20241230Final_Order_No_36434.pdf

Office of the Secretary
Service Date
December 30,2024
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER ) CASE NO. IPC-E-24-40
COMPANY'S ANNUAL COMPLIANCE )
FILING TO UPDATE THE LOAD AND GAS )
FORECASTS IN THE INCREMENTAL COST ) ORDER NO. 36434
INTEGRATED RESOURCE PLAN AVOIDED )
COST MODEL )
On October 15, 2024, Idaho Power Company ("Company") filed its annual compliance
filing to update the load forecast, natural gas forecast, and long-term contract changes used in the
Company's Incremental Cost Integrated Resource Plan ("ICIRP") avoided cost methodology
("Filing"). ICIRP avoided cost rates are available to QFs that are above the resource-specific
project eligibility cap for published avoided cost rates under Idaho's implementation of the Public
Utility Regulatory Policies Act of 1978 ("PURPA").
On November 4, 2024, the Commission issued a Notice of Filing, establishing public
comment and Company reply deadlines. Order No. 36385. Commission Staff ("Staff') filed
comments to which the Company replied. No other comments were received.
Having reviewed the record, the Commission issues this Order approving the Company's
annual update to its load forecast,contract changes,Peak Hours, and Premium Peak Hours as filed.
The Commission declines to adopt the Company's natural gas price forecast and directs the
Company to take additional action described below.
BACKGROUND
Pursuant to PURPA and the Federal Energy Regulatory Commission's ("FERC")
implementing regulations, this Commission has approved the IRP Method to calculate avoided
cost rates for qualifying facilities ("QFs") that are above the resource-specific project eligibility
cap. QFs that are below the applicable project eligibility cap may receive published avoided cost
rates calculated using the surrogate avoided resource ("SAR Method"). See Order No. 32697 at 7-
8.The avoided cost rate is the purchase price paid to QFs for the energy,or the energy and capacity,
that the QF provides to the utility. 18 C.F.R. § 292.101(b)(6)(defining "avoided cost"). To ensure
that avoided costs most accurately reflect the utility's marginal cost of energy or capacity, the
Commission has directed utilities to "update fuel price forecasts and load forecasts annually—
ORDER NO. 36434 1

between IRP filings," and to update the Commission about its "long-term contract commitments
because of[their] potential effect . . . on a utility's load and resource balance." Order No. 32697
at 22.
THE FILING
The Company currently forecasts an average annual load growth for the 20-year period
from September 2024 forward that constitutes an increase from the average annual load growth
forecast that the Commission approved in the Company's September 2023 forecast update.'
According to the Company, it developed its natural gas forecast using the most recent Henry Hub
and Sumas Basis Annuals from S&P Global Platt's Long-term Forecast, which was published in
September 2024. The Company continues to believe this forecast is the most appropriate for its
IRP avoided cost model.
The Company states it has six non-PURPA, long-term power purchase agreements with
projects that are currently online—Elkhorn Valley Wind (101 megawatts ("MW")), Raft River
Geothermal (13 MW), Neal Hot Springs Geothermal (22 MW), Jackpot Solar (120 MW), Black
Mesa Solar (40 MW), and Franklin Solar (100 MW). In addition to its agreements with non-
PURPA projects, the Company has 129 contracts for PURPA QFs which, in the aggregate,have a
total nameplate capacity of 1,128.58 MW.
The Filing also updates the Peak and Premium Peak Hours ("PPH")used by the Company
for the avoided capacity cost calculations available to energy storage QFs. The Company proposes
updated timeframes for determining its PPH for 2025 using the method directed by the
Commission in Order No. 34913. The Company proposes Peak hours for 2025 as follows: 1:00
pm through the 9:00 pm hour (to 10:00 pm) for the month of July; 3:00 pm through the 7:00 pm
hour(to 8:00 pm) for the month of August. The Company also proposes PPH for 2025 as follows:
5:00 pm through the 9:00 pm hour(to 10:00 pm) for the month of July; 5:00 pm through the 7:00
pm hour(to 8:00 pm) for August.
STAFF COMMENTS
Staff recommended approval of the Company's updated load forecast, PPH for use in
calculating capacity payments for energy storage QFs using ICIRP-based avoided cost rates, and
Peak Hours for use in calculating payments for energy storage QFs using SAR-based rates. Staff
also believed that the contract updates contained in the Filing are correct. However, Staff
1 The Commission approved the Company's September 2023 forecast in Order No.36037 in December 2023.
ORDER NO. 36434 2

