20191227Decision Memo.pdf

I ,_
DECISION MEMORANDUM
TO:CONIMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COIVIMISSIO N SE C R ETARY
LECAL
WORKING FILE
FRONI: YAO YIN
DA'I'E: DECENTBER 26.2019
UPDATE TO AVISTA'S PURPA AVOIDED COST RATES TO
INCORPORATE NEW COST OF DEI]'I'; CASE NO. AVU-E-19-14
Pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA) and the
implenrenting regulations of thc Fcdcral l')nergy Regulatory Commission (FERC). the
Commission approved a Surrogate Avoided Resource (SAR) nrethodology for calculation ofthe
published avoided cost rates paid to PURPA qualilying cogeneration and smal) power production
facilities (QFs) by ldaho Power Company. Avisla Corporation. and PaciliCorp.
STAI-F'S UPDATES TO PUBLISHED AVOIDED COST RATES
On November 29,2019. the Comnrission issued Order No. 34499. the final Order in
Avista's recent general rate case (Case No. AVU-E-19-04). The conclusion ofthe general ratc
case has triggered recalculation of published avoided cost rates for Avista to reflect the change of
cost of debt fron 5.72%o ro 5.20ok. As a result, the weighted cost of capital, which depends on
debt and equity, has changed f'rom 7.61% to 7.35oh. Past practice has been to incorporate new
changes following a general rate casc.
Weighted cost of capital alfects avoided cost rales in the SAR model in tu'o wavs. First.
il represents the avoided cost to a ulilit),to finance construction of new facilities. Second, it is
used as a discount rate in the process oflcvelizing avoided cost rates. A change in weighted cost
ofcapital from cach of these effects impacts levelized avoided cost rates in opposite directions.
For example. when weighted cost ofcapital is decreased, as is seen in this case, the cosl to
finance new facilities decreases. lorvering avoided cost rales. IIowever, a lowcr weighted cost of
capital also causes higher avoided cost rates when determining levelized rales, because cash
DECISION MITIvIORANDU M DECEN,IBER 26.2019-l-
STAFF RECOMMENDATION
Staff recommends the Commission process the case by modified procedure and set a
comment deadline ofJanuary 20, 2020. and a reply comment deadline ofJanuary 27,2020.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application and Nolice of Modified
Procedure that sets a comment deadline ofJanuary 20. 2020. and a reply comment deadline of
lanuary 27,2020 in this case?
eak"
Yao Yin
UdmcmoyA!isls'9 waighled Co6tofCapital decmemo
2DECISION MEMORANDLIM DECEMBER 26, 20I9
flows in the future are discounted less when brought back to present value. The hnal change in
levelized avoided cost rates depends on the nel effect.
Staff has recalculated published avoided cosl rates for Avista using the new cost ofdebt
as shown in the attachment. For levelized rates, new avoided cost rates can be higher or lower
than the old avoided cosl rates, depending on the contract length. However, non-levelized rates
are only affected by the decrease in cost to finance new facilities. Because there is an overall
decrease in the weighted cost ofcapital, thc proposed nonJevelized avoided cost rates are
consistently lower than the old nonJevelized rates.
Staff sent a letter via email to Avisla on December 26, 2019. Attached to the letter was
an updated vcrsion ofthe published avoided cost model as well as the resulting new avoided cost
rates. Staffasked Avista to review Lhe model and file comments with the Commission by the
comment deadline regarding whether the inputs were updated and included in the model
correctly.
AVISTA
AVOIOEO COST RATES FON WIND PROJECTS
xxxx, 2020
tn wh
Nsyr Conlnctt and Raplrcamant Cmlracl3 wllhout Full Caprctly P.ym.nls
Ellglblllty for thele ralcs ls limiled to prolccts 100 kW or 3maller.
