The URL can be used to link to this page

Home My WebLink About20040209Lafferty Exhibits Part IV.pdfDAVID J. MEYER SENIOR VICE PRESIDENT AND GENERAL COUNSEL A VISTA CORPORATION O. BOX 3727 1411 EAST MISSION AVENUE SPOKANE, WASHINGTON 99220-3727 TELEPHONE: (509) 495-4316 FACSIMILE: (509) 495-4361 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF A VISTA CORPORATION FOR THE AUTHORITY TO INCREASE ITS RATES AND CHARGES FOR ELECTRIC AND NATURAL GAS SERVICE TO ELECTRIC AND NATURAL GAS CUSTOMERS IN THE STATE~ IDmO CASE NO. A VU-04- CASE NO. A VU-04- EXHIBIT NO. ROBERT J. LAFFERTY FOR A VISTA CORPORTATION (ELECTRIC ONLY) (SCHEDULES 33, 34 & 35 OF THIS EXHIBIT ARE CONFIDENTIAL) SCHEDULE NO SCHEDULE 32 SCHEDULE 33 SCHEDULE 34 SCHEDULE 35 CASE NO. A VU.O4. EXHIBIT NO. TABLE OF CONTENTS DESCRIPTION Mitigating Measures Taken By Avista During 2001 Boulder Park - Initial Economic Analysis (Confidential) Small Generation Projects - Rejected Projects (Confidential) Boulder Park - Re-evaluation (Confidential) PAGE 1- 8 MitiS!ation Measures Taken By A vista DurinS! 2001 The Company implemented a variety of measures all aimed at mitigating the Company s price exposure in the face of very low streamflow conditions and very high and volatile power prices in the forward market. The Company took a portfolio approach that included acquiring both demand-side and supply-side resources to cover its energy deficiencies. A brief description of some of the measures taken by the Company to cover its deficiencies and mitigate increased costs is provided below. Communication of market conditions and conservation messages to customers. The Company communicated the challenges facing the electric utility industry and A vista to its customers through bill inserts, advertisements in the local newspaper, radio and TV media beginning in December 2000. Manyadvertisements were run in several different media including direct mail, customer education programs, radio, TV, and print. In a mid-June 2001 survey, 87% of A vista customers recalled seeing Company advertising specifically about conservation, and 73% of those customers said they had taken some action to reduce energy use as a result of the advertising messages. Escalation of energy efficiency efforts. The Company accelerated its energy efficiency efforts. The programs targeted measures that offered retail customers immediate electric savings through proven efficiency technologies. Over 688,000 compact fluorescent lamps were distributed, 8 350 rooftop HV AC units were tuned, and 952 gas water heaters were installed. These programs, and other efficiency measures, tripled the amount of energy savings the Company would otherwise achieve on an annual basis. Retail Buy-Back Programs. The Company received approval from the Commission to implement three "buy- back" programs including programs for industrial customers irrigationcustomers, and all other customers. The buy-back programs were designed to provide benefits to the specific customers reducing their load, as well as all other customers of the Company. At the time the programs were put into place they represented a lower-cost means to serve load requirements than purchasing additional energy in the wholesale market. The IPUC approved the Company request to terminate the all-customer program early, because it was no longer economic. Exh. 8 Schedule 32 R. Lafferty A vista Corporation Page 1 of 4 Miti!!ation Measures Taken By A vista Durin!! 2001 Filed for a modification of the air permit for the Rathdrum combustion turbines. As the Company entered 2001, it could operate the two Rathdrum units a total of 6600 hours per unit per year. Because of the high electric market prices, the Company filed to extend the hours of operation for Rathdrum to 8424 hours per unit per year. Otherwise, A vista would have had to shut the units down once the operating hour limit was reached. During the first half of 2001 , the Company proceeded to operate Rathdrum at full load in anticipation of receiving the permit modification. Running the units at full load avoided making additional expensive purchases from the wholesale market. The Company received the new permit in