20131127Reply Comments.pdf

Avista Corp.
141 1 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170
November 27,2013
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
Statehouse Mail
W . 472 Washington Street
Boise,Idaho 83720
RE: Case No. AVU-E-I3 -07 -2013 Electric Integrated Resource Plan
Dear Ms. Jewell:
Attached for filing with the Commission is an original and seven copies of Avista
Corporation, doing business as Avista Utilities (hereinafter Avista or Company), reply comments
regarding the Company's 2013 Electic Integrated Resource Plan (IRP) in accordance with Order
No. 32888. Avista believes the Company's 2013 IRP satisfies Commission Orders No. 22299
and No. 25260 and requests that the Commission acknowledge the 2013 Electric IRP as filed.
Please direct any questions regarding these comments to Clint Kalich at 509-4954532 or
clint.kalich@avistacom. com.
hJd)
(::)
t"o*.j
l','
LO
'U/\/:*4P
Manager, Regulatory Policy
Avista Utilities
509-495-497s
linda. gervais@avistacom. com
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O.BOX3727
I4I I EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220 -37 27
TELEPHONE: [phone]
[e-mail]
BEFORE THE IDAHO PT]BLIC UTILITIES COMMISSION
rN THE MATTER OF THE AVISTA ) CASE NO. AVU-E-13-07
CORPoRATTON 'S 2013 ELECTRIC )
INTEGRATED RESOURCE PLAN )
)
REPLY COMMENTS OF AVISTA CORPORATION
I. INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter Avista or
Company), at l4ll East Mission Avenue, Spokane, Washington, respectfully submits
reply comments regarding the Company's 2013 Electric Integrated Resource Plan (IRP)
in accordance with Order No. 32888. Avista believes the Company's 2013 IRP satisfies
Commission Orders No. 22299 and No. 25260 and requests that the Commission
acknowledge the 2013 Electric IRP as filed.
II. BACKGROUND
The Commission issued a Notice of Modified Procedure, Order No. 32888, on
September 10, 2013, setting forth a comment deadline of November 13, 2013. The
Commission Staff ("Staff'), the Idaho Conservation League ("ICL"), the Snake River
Alliance ("SRA";, and the Sierra Club and the Montana Environmental Information
Center ("SCMEIC") submitted comments on or prior to the deadline.
Per Commission Orders No.22299 and No. 25260, Avista is required to prepare
and file biennially an IRP outlying how the Company would serve its retail electricity
requirements into the future. Avista filed its 2013 Electric IRP on August 29,2013.
III. COMPANY RESPONSE
Avista's IRP process is open and public, allowing the IRP to reflect the best
analysis and information available to the Company and interested parties. The IRP itself
is developed with the help of a Technical Advisory Committee (TAC) made up of
customers, utility commission stafl consumer advocates, academics, utility peers,
govemment agency staff and Avista's energy analysts. In total, Avista invites more than
I lPage
120 representatives from 45 organizations. Six TAC meetings were held at Avista
headquarters between May 23, 2012 and June 19, 2013 to inform members, receive
feedback, and take suggestions, as well as direction from them. Further, Avista was
available to discuss IRP-related matters outside of the TAC meetings via telephone,
email, or in-person meetings.
It is important to note that, with the exception of Commission Staff, whom
attended all TAC meetings held in support of the 2013 IRP process, none of the parties
submitting comments in this Case materially participated in the IRP process. No
comments or feedback were received prior to Commission Order 32888. Neither ICL,
nor SRA, attended a single TAC meeting. SCMEIC did have a representative listen in,
via conference bridge, for a portion of one of the six TAC meetings. When comments
were provided by ICL, SRA, and SCMEIC, it was the first time Avista became aware that
they had any concerns. Such comments would be much more useful if provided in a
manner timely for inclusion in the 2013 IRP process. That being said, the comments and
concems of ICL, SRA, and SCMEIC, as expressed in this Case, do not warrant the
Commission to not acknowledge the Company's 2013 Electric IRP. Further, the IRP
does address the areas of concerns filed by ICL, SRA and SCMEIC.
None of the commenter's recommend the Commission not acknowledge the 2013
Electric IRP, instead they ask the Commission to direct Avista to perform various
analyses in future IRP processes. Commission Staff states specifically that the IRP meets
the requirements of Commission Orders on the requirements of developing and filing an
IRP. Avista believes the Commission has ample evidence on the record in support of
2lP age
acknowledging the 2013 Electric IRP as filed. Avista herein responds to various issues
raised by certain parties.
