Idaho Public Utilities Commission

Case No. AVU-E-12-01, Order No. 32459

February 21, 2012

Contact: Gene Fadness (208) 334-0339, 890-2712

Short-term agreement between Avista, landfill project OK’d

The Idaho Public Utilities Commission is approving a short-term power purchase agreement between Avista Utilities and a landfill gas generating facility south of Coeur d’Alene that is owned by Kootenai Electric Cooperative. The project is already operating and the effective date of the agreement is January 5, 2012.

The 3.2-megawatt project is a qualifying facility under the provisions of the Public Utility Regulatory Policies Act. PURPA requires that electric utilities offer to buy power produced from qualifying small power producers or cogenerators. The rate to be paid small-power producers is to be equal to the cost the utility avoids if it would have had to generate the power itself or purchase it from another source.

Kootenai initially approached Avista seeking a long-term contract, but the two parties could not agree on who should receive compensation for the renewable energy certificates (RECs)[1] associated with the project. Rather than engage in protracted litigation over RECs, Kootenai is attempting to enter into an agreement with Idaho Power Company to sell the output in Idaho Power’s eastern Oregon territory. Oregon requires investor-owned utilities to disclaim ownership of RECs and assign them to the project developer instead. Kootenai believes Idaho Power is the nearest utility in another state to which it can most easily wheel its output without operating at a loss. While that agreement with Idaho Power is being negotiated, Kootenai sought to enter into the short-term agreement with Avista to immediately provide for use of the landfill project’s output.[2]

Under the Avista sales agreement, Avista will purchase the landfill project’s output at the lower of either 85 percent of the market rate or the commission’s published avoided-cost rate for PURPA projects smaller than 10 average megawatts. Commission staff stated that given electric prices at the Mid-Columbia trading hub are currently far below the commission’s published avoided-cost rates and forecasted to remain low for the remainder of 2012, it is highly likely that the prices paid Kootenai with be 85 percent of Mid-Columbia’s non-firm rates. Rates paid the developer are eventually recovered from Avista customers.

The effective date for the sales agreement is January 5, 2012. Kootenai Electric may terminate the agreement at any time by providing Avista 30 days’ written notice.

Avista, headquartered in Spokane, serves about 122,000 customers in northern Idaho. Kootenai Electric is a member-owned cooperative utility headquartered in Hayden and is not regulated by the Idaho Public Utilities Commission.

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to Case No. AVU-E-12-01. Interested parties may petition the commission for reconsideration by no later than March 7. Petitions for reconsideration must set forth specifically why the petitioner contends that the order is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the petitioner will offer if reconsideration is granted.

Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.

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[1] Also known as Green Tags, RECs are tradable environmental commodities, which represent proof, that 1 megawatt-hour of electricity was generated from an eligible renewable energy source. A REC represents an additional payment for producing power from renewable resources. RECs can be sold on the open market, particularly to other utilities or generators attempting to meet Renewable Portfolio Standards in their states. Idaho currently does not have a Renewable Portfolio Standard.

[2] In Case No. IPC-E-11-23, Idaho Power petitioned the Commission to assert jurisdiction over the Kootenai sales agreement. The utility argues that because the power is generated in Idaho, transported over Idaho Power Company transmission lines and sold to Idaho Power customers, that the Idaho Commission, not Oregon’s, should have primary jurisdiction. If the Commission grants Idaho Power’s request, the project would be subject to Idaho rates and practices regarding the handling of RECs.