20180810Letter and Agreement.pdf

State of Idaho
DEPARTMENT OT WATER RESOURCES
322 East Front Street . P.O. Box 83?20 . Boise, Idaho 83?20-009E
Phone: [phone] . Fax: (208') 287-6100 . Webslte: rvww.ldwr.idaho.gov
C.L.'BUTCII" OTTER
Govtrnon
Transmitted Via Hand Delivery and by E-mail
Paul (ellander, President
Kristine Raper, Commissioner
Eric Anderson, Commissioner
CiO Diane Hanian, Commission Secretary
Idaho Public Utilities Commission
472W. Washington St.
Boise, Idaho 83702
GARY SPACKMAN
Dlrc0tor
August 10,2018
F.-]*cs
FFTffirnr)OT
#m
L,,(^)
(Jr
crr
/r( )I()
Re: Case Nos. AVU-E-17-09 and AVU-G-I7-05
Dear Commissioners,
I am writing to update you regarding discussions between the Idaho Department of Water
Resources (*IDWR") and Avista Corporation ("Avista"). Since early 201E, IDWR and Avista have been
discussing Avista's water right claims in the Coeur d'Alene-Spokane River Basin Adjudication
(*CSRBA"). The main focus of our discussions has been Avista's hydropower water rights at the three
dams and power plant at Post Falls ("Post Falls dam"). The State of Idaho has a history of disputes over
hydropower water rights. The Swan Falls controversy of the early l9E0s involving Idaho Power's
hydropower water rights at Swan Falls dam led to the commencement of the Snake River Basin
Adjudication (*SRBA') in 1987. Litigation in the SRBA related to Idaho Power's Swan Falls water
rights did not conclude until 2012. A main reason for engaging with Avista early in the CSRBA was to
avoid extended Iitigation over Avista's hydropower water rights, especially over the issue of
subordination to existing and future water rights.
In July of 2018, IDWR was notified of the Joint Applicattonfor an Order Authorizing Proposed
Transaction ("Joint Application") filed with the Idaho Public Utilities Commission ("PUC") by Avista
and Hydro One Limited ("Hydro One"). The Joint Application sought the PUC's approval of a planned
merger between Avista and Hydro One pursuant to Idaho Code $ 6l-328. Immediately, IDWR was
concerned the merger would disrupt the adjudication claim discussions and might impede or prevent
resolution of the issues. Furthermore, IDWR was concerned the merger could result in a change in the
use of water authorized by Avista's hydropower water rights. To ensure that the public interest, as it
pertains to Avista's use of water under its hydropower water rights, would not be adversely affected,
IDWR moved to intervene in the PUC proceeding. The PUC subsequently granted IDWR's petition to
intervene.
While IDWR's petition to intervene was pending before the PUC, IDWR and Avista continued
discussing Avista's hydropower water rights at Post Falls dam. We are pleased to inform you that IDWR
and Avista reached an agreement that addresses IDWR's concerns. Specifically, IDWR and Avista have
August 10,2018
Letter to Commissioners
Page2
reached an agreement regarding subordination of Avista's water rights consistent with the historical
operations at Post Falls dam. IDWR and Avista have agreed that Avista's water right claim nos. 95-4518,
95-91 15, and 95-91 l9 shall be recommended in the CSRBA with the following subordination language:
The use of water confirmed in this right shall be junior and subordinate to permits, Iicenses, or
decrees for all uses within the State of Idaho with a priority date of, or earlier than, July 25,2018,
diverted upstream from all three points ofdiversion for this right.
The use of water confirmed in this right shall be junior and subordinate to permits, licenses, or
decrees for all uses, except for permits, licenses, or decrees for inigation storage or power
purposes, within the State of Idaho with a priority date later than July 25, 2018, diverted upstream
from all three points of diversion for this right.
The use of water confirmed in this right shall not be subordinate to permits, license, or decrees
within the State of Idaho diverted downstream from all three points of diversion for this right.
The agreement ensures that the public inlerest, as it relates to Avista's water use pursuant
to its water rights, will not be adversely affected by the proposed transaction between Avista and
Hydro One. The agreement safeguards existing and future water users from changes in historical
operations, helps protect the summer lake level of Coeur d'Alene Lake, and supports the ongoing
operations of Post Falls dam in a manner consistent with prior agreements and the Idaho Department of
Environmental Quality 40 I Certification.