October 2001. Purchased spare parts for Rathdrum to reduce down-time during maintenance. Because of the increased operation of the Rathdrum turbines, it was necessary to schedule maintenance on the units in the spring of 2001. Under normal conditions, the Company would ship out key parts of one unit at a time to be reconditioned while other on-site maintenance was performed on the unit. The normal maintenance schedule would have been 12 to 14 weeks. Because of the high price of power, however, the Company located and purchased a spare set of parts to reduce the down-time for maintenance to only four weeks. The Company avoided additional high-priced purchases from the wholesale market during the weeks that maintenance would have otherwise occurred. Gained permission for increased operation of Northeast Combustion Turbines. Under the existing air emissions permit for the Northeast Turbines, the units are allowed to run approximately 500 hours per year. On the initiative of the Company, Avista was able to successfully negotiate agreements that granted permission to run the units for additional hours. The Company received permission to run the units for additional hours in August and September 2000 and beginning again February 21 , 2001 and continuing through the Governor Energy Supply Alert. Delayed delivery of BP A exchange obligation under the WNP-3 agreement. Under a provision of the WNP-3 Agreement the Bonneville Power Administration (BP A) called on over 200 000 MWh of energy for the months of January - April and June 2001 , to be provided by Avista at a price based on the operating costs of the Northeast Combustion Turbines. Through negotiations initiated by Avista, BPA agreed to delay the delivery of energy until the fourth quarter of 2001 , and relieve A vista of further obligations under the Settlement Agreement for the 2000/2001 operating year. At the time of the transaction, the estimated benefits to Avista s customers by delaying the deliveries were $6. million. On an actual basis, the benefits were calculated to be $44.8 million. Exh. 8 Schedule 32 R. Lafferty A vista Corporation Page 2 of 4 10. 11. 12. Miti!!ation Measures Taken By A vista Durin!! 2001 Inter-Month Exchanges: Purchase and sale. In April 2001 A vista was near load/resource balance for the third quarter of 2001, but was deficient energy in July and surplus in September. On April 18, 2001, the Company entered into an exchange transaction, where A vista purchased 50 aMW from a third party for July 2001 at $490IMWH and sold 50 aMW to the same party for September at $480IMWH. The difference in price was caused by the difference in market prices for the two months. The simultaneous sale of energy in September preserved, or hedged, the value of the surplus, as compared to a simple purchase of energy in July to cover the deficiency. Inter-Month Exchange: Exchange of energy. On April 12, 2001 , the Company entered into an exchange transaction, where Avista agreed to deliver 60 aMW to a third party in September 2001, in exchange for receipt of 50 aMW from the same party in July 2001. Avista was energy deficient in July, but surplus in September. The market price was higher in July than in September, which accounted for the difference in the energy deliveries. The agreement to exchange energy in this manner, preserved, or hedged, the value of the surplus in September, as compared to a simple purchase of energy in July at a cost of approximately $4901MWH to cover the deficiency. Leased temporary generation resources (30 MW of capability). The Company selected a variety of generation projects that could be installed quickly and run on natural gas or diesel fuel. The Company leased 20 diesel units (20 megawatts) and located them at Avista s Devil's Gap substation , and also leased six units (10 megawatts) that ran on a combination of natural gas and diesel, and located them at A vista s Kettle Falls generating station site. These units were dispatchable and did not have to run if purchasing energy in the short term market was less costly. The decision to pursue these projects allowed the Company to avoid additional high-cost purchases of energy from the