LEVELIZED NON.LEVELIZEO
CONTRACT
LENGTH
(YEARS)
CONTRACI
YEAH
NON,LEVELIZEO
RATES2020202124222023 2024 2025
1
2
3
5
6
7II
10
1l
,12
t3
14
r5
l5
17
18
19
20
24.78
2A 92
29.10
30 17
3r.1{
32.r8
33 47
34 53
35 52
36.36
37 11
378/
34.55
39 23
39 88
40 50itl I I
41.66
12 23
4215
29.a7
?375
30 7r
31.84
33 01
u17
35.62
36 66
37.55
38.35
39.07
39 E0
a0.50
41.t E,lr 82
12.15
43.04
43 50
1111
aa 67
30 4a
31.62
32 S0
34 t9
35 80
37.00
38.09
38.98
39.79
40.51
41_26
a1 97
12.65
a3 3t
a3 95
a4 55
1512
45.67
16.22
16.74
32 8r
34_25
35.61
37-38
3E 6r
39.70
40.58
4t 37
a2 0E
12 81
43.53
aa.21
44.47
43_52
16 13
16 71
a7 27
47 8:t
48.35
48 66
35 76
37lrt
40 33
2t1.39
12.22
42_94
43.64
14.37
45 07
45.75
16 42
a7.05
{7.68
18 26
{4.83
19.40
19.94
50.4s
50 97
38 62
40.98
12 08
4:i.05
43 8t
4a.51
4512
45 83
16 52
4t _20
47.65
48 5l
49 13
19-12
50 29
5087
51 a2
51.95
52.48
53 02
2020
2021
2022
2023
m21
m25
m26
2n27
mza
2029
2030
203r
2n32
2033
2034
2035
2036
2037
2038
2039
zUO
2M1
2042
2013
2041
2045
24.78
?307
30 48au
35 76
38 62
13 52
44 5r
45.t18
47.11
$-a2
49 St
52.13
5127
56 07
s7.79
59 79
5r 23
62 80
54 itg
66 95
68.30
59 86
72 52
75 56
78 53
Not€: Tnss€ rat€s will bs f!,nher adiusr€d wilh the applrcablE i,rlegralion charge
Not.r The r.t!3 lhoyrn rn thB l.bl. hav. bc.n comp!,|.d lr' n9 h. U.S. En.Oy lnlofln.llon Adminiilraliofl (ElA)! Anfiral En.rgy
Outbok 2019, r.l.aa.d J.nu.ry 2019 Sca AnrwslEn Cy Oullook ml9, Table 3I En€rgy Pdc.3 by Sacto.-l&unlain al
mp3/r'*wr-.|a.lpv/oullookde6o/laus6_.3i.php
AVISTA Pago I
ON.LINE YEAA
AVISTA
AVOIDEO COST RATES FOR SOLAR PBOJECTS
xxxx, 2o2o
T twh
New Contircl. .nd Rophcsmrnt Cont .ctt vrlthout Full C.p.ctty Paymantt
Eliglbllity lor lhes. r.les l! llrnltod to prolects 100 kW or smrllcr.
LEVELIZED NON.LEVELIZEO
CONTRACT
LENGTH
UEAAS)
ON,LINE YEAR
CONTRACT
YEAF
NOI+LEVELIZEO
RATES202020212022202324212025
I
3
5
6
7I
9
IO
1t
12
t3
16
17
18
t9
20
28 78
25.52
29 a0
30 t7
3r ta
32.r8
33.63
34.e1
35.89
38.74
1t -1?
11.73
42.32
42.91
43.48
{4.03
44.57
,45 m
45.59
45 07
29 07
4.75
30.71
3184
33.01
3.65
35.94
37.09
().29
a2 9l
43 a9
44.05
44.53
45.t9
15_74
46.28
46.80
a7 -91
a7.79
49 03
35.76
37_11
39.54
a0 96
42.16
t6.85
50.39
50.49
il.17
51.'13
51 53
5r 96
52-12
52.87
53.31
53 76
55 23
55 65
56 06
56 49
20?o
2021
20?2
2023
m21
2025
2026
2027
2028
2023
2030
2031
2032
2033
2034
2035
2036
2037
2036
&39
2010
204 |
2042
20/3
20(4
M5
24.76
29.O7
30.46
32.6.
