20100421notice_of_scheduling_order_no_31057.pdf

Office of the Secretary
Service Date
April 21, 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ADJUSTMENT OF
AVOIDED COST RATES FOR NEW PURPA
CONTRACTS FOR A VISTA CORPORATION
DBA A VISTA UTILITIES, IDAHO POWER
COMPANY, AND PACIFICORP DBA ROCKY MOUNTAIN POWER
CASE NO. GNR-10-
NOTICE OF SCHEDULING
ORDER NO. 31057
On March 16 2010, the Commission issued final Order No. 31025 in Case No. GNR-
10-01 approving a revised and updated calculation of the published avoided cost rates for
Avista Corporation dba Avista Utilities, Idaho Power Company, and PacifiCorp dba Rocky
Mountain Power. In our final Order we stated:
Presented in this case for Commission approval are revised published
avoided cost rates incorporating the (Northwest Power and Conservation)
Council's March 8 , 2010 medium natural gas price forecast. The
methodology for calculation of avoided cost rates was established in Case No.
GNR-02-, Order No. 29124. We find that the method for revising the
fuel cost adjustment to published avoided cost rates is a simple arithmetic
calculation. We find that the Council's new natural gas price forecast was
approved on March 2 2010, and posted on the Council's website on March 8
2010. Sixth Power Plan, Appendix A. We find that the change in avoided
cost rates depicted in Attachments 2-4 to this Order accurately incorporate the
Council's revised natural gas price forecast and are consistent with the
Commission-approved SAR methodology. We find it reasonable to issue an
Order implementing new published avoided cost rates without further notice
or procedure.
Order No. 31025 at 2.
On April 6, 2010, Windland, Inc. (Windland) and AgPower Jerome, LLC (AgPower)
(collectively Petitioners) filed a Petition for Reconsideration of Order No. 31025. Idaho Code
61-626; IDAPA 31.01.01.331. An Answer to the Petition for Reconsideration was filed by
PacifiCorp on April 13, 2010. A reply to PacifiCorp s Answer was filed by Petitioners on April
2010.
The Commission in this Order, and as further clarified below, grants reconsideration
and establishes a filing schedule for Petitioners ' comments on the accuracy of the revised and
updated calculation. Idaho Code g 61-626(2).
NOTICE OF SCHEDULING
ORDER NO. 31057
BACKGROUND
A. PURP A
Out of the nationwide energy crisis of the late 1970s, Congress enacted the Public
Utility Regulatory Policies Act of 1978 (PURP A). Sections 20 I and 210 of PURP A require
electric utilities to purchase power produced by co-generators or small power producers that
obtain qualifying facility (QF) status. Under PURP A Section 21 O(b), the rate to be paid for such
power is not to exceed "the incremental cost to the utility of alternative electric energy.
Pursuant to Congressional directive, the Federal Energy Regulatory Commission
(FERC) promulgated rules implementing Sections 20 I and 210 of PURP A. Under FERC rules
the utility requirement to purchase power from QFs is set out in 18 c.F.R. g 292.303(a). The
rate a qualifying facility is to receive for the sale of its power is generally referred to as the
avoided cost" rate - the incremental cost to an electric utility of electric energy or capacity or
both which, but for the purchase from the qualifying facility, such utility would generate itself or
purchase from another source. 18 C.R. g 292.101(b)(6). PURPA Section 210(b) and related
FERC regulations provide that the rates for QF purchases shall: (1) be just and reasonable to the
electric consumers of the electric utility and in the public interest; and (2) not discriminate
against qualifying co-generators or small power producers. 18 C.R. g 292.304(a)(1)(i), (ii).
There are two general caveats under PURP A: (1) electric utilities are not required to
pay more than the utility's avoided costs for purchases of QF capacity and energy (PURPA
Section 210(b), 18 C.R. g 292.304(a)(2)); and (2) co-generators and small power producers in
their sales to utilities are not to be subjected to pervasive utility type regulations, i., regulation
respecting (i) the rates of electric utilities and (ii) the financial and organizational regulation of
electric utilities. PURP A Section 21 O( e); 18 C.R. g 292.602( c)( 1 )(i)(ii).
In implementing PURP A, the Idaho Commission has developed a body of regulatory
decisions in generic rate setting and complaint actions since 1980 that set out the general
principles and framework under which Idaho electric utilities are to purchase power from
qualifying facilities.
