20090312final_order_no_30744.pdf

Office of the Secretary
Service Date
March 12 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FUEL-COST-
RELATED ADJUSTMENT TO PUBLISHED
IDAHO AVOIDED COST RATES FOR IDAHO
POWER COMPANY, P ACIFICORP DBA
ROCKY MOUNTAIN POWER, AND A VISTA
CORPORATION DBA A VISTA UTILITIES.ORDER NO. 30744
CASE NO. GNR-09-
Pursuant to the Public Utility Regulatory Policies Act of 1978 (PURP A) and the
implementing regulations of the Federal Energy Regulatory Commission (FERC), the Idaho
Public Utilities Commission (Commission) has approved a Surrogate Avoided Resource (SAR)
methodology for calculation of the avoided cost rates paid to PURP A qualifying cogeneration
and small power production facilities (QFs) by Idaho Power Company, Avista Corporation and
PacifiCorp. Avoided cost rates are the purchase price paid to QFs for purchases of QF capacity
and energy.
Three recent events have triggered a revision and updated calculation of new PURP A
avoided cost rates, i., the conclusion of a general rate case for Idaho Power (Case No. IPC-
08-10), the Commission s approval of a Stipulation proposing changes to non-fuel variable
components of avoided cost rates (Case No. GNR-08-02), and the release of a new natural gas
price forecast by the Northwest Power and Conservation Council (NPCC; Council).
The conclusion of a general rate case affects avoided cost rates because cost of
capital figures are used in avoided cost computations in accordance with the approved
methodology. The appropriate time to incorporate new cost of capital figures is following a
general rate case. A final Order in Idaho Power s general rate case was issued on January 30
2009 in Order No. 30722.
Pursuant to Commission-approved avoided cost methodology (Order No. 29124)
natural gas prices are to be updated when a new forecast becomes available from the Councilor
the Council's general advisory committees. Fuel costs are a component in both the fueled rates
and non-fueled rates available to QFs. A new Council natural gas price forecast was released on
December 29, 2008. Commission Staff provided Idaho Power, Avista and PacifiCorp with
worksheets on February 9, 2009 for review and comment showing the computation of the revised
avoided cost rates. The proposed changes are made in accordance with existing Commission
ORDER NO. 30744
Orders and approved methodology. The resultant change in avoided cost rates is a simple
arithmetic calculation. The new forecast includes a new starting gas price and fuel escalation
rate.
Idaho Power and Avista accept Staffs avoided cost calculations as accurately
incorporating the Council's December 29, 2008, revised natural gas price forecasts and as
consistent with the Commission s approved SAR methodology.
PacifiCorp in its comments believes that the Council's medium natural gas price
curve yields a price that is too high, and is not a true reflection of current gas costs. The
Council's price forecast includes five different levels to capture a range of possible outcomes
(low, medium-low, medium, medium-high, and high). Citing the Council's description of its low
case forecasts, current market "sign posts " and current market forwards, PacifiCorp believes that
the Council's low and medium-low price forecasts are a better indicator of current market
conditions than the medium case.
PacifiCorp requests that a technical conference be conducted to allow the parties to
revisit the existing avoided cost methodology and come up with a solution in light of the current
economic forecast. PacifiCorp suggests that the Commission consider updating the price
forecast after conditions have become more stable. At a minimum, PacifiCorp requests that the
Commission postpone approval of the gas curve component of published avoided cost rates until
the Council's draft fuel prices become final.
PacifiCorp states it has received six wind QF project requests totaling 235 MW since
January 26, 2009. All of these projects are off-system QFs with scheduled deliveries into an
already transmission-constrained area. PacifiCorp reminds the Commission that based on the
multi-state Revised Protocol agreement, costs associated with new QF contracts which exceed
the costs PacifiCorp would have otherwise incurred acquiring comparable resources will be
assigned directly to the state approving those contracts. Case No. P AC-02-, Order No.
29708.
Commission Findings
The Commission has reviewed the filings of record in Case No. GNR-09-
including the comments and recommendations ofIdaho Power, PacifiCorp and Avista. We have
also reviewed and considered the related comments of Black Canyon LLC and Idaho Windfarms
ORDER NO. 30744
LLC recommending approval, the underlying Idaho SAR avoided cost methodology, and the
Council's December 29 2008, natural gas price forecast for its Sixth Power Plan.
