20190621Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM: YAO YIN
DATE: JUNB 18,2019
SUBJECT:CASE NO. GNR.E.I9.OI
ANNUAL REVISION AND UPDATED CALCULATION OF THE
ADJUSTABLB PORTION OF THE AVOIDED COST RATE FOR
BXISTING PURI'A CONTRACTS TOR AVISTA CORPORATION DBA
AVISTA UTILITIES, FOR IDAHO POWER COMPANY, AND FOR
PACIFICORP DBA ROCKY MOUNTAIN POWER
cAsf, No. PAC-E-19-07
ANNUAL R.EVISION OT QT VAzuABLE ENERGY PRICES PURSUANT
TO TERMS OF THE 1992 AMENDMENTS TO POWER PURCHASE
AGRTEMrNTS BBTWEEN rIAHO QrS AND PACIFTCORp
The ldaho 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 f,or those QF
contracts using variable costs associated with Colstdp, u coal-fired generating facility in
southeast Montana. For those QF contracts with Colstrip-related fuel costs and variable 0&M,
future Colstrip variable cost adjustments are to be calculated by using FERC Form I Colstrip
Unit Coal Costs per megawatt hour (MWh) and adding $2.00/It{Wh (the average variable 0&M
cost of Colstrip plus ZO1llvIWh for generation taxes plus a five percent (5%) adustment for line
loss). As computed by Commission Stafl the Colstrip related adjustable rate will change from
16.54 mill/kWh to 16.17 mill/kWh (see Attachment l). 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 cosl rates under the Sumas-based methodology
is based on annual average gas prices indexed at Sumas, Washington. As reported by Avista, the
IDECISION MEMORANDUM
indexed gas prices havc increased by Sl.s370itrIMBtu. The approved gas price of
$3.4400/l\iIMBtu plus the $l.5370A,lMBtu results in a gas price of $4.9770lI4MBtu for the
2019-2A20 year (see Attachment 2). This is equivalent to 35.3367 millitkWh based upon a heat
rate of 71 00 BTU/kWh as approved in Order No. 29 I 24.
The Commission Staff calculated changes to the annual adjustable rate po(ion of
avoided costs for those QF contracts, using variable costs associated with Colstrip and Sumas,
and provided the respective utilities with the updates for review by letter dated May 31,2019.
Avista, Idaho Power, and PacifiCorp responded by letter that Staff s calculations are correct.
In accordance with OrderNo.29316, the adjustable portion of the avoided costrate
for PaeifiCorp contracts with 1992 amendments has also been recomputed. Beginning on Juiy l,
2003, the adjustable portion for these conbacts 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 1,2019 extending tluough
June 30, 2020 has been computed to be $23.85/M\il/h, an increase from $23.67lh,lWh last year.
PacifiCorp confirmed that Staff s calculations are correct (sce Attachment 3).
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 l. Avista, Idaho Power, and
PacifiCorp agree with StafPs proposed calculations. Also adjusted annually is the adjustable
portion of avoided cost rates for existing PacifiCorp contracts with year 1992 amendments. For
those contracts, PacifiCorp agrees with Staffls proposed calculations. Does the Commission
agree with the proposed changes in the variable rates?
Yin
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2DECISION MEMORANDUM
COLSTRIP ADJUSTABLE RATE CALCULATION Updated
For Period 7 I 1 I 1 9-G130120
Colstrip Fuel Cost from Avista FERC Form 1 for CY 2018
line 12 Net Generation (kwh)
line 20 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-E-99-1 O.N.28708 411712001
1,389,037,000
$19,679,460
$0.014168
$14.1677
$2.oooo
$16.1677
Colstrip_19-20
ATTACHMENT 1
Average Gas Prices at Sumas, Washington from Inside FERC publication
($/IVIMBtu)
Calculating the 2018-2019 Avoided Cost Adjustable Rate
Jan
Feb
Mar
Apr
May
Jun
July
Aug
S"p
Oct
Nov
Dec
2017
$4.85
$3.17
$2.20
$2.34
$2.42
$2.70
$2.29
$2.48
$2.s6
$2.3s
$2.6s
$3.15
2018
$2.90
s2.s3
$ 1.96
$ 1.7s
$ 1.69
$ 1.48
$l.7s
$2.24
$2.04
$2.2s
$ 13.32
$17.69
Average $2.763 $4.300
Actual Annual Adjustment:
$3.440 -($2.763 -$4.300) =$4.977
Note:
$6.94A4MBtu = 2007-08 Approved Rate
$7.18A4MBtu = 2008-09 Approved Rate
$9.00/IvIMBtu = 2009-10 Approved Rate
$4.62A4MBtu = 2010-11 Approved Rate
$4.99llv[MBtu = 2011-12 Approved Rate
$4.60AvIMBtu = 2012-13 Approved Rate
$3.454{MBtu = 2013-14 Approved Rate
$4.354{MBtu = 2074-15 Approved Rate
$5.10/IVIMBtu = 2015-16 Approved Rate
$3.092A4MBtu = 2016-17 Approved Rate
$2.850/lvIMBtu = 2017-18 Approved Rate
$3.440A4MBtu = 2018-19 Approved Rate
ATTACHMENT 2
PacifiCorp Total Variable Energy Rate for 2019-2020
Fuel Cost (2018 FERC FORM 1) Page 402 Line 20 (S)
Generation (2018 FERC FORM 1) Page 402 Line 12 (MWH)
Naughton
175,283,027
4,740,078
H untington
r25,760,156
5,O87,824
H u nter
737,576,088
7,t2L,380
Totals
378,619,277
t6,949,282
Average Fuel Cost (S/MWH)
Variable O&M (S/MWH)
Total Variable Energy Rate (S/MWH)
22.34
1.51
23.85
ATTACHMENT 3