20131113SRA Comments.pdf

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November t3,20t3
To: Idaho Public Utilities Commission
From: Ken Miller, Clean Enerry Program Director, Snake River Alliance
Re: Snake River Alliance Comments In the Matter of Avista Corporation's 2013 Electric Integrated
Resource Plan, Case No. AVU-E-L3-07.
On behalf of our members throughout Avista Utilities' Idaho service area, the Snake River Alliance
appreciates the opportunity to provide its comments on Avista's 2013 Electric Integrated Resource Plan.
(lRP), filed with the Commission on Aug. 29,20L3.
Introduction
Avista Utilities' 2013IRP, like those submitted by the two other investor-owned utility IRPs submitted to
the Commission this year, portrays an electric utility with reduced annual load growth expectations and
also a utilify that does not anticipate energr or capacity deficits until around2020, with the exception of
sporadic winter peaking deficits that the Company anticipates meeting with market purchases.
Nonetheless, Avista's Preferred Resource Strategy (PRS) and its action plan contemplates the addition of
four natural gas plants during the course of this IRP, through2032.
We are concerned by what appears to be a lack of enthusiasm at Avista for both demand-side
management and also renewable energy measures, as reflected on P. vii of the IRP:
"The 2013 PRS is significantly different from the 2011 IRP resource strategr; the 2011 PRS is in
Table 2. Since the prior plan, Avista's renewable and capacity needs have changed. Adding Palouse
Wind to Avista's resource mix in December 2012 satisfied the 2012 Northwest Wind component
of the 2011 PRS. Changes in the Washington State Energy Independence Act (EIA) eliminated the
need for a20L9/2020 wind resource. The amendment under SB5575 adds the Kettle Falls
Generating Station, and other legacy biomass plants, as EIA qualifying resources beginning in
20t6. The 2011 IRP forecast 1.6 percent annual load growth, while this IRP forecasts just over 1
percent growth. Lower expected load growth delays the first natural gas-fired resource need by
one year and eliminates the need for a combined cycle combustion turbine in2023."
Rather than plan for more aggressive acquisition of clean energy resources (while coincidentally
reducing greenhouse gas emissions) Avista justifies its lackluster record on DSM and renewables by
claiming as renewable some resources that previously did not quali8r under Washington State's RPS
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flnitiative 937),while at the same time saying reduced load growth makes certain other resource
acquisitions unnecessary, although the Company still anticipates adding nearly 50OMW of new gas-fired
generation.
While the Alliance questions the need and the associated risks associated with adding four more natural
gas plants to Avista's existing system, we are most concerned about the Company's ongoing commitment
to its 15 percent share (222MVO of the Colstrip Generating Station near Billings, MT. We begin our
comments with the Colstrip situation.
Colstrip
Of the three regulated electric utilities serving load in ldaho and to its credit, Avista is least reliant on
coal-fired generation, all the more so subsequent to Avista's sale of its 210MW share of the Centralia
plant in Washington state in 2000. Nonetheless,like ldaho's other electric IOUs, Avista shows no
inclination to prepare for the eventual closure of Colstrip, or at a minimum divesting its share of the
plant. In our view, Avista's dedication to Colstrip continues to place undue risk on the utility's Idaho
customers.
In its Notice of Filing Order No. 32BBB, this Commission refers to Avista's Expected Case scenarios since
2007 have included forecasts of greenhouse gas emissions costs. In its 2013 IRP, Avista opts against
modeling for greenhouse gas emissions costs:
"Based on current legislative priorities and the President's Climate Action Plan, the Company says
a national greenhouse gas cap-and-trade system or tax is no longer likely. Therefore, the 2013
Expected Case does not include a market or tax solution to reduce emissions. Instead, because the
states and the federal Environmental Protection Agency are implementing regulatory models
limiting emissions for new facilities, and requiring current facilities to either implement best
available control technologies or shut down, the 2013 IRP forecasts significant numbers of plant
retirements to meet these environmental rules."
We agree that expected amendments to the federal Clean Air Act Section 111(d) regarding emissions
from existing coal-fired power plants will almost certainly prompt the early retirement of coal plants
nationwide, although those amendments will not be formulated by EPA in the form of a proposed rule
until fune 20t4. And while we agree that the details of that rule cannot be known at this time, it ls known
that some form of emission controls from existing coal-fired power plants are forthcoming. This
Commission acknowledged such a possibility in its Order No. 32890 [n the Matter of PacifiCorp DBA
Rocky Mountain Power's 2013 Integrated Resource Plan, Case No. PAC-E-13-05):
"The Commission also acknowledges that recent history has demonstrated that attempts by
energy analysts to predict carbon pricing is fraught with failure and uncertainty. However, it
seems more likely than not that the EPA will move forward and enact additional regulations of
fossil fuels under the federal Clean Air Act. In light of this contingency, it appears to be in the best
interest of the Company and its customers to continue to evaluate and devote more focus on the
development of alternative energy resources."
