20130529final_order_no_32817.pdf

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MAY 2 9 2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ANNUAL UPDATE )
TO PUBLISHED AVOIDED COST RATES )CASE NOS.AVU-E-13-03
BASED ON THE UPDATED NATURAL GAS )IPC-E-13-13
PRICE FORECAST OF THE U.S.ENERGY )PAC-E-13-09
INFORMATION ADMINISTRATION (EIA)and )
UPDATED COST OF CAPITAL FOR AVISTA )ORDER NO.32817
CORPORATION DBA AVISTA UTILITIES.)
Pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA)and the
implementing regulations of the Federal Energy Regulatory Commission (FERC),the Idaho
Public Utilities Commission (Commission)has approved a Surrogate Avoided Resource (SAR)
methodology for calculation of the published avoided cost rates paid to PURPA qualifying
cogeneration and small power production facilities (QFs)by Avista,Idaho Power and
PacifiCorp.Avoided cost rates are the purchase price paid to QFs for purchases of QF capacity
and energy.Two recent events have triggered an updated calculation of published avoided cost
rates:(1)the release of a new natural gas price forecast by the U.S.Energy Information
Administration (ETA)and (2)the conclusion of a general rate case for Avista.
EIA UPDATE TO THE NATURAL GAS PRICE FORECAST
One of the key input variables in the computation of published avoided cost rates is a
long-term natural gas price forecast.In accordance with the methodology approved in Order No.
32697,the “reference case”natural gas price forecast for the Mountain Region’s Electric Power
sector found in ETA’s Annual Energy Outlook is to be used as the basis for computing published
avoided cost rates.In Order No.32697,this Commission stated that each year the final release
of the Annual Energy Outlook should automatically trigger a re-calculation of the published
avoided cost rates.In Order 32802,the Commission clarified that the update should occur on
June 1 or within 30 days of the final release of the Annual Energy Outlook,whichever is later.
This clarification was to accommodate for the possibility that,in any given year,the final release
of ETA data might not occur in time to meet a June 1 effective date.
AVISTA GENERAL RATE CASE
The conclusion of a general rate case affects avoided cost rates because cost of capital
figures are used in avoided cost computations in accordance with the approved methodology.
ORDER NO.32817 1
Consequently,an appropriate time to incorporate new cost of capital figures is following a
general rate case.On March 27,2013,the Commission issued final Order No.32769 in Avista’s
general rate case.See AVU-E-12-08.Pursuant to the Commission’s Order,Avista’s weighted
cost of capital and carrying charge rate were updated.
REVISED PUBLISHED AVOIDED COST RATES
Commission Staff recomputed published avoided cost rates for Idaho Power and
PacifiCorp using ETA’s most recent annual natural gas price forecast.Staff recomputed avoided
cost rates for Avista using EIA’s most recent annual natural gas price forecast and Avista’s
updated cost of capital and carrying charge rate.Staff provided Avista,Idaho Power and
PacifiCorp with worksheets on May 14,2013,for review and comment showing the computation
of the revised avoided cost rates.Idaho Power and PacifiCorp responded by letter accepting
Staffs avoided cost calculations based on ETA’s Annual Energy Outlook 2013 natural gas price
forecast and consistent with the Commission’s approved SAR methodology.Avista responded
by letter accepting Staffs avoided cost calculations based on ETA’s Annual Energy Outlook
2013 natural gas price forecast,Avista’s new cost of capital,and consistent with the
Commission’s approved SAR methodology.
FINDINGS AND CONCLUSIONS
The Idaho Public Utilities Commission has jurisdiction over Avista Corporation dba
Avista Utilities,Idaho Power Company and PacifiCorp dba Rocky Mountain Power 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.
Pursuant to its authority,the Commission has reviewed and considered the filings of
record.We find that the accuracy of the calculations and resulting rates disseminated by Staff
regarding ETA’s most recent annual natural gas price forecast have not been challenged.The
annual update to the SAR methodology’s natural gas price forecast is a relatively simple
arithmetic re-calculation.Likewise,we find that Avista concurs with the calculations based on
its updated capital cost assumptions.We observe that the utilities noted what amount to clerical
errors in the SAR model.These errors do not affect the re-calculation of avoided costs.We
ORDER NO.32817 2
tind,based upon our review of the totality of the updates and resulting calculations,that the
updated published avoided cost rates are fair.just and reasonable.We direct Staff to correct the
clerical errors noted by the utilities.
ORDER
IT IS HEREBY ORDERED that the updates to published avoided cost rates for
Avista,Idaho Power,and PacifiCorp are approved,effective June 1,2013.
THIS IS A FINAL ORDER.Any person interested in this Order may petition tbr
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 §6 1-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of May 2013.
PAUL KJELLANDER PRESIDENT
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MACK .REDFD,COMMISSIONER
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MARSHA H.SMITH,COMMISSIONER
ATTEST:
/1 Lj1.D.Jewell(I
COmmission Secretary
O:AVU-E-I 3-O3IPC-E-13-1 3PAC-E-I 3-O9ks
ORDER NO.32817 3