short-term wholesale market, and represented a "call option" to the Company for the amount of energy available from the units. Purchased additional small generation resources. In addition to the leased projects, the Company acquired generation sites and equipment, and initiated permitting on new generation to be owned by A vista. Projects were selected that could be installed quickly. The Company completed the Boulder Park project that includes six gas-fired reciprocating engines for a total of 25 MW. The Company also initiated plans to install a 23 MW combustion turbine at Othello, Washington and two gas-fired reciprocating engines at the Spokane Industrial Park (SIP). Subsequent to the drop in the electric power market in the second half of 2001, the Othello project and the SIP Project were cancelled. The decision to pursue these projects allowed the Company to avoid additional high-cost purchases of energy from the short-term wholesale market, and represented a "call option" to the Company for the amount of energy available from the units. Exh. 8/ Schedule 32 R. Lafferty A vista Corporation Page 3 of 4 Miti!!ation Measures Taken By A vista Durin!! 2001 As is evident from the list above, the Company implemented a wide variety of measures, involving both demand-side and supply-side resources, to cover its energy deficiencies caused primarily by the record-low streamflow conditions, and to mitigate the costs associated with the high and volatile power prices. Exh. 8/ Schedule 32 R. Lafferty A vista Corporation Page 4 of 4 CONFIDENTIAL Boulder Park - Initial Economic Analysis THIS PAGE CONTAINS CONFIDENTIAL MATERIALS AND IS SEP ARA TEL Y FILED Exhibit No., Schedule 33 Pages 1 - 8 R. Lafferty A vista Corporation CO NFID ENTIAL Small Generation Projects - Rejected Projects THIS PAGE CONTAINS CONFIDENTIAL MATERIALS AND IS SEP ARA TEL Y FILED Exhibit No., Schedule 34 Pages 1 - 4 R. Lafferty A vista Corporation CO NFID ENTIAL Boulder Park - Re-evaluation THIS PAGE CONTAINS CONFIDENTIAL MATERIALS AND IS SEPARATELY FILED Exhibit No., Schedule 35 Pages 1 - 4 R. Lafferty A vista Corporation DAVIDJ. MEYER SENIOR VICE PRESIDENT AND GENERAL COUNSEL A VISTA CORPORATION O. BOX 3727 1411 EAST MISSION AVENUE SPOKANE, WASHINGTON 99220-3727 TELEPHONE: (509) 495-4316 FACSIMILE: (509) 495-4361 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF A VISTA CORPORATION FOR THE AUTHORITY TO INCREASE ITS RATES AND CHARGES FOR ELECTRIC AND NATURAL GAS SERVICE TO ELECTRIC AND NATURAL GAS CUSTOMERS IN THE STATE OF IDAHO CASE NO. A VU-04- EXHIBIT NO. ROBERT J. LAFFERTY FOR A VISTA CORPORATION (ELECTRIC ONLY) SCHEDULE NO SCHEDULE 36 CASE NO. A VU-04- EXHffiIT NO. TABLE OF CONTENTS DESCRIPTION PAGE Kettle Falls CT - Initial Economic Evaluation and Re-evaluation ~'iI'STA. Corporation 'f \ ""t:. ~~ ~... 5 L .-;'1"'1.- 'f- /:;' ?~).Gc..; Interoffice Memorandum Energy Resources DATE:February 14, 2001 TO:Thomas Dempsey FROM:Steve Silkworth SUBJECT:Kettle Falls CT Installation - Revised Economic Evaluation Thomas - Attached to this memo are the revised economic evaluation results for the proposed combustion turbine addition to the Kettle Falls site. I revised this memo to reflect the economics based upon actual forward market strip prices for electricity and natural gas. In the previous analysis, I used the same price forecast that was prepared by RW Beck consultants for the recent Request for Proposal evaluation. This forecast is 12 weeks old and does not capture recent upswing in the spark spreads. For easy reference, also attached is a spreadsheet with the annual electric and natural gas prices used in the evaluation. Three Cases Analyzed: 1 . Simple cycle only 2. Simple cycle with HRSG and steam sent to feedwater heater in KFGS 3. Combined cycle with Staco mini-steam turbine, steam then sent to DA. Economics The project economics was evaluated by the method used in Avista s recent Request forProposal process. This method consisted of: Forward strip electric and natural gas prices through 2007 then hourly electric and monthly natural gas price forecast provided by RW Beck through 2025. Dispatch of the machine was calculated on an hourly basis by using