Given Avista's acknowledgment in this IRP that expected greenhouse gas (GHG) emissions regulations
might prompt Widespread coal plant retirements in the Western United States, we are mystified by
Avista's apparent position that the Colstrip Generating Station will somehow survive the coming
regulatory regime unscathed. Colstrip Units 3 and 4 are both approaching 30 years in operation, having
been commissioned in 1984 and L984, respectively. Avista has no ownership interest in Colstrip Units 1
' or2.
If any coal plant serving ldaho load is a candidate for retirement it is Colstrip. Avista's interest in Colstrip
is in Units 3 and 4, which are exposed to unknown additional environmental compliance costs that are
not adequately detailed in Avista's 2013 IRP. As we have with other electric utilities that have submitted
IRPs this year, the Alliance recommends that the Commission withhold acceptance of any portions of this
IRP that envision indefinite operations of Colstrip until such time as Avista provides the Commission with
more details about the expected costs (such as they can be determined) of all known and anticipated
environmental regulations that will require new investments in Colstrip Units 3 and 4. We understand
that Avista is a minority owner of Colstrip, but that does not relieve Avista of its responsibility to provide
this Commission with adequate details on how the costs of existing and future environmental compliance
will impact Avista's customers. Such an analysis should also include any possible risk exposure
associated with the ongoing civil litigation by the Sierra Club and the Montana Environmental
Information Center regarding Colstrip and its pollution-control requirements.
Given the uncertain regulatory landscape that exists today, many of these costs cannot be known. What is
known is that they will be substantial. What is also known is that the future ownership of Colstrip is
uncertain. Majority owner PPL Montana has announced plans to divest its interest in the plant although
no potential buyers have been identified. At a minimum, we recommend that Avista be directed to initiate
contingency planning for the possibility that one or more of Colstrip's four units may be decommissioned.
Given the regulatory uncertainty referenced above, we also question how the indefinite participation in
the Colstrip plant can be considered Avista's "least reasonable cost" alternative, particularly when the
cost of operating Colstrip going forward is not known.
This Commission is well aware of the risks that ongoing coal investments have posed to Idaho's other two
electric IOUs. Now, Avista faces similar challenges. The longer it remains invested in Colstrip, and the
more ratepayer dollars it must spend on the plant to maintain its environmental compliance, the more
expensive it will be when Avista must determine how to replace the 222 megawatts it receives from the
plant. Moreover, given Colstrip's history of uneven operations, Avista does not truly face replacing that
amount of power. Rather than modeling the cost of replacing Colstrip's nameplate capacity, Avista should
be modeling the actual amount of power delivered annually.
We disagree with Avista's statement on P. 4-4 that, until such time as a federal GHG reduction regime is
enacted, "a specific reduction strategy" must await future IRPs "when greater regulatory clarity and
better modeling parameters exist."
We also question Avista's findings (Table 8.13: No Colstrip Resource Strategy Scenario, P. B-26) that
appears to indicate that, without Colstrip as a resource, Avista would need to acquire seven additional
natural gas plants (CCCT and SCCT) with a nameplate capacity of nearly 800MW. Again, this calculation
appears to be based on Colstrip's nameplate capacity, which is never reached, rather than its actual
output which is considerably lower. Similarly, Avista's estimated costs for removing Colstrip Units 3 and
4 must be called into question, if in fact it does not need to replace the full 222MW.
Natural Gas
Avista's IRP contemplates the addition of an 83MW simple cycle combustion turbine (SCCT) in20L9;
another 83MW SCCT in2023; a27jMW combined cycle combustion turbine in2026; and a 50MW SCCT
in2032.
While natural gas generation is by far a cleaner alternative to coal-fired generation, we remain concerned
that Avista is already very long on natural gas, and that this IRP will increase ratepayer exposure to
natural gas price volatility as well as uncertain supplies. Avista acknowledges this challenge on P.4-1 of
its IRP:
"Higher fuel price volatility has historically affected the economics of natural gas-fired plants.
Their performance also decreases in hot weather conditions, it is increasingly difficult to secure
sufficient water rights for their efficient operation, and they emit significant greenhouse gases
relative to renewable resources."
