20170815IPC to Tamarack 1-2.pdf

DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221\Nest ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
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Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO
REVIEW THE SURROGATE AVOIDED
RESOURCE (SAR) METHODOLOGY
FOR CALCULATING PUBLISHED
AVOIDED COST RATES
CASE NO. GNR-E-17-02
IDAHO POWER COMPANY'S
ANSWERS AND RESPONSES
TO TAMARACK ENERGY
PARTNERSHIP'S FIRST
INTERROGATORIES AND
REQUESTS FOR PRODUCTION
COMES NOW, ldaho Power Company ("ldaho Power" or "Company"), and in
response to Tamarack Energy Partnership's First lnterrogatories and Requests for
Production to ldaho Power Company dated July 25, 2017, herewith submits the
following information :
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 1
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INTERROGATORY NO. 1: ldentify the instances in which ldaho Power has
entered into transactions using the lCE index in the past five years. For each
transaction, indicate whether ldaho Power received or delivered natural gas as a result
of the transaction, the purpose of the transaction (including whether the purpose of the
transaction was to serve as a hedge against changes in natural gas price), whether
ldaho Power agreed to receive or deliver natural gas pursuant to the contract,
derivative, or other financial instrument, whether the transaction resulted in the delivery
or receipt of natural gas by ldaho Power, and the volume of natural gas (if any) that
ldaho Power delivered or received as a result of the transaction.
ANSWER TO INTE ROGATORY NO. 1:ldaho Power transacted the following
physical deals using the lntercontinental Exchange ('lCE") lndex.
5,000.002867
2868
381 9
6t27t2015
6t26t2015
3t30t2016
6t30t20't5
6t26t2015
3t30t2016
10,000.0
0
-9,500.00
20,000.0
0
10,000.0
0
-9,500.00
2.689
4
2.671
1.563
1
Elmore
Pool
Elmore
Pool
East
Hamilton
NWP-Rocky
NWP-Rocky
NWP-Rocky
Purchase
Purchase
Sale
Mtn
Mtn
Mtn
Purchase deals 2867 and 2868 were to fuel natural gas generation. Sale deal
3819 was to liquidate surplus natural gas. These were all daily spot physical
transactions with firm commitments from both buyer and seller.
Additionally, ldaho Power transacted 133 ICE cleared, fonrvard financial
derivative transactions using the ICE exchange. These transactions do not final-settle
on ICE indices but are transacted on their trading platform and have credit margin
accounts which are daily-settled on ICE's fonruard price assessment. The 133 financial
derivative transactions were divided into 114 purchases totaling 22,710,000 MMBtus
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 2
Deal
Number
Transactio
n lndex
Transactio
n TypeStart Date End Date Volume BAV PointPrice
and 19 sales totaling 2,985,000 MMBtus. All the transactions were transacted for the
purposes of hedging against a change in natural gas prices.
Thirty-four purchases were made totaling 3,422,500 MMBtus and 11 sales were
made totaling 1,942,500 MMBtus for the purposes of heat rate hedging.
Seventy-five purchases were made totaling 18,755,000 MMBtus and five sales
were made totaling 810,000 MMBtus for the purposes of Energy Risk Management
Standards hedging.
One purchase was made totaling 150,000 MMBtus for the purposes of
repositioning gas supply.
Four purchases were made totaling 382,500 MMBtus and three sales were made
totaling 232,500 MMBtus for the purposes of hedging natural gas storage operations.
Please see the spreadsheet provided on the enclosed CD for supporting data.
The response to this Request is sponsored by Michael Polito, Power Supply
Operations Manager, ldaho Power Company.
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 3
INTERROGATORY NO. 2: ldentify and describe all purposes for which ldaho
Power has engaged in transactions using the ICE index in the past five years. Please
identify the total natural gas volume that was encompassed by the transactions used for
each purpose. Examples of purposes may include, for example and without limitation:
hedging; attempted arbitrage and/or speculation; and obtaining natura! gas for use at
ldaho Power facilities.
