20160204final_order_no_33463.pdf

Office of the Secretary
Service Date
February 4.2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION’S 2015 ELECTRIC )CASE NO.AVU.-E-15-08
INTEGRATED RESOURCE PLAN )
)ORDER NO.33463
_____________________________________________________________________________________________
)
On August 31,2015,Avista Corporation dba Avista Utilities filed its 205 Electric
Integrated Resource Plan (IRP).The Company files the IRP every two years to explain its
evolving plans to meet its customers’energy needs over the next 20 years.The IRP discusses
the Company’s existing resources and loads,evaluates resource acquisition strategies that could
be used to meet load under different future conditions,and identifies the Company’s Preferred
Resource Strategy for meeting expected load growth.
After the Company filed its IRP,the Commission invited interested persons to submit
comments in the case.See Order No.33385.The Commission Staff,Snake River Alliance
(SRA).and a customer filed comments,all of which recommended that the Commission
acknowledge the IRP.Staff and the SRA also recommended that the Company take some
additional actions.The Company did not file a reply.Having reviewed the record,we find that
the Company’s 2015 IRP discusses the subjects required by the Commission’s prior Orders.
OVERVIEW IRP PROCESS
An IRP is a status report on the utility’s ongoing,changing plans to adequately and
reliably serve its customers at the lowest system cost and least risk over the next 20 years.The
report informs the Commission and the public about the utility’s plans,and is similar to an
accounting balance sheet;i.e..it is a freeze frame”look at the utility’s fluid,resource planning
process.See Order No.22299.The IRP is meant to demonstrate to the public that the Company
has prepared for,and considered,many scenarios through a reasonable planning process.The
Commission thus expects a utility to have vigorously tested the IRP’s assumptions to ensure the
IRP accurately reflects changing markets and customer demand.
The Company must update its IRP every two years and allow the public to participate
in the development of the IRP.See id.and Order No.25260.The final IRP must include the
subjects required by the Commission’s prior Orders,including Order Nos.22299 and 25260.In
summary,the final IRP should explain the Company’s present load/resource position,expected
ORDER NO.33463 1
responses to possible future events,and the role of conservation in those responses.It also
should discuss “any flexibilities and analyses considered during comprehensive resource
planning,such as:(1)examination of load forecast uncertainties;(2)effects of known or
potential changes to existing resources;(3)consideration of demand-and supply-side resource
options;and (4)contingencies for upgrading,optioning and acquiring resources at optimum
times (considering cost,availability,lead time,reliability,risk,etc.)as future events unfold.”
See Order No.22299.The IRP should separately address:
•“Existing resource stack,”by identifying all existing power supply
resources;
•“Load forecast,”by discussing expected 20-year load growth scenarios for
retail markets and for the federal wholesale market including
“requirements”customers,firm sales,and economy (spot)sales.This
section should be a short synopsis of the utility’s present load condition,
expectations,and level of confidence;and
•“Additional resource menu,”by describing the utility’s plan for meeting
all potential jurisdictional load over the 20-year planning period,with
references to expected costs,reliability,and risks inherent in the range of
credible future scenarios.
Id.
If the Commission finds the IRP discusses these required subjects,then it will enter
an Order acknowledging that the Company filed the IRP.By acknowledging the IRP,the
Commission is acknowledging the Company’s ongoing planning process,not the conclusions or
results reached through that process.
THE 2015 ELECTRIC IRP
The Company’s 2015 Electric IRP guides the Company’s resource strategy over the
next two years and provides insight into its preferred resource procurements through 2035.In
summary,the 2015 IRP shows the Company can meet its customers’energy needs through 2020
with Company-owned or contractually-controlled generation resources,conservation,and market
purchases.In the longer term,plant upgrades,energy efficiency measures,and additional natural
gas-fired generation are integral to the Company’s 2015 Preferred Resource Strategy.Among
other things,the IRP discusses stakeholder involvement in the IRP process;projected load
growth;existing supply resources;energy efficiency and demand response;environmental policy
ORDER NO.33463 2
considerations;the Company’s Preferred Resource Strategy;and progress on action items
referenced in the 2013 IRP and new action items to be addressed in the 2017 IRP.
A.Stakeholder Involvement
The Company developed the IRP in consultation with its Technical Advisory
Committee (“TAC”).The TAC consists of more than 75 invited participants,including
customers,Commission Staff,the Northwest Power and Conservation Council,consumer
advocates,academics,environmental groups,utility peers,government agencies,and other
interested parties.The Company held six TAC meetings for this IRP and plans to expand TAC
membership in the future and maintain TAC meetings as an open public process.
B.Projected Load Growth
The 2015 IRP predicts the Company’s average annual load will grow by 0.6%per
year (down from the 2013 IRP’s prediction of 1%per year)through 2035,which in turn will
decrease the contribution of natural gas-fired peaking plants.The Company notes that its highest
peak loads occur during extreme winter weather conditions.The Company states it can meet
peak loads through 2020 by using its existing resources,conservation,and buying power on the
market.The Company notes it currently is buying power to meet a short-term capacity deficit in
the winter of 2015-2016,but the Company states it will not experience a long-term winter deficit
until 2021.
C.Existing Supply Resources
The Company owns 1807 megawatts (MW)of nameplate capacity generating
resources,including hydroelectric facilities having a nameplate capacity of 972 MW,and 845
MW of thermal generation.The Company also has power purchase agreements allowing it to
obtain about 477 average MW (aMW).The Palouse Wind farm and other PURPA facilities also
contribute to supply-side resources.Net metering customers have installed 1.8 MW of capacity
as of year-end 2014.
D.Energy Efficiency and Demand Response
The Company’s energy efficiency programs provide conservation and education
options to the Company’s residential,low-income,commercial,and industrial customers.For its
2015 IRP,the Company retained an independent consultant to develop a 20-year Conservation
Potential Assessment that formed the basis for the conservation portion of the IRP.The
Conservation Potential Assessment analyzed thousands of residential,commercial,and industrial
ORDER NO.33463 3
energy efficiency options.Based on this data,the Company reports that its historical energy
efficiency efforts have decreased its load requirements by 127 aMW,or about 11%of its total
load in 2014.However,the data also revealed that the Company’s demand response programs
had higher costs than were expected under the 2013 IRP and generally were not cost-effective.
In fact,the Company reports that the costs of its demand response programs would have to drop
by nearly 50%from 2023-2035 before they would be cost-effective.The Company thus opted
not to include demand response as a resource in the 2015 IRP.
The Company notes that the State of Washington’s Energy Independence Act (ETA)
requires the Company to meet 3%of retail load from qualified renewable resources by 2012,9%
by 2015,and 15%by 2020.The EIA also requires the Company to acquire all cost-effective
conservation and energy efficiency measures.The Company states that it will satisfy its EIA
obligations through the IRP timeframe by combining qualifying hydroelectric upgrades,the
Palouse Wind project,Kettle Falls Generating Station output,and renewable energy certificate
purchases.
E.Environmental Policy Considerations
The TRP notes that greenhouse gas regulation varies throughout the country.Some
states,for example,have active cap and trade programs,emissions performance standards,
renewable portfolio standards or a combination of active and proposed regulation affecting
emissions from electric generation resources.Further,the federal Environmental Protection
Agency (EPA)issued its proposed Clean Power Plan rule in 2014 with the intent of reducing
emissions from existing fossil fuel plants.The Company notes that its 2015 TRP reduces
emissions consistent with the EPA’s proposed rule.But the 2015 IRP does not account for the
final version of the EPA’s rule because the final rule issued after the Company had completed its
modeling for the 2015 IRP.The Company thus states it will analyze the EPA’s final rule and the
corresponding state implementation plans as it prepares its 2017 IRP.The Company predicts
western region emissions will decrease through 2035 while the Company’s emissions will
modestly increase.The Company explains this occurs because the Company does not own the
less cost-effective coal and natural gas-fired plants that are expected to close by 2035.
F.Preferred Resource Strategy
The IRP’s Preferred Resource Strategy (PRS)provides a least reasonable-cost
portfolio that minimizes future costs and risks within actual and expected environmental
ORDER NO.33463 4
constraints.The Company expects its 2015 PRS will outperform the 2013 PRS.Maj or changes
from the 2013 strategy include reduced contribution from natural gas-fired peaking plants,the
elimination of demand response due to higher estimated costs,and a modest reduction in energy
efficiency.
The Company developed its 2015 PRS through modeling techniques that balanced
cost,reliability,rate volatility,and renewable resource requirements.The resulting PRS,which
is summarized in the table below,includes energy efficiency,generation upgrades,and new
natural gas-fired generation:
2015 Preferred Resource Strategy
Thermal Upgrades 202 1-2025 38 38 35
Combined Cycle CT 2026 286 306 265
Natural Gas Peaker 2027 96 102 89
Thermal Upgrades 2033 3 3 3
Natural Gas Peaker 2034 47 47 43
lotal 565 597 524
liliciency Acquisition Winter Peak Energy
Improvemenl.s Range Reduction (‘aM\\’)
(M W)
I ner I flicienc\2016-2035 1 03 132
Distribution <1 <1
I fliciencies
Total 193 132
To develop the PRS,the Company first identified potential new generation resources
to serve projected electricity demand through 2035.The Company then mapped its existing
resources to the transmission grid to simulate hourly operations for the Western Interconnect
during this timeframe,and modeled the need to add new resources and transmission to the
Western Interconnect as regional loads grow and older resources are retired.The Company’s
model varied hydroelectric and wind generation loads,forced outages,and natural gas price data
over 500 iterations of potential future market conditions.Based on its analyses,the Company
expects the levelized Mid-Columbia electricity price to be $38.48 per megawatt hour (MWh)in
nominal dollars from 2016-2035.The Company notes that electricity prices highly correlate
Natural Gas Peaker
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with natural gas prices because natural gas typically fuels marginal generation in the Northwest.
The Company expects nominal levelized prices for natural gas at northeastern Oregon’s Stanfield
trading hub to be $4.97 per dekatherm over the next 20 years.
G.Action Items
The 2015 IRP contains an Action Plan that is based on input from Commission Staff,
the Company’s management team,and the TAC.The 2015 Action Plan updates the Company’s
progress on action items from the 2013 IRP.It also identifies three categories of new actions to
be performed before the 2017 IRP is published,including actions related to generation resource-
related analysis,energy efficiency,and transmission planning.
THE COMMENTS
Commission Staff,SRA,and an individual customer filed the only comments in the
case.All of them recommended that the Commission acknowledge the 2015 Electric IRP.Staff
opined that the 2015 IRP reasonably assesses the Company’s future options to meet future load,
gives balanced consideration to supply and demand resources,and adheres to the requirements of
Commission Order Nos.25260,24729 and 22299.In a similar vein,the individual customer
observed that the 2015 1RP is well balanced,and mixes hydro and other renewable energy,
conservation,and thermal resources to provide customers with reliable and reasonably-priced
energy for years to come.The SRA,too,noted that the IRP shows the Company does not need
new supply-side resources until 2021,can meet periodic capacity needs before 2021 through
market purchases,and is well prepared to meet its customers’energy needs for much of the IRP
period.The SRA nevertheless criticized the Company’s heavy reliance on natural gas-fired
plants that are subject to unknown regulations and costs and have uncertain reliability and
availability.Further,the SRA observed that the Company’s intent to acquire 565 MW of new
natural gas resources through 2035,while simultaneously shutting down demand response,sends
mixed signals about the Company’s ability to achieve deeper carbon emissions reductions.
Despite these concerns,however,the SRA recognized the Company continues to seek carbon
free resources to at least reduce its reliance on gas and coal.The SRA also appreciated the
Company’s interest in potential Energy Imbalance Markets that could help lower customer rates
by providing another market to buy and sell short-term capacity products and services.Lastly,
the SRA commended the Company for its continued progress in making the TAC and the
development of the Preferred Resource Strategy and IRP increasingly transparent and accessible
ORDER NO.33463 6
to the public.The SRA thus ultimately supported the 2015 IRP,and recommended that the
Commission acknowledge it.
Staff and the SRA also recommended that the Company take some additional actions.
Staff recommended that,for the 2017 IRP,the Company should address and quantify the effects
of the EPA’s Clean Power Plan rule on scenarios involving Colstrip Units 3 and 4.Staff
suggested this evaluation should consider the operating permit,emissions compliance,plant
operating life,and power supply costs.Staff also recommended that the Company thoroughly
investigate the demand response program,given that the Company’s firm curtailment program is
nearly cost-effective and has high achievable demand response potential.
The SRA,on the other hand,recommended that the Commission direct the Company
to not wait until it publishes the 2017 IRP to report to the Commission on how the EPA’s final
Clean Power Plan rule might impact the Company’s IRP and/or Preferred Resource Strategy.
The SRA also recommended that the Company become more familiar with solar characteristics
by exploring,at least as a pilot project,solar development and integration.
FINDINGS AND DISCUSSION
The Company is an electrical corporation and public utility as defined in Idaho Code
§§61-119 and -129,and the Commission has jurisdiction over it and the issues in this case under
Title 61 of the Idaho Code,including Idaho Code §61-501.Having reviewed the record in this
case,we find that the Company’s 2015 Electric IRP satisfies the requirements set forth in the
Commission’s prior Orders.We thus acknowledge that the Company has filed the 2015 Electric
IRP.In doing so,we reiterate that an IRP is a working document that incorporates many
assumptions and projections at a specific point in time.It is a plan,not a blueprint,and by
issuing this Order we merely acknowledge the Company ‘s ongoing planning process,not the
conclusions or results reached through that process.With this Order,the Commission is not
approving the IRP or any resource acquisitions referenced in it,endorsing any particular element
in it,or opining on the prudency of the Company’s decision to select its preferred resource
portfolio.The appropriate place to determine the prudence of the IRP or the Company’s decision
to follow or not follow it,and the validation of predicted performance under the IRP,will be a
general rate case or another proceeding in which the issue is noticed.
The Commission appreciates the Company’s collaboration with stakeholders in
developing the 2015 Electric IRP and willingness to continue to increase stakeholder
ORDER NO.33463 7
involvement in the IRP process.With respect to Staffs and SRA’s recommendations about the
Clean Power Plan,we expect the Company has been analyzing how the EPA’s final rule may
impact the Company’s resource planning,and we find it reasonable for the Company to discuss
the potential impacts with the TAC and stakeholders to ensure the 2017 IRP appropriately
addresses them.We also find it reasonable for the Company and its stakeholders to continue to
explore the role that demand response,solar energy,and other resources might have in the
Company’s resource planning.We appreciate the Staffs,SRA’s and other stakeholders’active
participation in the IRP process,and we are confident that their input helps the Company develop
a better and more comprehensive IRP.
ORDER
IT IS HEREBY ORDERED that the filing of the Company’s 2015 Electric IRP is
acknowledged.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
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.
ORDER NO.33463 8
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this J
day of February 2016.
PAUL KJELLANE,PRESIDENT
KRI INE RAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
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ORI)ERNO.33463 9