20211022Application.pdf

RrLEY NEWTON (rSB #r t202)
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208)-334-03r8
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BOISE, ID 83714
Attomey for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF COMMISSION STAX'F'S
APPLICATION TO UPDATE AYISTA
CORPORATION'S COST OF CAPITAL INPUTS
IN TIIE SURROGATE AVOIDED RESOURCE
METHOD
CASE NO. AYTI-E-21-16
APPLICATION
Pursuant to the Public Utility Regulatory Policies Act of 1978 ("PURPA") and the
implementing regulations of the Federal Energy Regulatory Commission ("FERC"), the Idaho
Public Utilities Commission ("Commission") has approved a Surrogate Avoided Resource
("SAR") method for calculating the avoided cost rates PURPA qualifuing facilities ("QFs") are
paid by Idaho Power Company, Avista Corporation, and PacifiCorp dba Rocky Mountain Power.
Avista Corporation's ("Avista") latest general rate case (Case No. AW-E-21-01) has triggered an
update of Avista's cost of capital inputs in the SAR Model.
In support of this Application, Commission Staffrepresents as follows:
I. BACKGROTINI)
The Commission calculates and publishes SAR Method rates for QFs that are under the
applicable resource type project eligibility cap. The SAR Model uses each utility's approved cost
of capital from their last general rate case. Avista's current cost of capital used in the SAR Model
was determined in Case No. AW-E-19-04.
On Septemba 1,2021, the Commission issued Order No. 35156, in Avista's most recent
general rate case (Case No. AW-E-21-01). That order kiggers a needed update of Avista's cost
of capital inputs in the SAR Model. Avista's cost of debt changed from 5.2%oto 4,70Yo, and its
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cost of common equity changed from 9.5o/o to 9.40%o. As a result, the weighted cost of capital-
which depends on the cost of debt and the cost of common equity- changed from7 .35o/oto 7 .05%.
Weighted cost of capital affects avoided cost rates in the SAR Model in two ways: (1) it
represents the avoided cost to a utility to finance construction of new facilities; and (2) it is used
as a discount rate in the process of levelizing avoided cost rates. When the weighted cost of capital
changes it impacts levelized avoided cost rates in opposite directions. For example, when weighted
cost of capital decreases, as it has in this case, the cost to finance new facilities decreases, lowering
avoided cost of capacity. However, a lower weighted cost of capital also causes higher avoided
cost rates when determining levelized rates because cash flows in the future are discounted less
when converted to present value. The final change in levelized avoided cost rates depends on the
net effect. Therefore, for levelized rates, new avoided cost rates can be higher or lower than the
current avoided cost rates, depending on the contract length. However, non-levelized rates are
only affected by the decrease in cost to finance new facilities and are consistently lower than the
current avoided cost rates.
II. TIIE UPDATES
l. Stafffirst updated the weighted cost of capital on Tab "AvistaCapCaChg" of the
SAR Model, which calculates Avista's Carrying Charge Rate. Next, Staff updated Cell E64
(UTILITY WEIGHTED COST OF CAPITAL) and Cell E65 (CAPITAL CARRYING CHARGE)
of Tab "AVOID NEW". Lastly, Staff verified Cell D37 (UTILITY WEIGHTED COST OF
CAPITAL) and Cell D50 (CAPITAL CARRYING CHARGE) of Tab "AVOID NEW" were
correctly used.
2. lncluded in this Application are the following Attachments:
a. An updated SAR Model with all the updates incorporated as mentioned
above.
b. Attachment A (Avista Avoided Cost Rates for New Contracts).
c. Attachment B (Avista Avoided Cost Rates for Renewal Contracts).
IIL MODIFIED PROCEDURE.
Commission Staff believes that a hearing is not necessary to consider the issues presented
herein and respectfully requests that this Application be processed under Modified Procedure, i.e.,
by written submissions rather than by hearing. Commission Rules of Procedure2}l - 204, IDAPA
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31.01.01.201-.204. If however, the Commission determines that a technical hearing is required,
the Commission Staffstands ready to prepare and present its testimony in such hearing.
IV. COMMT]NICATIONS AND SERVICE OF PLEADINGS.
Communications and service of pleadings, exhibits, orders, and other documents relating
to this proceeding should be sent to the following:
Riley Newton Mike Louis
Deputy Attorney General for the Idaho Public Idaho Public Utilities Commission
Utilities Commission P.O. Box 83720
P.O. Box 83720 Boise,lD 83702-0074
Boise, Idalro 83702-0074 [e-mail]
riley.newton@ouc. idaho. sov
v. REQUEST FOR RELTEF.
Commission Staffrespectfully requests the Commission issue an order: (l) authorizing this
matter to be processed by Modified Procedure; (2) approving the updates to the SAR Model as
described herein; and (3) approving the updated SAR Method avoided cost rates shown in the
attachments to this Application.
Respectfully submitted this 22 aay of October 2021.
Riley N
Deputy Attorney General
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