20171122IPC to REC 3-11.pdf

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LISA D. NORDSTROM
Lead Counse!
I [e-mail]
LDN:csb
Enclosures
RECEIVED
201?f{0y 2A PH t:33
,,,.i?i'j,iillf'hi8r,o*
November 22,2017
VIA HAND DELIVERY
Diane M. Hanian, Secretary
ldaho Public Utilities Commission
472West Washington
Boise, ldaho 83702
Case No. IPC-E-17-11
2017 lntegrated Resource Plan - ldaho Power Company's Response to the
Second Set of Production Requests of Renewable Energy Coalition
Dear Ms. Hanian
Enclosed forfiling in the above matter please find an originaland three (3) copies of
ldaho Power Company's Response to the Second Set of Production Requests of
Renewable Energy Coalition.
Also enclosed are four (4) copies each of non-confidential and confidential disks
containing information responsive to Renewable Energy Coalition's production request.
Please handle the confidential information in accordance with the Protective Agreement
executed in this matter.
Very truly yours,
Re
Lisa D. Nordstrom
An IDACORP CompanY
P.O. Box 70 (83707)
1221 W. ldaho St.
Boise, lD 83702
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I n o rd strom @ ida hopowe r. com
RECEIVED
201?l{0V 22 PH l:33
tiil\ilc PU[Llc
, r'l! l't-!t!i *ci.{FJlssloN
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S 201 7 INTEGRATED
RESOURCE PLAN
CASE NO. IPC-E-17-11
IDAHO POWER COMPANY'S
RESPONSE TO THE SECOND SET
OF PRODUCTION REQUESTS OF
RENEWABLE ENERGY COALITION
COMES NOW, ldaho Power Company ("ldaho Power" or "Comp?ny"), and in
response to the Second Set of Production Requests of Renewable Energy Coalition to
ldaho Power Company dated November 1, 2017, herewith submits the following
information:
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 1
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REQUEST FOR PRODUCTION NO. 3: Please refer to page 84 of the IRP
where ldaho Power states that it is using the Energy lnformation Administration's ("ElA")
High Oil and Gas Resource and Technology Case from EIA's 2016 Annual Energy
Outlook ("AEO") for its Natural Gas Price Forecast because "this case is more
consistent with recent price trends than the reference case."
a. What were the other EIA forecasts that ldaho Power could have used?
Please provide a fuller explanation of why each of the alternatives was rejected in favor
of the High Oil and Gas Resource and Technology Case.
b. Please explain why "recent price trends" are relevant to ldaho Power's
Natural Gas Price Forecast?
c. What "recent price trend" data did ldaho Power review? Please provide
this data.
d. Please explain how the High Oil and Gas Resource and Technology Case
is more consistent with recent price trends?
e. Please explain how the "recent price trend" data is more reliable at
predicting long-term natural gas forecasts than the EIA's Reference Case.
f. What (if any) are the actual natural gas prices ldaho Power has paid
during the last two years and contracted for in the future (and explain how they are
calculated)?
RESPONSE TO REQUEST FOR PRODUCTION NO. 3:
a. ldaho Power attempts to use the best gas price forecast which most
closely aligns with future expectations. Of the EIA natural gas forecasts from the 2016
EIA Energy Outlook, the High Oi! and Gas Resource and Technology Case is the case
that most aligns with the forward market information (lntercontinental Exchange ('lCE')
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 2
contracts). The other EIA forecasts did not represent the direction of future prices
indicated by the natural gas fonrard contract market. Additionally, ldaho Power
discussed the natural gas price forecasts extensively with members of the Integrated
Resource Plan ("lRP") Advisory Council ('IRPAC') and other public participants during
the IRP planning process.
b. As future natural gas price assumptions influence the financial results of
the operational modeling used to evaluate and rank resource portfolios, the Company
believes historical price trends are important to evaluate when choosing a natural gas
price forecast for the !RP. The natural gas price forecasts in the last two lRPs have
consistently overstated the gas price forecast when using the EIA Reference Case.
c. The "recent price trend" data ldaho Power reviewed was proprietary data
from lCE. Please see confidential Attachment 1, "Henry Hub Data Jan 2017," provided
on the confidential CD.
d. As shown in the graph below, the 2017 IRP planning case (High Oil and
Gas Resource and Technology Case) and the lCE settled contracts line up very well
through 2028, which is the extent of ICE data available at the time.
