20080606Decision Memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER RED FO RD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
FROM:SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
DATE:JUNE 6, 2008
SUBJECT:CASE NO. GNR-08-01 (Idaho Power, Avista, PacifiCorp)
ADJUSTABLE PORTION OF A VOIDED COST RATE
REVISEDfUPDA TED CALCULATION FOR EXISTING CONTRACTS.
CASE NO. PAC-08-04 (PacifiCorp)
ANNUAL VARIABLE ENERGY RATE ADJUSTMENT -
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 11.47 mill/kWh to 12.06 mill/kWh. The same calculated rate revision under the avoided
cost methodology is used by A vista, PacifiCorp dba Rocky Mountain Power 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 Avista, the
indexed gas prices have increased by $0.24/MMBtu. The approved gas price of $6.940/MMBtu
plus the $0.24/MMBtu increase results in a gas price of $7. 18/MMBtu for the 2008-2009 year.
DECISION MEMORANDUM
This equates to a SAR fuel cost of 50.98 mill/kWh using a heat rate of7 100 Btu/kWh as used in
the model for potential future contracts in accordance with Order No. 29124. For existing
contracts signed under an assumed heat rate of7 350 Btu/kWh, this equates to a SAR fuel cost of
52.77 mill/kWh.
The Commission Staff by letter (attached) dated May 5 , 2008 , 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 Staff s 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
plants, 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 , 2008
extending through June 30, 2009 has been computed by PacifiCorp to be $14.11/MWh, an
increase from $12.17 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 D. Woodbury
Deputy Attorney General
bls/M:GNR-O8-01 PAC-O8-04 sw
DECISION MEMORANDUM
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dahoPublic Utilities Commission
" Mt;.ruck Sterling
Statehouse Mail
West 472 Washington
Boise, ill 83720
RE: Case No. GNR-08-
Dear Mr. Sterling:
Avista is responding to the notice dated May 5,2008 regarding the annual revision and
updated calculation cifthe adjustable portion of the avoided cost rates. The Company is
in agreement with the Co1strip adjustable rate of 12.06 mill/kWh and the annual average
gas price of $7 . 18/MMBtu for the 2008-2009 year.
Thank you,
Clint Kalich
Manager of Resource Planning and Power Supply Analyses
RECEIVED
DB tiAY -5 PH 4= 02
STATE OF IDAHO IDAHO PUI3U('
UTILIllES COMMISSION
OFFICE OF THE ATIORNEY GENERAL
LAWRENCE G, WASDEN
May 5, 2008
Avista Corporation
Blair Strong
Paine, Hamblen, et al
717 W. Sprague Avenue, Suite 1200
Spokane, WA 99201-3505
Clint Kalich
Avista Utilities
1411 E. Mission
PO Box 3727
Spokane, WA 99220-3727
Michael Andrea
Avista Utilities
1411 E. Mission
PO Box 3727
Spokane, WA 99220-3727
Rocky Mountain Power
Dean Brockbank
PacifiCorp dba Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Greg Duvall
Laren Hale
PacifiCorp dba Rocky Mountain Power
825 NE Multnomah Street
Portland, OR 97232
Mark Moench
General Counsel
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Ted Weston
PacifiCorp dba Rocky Mountain Power
One Utah Center
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Idaho Power Company
Barton L. Kline
Idaho Power Company
PO Box 70
Boise, ID 83707-007
Randy Allphin
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
RE:Case Nos. GNR-O8-01; PAC-O8-
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
Contracts & Administrative Law Division, Idaho Public Utilities Commission
Q, Box 83720, Boise, Idaho 83720-0074, Telephone: [phone], FAX: [phone], E-mail: Ipuc(Qjpuc.state.id.
Located at 472 West Washington St, Boise, Idaho 83702
May 5 , 2008
Page 2
costs and variable O&M, future Colstrip variable cost adjustments are to be calculated by using FERC Form
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 will change from 11.47 mill/kWh to 12.06 mill/kWh. The
same calculated rate revision under the avoided cost methodology is used by Avista, PacifiCorp dba Rocky
Mountain Power 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 the Sum as-based methodology is based on annual average
gas prices indexed at Sumas, Washington. As reported by Avista, the indexed gas prices have increased by
$0.24/MMBtu. The approved gas price of $6.94/MMBtu plus the $0.24/MMBtu increase results in a gas price of
$7. 18/MMBtu for the 2008-2009 year. This equates to a SAR fuel cost of 52.77 mill/kWh as used in the model.
In accordance with Order No. 29316, the adjustable portion of the avoided cost rate for PacifiCorp contracts with
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 plants, 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 , 2008 extending
through June 30, 2009 has been computed to be $14.11 /MWh, an increase from $12.17 last year.
Accompanying this letter are worksheets showing the computation of the revised adjustable rates for the various
affected contracts. If after reviewing the revisions, you accept them as accurate please indicate your approval by
letter (or other filing) directed to the Commission in the reserved case docket numbers identified above. The
case heading for the generic adjustment, Case No. GNR-08-0 1 , will read as follows:
IN THE MATTER OF THE ANNUAL REVISION AND UPDATED CALCULATION OF
THE ADJUSTABLE PORTION OF THE AVOIDED COST RA TE(S) FOR EXISTING
PURP A CONTRACTS FOR A VISTA CORPORATION DBA A VISTA UTILITIES, FOR
IDAHO POWER COMPANY AND FOR PACIFICORP DBA ROCKY MOUNTAIN
POWER.
The case heading in the PacifiCorp case for PacifiCorp QF contracts with 1992 Amendment language, Case No.
P AC-08-, is as follows:
IN THE MATTER OF THE ANNUAL REVISION OF QF VARIABLE ENERGY PRICES IN
ACCORDANCE WITH TERMS OF THE 1992 AMENDMENTS TO POWER PURCHASE
AGREEMENTS BETWEEN IDAHO QFS AND PACIFICORP.
