20091208Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6864
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20nQ DEC -8 AM 10: 23
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UTiLiTl
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A VISTA CORPORATION )
DBA A VISTA UTILITIES' FILING OF ITS 2009 )
INTEGRATED RESOURCE PLAN )
)
)
)
)
CASE NO. A VU-E-09-09
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
attorney of record, Neil Price, Deputy Attorney General, and in response to the Notice of Filing
and Notice of Modified Procedure issued in Order No. 30928 on October 9,2009, submits the
following comments.
BACKGROUND
On August 31, 2009, Avista Utilties (Avista, Company) filed its 2009 Electric Integrated
Resource Plan (IRP) with the Commission pursuant to the Commission's biennial IRP fiing
requirements outlined in Order No. 22299, and later modified in Order Nos. 24729 and 30262.
This is the Company's tenth Integrated Resource Plan. The Commission requires regulated
electric utilities to fie an IRP every two years that projects future load requirements and explains
how the Company plans to deliver low-cost, reliable energy to its customers.
STAFF COMMENTS 1 DECEMBER 8, 2009
The 2009 IRP contains sections describing Avista's curent and forecasted loads and
resources, energy efficiency programs, environmental policy, transmission and distribution
systems, generation resource options, market analysis, preferred resource strategies and a
summar of actions taken by the Company in accordance with its 2007 IRP Action Plan.
ANALYSIS
Public Process
Avista's 2009 IRP was developed with assistance from its Technical Advisory Committee
(T AC). Members of the T AC include customers, Commission Staff, consumer advocates,
academics, utility peers, governent agencies and other interested parties. During the IRP
development process, each T AC member was asked to render input and their individual
assessment of the modeling assumptions, processes and general direction of the planing process.
The Company sponsored several T AC meetings throughout the course of the development of the
2009IRP. Each meeting focused on specific planng topics, reviewed the status and progress of
planing activities, and solicited ongoing input as the IRP was developed.
Staff actively participated throughout the process. Moreover, Staff was in close contact
with A vista throughout the IRP process and provided its opinions and input. Staff thoroughly
reviewed the draft IRP and provided comments. The Company satisfactorily addressed Staff s
comments in preparing the final IRP document:
Public paricipation in the 2009 IRP process was improved, although it continues to be
diffcult to achieve full paricipation from a broad cross section of customers and interest groups.
Staff urges A vista to continue its efforts to involve key customers, customer group
representatives, environmental organizations, and others to maintain a comprehensive and
balanced representation on the Technical Advisory Committee.
Load Forecast
A vista predicts its peak loads to grow 1.7 percent anually through 2029. Loads are
moderately lower in the 2009 IRP compared with the 2007 IRP due to the cumulative impact of
additional conservation measures from the 2007 IRP being incorporated in the forecast.
The national economic forecast upon which the 2009 IRP is based was prepared in March
2008, while county-level economic estimates were completed in June 2008. The actual forecast
STAFF COMMENTS 2 DECEMBER 8, 2009
was completed in July 2008. Consequently, because the load forecast was completed more than a
year before the final IRP was submitted, Staff does not believe that the full impact of the current
recession is reflected in the Company's load forecast. Normally, Staff would be concerned about
the accuracy of the forecast, but in this case, A vista is in a surplus condition for several years into
the future. The effects of the recession are expected to be temporary, and load growth is expected
to rebound to forecasted levels in the near future. Staff believes that the temporar effects of the
recession are unlikely to significantly influence the size or timing of new resource additions
planed much fuher in the future.
A vista's capacity and energy positions are summarized in the table below:
Net Position Forecast
As a general guideline, the anual energy position is used to determine when the Company needs
to acquire additional base-load energy resources. Absent new generation, energy deficits begin in
2018 with loads exceeding resource capability by 27 aMW. Energy deficits steadily increase to
527 aMW in 2029. Load growth and expiration of some long-term contracts account for the
significant majority of increasing deficits during this period.
On a monthly basis, A vista is frequently deficit in some months even though its anual
position is surlus. In other months, paricularly during spring ruoff, A vista is in a surlus
position. As usual, the Company plans to balance its monthly positions through short-term
market purchases or sales, exchanges or other arangements. However, over the long term, the
Company's strategy is not to rely on long-term market purchases to serve future base load
requirements.
Avista's capacity position is surplus through 2014. It then carries minor deficits in 2015
and 2016 due to expiration of an exchange contract before returning again to a deficit position in
2019. Capacity deficits grow to 823 MW by the end of the study in 2029. For the most par,
future capacity requirements wil be met through the acquisition of new resources, which provide
both capacity and energy.