B. The Current A voided Cost Methodology
The current administrative Surrogate A voidable Resource (SAR) methodology for
calculating the published avoided cost rates for QFs smaller than 10 aMW was approved in Case
No. GNR-02-, Order No. 29124 (September 26 , 2002). One of the key input variables in
NOTICE OF SCHEDULING
ORDER NO. 31057
the computation of avoided cost rates under this methodology is a long-term natural gas price
forecast; i., the medium natural gas price forecast developed by the Northwest Power and
Conservation Council (NPCC; Council).
In our 2002 Order approving the present methodology, we noted the then recent
extreme volatility in gas prices, acknowledged that gas prices had returned to more normal levels
and expressed concern that our failure to adjust avoided cost rates to reflect the lower gas costs
could result in unreasonable and unfair high costs being borne by the regulated utility. If left in
place, these higher than reasonable avoided costs ultimately would be paid by utility ratepayers.
Order No. 29124 at 4.
The Commission considered many gas price proposals and in the end adopted the
medium" fuel price forecast prepared by the Northwest Power Planning Council (now the
Northwest Power and Conservation Council) along with the method for establishing the starting
year gas price and escalation rate proposed by the Idaho Independent Energy Producers (lIEP).
In doing so, we stated:
(w)e express confidence in the source and the use of a medium forecast which
we believe has the highest probability of being right. We acknowledge that
the Power Council does not issue its forecast on a regular basis. This will
preclude a regular updating of the fuel price. Natural gas prices can be
updated when a new NWPPC forecast becomes available. A proceeding to
review. . . the starting gas price can also be initiated at any time by the
Commission on its own motion or by petition of any utility or QF.
Order No. 29124 at 10-11.
Based on subsequent changes in the natural gas price forecasts issued by the Council
the Commission pursuant to the SAR methodology issued Orders revising and updating the
calculation of published avoided cost rates: Order No. 29391 (December 5, 2003 - gas price
change); Order No. 29646 (December 1 2004 - gas price change and Idaho Power and Avista
cost of capital changes); and Order No. 30744 (March 12 , 2009 - gas price changes; Idaho
Power cost of capital changes; changes to non-fuel variables).
C. The 2009 A voided Cost Order
In our 2009 Order No. 30744, we revised published avoided cost rates incorporating
the Council's December 29, 2008 medium case (East-Side Delivered) natural gas price forecast
I In particular, the Order stated that the "Commission cannot expose ratepayers to avoided cost rates that rely too
heavily on uncharacteristically high (natural) gas prices in combination with a high escalation rate.Id.
NOTICE OF SCHEDULING
ORDER NO. 31057
(draft fuel prices for the Sixth Power Plan). In the case, PacifiCorp contended that use of the
Council's medium natural gas price curves resulted in avoided cost prices that were too high and
recommended that there be no change in the published rate until the Council's draft fuel prices
became final. We denied the relief requested by PacifiCorp. The Commission found that under
the current avoided cost methodology "rates are changed when the Council issues a new gas
price forecast." Order No. 30744 at 3. We reiterated that the change in natural gas prices
resulted in changes in avoided cost rates (which are) a simple arithmetic calculation. Id. at 3-
In our Order No. 30744, we took notice of the draft nature of the Council's planning
assumptions and fuel forecast and expressed confidence that the numbers and values would be
used by the Council in its Sixth Power Plan. In doing so, we stated "(h)owever, should the
numbers and values change appreciably in the Council's final Sixth Power Plan document we
will adjust the rates accordingly for prospective QF contracts." Order No. 30744 at 4. Again, a
change in the fuel gas forecast would cause the avoided cost rates to change. Calculating new
rates "is a simple arithmetic calculation.Id. The appreciable decrease in the gas price forecast
included in the Council's final Sixth Power Plan precipitated our downward adjustment of the
avoided cost rates in Order No. 31025.
Our characterization of the change in rates to be "a simple arithmetic calculation" is
not a mischaracterization. The recalculation process consists of (1) copying (or cutting as the
computer function is often called) the column of numbers (prices) set forth in the Council'
medium case fuel price forecast (East-Side Delivered), (2) pasting them into the avoided cost
calculation model (whereupon an instantaneous recalculation occurs), and (3) pushing the print
button. See Attachments to this Order.
On March 2 , 2010, the Council approved a new natural gas price forecast in
conjunction with the Council's approval and release of its Sixth Power Plan (Plan).The
approved forecast was posted on the Council's website on March 8, 2010. In accordance with
the Commission-approved methodology, the Commission issued Order No. 31025 on March 16
2010, implementing new published avoided cost rates. Given the nature of the published
avoided cost rate as defined by PURP A and FERC rules and the fact that the simple arithmetic
recalculation was executed pursuant to a Commission-approved methodology, we found
reasonable to publish the revised and updated calculation "without further notice or procedure.
