20180430REC Request.pdf

RECEIVED
Z0t0f,fii 30 PH 3:27J. Kahle Becker, ISB No. 7408
Attorney at Law
223 North 6th Street, # 325
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
rDAi-{C trtiBLl
ilTlt-iTil:S t0MMlS sl0l'{
Attomeys for Renewable Energy Coalition
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S ANNUAL UPDATE TO
AVOIDED COST RATES
CASENO. IPC-E-I8-05
I. INTRODUCTION
The Renewable Energy Coalition (the "Coalition") moves the Idaho Public Utilities
Commission to approve Staff s update to Idaho Power Company's ("Idaho Power") avoided cost
rate update, or in the alternative, request that the Commission schedule technical hearings. In its
letter dated April 19, 2018 filed in this Docket No. IPC-E-18-05, Idaho Power Company ("Idaho
Power") expresses concern over Staff s use of the Mountain Region's Electric power sector
natural gas price forecast from EIA's Annual Energy Outlook. Instead Idaho Power requests that
the Idaho Public Utilities Commission ("Commission") update its SAR methodology to use the
natural gas price forecast that Idaho Power used in its 2017 Integrate Resource Plan ("IRP").
The Renewable Energy Coalition ("Coalition") opposes Idaho Power's objection and supports
the Commission Staff s use of the traditional and approved EIA Annual Energy Outlook avoided
cost rate update.
II. REQUEST FOR TECHNICAL HEARING
Idaho Power's request should not be granted unless the Commission opens up this docket
and gives other stakeholders an opportunity to participate and comment through the submission
of formal evidence. Idaho Power has not put forth any testimony or other relevant evidence to
support a significant change in the natural gas forecast used for determining avoided cost rates.
The issue of what gas price forecast is most accurate is technical in nature, and it would be
inappropriate to proceed without expert testimony. Therefore, if the Commission chooses to
consider Idaho Power's request, then the Commission should approve Staff s update, and open
up a docket to consider Idaho Power's request, which will only become effective after a technical
hearing.
III. THE EIA ENERGY OUTLOOK SHOULD CONTINUE TO BE USED TO
SET AVOIDED COST RATES
The gas price forecast proposed by Idaho Power is not an appropriate forecast and
engendered controversy in both Idaho and Oregon when Idaho Power proposed using that
forecast in its 2017 IRP. Idaho Power departed from its past practice of using the EIA Reference
Case gas price forecastl and instead used the High Oil and Gas Resource and Technology Case,2
which forecasts a low natural gas price over the planning horizon. The Idaho Commission Staff
characteized this departure as "[t]the most critical difference in this IRP" noting that it "assumes
The Reference Case is "a business-as-usual estimate, given known market, demographic,
and technological trends." ElA,2016 Annual Energy Outlook report, at MT-l (available
at: https://www.eia.gov/outlooks/aeo/pdfl0383(2016).pdf) (hereafter referred to as 2016
AEO).
The High Oil and Gas Resource and Technology Case represents 50% higher rates of
recovery and technological improvement, and the Low Oil and Gas Resource and
Technology Case represents 50% lower rates of recovery and technological
improvement. 2016 AEO at E-l1.
2
extremely low natural gas prices."3 Staffalso noted that Idaho Power's proposal to use this
forecast prompted intense discussions during IRP stakeholder meetings and that stakeholders
unanimously opposed moving to the new forecast.4 Additionally, the Oregon Commission Staff
believed "that ldaho Power seem[ed] to have used subjective judgment in determining what a
likely future was," and that it should have provided a "more robust justification for the decision
to change its planning case from previous IRPs."5
The EIA's High Oil and Gas Resource and Technology Case represents an extreme set of
uncertain circumstances on one end of the spectrum. Idaho Power's proposed natural gas price
forecast relies on future discoveries of a larger resource base, higher rates of recovery, and
greater technological improvement than business-as-usual, and it does not account for possible
downsides in the natural gas industry such as lower rates of recovery, fewer technological
advances, or carbon regulation. The EIA analyzes a number of different future natural gas price
scenarios in its Annual Energy Outlook. There is the "Reference" case, the "High Oil and Gas
Resource and Technology" case, and the "Low Oil and Gas Resource and Technology" case.
Please refer to the EIA's Natural Gas: Henry Hub Spot Price graph included herein as "Figure
1."
Re Idaho Power Company's 2017 Integrated Resource Plan, IPUC Case No. IPC-E-17-
I 1, Comments of the Commission Staff at 6 (Nov. 27 , 2017).
rd.