A copy of the agreement between IDWR and Avista is attached to this letter. To ensure
documentation of the agreement before the PUC, IDWR requests that if the PUC approves the pending
transaction between Avista and Hydro One, the PUC include the agreement as an attachment or exhibit to
any such order so that the resolution of this issue is documented in the order.
Sincerely,
Director
Attachment: Agreement Regarding Subordination of Avista's Post Falls Hydroelechic Facility Water
Rights
Cc: All parties
CERTIFICATE OF SERVICE
I HERXBY CERTIFY that on this 1Oft day of August 2018, I served a true and correct
copy of the foregoing document on the following by the method(s) indicated.
AVISTA CORPORATION
David Meyer X u.s. Mail, postage prepaid
Vice President and Chief Counsel of E ftana Delvery
Regulatory & Govemmental Affairs n oYemightMail
Avista Corporation E [ff|l'*P.O.Box3727
Spokane, WA99220-3727
David. [e-mail]
Idatro Public Utilities Commissioners
C/O Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washington St.
Boise,Idaho 83702
diane.holt@puc. idaho. gov
Patrick Ehrbar
Director of Rates
State & Federal Regulation
Avista Corporation
[e-mail]
Elisabeth Thomas
Kari Vander Stoep
Dirk Middents
K&L Gates LLP
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-1158
I iz.thomas@kl gates.com
kari.vanderstoep@kl eates.com
[e-mail]
James Scarlett
Executive Vice President & Chief
Legal Officer
Hydro One Limited
i [e-mail]
IDAHO PUC
n U.S. Mail, postage prepaid
[l Hana Delivery
I OvemightMail
n FacsimileX Emalt
U.S. Mail, postage prepaid
Hand Delivery
OvemightMail
Facsimile
Email
HYDRO ONE LIMITED
D U.S. Mail, postage prepaid
I UanADelivery
E Overnight Mail
D FacsimileX smait
f] U.S. Mail, postage prepaidE HanaDefiveryE Ovemight Mail
f] Facsimile
X Email
trnn!x
Brandon Karpen
Deputy Attomey General
Idatro Public Utilities Commission
472W. Washington
P.O. Box 83720
Boise, lD $72A-0074
brandon.karpen@puc. idaho. eov
Ronald Williams
Williams Bradbury, PC
P.O. Box 388
Boise,ID 83701
ron@wil I iamsbradbury.com
Larry A. Crowley, Director
The Energy Strategies Institute, Inc
5549 S. Cliffsedge Ave.
Boise, tD 83716
qowlevla@aotcam
Dean J. Miller
deanj m i I ler(@cableone. net
Dr. Don Reading
6070 Hill Road
Boise,ID 83703
dread inq@m i ndsprine.com
carol. [e-mail]
[e-mail]
i ohn j acobs@c learwaterpaper.com
dav [e-mail]
nathan. smith@cl earwaterpaper.com
COMMISSIONSTAFF
X U.S. Mail, postage prepaid
E Hana Deliverytr!x
Overnight Mail
Facsimile
Email
IDAHO FORESTGROUP, LLC
X U.S. Mail, postage prepaid
E Uana DeIvery
n Overnight Mail
n Facsimile
X Email
X U.S. Mail, postage prepaid
n gana Delivery
trnx
Overnight Mail
Facsimile
Email
CLEARWATER PAPER CORPORATION
Peter J. Richardson EX U.S. Mail, postage prepaid
Richardson Adams, PLLC f] uana Defivery
515 N. 27s St. n ovemight Mail
Boise, rD 83702 E ff:l'*peter@.richardsonadams. com
f] u.s. Mail, postage prepaid
f] uana Delivery
fl Overnight Mail
n Facsimile
fi Email
X u.s. Mail, postage prepaid
f] nana Defivery
fl Overnight Mailfl Facsimile
[J nmait
I Emait
X smail
El Bmait
I email
E Email
COIVTMUNITY ACTION PARTNERSHIP ASSOCIATION OF IDAHO
Brady M. Purdy I u.s. Mail, postage prcpaid
Attorney at Law I uana Defivery
20lrN. f Z6 St. ! overnightMail
Boise, rD 83702 H ;ffii''"[e-mail]
Benjamin J. Otto
Idatro Conservation League
710 N. 6n St.
Boise,ID 83702
[e-mail].