Presented in this case for Commission approval under existing methodology are
revised published avoided cost rates incorporating the Council's December 29, 2008 medium
case (east-side delivered) natural gas price forecast (Draft Fuel Prices for the Sixth Power Plan).
PacifiCorp contends that use of the Council's medium natural gas price curves results in avoided
prices that are too high. PacifiCorp recommends that a technical conference be held to determine
the continued reasonableness of the published rate avoided cost methodology. Under the present
methodology, rates are changed when the Council issues a new gas price forecast.The
calculation of the fuel cost adjustment to published avoided cost rates is arithmetic. PacifiCorp
recommends that there be no change until the Council's draft fuel prices become final.
A contemporaneous avoided cost filing before the Commission is Case No. GNR-
08-, a Petition seeking Commission approval of a Stipulation proposing changes in generic
non-fuel-related Surrogate Avoided Resource (SAR) variables. Petitioners in that case
recommended that the generic non-fuel-related values of published rates be implemented at the
same time the Commission approves new fuel-related avoided cost components based on the
Council's median forecast of natural gas prices. In Order No. 30738 we approved changes in the
generic non-fuel cost variables to the SAR methodology. We incorporate those changes in our
calculation of the resultant rates in this case. Also incorporated in the revised rates is a utility-
specific change in Idaho Power s weighted cost of capital as a result of Order No. 30722 in Idaho
Power s recent general rate case.
We addressed PacifiCorp s procedural recommendations in Case No. GNR-08-
Order No. 30738. In that case we denied the relief requested by PacifiCorp stating:
The question as to reasonableness of rates needs to be based on a foundation
and supported by evidence. A single point in time 12-year price strip from the
New York Mercantile Exchange (NYMEX) for Henry Hub is not justification
for the relief requested by PacifiCorp nor reason to find that published rates
for 20-year contracts calculated under our approved methodology no longer
represent the utility s avoided costs. The record in this case, we find, does not
support the changes in the SAR avoided cost methodology or published rate
eligibility cap recommended by PacifiCorp. Nor does PacifiCorp present a
persuasive and compelling reason to defer Commission decision regarding a
change in the published rates until a record can be built. The uncertainty that
would result from granting the relief requested by PacifiCorp is justification
ORDER NO. 30744
and reason to proceed in a prudent and judicious manner and to require a
greater offering of proof than anecdotal evidence.
Order No. 30738 , p. 6.
Our reasoning in Case No. GNR-08-02 carrIes forward into this case where
PacifiCorp presents the same arguments.Regarding potential QF projects and scheduled
deliveries to PacifiCorp into transmission-constrained areas, we note that this is not an entirely
novel issue of the "first impression." Reference Case No. IPC-06-, Order No. 30414. Also
meriting mention, in Case No. GNR-08-, the Commission apprised both utilities and QFs
that under the Commission s Rules of Procedure, should any party believe that a prima facie case
can be made that the existing SAR methodology no longer produces reasonable avoided cost
rates, a petition could be filed by such party proposing a change.
The Commission in this case finds it reasonable to approve a change in the fuel-cost
component of published rates under the existing SAR methodology.We find the resultant
change in avoided cost rates to be a simple arithmetic calculation. At the same time, we find it
reasonable to adjust the published rate for changes in the generic non-fuel variables approved in
Order No. 30738 1 and the change in Idaho Power s weighted cost of capital from 7.852% to
180% approved in Order No. 30722. The Commission has reviewed the revised and updated
calculation of the avoided cost rates as set forth in the appendices to this Order and finds that
they correctly incorporate the identified changes. See Order No. 30744 , Appendices A, B, and
C. We find it reasonable to approve the avoided cost rates approved in this Order for QF
contracts executed on or subsequent to March 16, 2009.