35 75
38 62
a4_88
45 90
a7.89
76.01
77.U
51.38
53 32
55 79
57.61
59 35
61.37
52.84
54.43
66.14
100.55
70 00
7t.61
74.27
n.44
E0.gt
Nor6r Thsss rates willbe lunher adt st6d with th€ applicebl€ inlBgraloo chargo.
l{ot€i Th€ rar.3 shown in lhb labl€ hav. been compul.d using lh. U S. En rgy ln,ormatidr Adnid.ll.tion (ElA)'! Annu., Encryy
Odbot a)19, ,.l..tad Januxy 2019 S.. Annud Ena.gy Oulook 2019, T.U. 3.8 En6r0y Pdc6 by S.clor-Mount tn al
tnS.J v\rrv..ia gov/Mlook r&,trbl.3-r.l.plp
AVISTA Pago 2
30.48
31.62
32.90
34.19
36.03
37.10
38.m
42.20
4513
/15.56
45.m
46.53
47 _16
47.69
48.22
a8.73
19 22
49.70
5r.01
51.46
32.84
31.25
35 6r
37.68
39.r0
40.32
11_10
17.62
a7.93
46.35
48 82
49 30
49.79
50.29
50_77
51.25
51 72
53
'053 54
53.96
s8.62
/tl.611
42.96
a,{.06
49 56
53 49
53.25
53.32
5s.52
53 6r
54.r 6
54.55
54.95
55.36
55.78
57.34
37.74
56.13
5E 55
58.99
AVISTA
AVOIDEO COST FATES FOR NONSEASOTTAL HYDHO PROJECTSxtr,t,xyx
,turwh
l,l6w Conlrscts r.!d Rlpbccment Conlr.ctr wlttoul Full Crprclty Pryrnenls
Ellglbllily io.lhe5e r8tes ls llmlled to prolsclr smrllor thrn l0 aMW.
LEVELIZED NON.LEVELIZEO
CONTFACT
LENGTH
ftEARS)
ON.TINE YEAR
COMTRACT
YEAR
NON.LEVELIZEO
RATES2020 2021 2022 2023 202a 2025
1
3
6
?
6Il0tl
'12
r3
t4
t5
l6
17
t8
t9
20
2A 78
2A 92
2910
30.17
3r.1,1
32.18
3a.35
36 08
37.58
1012
42_29
43.t6
11.02
4,t.83
45.60
,t6.33
47.03
47.69
4.t2
44.92
23_O7
8.75
30 71
31.84
33 0r
35 53
37 a5
39 08
4t.69
11.25
45 1l
ir5_97
16 79
17.$
48.30
49.01
49.68
50.3r
50.s2
52.00
32_U
34.25
35.6r
39.10
It1.38
43.18
46 62
49.35
50 0E
50.84
51 5E
52 30
52.99
53.57y.31
54 93
55 52
56 71
57 25
s7 7A
35.75
37.11
41 50(}92
45 ?3
49 5a
5213530
53.61
54.29
5,19a
55.58
56 21
55.82
57 -41
57.98
59.2r
59.74
60 25
60 77
3€.62
4,t.69
{7.05
4E 69
52-83
*21
56.68
57.r8
57.72g_27
58.84
59.39
59.93
60.47
6r.75
62 26
62_75
63.26
63.78
2020
m21
20ux23
2t24
mz;
2026
&27
2024
2029
2030
2031
m32
m33
2034
2035
2036
2037
2038
2039
2040
2041
2012
2013
2014
?045
Not6: Thas€ ratas willb€ ludher adjualea, wilh lhe appcabla intalralion charoo