Please file your respective responses with the Commission on or prior to June 3 , 2008.
Thank you for your cooperation. Please feel free to contact me, or Rick Sterling, if you have any questions.
Sincerely,
~~~~
Scott D. Woodbury __~_~
Deputy Attorney General
Enclosures
bls/L:GNR-O8-0 1 P AC-O8-04 sw avoided cost
- -
COLSTRIP ADJUSTABLE RATE CALCULATION
For Period 7/1/08-6/30/09
Colstrip Fuel Cost from Avista FERC Form 1 for CY 2007
line 12
line 20
Net Generation (kwh)
Fuel
Fuel cost per kwh
Fuel Cost per MWh
Variable O&M , Gen. Tax, 5% line loss per MWh
Total Colstrip Adjustable Rate
Reference GNR-99-1 O.N. 28708 4/17/2001
-.--.- ...--.-......
Colstrip - 08-09 .xls
672 761 000
$16 829 966
$0.010061
$10.0612
$2.0000
$12.0612
......-...--.......---------
Average Gas Prices at Sumas, Washington from Inside FERC publication
($/MMBtu)
Calculating the 2008-2009 Avoided Cost Adjustable Rate
2006 2007
Jan $9.$6.41
Feb $7.$6.
Mar $6.$7.
Apr $5.$6.
May $5.$6.
Jun $4.$6.
July $5.$6.
Aug $5.$5.
Sep $5.$4.
Oct $3.$5.
Nov $7.$7.45
Dec $7.$8.
Average $6.28 $6.
Actual Annual Adjustment
$6.94 =-($6.28~$6:52)= $7.
Note:
$2.00/MMBtu = 1997-98 Approved Rate
$2.35/MMBtu = 1998-99 Approved Rate
$2.26/MMBtu = 1999-00 Approved Rate
$2.80/MMBtu = 2000-01 Approved Rate
$4.82/MMBtu = 2001-02 Approved Rate
$5.23/MMBtu = 2002-03 Approved Rate
$3.33/MMBtu = 2003-04 Approved Rate
$5.31/MMBtu = 2004-05 Approved Rate
$5.92/MMBtu = 2005-06 Approved Rate
$7.80/MMBtu = 2006-07 Approved Rate
$6.94/MMBtu = 2007-08 Approved Rate
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~PACIFICORP ENERGYl.ECE\VED
A DIVISION OF PACIFICORP
LI1GB PlA'i 23 at; to: 41
825 NE Multnomah, Suite 600
Portland, OR 97232
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UTILITIES CU:,;;\,;\SSION
May 23, 2008
Idaho Public Utilities Commission
PO Box 83730
Boise, ID 83720-0074
Attention: Scott D Woodbury ,
RE: Case Nos. GNR-08-1; Case No. PAC-08-
Dear Mr. Woodbury,
Thank you for your letter of May 5 2008 in which you provided the 2008-2009 updated
prices for the adjustable portion of the avoided costs rates under the present avoided cost
methodology. Your letter also provided an update to the adjustable rate portion of
avoided costs for QF contracts using variable costs associated with Colstrip and for
PacifiCorp contracts with 1992 amendments.
PacifiCorp has reviewed these proposed updated prices and agree that the prices have
been updated correctly. The Company accepts the new schedules as accurate.
If you have any questions please feel free to ca)) or email me at [phone] or
Hui. Shu~Paci fi Corp .com
Sincerely,
~L--
Hui Shu
Manager, Net Power Cost
CERTIFICATE OF SERVICE
I hereby certify that on May 23 , 2008, I caused to be served, via Overnight Delivery, a
true and correct copy of Rocky Mountain Power s Response in PAC-08-, to the
following:
I Blair Strong -
------'--
Iclint Kalich
Paine, Hamblen, et al i Michael Andrea
I 717 W. Sprague Ave, Suite 1200 11411 E. Mission
i Spokane, WA 99201-3505 i PO Box 3727
Spokane, WA 99220-3727
Dean Brockbank Greg Duvalli Mark Moench I Laren Halei Ted Weston 1825 NE Multnomah Street
: 201 S. Main Street, Suite 2300 I Portland, OR 97232
! Salt Lake City, UT 84111
I Barton L. Kline
! Randy Allphin
i PO Box 70
I Boise, ID 83707-007
, .. -,--,--------
Carrie Meyer
Coordinator, Administrative Services
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Randy C. Allphin
Senior Planning Administrator
Tel: [phone]
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Idaho Public Utilities Commission
Attn: Scott Woodbury
PO Box 83720
Boise, ID83720-0074
RE:CASE NOS. GNR-08-
IN THE MATIER OF THE ANNUAL REVISION AND UPDATED CALCULATION OF
THE ADJUSTABLE PORTION OF THE AVOIDED COST RATE(S) FOR EXISTING
PURP A CONTRACTS FOR A VISTA CORPORATION DBA A VISTA UTILITIES, FOR
IDAHO POWER COMPANY AND FOR P ACIFICORP DBA ROCKY MOUNTAIN
POWER..
We have reviewed the infonnation you have provided in your letter dated May 5, 2008
notifying Idaho Power of revision of the adjustable portion of the Avoided cost rate(s) for existing
PURP A contracts.. Idaho Power concurs that the model and calculations used by the IPUC staff for
Idaho Power Company are consistent with IPUC Order 28708.
Sincerely,
(J.
'l-andY C Allphin
Contract Administration
cc:Bart Kline (IPCa)
Donovan Walker (!PCa)
Page I of I
POBox 70 Boise, Idaho 83707 1221 W Idaho St. Boise, Idaho 83702