HomeMy WebLinkAbout20170628IPC to Simplot Attachment 1.pdf1
Darrington, Michael
From:Yao Yin <Yao.Yin@puc.idaho.gov>
Sent:Thursday, May 11, 2017 3:56 PM
To:Darrington, Michael
Cc:Randy Lobb; Youngblood, Mike; Mike Louis
Subject:[EXTERNAL] RE: SAR Model Update
Hello Michael,
Thanks so much for your email on the use of Mountain Region natural gas forecast in the SAR model. Since this is a
generic price forecast for all Idaho electric utilities, not just Idaho Power, we believe we should not change the forecast
unilaterally. But if Idaho Power would like to change the source of the forecast, it can file an application before the
Commission.
Thanks,
Yao Yin
Utilities Analyst
Idaho Public Utilities Commission
Tel: 208‐334‐0355
From: Darrington, Michael [mailto:MDarrington@idahopower.com]
Sent: Thursday, May 4, 2017 11:20 AM
To: Yao Yin <Yao.Yin@puc.idaho.gov>
Cc: Randy Lobb <Randy.Lobb@puc.idaho.gov>; Youngblood, Mike <MYoungblood@idahopower.com>
Subject: SAR Model Update
Hi Yao,
Idaho Power anticipates that pursuant to IPUC Order No. 32697, Staff will soon be updating the Surrogate Avoided
Resource (“SAR”) model with the updated Energy Information Administration (“EIA”) natural gas price forecast that was
released on January 5, 2017. Since the issuance of Order No. 32697, Staff has utilized the EIA forecast as an input to the
SAR methodology, and specifically applied the Mountain Region natural gas forecast under the table titled Electric
Prices: Energy Prices by Sector and Source.
Idaho Power understands that Order No. 32697 generically requires the use of the EIA forecasts as an input to the SAR
methodology, but that order and subsequent errata orders do not specify the data series that is to be applied to the SAR
methodology. Idaho Power is concerned that the use of the Mountain Region forecast is not a representative forecast
for natural gas prices as it represents pricing in a higher priced supply basin than where Idaho Power holds firm pipeline
capacity and performs natural gas transactions, and consequently its use unreasonably inflates the avoided cost prices
calculated under the SAR Methodology.
In accordance with Commission orders, the Incremental Cost Integrated Resource Plan (“ICIRP”) methodology utilizes
the natural gas price forecast that Idaho Power uses in its IRP process. The Company’s IRP model uses the EIA natural
gas price forecast for Henry Hub, adjusted for pricing at Sumas and Idaho City Gate, where Idaho Power holds firm
pipeline capacity and does perform natural gas transactions. Specifically, in the development of the 2017 IRP, Idaho
Power is using EIA’s Natural Gas Spot Price at Henry Hub: High oil and gas resource and technology (nom $/MMBtu)
forecast. Idaho Power has presented this forecast at the IRP Advisory Council (“IRPAC”) meetings, and believes the
forecast consists of a more accurate expectation of long term natural gas prices that are accessible to Idaho Power. As
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presented at the January 12, 2017, IRPAC meeting, and included below, analysis of this forecast demonstrates it follows
recent history and is in close alignment with ICE settled transactions, which are based on actual willing buyer/willing
seller transactions.
Idaho Power recommends that pursuant to Staff’s update to the SAR methodology in accordance with Order No. 32697,
that Staff use the Natural Gas Spot Price at Henry Hub: High oil and gas resource and technology (nom $/MMBtu)
forecast, that is more applicable to prices that are based on real and expected natural gas prices. Idaho Power
appreciates your consideration of this suggestion and believes that using this forecast will result in the determination of
more appropriate published avoided cost pricing.
Please contact me with any questions.
Sincerely,
‐ ‐
Michael Darrington
ENERGY CONTRACTS
Idaho Power|Power Supply
Work 208‐388‐5946
Email mdarrington@idahopower.com
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