Order No 28423.pdf

Office of the Secretary
Service Date
July 5, 2000
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE ANNUAL REVISION
AND UPDATED CALCULATION OF THE
ADJUSTABLE PORTION OF THE AVOIDED
COST RATES FOR AVISTA CORPORATION
DBA AVISTA UTILITIES—WASHINGTON
WATER POWER DIVISION, IDAHO POWER
COMPANY AND PACIFICORP DBA UTAH
POWER & LIGHT COMPANY.

)
)
)
)
)
)
)
)
)

CASE NOS. AVU-E-00-4
IPC-E-00-7
UPL-E-00-2

ORDER NO. 28423

On April 28, 2000, Avista Corporation dba Avista Utilities—Washington Water
Power Division (Avista; Water Power) filed with the Idaho Public Utilities Commission its
annual revised and updated calculations for the adjustable portion of avoided cost rates. Avista
submitted two sets of adjustable rate calculations: one for coal (Colstrip) and the other for gas
(Sumas). The Colstrip adjustments apply only to contracts executed between September 28,
1990 and January 30, 1995. The Sumas adjustments apply to all contracts for projects, 1 MW
and less executed since January 31, 1995. The annual adjustable rate calculation based on
Colstrip was addressed in Order Nos. 23349 and 26080, issued in Case Nos. WWP-E-89-6 and
WWP-E-95-3/IPC-E-95-7/UPL-E-95-2, respectively. The annual adjustable rate calculation
based on Sumas was addressed in Order Nos. 25883 and 26086, issued in Case No. WWP-E-93-
10.

Adjustable Rates–Colstrip
The adjustable portion under the previous-170 coal-fired Surrogate Avoided Resource
(SAR) methodology (Case No. U-1500-170) is based on the variable costs associated with the
operation of Colstrip, a coal-fired generating facility in southeast Montana. An annual filing is
required by Order No. 23349 (Water Power), Order No. 23357 (Idaho Power), and Order No.
23358 (PacifiCorp). Pursuant to the Commission’s administrative determination of avoided cost
rates, the adjustable portion of avoided cost rates is the same for all of Idaho’s major electric
utilities.

ORDER NO. 28423 1
By Order No. 23738 issued in Case Nos. WWP-E-89-6, IPC-E-89-11 and UPL-E-89-
5 issued June 17, 1991, the Commission approved the methodology utilized by Water Power
(now Avista) in annual Colstrip adjustable avoided cost rate submittals. The Commission
indicated that future adjustable rate updates would require only a single filing by Water Power,
with copies and party status provided to Idaho Power and PacifiCorp. The Commission directed
that all applications for future or subsequent annual updates be filed by June 1 with the effective
date for the new adjustable rate to be July 1. Under the established practice, the revised updated
calculations set forth in Avista’s April 28, 2000 filing are recognized as being submitted also for
approval for Idaho Power and PacifiCorp dba Utah Power & Light Company.
Avista represents that the Colstrip adjusted avoided cost rate calculated on actual
1999 costs changed from 8.86 mill/kWh to 10.51 mill/kWh. Coal costs increased 22.85% from
$6.96/MWh to $8.55/MWh. Variable O&M costs decreased 1.35%. Generation increased
0.152%.

Adjustable Rates–Sumas
By Order Nos. 25883, 25884 and 25882 issued in Case Nos. WWP-E-93-10, IPC-E-
93-28 and UPL-E-93-3/UPL-E-93-7 on January 31, 1995, respectively, the Commission
determined that the adjustable portion of avoided cost rates for future projects should be based
on annual average gas prices indexed at Sumas, Washington. The purpose of including an
adjustable component in the avoided cost rates is to capture annual changes in natural gas fuel
costs. Under the Commission approved SAR avoided cost methodology, the adjustable portion
of avoided cost rates is the same for all of Idaho’s major electric utilities and an annual filing is
required.
Water Power (now Avista), in consultation with the Commission Staff, devised a
methodology for making annual adjustments, which was accepted by the Commission in Order
No. 26135 in Case Nos. WWP-E-95-3/IPC-E-95-7/UPL-E-95-2. As reported by Avista in its
annual filing of April 28, 2000, the 1999 annual average gas price indexed at Sumas, Washington
was $2.15/mmBtu resulting in an increase of $0.54/mmBtu. The previously approved base gas
price of $2.26/mmBtu plus the $0.54/mmBtu increase results in a gas price of $2.80/mmBtu for
2000-2001 year. This by Staff’s calculation, equates to an SAR fuel cost of 20.58 mills/kWh as
used in the model. The difference in the Sumas average price and the new base gas price is the

ORDER NO. 28423 2
result of a timing difference and the use of a trailing average. A proposed schedule of revised
rates and a detailed sheet of variables for each utility was prepared by Staff and reviewed by the
utilities. As reflected in letters filed with the Commission, all utilities concur with Staff’s
variable adjustment calculations.

COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case
Nos. AVU-E-99-3, IPC-E-99-5 and UPL-E-99-2. We find that the accuracy of the variable rate
methodology figures submitted by Avista in this case has not been challenged
The Commission notes that pursuant to comments filed in last years docket for the
adjustable rate revision a separate generic electric docket (GNR-E-99-1) was established as a
place marker for further investigation into the continued reasonableness of using actual Colstrip
variable operating costs for determining the adjustable portion of avoided costs for the specific
generation of existing contracts utilizing same. Also to be explored in that case was the
availability of a reasonable and acceptable substitute or index, the use of which would result in
an avoided cost rate as defined in Sections 201 and 210 of the Public Utilities Regulatory
Policies Act of 1978 (PURPA) and the implementing Rules and Regulations of the Federal
Energy Regulatory Commission. The Commission is apprised that the established docket
remains active and continues to be used for discovery purposes. We find that it is reasonable to
continue with the existing methodology until such time as a factual record is developed
supporting a change in methodology, including a determination as to whether the variable rate
methodology can be changed independent of the fixed rate.
The methodology that this Commission has approved for determining the variable
components of the avoided cost rate is a relatively simple arithmetic recalculation. We find,
based upon our review of the calculations of both the Colstrip and Sumas updates, that the
resulting adjustable rates are fair, just and reasonable. Attached to this Order as Appendices A,
B and C are the tables showing the adjustable rates as updated by Avista’s filing for Avista,
Idaho Power and PacifiCorp, respectively.

ORDER NO. 28423 3
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Avista Corporation dba
Avista Utilities—Washington Water Power Division, Idaho Power Company and PacifiCorp dba
Utah Power & Light Company, electric utilities, pursuant to the authority and power granted it
under Title 61 of the Idaho Code, and the Public Utility Regulatory Policies Act of 1978
(PURPA).
The Commission has authority under PURPA and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed term obligations for the purchase of energy from qualified facilities,
and to implement FERC rules.

O R D E R
In consideration of the foregoing and as more particularly described, IT IS HEREBY
ORDERED that the Colstrip related adjustable portion of the avoided cost rate for existing
contracts and the Sumas related adjustable portion of the avoided cost rates for Avista, Idaho
Power and PacifiCorp dba Utah Power & Light Company are changed effective July 1, 2000, as
outlined in the attached schedules.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code § 61-626.

ORDER NO. 28423 4

ORDER NO. 28423 5
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of June 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

bls/O:avue004_ipce007_uple002_sw