20240214Staff Letter to AVU.pdf

P.O. Box 83720, Boise, Idaho 83720-0074 Telephone: [phone], Fax: [phone]
11331 W. Chinden Blvd., Bldg. 8, Suite 201-A, Boise, Idaho 83714

February 14, 2024

Via E-Mail:

John Lyons
[e-mail]
Avista Utilities
1411 E. Mission
PO Box 3727
Spokane, WA 99220-3727
Shawn Bonfield
[e-mail]
Avista Utilities
1411 E. Mission
PO Box 3727
Spokane, WA 99220-3727

UPDATES TO CAPACITY DEFICIENCY USED IN DETERMINING AVOIDED COST
RATES; ORDER NO. 36056 IN CASE NO. AVU-E-23-12.

On August 24, 2023, Avista Corporation d/b/a Avista Utilities (“Company”) applied to
the Commission for approval of its capacity deficiency period used for its avoided cost
calculations.
On January 11, 2024, the Commission issued Order No. 36056 in Case No. AVU-E-23-
12, approving “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.”
Order No. 36056 at 1. Specifically, the Order required the Company to use the Traditional
Method to determine the Load and Resource Balance (“L&R”) with the most current peak load
forecasts for both winter and summer. Order No. 36056 at 7.
On January 31, 2024, the Company filed a compliance filing to comply with Order No.
36056. The load forecast contained in the compliance filing was created by Applied Energy
Group (“AEG”) based on long-term projections of energy use given customer growth and
technology availability. The Company received this load forecast on January 29, 2024.
On February 5, 2024, the Company filed a revised compliance filing to modify its load
forecast to reflect inclusion of delivery losses, removal of the impact of net metered solar
generation on the winter peak load forecast, and removal of the impact of cooling load shapes on
Idaho Public Utilities Commission

Page 2 of 3

P.O. Box 83720, Boise, Idaho 83720-0074 Telephone: [phone], Fax: [phone]
11331 W. Chinden Blvd., Bldg. 8, Suite 201-A, Boise, Idaho 83714
the winter peak load forecast. Staff believes that these changes are reasonable and that the
revised load forecast is the most current peak load forecast, which complies with Order No.
36056.
The updated L&R shows that the first capacity deficit period is 2033. Staff updated the
Surrogate Avoided Resource (“SAR”) Model and re-calculated avoided cost rates for new
contracts to reflect the new capacity deficit information. Attachment A shows the updated
published avoided cost rates for new contracts.1
The capacity deficiency information is entered on Tab “Input – Avista IRP” and is used
by Tab “Input – Load and Resource” in the SAR Model. As a result, the avoided cost of
capacity will be paid to new projects starting in the first deficit year of 2033. For example, as
shown in Column AG on Tab “AVOID NEW” tab, the capacity payment will start in 2033.
For new “other”2 type of qualifying facilities (“QFs”), because the Company’s first
deficit date occurs in 2033 with a deficit amount of 4 MW, only partial capacity payments that
correspond to the 4 MW deficit are available in 2033, when the nameplate of the QF is above 4.3
MW (4.3 MW * 93% summer or winter on-peak capacity factor = 4 MW). In other words, if the
nameplate capacity under these specific circumstances is above 4.3 MW, the avoided cost rates
will vary with the nameplate capacity of the QF, and as a result, the Company should use the
SAR Model to calculate the specific rates for year 2033. If the nameplate is smaller than 4.3
MW, the avoided cost rates contained in Attachment A apply. This does not affect the avoided
cost rates of QFs seeking a renewal contract if they get paid for capacity at the end of the QF’s
previous contract term or they have already contributed to meeting the Company’s capacity
needs during the previous contract. Under these circumstances, the QF should receive full
capacity payments from the start of the renewal contract term. Rates for renewal contracts with
immediate capacity payments can be generated by the SAR Model by choosing “Replacement
contract” on Tab “AVOID NEW”, and the resulting rates will be shown on Tab “AVISTA NF
HLH LLH Levelized” and Tab “AVISTA NF HLH LLH Non-levelized.”
Please review these attachments and file a response with the Commission by February 20,
2024, stating whether the updates to the SAR model and the calculations were made correctly.
Please contact Yao Yin ([e-mail]) if you have any questions.

1 Published avoided cost rates for renewal contracts are not affected by the new first capacity deficit date because
those rates contain capacity payments from the first year of the contract term.
2 The “other” generation type category includes QFs such as biomass, co-generation, or geothermal.
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P.O. Box 83720, Boise, Idaho 83720-0074 Telephone: [phone], Fax: [phone]
11331 W. Chinden Blvd., Bldg. 8, Suite 201-A, Boise, Idaho 83714

Sincerely,

Michael Duval
Deputy Attorney General

Enclosures

I:\Legal\ELECTRIC\AVU-E-23-12_CapDef\AVUE2312_20240214Ltr.docx