IDAHO CONSERVATION LEAGUE
X u.S.Mail, postage prepaid
I ftana Delivery
fl Overnight tr,tail
Facsimile
Email
WASHINGTONAND NORTHERN IDAHO DISTRICT COUNCIL OF LABORERS
Danielle Franco-Malone EI u.s. Mail, postage prepaid
Schwerin Campbell Barnard
Iglitzin & Lavitt LLP
18 West Mercer Street, Suite 400
Seattle, WA 98119-3971
[e-mail]
!tr Hand Delivery
Overnight Mail
Facsimile
Email
nx
Nonnan M. Semanko
Parsons Behle & Latimer
800 West Main Sfreet, Ste. 1300
Boise,Idaho 83702
nsemanko@oarsonsbeh le.com
AVISTA CUSTOIVIER GROUP
X u.s. Mail, postage prepaid
E ganaDefivery
n OvemightMail
n Facsimile
I Email
L. Baxter
Agreement Regarding Subordination of Avista's Post Falls Hydroelectric Facility Water Rights
Purpose
This Agreement, reached between Avista Corporation, a Washington corporation {"Avista") and the
ldaho Department of Water Resources ("lDWR") (collectively the "Parties), is intended to capture the
mutual understanding of the Parties regarding subordination of Avista's Post Falls water rights, of record
with IDWR as Avista's claim nos. 95-4518, 95-9115, and 95-9119 (hereafter "Avista's water rights"). This
Agreement guides the Parties' actions in settings including, but not limited to, the Coeur d'Alene-
Spokane River Basin Adjudication ("CSRBA") and the currently pending proceeding before the ldaho
Public Utilities Commission ("PUC") related to the proposed merger of Avista and Hydro One Limited
(acting through its indirect subsidiary Olympus Equity LLC)("Hydro One").
This Agreement is built upon several anterests of the Parties:
r To protect the summer lake level of Coeur d'Alene Lake;
r To ensure the public interest, as it relates to the use of water by Avista, will not be adversely
affected by the proposed transaction between Avista and Hydro One; andr To support the ongoing operations of the three dams and power plant at Post Falls ("Post Falls
dam") in a manner consistent with prior agreements and as referenced by the ldaho
Department of Environmental Quality 401 Certification ("401 Certification") for Post Falls dam
and the Federal Energy Regulatory Commission's License for the Spokane River Project #2545
("FERC license").
Subordination of Avista's water rights
The Parties agree that Avista's water rights are subordinated consistent with the following language, and
the following language will be included in the CSRBA claims for Avista's water rights and will be
incorporated in IDWR's recommendations of Avista's water rights in the CSRBA Director's Report for
Basin 95 ("Director's Report"):
The use of water confirmed in this right shall be junior and subordinate to permits,
licenses, or decrees for all uses within the State of ldaho with a priority date of, or
earlier than, July 25, 2018, diverted upstream from all three points of diversion for this
right.
The use of water confirmed in this right shall be junior and subordinate to permits,
licenses, or decrees for all uses, except for permits, licenses, or decrees for irrigation
storage or power purposes, within the State of ldaho with a priority date later than July
25,2018, diverted upstream from all three points of diversion for this right.
The use of water confirmed in this right shall not be subordinate to permits, license, or
decrees within the State of ldaho diverted downstream from all three points of
diversion for this right.
Agreed Actions by the Parties
L. Upon both Parties' signature to this Agreement, IDWR will convey to the PUC a copy of this
Agreement along with a letter stating that if the PUC approves the pending transaction between
Avista and Hydro One, the PUC shall reference this Agreement in any such order. The letter will
1
also explain that with this Agreement, IDWR is satisfied that the proposed merger, with respect
to Avista's water rights, will not be adverse to the public interest;
2. Avista will not object to the terms of subordination described above which will be included in
the Director's Report for Avista's water rights, and will support those terms in the CSRBA;
3. The Parties agree on dismissal or withdrawal, as appropriate, of Avista's federal water right
claims in the CSRBA, numbered 95-15663 and 95-15664; and
4. Avista also owns certain water rights for power purposes at Cabinet Gorge dam, of record with
IDWR as water right nos. 96-4555,95-2L79,95-2180, and 96-2269. IDWR and Avista agree to
work, in good faith, toward reaching an agreement regarding subordination of Avista's water
rights at Cabinet Gorge dam.
General Terms
1. Consideration. The Parties acknowledge receiving sufficient consideration for the commitments
contained in this Agreement and waive any argument that they might have in any judicial
proceeding that no consideration exists to support this Agreement or that the consideration
received is not sufficient.
