20240111Final_Order_No_36056.pdf

ORDER NO. 36056 1
Office of the Secretary
Service Date
January 11, 2024

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On August 24, 2023, pursuant to Order No. 35810, Avista Corporation d/b/a Avista
Utilities (“Company” or “Avista”) applied to the Commission for approval of its capacity
deficiency period used for its avoided cost calculations (“Application”). The Company requested
its Application be processed by Modified Procedure.
On September 14, 2023, the Commission issued a Notice of Application and set deadlines
for public comments and the Company’s reply. Order No. 35923. Commission Staff (“Staff”)
submitted comments to which the Company replied. No other comments were received.
With this Order, the Commission approves the method used to determine the capacity
deficiency period—with the first deficit date to be determined after the Company has submitted a
satisfactory compliance filing.
BACKGROUND
Under the Public Utility Regulatory Policies Act of 1978 (“PURPA”), the Commission has
established a surrogate avoided resource (“SAR”) method and an Integrated Resource Plan (“IRP”)
method to calculate avoided cost rates for qualifying facilities (“QFs”). Under both methods, a QF
receives capacity payments only after the utility reaches the applicable capacity deficit date. Order
No. 32697.
The utility determines the capacity deficit date through the biennial IRP planning process
and submits it to the Commission in a proceeding outside the IRP docket. The capacity deficit date
determined in the IRP process is presumed to be correct as a starting point but will be subject to
the outcome of the subsequent capacity deficiency case. Order No. 32697.
In 2017, the Commission amended Order No. 32697 to require “that each Idaho electric
utility shall submit its updated capacity deficiency filing after the Commission has acknowledged
its IRP report, rather than upon its IRP filing….” Order No. 33917 at 4. On June 8, 2023, the
Commission further modified its instruction in Order No. 35810 and required Idaho Power
IN THE MATTER OF AVISTA
CORPORATION’S APPLICATION TO
UPDATE AND ESTABLISH ITS CAPACITY
DEFICIENCY PERIOD TO BE USED FOR
AVOIDED COST CALCULATIONS
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CASE NO. AVU-E-23-12

ORDER NO. 36056

ORDER NO. 36056 2
Company, Rocky Mountain Power, and Avista to file capacity deficiency cases within 30 days of
their respective IRPs being filed. The Company filed its 2023 IRP on June 1, 2023.1
APPLICATION
The Company stated that its 2023 IRP identified January 1, 2034, as its new capacity
deficiency date. The Company estimated its capacity deficiency date was later than the capacity
deficiency date initially estimated in its 2021 IRP because the Company has acquired significant
new resources since that time; the Company also listed certain new resources in its Application.
The Company represented that it did not include any Colstrip data into its capacity filing
because the exact date of the transfer of that resource to NorthWestern Energy was not yet
known—although the Company did state that the transfer should happen at the end of 2025.
STAFF COMMENTS
Staff recommended that the determination of the first capacity deficiency date and
deficiency amounts for new PURPA contracts should rely on a compliance filing incorporating
the Company’s updated peak load forecast and a Load and Resource Balance (“L&R”). Staff stated
that the L&R should be derived using the Company’s traditional method (“Traditional Method”),
rather than the method employed in the Company’s Application. In November 2023, the Company
indicated that it would have a new load forecast. Staff expressed concerns about the new method
used by the Company to quantify capacity amounts for meeting customer loads reliably.
Consequently, Staff suggested that, before the next deficiency date update case, the Company
should (1) demonstrate that its Qualified Capacity Contribution (“QCC”) values align with its
resource generation capabilities relative to peak loads and (2) develop a Planning Reserve Margin
(“PRM”) based on reliability targets. If the Commission agrees, Staff will verify the updated load
forecast and L&R through a compliance filing.
1. Load and Resource Balance
Staff compared the Company’s winter and summer capacity positions and found that, due
to small but significant differences in capacity positions between the Company’s proposed method
and the Traditional Method (with the Traditional Method consistently yielding higher capacity
positions), it is reasonable to continue using the Traditional Method until the Company addresses

1 The Company stated that it originally submitted its Capacity Deficiency filing on June 20, 2023, but that it was not
received by the Commission.

