20090218Avista Response.pdf

Avlsta Cor.
1411 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800.727.9170
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20D9 FEB 18 PH 3: 24
VIA Electronic Mail
February 18,2008
JeaD. Jewell, Secretary
Idaho Public Utilties Commission
Statehouse Mail
W. 472 Washington Street
Boise, Idaho 83720
RE: . Case NO. GNR-E-09..0 1 - In the Matter of the Fuel Cost Related Adjustment to
Published Idao Avoided Cost Rates for Idaho Power Company, Pacificorp DBA Rock
MOlUta.PoWer, and Avis:t Corporation DBA AvIsta Utilties
Dea Ms. Jewell:
In respol1seto ScottWoodbur's letter dated February 9,2009, Avista Utilties has reVIewedthe
avoi(led costealculåtions in Case No. GNR-E-09-01 and accepts them as accurately
inc()rpotating the draft NotthwestPower and Conservation Council natural gas price forecast into
the SARmodel.
Attached are Avista's comments in the above referenced Case provided to Commission Staff on
February 4,2009.
Pleae direct questions on this matter to Clint Kalich at [phone].
Sincerely,
mdaGerais
Manager, Regulatory Policy
State and Federal Regulation
Avista Utilities
509495-4975
Enc.
RFCE~ ....-
1009 FEB \ 8 PM 3: 2i.
Februar 4,2009
Via Email Only
Rick Sterling
Idaho Public Utilties Commission
472 W. Washington
Bois, In 83702
Email: rick.sterling~uc.daho.gov
Re: Idaho Draft Avoided Cost Rate
Dear Rick:
On Januar 26, 2009, you forwarded for review and commcnt Idaho'8 draft avoided cost
rates. I have reviewed the draft avoided cost rates for Avista Corporation (" Avista") and believe
that you havc properly calculated costs given your assumptions. That said, A vista has some
concerns with those assumptions and provides th following comments on the draft avoided cost
rates.
NWPCC Assuptions are Not Y ct Final
According to the stipulation agree by the parties latc last year in IPUC Docket No.
GNR-E-08-02, Surrogate Avoided Resource ("SAR") assumptions are to bc updated as they
become available from the Northwest Power and Conservation Council C'NWPCC" or
"C()imcil"). Although draft values are now available from the Council, it has not released even
its Drft Sixth Power Plan. The final plan is not anticipated until late this year. The values
included in the proposed PURPA rate appear to be based on current draft documents and not
final values. It is very likely that this information wil not change; however, A vista understands
that under the stipulation final values wil be used. At a minimum, the IPUC should make clear
that, once final vales are available, the avoided cost rates wil be revised to reflect such final
values.
The SAR Assumption for HAP Was Not Updated
Notwithstading the above comment regarding the use of final values issued by the
NWPCC. the !PUC has not updated aU SAR assumptions identified in the stipulation.
Specifically, the equivalent availabilty factor ("EAF") was not increased to 92% per the
NWPCC draft. The stipulation is clea that the listed SAR values wil an be updated, including
EAF. Adjusting the EAF to 92% based on Council data lowers the 20-year levelized rate by
approximately $2IWh
Capital Costs Arc Overstated
In reviewing the capital cost assumption, it appears that the IPUC selected the highest
capita cost value from the NWPCC foreast, both from a historical and projected basis. The
NWCC is forecasting a drmatic faU in gas plant capital costs, from approximately $1,200 per
kW presntly to $850 per kW. It is inappropriate to set long-term PURPA rates for projects built
years into the future at today's inflated (and fallng) prices. Another method should be
employed.
One approach would be tó calculate an avoided cost for each online year, using the
NWPCC capacity cost estimate in that year. Another approach would be to accept the long-term
cot trend ($852 per kW in 2006 dollars) by averaging prices over the 20-year horizon of201 0 to
2029. Avista is open to other ideas, so long as they reflect anticipated expected long-term
project costs. Lowering the capital cost frm $1.300/kW in 2008 to $900/k W in 2008 lowers the
20-year levelized rate by approximately $7/MWh.
The IPUC Should Mak Clear that the Use of Draft Data in this Circumstance Does Not Set Any
Precedent
Assuming the IPUC must proceed with implementing rates based on draft NPCC data in
this case. Avista would hope that in the futue adjustments ar made based on information
cuntained in final docúments.
Grandfatherng
There is a long history of grandfathering projects due to changing circumstaces. To
prevent this, A vista would like it made clear to all parties ahead of time that contracts signed
based on these rates will not be adjusted in the future, up or down, based on new informatIon.
Contrcts signed under then-curent terms should stand.
Unifotmty with Other State PURA Rates
Idaho PURP A rates are now significantly above rates available to developers located outside of
Idaho. The discrepancies are large enough that it would be reonable to expect these developers
Ì(J wheel their power frm locations outside of Idaho (but potentially within the service terrtories
of multi-jurisdictional utilities) to locations inside simply to acquire the higher PURPA rate.
Even with thc cost oftransmissIon the economics would appe to support this activity.
Although IPUC staff have indicated that they do not believe this would be aHowed. A vista is
una'ble to locate any law or ordcr that would prevent this occurrng.
Overall PURP A Rate Appears Higb
Paying nearly $90 perMWh for wind generation when Avista docs not obtain the grecn tag value
seems very lugh. Avista believes there is the potential for it to build wind projects at this cost
and retain the green tag value. One solution the company has considered is moving to a Wind
8M where a proceeding could be used to define generic wind costs rather than forcing a wind
facilty to look like a gas plant.
Avista appreciates the opportunity to comment on the draft avoided cost rates. Please
contact me if you have any questons re,garding any of Avista's comments.
Respectfully submitted,
Clint Kalich
Manager of Resource Planning and Analysis