Nota: Th€ rataa aho{n ln lhi. tabl€ hav6 bosn compul.d urlng the U.S Enargy hlorm.tiJl1 Adninlslration (ElA)'6 Anrud En€Ey
Outlook 2019, rchalod Jenuary ?0r9. S€€ Annu.r €n .ey Oulooi 2019, Ttblr 3.8 En6Oy Pricrs by S€cior'Mountain st
htlpsr rnNw.ia.gov/oulhokrr6onabl.s-r.l.php
AVISTA Pag€ 3
30.48
3t.62
32.90
34.r 9
37 12
39.23
a0 96
4a 06
rt6 5l
17.13
18 27
a9 06
49 82
50 54
51-2s
51 91
52_51
53.r4
54.28
54 84
28.74
29-O1
30 4E
32.U
35 75
38.62
5t l9
52.30
54.39
13 23
75 02
5€ 16
60.81
52 7E
64.71
55 55
68 67
70 25
71 95
7378
9? 28
77 _47
79 59
4237
85 56
88 67
AVISTA
AVOIOEO COST RATES FOR SEASONAL HYDBO PROJECTS
xxxx, 2020
t/lilwhNr Contncl! ,nd ReplactmGnt Conlr.ct! wllhoul Full Crprclty Prymentr
Ellglblllty lor rhssB Et.r lE llmlled to p.olccls rrrllllc.lhln 10 lMW
LEVELIZED NON.LEVELIZED
CONTRACT
LENGTH
(YEARS)
ON-LINE YEAR
CONTRACT
YEAR
NON.LEVELIZEO
FATES2020 2021 2022 2023 20?4 2025
1
2
3
4
5
6
7
8I
r0II
12
t3
14
15
t6
't7
18
r9
20
28.79
28-92
29.10
3017
3r.14
32.18
3.13
33.9,{
3172
38.85
12-32
42.56
42.89
43.24
43.50
43.08
t4_37
11?5
45 12
/t5 /t9
n_07
29-75
30.7r
31.E4
3:t.0 |
3rt.06
34.91
35.73
10.11
a4 28
44 43
4a 70
45.00
15 31
a5.59
46 06
a6.43
a6 79
47.15
48.87
30 48
31.62
32 90
34 19
35 28
36 15
36.98
12.31
46.65
46.6G
46.8r
47.U
47.32
47.63
47.96
48.30
4a.65
49.00
50.83
5l.r 5
32.84
34.25
35.6r
36.71
37.5,r
3E.35
44.57
49.40
a9 lE
ilg 18
a9 29
491€
49_72
50 01
50.30
50 62
50.91
52 9r
5A 2l
35.75
37- 1a
38.20
38.91
39 71
47.05
s2.s1
51.95
51 72
51.57
51.71
5r.88
52.!0
52 31
52.61
52.90
55 0l
55 29
55 57
55 87
38.62
39.55
40.15
40 E9
49.83
56.06
5,(.43
54 15
54.05
54 07
s1-20
54.37
54.58
54.82
57.10
57.3i
57-58
57 67
58 20
2020
2021
2022
2023
2021
?o25
2a?5
a27
202r
202i
2030
2031
2032
m33
2034
2035
2036
2037
2038
2039
2040
2(xr
?o12
2043
2044
20as
28.74
25.07
30.,16
32_01
35 76
38 62
40.55
.1 50
4312
92.69
94.76
15_72
49.19
50.99
52 74
54.i|1
56 35
57.75
59.26
60.90
120-14
64 61
65 13
58.72'lt.*
74.61
Nola: A "aaaaonal hydro p.olacf b da,inad a5 a lanorallon ,icilily which producos al lea3l 55% o, ils lnnu.l 9.n...lirr duing the
nEdlhs ot Jun . July. .nd A{utt Ord€r 32802.
