Potlatch.pdf

Office of the Secretary
Service Date
June 21, 2001
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.

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CASE NOS. AVU-E-01-8
IPC-E-01-17
UPL-E-01-1

ORDER NO. 28758

On April 18, 2001, 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 for gas at Sumas. 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 Sumas rates was addressed in Order Nos.
25883 and 26086, issued in Case No. WWP-E-93-10.
Commission Staff calculated the annual revised and updated calculation for the
adjustable portion of avoided cost rates for coal using Colstrip. The Colstrip adjustments apply
only to contracts executed between September 28, 1990 and January 30, 1995. The annual
adjustable rate calculation based on Colstrip costs was calculated pursuant to a new methodology
approved by the Commission in recent Order No. 28708, Case No. GNR-E-99-01.

Adjustable Rates–Colstrip
The adjustable portion under the previous coal-fired Surrogate Avoided Resource (SAR)
methodology established in 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 for each jurisdictional utility under specific orders for each. (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.
The Idaho Public Utilities Commission in recent Order No. 28708, Case No. GNR-E-99-
1, established a new methodology for the annual adjustable rate portion of avoided costs for those

ORDER NO. 28758 1
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 will change from 10.51
mill/kWh to 9.72 mill/kWh. The same calculated rate revision under the avoided cost methodology
is used by Avista, PacifiCorp dba UP&L and Idaho Power Company. This change in the variable
rate affects existing contracts under the previous SAR methodology.
Commission Staff calculates that the Colstrip adjusted avoided cost rate calculated on
actual 2000 costs changed from 10.51 mill/kWh to 9.72 mill/kWh.
By prior Commission Order No. 23738 annual updates require only a single filing by
Avista, with copies and party status provided to Idaho Power and PacifiCorp. All applications for
annual updates are to 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 18, 2001 filing and Staff’s calculated change in Colstrip adjustable rates are recognized as
being submitted also for approval for Idaho Power and PacifiCorp dba Utah Power & Light
Company.
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 18, 2001, the 2000 annual average gas price indexed at Sumas, Washington was
$4.82/mmBtu resulting in an increase of $2.02/mmBtu. The previously approved base gas price of
$2.80/mmBtu plus the $2.02/mmBtu increase results in a gas price of $4.82/mmBtu for 2001-2002

ORDER NO. 28758 2
year. This by Staff’s calculation, equates to an SAR fuel cost of 35.43 mills/kWh as used in the
model. The difference in the Sumas average price and the new base gas price is the 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 based on Sumas and calculated by Staff based on Colstrip has not been
challenged.
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.

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

ORDER NO. 28758 3
PacifiCorp dba Utah Power & Light Company are changed effective July 1, 2001, 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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______
day of June 2001.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary
vld/O:AVUE0108_IPCE0117_UPLE0101_sw

ORDER NO. 28758 4