the Prosym production cost model from February 2002 to December 2025. Plant characteristics such as heat rate, VOM and O&M costs , planned maintenance , andcapital costs were provided by the Generation and Production department. All other costs were modeled consistent with the company s Standard Assumptions Manual and revenue requirements model. Exh. 9 Schedule 36 R. Lafferty A vista Corporation Page 1 of 11 Economic Results (2001 $' Net Benefit.Nominal Net Benefit Real Net Present Value $ Levelized $/MWh Levelized $/MW h (ODD' 1. Simple Cycle Only 12.151 2. Simple cycle with 16.12.601 HRSG and steam sent to feedwater heater 3. Combined cycle 15.11.258 with Staco mini-steam turbine, steam then sent to DA The results indicate that in all cases, the project returns a positive present value. In other words, each of the cases are lower in cost than equivalent market purchases over the project lives. Cases 2 and 3 have a payback of approximately three years. If you have any questions, please call me on extension 8093. Distribution: Ed Groce Clint Kalich Jason Thackston Jerry Parmentier Steve Wenke Exh. 91 Schedule 36 R. Lafferty Avista Corporation Page 2 of 11 ::! :::s !:! I::s 'tI M Dig.!!0..=. ;:)~:; 01 a :!= uC1\1 . ..U. .. E .! :q:; .:: L ~ ...... i n . --..:.. ! L~ H u Hi ~... Ui ~ . I ;: ~ " 5.. ! 5 ;. ~,o; Ii~ i 1 ~ 'Eii I: I ~ !1= " .."::! 0 "'" J;;~ ~;H0 : ~;..5 :0 5 B'!!Ii~ ;"'G~.5,;;5.; 53CIi ~ ~ - h Iii! li-- !! :::::: '" IiI. Ha",.o~aaa&1~.n11i:!~ ~Ii:.:; .... it ~h~i I: ~:I ~ - -. - ~ - O. ~o - "10 - - - - 0 O. -" ~ -. t i ~ :::::~ ~ ~ ~: gg ~:: =:~: g;:= i .1 ~ ~ i -:u ON_-M.M.N.-__-.~.._"N~_.- ~- :=Z==I=:~~=~g:=lsa88=3== ...!. - ....NftN ftftN ftftN ftft....ft... ;! .--- - - - - -- N _0 - N- N~." 0 -- t i g:;$ S S ~ = =~ ~~====;:::~::: 1 ~ ; 5 5E: ~;E!~; 5Sg 5; s Ei !!x;: . i ftNftNftNNNNftNNNNNNft""""""N i O ~;;_- =;:a=-.ON~_~__~~N ! i --- ==- =---N"~~~~~~:~:NN ~::: =~I~" 8 i :::=== ~ a ~::: i ~== ~ ~~ i ~ ~~~N~~NN~:~~ ~N ~~ N : ::::~~N ;;; :~;: ~: ~;::::;; ;;;;;;; 1 !! ! 0 ~~il~:~a55;;!~~E;;!~~~=~i .N- ------ ~ o a~;i;iE;;:=ii;!==ei8s88i 511~ i ~. N N - - - ~ ~ ~ N ~ ~ - - : - - N N N - ~.. ~.... ~~.. -~..~.. ~ ~ ~~ ~.... ~ ~.- ~I~ I ~ = ~ ~ ~ = ~ = = = ~ = = = = = = = = = ~ ~ ; = = ;; . ON"" ~ N ~- N M ~ a-.z-,; M -.. = - 8"- 3 ~ ~' ! 3 S ~ : ~: : ~ = ~ = ~: ~I~ ! = 8 - . ~ = ~,,- .~ ~ ;! ON"N~N_-NM~2-.Z-N-_=--8N"~ ~;~:.:;Z~~~I;.~=_!!1!t8=_ =.~ l~ - - - - - - - - - - - - - - - - - lie - ~ ~ ~ - O. - N NN-- 0- -- - ~~-_..pp~~~ft~~p~~~~~"""""""""" !E ~==;!i :::=:=~:. ==; ==~=!'! !Ii u - ! ~ 3 ii88888g88!!=~====~==~~~~~~ ~i!,. - NNNN""NN"2~2222222~22~222 ~~1a ~ . .:!,;: ~ ~ I HiE -NNUHU!!=~:!==I=~==2~~~~~ ~~~i - N - .1-" N - ~ 2 = = = ~ = ~= ~ ~ ~;: ~ ~ ~ ~ ~ ~ ~ ~ ~ = = ~ ~ = ~ = ~ ~ ~ ~; ~; ~ ~ 0000000000000000000000000 i i~ 0 .~~~~=8B:::=:=2:;==;;~~: : i ~------- 00000000000000000000000000 i 0000000000000000000000000 0000000000000000000000000Ii: H .. - - N- N -. _N ~ ~ - N_..." __NO~ Ji. p pft..._~ --...... ~ ~ NftN pp~p" j 1 ~ N N N N N " - - - - - - - - - - ~ - - ~ ~ - - - ~ 0.. 8 ~ .. . ~ N - . ; - ~ . N - ~ ~ ~ ~ m - ; - = ~ ~;~: ~~~ =I~ ~== a~: -. - - ~ ~~.. i i ~----------~~~~ ;;; 00000000..00.00000 0 w~_. 0 0 jla i ~ 0_8~~~NN__;-~.N-~~I.m-N-= ~ ~:::::; ~ ~ = ~ = = a a: - - ; - ~~~- i ~-~----~~ ~-~~~- 0 - - - - - - -- - ~... - - ~ N - - -. N.. ~ " ~ ~ ~ ~::~ ~ ~ ~ ~ ~~ ~~ = = ~:::: ==!!. -I~: :~ . ::i= - -- -: : t:; :::- -:::!:;; Exh. 9 Schedule 36 R. Lafferty Avista Corporation Page 3 of 11 i n - -- h.. !:!; : I: ~i= e-6 i-I! H ! H =:! a ~ : ~ .. i ~iI: 'i ~!:h ! 5~Ppo: ! :!":! '" id~ ~ Dlj.!: ~ 3~H ~.!! .:Ii is.!!'!! ;:) Ig~ !! ~aH..!!! l:i c: - """ . III . u u. ;; E .! ;q.::~ ~ 5 ;i ~ ~ lii cc c~= 888Iii!! ---88 .,.,.. .... N ....... '" I ;Ii a3 ~;aIO~Ii 0;; 'I . ~nH~S 0000:' . H !: j; i _..:~ ii ~.. . :u Oh_S.N.-,.n_--hN_n_Nhh..Nn~; 8'~a~~~~ :~~~~~~~~~~~~=~~~;; i .......NN..NNN.N.....NNN ~.,.,.,.,.,.,.,.,~~....,~.~~~~...,~~ i i ~:. S ss ~ ~=~~~ ===:;;:; ,,~:: I~ ~ ~~ ...h l-.h____-OOhN..h-_n...N=; h ::a ~: oS ~:~.; = = ~~ ~8 .I~: i NNftNftft-_NftNftftftftftftNNNftftNN "K;;===81~~~.==:=10888~~~ ~I~ i - - - - - - - - - - - - - - - - - N N N N N N - sEi == E!! !:ii~ a~iS5a :52 =1 I~ i NN - - N - ..: - - ..: - ft ft ft ft N ft - - ft ft - N - -.. -. N - - - -.