ANSWER TO INTERROGATORY NO. 2: Please see the Company's response
to Tamarack Energy Partnership's ("Tamarack") lnterrogatory No. 1.
The response to this Request is sponsored by Michael Polito, Power Supply
Operations Manager, ldaho Power Company.
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 4
REQUEST FOR PRODUGTION NO. 1: On pages 4 and 5 of Idaho Power's
Response and Objection the Company states:
As presented at the January 12, 12017 [stc/, IRPAC
meeting, and included below, analysis of the [stc/ this
forecast demonstrates it follows the recent history and is in
close alignment with ICE settled transactions, which are
based on actual willing buyer/willing seller transactions.
ldaho Power recommends that pursuant to the
required annual avoided cost update to the SAR
methodology in accordance with Order No. 32697, the
Natural Gas Spot Price at Henry Hub: High Oil and Gas
Resource and Technology (nom $/MMBtu) forecast from
EIA's Annua! Energy Outlook be utilized, adjusted for pricing
at Sumas and ldaho City Gate.
Please provide, on a daily basis, the ICE settled transactions for the period used in the
analysis depicted in the Graph on page 4 of the Response and Objection. Please
include, on a daily basis, the Settled Price, the Open lnterest, and the Total MMBtu for
each transaction in your answer. Please provide responsive data in electronic format,
with any formulae intact.
RESPONSE TO REQUEST FOR PRODUCTION NO. 1: Idaho Power,s ACCESS
to ICE is through a paid subscription, which prohibits the Company from sharing this
data. Contact information for ICE can be found at the following web address:
https://www.th ce.com/index
Please see Attachment 1 provided in the Company's response to Tamarack's
Request for Production No. 2 for the analysis depicted in the graph on page 4 of ldaho
Power's Response and Objection.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 5
REQUEST FOR PRODUCTION NO. 2: Please provide any analysis or study
conducted by, or reviewed by, the Company regarding the correlation between the
Natural Gas Spot Price at Henry Hub: High Oil and Gas Resource and Technology
(nom $/MMBtu) and the Henry Hub Natural Gas Spot Prices. Please provide any such
analysis or study, and any data used in or resulting from any such analysis or study, in
electronic format with any formulae intact.
RESPONSE TO REQUEST FOR PRODUCTION NO. 2: ln supporting its
decision to use the Energy lnformation Administration ("ElA') Henry Hub High Oil and
Gas Resource and Technology as the 2017 lntegrated Resource Plan ("lRP") natural
gas price forecast, ldaho Power analyzed extensively natural gas prices and the
performance of recent natural gas price forecasting. An explanation of this analysis
follows.
The below graph provides actual natural gas prices at Henry Hub (2008-2015,
nominal $/MMBtu), EIA annually issued forecasts for 2009 through 2016, and ICE-
reported natural gas settlement prices for 2009 through 2016. While there is much to
process in reviewing the graph, it is clear that the price of natural gas since the late '00s
has been consistently over forecast, whether by the EIA or (to a lesser extent generally)
by parties trading natural gas futures (i.e., ICE natural gas settlements).
i:m
Comparian ol Henry Hub Nalurel G6
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IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 6
*r#
ln fact, a review of natural gas prices at Henry Hub indicates that annual prices
beginning with 2009 have averaged approximately $3.50/MMBtu, have ranged between
roughly $2.50/MMBtu and $4.50/MMBtu, and have a slight downward trend (the slope of
a line fitted to the eight observations over 2009 through 2016 is $0.20lMMBtu/year).
