20070621_1960.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER RED FO RD
COMMISSION SECRETARY
LEGAL
FROM:SCOTT WOODBURY
DATE:JUNE 15,2007
SUBJECT:CASE NO. GNR-07-01 (Idaho Power, Avista, PacifiCorp)
ADJUST ABLE PORTION OF AVOIDED COST RATE
REVISEDfUPDA TED CALCULATION FOR EXISTING CONTRACTS.
CASE NO. PAC-07-09 (PacifiCorp)
ANNUAL VARIABLE ENERGY RATE ADJUSTMENT -
1992 AMENDMENT Q F CONTRACTS.
The Idaho Public Utilities Commission in Order No. 28708, Case No. GNR-99-
established a methodology for the annual adjustable rate portion of avoided costs for those QF
contracts using variable costs associated with Colstrip, a coal-fired generating facility in
southeast Montana. For those QF contracts with Colstrip-related fuel costs and variable O&M
future Colstrip variable cost adjustments are to be calculated by using FERC Form 1 Colstrip
Unit Coal Costs per megawatt hour (MWh) and adding $2.00/MWh (the average variable O&M
cost of Colstrip plus 20~/MWh for generation taxes plus a five percent (5%) adjustment for line
loss). As computed by Commission Staff, the Colstrip related adjustable rate should change
from 9.38 mill/kWh to 11.47 mill/kWh. The same calculated rate revision under the avoided
cost methodology is used by A vista, PacifiCorp dba Rocky Mountain Power and Idaho Power
Company. This change in the variable rate affects existing contracts under the previous SAR
methodology.
The adjustable portion of the avoided cost rates under Sumas-based methodology is
based on annual average gas prices indexed at Sumas, Washington. As reported by Avista, the
indexed gas prices have decreased by $0. 86/mmbtu. The approved gas price of $7.80/mmbtu
plus the $0.86/mmbtu decrease results in a gas price of $6.94/mmbtu for the 2007-2008 year.
DECISION MEMORANDUM
This equates to a SAR fuel cost of 49.27 mill/k Wh using a heat rate of 7 100 btu/k Wh as used in
the model for potential future contracts. For existing contracts signed under an assumed heat rate
of7 350 btulkWh, this equates to a SAR fuel cost of 51.01 mill/kWh.
The Commission Staff by letter dated May 24 2007, prepared by Staff Engineer Rick
Sterling, calculated changes to the annual adjustable rate portion of avoided costs for those QF
contracts using variable costs associated with Colstrip and Sumas for review by the respective
utilities. Avista, Idaho Power and PacifiCorp by letter responses (attached) indicated that Staffs
calculations are correct noting, however, that a heat rate of 7,350 btu/k Wh should be used for the
Sumas adjustment for existing contracts and a heat rate of7 100 btu/kWh should be used for new
contracts in accordance with Order No. 29124.
In accordance with Order No. 29316, the adjustable portion of the avoided cost rate
for existing PacifiCorp contracts with year 1992 amendments has also been recomputed:
Beginning on July , 2003 , the adjustable portion for these contracts was ordered to be equal to
the average cost of fuel for the Carbon, Hale, Naughton, Huntington and Hunter generating
plants, including a variable O&M component of $1.51 but exclusive of generation taxes and a
line loss adjustment. The variable energy rate applicable to deliveries commencing July , 2007
extending through June 30, 2008 has been computed by PacifiCorp to be $12.17/MWh, an
increase from $12.03 last year.
COMMISSION DECISION
Under avoided cost methodology the adjustable portion of avoided cost rates for
existing contracts is calculated annually for an effective date of July 1. Avista, Idaho Power and
PacifiCorp agree with Staffs proposed calculations. Also adjusted annually is the adjustable
portion of avoided cost rates for existing PacifiCorp contracts with year 1992 amendments.
PacifiCorp for those contracts has computed the new variable energy rate. Does the Commission
agree with the proposed changes in the variable rates?