2. Binding Effect of Aereement. This Agreement is intended to be a final and binding agreement
between IDWR and Avista, jointly and severally, and inures to the benefit of, and is binding
upon, the successors in interest and assigns of each entity. The Parties further agree that this
Agreement is not contingent upon approval of the pending PUC merger case between Avista
and Hydro One.
3. CapacitvtqExecuteAEreernent. ThePartieswarrantandrepresentthatthepersonexecuting
this Agreement on its behalf is empowered to do so and thereby binds it by signing this
Agreement.
4. Waivers. The failure to object to any breach of any term or condition in this Agreement shall
not constitute a waiver, and no failure to object shall be deemed a waiver of any prior or
subsequent breach.
5. Entiretv of Aereement. This Agreement represents the entire and integrated agreement
between the Parties with respect to the subject matter hereof. No promise or inducement has
been offered or made except as herein set forth, and this Agreement is executed by each party
without reliance upon any statement or representation by any other party or its agent.
6. Modificatjon. To the extent this Agreement may be amended or modified, it shal! be only by a
written agreement signed by each of the parties to this Agreement.
7. Dispute Resolution. The Parties agree to meet and discuss informally, in good faith, before filing
an action arising from the Agreement.
8. Execution of Asreement ln-Parts. Due to time constraints, the parties acknowledge that it is not
possible to have all Parties sign the same copy of this Agreement. Therefore, the parties agree
that this Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument.
2
9. Sisnatures. ln witness whereof, the partles to this Agreement through their duly authorized
representatives have executed this Agreement and certify that they have read, understood, and
agreed to the terms and conditions of this Agreement as set forth herein.
Agreed to, the 25th ofJuly,2018.
Avista Corp
Bruce Howard, Sr. Director
Real Estate and Environmental Affairs
For IDWR
Gary Spackman, Director
ldaho Department of Water Resources
3
ACKNOWTEDGEMENTS
srArE oFUOoshi,^g,luu
COUNTY OF*(*^.
On this?5 day of July, 2018, before me,
be the person who executed the foregoing instrument on behalf of Avista Corporation, and he/she
acknowledged to me that he/she executed the same.
ss,
?.oJ Pc lc<
A notary public of the State of t.!^sh. *n*o.,. , personally appeared Bfucr- f'to,^lcJd
a Sr, i)', rc-(-&r of Avista Corporation, known or identified to me to
NOTARY PU
Residing at:
BLICStoutna , ,JA
Mycommission"rpir"r@
STATE OF
COUNTYOF
On this _ day of July, 2018, before ffie, _ ,
A notary public of the State of ldaho, personally appeared GARY SPACKMAN, the Director of the ldaho
Department of Water Resources, known or identified to me to be the person who executed the
foregoing instrument on behalf of the ldaho Department of Water Resources, and he acknowledged to
me that he executed the same.
NOTARY PUBLIC
Residing at:
My commission expires:
ss.
4
)
)
)
)
)
)
9. Sirnatures. ln wftness whereof, the partles to this Agreement throt4h their duly authorlzed
rcpresentatives have executed this Agreement and certlfy that they have read, understood, and
agrced to the terms and conditlons of thls ASreement as set forth herein,
ASreed to, the 25th ofJuly, 2018.
For Avlsta Corp
Bruce Howard, Sr. Director
Real Estate and Envlronmental Afhirs
For
Gary Director
ldaho Department of Water Resources
3
ACKNOWTEDGEMENTS
STATE OF
COUNTY OF
On this _ day of July, 2018, before ffi€, .
A notary public of the State of personally appeared
a-ofAvistaCorporation,knownoridentifiedtometo
be the person who executed the foregoing instrument on behalf of Avista Corporation, and helshe
acknowledged to me that he/she executed the same.
NOTARY PUBLIC
Residing at;
My commission explres:
STATE OF
COUNTY OF $.?fa,-
on this.2Stay of July, 2018, before me,Y.*. A rJx.l.a-
A notary public of the State of ldaho, personally appeared GARY SPACKMAN, the Director of the ldaho
Depanment of Water Resources, known or identified to me to be the person who executed the
foregoing instrument on behalf of the ldaho Department of Water Resources, and he acknowledged to
me that he executed the same.
fJZ*- A
NOTARY PUBLIC
Residing at;?)1.*,a Xrt,aa-.
Mycommission
Hn'to )
)
)
55.
t*--
4
+
+a
g\!^l A
o
ID
)
) ss.
)
t.t