NOTICE OF SCHEDULING
ORDER NO. 31057
PETITION FOR RECONSIDERATION
Petitioners, Windland and AgPower, contend that issuing Order No. 31025 changing
published avoided cost rates "without notice or further procedure" violated their "statutory and
constitutional rights to notice and opportunity to be heard.Petitioners contend that the
published avoided cost rates established in Order No. 30744 are a government-created, statutory
entitlement and that QFs pursuing the published rates have an entitlement to those rates protected
by the Due Process Clause. Citing Idaho Code g 61-307 (Schedules - Change in Rate and
Service); Article I, g 13 of the Idaho Constitution and the 14th Amendment of the United States
Constitution (the right to procedural due process oflaw).
Petitioners contend that each were engaged in developing PURP A projects and in
perfecting eligibility for power contracts at the published rates and interconnection for their
respective projects. They also assert they made financial expenditures in reliance on the higher
published rates set forth in Order No. 30744.
Had the Commission provided Windland and AgPower with an opportunity to review
Staff s calculations and to comment on what they allege was a significant reduction in avoided
cost rates, Petitioners state they may have advocated for additional changes to the SAR
methodology. Petition at 10. These changes, Petitioners opine, may have included alterations to
carry forth what they contend is PURPA's objective, i., to promote renewable energy
development.
Petitioners request that the Commission delay the effective date of Order No. 31025
pending hearing and final Order on Reconsideration. Id. at 2.
In its Answer, PacifiCorp requests that the Commission deny the Petition for
Reconsideration contending that the Commission s Order No. 31025 violates neither Idaho Code
g 61-307 nor the procedural due process clauses of the Idaho or United States Constitutions.
Should reconsideration be granted, PacifiCorp requests that the avoided cost rates adopted in
Order No. 31025 remain in effect unless and until found to be unjust or unreasonable.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings ofrecord in Case No. GNR-
I 0-0 I including our final Order No. 31025 approving a revised and updated calculation of
published avoided cost rates. We have reviewed the current SAR methodology approved
initially in Order No. 29124 and our subsequent Orders approving fuel cost adjustments pursuant
NOTICE OF SCHEDULING
ORDER NO. 31057
to that methodology. The Commission has reviewed the Petition for Reconsideration of Order
No. 31025 filed by Windland, Inc. and AgPower Jerome, LLC. We have also reviewed the
answer ofPacifiCorp and Petitioners ' reply.
As reflected in our Order No. 31025 , this change in published avoided cost rates was
triggered by a new fuel price forecast issued by the Northwest Power and Conservation Council.
The avoided cost methodology did not change and the adjustment of the rates was a simple
arithmetic calculation. As noted in Order No. 30744, avoided cost "rates are changed when the
Council issues a new gas price forecast." The change in published rates is an implementation of
approved methodology and is not an opportunity to revise methodology. The Commission has
an open docket for review of the SAR methodology, Case No. GNR-09-03.
Petitioners contend that they have not had an opportunity to review the calculations
revising the published avoided cost rates or to provide comment on them. We find it reasonable
to grant limited reconsideration and establish a filing date of WEDNESDAY, APRIL 28, 2010
to allow Petitioners the opportunity to file written comments on whether the adjustment was
correctly calculated and whether the approved methodology was correctly implemented. Idaho
Code g 61-626(2). It is not an opportunity to comment on the methodology or to propose
changes to the methodology.
The Commission recognizes that there are economic consequences to QF developers
in a downward adjustment to rates. This is not the forum to present such information, nor is such
information relevant in determining the timing of a decrease in rates, a rate we note that is
ultimately paid by utility customers. A delay in changing avoided cost rates means that
ratepayers are saddled with rates that are too high and therefore unreasonable. PURP A g 21 O(b);
Idaho Code g 61-622.
Petitioners contend that the manner in which the published avoided cost rates were
changed resulted in a denial of due process in contradiction of statutes, rules and constitutional
rights. We find the revision and recalculation of the published avoided cost rates in this case to
be an administrative and ministerial act. As set out in the Attachment, the calculation of new
avoided cost rates is a simple process. We further find that no violation of notice or due process
has occurred and that no cure is necessary. We find Petitioners' arguments to the contrary to be
unpersuasive and without merit. The existing SAR methodology for calculating avoided cost
rates was a result of a fully litigated prior proceeding. It is well established that a utility cannot
NOTICE OF SCHEDULING
ORDER NO. 31057
be required to pay more for QF power than its avoided cost. Under the approved methodology,
with a posting of a new gas forecast, the variable component of the avoided cost rates changes.
