20200603Comments.pdf

JOHN R. HAMMOND, JR.
DEPUry ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO. 5470
Steet Address for Express Mail:
1133I W CHINDEN BVLD, BLDG 8, SUITE 2OI-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE TIIE IDAHO PUBLIC UTILITIES COMMISSION
AVISTA CORPORATION'S PETITION FOR
APPROVAL OF A SETTLEMENT
AGREEMENT BETWEEN CLEARWATER
PAPER CORPORATION AI\D AVISTA
CORPORATION
cAsE NO. AVt -G-20-02
COMMENTS OF THE
COMMISSION STAFF
The Staffof the Idaho Public Utilities Commission submits the following comments
regarding the above referenced case.
BACKGROUND
On April 7,2020, Avista Corporation ("Company") filed a Petition seeking approval of
a settlement agreement ("Agreement") with Clearwater Paper Corporation ("Clearwater")
pursuant to Commission Rule of Procedure 53. IDAPA 31.01.01.053. The proposed
Agreement resolves a dispute over a penalty that could have been imposed on Clearwater under
the Company's Idaho Natural Gas Tariff, Schedule 146 - Transportation Service for Customer-
Owned Gas ("Tariff'). The Company requested that the Petition be processed by Modified
Procedure. Petition at 6.
The Company and Clearwater agreed that the amount of the penalty was unduly
burdensome due to the unique circumstances that existed when it was incurred. Id. at 4. As a
result, the Company asked the Commission for a limited waiver of certain penalty provisions in
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ISTAFF COMMENTS JLTNE 3,2020
the Tariffand permission to enter into settlement discussions with Clearwater. Id.; see also
Order No. 34549.
After settlement negotiations the Company and Clearwater agreed to a reduced Penalty of
$500,000. Id. at 5. The Company asserts this amount strikes a reasonable balance between
providing meaningful deterrence due to the large dollar amount but not so high as to become
unduly burdensome when there was significant turmoil in natural gas markets. /d. Further, the
Company contends there was no financial harm to the Company's core customers, nor was it
penalized by Northwest Pipeline. 1d.
STAFF ANALYSIS
Pursuant to Order No. 34549 that granted a limited waiver of certain penalty provisions
in Schedule 146, the Company and Clearwater have reached a settlement agreement on the
amount of entitlement penalties levied by the Company against Clearwater. Staff has reviewed
the Agreement, prior Commission orders, and provisions under the Company's natural gas
tariffs. Based on its review, Staffrecommends the Commission approve the Agreement.
On October 9,2018, the Enbridge-owned West Coast Pipeline experienced a rupture that
reduced natural gas flows to the Sumas natural gas trading hub for the entire 2018-2019
wintertime period. The rupture, coupled with Jackson Prairie system maintenance and outages,
resulted in unusually high prices and volatility at Sumas. In February and March 2019,
Northwest Pipeline issued certain entitlement notices requiring shippers on their pipeline to stay
within a certain percentage of their nominated natural gas supplies. The Company issued the
same entitlement notices to Clearwater and other transportation customers. Despite these
notifications Clearwater exceeded its nominated natural gas volumes eight times between
February 7,20L9 and March 4,2019. Those eight exceedances led to imposition of $926,202
entitlement penalties under the Company's Tariff.
The entitlement penalty in Schedule 146 is calculated by the greater of $1.00 per therm or
150% of the highest midpoint price at one of a select number of natural gas trading hubs.
Because the events surrounding the Enbridge pipeline rupture culminated in anomalous spikes in
the price of gas at Sumas, the penalties levied on Clearwater were unduly burdensome. As a
result, the Company asked the Commission for a limited waiver of certain penalty provisions in
the Tariffand permission to enter into settlement discussions with Clearwater; see Order
No.34549.
STAFF COMMENTS JUNE 3,20202
In Order No. 34549, the Commission stated:
This limited waiver does not authorize the Company to forgive the penalty
or to negotiate a nominal penalty. We approve the limited waiver here for
one reason - no one appears to have been harmed by Clearwater's
exceedances. Avista was not penalized by Northwest Pipeline, and no other
transportation customers appear to have been harmed.
The two parties meet on February 21,2020 and on March 2,2020 and reached an
agreement on a reduced penalty of $500,000. Staffbelieves the agreed-upon penalty complies
with OrderNo. 34549 and strikes a reasonable balance whereby the penalty is sizeable enough to
discourage future entitlement violations, while at the same time is not so high that it is unduly
burdensome. No other customers were harmed by Clearwater's entitlement violations, and the
Company was not penalized by Northwest Pipeline. The penalty is passed through the
Company's annual purchased gas adjustment mechanism as an offset to deferred gas costs.
STAFF RECOMMENDATION
Staffrecommends the Commission approve the Agreement between the Company and
Clearwater reducing the entitlement penalties levied against Clearwater from $926,202 to
$500,000.
Respectfully submitted this 3'd day of June 2020
R. Hammond
Attorney General
Technical Staff: Travis Culbertson
Bentley Erdwurm
i:umisc :commentdawg2O.2jhtncbe comments
3STAFF COMMENTS JUNE 3,2020
CERTIF'ICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 3'd DAY OF JUNE 2020,
SERVED THE FOREGOTNG COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AW.G-20-02, BY E-MAILING A COPY THEREOF, TO TIIE
FOLLOWING:
MICHAEL ANDREA
SENIOR COI.'NSEL
AVISTA CORPORATION
POBO)(3727
SPoKANE WA99220-3727
E-mail: michael.andrea@avistacorp
PATRICK EHRBAR
DIR OF REGI.'LATORY AFFAIRS
AVISTA CORPORATION
POBOX3727
SPOKANE WA99220-3727
E-MAIL: [e-mail]
avistadockets @ avi stacorp. com
SECRETARY
CERTIFICATE OF SERVICE