recommended that the Commission approve the natural gas forecast contained in Table No. 1 of
Staff s comments for use in determining the Company's ICIRP-based avoided cost rates, instead
of the Company's proposed forecast. Staffs analysis and rationale for each of these
recommendations is described below.
1. Load Forecast
Staff compared the load forecast proposed in the Filing with that approved in the
Company's last forecast update in Case No. IPC-E-23-25. Although the proposed load forecast
generally exceeds that approved in Case No. IPC-E-23-25 throughout the forecast period, Staff
believed the difference is reasonable and explained by (1) increased demand from a special
contract customer; and (2) commercial and industrial load growth stemming from population
growth and economic development. Additionally, Staff noted the Company's adoption of a 501h
percentile load forecast better reflects expected load under normal conditions and, therefore,
avoided costs.
2. Peak and Premium Hours
Despite concerns about the load forecast percentiles used to develop them,
Staff believed the Company's proposed PPH are reasonable. Staff noted that the Company used
the same method to develop the proposed PPHs used to develop the PPH approved in the
Company's last forecast update. However, Staff expressed concern that some of the datasets the
Company analyzed to develop its PPH were based on different percentiles of load. Specifically,
Staff noted that the forecasted 2025 average hourly load the Company analyzed was based on the
50th percentile while the Loss of Load Probability data from the 2023 Integrated Resource Plan's
Preferred Portfolio is based on the 70th percentile.Although Staff recommended that the Company
use the same percentile across the datasets used to develop its PPH for comparable results, the
highest load hours are the same under both the 50th and 70th percentile of load forecasts.
Accordingly, Staff believed the Company's proposed PPHs are reasonable and recommended
approval of (1) the proposed PPHs for calculating the capacity payments under ICIRP-based
avoided cost rates; and(2)the proposed Peak Hours for calculating capacity payments under SAR-
based rates.
3. Natural Gas Forecast
Staff recommended using the average of Avista's and Rocky Mountain Power's natural
gas forecasts, instead of the Company's proposed forecast. To support this recommendation, Staff
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noted that the proposed forecast is substantially different than (1) Avista's and Rocky Mountain
Power's forecasts in the near term; and(2)the gas forwards market published by NYMEX. Staff s
comments indicated that the inconsistency between the Company's proposed forecast and that of
the other two major Idaho electric utilities apparently arose from changes to market fundamentals.
However, these changes are not reflected in Henry Hub forecasts of either Avista or Rocky
Mountain Power. Accordingly, Staff believed the Company's natural gas forecast was
unreasonable.
COMPANY REPLY COMMENTS
The Company accepted Staffs recommendations to approve the load forecast and PPHs
and focused its reply comments on opposing Staffs recommendation to substitute the proposed
natural gas forecast with the average of Avista's and Rocky Mountain Power's natural gas forecast.
The Company supported its opposition with two arguments. First, the Company argued that
rejecting its natural gas forecast runs contrary to the intent of the forecast update process. In this
vein,the Company contended that the purpose of updating the load and gas forecasts is to produce
an accurate reflection of the Company's current avoided costs. According to the Company, not
only would adopting Staffs recommendation disconnect the price forecast in the 2023 IRP from
the forecast used in the ICIRP,but it would do so without the level of public review and comment
by the Company's stakeholders available in the IRP process.
The Company also contends that Staffs recommendation to reject the Company's natural
gas forecast is not supported by evidence. To support this contention, the Company noted its
forecast is based on specific drivers and market fundamentals. Furthermore, the Company
observed that the Henry Hub and NYMEX are distinct and relying exclusively on current NYMEX
futures will not accurately reflect the daily gas price exposure the Company will eventually
experience.Additionally,the Company objected to the inputs of other utilities being used to update
its avoided cost rates. In particular, the Company noted that Avista's natural gas forecast will be
more than a year old when the update becomes effective on January 1, 2025. Accordingly, the
Company requested that the Commission approve its natural gas forecast contained in the Filing.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over this matter under Idaho Code §§ 61-501, -502 and-
503. The Commission is empowered to investigate rates, charges,rules,regulations,practices, and
contracts of public utilities and to determine whether they are just, reasonable, preferential,
ORDER NO. 36434 4