Re Idaho Power Company's 2017 Inteerated Resource Plan, Oregon Public Utility
Commission ("OPUC") DocketNo. LC 68, Staff s Opening Comments at25-26 (Oct.31,
2017) (available at:http:lledocs.puc.state.or.us/efdocs/HAC/lc68hac152510.pdf).
3
4
5
Figure I
Natural Gas: Henry Hub Spot Price
nom $/MMBtu
a}--_-
15 Lil oil and geg rawrce and te-ioology , ,
10
Relereoe case
2018 Nn nn 20.24 nn ?f,28 2030 2IJ,32
- Roference High oil and gas rosource and technology
- Low oil and gas resour@ and technology
2034 2036
elal Source: U.S. Energy lnf ormation Administration
The Reference Case is "a business-as-usual estimate given known market, demographic,
and technological trends."6 Idaho Power began using the EIA in its 2013 IRP as the basis for the
natural gas price forecast.T ln both the 2013 and 2015 IRPs, Idaho Power used the Reference
Case as its price forecast.8 As Figure I illustrates, the EIA's 2016 Reference Case represents a
middle-of-the-road estimate with rates gradually increasing to approximately $7.50/MMBtu.
The High Oil and Gas Resource and Technology Case represents a "larger resource base
and more rapid improvement in production technologies" than the Reference Case.e
Specifically, this case includes 50% higher estimated ultimate recovery as well as recovery of
EI.A, 2016 Annual Energy Outlook report, at MT-l (available at:
https://www.eia.eov/outlooks/aeo/pdfl0383(2016).pdf) (hereafter referred to as 2016
AEO).
Attachment A (ldaho Power's Response to REC's Data Request No. 1.2).
See ldaho Power's 2015 IRP at 85; see also Idaho Power's 2013 IRP at 62.
2016 AEO at ES-6.
6
7
8
9
5
additional unidentified resources, 50oh higher rates of technological improvement, and 507o
higher rates of technically recoverable undiscovered resources in Alaska and offshore.l0 As
illustrated in Figure 1 above, this case results in the lowest projected natural gas prices staying
below $s/MMBtu over the entire planning horizon.
On the other hand, the Low Oil and Gas Resource and Technology Case represents the
other end of the spectrum. Specifically, this case includes 50% lower rates of technological
improvement, and 50% lower rates of technically recoverable undiscovered resources in Alaska
and offshore.rr Figure I illustrates that this case has the highest natural gas prices over the
planning horizon with rates reaching nearly $15A4MBtu.
The EIA's High Oil and Gas Resource and Technology forecast relies on aggressive
estimates in oil and gas recovery and technology. It is an exffeme case. To rely on such an
aggressive forecast ignores the risk and uncertainty that gas recovery and technological
improvement will not keep pace, and reliance upon this forecast will not accurately represent
Idaho Power's avoided costs. Therefore, it is inappropriate to use that forecast as a basis for
determining avoided costs. The EIA Annual Energy Outlook should continue to be used for the
SAR methodology, and if a new forecast is considered, the Commission should open a docket
and select a forecast that most accurately forecasts natural gas prices.
IV. CONCLUSION
The Commission should approve new avoided cost rates using the EIA Annual Energy
Outlook and reject Idaho Power's recommendation to use EIA's High Oil and Gas Resource and
Technology forecast. If the Commission intends to consider use of EIA's High Oil and Gas
l0 2016 AEO, at E-11.
2016 AEO, at E-11.ll
Resource and Technology forecast, then it should hold a technical hearing to investigate the
reasonableness of this approach. The annual avoided cost update and these comments alone are
not sufficient process to approve such a change to the natural gas price forecast.
J. KAHLE BECKER ATTORNEY AT LAW
/s/ J. Kahle Becker
J. Kahle Becker
Attorney for the Renewable Energy Coalition
Orieinal and 7 copies to:
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise, ID 83702
x
U.S. Mail, Postage Prepaid
Overnight Courier
Hand Delivered
Via Facsimile
E-mail
d i ane. hanian(LDpuc. idaho. sov
Copies to:
Donovan Walker
Idaho Power Company
PO Box 70
Boise, ID 83707
U.S. Mail, Postage Prepaid
Overnight Courier
Hand Delivered
Via Facsimile
X E-maildwalker(a)idahopower.com
Sean Costello I Deputy Attorney General
Office of the Attorney General
Idaho Public Utilities Commission
472W. Washington
P.O. Box 83720
Boise, Idaho 83720-0074
U.S. Mail, Postage Prepaid
Overnight Courier
Hand Delivered
Via FacsimileX E-mail sean.costello(Oouc.idaho.eov