Not6 Thssc raies willbe lunhar adiust6d with lhe applicauo inlegr.tion chargo
Nola: Th. raba ahown in lhi. l.bL haya b.an coEprr.d 'r9ne ha U.S- Emrgy lr onnarql Adddllr.lbn (E|A)'B Annual Eie€y
Outloot mtg, r6l6es.d Ja.u.ry 2019. S€e AnrualErErgy Oullook 201S, T.ble 3.8 Erlarly Pric.3by S.clor-ti,lounL,n al
hllpsr/*ur-.1..0ov/oullmlc/.6o[bl6s-rst.php
AVISTA Paes 4
AVISTA
AVOIDEO COST RATES FOR OTHEF PROJECTS
nxx, m20
,riwh
llew Contr.ctt .nd ncplrcl}mrnl Conl,lc&r f,lthoul Full Clprcity Prymcnt3
Ellglblllly lor these rrl6s ls llmllcd lo prol?cls 8lnaller lhan 10 eMW.
LEVELIZED NON-LEVELIZEO
CONTRACT
LENCTH
(YEARS)
ON.LINE YEAR
CONIRACT
YEAN
NON-LEVEUZEO
RATES2A2A2021 2022 mX m21 2023
1
2
7I
9
l0
1t
l2
l3
11
t5
16
1l
r8
19
20
2A 7B
28-92
?3-10
30.t7
31 14
32 18
3517
38.05
10 23
42 0a
a3 62
41.99
16 28
17 47
18.55
49.58
50.54
51.a2
52 26
53 tN
29 07
2375
30.71
31.84
33.01
35 89
39.79
12.17
44 t1
a5 76
11.19
16.53
19-75
50.E/
5r.91
52.89
53 80
54 65
55 45
56 22
30 4E
3r.62
32.90
34.19
38.82
42 07
4{ 63
45.65
48.36
19.82
51.17
52_40
53.53
54.58
55.57
56.48
57.33
58.r4
5E 92
59 65
32.U
31-25
35 61
41.30{/92
17.63
49 70
51.40
52.83
54.16
55 37
56.49
57 _52
58.49
59.40
60.24
51.0,{
61.82
62 55
63 24
35 76
37.ra
1151
48 5!
51 27
53.27
5,{ 88
56.22
57-48
56.63
59.70
61.6?
5? 50
6:t.32
64.09
64.86
65.5t
66.26
66.33
38.62
19 a2
53 40
5519
57 5E
50.94
60 06
61.17
62.19
63.16
61.07
u.94
65.76
66.53
67 _27
5E.01
68_7'l
69.37
70 03
70_t0
2020
2021
m22
m23
2n24
2025
?026
2027
2!2a
2029
2030
2031
2032
203.1
2035
2035
2(]E7
2038
2039
2010
204 t
2M2
2043
20{/
2045
a.7a
2307
30.48
32.84
35.76
38.52
5r.02
e.27
54 50
65.70
67-37
64.74
71.54
73.66
75_75
T1.76
60.05
8t.79
83 66
85.66
88.43
90.10
92.01
s1.97
98 45
t 0r.45
Nole: 'oth€r projc.ts" r.lers to projecls other than *ind. rolar, non-seaso.al hyd.o. and t€asonal hydro Froj?cls These'Oth6r
p.olocts' may rEhrde (bul ar€ not limilod lo); cofon€rali.tr!, tiolnass, tiogas, hndfiligas, or geolh€rmal p.oiecis.
Notc: Th. r.r.s.hown in lhis lEH6 h.ve b€.n corputod using th. U.S. En€rgy Inlo.ma[on Adn nElr.tion (ElA)a Annu.lEnargy
Oullooi 2019, i.l.a5.d Januxy 2019. 5.c Annuel En.r0y Oulroo| 2019, TaU.3 6 En€rly Pricet by S.clor.MoiJnreln El
http3 //Myr.ara.gov/oullookralo^tuc!-rc,.php
AVISTA P.or 5