We take notice of the draft nature of the Council's planning assumptions and fuel
forecast and have reasonable confidence that the numbers and values will be used by the Council
in its Sixth Power Plan. However, should the numbers and values change appreciably in the
Council's final Sixth Power Plan document we will adjust rates accordingly for prospective QF
contracts.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power Company,
PacifiCorp dba Rocky Mountain Power and A vista Corporation dba A vista Utilities, electric
1 i.e., Heat Rate 7 100; Equivalent Availability Factor 90%; Capital Cost $1 313 per kW; Variable O&M $1.77 per
MWh; Fixed O&M $14.57 per kW; O&M Escalation Rate 2.0%; SAR Escalation Rate 1.4%; and General Inflation
Rate 2.0%.
ORDER NO. 30744
utilities, pursuant to the authority and power granted it under Title 61 of the Idaho Code and the
Public Utility Regulatory Policies Act of 1978 (PURP A).
The Commission has authority under PURP A Sections 201 and 210 and the
implementing regulations of the Federal Energy Regulatory Commission (FERC), 18 C.R. 9
292, to set avoided costs, to order electric utilities to enter into fixed-term obligations for the
purchase of energy from qualified facilities and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described above IT IS
HEREBY ORDERED and the Commission hereby approves changes in the published avoided
cost rates incorporating (1) the Northwest Power and Conservation Council's December 29
2008 medium case (east-side delivered) natural gas price forecast (Draft Fuel Prices for the Sixth
Power Plan), (2) the generic non-fuel variable changes approved in Case No. GNR-08-
Order No. 30738, and (3) the change in Idaho Power s weighted cost of capital approved in
Order No. 30722. A schedule of new rates accompanies this Order for an authorized effective
date of March 16, 2009.
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. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
ORDER NO. 30744
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this / J...
+1&
day of March 2009.
J1
~~~
MARSHA H. SMITH, COMMISSIONER
~~-
. KEMPT MMISSIONER
ATTEST:
~~;
Commission Secretary
bls/O:GNR-O9-O1 sw
ORDER NO. 30744
AVISTA
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
March 16, 2009
$/MWh
LEVELIZED NON-LEVELIZED
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(yEARS)2009 2010 2011 2012 2013 2014 YEAR RATES
76.47 75.77.68 79.81.83.2009 76.47
76,76.78.80.82.84.2010 75.
76.77.79.81.83.85.2011 77.68
77.78.80.82.84.86.2012 79.
78.79.44 81.83.85.87.2013 81.
78.80.82.84.43 86.47 88.2014 83.
79.81.15 83.85.87.89.47 2015 85.
80.81.84.86.88.90.2016 87.
81.82.84.86.89.91.2017 90.
81.83.85.87.89.92.2018 92.
82.84.86.47 88.90.92.2019 94.
83.85.87.23 89.91.93.2020 96.
84.85.87.90.92.94.2021 99.
84.86.88.90.93.95.2022 101.41
85.44 87.89.43 91.93.96.2023 103.
86.87.90.92.94.97.2024 106.
86.88.90.93.95.44 97.2025 108.
87.89.91.93.96.98.2026 111.
88.89.92.94.96.99.2027 115.
88.90.92.95.97.100.2028 118.46
2029 121.
2030 125.
2031 128.
2032 131.
2033 135.
2034 138.
Note: The rates shown in this table have been computed using the Northwest Power and Conservation Council's December 29, 2008
Fuel Price Forecast. (See Order No. 30480).
APPENDIX A
PAGE 1 OF 2
CASE NO. GNR-09-
ORDER NO. 30744
AVISTA
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
March 16, 2009
$/MWh
LEVELIZED NON-LEVELIZED
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)2009 2010 2011 2012 2013 2014 YEAR RATES
15.15.46 15.16.16.16.2009 13.
15.15.15.16.16.17.2010 13.
15.45 15.16.16.16.17.2011 14.
15.15.16.16.17.17.2012 14.40
15.16.16.16.17.17.2013 14.
15.16.16.17.17.45 17.2014 15.
16.16.45 16.17.17.18.2015 15.
16.16.16.17.17.18.2016 15.
16.16.17.17.17.18.2017 16.
16.16.17.17.18.18.2018 16.
16.17.17.46 17.18.18.2019 17.
16.17.17.18.18.43 18.2020 17.
16.17,17.18.18.19.2021 18.
17.17.49 17.18.18.19.2022 18.
17.17.18.18.45 18.19.2023 19.
17.17.18.18.19.19.46 2024 19.
17.48 17.18.18.19.19.2025 20.
