20241212Reply Comments (Redacted).pdf

Mq% IQAHO R-
MEGAN GOICOECHEA ALLEN 2024 December 12
Corporate Counsel IDAHO PUBLIC
mgoicoecheaal len(cD_idahopower.com
UTILITIES COMMISSION
December 12, 2024
VIA ELECTRONIC MAIL
Commission Secretary
Idaho Public Utilities Commission
11331 West Chinden Blvd., Building 8
Suite 201-A
Boise, Idaho 83714
Re: Case No. I PC-E-24-40
Idaho Power Company's Annual Compliance Filing to Update the Load and
Gas Forecast in the Incremental Cost Integrated Resource Plan Avoided
Cost Model
Dear Commission Secretary:
Attached for electronic filing is Idaho Power Company's Redacted Reply
Comments in the above entitled matter. If you have any questions about the attached
documents, please do not hesitate to contact me.
Very truly yours,
Megan Goicoechea-Allen
MGA:cd
Enclosures

MEGAN GOICOECHEA ALLEN (ISB No. 7623)
DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
mgoicoecheaallen(a�idahopower.com
dwalker .idahopower.com
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S ANNUAL COMPLIANCE ) CASE NO. IPC-E-24-40
FILING TO UPDATE THE LOAD AND GAS )
FORECASTS IN THE INCREMENTAL ) IDAHO POWER COMPANY'S
COST INTEGRATED RESOURCE PLAN ) REPLY COMMENTS
AVOIDED COST MODEL. )
Idaho Power Company ("Idaho Power" or "Company"), in accordance with the
Idaho Public Utilities Commission's ("Commission" or "IPUC") Notice of Modified
Procedure, Order No. 36385, hereby respectfully submits the following Reply Comments
in response to the Comments filed by Commission Staff ("Staff") on December 5, 2024.
I. INTRODUCTION
On October 15, 2024, Idaho Power filed its annual Compliance Filing pursuant to
Order Nos. 32697 and 32802 to update the load forecast and natural gas forecast
components of the Incremental Cost Integrated Resource Plan ("ICIRP") avoided cost
methodology. The Compliance Filing also updates the long-term contract changes, as
well as the Peak and Premium Peak Hours used to calculate capacity payments for
energy storage Public Utility Regulatory Policies Act of 1978 qualifying facilities ("QF").
IDAHO POWER COMPANY'S REPLY COMMENTS- 1

In its Comments, Staff recommended that the Commission approve certain aspects of the
Company's proposed updates but reject the Company's proposed natural gas forecast.
Idaho Power now respectfully submits these Reply Comments to address the
recommendations made by Staff.
II. STAFF RECOMMENDATIONS
Idaho Power appreciates Staff's review of the Compliance Filing update and
supports Staff's recommendation for the Commission to approve the Company's
proposed load forecast and Peak and Premium Peak Hour designations for battery
storage capacity payments with an effective date of January 1, 2025, as well as Staff's
verification of the contract updates. With respect to the natural gas price forecast included
in the Company's Compliance Filing, Staff recommends the Commission reject the
Company's proposal to use the S&P Platts long-term natural gas forecast, including
Henry Hub and Sumas Basis Annuals (the "Platts forecast"), published in September
2024, to update the natural gas price forecast in ICIRP avoided cost calculations. Instead
of endorsing the Company's proposal, which is a continuation of the methodology
employed by the Company for the Integrated Resource Plan ("IRP") planning case natural
gas prices forecast in its 2023 IRP and acknowledged by the Commission in Order No.
36233, Staff recommends that the Commission direct Idaho Power to use an average of
Avista's and Rocky Mountain Power's gas forecasts as an input to the calculation of Idaho
Power's ICIRP-based avoided cost rates. As explained more fully below, Idaho Power
respectfully disagrees with Staff's recommendations regarding the natural gas price
forecast.
III. NATURAL GAS PRICE FORECAST
A. Staff's Recommendation to Change the Forecast Source in this Proceeding
is Contrary to the Intent of the Forecast Update.
IDAHO POWER COMPANY'S REPLY COMMENTS-2

The ICIRP avoided cost methodology, utilized for all proposed QF projects that
exceed the published rate eligibility cap, takes into account many different variables and
produces a result based on each individual utility's need for energy. As its name implies,
this methodology relies on numerous assumptions from each utility's IRP, such as fuel
price forecasts, load forecasts, resource costs, load-resource balances, and composition
of preferred portfolios. In considering the appropriate frequency for updating inputs to the
methodology the Commission found that, while it was reasonable for some variables and
assumptions utilized in the methodology to remain fixed between IRP filings, "in order to
maintain the most accurate and up-to-date reflection of a utility's true avoided cost, utilities
must update fuel price forecasts and load forecasts annually- between IRP filings." Order
No. 32697 at 22. Addressing the timing of these annual updates, the Commission
accepted the joint utilities' recommendation to update the natural gas and load forecasts
used in each utility's respective IRP avoided cost methodology on October 15. Order No.
32802 at 3.
While the Commission deemed it wise for the three utilities to update their annual
IRP forecasts on a uniform date "to avoid confusion, ensure consistency, and alleviate
gamesmanship,"' there was no requirement for the utilities to use the same data sources
or modeling in deriving IRP-based rates. By comparison, for updates to the Surrogate
Avoided Resource methodology, the Commission specified that natural gas prices should
be updated annually with the most recent natural gas forecasts provided by the United
States ("US") Energy Information Administration's Annual Energy Outlook.2 As
demonstrated by these different approaches, the ICIRP methodology is intended to be
more individualized and reflective of the specific circumstances of each utility, a concept
Order No. 32802 at 3.
2 Order No. 32697 at 52.
IDAHO POWER COMPANY'S REPLY COMMENTS-3

