The URL can be used to link to this page

Home My WebLink About20071024PacifiCorp comments.pdf~ ~\;oo ~OUNTAIN " ~~1 :C M\ K\' 24 October 24 2007 . "" ' i;)Ub :~(" C\ \\LF:l;~.J rOf,M.J\\S,:;k, VIA OVERNIGHT DELIVERyJnU \ h:, 201 South Main, Suite 2300 Salt Lake City, Utah 84111 Ms. Jean D. Jewell Commission Secretary Idaho Public Utilities Commission PO Box 83720 Boise, ID 83720-0074 Re:Comments of Rocky Mountain Power in Case No. IPC-O7- Dear Ms. Jewell: Rocky Mountain Power , (" RMP" or the "Company ), hereby submits for filing an original and seven copies of Comments of Rocky Mountain Power in Case No. IPC-07-15. Communications relating to this proceeding should be served on the following: Jordan A. White Rocky Mountain Power 201 South Main, Suite 2300 Salt Lake City, Utah 84111 i ordan. white(illpacificorp .com Brian Dickman Rocky Mountain Power 201 South Main Street, Suite 2300 Salt Lake City, UT 84111 Brian.Dickman(illPacifi Corp. com In addition, it is respectfully requested that all formal correspondence and Staff requests regarding this material be addressed to: By E-mail (preferred):datareq uest(illpacifi c orp. com By Fax:(503) 813-6060 By Regular mail:Data Request Response Center PacifiCorp 825 NE Multnomah, Suite 2000 Portland, OR 97232 Sincerely, J! Jeffrey K. Larsen Vice President, Regulation Enclosure Cc: Bart Kline Lisa Nordstrom Jordan A. White Rocky Mountain Power 201 South Main, Suite 2300 Salt Lake City, Utah 84111 Tel: (801) 220-4640 Fax: (801) 220-3299 i ordan. whi te(illpacificoro. com Attorney for Rocky Mountain Power BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF IDAHO POWER' PETITION TO MODIFY THE METHODOLOGY FOR DETERMINING FUEL COSTS USED TO ESTABLISH PUBLISHED RATES FOR PURP A QUALIFYING FACILITIES CASE NO. IPC-07- COMMENTS OF ROCKY MOUNTAIN POWER Rocky Mountain Power ("Rocky Mountain Power" or the "Company ) respectfully submits the following comments in the above referenced matter. Back2round The current surrogate avoided resource (SAR) methodology was adopted by the Commission in Order No. 29124 (September 2002). The fuel cost component of the SAR methodology utilizes an arithmetic average of the nominal prices for natural gas for the first three years of the Northwest Power Planning and Conservation Council's (NWPCC) median 20- year forecast of natural gas prices to calculate the starting year gas price. These three averaged years consist of the current year s forecasted price, plus the previous two years forecasted prices. The SAR methodology then escalates the starting year natural gas price at a constant rate of 2.3% each year during the 20 year period. The escalation rate is derived from the same NWPCC 20-year natural gas forecast. This fuel cost calculation was implemented for the IPC-O7-15 COMMENTS OF ROCKY MOUNTAIN POWER- avoided costs in 2002 and updated for a revised NWPCC forecast per Order 29646 in 2004. NWPCC released its latest update on natural gas price forecast in July 2007. II.Idaho Power s Petition In its petition, Idaho Power notes the major divergence from NWPCC' s forecast of natural gas prices and the resulting cost of fuel for the SAR because of the fuel cost calculation procedure. It further explains that the principal reason for the divergence is that the use of the 3- year average starting price and the linear escalation over the 20-year period from that price fails to incorporate the expected downward trend in natural gas prices apparent in NWPCC's 20-year forecast. Idaho Power argues that failing to recognize the non-linear shape of the NWPCC's 2007 forecast will cause the published rates to be much higher than they otherwise would be and proposes that the Commission utilize the average of all 20 years of the NWPCC's final 2007 median 20- year natural price forecast as the fuel cost component in the SAR methodology. Idaho Power further contends that a fuel cost calculation in the SAR methodology that uses the 20-year average price of the NWPCC's final 2007 median natural price forecast , would require no escalation over the 20 year term. III Rocky Mountain Power s Comments Rocky Mountain Power supports Idaho Power s effort to modify the fuel calculation component of the SAR methodology. The Company also agrees that the current fuel cost calculation in the SAR methodology will result in artificially high published avoided costs. Such costs are not representative of those Rocky Mountain Power could avoid by purchasing energy generated by a qualified generation facility (QF) under a standard power purchase agreement. IPC-O7-15 COMMENTS OF ROCKY MOUNTAIN POWER- QF agreements signed using the 2007 NWPCC forecast (with the abnormally high natural gas rates in 2005 through 2007 and escalated at the rate of2.3% each year) could result in unreasonable and unfair costs being borne by the Company. Ultimately, these costs would be paid by ratepayers -- in direct violation of the PURP A ratepayer neutrality standard. Ratepayers should not be subject to avoided cost rates that rely too heavily on uncharacteristically high gas prices as a starting point and then artificially escalate over a 20-year period. Rocky Mountain Power supports Idaho Power s petition to modify the fuel calculation in the SAR methodology as an initial corrective step. The Company believes, however, that the correct and ultimate procedure for fuel cost calculation in the SAR methodology should use NWPCC's final 2007 median 20-year natural price forecast as it is published on a year by year basis. This procedure would result in a fuel cost calculation component in the SAR methodology that is more accurate and reflective of the gas costs. Respectfully submitted this 24th day of October 2007. ROCKY MOUNTAIN POWER ~~~ JORDAN A. WHITE Attorney for Rocky Mountain Power IPC-O7-15 COMMENTS OF ROCKY MOUNTAIN POWER-