While ldaho Power recognizes that many factors influence the price of natural gas, the
trend in natural gas prices since the late'00s is considered to be highly correlated with a
marked increase in U.S. dry shale gas production. As illustrated in the below EIA
graph, U.S. dry shale gas production has increased roughly eightfold since 2008.1
U.S. dry shale gas production
shalo gss productiori (dry)
billlon cubic fccl per day
rMarcEllus (PA, VtA/. OH & NY)
r Utica (Otl, PA A WV)
r Permian ffx & NM)
rHaynasvilla (LA E TX)
I E8gle Ford (TX)
r Feycnadllc (AR)
r Barnett (TX)
r$/bodbrd (oK)
', Bald<an (ND E MT)
Antsim (Ml, lN &OH)
Rcst of US'shale'
2m3 2005 A)07 20G) Ar1 2013 2015 2017
sdrngtr: ErA.hrlv.d hofir rlrt adrinllr.thra dalri co{ochd by trrilllrrglT$o hr. o& .r. through Jurx 2ol7 .nd r.prt .nt EIA'r orlkld ltghl
el.t aathlrtac- brrt.'t lro{ $rnr, (hla slLla abbnryl'tio'rr la(Icah prftrary riata(r}
Beginning with 2009 and the onset of the marked expansion in shale gas
production, a relatively well-performing forecast for annual natural gas prices would
have been a persistence-based forecast (i.e., prices of today are a good predictor of
future prices); as noted earlier in this response, natural gas prices have exhibited a
stable, or even slightly downward, trend over the eight-year period. Thus, it was ldaho
1 EIA website "Where Our Natural Gas Comes From." Accessed July 27,2017. Available via the
following link: https://www.eia.qov/enerqvexplained/index.cfm?paqe=natural qas where.
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 7
50
45
{o
35
30
25
20
15
10
5
0
Power's judgment in deciding upon a 2017 lRP natural gas price forecast that the High
Oil and Gas Resource Technology forecast, which predicts only modest increases in
natural gas prices over the coming 20 years, is more highly correlated with observations
on natural gas prices since the late '00s than the EIA reference case natural gas prices
forecast.
Please see the attachments provided on the enclosed CD for the analysis data
discussed in this response.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
DATED at Boise, ldaho, this 15th day of August 2017 .
DONOVAN E. WALKER
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 1sth day of August 2017 I served a true and
correct copy of IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO
TAMARACK ENERGY PARTNERSHIP'S FIRST INTERROGATORIES AND
REQUESTS FOR PRODUCTION upon the following named parties by the method
indicated below, and addressed to the following:
Commission Staff
Daphne Huang
Deputy Attorney General
ldaho Public Utilities Commission
47 2 W est Wash ington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
J. R. Simplot Company
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
Avista Corporation
Michael G. Andrea, Senior Counsel
Avista Corporation
1411 East Mission Avenue, MSC-33
Spokane, Wash ingt on 99202
Clint Kalich, Manager
Resource Planning and Analysis
Avista Corporation
1411 East Mission Avenue, MSC-7
Spokane, Washington 99202
ldahydro
C. Tom Arkoosh
ARKOOSH LAW OFFICES
802 West Bannock Street, Suite 900
P.O. Box 2900
Boise, ldaho 83701
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IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION .9
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Renewable Energy Coalition
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27th Street
Boise, ldaho 83702
lrion Sanger
SANGER I.AW, P.C.
1117 SW 53'd Avenue
Portland, Oregon 97215
Tamarack Energy Partnership
Preston N. Carter
Michae! C. Creamer
GIVENS PURSLEY LLP
601 West Bannock Street
Boise, ldaho 83702
Pacificorp, d/b/a Rocky Mountain Power
Yvonne Hogle
Ted Weston
PacifiCorp dlbla Rocky Mountain Power
1407 West North Temple, Suite 320
Salt Lake City, Utah 84116-3187
Daniel MacNeil
PacifiCorp dlbla Rocky Mountain Power
825 NE Multnomah Street
Portland, Oregon 97232
Jeffrey K. Larsen, VP
Regulation and Government Affairs
PacifiCorp dlbla Rocky Mountain Power
1407 West North Temple, Suite 310
Salt Lake City, Utah 84116
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mcc@oivenspursley. com
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ted.weston@ pacificorp. com
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Christa Bearry, Legal Assistant
IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO TAMARACK ENERGY
PARTNERSHIP'S FIRST INTERROGATORIES AND REQUESTS FOR PRODUCTION - 1O
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