A downward adjustment of the gas forecast results in a lower avoided cost. Our explicit findings
in Order No. 31025 can be read in no other way than but an implicit finding of "for good cause
shown.Reference Idaho Code g 61-307. We find that no persuasive argument has been
advanced by Petitioners to require a stay of the Commission s Order No. 31025.
The Commission also notes that complaints for grandfathering have been filed by
Windland against PacifiCorp (Case No. PAC-I0-05), and AgPower against Idaho Power (Case
No. IPC-10-11) alleging entitlement to power purchase contracts under the published rates of
Order No. 30744. This docket is not a forum to pursue those claims. The Petitioners will have
an opportunity to pursue those claims in the other dockets.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over A vista Corporation dba
Avista Utilities, Idaho Power Company, and PacifiCorp dba Rocky Mountain Power, electric
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. g
292, to set avoided costs, to order electric utilities to enter into fixed-term obligations for the
purchase of energy and capacity from qualified facilities and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above, IT IS HEREBY ORDERED and the Commission does hereby grant the Petition for
Reconsideration filed by Windland and AgPower and establishes a schedule for filing of written
comments by Petitioners regarding the calculation of the fuel cost related adjustment to
published avoided cost rates. With the filing of comments by Petitioners the Commission will
consider the matter to be fully submitted.
IT IS FURTHER ORDERED that the avoided cost rates published in Order No.
31025 remain in effect unless and until proven to be incorrectly calculated or changed by the
Commission. Idaho Code g 61-626(3).
NOTICE OF SCHEDULING
ORDER NO. 31057
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ,2/
day of April 2010.
Q/.~JI . KEMPTO , P DENT
MARSHA H. SMITH, COMMISSIONER
ATTEST:
Commission Secretary
bls/O:GNR-IO-O 1 sw2
NOTICE OF SCHEDULING
ORDER NO. 31057
Tabl!!Al-T: N:1m!f'Jll Ga;!Prices at Key Hub.s and. N!orrhm;.est Gmer.ab:'l"$
2001j;~3\i1NlBtn
M"'di1.UiIl '('ace
il,.i.OO
-,
:2C\05 7.Et~ 6.9B 7.(;8 7.7:1 5:32C,04; 6.72 5.8~ S.~5 6.55
201:17 f.63 5.67 5:78 6.38 6.20D1 8.12 7.DB 7:71 6.41 7.
200;9 l3.5',3350 3);4 459
201'0
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2017 5.57
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201'~':J.6.54
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2022
20.:!'S-9':::
2024 6.4fi !:t3 7.z5o
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Step 1 Copy
. "'""'""""...
or
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ATTACHMENT
ORDER NO. 31057
PAGE 1 OF 3
. Natuf~I'. II ~s' Price ' (j~li\(efe(j'.tg'. lI~ii~f~!!ii9ffri'~I!\;;!~. A~,.of~..R.ellions
Medium 2006$/MMBtu
13/14/09 Estimated differentiais (year 2000$)
(Constant $ Markup are in $2000)
-Woiihead HH to HH to
to HenryFl!Jb AECO Rockies
$0.$1.$0.47 $0.47 $0.41 $0.47
Welihead Real
Price Growth
Forecast Muitipiier N CA N. Nevada S. Idaho Utah Wyoming
2005 $7.$7.72 $8.$7.49 $7.70 $7.29 $7.$7.$7.
2006 $6.23 6.42 $6.$7.$6.$6.$6.$6.46 $6.$6.
2007 $6.6.25 $6.$7.$6.22 $6.$6.$6.$6.$6.
2008 $7.$7.$8.47 $7.$8.$7.$8.$7.$7.
2009 $3.1.24 $4.$4.75 $3.$4.$3.$4.49 $3.$3.
2010 $4.$4.$5.$4.$5.$4.49 $5.$4.$4.
2011 $4.1.24
$ .
$4.$5.$4.$5.$4.$5.$4.49 $4.
2012 $4.1.25 $5.$5.$5.$5.$5.$5.$4.75 $4.
2013 $5.$5.$6.$5.$6.$5.$5.$5.$5.
2014 $5.43 1.26 $5.$6.$5.$6.$5.$6.$5.$5.