Scott D. Woodbury
bls!M:GNR-O7-0 I P AC-O7-09 _
DECISION MEMORANDUM
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201 South Main, Suite 2300
Salt Lake City, Utah 84111
June 15, 2007
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Idaho Public Utilities Commission
PO Box 83730
Boise, ill 83720-0074
Attention: Scott D Woodbury
RE: Case Nos. GNR-07-1; PAC-07-
Dear Mr. Woodbury,
Thank you for your letter of May 24 2007 in which you provided the 2007-2008 updated prices
for the adjustable portion of the avoided costs rates under the present avoided cost methodology.
Your letter also provided an update to the adjustable rate portion of avoided costs for QF
contracts using variable costs associated with Colstrip and for PacifiCorp contracts with 1992
amendments.
During our reviewing the proposed gas price update, we noticed that the heat rate used to convert
the proposed gas price was 7350 MMBtu/KWH. In Order No. 29124 issued on 9/26/02, the
Commission changed the heat rate from 7350 to 7100. Therefore, using a gas price of$6.94 and
a heat rate of 7100, the adjustable portion of the fueled rate should be 49.27 mills/kWh.
With the exception of the item listed above, PacifiCorp has reviewed the price update and agree
that the prices have been updated correctly.
If you have any questions please feel free to call or email me at [phone] or
Mark. Widmer~PacifiCorp.com
Sincerely,
~oxt \)j(tiww (p,J\ '
Mark Widmer
Director, Net Power Cost
...-
DAHO~POWER~
An IDACORP Company
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June 15 , 2007
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Randy C. Allphin
Senior Planning Administrator
Tel: [phone]
rallphin(Q),idahopower.com
Idaho Public Utilities Commission
Attn: Scott Woodbury
PO Box 83720
Boise, ID 83720-0074
RE:CASE NOS. GNR-07-
IN THE MATTER OF THE ANNUAL REVISION AND UPDATED CALCULATION
THE ADJUSTABLE PORTION OF THE AVOIDED COST RATE(S) FOR EXISTING
PURPA CONTRACTS FOR AVISTA CORPORATION DBA AVISTA UTILITIES, FOR
IDAHO POWER COMPANY AND FOR P ACIFICORP DBA UTAH POWER AND LIGHT
COMP ANY.
We have reviewed the information you have provided in your letter dated May 24, 2007
notifying Idaho Power of revision of the adjustable portion of the Avoided cost rate(s) for existing
PURP A contracts.. Idaho Power concurs that the model and calculations used by the IPUC staff for
Idaho Power Company are consistent with IPUC Order 28708.
In reviewing the letter it was noticed that the calculation of the approved gas price of $7.
less the $0.87 decrease resulted in a new price of $6.94. Mathematically, this calculation should
result in a new price of $6.93. Idaho Power contacted Rick Sterling and discussed this calculation;
the $0.01 difference is a result of mathematical rounding of the components within this calculation.
Based upon our discussion with Rick, the $6.94 value is acceptable.
Sincerely,
(J.
~~
Randy C Allphin
Idaho Power Company
Cc:Bart Kline (Ipco)
Page 1 of 1
POBox 70 Boise, Idaho 83707 1221 W Idaho St. Boise, Idaho 83702
Avista Corp.
1411EastMission PO Box3727
Spokane, Washington 99220-3727
Telephone [phone]
Toll Free 800-727-9170
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June 12, 2007
State ofIdaho Public Utilities Commission
Mr. Rick Sterling
Statehouse Mail
West 472 Washington
Boise, ill 83720
RE:Case No. GNR-07-
Dear Mr. Sterling:
Avista is responding to the notice dated May 24 2007 regarding the annual revision and
updated calculation ofthe adjustable portion of the avoided cost rates. The Company is
in agreement with the Colstrip adjustable rate of 11.47 mill/kWh and the annual average
gas price of $6. 94/mmbtll for the 2007-20087 year.
Clint Kalich
Manager of Resource Planning and Power Supply Analyses