17.18.18.43 18.19.19.2026 20.
17.18.18.18.19.42 19.2027 21.
17.18.18.19.19.20.2028 21.
2029 22.
2030 22.
2031 23.
2032 23.
2033 24.41
2034 25.
EFFECTIVE DATE ADJUSTABLE COMPONENT
3/16/2009 55.
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tables
above.
Example 1. A 20-year levelized contract with a 2009 on-line date would receive the following rates:
Years Rate
17.84 + 55.
17,84 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2009 on-line date would receive the following rates:
Years Rate
13.33 + 55,
13.68 + Adjustable component in year 2010
14.04 + Adjustable component in year 2011
14.40 + Adjustable component in year 2012
Note: The rates shown in this table have been computed using the Northwest Power and Conservation Council's December 29, 2008
Fuel Price Forecast. (See Order No. 30480).
APPENDIX A
PAGE 2 OF 2
CASE NO. GNR-09-
ORDER NO. 30744
IDAHO POWER COMPANY
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
March 16, 2009
$/MWh
LEVELIZED NON-LEVELIZED
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)2009 2010 2011 2012 2013 2014 YEAR RATES
76,75.77,80.81.83.2009 76.
76,76.78.80,82,84.2010 75,
76.77.79.81.83,85,2011 77.
77.78.80,82.84.86,2012 80,
78.79,81.83,85,87.2013 81.
78,80.40 82.47 84.86.88,2014 83.
79.81.83,85.41 87.47 89.2015 85,
80.49 82.84.86,88,90.48 2016 88.
81,82,85.87,89,91.2017 90.
82,83.85.87.90.92,2018 92.40
82.84.49 86,88.90.93.2019 94.
83.85.87.89,91,93.2020 96.
84.86,88.90,92.48 94,2021 99,
84,86.88.91.93.95,2022 101,
85,87.44 89,91.94.96.40 2023 103.
86.88,90.92,94.97.2024 106.42
86.88,91.93,95,98,2025 108.
87.89.91,94.96.45 98,2026 112.
88,90.92,94.97.99.2027 115.
88,90.93.22 95.97,100,2028 118.
2029 121,
2030 125.47
2031 128.
2032 131,
2033 135.
2034 138.
Note: The rates shown in this table have been computed using the Northwest Power and Conservation Council's December 29, 2008
Fuel Price Forecast. (See Order No. 30480), These rates also reflect a change in Idaho Power s weighted cost of capital as a result of
Order No, 30722 in the Company s recent general rate case.
APPENDIX B
PAGE 1 OF 2
CASE NO. GNR-09-
ORDER NO. 30744
IDAHO POWER COMPANY
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
March 16, 2009
$/MWh
LEVELIZED NON-LEVELIZED
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)2009 2010 2011 2012 2013 2014 YEAR RATES
15,15.15.16.16.16,2009 13.
15,15.16.16.40 16,17,2010 13,
15.48 15,16,16,16,17.2011 14,
15.16,16,16,17.17.2012 14.44
15.16.16.16.17.17,2013 14.
15,16.16.17.17,17,2014 15,
16.16,16,17,17.18.2015 15.
16.28 16.17,17.43 17.18.2016 16.
16.43 16.17.17.18.18.42 2017 16.41
16.16,17,17,18,18,2018 16.
16.17.17,17,18.18.2019 17.
16,17.17.18.18.48 18.2020 17,
17,17.40 17,18.18,19,2021 18.
17.17.17.18,18.19.2022 18.
17,17.18.18.18.19.2023 19,
17.41 17,18,18.19,19,2024 19.
17.17.18,18,19,19.2025 20.
17,18.18.18,19.19.2026 20,
17,18,18,19.19.19,2027 21.
17.18.18,19,19,20,2028 21,
2029 22,
2030 22.
2031 23,
2032 23.
2033 24.47
2034 25,
EFFECTIVE DATE ADJUSTABLE COMPONENT
3/16/2009 55,
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tables
above.
Example 1. A 20-year levelized contract with a 2009 on-line date would receive the following rates:
Years Rate
17.91 + 55.
17,91 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2009 on-line date would receive the following rates:
Years Rate
13.37 + 55.