-- -... - ."h N.--ii~~~';N ";';h';~';~~~~~~~~~~=~ ! " !~&8~i~;!:!;=E~E~E=~~~5!i .N- ------ . c o ;~~.55.;5!i5:5a55~i~5!i~ 3. i _.N_- ------------------ .. - - -... --. -.. ... .....~. ~ ii ~=====~~=~~~~~~~~~~~~~=~. ~ ::c - : ~ " 55s55~=~=!!5~!!!$5~e::!5u.. . -----_ ..:..:__..:_- 'I ': I 00 ~ ~ "NN ~__h."-S8..ISS_h.~lh~ S:::~=S::~;::_._=;~h. =.- j i ..,.,~.,.,~~~~~~.....,.,.,.,~~..,.,~ i--------------""""""o""" I~ 0 ~ ~!!! I: =: = ~ ~ =: = =:,; s:; ~:; = 00......0""""""""..............000..3 .I I ~I. 0 = ~ 3 Z 81::: = ~:: 1=: =; s:; = = =jln - - - - - I)Ui O"""""""""""""""""""""""" : IJi """"""""""""""""""""""""" ~ I~i .................................................. . N. - -. -... h N. N...... -.. .h. f~: ~ = ~ =~ = = ~ ~:~ ~ ~~ ~~ ~ ~ ~ ~ ~ ~~ ~ e j " ~~~~5~~asls:=;!:~!~E$5;! ! i ------ ;;; ~ i " -....... -'-~ " 1$~~5~~ai8s:=;!:~!~E$a;! i ---_ ..:__ ..:_-- I "NNh__.....N.._._.......- i ";::::~::~~~::::::;;:=:== . II =1:00 ;15.. o ' ~ !ii!~!iii~ig~~i~~~~~~~~~~ ~~~.-. =~a: N h_." NN.D ; ~;.ii - N D.h.. -NN :2:!!___N NNNN :i:~~~- ~ - .-~-I-~!!==== ~:!!=:!!~~;::;;::;::~;::~;::::::!:S:_;::::::;=:!i::;:O::!:".;I:;";I::I~~ ::i:: - .. . U . t ~ " . ;:.0; ~ i:! . ::.. .= ~;;: Exh. 9 Schedule 36 R. Lafferty A vista Corporation Page 4 of 11 -c : tn . (') .. . . . ::I B i f Ii 10 1 All Ke t t l e F a l l s U p g r a d e Ay l " , " C o " , o , " l I o n Ec o n o m i c A n l l V I I I D l l o n A.. u m 11 . . , . I n " , I I , . CD , I '0 0 '0 0 0 , fI ' " C h . . . . ,k W - m o n l h y, n , . " o , . . lO O " " ' W h El o c l n o _1 I . . a L . . . . , ,c o n i , P , " . . I C . . , o ' "" ' W fI , " D ' " lo o n ,k W . m D n ' " 8 H . . , A " , \2 B B O II " " , W h E, . . I ' I I . . A " . . In ' u , . . o , C o o l ," " 0 " . 1 1 , 1 1 , . . . , , , - Ho " n o l D I , . . . . . , A ' " "0 . ' . P , . . . G . . U . . , 10 ' oo o , d l h Fl I I . D ' " -, . . . , 0. . 7 . . . , - n lo o o l l d ' " A.. I 0 1 ' 0 . . . . 1 A ' " ,.. n l Y" ' , b I , D ' " ,.. . 1 EI , " " . W h H l l n 0 I / I I W . _ ' " Ih r u 1 0 0 1 T. . n ' - - - U " 2.0 DI , . . n l G,n o r l l ' n l i , l I . . r. . . 1 FI . , d C . . " To ' " F i l l d C o ' " Lo n C" , . . , A o c o " N . n . "'. . . " ' n , . . . , a- . . " . . , " ' , I . ' , . , n c o 10 " ' " ' 0 " An . . 1 0 " An . . \ 0 " a- . . ' I n D y, n , b I ' C o ' " To t " " . . co C o o l En . . . . -- . ; ; ; 0 . ; - ' To , 1 I :0 1 1 ' ". . . .. ; ; . ; '., u r . To ' , 1 :0 , 1 , C.. . " c" . . , Ct o I I I l .. . . a I . Ii ; ; .. " C . . . " , 0'" .. . . . . ,. . . . . . '0 0 \ 'O I Y I I I I 'D l Y I I I I 'D l Y I I I I IO I Y I I I I IO I Y I I I I ID l Y I I I ' '0 0 ' 17 . "1 3 "1 3 ,. . . 1.1 \. . . . 21 . 75 7 IT . II I ' 12 1 0 "'" '0 0 ' '0 . "1 2 "1 2 22 . 22 7 22 7 21 . II I ' \1 . 1 \O S '1 2 7 51 . '1 5 5 13 . ,' " II . \ O I l \, 0 8 8 ,. . . 11 . 1 \. . , I I I I 25 1 1 ,7 . 2 IS . 00 ' IS . 21 . 1 "0 1 \0 1 11 . I. . 12 1 .. . \1 1 1 IH I 'O I l II , 10 0 1 21 . II I 11 . \ 0 2 5 02 1 1:1 3 ,. . II . \I I I \I I I IS . 10 1 . 10 0 ' 12 . 1 70 , 5.1 II I 71 . II I .. . 70 1 18 7 1S 2 . 10 0 8 12 . 1 11 . 1 11 . IS I 77 1 II I '1 , 71 3 71 . 20 0 8 12 . 1 .. . 37 . 10 1 10 1 10 , II I 1.1 '1 8 11 0 31 . '7 1 3 71 , 10 1 0 23 . ,. . '7 ' '7 ' '1 . 1 11 8 ,. . 13 \ '1 . 1 '0 " 23 . 77 1 77 1 :1 3 . ,. . II " 1.7 II I II I 10 , 17 1 1 77 . 10 \ 2 13 , 2 7.. 71 \ ,. . :1 1 . \ 0 " 10 1 .. . II I ,. . . 71 3 77 . 20 " 22 . 1 72 0 72 0 12 . 2 2.1 71 5 11 . 7 11 . 17 " 71 . lo l l 11 . 1 II I 12 . 1 2.1 71 \ 71 1 IS . II I '0 1 .. . .. 1 \7 1 1 0'. '0 " 10 . 11 . 70 1 70 1 I. . \1 \ .. . 11 7 00 7 11 . 17 " 82 . '0 " 10 . II I 2" - ' 71 5 \1 1 1.7 lI S \. . . . '0 . \7 1 1 13 , 10 1 7 10 . 10 2 10 2 21 . II I II I ,1 . 1 71 1 .. . \ 0 2 ' \ 0 1 7 52 . 1 17 3 2 IS . 10 1 8 20 . 17 2 17 1 21 . 1 II I II I 20 . 77 5 II I OS \ 10 1 ' 51 . 1 70 5 II . lO l l \1 . 7 ,. . 27 . 17 1 11 . 1 7:1 1 \I S \O S I \1 1 8 51 , \1 1 5 15 . 10 2 0 10 . II I 25 . II I 11 . 11 0 17 1 18 . 11 2 5 "1 2 11 . lO l l II I II I 11 . II I II I 11 . 2 10 ' ,. . 18 . 11 1 \ 17 1 51 . 11 2 II . IO U II ' II I 11 . 1 II I 11 . 0 10 ' 2\ . 