ORDER NO. 36056 3
Staff’s concerns with the proposed method. This matter is further discussed below and illustrated
in Table Nos. 1 and 2.
Table No. 1: Winter Capacity Position Comparison

Year
Capacity positions in
January under proposed
method (MW)
Capacity positions
in January under
traditional method
(MW)
Capacity
Difference in
January (MW)
2024 224 318 94
2025 214 308 94
2026 122 215 93
2027 150 233 83
2028 140 224 83
2029 113 186 73
2030 99 172 73
2031 76 148 72
2032 53 126 72
2033 35 107 72
2034 (52) (8) 43
2035 (76) (32) 43
2036 (166) (125) 41
2037 (196) (155) 41
2038 (227) (186) 42
2039 (261) (219) 42
2040 (297) (256) 42
2041 (405) (343) 62
2042 (730) (670) 60
2043 (790) (725) 66
2044 (842) (777) 66
2045 (896) (830) 66

ORDER NO. 36056 4
Table No. 2: Summer Capacity Position Comparison

Year
Capacity positions in
August under
proposed method
(MW)
Capacity positions in
August under
traditional method
(MW)
Capacity
Difference in
August (MW)
2024 264 350 85
2025 326 411 85
2026 233 316 83
2027 271 355 84
2028 262 346 84
2029 228 308 79
2030 208 287 79
2031 184 273 90
2032 158 248 90
2033 128 218 90
2034 40 105 65
2035 16 81 65
2036 (49) 8 57
2037 (82) (25) 57
2038 (116) (61) 55
2039 (152) (97) 55
2040 (185) (129) 55
2041 (281) (208) 73
2042 (572) (486) 86
2043 (636) (542) 95
2044 (686) (591) 95
2045 (738) (644)
2. Loads in the L&R
The loads in the L&R are comprised of two things: the load forecast and the PRM.
i. Load Forecast
Staff was concerned about the accuracy of the proposed load forecast—prepared 15 months
before the Commission’s decision on capacity deficiency and the subsequent avoided cost rates.
Staff recommended filing an updated L&R that explained the differences between the updated and
proposed load forecasts. Staff also noted that the Commission mandates the use of the latest
information for calculating rates. Staff believed the current forecast—developed in summer
2022—was outdated. Staff noted the Company was expected to have a more current forecast in
November 2023 as discussed earlier.

ORDER NO. 36056 5
ii. The PRM
The PRM is incorporated into the load forecast to ensure that there is adequate additional
capacity for meeting reliability targets. In the 2023 IRP, the Company used “16 percent of the
winter load and 7 percent of the summer load as PRMs,” determined through simulations to
achieve a five percent loss of load probability (“LOLP”). Staff Comments at 6. However, in the
same IRP, the Company adjusted the LOLP values to “22 percent for winter load and 13 percent
for summer load” to align with capacity positions from its Traditional Method, rather than
explicitly deriving PRMs to meet reliability targets. Id. Although Staff agreed this approach was
reasonable for maintaining short-term capacity positions, Staff recommended deriving PRMs from
the Company’s reliability target with capacity contribution values developed in an appropriate
manner.
3. Resources in the L&R
Staff’s assessment of resources in the L&R centered on two key aspects: (1) determining
if the resources included in the L&R were appropriate for establishing the capacity deficiency date
for avoided cost rates, and (2) evaluating the reasonableness of capacity contribution factors at the
system peak for those resources.
i. Resources included in the L&R
Staff believed that the following resources were reasonable and appropriate to include in
the L&R: the Colstrip coal plant,2 the Lancaster natural gas purchased power agreement (“PPA”),
the Chelan PUD Hydro PPA, the Columbia Basin Hydro PPA, and the Clearwater Wind PPA. Of
note, for the PPA’s listed, Staff stated that each had been signed, executed, and did not require
additional Commission approval.
ii. Resource Capacity Contributions
The Company utilized QCC values from the Western Resource Adequacy Program
(“WRAP”) to determine its resource capacity within the L&R (“WRAP Method”). The Company
justified this by asserting alignment with historical performance within a regional context during
peak periods. However, Staff suggested that the Company should focus on its own system’s peak
loads and resource contributions rather than relying on WRAP QCC values—as regional variations
might not match the Company’s peak hours. Staff recommended the Company use the Traditional

2 Staff stated that it was appropriate to remove the Colstrip coal plant from the L&R starting in 2026 due to the
Company’s transfer of ownership agreement with Northwestern Energy that had been signed and fully executed.