Staff believes that the load forecast prepared and used by A vista for its 2009 IRP is
reasonable. In addition to considering a base case forecast, "high" and "low" economic forecasts
STAFF COMMENTS 3 DECEMBER 8, 2009
were also prepared to evaluate plausible changes in load due to population change within the
Company's existing service area.
Environmental Policy
Environmental issues are becoming an extremely important consideration in electric utilty
integrated resource planing because of the restrictions they impose on new generation
alternatives and because of the cost of compliance for continuing to operate existing generation.
Avista's 2009 IRP devotes an entire chapter to environmental policy. The Company has formed
an internal Climate Change Committee to monitor emissions legislation and issues. The IRP
outlines the Company's position on climate change legislation and discusses varous greenhouse
gas concerns for resource planing. Planning is more difficult and uncertain because of the
variety of different state and federal legislation, nearly all of which are in various stages of
development. For the 2009 IRP, Avista is planing to meet all existing greenhouse gas
requirements in Washington, and has made reasonable assumptions about the content, timing and
costs of meeting proposed federal requirements.
Demand Side Management and Supply Side Effciency
A vista plans to acquire 102 aMW of energy efficiency over the next 10 years and 226
aMW over 20 years. These acquisitions will also reduce the system peak. Efficiency gains are
expected to shave 153 MW from the 2020 peak, and 339 MW from the 2029 peak.
Energy Efficiency
Avista's IRP process includes multiple steps in identifying energy effciency improvement
potentials, both on the supply-side and demand-side. The Regional Technical Forum's (RTF)
evaluation of energy effciency potential was used as Avista's starting point. In developing its
2009 IRP, the Company says it evaluated about 3,000 efficiency concepts. The total resource
cost-effectiveness (TRC) of individual energy efficiency measures were estimated and used as a
screening tool. The TRC cost-effectiveness was calculated by comparing each measure's
estimated savings over its 8,760-hour anual resource profile to the 8,760-hour avoided
supply-side cost structure.
STAFF COMMENTS 4 DECEMBER 8, 2009
In developing its high-level energy efficiency targets, the Company relies upon the
Northwest Power and Conservation Council's Power Plans and its own contracted studies of
energy savings potentials. Its last contracted study was completed in 2005 and A vista says it wil
have this study updated in preparation for its 2011 IRP process.
A vista says it uses its IRP results to budget for energy efficiency measures, determine
manpower resources needed, and identify general efficiency targets. But, because the IRP results
lack sufficient detail, the Company does not use the IRP results as an energy efficiency business
plan.
In sumary, Avista says the IRP process helps the Company develop its conservation
business plan and establish acquisition targets, while meeting its regulatory requirements.
Importantly, Avista concludes that "...numerical targets do not displace the Company's
fudamental obligation to pursue a resource strategy that best meets customer needs under a
continually changing environment. The efficiency targets established in this IRP planing
process may be modified as necessar to meet these evolving obligations."
Staff appreciates A vista's long-held and continuing commitment to helping its customers
reduce their bils through cost-effective demand-side management (DSM). Staff fuher
appreciates that A vista does not limit its review and recalculation of DSM resource potential to
the biennial IRP process and, instead, is continually searching for ways to cost-effectively help
customers use energy more effciently. Staff believes Avista's approach to identifying and
updating DSM potential is well-reasoned.
However, Staff notes that throughout the IRP, Avista references only the TRC for
evaluating cost-effectiveness potentiaL. Historically, the TRC is but one of four cost-effectiveness
tests that A vista uses to evaluate DSM - the other three are the utilty cost test (UCT), the
paricipant test, and the ratepayer impact test (RIM). While there is no indication that A vista wil
cease to evaluate DSM using all four of the above tests, we caution against a possible over-
reliance upon the TRC. The TRC is a good test, but by itself it is not sufficient for ensuring
maximum, long-term cost-effective DSM for a utility's entire customer base and equitable
treatment among its customers.
STAFF COMMENTS 5 DECEMBER 8, 2009
Resource Options
A vista considered a variety of options to meet future resource deficits. Besides
conservation, the Company considered upgrading existing hydro projects, building new facilties
and contracting with other energy companies for future. delivery.