1 \ 0 1 ' "' 7 11 . 13 0 87 . 10 2 3 \1 . 0 .. . .. . 11 . 2 II I II I 15 . 1 10 . 10 1 1 I I S I 11 . II . lo l l 11 . .. , al l 11 . 0 11 . 3 15 1 .. , \0 " \ O I l 11 . 1 92 . 20 2 ' '" . 11 7 11 . 1 II I ,. . I" . I. . II . 05 \ 1\0 .. . . II , .. 2 0 0 1 1 N,I P ' " , n l Y i l u l .. . , "'" 1" 0 1. , 0 12 \ 1 \ \5 \ 11 , \S 2 1 7 11 , 11 7 No m ' n " L , v l n . . . . C o " I / I I W h 13 . 1 2.1 1S . \2 . 1 10 . II . RI I ' L l v , n n d C . , I ( I / I I W h I I ' 25 . 21 . .. . 17 . 7& , :; : 0 t r 1 l' ? " po \ 0 ~. . . . . . AY I S T A U T I L I n E S CU I ' K I n ' , F , n , C T . . Sl m p " C ' , " D . " o~ " . .o o , . ~ , . , . " . c r c . " " , ~ o m . . . '" ' 0 ' '-0 : : :: r '" C 0t 1... . . 4.iiJilISTA8 Corp. Interoffice Memorandum Resource Optimization DATE:September 12 2001 TO:Ed Groce FROM:Clint Kalich cl2- SUBJECT:Re-visit of Kettle Falls CT Per your request, following are revised economic analyses on the Kettle Falls CT. It important here to recognize the work of Steve Silkworth, as he provided the initial economic models used. Without his efforts , I would expect this memo to take a number of additional days to generate. Project completion, according to Tomas Dempsey, will cost $1.7 million. Although an exact figure of expenses to date was not provided, you likely recall an initial estimate of $8.5 millionfor the entire project. Given this assumption , just under $7 million already has been spent to'- t-d8te on the project. 1Jr- c--,h ~ To evaluate the CT project, two scenarios were performed: 1) combined-cycle operation w~~l\.t the existing Kettle Falls boiler and 2) simple-cycle operation. The attached spreadsheets explain that operating in simple-cycle the new CT would generate losses of approximately $250 000 on expenses of $400,000, per year. The project would generate losses through 2013 and thereafter add positive margins to the Company. Over the 24-year analysis, the net present value of the investment is a loss of $856 000 (2001 $). On a per-unit basis, the nominal levelized loss is $6.3 per MWh (2001 $). In combined-cycle, the new CT project generates a positive net present value of nearly $4 million (2001$) over 24 years, or $6.7 per MWh nominallevelized. However, the project does not provide positive cash flow until 2008 losing in the earlier years on average about $90 000 on project costs of $1.million annually. Additionally, analyzing the CT as a combined-cycle unit presents a very optimistic picture. Given the plant's heat rate , it is likely that at most times it will not be the least-cost option to run the turbine to add heat to the Kettle Falls boiler. With gas at more than $3 per decatherm, the plant's nearly 000 combined-cycle heat rate puts generation at over $25 per MWh. If you need some additional information or analysis, please give me a call. attachments Cc: l-;1e.,9~~ ~~y., ~r~, Steve Wenke, S~~ve Silkworth Exh. 91 Schedule 36 R. Lafferty Avista Corporation Page 6 of 11 KF CT Study 09111101 These values were given to me from Thomas Dempsey on 9111101 for the Kettle Falls CT. This option burns natural gas in simple cycle and diverts waste heat in a feed water heater in the existing Kettle Falls boiler for heat recovery. Heat Rate = 8845 kWlBtu (Higher Heating Value) Capacity = 7072 kW (SCCT) + 3030 kW (Heat Recovery) = 10 102 kW Capital required to complete the project = $1 700,000 Exh. 91 Schedule 36 R. Lafferty A vista Corporation Page 7 of 11 .!! II) " .!!.! iii .. E =-- JM ~ g ~ ~ ! : p. g'~fa: ~: Ie ~ ~ ~ GI oC gJ: .:J L I- " .!!.! iii ... ! n ";..;! ~ . i iI- i ~ '2' j 1 .. z . I : ~ i ! ~~ iih I: 1:1 -1= " 0""! =!D !J Z:I . I" (; 3~.i ~~nIi" .." c ~~ .s.;;i.; 5 ~Ii ~~~ Hi ':: i I rJ ~ ~ !! :::::: :I J .2 ~ (; = ~ Ii" Jti"" 1 . .HiG!!~It It.:! . H 8'" 1P .;1 .. :; ~ ~.;~ . l:!': - f~~;~;;23~~;3;2~~~~;;;2aaa 5 =! e :; ~ i~ a~aia:!:i~:=!~i:;i:E=ia; ~. -:~-=~:~=..;:..;:"..;~" ;! . I ~~~.., ~~~ N~:-~N~~~~~ - ~~~ONf i ~~~~~~~: ~"~~==s; ~~; :;::: ! ~ 0 ~: E 5: i = ~; 5; e;: = e E ~ ;! 5 g; Ii - ~----"""..;..;..;"..;..;..;..;" 0;=;:::1111;1;;;!!=!!!!~! ~ I :;:= ~ lEi ~ He 55 is I;; E J 5 iE ------""""..;..;..;..;""..;" I~! ~O~N~~~~~ON~~~..,ON~O~N"'~N j- f~"_O""O_"O__D:::::===:::= i:: -! e ~ 0 :=;;- ::e;~:!