ORDER NO. 36056 6
Methods for developing the L&R and determining capacity deficiency dates and amounts until
evidence demonstrates the representativeness of WRAP QCC values for the Company’s system
peaks.
REPLY COMMENTS
The Company stated that it agreed with Staff’s recommendation to update the load forecast
and also use the Traditional Method to determine its capacity position. The Company noted Staff’s
concerns with the filing in this case and proposed a new method for future filings.
The Company agreed with Staff’s recommendation to update the load forecast when
more current data becomes available in late November 2023. The Company stated it agreed with
Staff regarding the inclusion of signed resources and exclusion of the Colstrip for capacity
determination starting in 2026. The Company stated that it wished to use the Traditional Method
for this filing; however, the Company proposed a modified version of the WRAP Method (with
PRMs from the Company’s reliability targets) in future filings (“Modified WRAP Method”). The
Company described the Modified WRAP Method as follows:

1) Avista will continue to use the Western Reginal Adequacy Program’s
(WRAP’s) qualified capacity contribution (QCC) methodology and accounting for
resources.
2) Any variable energy resource (VER), demand response, or energy storage
facility included in the resource position will include a modified QCC for future
years given expected changes in its ability to meet regional loads. This will either
use the methodology described in the 2023 IRP (Chapter 6, pages 22-23) or will
use any future guidance provided by the WRAP, if available.
3) Avista will conduct a loss of load probability (LOLP) or reliability study in
the 2025 IRP process to determine the appropriate Planning Reserve Margin (PRM)
necessary to achieve a 5% LOLP using the WRAP accounting methodology and
the resulting resource QCC values.

Company Reply Comments at 1-2. The Company’s reply comments also included a significant
amount of additional information for future filings that was not related directly to this filing.
COMMISSION DECISION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-501, -502, and
-503. Idaho Code § 61-501 authorizes the Commission to “supervise and regulate every public
utility in the state and to do all things necessary to carry out the spirit and intent of the [Public
Utilities Law].” Idaho Code §§ 61-502 and -503 empower the Commission to investigate rates,
charges, rules, regulations, practices, and contracts of public utilities and to determine whether

ORDER NO. 36056 7
they are just, reasonable, preferential, discriminatory, or in violation of any provision of law, and
to fix the same by order. In addition, the Commission has authority under PURPA and Federal
Energy Regulatory Commission (“FERC”) regulations to set avoided costs, to order electric
utilities to enter fixed-term obligations for the purchase of energy and capacity from QFs, and to
implement FERC rules. The Commission may enter any final order consistent with its authority
under Title 61 and PURPA.
The Commission has reviewed the record, including the Company’s filing and attachments,
Staff’s comments, and the Company’s reply. The Commission finds that a compliance filing is
necessary and directs the Company to use the Traditional Method for deriving an updated L&R
using the peak load forecasts for both summer and winter with updated information as discussed
in Staff’s Comments. Likewise, the Commission orders the Company to show that the method
used to derive the Company’s QCC values reflect the generation capacity of the Company’s
resources relative to the peak loads within the Company’s system before the next capacity
deficiency update case. The Commission also orders the Company to develop its PRM driven by
the Company’s reliability target and appropriately developed capacity contribution factor system
before the next capacity deficiency update. With these conditions in mind, the Commission finds
it reasonable to approve the method used to determine the Company’s capacity period. The first
deficit date will be determined after the Company has submitted a compliance filing that corrects
the necessary issues, and provides the desired explanations, as recommended by Staff and
discussed above.
ORDER
IT IS HEREBY ORDERED that, within 21 days, the Company must file an updated L&R
as a compliance filing using the Company’s Traditional Method for deriving it by using the most
current peak load forecasts for both winter and summer.
IT IS FURTHER ORDERED that the Company is to demonstrate that the method and
inputs used to derive the Company’s QCC values reflect the generation capacity of the Company’s
resources relative to the peak loads within the Company’s system prior to the next capacity
deficiency update.
IT IS FURTHER ORDERED that the Company is to develop its PRM driven by the
Company’s reliability target and appropriately developed capacity contribution factor system prior
to the next capacity deficiency update.

ORDER NO. 36056 8
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 about any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 11th day of
January 2024.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER
ATTEST:

Monica Barrios-Sanchez
Interim Commission Secretary

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