A vista has already been upgrading many of its hydro facilties over the past several years,
and plans to upgrade others in the next two years. While the upgrades typically add small
amounts of additional capacity, they are cost effective and do help to defer the need for other
resources. In addition to the small upgrades, A vista designed and studied other larger potential
upgrades at Long Lake and Cabinet Gorge. These upgrades were too costly in previous studies,
but increasing market prices, growing capacity needs, renewable energy incentives and carbon
emission costs may make these resources financially more attractive now. A vista also developed
preliminar plans to replace the powerhouse at Post Falls, doubling its capacity. These large
hydro upgrade options have attracted attention during this IRP cycle and wil be further studied
between now and the 2011 IRP.
Both simple and combined cycle gas-fired combustions turbines were evaluated as
generation alternatives in the 2009 IRP. The technology provides a reliable source of both
capacity and energy for a relatively inexpensive upfront investment. The main disadvantage is
generation cost volatilty due to reliance on .natural gas.
Pulverized and integrated gasification combined cycle (IGCC) coal plants were included
as resource options for the IRP. Although legislation was recently passed in Washington State
effectively prohibiting local electric utilties from developing coal-fired facilties that do not
sequester emissions, a coal facility could legally be constructed to serve Idaho loads, where no
emissions performance standard exists. However, Avista is not considering a pulverized coal
facility for the 2009 IRP and believes such a facilty is unlikely to be approved.
Concerns over the environmental impact of carbon-based generation technologies have
increased demand for renewable generation, particularly wind. A vista studied several wind
resource locations, including the Reardan site just west of Spokane, the Columbia Basin,
Montana, small scale sites, and offshore wind development. Transmission availabilty was also
considered in the analysis.
STAFF COMMENTS 6 DECEMBER 8, 2009
Numerous other resource options were considered in the IRP analysis, including solar,
geothermal, biomass and wood generation, small cogeneration, nuclear, tidal and wave,
hydrokinetics, pumped storage, and large scale hydro.
Washington State Renewable Portfolio Standard
In the November 2006 general election, Washington State voters approved Citizens
Initiative 937 (1-937), the Energy Independence Act. The initiative requires utilities with more
than 25,000 customers to source three percent of their energy from qualified renewables by 2012,
nine percent by 2016, and 15 percent by 2020. Utilities also must acquire all cost effective
conservation and energy efficiency measures. Even though A vista does not require new
resources to meet forecasted loads through 2017, this new law requires Avista to acquire
qualified renewable generation or Renewable Energy Certifcates resources it otherwise
would not need to meet the initiative's renewable goals.
A vista wil meet or exceed its renewable requirement goals between 2012 and 2015 with a
recent REC purchase and qualified hydroelectric upgrades. The Company wil need its next block
of qualifying resources prior to 2016 and another block wil be required prior to 2020. Assuming
A vista meets RPS requirements with wind, it wil require 150 MW of nameplate capacity by 2016
and a similar amount by 2020.
On September 23,2009, Avista released a request for proposals (RFP) for up to 35 aMW
of renew abIes (up to 150 MW nameplate if wind). Bids were submitted on October 23,2009.
The Company is currently evaluating the bids and expects to make a final selection in February
2010. Avista concurrently solicited bids to develop the Reardan wind project site near Spokane,
for which the Company owns the development rights. The Company has informed Staff that bids
for development of the Reardan site will be evaluated against the best bids from the RFP to select
the best combination of projects to meet 1-937 requirements.
The issuance of the renewables RFP, as stated previously, is not being driven by an
immediate need for new resources, but is instead being driven by the need to meet Washington
State renewable portfolio standards (RPS). Moreover, assuming the RFP is successful, renewable
resources will be acquired approximately four years earlier than is necessar to keep pace with
Washington's RPS requirements. Avista's reasons for acquiring renewable resources early is to
take advantage of federal production tax credits that expire at the end of 20 12, to possibly
STAFF COMMENTS 7 DECEMBER 8, 2009
exercise an option to develop an attractive wind project site within its service territory near its
load center - a site that may not stil be available to A vista in the future, and to take advantage of
curently attractive prices for wind turbines.
Staff takes no position here on the prudence of A vista's rene~able resource acquisition
decisions, but mentions it here because renewables acquisition is one of the most significant
outcomes of the 2009 IRP. The choice of the specific selected resources, the decision to acquire
resources early, and the allocation of costs amongst state jurisdictions wil all be addressed later
when A vista seeks to recover costs through rates.
Preferred Resource Strategy
A vista's Preferred Resource Strategy (PRS) provides direction and guidance for resource
acquisitions over the 20-year IRP planing horizon. The 2009 PRS is the least-cost achievable
plan accounting for climate change and fuel supply and cost risks. Selection of the PRS
considered generation, transmission, and emissions costs for the various alternatives. The PRS
strikes a reasonable balance between keeping average costs and varation in year-to-year costs
low.
