20170824Attachment 52B.pdf

Natural Gas Update
IPUC
September 30, 2015
Staff_PR_052 Attachment B Page 1 of 28
Agenda
• Market Dynamics
• Storage Optimization Plan
• 2015 2016 Procurement Plan Results
• 2016 – 2017 Procurement Plan
• IRP U date
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Market DynamicsMarket
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Dec ‘‘
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US Natural Gas StorageUS
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St O ti i ti PlStorage p m za on an
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Procurement Plan changes - Storage
p m za on
Stora e O timization
• Changes:
– Removed the “storage injections and withdrawals” portion within

– Incremental Hedges: Avista is replacing approximately 50% of
the JP storage withdrawals that were previously made to cover
- .
35,000 Dth/day for December 2015, January 2016 and February
2016.
•a as no c ange :
– Peak day needs continue to be served from JP
– Daily price volatility optionality
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$40 M
$30.  M
.  M
"Spot To Spot" vs "Cash to Forward" Model 
Last 5 Storage Seasons
$12.8  M
$20.  M
$2.1  M
$8.3  M$9.6  M
$4.9  M
.  M
$4.8  M $4.7  M
$.  M
$10.  M
‐$7.3  M
‐$9.1  M‐$10.  M
‐$30.  M
‐$20.  M
Storage Inventory Synthetic Model Value Optimized Model value
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Example of Acceptable Storage Optimization Deals
Buy 75,000 Dth
& Inject
Sell 2,500 Dth/Day In November
& schedule the withdrawal
Cash To Forwards
Standard 11
ExampleExample
Sell 77,500 Dth
& withdraw
Buy 2,500 Dth/Day In August
& cancel scheduled withdrawal
Forward To Cash22
Buy 2,500 DTh/day Sep &
schedule Injection
Sell 2,500 Dth/Day In Jan
& schedule the withdrawal
Forward To Forward
Standard 33
Sell 2,500 DTh/day May &
cancel scheduled injection
Buy 2,500 Dth/Day In June
& schedule the injection Roll44
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Today
CASH
4
$3.00 $3.10 $3.00 $2.50 $2.75 $3.25 3.35 $3.50 $3.60 $3.70 $3.50 $3.25$3.00
1 3
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Added Incremental HedgesAdded
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2015 2016 P t Pl R lt2015 rocuremen an esu s
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Prompt Year Procurement
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2015 –2016 Procurement Plan Hedges2015
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2016 – 2017 Procurement Plan
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Procurement Plan Philosophy
•Mission
•To provide a diversified portfolio of reliableTo
supply and a level of price certainty in volatile
•We cannot accurately predict what natural gas prices will do, however we
can use experience, market intelligence, and fundamental market analysis to
structure and guide our procurement strategies.
•Our goal is to develop a plan that utilizes customer resources (storage and
, y v y v ,
allows discretion to take advantage of pricing opportunities should they arise,
and appropriately manages risk.
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Comprehensive Review of Previous Plan
Review conducted with SOG includes:
• Mission statement and approach
•urren an u ure mar e ynam cs
• Hedge percentage
• Resources available i.e. stora e and
transportation)
• Hedge windows (how many, how long)
• Long term hedging approach
• Storage utilization
, , ,
etc.)
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A Thorough Evaluation of Risks
Load Volatility
•Seasonal Swings
Price
•Cash vs. Forward
Legislation
•Does it impact 
our plan?
Risk 
Assessment
Market 
Liquidity
•Is there enough?
Foreign 
Currency
•What’s our 
exposure?
Counterparty
•Who can we 
transact with?
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What we like about the current Plan?
• Overall structure of the plan meets the objectives/mission
• Diversity of plan components

• Focus on both short term and long term
• Opportunistic characteristics
Areas of Focus
•Hedge percentage
•Hedge vs. Index
•Window mechanics
•• price derivation, floors and ceilings, tenor, etc.
•Pricing targets on discretionary hedging
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Procurement Plan Structure
•The procurement plan incorporates a portfolio approach
that is diversified in terms of:
–Components: The plan utilizes a mix of index, fixed price, and storage
transactions.
–Transaction Dates:Hedge windows are developed to distribute the
transactions throughout the plan.
–Supply Basins:Plan to primarily utilize AECO, execute at lowest price basis
at the time.
Delivery Periods:Hedges are completed in annual and/or seasonal
timeframes. Long-term hedges may be executed.
•Transactions are executed pursuant to a plan and
process; however, the procurement plan allows Avista to
be flexible to market conditions and opportunistic when
.
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2016 –2017 Procurement Plan2016
Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Total
WA/ID Avg Load 104,116 135,379 133,051 120,180 95,257 63,683 36,707 26,056 20,728 20,749 24,656 60,583 25,496,444 
Seasonal Load ‐
Fuel 1,284 1,435 1,431 1,397 1,479 1,085 737 327 260 372 466 1,046 343,527 
Long‐term ‐
Previous 2/ 24,050 24,050 24,050 24,050 24,050  ‐ ‐ ‐ ‐ ‐ ‐ ‐14.1%
One‐year or less 28,000 28,000 28,000 28,000 28,000 10,000 5,000 2,500 2,500 2,500 2,500 10,000 20.5%
scre onary ‐31, 31, 31,  ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐11.
Index/Spot 53,350 53,264 50,932 38,027 44,686 54,768 32,444 23,883 18,488 18,621 22,622 51,629 54.5%
Index/Spot vs. 
Total 52.47% 40.40% 39.36% 32.80% 48.46% 87.70%90.39% 92.92% 90.45% 91.53% 93.64% 86.95% 100.00%
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*Dekatherms per day
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2016 -2017 Proposed Procurement Plan
What changed?
• Slightly increased index
percentage
• 5,000 Dth more hedged from prior
• Maintained one year or less
hedging
•Added Discretionary hedges
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This is how the initial set point isThis
determined:
1 day forward – 50%
3 years index – 50%
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IRP Update
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2016 IRP Timeline
Fil Fi l Pl
Draft Review
e Fina  Plan 
• August 31, 
2016
TAC  Meetings
•January 2016
 2016
Work Plan
January 2016
Demand and DSM
•February 2016 –
Distribution and 
Supply
• Filed on 
August 
31,2015
•March 2016 –
Preliminary Output
•April 2016 – Results
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