s16.OO
S14.oo
s12.OO
s10.oo
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S6.m
S4.oo
S2.m
s-
Henry Hub Natural Gas Prices (Nominal
Slmmbtu)
-F
st(,',-d
-2077
EIA Reference Cae
-ZOtl
IRP Planning
-lCE
Settles 2016
19€7 2m1 2m5 2@9 2013 2017 2021 2025 2029 2033
2017 EIA Low Oil and Gas
Rcsource and
Technology Case
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 3
e. The graph provided as confidential Attachment 2 on the confidential CD
compares natural gas prices from ICE Henry Hub ("HH") contract settles and EIA
forecasts from 2009 to 2016. The graph shows a strong correlation between the ICE
and EIA futures in 2009, 2010,2011, and 2012. Starting in 2013, the futures begin to
diverge with EIA continuing to show a much larger increase in the forecast and ICE
contracts showing a much flatter future. Looking at the actual HH line, which is flat or
declining from 2009 forward, ldaho Power believes the past seven-year trend of low
prices will persist-as does the market, as shown by the 2016lCE contracts.
f. ldaho Power uses Platts to obtain natural gas settlement prices. Please
see Table 1 in confidential Attachment 3 provided on the confidential CD for actual
weighted average price per MMBtu for 2015, 2016, and year to date 2017.
Idaho Power forward contracts are priced at agreed-upon pricing when the
contract is negotiated. Please see Table 2 in confidentia! Attachment 3 provided on the
confidential CD for forward contract purchases by MMBtu (weighted average) for
October 2017 through Apri! 2019.
The confidentia! CD will be provided to those parties that have executed the
Protective Agreement in this matter.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION .4
REQUEST FOR PRODUCTION NO. 4: Please refer to the graph on page 84 of
2017 IRP where ldaho Power shows the EIA Reference Case forecast, and the EIA
High Oil and Gas Resource and Technology Case forecast. Please also refer to ldaho
Power's 2015lRP on page 85 where ldaho Power also included the Low case.
a. Please explain why ldaho Power has not considered the low case in the
2017 IRP? lf the low case was considered in the 2017 !RP, please explain why it has
not been displayed on this graph as it was in the 2015 lRP.
b. What are the assumptions used in the EIA's Reference Case, High Oil and
Gas Resource and Technology Case, and Low Oil and Gas Resource and Technology
Case?
c. Please explain why EIA chose the EIA Reference Case over the others,
and why EIA did not choose the EIA High Oi! and Gas Resource and Technology Case?
d. What makes ldaho Power different such that it should not use the EIA's
Reference Case?
RESPONSE TO REQUEST FOR PRODUCTION NO. 4:
a. ldaho Power considered the EIA low case natural gas forecast when
choosing the IRP planning case forecast. However, not all information considered in
the preparation of the IRP was presented in the lRP.
b. The assumptions used by the EIA under its various forecasts can be found
at:https : //www. eia. q ov/o 3(2016).odf.
c. Please see EIA's 2016 report at the link provided in subpart b above for its
discussion of the forecast cases and assumptions.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 5
d. Please see the Company's response to Renewable Energy Coalition's
Request for Production No. 3 for ldaho Power's selection of the planning case natural
gas forecast.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 6
REQUEST FOR PRODUCTION NO. 5: Please refer to page 85 where ldaho
Power states that it applies a Sumas basis adjustment and transportation cost to the
Henry Hub price to derive an ldaho Citygate price. What is the formula ldaho Power
uses to adjust for the Sumas basis and transportation cost? Please provide any
spreadsheets used for this analysis with all formulas intact.
RESPONSE TO REQUEST FOR PRODUCTION NO. 5: Please see the Excel
workbook provided on the confidential CD for the requested information. The
confidential CD will be provided to those parties that have executed the Protective
Agreement in this matter.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 7
REQUEST FOR PRODUCTION NO. 6: Please refer to page 112, Figure 9.1 of
the lRP.
a. Does this graph reflect that ldaho Power has selected the lowest of all gas
scenarios as the planning case, and only analyzed price sensitivities above that of the
planning case?
b. Why has ldaho Power not analyzed any sensitivities below the planning
case?
c. Why has ldaho Power chosen to use low gas prices in its planning case
scenario?
d. Is this the same gas price assumptions ldaho Power has used for its
energy efficiency analysis?
RESPONSE TO REQUEST FOR PRODUCTION NO. 6:
a. No. The natural gas price forecast sensitivities shown in Figure 9.1 are
based on the 2016 EIA High Oil and Gas Resource and Technology ("E|AHO") Case
forecast (depicted as the "Planning Case" in Figure 9.1). The graph in Figure 9.1
displays the resulting natural gas prices based on the EIAHO Planning Case forecast
over a range of upward price sensitivities. The objective of the gas price sensitivities
analysis was to test the performance of each portfolio over a possible range of higher
priced futures, which helps effectively test the key resource decisions of coal unit
retirement and the Boardman to Hemingway transmission project evaluated in the 2017
IRP.
b. The natural gas forecast was discussed at the September 2016 and
March 2017 IRPAC meetings. Following those discussions, it was determined that
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 8
testing sensitivities lower than the EIAHO Planning Case forecast was not informative to
the resource portfolios being evaluated.