2015 $5.75 1.26 $6.$6.$5.$6.$5.$6.$5.$5.
2016 $5.1.26 $6.$6.$6.$6.$6.$6.$5.$5.75
2017 $5.$6.$6.$6.$7.$6.$6.$5.$5.
2018 $6..46 $6.46 $7.$6.$7.$6.$6.$5.$5.
2019 $6.
$ .
$6.$7.20 $6.$7.$6.$6.$5.$6.
2020 $6.1.28
$ .
$6.$7.$6.45 $7.$6.41 $7.$6.$6.
2021 $6.1.28 $6.$7.45 $6.$7.$6.$7.22 $6.$6.
2022 $6.$6.$7.$6.$7.$6.$7.$6.$6.40
2023 $6.$7.$7.75 $6.$7.$6.$7.$6.46 $6.
2024 $6.1.29 7.27 $7.$7.$7.$7.$6.$7.$6.$6.
2025 $7.$7.44 $8.$7.$8.$7.$7.$6.75 $6.
2026 $7.$7.$8.$7.$8.$7.$7.$6.$6.
2027 $7.$7.$7.$8.$7.$8.$7.$8.$6.$7.
2028 $7.$7.74 $7.$8.$7.$8.47 $7.41 $8.$7.$7.
2029 $7.40 1.31 $7.$7.$8.47 $7.$8.$7.$8.$7.$7.
2030 $7.1.32 $7.$7.$8.$7.$8.$7.$8.$7.$7.
Average $6.$1.26 $6.$7.$6.$6.$7.$6.$6.$5.$6.$6.
Difference between averages $0.$1.$0.$0.$0.($0.05)$0.($1.19)$0.$0.
Step 1: Electronically
Copy Prices From Here
ATTACHMENT
ORDER NO.057
PAGE 2 OF 3
WOIDED COST CALCULATION MODEL
Idaho Public Utilities Commission
1. Choose Utility !pCO
2. Choose Condition NON.FUELED
3. Copy rates to tariff sheets
(Repeat for each utility and fuel condition chosen).
4. Print Rates
INPUT
DATA
FIRST DEFICIT YEAR:
SURPLUS ENERGY COST (S!MINh):
SURPLUS COST BASE YEAR:
SAR" PLAtH LIFE (YEARS):
SAR" PLAt.T COST (S!kW):
BASE YEJlR OF "SAR" COST
SAR"CAPACITY FACTOR ('Yo):
HEAT RATE (BTUlkWH):
UTILITY WEIGHTED COST OF CAPITAL ('!o):
. RAIEJ'AYERDISCOUNT RATEj'k.j:
SAR' FIXED 0&1.1 (S!kW):
SAR"\'ARIABLEO&~il(SIf,\VVhJ.
CURRENT YEAR GAS PRICE (S:MMBTU):
CURRENT YEAR FUEL COST (S!MWh)
BASE YEAR O&M EXPENSES:
BASE YEAR FUEL COST... ..... m . ..
ESCAlATION RATE; "SAR'" ('Yo):
ESCALATION RATE; SURPLUS ('!o):
ESCALATIOH RATE: O&M (%j.
ESCALATION RATE; FUE:l(~t)
ADJUSTABLE PORTION (SIMWh):
CAPITAL CARRYING CHARGE ('!o)
LEVEL CARRYING CqST(SIMw,hj:
TIL HIG" RATE ('Yo):
TYPE OF RATES:
CURRENT YEAR:
20-yr Levelized rate, 2009 on-line date:
iPCO
DATA
1.313
2008
90.
100
180%
180%
1'1.57
177
35.
2008
20010
140%
00%
11.9~1%
1.9.6(1
1-10%
NON.FUELED
2.010
79.
Version
4/20/2010
YEAR
2005
2006
2007
2008
2009
2010
2(111
2012
2013
2014
2(115
2016
2017
2018
201~
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
13.~2
7.68
FUEL COST
$/MWh
43.
46.
IH7 45..20
56.74
29.46
35.
:36 38,
41.46
44,
48.
51.87
53.
7.86 55,
57.,
8.46
...
60.
62.
.9..14 64.
67.
70.
10.73.
10.76,.
1116 79.23
11.54 81.90
11..9.2 84.
12.87.
12.74 90.48
13.
General inflatiDI1 rate
5.18
'3.1\
622
6.44
G5.4..
6./9
694
Paste
ATTACHMENT
ORDER NO. 31057
PAGE 3 OF 3