20200207Notice_of_Application_Order_No_34550.pdf

Office of the Secretary
Service Date
February 7,2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA'S )CASE NO.AVU-E-20-01
APPLICATION FOR AN ORDER )
AUTHORIZING ACCOUNTING AND RATE )NOTICE OF APPLICATION
MAKING TREATMENT OF COSTS )
ASSOCIATED WITH THE ENERGY )NOTICE OF
IMBALANCE MARKET )MODIFIED PROCEDURE
)ORDER NO.34550
On January 10,2020,Avista Corporation ("Company")applied to the Commission for
an order allowing the Company to defer incremental operation and maintenance costs associated
with joiningthe California IndependentSystem Operator's ("CAISO")Western Energy Imbalance
Market ("EIM").The Company seeks to defer those costs until they can be included in base rates
through a general rate case proceeding.The Company signed an EIM implementation agreement
with the CAISO on April 25,2019.The Company requests that its Application be processed by
Modified Procedure.
The Commission now issues this Notice of Application and Notice of Modified
Procedure setting public comment and Company reply deadlines.
BACKGROUND
An energy imbalance market pools generation of interconnected electricity providers
within a region and dispatches those resources with the goal of more accurately matching actual
production with actual demand.See Order No.33706.An energy imbalance market operates on a
nearly real-time basis with multipleparticipants,as opposed to more conventional long-term,
bilateral contracts which deliver energy in hourlyblocks.Id.
In November 2014,the CAISO and PacifiCorp formed the EIM.The EIM is a five-
minute market administered by the CAISO.Id.The market utilizes an automatic model to identify
the least-cost energy resources to serve real-time customer demand.Id.EIM participants bid
resources into the market,and the operator dispatches those resources based on the marginal price
for energy imbalances factoring in load and available generation.Id.The Company has been
actively monitoring the operation and expansion of the EIM.Application at 2.The Company also
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO.34550 1
regularly participates in regional meetings and dialogue associated with the EIM,including the
potential expansion of the EIM to a day ahead market.Id.
NOTICE OF APPLICATION
YOU ARE HEREBY NOTIFIED that the Company expects to "go live"with the EIM
by April 1,2022.The Company's decision stems from the risk associated with being a non-EIM
participant'and the changing resource portfolio in its Balancing Authority Area ("BAA").
YOU ARE FURTHER NOTIFIED that the Company has recently signed two
renewable energy power purchase agreementS2and expects to integrate more projects as state clean
energy policies change and prices continue to drop for renewables.3 The Company stated that the
ability to balance and regulate load and renewable resources by leveraging EIM resources,instead
of relyingsolely on Company resources for regulation and flexible ramping,provides operational
benefits.
YOU ARE FURTHER NOTIFIED that according to the Company's Application,over
75 percent of the load in the western interconnection has committed to joiningthe EIM by 2022,
and non-participation will cause growing liquidity risk,forcing those non-participating utilities to
hold more reserves to minimize in-hour fluctuations.*
YOU ARE FURTHER NOTIFIED that based on a third-partyconsultant's assessment,
the Company estimates it will cost between $21.4 million and $26.7 million,on a system basis,to
fully prepare for market entry.These costs,which the Company seeks to defer for later recovery
in rates,are primarily related to developing the network model per the CAISO's requirements
including EMS/SCADA integration,development of a generation resource bid strategy and
population of the generation resource master file,conducting request for proposals and selecting
new market related software applications,completion of modeling into the CAISO test
environment,and employee training.
1 Recently Idaho Power and Powerex have integrated into the EIM.In addition,Seattle City Light,Northwestern Energy,and
Bonneville Power Administration will all join the market in the next two years.
2 The Company has recently signed power purchase agreements for 20 Megawatts ("MW")of Solar that came online in
December2018 and 145 MWs of wind that will come online in late 2020.
*As additional variable resources are integrated into the Avista BAA and the EIM grows,it will become more efficient and cost-
effective for Avista to rely on the EIM to help meet the in-hour variability,instead of holding back and dispatching Avista-owned
resources to meet the flexible ramping requirements,according to the Company's Application.
