20210325Avista to Staff 70-77.pdf

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
RECEIVED
2021March 25, PM 5:00
IDAHO PUBLIC
UTILITIES COMMISSION
JURISDICTION: IDAHO
CASE NO.: AVU-E-2l-01/AW-G-21-01
REQUESTER: IPUC
TYPE: Production Request
REQUESTNO.: Staff-070
DATE PREPARED
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
0312412021
Clint Kalich
Clint Kalich
Power Supply
(so9) 4es-4s32
REQUEST:
Mr. Kalich's direct testimony states that in the past, Avista ran the entire 80-year hydro record
through the Model, averaging the results. The Company now dispatches resources using median
monthly water levels derived from the 80-year water record under the single-zone method. Please
answer the following:
a. Please describe the causal relationship between the hydro conditions used as an input into
the Model and the resulting Net Power Cost ("NPC"). For example, as hydro conditions
improve, does the resulting NPC decrease linearly or non-linearly? Are there any
discontinuities, asymptotes, or convergences in the results?
b. Has the Company analyzed and compared the two different treatments under the
single-zone method in terms of the result difference? If so, please provide the results of
the analysis and explain causes for any differences.
RESPONSE:
Avista did not run 80 water years for this case, only the median water year. To help illustrate these
questions see Staff PR_070 Attachment A - "AVU-E-19-04 Aurora Model Costs By WaterYear
(PR70)." ln our 2019 case we did model all 80 water years, enabling this comparison from a very
recent point in time. This file provides both annual hydro and modeled portfolio costs. The values
for the mean and median cases are nearly identical, with median water having a $40,000 (-0.27%)
lower cost than the average of the 80 water years. The results of this data would explain that
median and mean are very similar in outcome.
Further, attached to this response is a presentation made to a working group of interested parties
after our 2017 general rate case in Washington. The Commission order in that case defined a
collaborative to study power supply modeling. StafLPR_07O Attachment B - "Workshop 3
Presentation Final vl2-I3-2018 (PR7O).pptx" contains a summary of the results ultimately
convincing the Company and parties to that effort to shift to median water modeling. The effort
evaluated the 8O-year record relative to our original filing in the state. The numbers showed that
median water in a closed-system model, like being used in this filing, resulted in approximately
$1.2 million lower power supply expenses relative to modeling the entire record in a full
WECC-dispatch scenario. See slide 7 (Original Filed vs. Median Water Closed System) for this
specific data. Other useful background information and detail are contained in the remaining
slides.
The decision to move to median water was the result of this Z-year workshop effort convincing the
Company that the large body of work necessary to ensure Aurora emulated forward market prices
over 80 water years did not benefit the filing for any party. The answer was the same. Developing
and auditing power modeling results is much easier with 1/80ft of the data.
Page I ofl
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATTON
ruRISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-2I -01 / AVU-G-21-01
IPUC
Production Request
Staff-074
DATE PREPARED: 0312412021WITNESS: Mark Thies
RESPONDER: John Wilcox
DEPARTMENT: FinanceTELEPHONE: (s09) 49s-417t
REQUEST:
Please provide Avista's utility dividend payment policy. Identiff the amounts of net income and
actual dividend payments over the last five yffirs.
RESPONSE:
The Company is targeting an industry averagepayoutratioof 65Yoto75Yo. Avista Corp.'s Board of
Directors considers the level of dividends on our coillmon stock on a recurring basis, taking into
account numerous factors including, without limitation:
. our results of operations, cash flows and financial condition,
o the success of our business strategies, and
. general economic and competitive conditions.
(Dollars in thousands)Net Income
2016 $137,228
2017 $115,916
2018 $136,419
2019 $196,979
2020 $129,488
Dividend Payments
$87,154
$92,460
$98,046
$102,772
$110,254
A\ruSTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AW-E-21-01
IPUC
Production Request
Staff-076
DATE PREPARED: 0312412021WITNESS: Scott Kinney
RESPONDER: Scott Kinney
DEPARTMENT: Power Supply
TELEPHONE: [phone]
REQUEST:
Referencing witness Kinney's testimony on page 4, please provide the Company's evidence that
EIM participants are less likely to conduct bi-lateral transactions close to the operating hour.
RESPONSE:
The Company reviewed its short-term power supply transaction volumes with PacifiCorp, Puget
Sound Energy and Portland General Electric before and after these entities joined the EIM.
Unfortunately, Avista transaction accounting system does not store the timestamp of specific
transactions that are tied to a master or generic contract or deal with other entities. Because of this
the Company is not able to separate transactions that occurred close to the hour or in the hour with
transactions that occurred several hours or a day before the operation hour.
Avista leadership actively discusses real-time market liquidity and transaction opportunities with
its real-time traders as part of our risk managernent process. This is an important discussion to
understand risk and determine if hedging or pre-schedule process changes are needed. As Entities
joined the EIM, the real-time traders indicated that those entities that joined the EIM started to
limit near-term buy and sell transactions with Avista because they were required to create and
submit base schedules and bid curves to CAISO and pass EIM resource sufficiency and flexibility
tests prior to the operating hour in order to be able to participate in the EIM. The EIM tests are
critical to ensure participants have sufficient resources to meet obligations and are not leaning on
the market. Since EIM participants are required to finalize their resource plan further ahead of the
hour, their real-time trading activity shifted. The entities continued to fransact well before the
operating hour but limited trades as they approached the EIM base schedule submittal time. A1l
real-time in-hour transactions with EIM entities has stopped since the EIM dispatches their
resources in-hour based on submitted bids.
AYISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
ruRISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-2 1 -0 1 /AW-G -21 -0r
IPUC
Production Request
Staff-077
DATE PREPARED: 0312412021WITNESS: Scott Kinney
RESPONDER: Scott Kinney
DEPARTMENT: Power Supply
TELEPHONE: [phone]
REQUEST:
Referencing witness Kinney's testimony on pages 4 and 5 of the factors that led to the Company's
decision to enter the EIM, how much weight was given to the Company's clean energy goals and
the Washington renewable regulations?
RESPONSE:
As stated in my direct testimony the primary driver for Avista joining the EIM was due to short
term market liquidity risks associated with 20 utilities encompassing over 80% of the western area
load either participating in already or committed to join the EIM by April 2022. Response to
Staff-PR-076 provides additional information regarding changes to short term trading activity with
Avista's traditional northwest trading partners after they joined the EIM. Another published
benefit to EIM participation is the ability to facilitate additional renewable generation integration
because of regional footprint diversity and the ability to balance the variable nature of renewable
resources with a larger generation portfolio. Avista anticipates that its resource mix will continue
to transition to incorporate more renewable resources based on multiple circumstances or drivers.
The Company's clean energy goals and Washington renewable regulations are two of the many
drivers that will facilitate this resource transition. With the recent change in government
administration there is a good chance that tax credits or incentives for renewable projects will be
renewed, which will drive renewable prices lower and make them more attractive than other
resource options or the market. As battery technology improves and associated costs decline, they
can efficiently and effectively be paired with renewable projects to provide a cost-effective
capacity resource. Also, if tax incentives are renewed there could be an influx of PURPA projects
in the region that would ask for contracts with Avista. Finally, with the current administration the
discussion of a national clean energy standard is starting again and could lead to requirements to
reduce generator emissions to meet a national standard.