20171207Comments.pdf

DAPI{NE HUANG
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8370
IN THE MATTER OF THE ANNUAL
COMPLIANCE FILING OF IDAHO POWER
COMPANY TO UPDATE THE LOAD AND GAS
FORECASTS IN THE INCREMENTAL COST
INTEGRATED RESOURCE PLAN AVOIDED
COST MODEL
RECEIVED
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THB IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. IPC-E-I7-15
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Daphne Huang, Deputy Attorney General, submits the following comments.
BACKGROUND
On October 13,2077,ldaho Power Company filed its annual update to certain
components of its avoided cost rate calculation for qualifying facilities (QF) under the Public
Utility Regulatory Policies Act of 1978 (PURPA). Specifically, Idaho Power updated the load
forecast, natural gas forecast, and contract information components that it uses to calculate
avoided cost rates under the incremental cost Integrated Resource Plan (IRP) method, and asks
the Commission to accept the updated information for filing.
Under PURPA, electric utilities must purchase electric energy from QFs at rates
approved by the applicable state agency-in Idaho, this Commission. 16 U.S.C. $ 824a-3; Idaho
Power Co. v. Idaho PUC,155 Idaho 780, 780, 316 P.3d 1278,1287 (2013). The purchase or
"avoided cost" rate shall not exceed the "'incremental cost' to the purchasing utility of power
1STAFF COMMENTS DECEMBERT ,2077
which, but for the purchase of power from the QF, such utility would either generate itself or
purchase from another source." Order No. 32697 at7, citing Rosebud Enterprises v. Idaho PUC,
128 Idaho 624, 917 P .2d 781 ( I 996); 18 C.F.R. 5 292.1 0l (bx6xdefining "avoided cost").
The Commission has established two methods of calculating avoided costs, depending on
the size of the QF project: (1) the surrogate avoided resource (SAR) method, and (2) the IRP
method. See Order No. 32697 at7-8. With respect to the IRP method, the Commission requires
utilities to update fuel price forecasts and load forecasts each year on October 15. Order No.
32802 at 3. All other IRP method variables and assumptions remain fixed between the biennial
IRP filings. Order No. 32697 at22. The Commission expects the utility's load and resource
balance to account for long-term contract commitments, and PURPA contracts that have
terminated or expired. .1d.
In its Application, Idaho Power proposes to update its load forecast, natural gas forecast,
and contract information. The Company explains that the information has been incorporated into
its IRP avoided cost model and that it will use the model to begin negotiating contractual avoided
cost rates as of October 15, 2017 . Application at 2.
STAFF ANALYSIS
Staff reviewed the Company's Application, and reports as follows
Updated Load Review
Idaho Power's updated load forecast is from October 2017 and shows, on average, an
increase in its customer loads when compared to last year's load forecast update. Staff compared
Idaho Power's proposed average annual load forecast from 2017 through2034 to last year's
filing in Case No. IPC-E-16-22. The comparison shows that the 2077 forecast is 1 .T6ohhigher
than the 2016 forecast. The Company justifies this increase in its 2017 IRP due to continued
economic improvement in the Company's service territory. Staff agrees with the Company's
rationale and finds the new forecast is reasonable.
Updated Natural Gas Review
In this case, Idaho Power proposes to update the gas price forecast using the Energy
Information Administration's (EIA) "Natural Gas Henry Hub Spot Price: High Oil and Gas
Resource and Technology" forecast, published on January 5,2011. The Company adjusted it for
2STAFF COMMENTS DECEMBERT ,2017
pricing at the Sumas hub and for transportation cost to the Idaho City Gate. The Company
changed the forecast it used from last year's update which used EIA's "Natural Gas Henry Hub
Spot Price Reference Case." The 2017 IRP switched to the same EIA forecast and has not been
accepted by the Commission. The Company explains that the 2017 forccast shows "a decrease
in the average annual natural gas prices over the remaining period" compared to the 2016
forecast. Idaho Power believes the new forecast method more closely aligns with current and
future expectations.
Staff concedes it is difficult to determine the accuracy of any forecast, especially a
forecast with a 2)-year time horizon. Idaho Power states the High Oil and Gas Resource and
Technology Case is supported by future trading prices from the Intercontinental Exchange (ICE).
See Production Response No. 2. However, Staff has similar concerns in this case regarding the
change in the Company's natural gas price forecast as those expressed in Staff comments filed in
Case No. IPC-E-17-11, Application for Acceptance of the 2017 lntegrated Resource Plan. Staff
maintains that ICE transactions reflect the price for which today's market players are willing to
buy and sell options over the next seven years, rather than a reflection of actual future spot
market prices over the 2)-year forecast period. Staff also maintains that using a gas price
forecast estimated to be in the 5 to 10 percentile range, reflecting some of the lowest possible gas
price forecasts is in stark contrast to the Company's water and load assumptions in the 70 to 95
percentile range, reflecting some of the highest possible water and load conditions.
Nevertheless, Staff recommends accepting the Company's new gas price forecast in this
case but urges the Company to look closely at the assumptions and caveats the EIA uses to
develop the various gas price forecasts, The Company should then be prepared to explain why
its chosen forecast with the underlying assumptions is more reasonable than the gas price
forecast used in previous IRPs or natural gas updates.
Contract Terminations, Expirations, and Additions
Since last year's filing, Idaho Power has added 23.75 MG from four new PURPA solar
projects, 5 MW from one new Idaho biomass PURPA project, and2.75 MW from three
replacement PURPA hydro projects. In addition, Magic Valley cogeneration project and Mill
Creek Hydro project, totaling 10.8 MW, have expired. Staff verified this information and found
it to be accurate.
aJSTAFF COMMENTS DECEMBERT ,2017
STAFF RECOMMENDATION
Staff recommends approval of the updated load forecast, natural gas forecast, and long-
term contracts to be used in the IRP methodology. Staff also recommends that if the Company
uses a different EIA forecast as its base forecast, the Company must justify the change including
an examination of the underlying assumptions that EIA or other third party entities used to
develop that forecast.
Respectfully submitted this 7b day of December 2017
uang
General
Technical Staff: Yao Yin
Stacey Donohue
Kevin Keyt
i:umisc/comments/ipce I 7. I 5 djhyysdksk comments
4STAFF COMMENTS DECEMBER7,2077
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 7TH DAY oF DECEMBER 2017,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-17-15, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DONOVAN E WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail : [e-mail]
[e-mail]
S
CERTIFICATE OF SERVICE