The 2009 PRS consists of hydro upgrades, wind, conservation, distribution efficiency
programs and natural gas-combined cycle gas turbines. The specific resources contained within
the PRS for the 2009 IRP, in cumulative nameplate capabilty, are shown below:
2009 Preferred Resource Strategy
NWWind 2012 150.0 48.0
Distribution Effciencies 2012-2015 5.0 2.7
Little Falls Unit Upgrades 2013-2016 3.0 0.9
NWWind 2019 150.0 50.0
CCCT 2019 250.0 225.0
Upper Falls 2020 2.0 1.0
NWWind 2022 50.0 17.0
CCCT 2024 250.0 225.0
CCCT 2027 250.0 225.0
Conservation All Years 339.0 226.0
Total 1,449.0 1,020.6
Following the acquisition of the wind!renewables that Avista is curently seeking, the next
large capacity addition would be a 250 MW combined cycle combustion turbine in 2019.
STAFF COMMENTS 8 DECEMBER 8, 2009
Another 150 MW of wind capacity is also needed by the end of 2019 for the 15 percent
Washington RPS goal, followed by a 50 MW wind resource in 2022 to meet additional RPS
obligations created by load growth. In 2024 and 2027, another 250 MW natural gas combined-
cycle plant is needed to meet a capacity deficit created by the expiration of the Company's
Lancaster tollng agreement.
Differences from the 2007 IRP
The major change from the 2007 PRS is a greater reliance on wind to meet renewable
portfolio stadards, rather than a combination of wind and other renewables. More wind was
selected because it is the only renewable resource available in quantities large enough to affect
utility planning. It also is more actionable and controllable by the utilty, allowing for less
reliance on third-pary developers that might or might not respond to utilty request for proposal
efforts. The 2009 plan includes 750 MW of natural gas and 350 MW of wind. The 2007 plan
included 677 MW of natual gas-fired generation and 300 MW of wind.
Risk Analysis
A vista made considerable analytical effort to evaluate the Preferred Resource Strategy
against several alternative strategies under various scenarios of load, hydro conditions, emissions
charges, wind generation, capital costs and fuel prices. In addition, scenarios were investigated
that included availabilty of nuclear plants beginning in 2020, and an influx in the use of electric
cars. Overall, the Preferred Resource Strategy performed well, both in the Base Case and under
numerous scenarios. The chosen combination of resources provides for a significant reduction of
risk at a very modest impact to expected costs.
Staff believes that the Company's risk analysis was rigorous and thorough, and that a
reasonable range of risks and scenarios were considered. Staff concurs that the Preferred
Resource Strategy selected by the Company is superior to the other resource strategies considered
in the IRP.
Transmission
The 2009 IRP devotes a chapter to transmission and distribution issues. In the past few
years, A vista has completed several transmission projects to increase capacity and improve
reliability. The Company also continues to plan for transmission improvements to its own
STAFF COMMENTS 9 DECEMBER 8, 2009
system, and to actively paricipate in numerous regional transmission planing groups. Staff is
encouraged that the transmission planing process and the IRP process appear to much more
closely aligned and better coordinated than in the past.
Because many potential new generating resources are likely to be located away from load
centers and perhaps outside of A vista's control area, transmission analysis has been performed to
estimate the costs of new transmission and transmission upgrades. Additional analysis has also
been done to quantify the costs to interconnect projects at specific locations.
A completely new element in the 2009 IRP is analysis of potential distribution system
efficiency improvements. A vista has formed a System Efficiencies Team consisting of
operational, engineering and planning staff to develop a plan to evaluate potential energy savings
from transmission and distribution (T&D) system upgrades. The first phase of the project
summarized energy savings from distribution feeder upgrades. The second phase, which is now
underway, combines a study of transmission system configurations with "right sizing"
distribution feeders to reduce system losses, improve system reliabilty and meet future load
growth. Economic analysis is being performed to weigh capital investment costs against energy
savings and reductions in O&M costs. Although the energy savings are likely to be fairly small,
they nevertheless wil help contribute to meeting future load growth while at the same time
reducing costs and optimizing system performance. Staff is encouraged by A vista's initiative to
look beyond traditional new resource options and conservation as ways to meet expected load
growth.
2009 Action Plan Items
A vista's IRP contains the Company's 2009 Action Plan as well as its assessment regarding
its progress toward implementing its 2007 IRP Action Plan. The 2009 Action Plan contains
activities and studies to be developed and studied in the Company's 2011 IRP. It includes specific
items in four areas: resource additions and analysis, energy efficiency, environmental policy,
modeling and forecasting enhancements, and transmission planning.
