2001618_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
BILL EASTLAKE
TONYA CLARK
DON HOWELL
LYNN ANDERSON
DAVE SCHUNKE
RICK STERLING
RANDY LOBB
GENE FADNESS
WORKING FILE
FROM:
DATE:
JUNE 18, 2001 RE: CASE NOS. AVU-E-01-08/IPC-E-01-17/UPL-E-01-01
ADJUSTABLE PORTION OF AVOIDED COST RATE
REVISED AND UPDATED CALCULATION

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 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.

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 in letter filing received April 18, 2001, the indexed gas prices have increased by $2.02/mmbtu. The approved gas price of $2.80/mmbtu plus the $2.02/mmbtu increase results in a gas price of $4.82/mmbtu for the 2001-2002 year. This equates to a SAR fuel cost of 35.43 mill/kWh as used in the model.
The Commission Staff by letter dated May 15, 2001, prepared by Staff Engineer Rick Sterling, calculated a new schedule of rates in a detailed sheet of variables for review by the respective utilities. The utilities by letter response (attached) all indicate that the schedule is accurate. A proposed Order is tendered for Commission consideration.
Commission Decision
A proposed Order in Case Nos. AVU-E-01-08/IPC-E-01-17/UPL-E-01-01 is tendered for the Commission’s consideration and signature. Does the Commission agree with the proposed changes in the variable rate?

vld/M:AVUE0108/IPCE0117/UPLE0101_sw

DECISION MEMORANDUM 1