recognized by Staff in testimony submitted in Case No. GNR-E-11-03: "1 believe that
utilities should be permitted to use the same forecasts and sources (or combinations of
sources) as they use in their IRPs for use with the IRP methodology...113
A review of the regulatory history demonstrates that the purpose of the annual
updates to the natural gas and load forecasts used in each utility's respective IRP avoided
cost methodology is to ensure the most accurate and up-to-date reflection of a utility's
true avoided cost. The important concept incorporated by this annual update procedure
is that the gas forecast methodology used for avoided cost pricing remains consistent
with that used by the utility in its IRP while allowing the data (vintage) to be updated on an
annual basis, rather than every two years with the IRP.4 This allows for a more
streamlined update to the inputs to the avoided cost prices, while also allowing for a full
review and consideration of any proposed changes to the methodology to occur in the
context of the IRP.
Accepting Staff's recommendation to use an average of other utilities' gas price
forecasts as Idaho Power's updated natural gas price forecast in this case, rather than
the Platts forecast used in the most recently acknowledged IRP, would inappropriately
create a disconnect between the gas price forecast source in the 2023 IRP and the
forecast used in the ICIRP methodology between IRPs. Importantly, the forecast sources
are intended to be the same. Staff's proposal to change the forecast source in this
proceeding--based on Staff's supposition that the forecast is too high in the early years—
is inconsistent with the intent of this proceeding.
Further, the change would be made without the same level of public review and
opportunity for comment by Idaho Power's stakeholders as occurs within the IRP process.
3 Case No. GNR-E-11-03, Sterling Direct Testimony at 22-23 (May 4, 2012).
4 See Idaho Power's Reply Comments in Case No. IPC-E-21-35 for a more comprehensive discussion of
the purpose of the annual updates to the load and natural gas price forecasts.
IDAHO POWER COMPANY'S REPLY COMMENTS-4

The use of the Platts forecast in the IRP was reviewed and commented on extensively by
stakeholders in the public meetings leading up to the 2019 IRP and in the proceeding
regarding the 2019 IRP (IPC-E-19-19), and the Commission ultimately acknowledged
the IRP with that forecast in Order No. 34959. The use of the Platts forecast in the IRP
was again reviewed and discussed in the public meetings during the development of the
2021 and 2023 IRPs, as well as recently in the preparation of the 2025 IRP. It would not
be appropriate to make a change of this magnitude—changing the source of the gas price
forecast to something other than what is used or even proposed in the IRP— in this routine
update proceeding, and particularly without adequate opportunity for stakeholder review
and comment.
In short, it is contrary to the intent of this proceeding to propose an entirely new
forecast methodology that does not align with the Company's IRP in the October 15
update proceeding. Changes to the forecast methodology should be vetted through the
Company's IRP process, and ultimately be consistent with the Company's IRP.
B. Staff's Recommendation to Change the Forecast Source is Not Supported
by the Evidence.
Staff's recommendation to reject Idaho Power's use of the Platts forecast is based
on two factors: (1) Staff's comparison of the Platts forecast to Avista's and Rocky
Mountain Power's gas price forecasts recently filed through these utilities' annual
updates, and (2) a comparison of the Platts forecast to Henry Hub contract prices from
the past 12 months for January, June, and December M. Based on these two
considerations, Staff concludes that the Platts forecast is not reasonable because, in the
near-term, it is "significantly different than Avista's and Rocky Mountain Power's
forecasts" and because the near-term forecast "does not align with the pattern in the gas
forwards market." Staff Comments at 4. Idaho Power acknowledges that the forecasts
IDAHO POWER COMPANY'S REPLY COMMENTS-5