13,72 + Adjustable component in year 2010
14.08 + Adjustable component in year 2011
14.44 + Adjustable component in year 2012
Note: The rates shown in this table have been computed using the Northwest Power and Conservation Council's December 29, 2008
Fuel Price Forecast. (See Order No. 30480). These rates also reflect a change in Idaho Power s weighted cost of capital as a result of
Order No, 30722 in the Companys recent general rate case.
APPENDIX B
PAGE 2 OF 2
CASE NO. GNR-09-
ORDER NO. 30744
PACIFICORP
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
March 16, 2009
$/MWh
LEVELIZED NON-LEVELIZED
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(yEARS)2009 2010 2011 2012 2013 2014 YEAR RATES
76.75.77.80,82.84,2009 76.
76.76.79,81.83,85,2010 75.
76,77.89 80.82.84.86.2011 77.
77.78.80,82,84.86.2012 80.
78.79.81.83.85,87,2013 82.
79,80,82.84.86,88.2014 84.
79.81.44 83.85,87.89.2015 86,
80.82.84.86.46 88.90,2016 88.
81.44 83,85.87.89.91.2017 90.
82.20 83.85.88,90.92.40 2018 92,
82.84.86,88.91.93,2019 94.
83.85.42 87.89.91,94.2020 97.
84,86.88.90.49 92.94.2021 99,
85.86.89,91.93.45 95,2022 101.
85.87,89.92.94.96.2023 104.
86.45 88,90.92,95.97.40 2024 106,
87,89.91,93.95.98,2025 109.
87.89,91.94.26 96,99.2026 112.
88.42 90,92.95.97.99.2027 115,
89,91,93,95,98.100,2028 118.
2029 122.
2030 125,
2031 128.
2032 131,
2033 135.
2034 139.
Notes: (1) The rates shown in this table have been computed using the Northwest Power and Conservation Council's December 29
2008 Fuel Price Forecast. (See Order No. 30480), (2) The rates shown in this table have been computed using the weighted average
cost of capital from PacifiCorp s most recent general rate case, (See Order No. 30482).
APPENDIX C
PAGE 1 OF 2
CASE NO. GNR-09-
ORDER NO. 30744
PACIFICORP
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
March 16, 2009
$/MWh
LEVELIZED NON-LEVELIZED
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)2009 2010 2011 2012 2013 2014 YEAR RATES
15.15.15,16.16.17,2009 13.47
15.42 15.16.16,16.17,2010 13.
15,15.16.16,17.17.47 2011 14.
15,16.16.49 16.17,17.2012 14,
15.16,16.17.17.44 17,2013 14.
16.16.45 16.17,17.18,2014 15.
16.16.16.17,17.18.2015 15.
16.16.17,17.17,18.2016 16,
16,16,17,17.18,18.2017 16.
16.17,17.47 17.18.18,2018 16.
16.17.17.18,18.45 18.2019 17,
16.17.17.18.18,19.2020 17.
17.17.17,18.18,19.2021 18.
17.17,18,18.48 18.19.2022 18.
17,17,18.18,19.19,2023 19,
17.17.18.18,19,19.2024 19.
17.18.18.48 18.19,19.2025 20.
17,18,18.19,19.48 19,2026 20,
17,18.18.19,19,20.2027 21.
18.18.44 18,19.19,20.2028 21,
2029 22,
2030 22.
2031 23.45
2032 24.
2033 24.
2034 25,
EFFECTIVE DATE ADJUSTABLE COMPONENT
3/16/2009 55.
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tables
above,
Example 1. A 20-year levelized contract with a 2009 on-line date would receive the following rates:
Years Rate
18,02 + 55.
18,02 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2009 on-line date would receive the following rates:
Years Rate
13.47 + 55,
13.82 + Adjustable component in year 2009
14,18 + Adjustable component in year 2010
14.55 + Adjustable component in year 2011
Notes: (1) The rates shown in this table have been computed using the Northwest Power and Conservation Council's December 29
2008 Fuel Price Forecast. (See Order No, 30480), (2) The rates shown in this table have been computed using the weighted average
cost of capital from PacifiCorp s most recent general rate case. (See Order No. 30482),
APPEND IX C
PAGE 2 OF 2
CASE NO. GNR-09-
ORDER NO. 30744