c. The Company chose the EIAHO case forecast as its Planning Case
because actual natural gas prices have consistently been lower than the Idaho Power
IRP Planning Case EIA forecast selected in the past several IRP cycles. The IRP
Planning Case natural gas price is based on an EIA forecast. Upon a detailed a review
of ICE settled forward contracts, ICE was shown to be a more accurate indicator than
the EIA Planning Case forecast used in the IRP over the past few years. Comparing
the ICE reviewed data to the 2016 EIA forecasts available, the 2016 EIAHO case
forecast was selected, as it closely followed the ICE fonrard contract prices as
compared to the other available EIA forecasts.
d. The 2016 EIAHO case natural gas forecast was not used in the energy
efficiency analysis used in Appendix B of the 2017 lRP.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REOUESTS OF RENEWABLE ENERGY COALITION - 9
REQUEST FOR PRODUCTION NO. 7: Please refer to pages 112-113 where
table 9.4 shows the portfolio relative costs under increasing levels of gas prices. With
increasing gas price forecasts, portfolio costs increase for P1, P3, P4, P6, P9, P10, and
P12. Please explain why the portfolio costs did not increase for P2, P5, P7, PS, and
P11.
RESPONSE TO REQUEST FOR PRODUCTION NO. 7: Table 9.4 provides the
relative increase in portfolios in relation to the planning case portfolio (P7) for the
planning case and eight higher gas sensitivities. Costs for all portfolios increased with
increasing gas prices. The planning case P7 remained the lowest cost under all
sensitivities except for the 400 percent increase where P5 was the lowest cost portfolio.
Portfolios P1, P3, P4, P6, P9, P10, and P12 are portfolios that include higher
investments in gas-fueled resources. Portfolios P2, P5, P8, and P11 include
investments in photovoltaics and, therefore, are not impacted as much by increased gas
prices.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 1O
REQUEST FOR P NO. 8:Please refer to page 114 of the IRP
a. Please explain what ldaho Power means by "adjusted upward from the
planning case gas price forecast." Please explain why ldaho Power used this approach.
b. Please explain how ldaho Power estimated the black dashed line in figure
9.2 and why the Company chose a lower estimation for natural gas prices while it did
not choose a lower estimation for the other two stochastic variables (customer load
sampling or hydro generation sampling).
RESPONSE TO REQUEST FOR PRODUCTION NO. 8:
a. The "adjusted upward from the planning case gas price forecast" means
most of the future gas price forecasts are higher than the planning case gas price
forecast, with some futures below the planning case. With today's unprecedented low
natural gas prices, the Company chose to evaluate the upward risk if natural gas prices
were to return to historical levels.
b. Figure 9.2 on page 114 of the IRP shows 100 future gas price forecasts
that were used in the Company's stochastic analysis. The starting point for the
stochastic analysis is the planning case natural gas forecast, represented by the black
dashed line near the bottom. Therefore, the black dashed line in Figure 9.2 is the
planning case natural gas price, not an estimated value. The dashed black line in
Figure 9.3 is the planning case customer load and the dashed black line in Figure 9.4 is
the planning case hydro generation. The risk sampling for Figures 9.3 and 9.4 show a
normal distribution, where 50 percent of the draws are above the planning case and 50
percent of the draws are below the planning case.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 11
REQUEST FOR PRODUCTION NO. 9: Please refer to page 109 of Appendix C
to the IRP where ldaho Power shows the historic EIA Henry Hub natural gas spot price
forecasts for 2010 through 2016. Are these all based on the EIA's Reference Case in
each year or the High Oil and Gas Resource and Technology Case?
RESPONSE TO REQUEST FOR PRODUCTION NO.9: The graph on page 109
of Appendix C includes information from the EIA Reference Case lor 2010-2015 and the
EIA High Oil and Gas Resource and Technology Case lor 2016. Please see the Excel
file provided on the non-confidential CD for the source of the graphed numbers.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 12
REQUEST FOR ucTtoN No. 10:Please refer to page 108 of Appendix
C to the lRP where ldaho Power shows the ldaho Citygate Natural Gas, Coa!, and
Nuclear Price Forecasts. Please also refer to Idaho Power's 2015lRP on page 129 of
Appendix C, where ldaho Power also included the ldaho Citygate Natural Gas prices
based on the High Case and the Low Case. Please explain why ldaho Power has
chosen to only analyze the ldaho Citygate natural gas price forecast for its planning
case (the High Oil and Gas Resource and Technology Case), and not also compare the
ldaho Citygate natural gas prices based on EIA's Reference Case and Low Oil and Gas
Resource and Technology Case?
