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Home My WebLink About20240816Staff Application.pdf RECEIVED 2024 August 16,AM 10:04 IDAHO PUBLIC UTILITIES ADAM TRIPLETT COMMISSION DEPUTY ATTORNEY GENERAL IDAHO PUBLIC UTILITIES COMMISSION PO BOX 83720 BOISE, IDAHO 83720-0074 (208)334-0318 IDAHO BAR NO. 10221 Street Address for Express Mail: 11331 W CHINDEN BVLD,BLDG 8, SUITE 201-A BOISE, ID 83714 Attorney for the Commission Staff BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF COMMISSION ) CASE NO. GNR-E-24-01 STAFF'S APPLICATION TO UPDATE ) INPUTS TO THE SURROGATE ) STAFF'S APPLICATION TO UPDATE AVOIDED RESOURCE METHOD ) SAR MODEL AND SAR-BASED AVOIDED COST RATES ) AVOIDED COST RATES Commission Staff, pursuant to Commission Rule of Procedure 52, the applicable provisions of the Public Utility Regulatory Policies Act of 1978 ("PURPA"), and as directed by Order No. 34628, respectfully applies to the Idaho Public Utilities Commission("Commission") for an order updating inputs to the surrogate avoided resource model ("SAR Model"), making administrative changes to the SAR Model, and approving the SAR-based avoided cost rates attached to this Application. I. BACKGROUND The Commission calculates and publishes SAR Method rates for qualifying facilities ("QF") that are under the applicable resource type project eligibility cap. In Order No. 32697, the Commission found it was appropriate to annually update the SAR Model with the most recent gas forecast provided by U.S. Energy Information Administration's ("EIA") Annual Energy Outlook, specifically the Mountain Region Reference Case forecast. Since then, Staff has used this data source for the annual natural gas forecast update for the SAR Model. However, EIA did not publish Annual Energy Outlook in 2024,because their modeling system STAFF'S APPLICATION TO UPDATE SAR MODEL AND SAR-BASED AVOIDED COST RATES -1- "requires substantial updates to better model hydrogen, carbon capture, and other emerging technologies." See https://www.eia.gov/outlooks/aeo/. II. INTRODUCTION Staff proposes the following in this Application: • Use of the average of AECO Hub prices, Stanfield Hub prices, Sumas Hub prices, and Opal Hub prices from the December 2023 natural gas price forecast published by Northwest Power and Conservation Council ("NWPCC") for this year's update and for future updates until the EIA forecast becomes available. This will ensure published avoided cost rates are determined accurately by using the latest natural gas forecast. • Separation of the current SAR Model into three utility-specific SAR Models(i.e. Avista SAR Model, Idaho Power SAR Model, and Rocky Mountain Power SAR Model.) This will prevent complications and processing delays caused by multiple model updates from different utilities that occur during the same time. Staff will discuss each item below in detail. III. PROPOSED NATURAL GAS FORECAST FOR 2024 To accomplish this year's annual update for the SAR Model, Staff explored different options to replace the natural gas price forecast until the EIA forecast becomes available. In considering its options, Staff considered the following criteria: a) The forecast must be publicly available; b) The release of the forecast should be close to the time when EIA publishes its forecast; c) The forecast should reflect prices of the natural gas sourced by Idaho's three regulated electric utilities; d) The time horizon of the forecast must have sufficient length for 20-year contracts; and e) The resulting forecasts from the source chosen should yield similar results to EIA's forecasts produced in a similar prior time period. Based on these criteria, Staff proposes to use the average of AECO Hub prices, Stanfield Hub prices, Sumas Hub prices, and Opal Hub prices from the December 2023 natural gas price STAFF'S APPLICATION TO UPDATE SAR MODEL AND SAR-BASED AVOIDED COST RATES -2- forecast published by Northwest Power and Conservation Council ("NWPCC") for this year's update and for future updates until the EIA forecast becomes available. See https://www.nwcouncil.or /g energy/energy-forecasts/ The proposed forecast is shown in Table 1. Table 1. Proposed