~~~~~~:5~~~~ I. 0 :83~Gt=~ZG~:=-~"=" =~=~- I~ "" """-"~ 0 ---_:~; 0 ;O--D31JI~ i --- ~--------~ _::::::::::::::::::::::::::~~~ !! ill -----~ ! ;; . = D =====I=;~=~=====!::~=::: """""""""""""""""""""""" u 0 .. - ;! 0 =====1=;~=======~::~=::: """""""""""""""""""""""" il~ i ON~~.~~~~~NNNN""""""""""""""" i - - 0 00 0 0 0 0 00 - 0 0 0 0 0 0 0 0 0 0 0 0 f ,.! e Ij - 0 ~ ~ ~ = = : : = : = = : : : : = : : - - ft - - - 0000000000000000000000000 i iJ ... I ~=====:=:==::::= 2 2- -ft.._- 00000000000 _0 00 00000 00000 iF... . i: ~ =. " ; i!i!iiiiiiiiiiiiiii5i~ii5 i3~ -""o._ft_-O-"".._ft__O-""_. i~~ ----------"""""" ~~~:- ~ ~ . ~ ~ - - ~ 2 - - - - - - - ~ ~ 2 ~ ~ = ~ = ~ ~ ~ ~ 2 ~ ~ = ~ ~ ~ ~ ~ = ~ . ; ~ ~ . . . " i 0000000000000000000000000 0000 e 000000 00 eDD 0 00 0 00000 ;;;:;::::::::::::::::::::~~::::: ~ 0 ~=!!;S55$=S~~~~~=!=55=5=! i I: - ooeoooooOOOOOODOooooooeoo ; " i .:J 0 ~ 5! !;S55=5$~~~ ~~$!= 55=: . i O~O ~~"'~N ~ 0 o~o.., ~ N~ "'~N~~.~'"0"_" 0" 00... -. - 0 - ~ D. _.0 ~--! "-""""OOOO.O_--"ft~ft~ft"ftft " -~ ::" -:: :; ft " .... - 0".o " " ,; 0 = ~ a i t; ~ .."~ ::!. "~ =- - .o..; ::I Exh. 91 Schedule 36 R. Lafferty A vista Corporation Page 8 of 11 :::.. .. GJ :::...!! . a. " ..!! D !-a l ~ ~I lJ: I- . ~ CJ : gCJ .. ij en .::.!! . iiiu.. 0 E :z: i n - --"'... ~.:: ~ H;i!~ H ;; 1:..;S H . I i ~" 3 &J: ~"5 ~ ilh ! 5~P! :!a ~ ~ H 3 ~ J: ~ 5..p =! j~~! :I! cc c Ii! !!! !! ::: '" Ii,~;n ~'" ~C!;I)~I1iiH..H.:: . H ~:! .: :! - 11; ~ ~Ii il~ ~ I:u a.s.~'--3----gal-_Na_- ,~ ;~~_~_. ~=N ~~~~~~~tg~~~'------------! . I i ~d; ;;;; =;;; ~; a a 2~;;;a;;; ! ~ a ~;:~ ~ = ~ a! S!!i =!i !~2! s =~ a! i ------------ ~ a-.-.--==2===":~tttttttt ;: i !!! =!!! 21 =~! 5! = 5 ie= =! iE ~i -------_ .:_",- ~_ft_ft-_N._- --a.._.ft--al-ja I!!~ii~;~===::=....===:::=i'i' ! e ~ a t=!!5ai!5:!-ia5!!!5!!5!; I! a :N=:=:#:=t33~!:g:i=~~!;~ :~ ----a . - .. ~ . -- aft_- - --~I-_---~~..al--_a~ li ==~:::~~:=====..=....... i !; ---.. . ~ a !!5=!!!~5S;!a5S~2:!~=5:! ~ II! i Ii: . ~ ~ a !!5!!!!~aS;2aa=~2=!~5==! ilH ..~~. ~.. ~~~ ......~... ~~~ I! ---1-10 hN_-N_- aa GaGa aaaaaa ! e I~- a===N====~======:==--h__- 111 i a a a a aa a a a a a a a a a a a a a a - a a a a !I~ " a = = = N = = = = ~ = = = = = = : = = - - 10 - - - :1' .aaaaaaaaaaaaaaaaaaaaaaaaa olH _a a aa aaa GaGa a a a a a aaa a aaa a C i aaaaaaaaaaaaaaaaaaaaaaaaa a- - I- ft a I- ft - --- -- ft- ---_ft- is::;:= ~ ~=== =.... .........:!~-- i'l a ~==#==NN=Z:12=~al:~~=N==c~ NNNNNNNNNN--N"NN-_--__-- 1 i aaaaaaaaaaaaaaaaaaaaaaaaa ; iII: ~ a ~=='==NN=Z:I:=!al:~~=;==N N N N N N N N - N - - N N N N - - - - - - - - . i . ~ . . ~ ~ ~ ~ ~ a ~ ~ ~ . . . . . . . . . . - .a NN N NNNI- 10 =10 10 I- = = = == == === == 8 88 8 8 I 8 i i = : = = = = = ~ = = : s E = : g Ij N N N N N N N N N : = = = = = = = = = = N N = = N - N - . . - I- - - = : = = = = = ~ = = = N = = : : ~I= 1 ~u - ;: 'i 1 i ~ 'in.s.. 1:-II .. . :~:z::z: a:M'~~~-~2=~~:~~=~~~=~~=~~=~~a====~~=~~~===~~~= - -:: = - a ..... -~ ::!:! := ~ ; E t ~ .:"~ =:: '".. ~ -Ii ;;;::: . a = : Exh. 9 Schedule 36 R. Lafferty Avista Corporation Page 9 of 11 \'iI'STA. Corp. Interoffice Memorandum Resource Optimization DATE:April 8 , 2002 TO: FROM: Bob Lafferty Clint Kalicha SUBJECT:Revisit of September 12, 2001 Kettle Falls CT Analysis On September 12 , 2001 I prepared an analysis of the Kettle Falls CT based on the remaining capital expenditures necessary to complete the project. The results of the analysis showed anNPV of nearly $4 million over 25 years in combined-cycle operation , and a loss of $850thousand in simple cycle. My September 12, 2001 memorandum explained that "analyzing theCT as a combined-cycle unit (CCCT) presents a very optimistic picture (of project economics). This statement was not intended to imply that the economics in simple-cycle operation were the appropriate measure of project value, but only that the CCCT configuration over-states the true value of the plant. In fact, at the time I felt the analysis supported completing the project basedon the range of the results. At the time of the earlier memorandum , I was not able to properly represent the plant's physicalcharacteristics in Prosym. In the CCCT case the waste heat