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Home My WebLink About20180419Idaho Power Response Letter.pdfSIffi* April 19,2018 RECEIVED ?$IB APR 19 PH 3: 3I ,,,',i,'i':*.iiii,follt*'o* An IDACORP ComDanY @ P.O. Box 70 (83707) 1221 W. ldaho St. Boir€, lD 83702 Diane Hanian, Secretary ldaho Public Utilities Commission 472 West Washington Street P.O. Box 83720 Boise, lD 83720-0074 Re: Case No. IPC-E-18-05 Update to Published Avoided Cost Rates to Reflect an Updated Natural Gas Price Forecast of the U.S. Energy lnformation Administration ("ElA") Dear Ms. Hanian: ldaho Power Company ("ldaho Powe/' or "Company") has reviewed the information you have provided in your letter dated April 5, 2018, notifying the Company of revisions to the Public Utility Regulatory Policies Act of 1978 (.PURPA") published Avoided Cost Rate(s) in accordance with ldaho Public Utility Commission ("Commission") Order Nos. 32697 and 32802, specifically the update of the natural gas forecast to include the February 6, 2018, EIA natural gas forecast. ldaho Power concurs that the model calculations used by Commission Staff for ldaho Power are consistent with the Surrogate Avoided Resource (.SAR') methodology approved in Commission Order Nos. 32697 and 32802; however, ldaho Power has concerns with the inclusion of the specific "reference case" natural gas price forecast for the Mountain Region's Electric Power sector included in EIA's Annual Energy Outlook. Commission Order No. 32697 generically requires the use of the EIA forecasts as an input to the SAR methodology, but that order and subsequent errata orders do not specify the data series that is to be applied to the SAR methodology. ldaho Power is concemed that the use of the reference case Mountain Region sector forecast is not a representative forecast for natural gas prices as it represents pricing that is higher than historical and expected natural gas transactions for ldaho Power, and consequently its use unreasonably inflates the avoided cost prices calculated under the SAR Methodology. ln accordance with Commission orders, the lncremental Cost lntegrated Resource Plan avoided cost methodology utilizes the natural gas price forecast that ldaho Power uses in its lntegrated Resource Plan ("lRP") process. The Company's 2017 IRP uses the EIA natural gas price forecast for Henry Hub, adjusted for pricing at Sumas and ldaho City Gate transport costs, where ldaho Power holds firm pipeline capacity and performs the vast majority of its natural gas transactions. Specifically, in the the 2017 lRP, ldaho Power used EIA's Natural Gas Spot Price at Henry Hub: High oil and gas resource and technology (nom $/MMBtu) forecast. ldaho Power has applied the adjusted2018 Natural Gas Spot Price at Henry Hub forecast to the SAR model and compared the resulting avoided cost prices to the prices determined by Staff that are contained in Staffs April 5, 2018, letter. When the Natural Gas Spot Price at Henry Hub forecast is applied as the basis in the SAR methodology, the approximate decrease in 20- Diane Hanian, Secretary April 19,2018 Page 2 year levelized avoided cost prices across all resource types, assuming an online year of 2018, is $1 0.99 per megawaft-hour. Customers are harmed by an avoided cost methodology that results in prices based on naturalgas forecasts that are not applicable to the utility. ldaho Power has experienced continued development of new qualified facility ('QF") projects that are eligible for published avoided cost rates, numerous projects have recently entered into replacement energy sales agreements ('ESA") for existing projects, and many more have or are expected to request replacement ESAs this year and the next several years. Since Order No. 32697 was issued on December 18, 2012,ldaho Power has entered into nine new ESAs and 10 replacement ESAs containing published avoided cost prices that are based on the EIA Mountain Region forecast. !t is anticipated that in 2018, at least one new project is expected to come under contract with cunent published avoided cost rates, and one additional existing project will request to implement a replacement ESA. ln 2019, the number of existing projects expected to request replacement ESAs grows to 10, and in 2020, it is expected that 16 QF projects will request replacement ESAs. Continued use of the Mountain Region natural gas forecast, that generally does not represent prices that are utilized by the utility, results in higher avoided cost prices that customers are required to pay. The application of a forecast for utilities required to utilize the SAR methodology that does not result in utility specific avoided costs can be remedied by applying a natural gas forecast stream for each of the three utilities. The SAR model is already set up to recognize different model inputs and variables for each utility, such as capacity rate calculations, seasonalization factors, and load and resource data; and the application of the proper natural gas forecast should be consistent with other utility specific inputs. ldaho Power respectfully suggests that Commission Staff consider updating the SAR methodology to reflect natural gas forecasts that are specific to each utility. ldaho Power appreciates your consideration of this suggestion and believes that using utility specific forecasts will result in the determination of more appropriate published avoided cost pricing. lf you have any questions regarding this conespondence, please contact me at 388-5946 or mdarrinqton@idahopower.com. Sincerelyrfury< Michael Darrington Energy Contracts Leader MD/kkt Sean Costello, IPUC Yao Yin, IPUC cc: