20180108Reply Comments.pdf

AE-srsra
Avista Corp.
141 1 East Mission P.O. Box 3727
Spokane, Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170
January 5,2018
Diane Hanian, Secretary
Idaho Public Utilities Commission
P O Box 83720
Boise, ID 83720-0074
RE: CASE NO. AVU-E-I7-08
REPLY COMMENTS OF AVISTA CORPORATION REGARDING THE COMPANY'S 2OI7
ELECTRIC INTEGRATED RESOURCE PLAN
Dear Ms. Hanian:
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 2017 Electric Integrated Resource Plan (lRP) in accordance with Order
No. 33900. Avista believes the Company's 2017 IRP satisfies Commission OrdersNo.22299
and No. 25260 and requests that the Commission acknowledge the2017 Electric IRP as filed.
If you have any questions regarding these reply comments, please contact James Gall at 509-
495 -2189 or John Lyons at 509-495-85 1 5.
Sincerely
Gervais
Sr. Manager, Regulatory Policy
Avista Utilities
509-495-4975
I inda. gervais@avistacorp. com
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DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
141I EAST MISSION AVENUE
P.O. BO){ 3727
SPOKANE, WASHINGTON 99220.37 27
PHONE: (509) 49s-4316
FAX: (s09) 49s-88s1
david. meyer@ avi stacorp. com
IDAHO BAR #8317
RECEIVED
20lB Jf.H -8 [l{ 9: l5
ii"'r:li,-l PUBLIc
lll i L'l'f i.:S C0MMISSI0N
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE AVISTA
CORPORATION' S 2OI7 ELECTRIC
INTEGRATED RESOURCE PLAN
CASE NO. AVU.E-17-08
REPLY COMMENTS OF AVISTA
CORPORATION
I. INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter Avista or
Company), at l4l1 East Mission Avenue, Spokane, Washington, respectfully submits
reply comments regarding the Company's 2017 Electric Integrated Resource Plan (IRP) in
accordance with Order No. 33900. Avista believes the Company's 2017 IRP satisfies
Commission Orders No. 22299 and No. 25260 and requests that the Commission
acknowledge the 2017 Electric IRP as filed.
II. BACKGROUND
The Commission issued a Notice of Modified Procedure, Order No. 33900, on
October 4,2017, setting forth a comment deadline of December 15, 2017. The
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commission Staff ("staff') and the Idaho conservation League ("ICL"), submitted
comments on or prior to the deadline.
Per Commission Orders No.22299 and No. 25260, Avista is required to prepare
and f,rle biennially an IRP outlying how the Company would serve its retail electricity
requirements into the future. Avista filed its 2017 Electric IRP on August 31,2017.
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 staff, consumer advocates, academics, utility peers, government agency
staff and Avista's energy analysts. In total, Avista invites over 100 representatives from
many outside organizations. Six TAC meetings were held at Avista headquarters between
June 2, 2016 and June 20, 2017 to inform members, receive feedback, and take suggestions
from them. Further, Avista was available and discussed IRP-related via telephone, email,
and in-person meetings.
None of the commenters recommend that the Commission not acknowledge the
2017 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 for developing and filing an IRP. Avista believes
the Commission has ample evidence in support of acknowledging the20l7 Electric IRP as
filed. Avista herein responds to various issues raised by Staff and ICL.22
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A. Long Term Position - Lancaster Power Purchase Agreement
Staff requested modeling of a contract extension for the Lancaster power purchase
agreement in the 2019 IRP. Avista is open to an extension of this contract, and has stated
as such many times in the TAC meetings. This option could be pursued if a contract
extension becomes available at terms that are beneficial to customers and the Company.
This contract does not expire until October 2026, so it is probably premature to enter into
any sort of discussions about extending the contract until the 2021timeframe, unless the
current owners of Lancaster decided to approach us earlier.
B. Policy Considerations
Staff commented concerning the amount of emissions associated with the Clean
Power Plan (CPP) that'0... the Company did not clearly state that each of the Company's
portfolios comply with the existing rule." (Staff, p. 7) The CPP was a state-level goal at
the time the20l7 IRP was completed, so all modeling ensured that each state would be in
compliance with the CPP goals. The CPP was stayed during legal proceedings, and the
subsequent change in administrations resulted in the current status of the CPP being
fundamentally changed, so none of the States in which Avista has covered resources ever
developed company-level goals to compare the Company's portfolios to.
Staff also recommended that Avista be more specific conceming environmental
capital investment. Additional details about Reasonable Progress for the Regional Haze
program in Montana identified in the September 2017 review and expectations for that and
other expected state and federal emissions controls for Colstrip will be discussed through
the TAC process for the 2019 IRP.22
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C. Market Analysis
Staff expressed "... concems about the natural gas and coal price forecasts Avista
used to model both regional and Company-owned resource dispatch." (Staff, p. 9) The
concems with the natural gas price forecast being too low are discussed here and coal prices
are discussed in the next section. The natural gas price forecast used for the 2017 IRP was
discussed in detail with the TAC in several different meetings and Avista was unaware of
any Staff concerns. The natural gas price forecast is done stochastically, or randomly
determined, to account for the risk of higher and lower prices. Also, a second consultant's
price forecast will be incorporated in the modeling for the 2019 IRP, and this information
will again be presented to the TAC for their review and consultation. Avista looks forward
to working with Staff in the 2019 IRP to address any concerns they might have with our
natural gas forecast.
D. Coal Fuel Price and Conditions
Staff and ICL both had comments concerning coal prices. Staff had concerns about
the coal price forecast for Colstrip, specifically the risk aspect of the fuel supply from the
Rosebud mine based on the current contract and l0-K filing from Westmoreland Coal (the
mine owner) concerning the amount of coal reserves at the Rosebud mine. The current
coal contract expires in20l9 and is in the process of renegotiation. This mine only supplies
Colstrip and there is no indication of the company wanting to stop mining at Rosebud, so
they have a strong incentive to renew the contract.
Regarding the amount of reserves at the Rosebud mine, there appears to be a
common misunderstanding about the l0-K filing from the Westmoreland Coal Company.
Page l0 of the March 29, 2017 Westmoreland 10-K lists estimated mine life with current
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plan referencing 2024. Contrary to some opinions in the TAC and other public forums,
this does not mean that the Rosebud mine is projected to run out of coal in2024. The2024
date is simply a calculation of the current amount of permitted coal divided by the annual
production capacity. The same page shows 85,453,000 tons of currently permitted coal
and a production capacity of 13,300,000 tons per year, which means there are 6.4 years of
currently permitted coal at the mine (85,453,000 divided by 13,300,000 : 6.4). The total
proven reserves at the Rosebud mine are 250,141,000 tons or 18.8 years (250,141,000
divide by 13,300,000: 18.8) which would extend the amount of coal out to the2034-2035
time period. Also, these numbers are based on 13,300,000 tons per year of production
capacity, and the actual production levels for 2014,2015 and 2016 are much less at
9,018,000 tons,9,626,000 tons, and 8,812,000 tons, respectively. The amount of coal
mined will further decrease when units I and 2 shut down by 2022. The renewal of the
coal contract beyond 2019 and new coal permits beyond 2024 will be discussed with the
TAC during the development of the 2019 IRP.
ICL's concerns about Colstrip fuel prices centered around the Company providing
"... a more thoroughly analyzed evaluation of fuel price of coal at Colstrip and a forecasted
range of price volatility over the 2l-year timeframe of the 2019 IRP." (ICL Comments, p.
5) As ICL acknowledged from page l0-8 of the IRP, the coal prices for Colstrip are
confidential and the Company has no plans to publish them in the IRP. Regarding the
future prices, the Company had to use its expectations of future prices because the current
contract expires in 2019 and the new contract is in negotiations. The costs of the new
contract will be used for modeling the 2019 [RP, and for prices beyond the length of the
contract a high/low price scenario can be studied if desired by the TAC.