differ in the near-term horizon but respectfully disagrees with the conclusion that Platts is
not reasonable.
1) The Platts Forecast Is Based on Platts' Specialized Industry
Expertise and Expectations Regarding Market Fundamentals.
Idaho Power uses Platts as its natural gas forecast because it has confidence in
Platts' expertise in exploration and production dynamics to produce gas price forecasts
for the spot market(i.e., day-ahead and real-time gas trading). As part of the IRP process,
the Company has reviewed and analyzed various approaches used to forecast natural
gas prices, including consideration of the underlying assumptions in natural gas price
forecast methodologies. Based on this exercise, the methodologies used by peer utilities,
and feedback received during IRPAC meetings, Idaho Power determined the Platts
forecast to be most appropriate. Specifically, Idaho Power believes that the
inputs/techniques used to develop the Platts forecast help ensure reliability, including the
fact that it is based on fundamental market drivers rooted in supply and demand
dynamics. Additionally, Platts' forecast model inputs include production, storage,
transmission, and pipeline considerations, among other factors, which work to solve for a
competitive market equilibrium; stated differently, all the market fundamentals behind
supply and demand are weighed in Platts' robust forecast modeling, thus yielding a
justified and defensible gas forecast.5 Moreover, the Platts forecast is updated quarterly
versus other forecasts that are updated annually, and further, Platts forecasts price
curves for individual proxy basis hubs, which is not only consistent with what is used in
the IRP but aligns with IPC's trading operations.
5 See, e.g., Idaho Power Company 2023 Integrated Resource Plan, p. 110-111, available at
https://docs.idahopower.com/pdfs/AboutUs/PIanningForFuture/irp/2023/2023-irp-fina1.pdf.
IDAHO POWER COMPANY'S REPLY COMMENTS-6

Idaho Power understands that utilities may use alternate natural gas price forecast
methodologies, including some that may exclusively use NYMEX futures pricing over the
first few years of the forecast period. However, Idaho Power disfavors this method for a
few reasons. First, Henry Hub and NYMEX are distinctly different. Henry Hub (Platts)
attempts to reflect the price at which the actual daily physical forward price is expected to
settle. In contrast, NYMEX is a futures trading price that allows for risk management (i.e.,
price hedging). Being that Idaho Power does not price hedge 100 percent of its gas unit
capacity 100 percent of the time, using NYMEX price curves as the primary forecast does
not align with physical daily gas procurement operations. Additionally, relying exclusively
on today's NYMEX futures forecasted gas price does not accurately represent the daily
physical gas price exposure that Idaho Power is subjected to upon daily settlement.
Importantly, Idaho Power uses gas fuel exclusively for power generation (not residential
and commercial heating) and dispatch decisions are made daily in order to align with the
daily settled power markets.
Moreover, given that this annual compliance filing is intended to maintain the most
accurate and up-to-date reflection of a utility's true avoided cost between IRP filings, the
Company believes it is appropriate to align the update with the inputs/techniques used in
Idaho Power's IRP, as opposed to those of other utilities—not only is Idaho Power not a
party to the internal natural gas decisions of other utilities, but other utilities' natural gas
forecasts may be based on older data that considers now outdated factors. For example,
Avista's natural gas forecast, used in its most recent annual update filing in Case No.
AVU-E-24-10, is dated December 15, 2023, making it now a year old. Idaho Power does
not support use of a forecast in an annual update filing that will be over a year old by the
time the update is effective on January 1, 2025. Indeed, a forecast from December 2023
IDAHO POWER COMPANY'S REPLY COMMENTS-7

may not display the near-term price bump exhibited in the Platts forecast that Idaho Power
proposes to use and with which Staff appears most concerned—but an outdated forecast
is not better or more informed, it is simply stale.
Based on reasoned analysis, Idaho Power intends to use the most recent Henry
Hub and Sumas Basis Annuals from Platts in its IRP and continues to believe it is
appropriate for use in this proceeding as well.
2) The Platts Forecast for 2026 is Based on Specific Market Drivers and
Fundamentals.
IDAHO POWER COMPANY'S REPLY COMMENTS-8

IV. CONCLUSION
The Company appreciates and accepts Staff's recommendations to approve the
load forecast as well as Peak and Premium Peak Hour designations for battery storage
capacity payments with an effective date of January 1, 2025, and its verification of the
contract updates. However, Idaho Power disagrees with Staff's recommendation to use
an alternative natural gas price forecast based on the average of the forecasts relied on
by other utilities; Staff's preferred approach is not only inconsistent with what was utilized
in the Company's most recently acknowledged IRP, it fails to consider the merits of Platts
or the daily natural gas procurement operations of Idaho Power. As such, the Company
continues to support the use of the Platts forecast. Idaho Power respectfully requests the
Commission approve the natural gas forecast submitted in its Compliance Filing, and
thanks the Commission for its consideration of these comments.
IDAHO POWER COMPANY'S REPLY COMMENTS-9

Respectfully submitted this 12t" day of December 2024.
ANr T 1*W�VA
MEGAN GOICOECHEA ALLEN
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS- 10

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 12t" day of December 2024, 1 served a true and
correct copy of the within and foregoing Idaho Power Company's Reply Comments upon
the following named parties by the method indicated below, and addressed to the
following:
Adam Triplett Hand Delivered
Deputy Attorneys General U.S. Mail
Idaho Public Utilities Commission Overnight Mail
P.O. Box 83720 FAX
Boise, ID 83720-0074 X Email - adam.triplett(a).puc.idaho.gov
9 IDV)
Christy Davenport, Legal Assistant
IDAHO POWER COMPANY'S REPLY COMMENTS- 11