from the simple-cycle is injected into the existing Kettle Falls boiler. However, unlike more traditional CCCT plants, theopportunity cost" of displaced fuel is not natural gas. The boiler at Kettle Falls is limited toapproximately 47 megawatts. The CCCT operation therefore reduces the amount of wood fuelburned by the main plant. Because the wood fuel is substantially lower in cost than natural gas the economic benefit of CCCT operation is therefore reduced. For example, if natural gas costs$3.00 per decatherm and wood fuel costs $1 .50 per decatherm, the waste heat from simple-cycle operation is worth half as much as it would be was the boiler capability not limited. Based upon additional experience gained since the time of the initial analysis, the true physicalnature of the new CT now can be modeled. Per your request, I re-ran project economics based upon the same forward market information used in the original analysis last September. The results show that when the project is modeled true to its engineering (i.e., CCCT displacingwood fuel), the NPV was $0.7 million , with the plant operating at most on average at half of its available hours. Although significantly lower than the CCCT value of $4 million modeled inSeptember of last year, the analysis clearly shows the Kettle Falls CT to be economic over its life. During my work in reviewing the original economics, I noticed that the forward prices used in the evaluation did not tie into the R.W. Beck price forecast until 2014. In most analyses of thisterm (e., 2000 RFP) we ve started using the R.W. Beck values in 2008. Were we to use the long-term R.W. Beck price forecast beginning in 2008 , the economic value of the plant wouldrise to $2.9 million NPV. attachment Exh. 9 Schedule 36 R. Lafferty Avista Corporation Page 10 of 11 I; 0 ~ N ~ 0 . ~ - 3 N ~ - N ~ N ~ ~ N ~ - ~ - 0 - N Ij ~:. ;~:~. :~:~~;18~3=~:ft~~ ~ ~ N--N~NNNNNNN 0 Ii! i -ON ~"-_"_N.NN__.__~ !: :::~ :;" I' ::~~ i "~"~~~~=~::: ;;:::::;;N N , i c ~ ' ' :! ~~.o i:; ii 5;;: = E!:! e ~~ H B H lii!!:: I a ~ 1i --------........ - jl g-= '~ z i! , !~' ~jlor:~:~:J :::I ::I~l~ ' ' 0 - O__"N". N N - ~..~ N NO.... ::::1:" It~l"N___- .....O l~~" ' '~.......-~.....~-~~~~........ ~~;;::=;;:="_"."~OOOOO."_--- : ,!- ;: I.m;m;I""mi!lm';~2 i i --i I i; Ii II 1 II 1 'hrOOOOOO 'OOOOOooooooooooooo 0. H ~I~ ~0 ~ '; . ~Iq ....,~~~--- ~ 0 1NN~"~_"N ~_~"N ~3O"N"-0_- Ii 2":\; ~i ~ :::;~~~~;:; rrlrNN ::::::;;;;;;~~ :, , ~m"' I 'i;m'~l;;mm I' h ! I ':iI1: _NN"O"~-"O-N'NI.'~"~'-"O_NN"~ ;:= ;:11 ,. 888888888;;;;0'000;;0:::::::::::::::::: - ' ' . i::I~::::I ,:: i:, '::::::: 11~IH" : 1.'1 ! ,'--- I---YNN ~L~~ 1"'1 ~ '1- +H~121=I=r=l= ,j1~=I"'I~I~I;:;I~:::: ;c-.I;::I~I~I~ i!'.lgl;::;I:::I:::I=I::::I~1': ~= ,*:; '1 ~r= I IIII ';1 ;;;;~ p ':'i I =1 , i~ /s j~ ~ i a s i ~;: ~ 1! I: 8 ~ ~N .. :: ~ 0 ... :0 .!!! "iii .. ~ S - - ,:;:., ;; ::I ; i" = ~~;~ (; ~~;:., ;~ I.~ 5~~eO;5'::'i.~ $.,,~IU ~~I-;':l....~.;a.; ,G) ',~ 'I'! )1!ll~; , .111: ' : (J' "(J , ' i ~(J ~~ --- h ~n .!!! - 8 ~ - 1;-~ 8 --...... NNW . I ' c I ~ ~ ~ ; ~ - ::I c c .. !a(; g.. '.: ... .. .. : 1i 5~~~h" ...~ ~ ~~ : r r; ; ~ ; r ; r ; ~I: ;Ir ~ = : I ~ ~ :.:; :!~ _OG~O._ON"GGN_:NNN -~~N. -~= G ~~~:;:~:~=~ft~:::~;;~~~;::: ~ j -~ ~-~NNWNNNNNNNNN .~ _...~ _N N -.. -.. ..~.... N_" - N 00i~ ~~ ~~~ ~ N N ~ ~~ ~.. ~ N~ ~~~.;.. N.~ I~ ~ ~ N M N N N N N N N N N . ~ . . . ~ ~ . 0 ~ 0 0 . .. ;i;: 0.. - ~ ~ - 0 ~ ~ N - ~ -.. - - 0 ~~ 0 0 ~ ~:- .~l~. =.... =;;;;;;;;:::::~::=~ 8:=__ .; : ~! I 0 -- ~--~- - .~_o ~~~~NOO-__-- N ~. ON .".... ......~~ ~~~..~.... :! i1!""""N---- i ~ ;; . QI~ ~ ~ -.. ~.. ~.. -; ~.. - - - - ~ N ~,,- - 5~ . ~~::::~N ~~WW :~~=;:;N ~:;;;;;;N 1-; Iii: ::i: 0 1: ~ ~ G ~ 0 - ~.. - ; ~ .. .. - - - ~ N ~ .. - . ! ~)~ 1~~:~:;:;=w ~NN :;~~~;:;N ::;;;;;;W , . I , 0 ft --.~OO~~"O"NftftNN"NNN---~~~~~~"oo""o"o"o"o""o""" ~ e 0 - 0 N I" N - 0.. - - ~ 0 G. .IN" - 0 0 - - ~.. ~ 0 ~ , NNN_ ___~~~-~--- 'I ' i ' Ii000 Q 0000 0 00 0 0 Q 000 0000 OQ 00~I;ajlP ~. . :::::::;;~===~~~:::~~:!:!._~....o :In OOOOOOOOOOOOOOOOQOooooooo Q - ~ 000000000000000000000000 000000 QOO 0000 0 QQ 0 000000 00 : "~ . u . ~ ~ 'i . '::i;! -!! Exh. 9 Schedule 36 R. Lafferty A vista Corporation Page 11 of 11