20080208Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER RED FORD
CO MMISSI 0 NER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:NEIL PRICE
DEPUTY ATTORNEY GENERAL
DATE:FEBRUARY 7, 2008
SUBJECT:A VISTA'S 2007 ELECTRIC INTEGRATED RESOURCE PLAN (IRP);
CASE NO. A VU-07-
On August 30 2007, Avista Corporation dba Avista Utilities ("Avista ) filed its 2007
Integrated Resource Plan (IRP) with the Commission pursuant to the biennial filing requirement
mandated in Order No. 22299, as modified in Order No. 30262.
On November 21 , 2007, the Commission issued a Notice of Filing, Notice of
Modified Procedure and Notice of Comment Deadline and solicited comments on the IRP.
Subsequently, the Staff was the only party to file comments within the established comment
period.
AVISTA'S 2007 INTEGRATED RESOURCE PLAN
Avista s IRP contains the Company s 2007 Action Plan and its assessment of its
progress toward implementing its 2005 Action Plan. The 2007 Action Plan contains activities
and studies to be developed and studied in the Company s 2009 IRP. It is divided into four main
areas: renewable energy and emissions, modeling enhancements, transmission modeling and
research and conservation.
The Company s 2007 IRP includes the following highlights:
The Company has elected to forego future "coal-fired generation due to
changing economics and recent legislation effectively barring its use" in
the state of Washington. IRP Executive Summary, at i. Fixed price
natural gas resources will replace coal-based resources.
DECISION MEMORANDUM
The Company included carbon emissions in its "Base Case cost
estimates for the first time in its 2007 IRP. Id. at viii. The Company
claims that it has one of the "smallest carbon footprints" out of the
nation s "top 100 producers of energy resources.Id.
The Company estimates system-wide annual energy deficits beginning in
2011
, "
with loads exceeding resource capabilities by 83 aMW" and rising
to 272 aMW in 2017 and to 513 aMW in 2027.Id.
The energy resource deficits are attributable to an estimated 2.3 percent
energy and capacity load growth through 2017 and the expiration of
certain long-term (supply) contracts.Id.
Conservation acquisition is forecast to rise approximately 25 percent"
over the Company s 2005 IRP "and by more than 85 percent from the
2003 IRP.Id. at v.
A Western Interconnect-wide study was performed to understand the
impact of regional markets" on A vista. Id. at ii. The Company submitted
the data compiled from the various regional markets to a "monte-carlo
style analysis" and "the results were used to estimate the Mid-Columbia
electricity market." Id.
The Company s Preferred Resource Strategy (PRS) includes the addition
of 350 MW of CCCT (Combined Cycle Combustion Turbine); 300 MW
of wind; 35 MW of other renewable resources; and 87 MW of
conservation between 2007 and 2017. Id.Table 2, at vi. Beginning in
2010, A vista plans to secure the output from the Lancaster Generation
Facility, a 245 MW gas-fired combined-cycle combustion turbine with an
additional 30 MW of duct firing capability.
STAFF COMMENTS
Staff acknowledged the relatively constrained resource planning environment that
A vista and other electric utilities currently find themselves. Carbon emission and renewable
portfolio statutes in the surrounding States of Washington, Oregon and California have served to
limit Avista s resource planning options. While the State of Idaho has yet to enact carbon
emission or renewable portfolio standards, multi-jurisdictional utilities like A vista find it
impracticable to implement new resource generation projects exclusively to serve Idaho resource
loads.
Staff also notes that each of the traditional options available for new resource
generation pose unique problems. Gas-fired generation exposes the Company and its customers
DECISION MEMORANDUM
to the risk of fuel price volatility. As mentioned earlier, coal-fired generation is being phased out
as a resource option due to evolving carbon emission standards. Integrated Gasification
Combined-Cycle (IGCC) offers some promise, but it is evident that the technology must be
further developed before it can be considered a serious near term alternative.
As a result, Staff believes that it is imperative that A vista take full advantage of
opportunities to minimize its anticipated load growth by maximizing the use of cost-effective
demand-side management (DSM) programs, fully exploit renewable generation options and
closely examine future advances in fossil-fuel generation technology. Additionally, Staff opines
that electric utilities should consider the potential for integrating nuclear energy into their long-
term resource planning. Staff strongly urges the development of new and innovative methods to
counteract the price volatility normally associated with gas-fired generation, as it becomes a
more dominant resource in their portfolio. Staff believes that Avista s 2007 Action Plan, as
outlined in its 2007 IRP, will allow the Company to meet its future load obligations in a cost
effective manner.
STAFF RECOMMENDATION
Staff believes that A vista has met the Commission s requirements with regard to its
2007 IRP filing. However, Staff advises the Company to be mindful of the increased volatility
that will likely accompany the Company s increased reliance on natural gas resources and
develop new strategies to reduce such volatility. Staff recommends that Avista closely monitor
advances in "clean coal technology" and consider nuclear energy in future IRP filings. Staff is
confident that the Company can forestall its anticipated resource deficit from 2011 to
approximately 2014 through the combination of adding the Lancaster gas-fired combined cycle
plant to its portfolio, acquiring additional renewable resources and increasing the output of its
DSM programs.
Overall, Staff believes that A vista has "done a good job in assessing its load-resource
conditions, incorporating demand-side management, evaluating new resource alternatives
analyzing risk and in selecting a reasonable portfolio of new resources.Staff therefore
recommends that the Commission accept and acknowledge Avista s 2007 Integrated Resource
Plan.
DECISION MEMORANDUM
COMMISSION DECISION
Does the Commission wish to accept and acknowledge Avista s 2007 IRP filing?
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DECISION MEMORANDUM