of this Agreement, Avista will invoicc(llearwaler for the Settlentent Atnount. Clearwater shall pay the Seitlemcnt Amotrnt witSin 30days of the clate of such invoice. Cleatwater's payment of the Settlement Anrount shall fully audfinally resolve the Entitlernent Issue,
l^kSE'TTLI]MEN'I' AGREEMENT Page2
*
5' \o Precetlcnt' 'l'he Parties agree that this.Agreenrent rcpresents a conrpromise of rhepositiorts ol'the l)nflies in this case ind is enterccl in-to by tn. pi.ii.s to resolve the Entitlernentlsstre''l'ltc Partir:s acknowtedge that rtre Entitlement rrru" i, u"rut on unique circumstances thatexistcd only for clearrvater's Entitlernent Issue. The Parlies undeuand aud agree that thisAgrcenteltt shall not establish a cou$e of dealing or otherwise-fovide *y pr.".Jrn, fo,addressing firture entitlcnrent penalties or any other penalties ttut ,nay be i,rpor"O ,nJ",Avista's tariff.
6. Confidentialitv: Resgvalion of Riglrts. Except to tlrc extenr necessary to support theapproval of this Agreemenl by the Cornmission, this Agreernent and all stateinents made andpositions laken in negoliatiorrs relating to this Agreenrent shall be confidentialan<t shall nor 6"adnrissiblc in evidence in this.o.t any other proceeding. In no event shall either party shall bebound, bcnefited or prejudiced by any posiiion asscrtid in the negotiation of this A-greenrent,except to tltc cxtenl expressly stated lterein. llris Ageement sha'il not be construedas a waiverof the righls of either.Pafly unless such rights arr expressly waived herein. No findings of fact orconclusions of law otlrcr than those statecl herein stratt Ue deemed to be implicit in thiJAgreerncnl.
7 ' ]'his Stipulation rnay be executed in counterparts and each signed counterpart sha[constitute an original documenl.
DA'IED this 2nd day of April, 2020.
AVISI'A CORPORA]ION CLEARWATER PAPER CORPORATION
il,A,^,Xk"A,*
?t
By
Miclrael Arrdrea
Scnitlr (lounsel lbr Ayista
Terry Borden
Vice President of Procurernent for Cleanvater
Paper Corporation
SL-TTLEMEN 1' AGR UEMENT Page 3
il$(