2000627_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
RANDY LOBB
RICK STERLING
BILL EASTLAKE
WORKING FILE

FROM:

DATE: JUNE 27, 2000

RE: CASE NOS. AVU-E-00-04/IPC-E-00-07/UPL-E-00-02
ADJUSTABLE PORTION OF AVOIDED COST RATE
REVISED AND UPDATED CALCULATION

On April 28, 2000, Avista Corporation dba Avista Utilities—Washington Water Power Division filed with the Idaho Public Utilities Commission its annual revised and updated calculations for the adjustable portion of avoided cost rates. The adjustable portion under the previous SAR methodology is based on the variable costs associated with the operation of Colestrip, a coal-fired generating facility in southeast Montana. The same calculated rate revision under the avoided cost methodology is used by Avista, PacifiCorp dba UP&L and Idaho Power Company. As computed by Avista, the adjustable rate for Avista, PacifiCorp and Idaho Power will change from 8.86 mills/kWh to 10.51 mills/kWh. This change in the variable rate affects existing contracts under the previous SAR methodology.
The adjustable portion of the avoided cost rates under the present methodology is based on annual average gas prices indexed at Sumas, Washington. As reported by Avista, the indexed gas prices have increased by $0.54/MMBtu. The approved gas price of $2.26/MMBtu plus the $0.54/MMBtu increase results in a gas price of $2.80/MMBtu for the 2000-2001 year. This equates to an SAR fuel cost of 20.58 mill/kWh as used in the model.
Avoided cost rates for Avista, in addition to changing because of fuel price adjustments, have also changed because of new cost of capital numbers adopted by the Commission in Case No. WWP-E-98-11, Order No. 28097 issued July 29, 1999.
Staff by letter dated May 19 prepared by Staff Engineer Rick Sterling, calculated a new schedule of rates and a detailed sheet of variables for review by the respective utilities. The utilities by letter response all indicate that the schedule is accurate. A proposed Order is tendered for Commission consideration.
Commission Decision
A proposed Order is tendered for the Commission’s consideration and signature. Does the Commission agree with the proposed changes in the variable rate?

vld/M:AVU-E-00-04/IPC-E-00-07/UPL-E-00-02_sw

DECISION MEMORANDUM 2