20040728_900.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:RICK STERLING
DATE:JULY 22, 2004
RE:AVISTA TARIFF ADVICE ADV-04-02-, REVISIONS TO SCHEDULE 95
OPTIONAL RENEWABLE POWER RATE
On June 15, 2004, Avista filed a tariff advice seeking changes to its Schedule 95, which
is the Company s Optional Renewable Power Rate that enables customers to pay additional
amounts to purchase renewable energy, rather than the blend of energy produced by the
Company s hydro and non-renewable generation resources. In its promotions to customers
A vista identifies this as the "Buck-a-Block" program. Currently, over 2500 customers (1800 in
Washington and 700 in Idaho) are participating in the program.
The purpose of this filing is to reflect changes to the Buck-Block program as a result of
a new underlying power supply contract to support this program. The revised program would
continue voluntary participation in increments of $1 per block. However, each block would now
be equal to 300 kWh of renewable energy rather than the previous block amount of 55 per kWh.
As with the previous Buck-Block program, customers may purchase an unlimited number of
blocks at $1 each. Every $1 block purchased ensures 300 kWh of electricity is generated from
new renewable resources. This increase in the block size reflects a lowering in wholesale costs
of wind power to A vista and represents the cost of renewable energy certificates (RECs)
associated with this resource. An REC is documentation that defines a generating facility as a
renewable resource. The RECs would be primarily from wind power generated at the Stateline
Wind Energy Center but could also come from other certified renewable resources.
DECISION MEMORANDUM - 1 -JULY 22, 2004
ST AFF ANALYSIS
Because the proposed revision in block size will effectively decrease customers ' costs for
participation, Staff believes that it is appropriate to process this request as a tariff advice. With
the increase in block size, Staff notes that the price premium to customers for purchasing
renewable rather than traditional resources is quite small. At $1 per 300 kWh block, the price
premium will become 0.3 cents per kWh rather than 1.8 cents per kWh previously. Staff has
reviewed the Company s workpapers showing how the 300 kWh block size has been determined
and believes that the new larger block size can be supported given the price of A vista s wind
purchase from Stateline.
Such a low premium may entice more customers to participate in the program.
participation grows substantially, Staff believes that customer demand can still be satisfied due to
the size of A vista s wind energy purchase from Stateline. The Stateline purchase was for
approximately 10 aMW for a term of 10 years. In the unlikely event customer demand grows
beyond the Company s expectations, A vista proposes to limit customer participation to balance
customer demand with available renewable energy certificates.
Because A vista s contractual purchase from Stateline is considered part of the
Company s generating resource portfolio just like its other purchases, non-participating
customers will enjoy nearly the same benefits of the renewable energy as participating
customers. The only thing participants will receive in exchange for their slightly higher energy
payments are renewable energy certificates (RECs). An REC is documentation that defines a
generating facility as a renewable resource. RECs, which represent only the environmental
attributes of renewable generation, provide a way for such "environmental attributes" to be
traded and valued on the secondary market. Effectively, participants receive the satisfaction in
knowing that their participation in the program helped to encourage A vista to pursue renewables.
Despite participants and non-participants alike receiving nearly the same benefits of A vista
renewable energy purchases, Staff does not oppose charging a slight premium to participants
since participation is strictly voluntary. Staff believes the program gives customers a mechanism
to show their support for renewable energy.
A vista s purchase of wind energy under the Stateline contract is treated no differently
than other power supply purchases made by the Company. Consequently, Avista s cost of
purchases of energy from Stateline are already covered by customers' base rates. Avista s costs
DECISION MEMORANDUM - 2 -JULY 22, 2004
of purchasing RECs from Stateline, however, are not included in base rates. Funds collected
from participants in the Buck-Block program will be booked in a separate account that will be
dedicated toward the purchase of the RECs. Thus, customers are not "paying twice" for A vista
purchases under the pro gram.
While the most significant proposed change to Schedule 95 is an increase in block size
there are other proposed minor language changes. Staff finds all of the proposed changes to be
acceptable.
A copy of Avista s Schedule 95 tariff with proposed changes indicated is attached for
reference.
STAFF RECOMMENDATION
Staff recommends approval of the changes to A vista s Schedule 95 as proposed.
COMMISSION DECISION
Does the Commission wish to approve the changes to Schedule 95 as proposed by
A vista?
i:udmemoslbuck a block ta
DECISION MEMORANDUM - 3 -JULY 22, 2004