RESPONSE TO REQUEST FOR PRODUCTION NO. 10: ln the 2017 lRP,
ldaho Power's planning case natural gas forecast (the EIA High Oil and Gas Resource
and Technology Case) was analyzed over varying price sensitivities (or scenarios).
Pages 112-113 of the 2017 IRP describe the analysis in which ldaho Power analyzed
natural gas price sensitivities ranging up to 400 percent of planning case natural gas
price forecast. For the stochastic risk analysis, described on pages 114-117 of the 2017
lRP, ldaho Power analyzed 100 different natural gas price scenarios (Figure 9.2, page
114 ol 2017 IRP). Thus, while the referenced page of Appendix C to the 2017 IRP
shows only the planning case ldaho Citygate natural gas price forecast, the analysis
performed for the 2017 IRP considered a wide range of alternative natural gas price
futures as described above.
The referenced graph in the 2015 IRP was for comparison purposes only. The
stochastic risk analysis performed for the 2015 IRP was like that performed for the 2017
IRP in that 100 different natural gas price scenarios were analyzed. An analysis of
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 13
natural gas price sensitivities, such as described above and on pages 112-113 of the
2017 lRP, was not performed for the 2015 lRP.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 14
REQUEST FOR PRODUCTION NO. 11: What data did ldaho Power use for gas
prices in its energy efficiency analysis? What data did ldaho Power use for gas prices
in its load-resource balance analysis?
RESPONSE TO REQUEST FOR PRODUCTION NO. 11: Prior to each IRP
cycle, Idaho Power contracts with a third-party consultant. ln 2016, the Company
contracted with the Applied Energy Group to produce an Energy Efficiency Potential
Study. The Company provides its contractor with the preliminary demand-side
management ("DSM") alternative costs based on the previous IRP preferred portfolio,
updating those variables that are available at that time. For the 2017 !RP, the Company
updated the load forecast and the gas forecast using the EIA 2016 AEO Reference
Case. Because of the timing of the energy efficiency potential analysis, the final DSM
alternative costs had not yet been determined. The Company and its contractor must
use the best data available at the time of the potential study to incorporate energy
efficiency potential into the IRP process.
The final DSM alternative costs published in the 2017 IRP Appendix C:
Technical Report are based on the 2017 IRP preferred portfolio using the 2017 IRP
planning case natural gas price forecast, which is based on the EIA 2016 AEO High Oil
and Gas Resource and Technology Case. These DSM alternative costs are used for
program cost-effectiveness after the IRP has been acknowledged by the ldaho Public
Utilities Commission and the Public Utility Commission of Oregon.
To identify the need and timing of future resources, ldaho Power prepares a
load-resource balance analysis that accounts for forecast load growth and generation
from the Company's existing supply side, demand-side, and transmission resources.
The load-resource balance analysis does not use a gas price in determining any
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 15
resource deficits. The load and resource balance is discussed in more detail in Chapter
7 of the 2017 lRP.
The response to this Request is sponsored by Rick Haener, Power Supply
Planning Leader, ldaho Power Company.
DATED at Boise, ldaho, this 22nd day of November 2017.
lSA D. N
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION . 16
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 22nd day of November 2017 I served a true and
correct copy of IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION upon the
following named parties by the method indicated below, and addressed to the following:
Commission Staff
Sean Costello
Deputy Attorney General
!daho Public Utilities Commission
47 2 W est Wash i ngton (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
Industrial Gustomers of ldaho Power
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, Idaho 83703
Sierra Club
Gloria D. Smith
Sierra Club
2101 Webster Street, Suite 1300
Oakland, California 94612
ldaho lrrigation Pumpers Association, lnc.
Eric L. Olsen
ECHO HAWK & OLSEN, PLLC
505 Pershing Avenue, Suite 100
P.O. Box 6119
Pocatello, ldaho 83205
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Anthony Yankel
12700 Lake Avenue, Unit 2505
Lakewood, Ohio 44107
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IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 17
ldahydro
C. Tom Arkoosh
ARKOOSH LAW OFFICES
802 West Bannock Street, Suite 900
P.O. Box 2900
Boise, ldaho 83701
Micron Technology, lnc.
Thorvald A. Nelson
Emanuel T. Cocian
Kim Stanger
HOLLAND & HART, LLP
6380 South Fiddlers Green Circle, Suite 500
Greenwood Village, Colorado 80111
Pete Bennett
Micron Technology, lnc.
8000 South Federal Way
Boise, ldaho 83707
STOP B2H
Jim Kreider
STOP B2H
60366 Marvin Road
La Grande, Oregon 97850
Renewable Energy Coalition
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27th Street
Boise, ldaho 83702
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IDAHO POWER COMPANY'S RESPONSE TO THE SECOND SET OF
PRODUCTION REQUESTS OF RENEWABLE ENERGY COALITION - 18
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