20030912Avista 1st Response Nos. 1&2.pdf

Avista Corp.
1411 East Mission PO Box 3727
Spokane, Washington 99220-3727
Telephone [phone]
Toll Free 800-727-9170
;,'
c r-r I \1 r.
'\ -' ~
! . L.
,0"
~;j
, ,- 'm
~~'
'V'STA.
Corp.2UO3 SEP 12 Ai'~ 10:
,. , "
UTI! !:::C~ !'
-;:(;,:,,_
v~ ,I dvvl
September 11, 2003
Idaho Public Utility Commission
472 W. Washington
Boise, ID 83702
Attn: Patricia Harms
Re:Case No. A VU-03-
Mr. Woodbury,
I have attached one copy of Avista s response to Staff Data Request No. (s)
and 2.
If you have any questions, please call Bob Lafferty at [phone].
1CerelY,
Rate Analyst
Enclosures
A VISTA CORP.
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-03-
IPUC Staff
Data Request
DATE PREPARED: 9110/03WITNESS: Dick StOITO
RESPONDER: Bob LaffertyDEPT: Energy Resources
TELEPHONE: [phone]
REQUEST:
Please describe the decisions and decision points inherent in the Company s purchase and
subsequent fixing of the price of 27 658 IvThffitu/day of gas purchased on March 13 2001.
Please discuss these transactions as they relate to the Company s Risk Policy.
RESPONSE:
Prior to year 2000, the forward-implied heat rate between electric power price and natural
gas price was not often high enough to warrant purchasing natural gas for future electric
power generation. To the extent that the Company did not purchase natural gas in
advance, it would on a daily basis, evaluate whether to run the combustion turbines
depending on the natural gas and electric price spread for that day. In April 2000, the
Company began purchasing forward natural gas because the implied forward heat rate
had increased to a level where it was more cost-effective to purchase natural gas for
generation than to purchase energy from the market to cover resource deficiencies.
Natural gas was purchased for the Company s natural gas fired generators over a period
of time for various future delivery periods. The natural gas was purchased such that it
could be used in the various company operated natural gas fired generation projects:
Rathdrum, Northeast, Boulder Park and CS2.
As part of the overall natural gas portfolio acquisition process, the Company took a series of
steps in the first half of 2001 to secure the firm natural gas supply, and to fix a portion of the
Company s forward natural gas supply costs.
In March 2001 , the Company contracted for firm natural gas deliveries on the PG&E Gas
Transmission Northwest line from the Canadian border to Malin, at the California-Oregon
border, for approximately 48 000 Dth/day at a floating monthly index-based price. This
represented 47% of the Company s total gas consumption capability, and enough firm natural
gas supply to operate the CS2 plant including the duct burner. The natural gas could be
delivered at several points on line between the Canadian border and the California-Oregon
border at Malin including Rathdrum, Northeast, Boulder Park and CS2. In addition, Malin is an
active marketing point where the Company can sell natural gas. The term of one transaction for
000 Dkth/day was November 1 , 2001 through October 31 , 2004. The term of the second
transaction for 20 000 Dkthlday was June 1 , 2002 through October 31 2003.
In April and May 2001 , the Company fixed the price of 40,000 Dkthlday through four fixed-for-
floating transactions. The weighted average hedge prices, including index adder, were $5.99/Dth
for 20 000 Dkthlday for the June 1 2002 through October 31 2003 period; and $6.45/Dth for
000 Dkthlday the November 1, 2001 through October 31,2004 period. Hedging the price of
Response to Staff Request No. 1O1(C)
Page 2
natural gas was less expensive than purchasing power at the prices in the forward market. The
fixed price gas could be used to generate power at the Company s plants for the following cost:
Plant
Coyote Springs 2
Boulder Park
Kettle Falls CT
Rathdrum
Northeast
Generation
Cost ($/MWh)
$45
$58
$57
$75
$85
This gas was purchased at a time when the comparable cost for electricity was in the range of
$75/MWh to $117/MWh for flat power at the Mid Columbia. The April-May 2001 hedges fixed
the price of 39% of the Company s total gas generation capability from June 2002 through
October 2003 and 20% of the Company s total gas generation capability for the period
November 2003 through October 31 2004.
The Company s risk policy guidelines set limits on the Company s short and long positions. In
general, the Risk Policy is biased against having a short position and toward having a long
position. The average volumetric limit on the short position is reduced as that period moves into
the nearer term. As the term of the transaction increases the authorization for signing the
transaction agreement increases to a higher level of management. The Risk Policy does not
preclude or restrict the Company from entering into longer-term contracts for electric power or
fuel for power.
Page 2
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
REQUEST:
VISTA CORP.
RESPONSE TO REQUEST FOR INFORMATION
Idaho
A VU-03-
IPUC Staff
Data Request
DATE PREPARED: 9110/03WITNESS: Dick StOITO
RESPONDER: Bob LaffertyDEPT: Energy Resources
TELEPHONE: [phone]
Please describe the decisions and decision points inherent in the Company s purchase and
subsequent fixing of the price of 20 000 MMBtu/day of gas purchased on March 22, 2001.
Please discuss these transactions as they relate to the Company s Risk Policy.
RESPONSE:
Please see response to Staff Data Request No. 1.