I. Related to Colstrip
The commenting parties (excluding Commission Staffl expressed various
concerns that Avista did not adequately analyze, in their views, the various risks of the
continued operation of Colstrip. However, Avista did dedicate a portion of the IRP to
evaluating Colstrip options, including major upgrade and retirement options under both
the Expected and High Carbon pricing cases. The IRP contains significant analysis of
potential future liabilities with all thermal generation, and Colstrip specifically. The l0-
page Policy Considerations section (Chapter 4), talks extensively about various
environmental issues, Avista's climate change policy efforts, and current and proposed
future environmental regulations at both the state and federal levels. The Market
Analysis section (Chapter 7), details current and projected Western Interconnect carbon
emissions, discusses briefly carbon and other environmental impacts of Western
Interconnect thermal generation, and describes a Carbon Pricing case where the market is
burdened by a carbon tax or similar program. This case explains the impacts of pricing
carbon on the overall wholesale marketplace.
The Preferred Resource Strategy (PRS) section (Chapter 8) of the IRP spends six
of its 37 pages detailing the environmental risks of Colstrip, as well as its performance in
the Expected and Carbon Pricing cases. The result of this extensive analysis shows that
Colstrip continues to provide value to customers.
3lPage
Commenting parties, (excluding Commission Staff), expressed concern the IRP
fails to disclose and adequately evaluate the potential impacts of the SCMEIC civil case
against Avista and the other owners of Colstrip. However, the IRP would not be the
proper method for Avista to address legal matters of this nature. The Company has fully
disclosed this litigation in its Securities and Exchange Commission (SEC) filings.
Unfortunately, such litigation limits, rather than enhances, public resource planning
efforts. In addition, it is also too early to determine the outcome of the civil case and
what portfolio and financial impacts the Company and its customers might incur. Many
of the concerns expressed relate to Colstrip Units I and 2, of which Avista has no
ownership interest. Avista is a minority 15% owner of only Units 3 and 4, which account
for approximately 222 MW .
ICL challenges the IRP's lack of a carbon adder in the Expected Case, though
ICL provided no recommended means of implementing such an adder in the future.
Instead, ICL explains in their comments that such an analysis is difficult. Avista agrees
with ICL that modeling carbon policies into the future is diffrcult. In past IRPs, Avista
included carbon adders in its Expected Case, however conditions have changed.
Currently, there is no pending legislation or rules requiring implementation of such an
adder within this IRP timeframe. This IRP does include current and expected EPA
regulations regarding permitting new coal fired facilities and tougher emission control
requirements.
ICL suggested in its comments that to keep the costs of Colstrip retirement lower,
Avista should have relied on the wholesale marketplace for replacement power instead of
4lPage
planning for a new generation resource. Such market reliance should, in Avista's view,
only occur after a thorough evaluation of the wholesale power market, and a finding that
significant surpluses exist within it. In both Avista and the Northwest Power and
Conservation Council's (NPCC) assessments of the wholesale market, a deficiency exists
well before any reasonable retirement timeline for Colstrip. It would therefore be
incorrect to assume Colstrip output in the IRP is replaced with market purchases.
ICL expressed a concern that Avista did not include a sale value for Colstrip at
retirement. The Colstrip retirement scenario does not include any offsets from selling the
plant at a cost beyond reclamation. There is no reliable information presently to
determine how a sale, if any, would impact the economics of Colstrip retirement. In its
analysis, the Company followed the direction of the Washington Utilities and
Transportation Commission (UTC) and focused instead on the impacts of removing the
plant from its portfolio. As described above, the retirement of Colstrip would be
expected to cost customers tens of millions of dollars per year in replacement portfolio
power supply expenses.
SRA asked the Commission to:
...withhold acceptance of any portions of this IRP that envision indefinite
operations of Colstrip until such time as Avista provides the Commission
more details about the expected costs (such as they can be determined) of
all known and anticipated environmental regulations that will require new
investment in Colstrip Units 3 and 4.
They went further to suggest that Avista should prepile contingency planning for
replacement of the plant. The IRP does contain a discussion specific to Colstrip and
future emissions compliance beginning on page 8-29 of the plan. The IRP evaluated
5lPage
future environmental regulations as they pertain to Colstrip units 3 and 4, and went so far
as to evaluate Colstrip under three different environmental policy scenarios.
