28550.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE INVESTIGATION OF THE CONTINUED REASONABLENESS OF USING VARIABLE COSTS ASSOCIATED WITH THE OPERATION OF COLSTRIP FOR ANNUAL ADJUSTABLE RATE CALCULATIONS AS PREVIOUSLY AUTHORIZED IN COMMISSION ORDER NOS. 23449, 26080 AND 23738.
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CASE NO. GNR-E-99-01

NOTICE OF AVISTA LETTER

NOTICE OF COMMENT SOLICITATION

ORDER NO. 28550

The Public Utility Regulatory Policies Act of 1978 (PURPA) requires electric utilities to enter into fixed term obligations to purchase energy from qualifying cogeneration and small power production facilities (QFs). The rate to be paid for such power is not to exceed the “incremental cost” to the utility of alternative electric energy, commonly referred to as a utility’s avoided cost. The avoided cost rates of Idaho’s major electric utilities consist of fixed and variable components. The variable component is adjusted annually.
The case docket in GNR-E-99-1 was established by the Idaho Public Utilities Commission (Commission) in 1999 as a vehicle for examining the continued reasonableness of using variable costs associated with the operation of Colstrip for the annual adjustable rate portion of avoided costs. Reference Commission Order Nos. 23349, 26080 and 23738. The use of Colstrip costs to determine the variable rate component was part of a prior Surrogate Avoided Resource (SAR) methodology developed in Case No. U-1500-170 (-170) for determining a utility’s avoided cost. There are 24 affected PURPA projects that use Colstrip in the adjustable rate component of their contract rates.
The –170 SAR methodology variable rate component is based on the variable costs associated with the operation of Units 3 and 4 of Colstrip, a coal-fired generating facility in southeast Montana. The adjustable portion of the avoided cost rate is updated annually. The same calculated rate revision for the variable component under the avoided cost methodology is used by Avista Corporation dba Avista Utilities—Washington Water Power Division (Idaho), PacifiCorp dba Utah Power & Light Company and Idaho Power Company.
YOU ARE HEREBY NOTIFIED that Avista by letter dated August 30, 2000 (attached), apprises the Commission that the Company will be unable in the future to furnish variable cost figures based on actual variable costs of Colstrip Units 3 and 4 for the purpose of determining avoided cost rates in Idaho.
As reported by Avista, although the Company still retains its ownership share, Montana Power has sold its majority share and is no longer the plant operator. The new owner, PP&L Montana, LLC, operates Colstrip Units 3 and 4 as a non-utility generator. The new owner does not utilize the same reporting criteria respecting costs as do regulated utilities. Many of the accounts relied upon by Avista Corp, in its avoided rate calculation in the past are now combined into larger categories and are not available.
Avista requests that it be relieved of the obligation of determining the adjustable portion of the avoided cost rates applicable to a coal plant SAR. Avista recommends that consideration be given to utilizing another source of information for purposes of determining the adjustable portion.
COMMISSION FINDINGS
The Commission has reviewed the filings of record in Case No. GNR-E-99-01, including the August 30, 2000 letter from Avista. We find that Avista’s letter filing should be provided to all affected contract parties. We also find it reasonable to solicit alternatives for determining annual adjusted rate calculations for those QF contracts containing Colstrip variable rates. Following receipt of comments, the Commission envisions that a public workshop will be scheduled to explore whether a consensus can be reached on a proposed substitute.
Accordingly, YOU ARE FURTHER NOTIFIED that written comments from Avista, PacifiCorp and Idaho Power Companies and from Commission Staff with suggested alternatives for determining annual adjusted rate calculations for those QF contracts containing Colstrip variable rates are to be filed with the Commission on or prior to Friday, December 22, 2000.
YOU ARE FURTHER NOTIFIED that the Commission in the same timeframe also solicits suggestions and written comments from affected QF contract parties.
O R D E R
In consideration of the foregoing and as more particularly described above, IT IS HEREBY ORDERED and the Commission does hereby adopt the foregoing scheduling and procedure in Case No. GNR-E-99-01.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______ day of October 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

vld/O:GNR-E-99-01_sw

NOTICE OF AVISTA LETTER
NOTICE OF COMMENT SOLICITATION
ORDER NO. 28550 1

Office of the Secretary
Service Date
October 23, 2000