discriminatory, or in violation of any provision of the law, and to fix the same by order. Idaho
Code §§ 61-502 and -503. Additionally, the Commission has authority under PURPA and FERC
regulations to set avoided costs, to order electric utilities to enter fixed-term obligations for
purchase of energy from QFs, and to implement FERC rules. The Commission may enter any final
order consistent with its authority under Title 61, Idaho Code, and PURPA.
Under this authority,we have reviewed the record, including the Filing, Staff s comments,
and the Company's reply. Although we find the proposed load growth forecast and all contract
changes to be reasonable as filed,we cannot say the same for the Company's proposed natural gas
price forecast. Although the Company's Henry Hub forecast for 2025 only slightly exceeds those
submitted by Avista and Rocky Mountain Power,it jumps significantly for 2026—almost doubling
the price predicted for 2025 and then dropping back down in 2027. In addition to the forecasts
filed by Avista and Rocky Mountain Power,NYMEX futures do not indicate that the Company's
forecasted price spike will occur in 2026. Throughout the Company's forecasted spike, the
forecasts for Avista and Rocky Mountain Power are nearly the same, appear consistent with
NYMEX forward prices, and remain substantially stable. Furthermore, contracts negotiated with
ICIRP avoided cost methodology are typically two-year contracts, making the accuracy and
reliability of near-term price forecasting critical.
Moreover, this is not the first time a significant discrepancy between the Company's
natural gas forecast and those submitted by Idaho's two other large electric utilities has arisen. The
Company's 2021 natural gas forecast was significantly lower than Avista's and Rocky Mountain
Power's forecasts over the near-term, which is the critical timeframe for two-year PURPA
contracts for QFs. Order No. 35294. To address this discrepancy, we directed the Company to file
a three-year natural gas forecast using the latest NYMEX forwards prices to determine IRP avoided
cost rates for contracts signed after January 1, 2022, until the Company's next natural gas price
forecast annual update.
We find it reasonable to impose a similar requirement in this case. We acknowledge the
Company's concern that NYMEX forward prices rely on hedging practices that differ from the
Company's. However, the NYMEX forecast reflects current market conditions and aligns with
other similar forecasts filed by Avista and Rocky Mountain Power. Accordingly, we direct the
Company to file a three-year natural gas forecast utilizing the latest NYMEX forward prices as a
ORDER NO. 36434 5

compliance filing. This forecast shall be used to determine avoided cost rates for contracts signed
after January 1, 2025.
Finally, the Peak Hours and Premium Peak Hours used to calculate and pay capacity
payments for energy storage QFs are the same as those approved in the Company's last forecast
update. We acknowledge Staff s concerns over the Company's use of the 50th percentile load
forecast on some of the datasets used to generate the Peak Hours and Premium Peak Hours.
However, because the highest-load hours are the same for the 50th or 70th percentile of load
forecast,we find it reasonable to approve the Company's proposed Peak Hours and Premium Peak
Hours.
ORDER
IT IS HEREBY ORDERED that the Company's annual updates to its energy load forecast
are reasonable and approved, effective as of January 1, 2025.
IT IS FURTHER ORDERED that the Company file a three-year natural gas forecast update
as a compliance filing to this case,utilizing the latest NYMEX forward prices to determine avoided
cost rates from contracts signed after January 1, 2025, until the effective date of the next natural
gas price forecast annual update.
IT IS FURTHER ORDERED that the Company's proposed Premium Peak Hours used to
calculate and pay capacity payments for energy storage QFs using ICIRP-based avoided cost rates
are approved, as filed.
IT IS FURTHER ORDERED that the Peak Hours used to calculate and pay capacity
payments for energy storage QFs using SAR-based avoided cost rates are approved, as filed
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order about any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
ORDER NO. 36434 6

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 301" day of
December 2024.
ERI ND SON, PRESIDENT
J R. HAMMOND JR., COMMISSIONER
G
EDWARD LODGE, MISSIONER
ATTEST:
Of
i aB i S c
Commission Secre
I:\Legal\ELECTRIC\IPC-E-24-40_update\IPCE2440_final_at.docx
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