Both the SCMEIC and SRA expressed concern that in the Colstrip retirement
scenarios the IRP replaced Colstrip output on a nameplate capacity basis. If Avista was
short only on energy it might make sense to consider Colstrip's retirement on an energy
basis, but the Company is not short of energy. The IRP shows that Avista's needs are
driven exclusively by capacity (page 2-34 to 2-41). Replacing Colstrip based on its
energy output would leave the Company short of those resources necessary to maintain
reliable service for its customers and further increasing the cost to serve.
II. Energy Conservation
The Company will address each significant comment regarding energy
conservation as follows:
a. Rely on Carbon Pricing Scenario To Set Higher Conservation Targets - ICL
recommends in its comments that Avista use the Carbon Pricing scenario to
support a higher level of energy conservation. Additional conservation would
increase portfolio costs, and is not supported by the IRP analysis. In Table 8.12
on page 8-25 of the IRP, the l25Yo of avoided cost case shows that increasing
conservation from 164 aMW over 20 years in the Preferred Resource Strategy
(PRS) to 185 aMW, the approximate level of conservation in the Carbon Pricing
case, was higher in cost than the Expected Case by $9 million levelized per year.
In the Expected Case, the PRS includes 240 MW of incremental efficiency (164
aMW). The acquisition already benefits from an avoided cost 10olo higher than
what is used for generation resources. This adder increases conservation
acquisition in the IRP by l0 aMW of conservation for an annual increased
portfolio power supply cost of $5.3 million. Further, incentives would not be
appropriate in the IRP, or consistent with least-cost principles.
6lPage
b. Integrate Results of Conservation Potential Assessment (CPA) Into Near-Term
Planning - ICL suggested in its comments that Avista should integrate the results
of its conservation potential assessment into near-tenn energy efficiency planning.
Avista already performs such integration. The IRP includes a CPA for the two-
year time period covered by this IRP, and for the next ten years. The CPA was
developed by EnerNOC, ffi independent consultant. Together with the CPA,
Avista has a substantial 2014 DSM Business Plan, outlining acquisition and
tactics.
c. Rely on Demand Response to Replace Gas Plants - SRA recommends that Avista
consider demand response as an altemative to building gas-fired generation.
Avista did include 19 MW of demand response in the 2013 IRP. This was the
first time a demand response program passed the least costs test. With some
demand response programs passing the cost-effectiveness test, Avista included an
action item in the IRP to study this resource further. Where the study supports the
present level of demand response or an expansion of the technologies, the
Company will pursue this resource and will discuss the results in the 2015
Electric IRP.
III. Substitution of Hydro Upgrades for Gas Generation
a. ICL suggests that Avista pursue hydro upgrades at its existing facilities rather
than rely on the PRS recommendation of additional gas-fired plants. The IRP
specifically evaluated hydro upgrade options starting on page 6-15 and found that
the hydro upgrades were not least-cost, nor would they reduce an overall portfolio
risk in a significant manner.
7lP age
Avista appreciates the opportunity to provide reply comments regarding the
Company's 2013 Elecfric IRP. Please direct any questions regarding these comments to
Clint Kalich at 509-495 -4532 or clint.kalich@.avistacorp.com.
DATED at Spokane, Washington, this e*rofNovemb er,2013.
AVISTA CORPORATION
Ui' Y//r
David J. Meyer
Vice President and Chief Counsel for
Regulatory and Governmental Affairs
8lPage
CERTIFICATE OF SERYICE
I HEREBY CERTIFY that I have this 26b day of November, 2013, served the foregoing
Compliance Filing in Case No. AVU-E-13-07 upon the following parties, by mailing a copy
thereof, properly addressed with postage prepaid as well as electronically sent to:
Jean D Jewell, Secretary
Idatro Public Utilities Commission
Statehouse
Boise,ID 83720-5983
Jean j ewell@Auc. idatro. sov
Ken Miller
Clean Energy Program Director
Snake River Alliance
P.O. Bo l73l
Boise,ID 83701
(208) 344-et6t
kmiller@ snakeriveralliance. org
Montana Environmental Information Center
Anne Hedges
107 W. Lawrence St. #N-6
Helena, MT 59601
[e-mail]
Benjamin J. Otto
Idatro Conservation League
710 N. 6s Street, P. O. Box 844
Boise,lD 83702
botto@idahoconservation. org
Zack Waterman
Siena Club
PO Box 1290
424E,. Main, STE 2028
Bozeman, MT 59771
P:406-582-8365
F:406-582-9417
Zack.waterman@ sierraclub. org
State & Federal Regulation