Potlach wants to sell power on the open market

With Northwest power prices on the rise, Idaho's Potlach Corp. has asked Idaho regulators to rule a unit of Avista Corp. must serve all Potlach's electricity needs so the wood products company can sell power it makes on the open market. Avista said such a move would be unfair to its other customers.


By the OGJ Online Staff

HOUSTON, May 11 -- With Northwest power prices on the rise, Idaho's Potlach Corp. has asked Idaho regulators to rule a unit of Avista Corp. must serve all Potlach's electricity needs so the wood products company can sell power it makes on the open market.

Potlatch generates a significant portion of its power needs at its Lewiston plant with its own cogeneration facilities. The company wants Avista to serve its entire load, thus allowing Potlatch to sell its power on the wholesale market.

Under a buy-sell agreement between the companies that expires at the end of the year, Potlatch generates 55-59 Mw in a waste wood-fired boiler and sells it to Avista at a negotiated price. Avista then sells back an equivalent load, plus an additional 9-15 Mw at another negotiated price.

"Under the law we have to right to be served as any other industrial customer is served," said Potlatch spokesman Tom Sullivan. Potlatch wants Avista to serve its entire load at rates that are calculated in the same manner as the company's other customers.

Avista said its contract complies with a 1992 Idaho Public Utilities Commision order that requires a special contract when service exceeds 25,000 kw-hr. Such a contract, Avista said, allows the utility flexibility to negotiate rates that reflect the expense of serving large loads. Potlach is Avista's biggest customer.

Avista said it does not have generation resources to serve Potlatch's entire load and would have to contract for supply. Moreover, Potlatch did not provide Avista with adequate notice of change in load requirements, the utility said.

Avista argued it is in the public interest for Potlatch to uses its cogeneration to serve its own load. The company maintained that because Potlatch's request is recent, it did not develop a long-term plan to serve Potlatch's entire electric load requirement.

In order to comply with Potlatch's request, Avista said it would be necessary to acquire more expensive new resources. These higher costs, the company argued, would ultimately be borne by Avista's other customers through increased rates.

Sullivan said selling the electricity on the open market will help keep the Lewiston plant viable. Potlatch blamed a first quarter 2001 loss largely on continuing high energy costs and poor market conditions for most of its products. L. Pendleton Siegel, Potlatch chairman and chief executive officer, said the company was trying to mitigate losses in the pulp and paper segment costs through conservation initiatives and enhancement of its internal electrical generation capabilities.

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