20040621Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:JUNE 16, 2004
SUBJECT:CASE NO. GNR-04-1 (Idaho Power, Avista, PacifiCorp)
ADJUSTABLE PORTION OF AVOIDED COST RATE
REVISED/UPDATED CALCULATION FOR EXISTING CONTRACTS
CASE NO. PAC-04-3 (PacifiCorp)
ANNUAL VARIABLE ENERGY RATE ADJUSTMENTS -
1992 AMENDMENT QF CONTRACTS
The Idaho Public Utilities Commission in Order No. 28708, Case No. GNR-99-
established a methodology for the annual adjustable rate portion of avoided costs for those QF
contracts using variable costs associated with Colstrip, a coal-fired generating facility in
southeast Montana. For those QF contracts with Colstrip-related fuel costs and variable O&M
future Colstrip variable cost adjustments are to be calculated by using FERC Form 1 Colstrip
Unit Coal Costs per megawatt hour (MWh) and adding $2.00/MWh (the average variable O&M
cost of Colstrip plus 20~/MWh for generation taxes plus a five percent (5%) adjustment for line
loss). As computed by Commission Staff the Colstrip related adjustable rate should change from
64 mill/kWh to 8.88 mill/kWh. The same calculated rate revision under the avoided cost
methodology is used by Avista, PacifiCorp dba UP&L and Idaho Power Company. This change
in the variable rate affects existing contracts under the previous SAR methodology.
The adjustable portion of the avoided cost rates under Sumas-based methodology is
based on annual average gas prices indexed at Sumas, Washington. As reported by A vista, the
indexed gas prices have increased by $ 1. 98/mmbtu. The approved gas price of $3.33/mmbtu
plus the $1.98/mmbtu increase results in a gas price of $5.31/mmbtu for the 2004-2005 year.
This equates to a SAR fuel cost of 39.03 mill/kWh as used in the model.
DECISION MEMORANDUM
The Commission Staffby letter dated May 28 2004, prepared by Staff Engineer Rick
Sterling, calculated changes to the annual adjustable rate portion of avoided costs for those QF
contracts using variable costs associated with Colstrip and Sumas for review by the respective
utilities. Avista, Idaho Power and PacifiCorp by letter responses (attached) indicated that Staffs
calculations are correct.
In accordance with Order No. 29316, the adjustable portion of the avoided cost rate
for existing PacifiCorp contracts with year 1992 amendments has also been recomputed.
Beginning on July 1 , 2003, the adjustable portion for these contracts was ordered to be equal to
the average cost of fuel for the Carbon, Hale, Naughton, Huntington and Hunter generating
plans, including a variable O&M component of $1.51 but exclusive of generation taxes and a
line loss adjustment. The variable energy rate applicable to deliveries commencing July 1 , 2004
extending through June 30 2005 has been computed by PacifiCorp to be $10.52/MWh, an
increase from $10.1 7 last year.
Commission Decision
Under avoided cost methodology the adjustable portion of avoided cost rates for
existing contracts is calculated annually for an effective date of July 1. A vista, Idaho Power and
PacifiCorp agree with Staffs proposed calculations. Also adjusted annually is the adjustable
portion of avoided cost rates for existing PacifiCorp contracts with year 1992 amendments.
PacifiCorp for those contracts has computed the new variable energy rate. Does the Commission
agree with the proposed changes in the variable rates?
Scott Woodbury
bls/M:GNREO401 PACEO403 sw
DECISION MEMORANDUM