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E. Portfolio Scenarios - Colstrip
Staff had questions concerning the identification of the cost for Selective Catalytic
Reduction (SCR) and the Coal Combustion Residuals (CCR). The specific costs of SCR is
proprietary information that was included in the modeling for the IRP, but was not
published. However, the SCR cost information was provided in a confidential data request
to Staff. Further, SCR costs were included in the Expected Case of the IRP, but were
assumed to be avoided in the early shutdown scenarios.
Regarding the concerns about the avoidance of CCR requirements in an early
Colstrip retirement scenario, as explained on page 7-6 of the 2017 IRP, the EPA issued a
final rule concerning CCR in 2014 and early closure of the plant would not eliminate the
need to comply with this federal requirement. There would be fewer CCRs if the plant
closed early, but the requirements under the final EPA rule would still exist because the
plant has and will continue to produce CCRs while operating. The expected costs for CCR
were also included in the modeling for the IRP and provided to Staff in a confidential data
request.
F. Related to the Hydro One Acquisition
The Idaho Conservation League (ICL) opens their comments about Avista's 2017
Electric IRP with concerns about the continuity of staff and direction for the IRP if the sale
of Avista to Hydro One is completed. There are no plans or provisions in the merger
agreement for Hydro One to take over the direction, development or staffing of the IRP
team or any other operational function at Avista.
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G. Suggested Corrections to the 2017 IRP - ICL
Regarding the passage of an extension to California's cap and trade program
referenced on page 7-2,the IRP incorrectly states that California did not pass an extension
to this program. The sentence was true when the draft was written, but did not get corrected
in the final draft. However, as discussed elsewhere in the document, all of the relevant
modeling assumed the continuation of this cap and trade program.
ICL had three requests for more analysis of Puget Sound Energy's (PSE) agreement
with the Washington Utility and Transportation Commission (WUTC) concerning their
depreciation schedule for Units 3 and 4 of Colstrip, their allocation of transition funds, and
the impact of Oregon State Bill 1547 on Colstrip. The Company is unsure why ICL lists
these issues concerning PSE under "Corrections to the IRP" since Avista is not a participant
in that settlement, the settlement was not reached until August 25, 2017, when the2017
IRP was already completed and being printed, and the WUTC did not approve the
settlement until December 5, 2017. However, the Company already planned to address
both issues conceming PSE in the20l9IRP. The PSE settlement simply occurred too late
to be modeled or even discussed in the2017 IRP. Regarding Oregon State Bill 1547, there
was no publically available information to discuss or analyze in the 2017 IRP about how
PacifiCorp or Portland General Electric's exercise of its ownership in Colstrip Units 3 and
4 would be altered by this law beyond what was said in the IRP. This issue will also be
discussed with the TAC for the 2019 IRP.
H. Resource Characterizations
ICL also had several comments about transparency of AUROft.,{xmp and PRiSM.
Avista has and will continue to provide as much non-confidential information as we can in
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the TAC meetings and the IRP. However, the proprietary nature of these models, their
complexity, and the need to use confidential information in order to obtain the most
accurate modeling results possible, necessitates a certain amount of caution in the
disclosure of confidential information when making use of these modeling tools.
Avista appreciates the opportunity to provide reply comments regarding the
Company's 2017 Electric IRP. Please direct any questions regarding these comments to
James Gall at 509-495-2189 or John Lyons at 509-495-8515
DATED at Spokane, Washington, this 5th day of January, 2018
AVISTA CORPORATION
David J.
Vice President and Chief Counsel for
Regulatory and Governmental Affairs
REPLY COMMENTS OF AVISTA CORPORATION - 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 5th day of January, 2078, served the foregoing Reply
Comments in Case No. AVU-E-17-08 upon the following parties, by mailing and/or emailing a
copy thereof, sent to:
Diane Hanian
Idaho Public Utilities Commission
427 W. Washington St.
Boise,ID 83720-5983
Di ane.Hani an@puc. idaho. eov
Matthew A. Nykiel
Idaho Conservation League
P. O. Box 2308,102 S. Euclid #20
Sandpoint,ID 83864
mnykiel@idahoconservation. orq
<-
Shawn
Sr. Regulatory Policy Analyst
Avista Utilities
State & Federal Regulation