Avista, KEC reach short-term power deal

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 owned by Kootenai Electric Cooperative.

The project is already operating and the effective date of the agreement is Jan. 5.

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) 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.

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 will be 85 percent of Mid-Columbia's non-firm rates. Rates paid the developer are eventually recovered from Avista customers.

Kootenai Electric may terminate the agreement at any time by providing Avista 30 days' written notice.