Significant 2009 Action Plan items are listed below.
STAFF COMMENTS 10 DECEMBER 8, 2009
Resource Additions and Analysis
. Continue to explore the potential for wind and non-renewable resources.
. Issue an RFP for the Reardan wind site, and up to 100 MW of wind or other renewables in
2009. (currently underway)
. Finish studies regarding costs and environmental benefits of the large hydro upgrades at
Cabinet Gorge, Long Lake, Post Falls and Monroe Street.
. Study potential locations for the natural gas-fired resource identified to be online between
2015 and 2020.
. Continue paricipation in regional IRP processes, and where agreeable find resource
opportunities to meet resource requirements on a collaborative basis.
Energy Effciency
. Pursue American Reinvestment and Recovery Act of 2009 funding for low income
weatherization.
. Analyze and report on results of the July 2007 through December 2009 demand response
pilot in Moscow and Sandpoint.
. Have an external pary do an updated study on technical, economic, achievable potential
for energy efficiency in Avista's service territory.
. Study and quantify transmission and distribution efficiency concepts as they apply toward
meeting Washington RPS goals.
. Update processes and protocols for conservation measurement, evaluation and
verification.
. Determine potential impacts and costs of load management options.
Environmental Policy
. Continue to study the potential impact of state and federal climate change legislation.
. Continue and report on the work of Avista's Climate Change Committee.
STAFF COMMENTS 11 DECEMBER 8, 2009
Modeling and Forecasting Enhancements
. Refine cost driver relationships in the stochastic modeL.
. Continue to refine PRiSM by developing a resource retirement capabilty, adding the
ability to solve for other risk measurements and by adding more resource options.
. Continue developing Loss of Load Probability and Sustained Peaking analysis for
inclusiQI in the IRP process, and confirm appropriateness of the 15 percent capacity
planing margin assumed for this IRP.
. Continue studying the impacts of climate change on the load forecast.
. Study load growth trends and their correlation to weather patterns.
Transmission Planning
. Work to maintain/retain existing transmission rights on the Company's transmission
system, under applicable FERC policies, for transmission service to bundled retail native
load.
. Continue involvement in BP A transmission practice processes and rate proceedings to
minimize costs of integrating existing resources outside of the Company's service area.
. Continue paricipation in regional and sub-regional efforts to establish new regional
transmission structures (ColumbiaGrid and other forums) to facilitate long-term expansion
of the regional transmission system.
. Evaluate costs to integrate new resources across Avista's service territory and from
regions outside of the Northwest.
. Study and implement distribution feeder rebuild projects to reduce system losses.
. Study transmission reconfigurations to economically reduce system losses.
The 2009 Action Plan, Staff believes, is a reasonable set of actions that will allow A vista
to continue to meet its load obligations cost effectively, while also supporting the preferred
resource strategy identified in the IRP and improving the planing process going forward.
STAFF RECOMMENDATIONS
Avista's need for new resources is driven primarily by the need to meet RPS requirements
in Washington, not by its load-resource balance. The Company's Preferred Resource Strategy
STAFF COMMENTS 12 DECEMBER 8, 2009
calls for acquisition of up to 150 MW of wind or other renewables by the end of2012, several
years in advance of its need to either satisfy its Washington RPS requirements or its near-term
load growth. An RFP is currently underway to acquire these renewables, most likely wind. Staff
recommends that the Commission scrutinize the Company's decision for early acquisition of
renewables at the time it makes a fiing to begin recovering the cost of the renewables in
customers' rates. At that time, the Commission should also address the sharing of costs between
Idaho and Washington for resources not necessarily needed to meet load but acquired to meet
Washington RPS requirements.
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. However, because the load forecast upon
which the 2009 IRP is based was finalized before the full impact of the current recession were
known, Staff recommends that A vista pay particular attention to revising its load forecast as
appropriate for its 2011 IRP.
Staff recommends that A vista's 2007 IRP be accepted for fiing and acknowledged.
Respectfully submitted this ~p day of December 2009.
~
Neil Price
Deputy Attorney General
Technical Staff: Rick Sterling
Lynn Anderson
i:umisc:commentsavue09.9nprpsla comments
STAFF COMMENTS 13 DECEMBER 8, 2009
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF DECEMBER 2009,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-E-09-09, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
LINDA GERVAIS MGR
REGULATORY POLICY
AVISTA CORPORATION
PO BOX 3727
SPOKANE WA 99220-3727
\bt~SECRETAR -
CERTIFICATE OF SERVICE