Natural Gas Forecast based on Four Hubs AECO Sumas Opal Stanfield Average 2024 2.90 4.22 4.21 4.13 3.87 2025 3.15 4.56 4.60 4.51 4.20 2026 3.07 4.46 4.48 4.40 4.10 2027 3.05 5.39 4.88 4.80 4.53 2028 3.00 5.30 4.78 4.71 4.45 2029 2.98 4.33 4.34 4.26 3.98 2030 3.23 4.67 4.72 4.64 4.31 2031 3.38 4.88 4.96 4.87 4.53 2032 3.61 5.20 5.33 5.23 4.84 2033 3.69 5.30 5.45 5.35 4.95 2034 3.84 5.52 5.69 5.59 5.16 2035 4.19 5.99 6.23 6.12 5.63 2036 4.42 6.31 6.59 6.48 5.95 2037 4.50 6.41 6.71 6.59 6.05 2038 4.61 6.57 6.89 6.77 6.21 2039 4.84 6.89 7.25 7.13 6.53 2040 5.26 7.47 7.92 7.78 7.11 2041 5.45 7.72 8.21 8.07 7.36 2042 5.59 7.91 8.43 8.28 7.55 2043 5.79 8.19 8.74 8.59 7.83 2044 5.83 8.25 8.81 8.66 7.89 2045 5.97 8.43 9.02 8.87 8.07 2046 6.12 8.64 9.26 9.10 8.28 2047 6.27 8.85 9.50 9.34 8.49 2048 6.43 9.07 9.75 9.59 8.71 2049 6.59 9.30 10.01 9.84 8.94 2050 6.76 9.53 10.27 10.10 9.16 Public Availability Like the EIA forecast,the NWPCC forecast is a publicly available dataset,which provides a higher level of transparency. (The NWPCC forecast was used in the SAR Model before the Commission adopted the EIA forecast. See Order No. 32697 at 10.) STAFF'S APPLICATION TO UPDATE SAR MODEL AND SAR-BASED AVOIDED COST RATES -3- Similar Release Dates December of 2023 is close to the time when EIA would have updated its natural gas forecast. Typically, EIA publishes its annual natural gas forecast between January and March of each year. Staff believes December of 2023 is close to when EIA would have updated its 2024 forecast. Idaho Utility Sources of Natural Gas aligned geographically with Staff Proposed Forecast Staff s method uses NWPPC's AECO, Stanfield, Sumas, and Opal hub forecasts, which are the major hubs utilized by Avista, Idaho Power, and Rocky Mountain Power. Staff believes that, by using these hubs as a basis for Staffs proposed forecast, it aligns with the rationale for using EIA's Rocky Mountain Region forecast,which was adopted in Order No. 32697 as the three Idaho utilities are largely located within Mountain Region. For example, Avista receives 84% of its gas from AECO Hub and 15% of its gas from Stanfield Hub. See Avista's Audit Request Response No. 1(b)filed on May 8,2024. Idaho Power receives 70% of its gas from Sumas Hub and 30% of its gas from Opal Hub. See Idaho Power's Audit Request Response No. 1(b) filed on April 24, 2024. Rocky Mountain Power receives 74% of its gas from Opal Hub, 15% of its gas from Sumas Hub, and I I%of its gas from Stanfield Hub. See Column F of Tab"Blended 0324"of the Confidential Attachment in Rocky Mountain Power's I sT Supplemental Audit Request Response filed on May 20, 2024. Sufficient Forecast Time Horizon The NWPCC forecast reflects natural prices through year 2050,providing a forecast time horizon sufficient for 20-year contracts that will potentially come online over the next five years. For example, if a QF is expected to come online in 2029, it would need avoided cost rates from 2029 through 2049, which can be accommodated by the NWPCC forecast. Forecast Methods Produce Similar Results Staff compared the 2022 forecast determined under Staffs proposed method to the 2022 EIA Mountain Region forecast as shown in Figure No. 1 below. Because of the similarities of the two forecasts produced in 2022, Staff believes the proposed forecast from NWPCC data would likely reflect EIA's forecast,had EIA developed a forecast this year. STAFF'S APPLICATION TO UPDATE SAR MODEL AND SAR-BASED AVOIDED COST RATES -4- Average of Four Hubs (May 2022) vs. EIA (March 2022) 9.00 8.00 7.00 6.00 m 5.00 4.00 3.00 2.00 1.00 0.00 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Average of Four Hubs EIA(Moutain Region) Figure No. 1: Comparison of Staff s Forecast and EIA's Forecast for Year 2022 IV. SEPARATING SAR MODEL INTO THREE UTILITY-SPECIFIC MODELS Staff proposes separating the SAR Model into three utility-specific models with the same calculations and assumptions that are in the current SAR Model to allow Staff to make changes to the model and publish avoided cost rate updates for each utility separately. Currently, the SAR Model includes all three utilities' assumptions and resulting