4 The Company cites "EIM participants are less likely to conduct bilateral transactions close to the operating hour,due to the need
to pass EIM sufficiency and flexible ramping tests and meet other market transactions closing times that occur well before the
operating hour.Holding additional reserves will lead to higher overall power supply costs since excess available resources can't be
fully optimized or additional resources may need to be purchased,"according to the Company.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO.34550 2
YOU ARE FURTHER NOTIFIED that the Company expects to incur $3.5 million to
$4.0 million in system costs per year to operate in the EIM.These ongoing,annual costs will
include maintenance costs for software licenses and communication networks,adding
approximately 12 new employees to facilitate market operations and settlements,a new five-
person 24x7 hour EIM operating desk,and CAISO EIM fees.
YOU ARE FURTHER NOTIFIED that the Company retained a different third-party
consultant to assess potential EIM benefits.The assessment estimated the Company could see
system annual benefits between $2 million and $12 million.The assessment used four main
assumptions:(1)the amount of flexible hydro bid into the market;(2)the amount of transmission
that is made available for market transactions;(3)the amount of renewable generationintegrated
into the Company's BAA,and data sources from other EIM participants estimated benefits.The
assessment produced 24 scenarios that the Company used to estimate annual benefits of $5.8
million.
YOU ARE FURTHER NOTIFIED that using the cost and benefit assessments,the
Company performed a breakeven analysis.To break even in ten years with integration costs of
$21.4 million,the Company must realize system annual benefits averaging about $5.0 million.If
the integration costs increase to $26.7 million,the Company must realize system annual benefits
averaging about $6.0 million per year.
YOU ARE FURTHER NOTIFIED that the Application is available for public
inspection during regular business hours at the Commission's office.These documents are also
available on the Commission's web site at Click on the "ELECTRIC"icon,
select "Open Cases,"and then click on the case number shown in the caption of this document.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission's jurisdiction under Title 61 of the Idaho Code.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be conducted
pursuant to the Commission's Rules of Procedure,IDAPA 31.01.01.000 et seq.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has determinedthat the public
interest may not require a formal hearing in this matter,and that it will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Commission's Rules of Procedure,IDAPA
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO.34550 3
31.01.01.201 through .204.The Commission notes that Modified Procedure and written comments
have proven to be an effective means for obtaining public input and participation.
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this
Application must file a written comment in supportor opposition with the Commission by
March 4,2020.The comment must contain a statement of reasons supporting the comment.
Persons desiring a hearing must specifically request a hearing in their written comments.Written
comments concerning this Application shall be mailed to the Commission and the Company at the
addresses reflected below:
For the Idaho Public Utilities For Avista:
Commission:
Commission Secretary David Meyer
Idaho Public Utilities Commission Patrick Ehrbar
P.O.Box 83720 Avista Utilities
Boise,ID 83720-0074 1411 E.Mission Avenue
P.O.Box 3727
Street Address for Express Mail:Spokane,WA 99220-3727
Building 8,Suite 201-A
Boise,Idaho 83714
These comments must contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission's home page at Click the "Consumers"tab then click the "Case
Comment Form"and complete the comment form using the case number as it appears on the front
of this document.
YOU ARE FURTHER NOTIFIED that the Company must file any reply comments by
March 11,2020.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are received
within the time limit set,the Commission will consider this matter on its merits and enter its Order
without a formal hearing.If written comments are received within the time limit set,the
Commission will consider them and,in its discretion,may set the same for formal hearing.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO.34550 4
ORDER
IT IS HEREBY ORDERED that the Company's Application be processed by Modified
Procedure,Rule 201-204 (IDAPA 31.01.01.201-.204).Persons interested in submitting written
comments must do so by March 4,2020.The Company must file any reply comments by March
11,2020.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of February 2020.
PAUL K A Ë),PRESIDENT
I INE RAPER,C MMIŠSIONER
ERIC A ER ON,COMMISSIONER
Diane M.Hanian '
Commission Secretary
I:\Legal\ELECTRIC\AVU-E-20-01\Orders\AVUE2001_NtcAppModdh.docx
NOTICE OF APPLICATION
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