20150619Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER RAPER
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
DATE:JUNE 19,2015
SUBJECT:CASE NO.GNR-E-15-01 (Idaho Power,Avista,PacifiCorp)
ADJUSTABLE PORTION OF AVOIDED COST RATE
REVISED/UPDATED CALCULATION FOR EXISTING CONTRACTS.
CASE NO.PAC-E-15-08 (PacifiCorp)
ANNUAL VARIABLE ENERGY RATE ADJUSTMENT -
1992 AMENDMENT QF CONTRACTS.
The Idaho Public Utilities Commission in Order No.28708,Case No.GNR-E-99-1,
established a methodology for the annual adjustable rate portion of avoided costs for those QF
contracts using variable costs associated with Coistrip,a coal-fired generating facility in
southeast Montana.For those QF contracts with Coistrip-related fuel costs and variable O&M,
future Coistrip 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 Coistrip plus 20Ø/MWh for generation taxes plus a five percent (5%)adjustment for line
loss).As computed by Commission Staff,the Coistrip related adjustable rate for the 2015-2016
year should change from 16.08 mill/kWh to 16.68 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 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 $0.75/MMBtu.The approved gas price of $4.35/MMBtu
DECISION MEMORANDUM 1
plus the $0.75/MMBtu increase results in a gas price of $5.10/MIVIBtu for the 2015-2016 year.
This equates to a SAR fuel cost of 36.21 milL/kWh,using a heat rate of 7,100 Btu/kWh as used in
the model for potential future contracts in accordance with Order No.29124.
The Commission Staff calculated changes to the annual adjustable rate portion of
avoided costs for those QF contracts,using variable costs associated with Coistrip and Sumas,
and provided the respective utilities with the updates for review by letter dated May 29,2015.
Avista,Idaho Power,and PacifiCorp responded by letter 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
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 1,2015
extending through June 30,2016 has been computed by PacifiCorp to be $21.75/MWh,an
increase from $20.47 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.Avista,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?
Daphne Ekuang
Deputy Attorney General
bls/M:GNR-E-15-0 1_PAC-E-1 5-08_djh
DECISION MEMORANDUM 2
COLSTRIP ADJUSTABLE RATE CALCULATION Updated
For Period 711115-6130116
Coistrip Fuel Cost from Avista FERC Form I for CY 2014
line 12 Net Generation (kwh)1,464,025,000
lIne 20 Fuel $214951676
Fuel cost per kwh 80.014683
Fuel Cost per MWh $14.6826
Variable O&M,Gen.Tax1 5%lIne loss per MWh $2.0000
Total Coletrip Adjustable Rate $1 6.6826
Reference GNR-E.99-1 O.N.28708 411712001
Colstrip_1 5-16
Average Gas Prices at Suinas,Washington from Inside FERC publication
($/MMlhu)
Calculating the 2015-2016 Avoided Cost Adjustable Rate
2013 2014
Jan $3.58 $4.89
Feb $3.58 $5.12
Mar $3.46 $5.78
Apr $3.93 $4.37
May $3.91 $4.53
Jun $3.94 $4.28
July $3.46 $4.37
Aug $3.27 $3.69
Sep $3.19 $3.85
Oct $3.24 $3.91
Nov $4.27 $3.62
Dec $4.31 $4.68
Average $3.68 $4.42
Actual Annual Adjustment:
$4.35 —($3.68 —$4.42)=$5.10
Note;
$6.94/MMBtu =2007-08 Approved Rate
$7.1 8/MMBIu 2008-09 Approved Rate
$9.OOIMMBtu =2009-10 Approved Rate
$4.62fMMBtu 2010-11 Approved Rate
$4.99/MMl3tu =2011-12 Approved Rate
$4.60/MiviBtu =2012-13 Approved Rate
$3.45IMMBtu =2013-14 Approved Rate
$4.35fMMBtu 2014-15 Approved Rate
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