The Alliance agrees with Avista that natural gas plants present unique challenges to electric utilities.
Given that the bulk of these proposed gas-fired generation additions are 10 years or more out, we suggest
that the Commission direct Avista to begin analyzing other alternatives, including demand response
measures, to replace any deficits that would otherwise be filled by one or more of these gas plants.
The Commission is aware of the costs to acquire a natural gas resource, and as mentioned this IRP
contemplates several of them over the course of the plan. We recommend that the Commission examine
closely the cost-benefit of acquiring these assets when alternatives, such as demand response, might
capably fill the same role in meeting peak demand. Avista notes on P. 8-12:
"Beginning in20L9, additional emissions will occur from new peaking resources, but these
resources will not affect overall emissions levels much due to low projected runtime hours."
We appreciate that some of these gas peaking plants will not be dispatched often, but that raises
questions about their efficacy in Avista's overall portfolio.
Demand-Side Management
We appreciate that Avista's DSM measures will forestall the need to additional supply-side resources, and
in that without these measures the Company would face deficits sooner than the projected 2020 dates.
We are pleased that, with this IRP, Avista plans to begin to incorporate demand response programs into
its portfolio and encourage the Company to become comfortable with DR as quickly as possible so that it
can be incorporated into future PRS's as a possible replacement for natural gas peaking units. Avista
states on P. B-11 that it is possible that DR can defer or eliminate the need for the 2019 simple cycle gas
plant acquisition "depending on its achievable potential and the actual costs incurred to procure it."
Clearly, Avista has a DR learning curve ahead of it, but we applaud its decision to dive into the demand
response pool and we hope the Commission provides all the encouragement possible to ensure Avista's
DR research and future development are successful.
However, we believe the 19MW of DR identified in the PRS (acquisition range: 2022-2027) is
unacceptably unambitious and we recommend the Commission direct Avista to further analyze its DR
potential. Avista forecasts that its GHG emissions will increase over the course of this IRP, and an
underwhelming deployment of DSM resources is the leading culprit.
Avista notes that GHG emissions across the Western Interconnect will decline over the same period due
to the retirement of other coal plants, but it attempts to explain its anticipated increase in GHG emissions
by pointing out its GHG emissions footprint is lower than most Western utilities to begin with. We
disagree. Planning 492MW of natural gas plants and upgrades over the course of this IRP while planning
for a meager 19MW of DR does not reflect a serious effort to reduce carbon emissions.
Net Metering
a
The IRP states at P. 2-20 that:
"A small but growing number of customers continue to install their own generation at an
increasing pace. Ln2007 and 2008, the average new net-metering customers were 10, and
between 2009 and 20L2, the average increased to 38 per year, likely in responses to generous
federal and state tax incentives."
Avista then describes other incentives, such as the federal tax credit and tax incentives in the state of
Washington. Currently, according to the IRP at P.2-21,190 customers system-wide have installed net-
metered generation equipment fore a total of 1.1 MW of capacity. That is the equivalent of .5 percent of
Avista's generation capacity. Avista warns onP.2-2L that, "lf the number of net-metering customers
continues to increase, Avista may need to adjust rate structures for customers who rely on the utility's
infrastructure but do not contribute financially for infrastructure costs."
The Commission is by now well aware of the myriad issues involved in electric utility net metering
programs. We fail to see how 190 customers is reason for the kind of alarm referenced in the above
passage - perhaps triggering a filing for a rate adjustment for net metering customers. As the Commission
is now well aware, net metering customers provide more benefits to their utility than they detract from
it. If Avista's warning that it may seek to "adjust rate structures" is intended as a caution that a .5 percent
of capacity net metering rate is becoming a problem, then we recommend the Commission inquire to the
Company what it believes an appropriate net metering penetration rate would be and why such a low
percentage of net metering customers on Avista's system is creating potential problems.
Conclusion
The Alliance appreciates the extraordinary amount of effort that Avista and stakeholders put into
development of this IRP. We believe the document is commendable and for the most part defensible.
However, as mentioned above, we have significant concerns about Avista's position on its Colstrip
resource and we believe the impacts of divesting ownership of Colstrip and replacing its 222MW of
nameplate generation has been overstated and must be revised. We also recommend that the
Commission review Avista's commitment, or lack thereof, to future DR investments, DSM investments in
general, and its plans to acquire significant amounts of new gas-fired generation.
Respectfully submitted,
g<-,,-?\d/14
Ken Miller
Clean Energy Program Director
Snake River Alliance
P.O. Bo 1731
Boise,lD 83701
(208) 344-et6t
[e-mail]