avoided cost rates. This could create two issues. First, when multiple updates from different utilities occur around the same time, the SAR Model updated for one utility may contain an early update for another utility that has not yet been approved. For example, assuming the SAR Model is updated to reflect Idaho Power's new first capacity deficiency period and is sent to Idaho Power for its review. During its review period, the SAR Model is updated again to reflect Avista's new first capacity deficiency period in an Avista case. Then the second SAR Model that reflects Avista's new first capacity deficiency period will contain the first SAR Model's update that reflects Idaho Power's new first capacity deficiency period, even though the first update has not yet been approved. STAFF'S APPLICATION TO UPDATE SAR MODEL AND SAR-BASED AVOIDED COST RATES -5- Second, because different cases may have different processing times, it is possible that a newly approved SAR Model for one utility may contain outdated information for another utility. For example,assuming again the SAR Model is updated to reflect Idaho Power's new first capacity deficiency period, and later the SAR Model is updated again to reflect Avista's new first capacity deficiency period. If the second SAR Model that contains Avista's update is approved earlier than the first SAR Model that contains Idaho Power's update, then the latest approved SAR Model, which is the first SAR Model in this scenario,will contain outdated first capacity deficiency period of Avista. To address these issues, Staff proposes separating the SAR Model into three utility-specific models with the same calculations and assumptions that are in the current model. The separation into separate models has no effect on the calculation of the rates or the functionality of the model. Separating the SAR Model also has the added benefit of allowing better tracking of updates that occur for each utility based on when the updates are approved by the Commission. V. UPDATED MODELS AND AVOIDED COST RATES Staff updated the natural gas forecast in each of the separate utility-specific SAR Models: • Avoided Cost Model Order No. XXXX ver XXX XX, 2024 Annual Gas Update (AVU).xlsm • Avoided Cost Model Order No. XXXX ver XXX XX, 2024 Annual Gas Update (PAC).xlsm • Avoided Cost Model Order No. XXXX ver XXX XX, 2024 Annual Gas Update (IPCO).xlsm Staff also calculated avoided cost rates using the utility-specific SAR Models and provided them as attachments to this Application: • Attachment A Avista Rates for New Contracts • Attachment B Avista Rates for Renewal Contracts • Attachment C PAC Rates for New Contracts • Attachment D PAC Rates for Renewal Contracts • Attachment E IPCO Rates for New Contracts • Attachment F IPCO Rates for Renewal Contracts STAFF'S APPLICATION TO UPDATE SAR MODEL AND SAR-BASED AVOIDED COST RATES -6- y 'g o 0 o b CD CCD O v' ab CD CD 7 I-D o a. CD CD CL CD cc n con CD CD 0 W CD CcnQ `4 L oo O O r. o . CL Q z o 0 0 0 0 O� a � D CD P y o o p O C CD CD CD m CL Qn CD CD CA O a� O CD CDCD g CD d � o •sCD a c o CD CD yCDCDCD Ln .� tv viEn ¢ N -d ° � p �. y 7� L bdb ¢ � O CDrD CD CD n m CD � � CD ni CD r CD n C O �' UQ CD m CD O O �• CD CD m O _ CD Qn N N O v' O d Vim] N � CD3 � c o o Z � �* Q- CD CD ry CD S O `C r CD CD CD ¢ cn �. CDQ, U5 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 16th day of August 2024, I served the foregoing APPLICATION, in Case No. GNR-E-24-01, Via Electronic Mail to the following: Donovan Walker Mark Alder Camille Christen Joe Dallas Idaho Power Company Rocky Mountain Power 1121 W. Idaho Street 83702 1407 West North Temple, Ste. 330 P.O. Box 70 Salt Lake City, UT 84116 Boise, ID 83707-0070 mark.alderkpacificorp.com dwalkergidahopower.com joseph.dallaskpacificorp.com CChristen(&idahopower.com docketskidahopower.com energycontracts(cr�,idahopower.com David Meyer Shawn Bonfield Avista Corporation P.O. Box 3727 1411 East Mission Avenue Spokane, WA 99220-3727 david.meyer(a,avi stacorp.com shawn.bonfieldgavistac orp.com avistadocketskavistacorp.com KERI J. AWKER Legal Assistant STAFF'S APPLICATION TO UPDATE SAR MODEL AND SAR-BASED AVOIDED COST RATES -8-