20211228Reply Commments.pdf

DONOVAN E. WALKER
Lead Counsel
[e-mail]
December 28, 2021
VIA ELECTRONIC MAIL
Jan Noriyuki, Secretary
Idaho Public Utilities Commission
11331 West Chinden Blvd., Building 8
Suite 201-A
Boise, Idaho 83714
Re: Case No. IPC-E-21-35
Idaho Power Company’s Application to Update the Gas Forecast in the
Incremental Cost Integrated Resource Plan Avoided Cost Model
Dear Ms. Noriyuki:
Attached for electronic filing is Idaho Power Company’s Reply Comments in the
above entitled matter. If you have any questions about the attached documents, please
do not hesitate to contact me.
Attachment No. 1 to Idaho Power Company’s Reply Comments is confidential.
Please handle the confidential information in accordance with the Protective Agreement
to be executed in this matter.
Very truly yours,
Donovan E. Walker
DEW:cld
Enclosures
RECEIVED
2021 DEC 28 PM 4:28
IDAHO PUBLIC
UTILITIES COMMISSION
IDAHO POWER COMPANY’S REPLY COMMENTS - 1
DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
[e-mail]

Attorney for Idaho Power Company

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S ANNUAL COMPLIANCE
FILING TO UPDATE THE LOAD AND GAS
FORECASTS IN THE INCREMENTAL
COST INTEGRATED RESOURCE PLAN
AVOIDED COST MODEL.

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CASE NO. IPC-E-21-35

IDAHO POWER COMPANY’S
REPLY COMMENTS

Idaho Power Company (“Idaho Power” or “Company”), in accordance with the
Idaho Public Utilities Commission’s (“Commission” or “IPUC”) Notice of Modified
Procedure, Order No. 35228, hereby respectfully submits the following Reply Comments
in response to the Comments filed by Commission Staff (“Staff”) on December 21, 2021.
I. INTRODUCTION
On October 15, 2021, Idaho Power filed its annual Compliance Filing pursuant to
Order Nos. 32697 and 32802 to update the load forecast and natural gas forecast
components of the Incremental Cost Integrated Resource Plan (“ICIRP”) avoided cost
methodology. On November 5, 2021, Idaho Power filed a Supplement to the Annual
Compliance Filing, pursuant to Order No. 34913, to add the first update to the Peak Hours
and Premium Peak Hours used to calculate payment for battery storage resources in the
ICIRP avoided cost model. On November 22, 2021, Idaho Power filed a Second
Supplement to the Annual Compliance Filing to provide the gas price forecast in nominal
IDAHO POWER COMPANY’S REPLY COMMENTS - 2
pricing rather than in real pricing. Staff filed Comments on December 21, 2021. Idaho
Power now respectfully submits these Reply Comments.
II. STAFF RECOMMENDATIONS
Idaho Power appreciates Staff’s detailed and thoughtful review of the Compliance
Filing update. The Company appreciates and accepts Staff’s recommendations to
approve the Load Forecast, Contract Changes, Peak Hours, and Premium Peak Hours.
However, Idaho Power respectfully disagrees with Staff’s recommendations regarding the
natural gas price forecast. Staff recommends that the Platt’s natural gas price forecast
filed in the Second Supplement be rejected and in its stead, that the Commission Order
the Company to: (1) file a forecast for the next three years as a compliance filing to this
case, utilizing the latest NYMEX forward prices to determine IRP avoided cost rates for
contracts signed after January 1, 2022, until the effective date of the next natural gas
price forecast annual update; and (2) reevaluate the Company’s natural gas price forecast
methodology prior to the next annual update, especially the method used to determine
the first three years of the forecast time horizon used to determine IRP-based avoided
cost rates. Staff also recommends the changes be effective January 1, 2022, and that all
future updates filed on October 15 be effective the following January 1.
Idaho Power has concerns with Staff’s recommendations regarding the natural gas
price forecast and the January 1 effective date for this year and into the future. Idaho
Power’s respectfully submits these Reply Comments addressing these issues.
III. NATURAL GAS PRICE FORECAST
A. Staff’s Recommendation to Change the Forecast Source in this Proceeding is
Inconsistent with Commission Precedent. In final Order No. 32697, the Commission
determined that the inputs to the ICIRP avoided cost methodology, utilized for all
proposed Public Utility Regulatory Policies Act of 1978 (“PURPA”) Qualifying Facility
IDAHO POWER COMPANY’S REPLY COMMENTS - 3
(“QF”) projects that exceed the published rate eligibility cap, will be updated every two
years upon acknowledgement of the utility’s Integrated Resource Plan (“IRP”) filing, with
the exception of the load forecast and the natural gas forecast—which are to be updated
annually by October 15 of each year. Order No. 32697, p. 22; Order No. 32802.
Historically, the October 15 update to the natural gas price forecast has been an
update to the vintage of the natural gas price forecast, not to the source of the forecast
or the methodology for calculating it. See, e.g., Case Nos. IPC-E-13-18; IPC-E-14-25;
IPC-E-15-25; IPC-E-16-22; IPC-E-17-15; IPC-E-18-13; IPC-E-19-31; IPC-E-20-35; IPC-
E-21-15. The update has incorporated the most-recent version of the forecast used in
the most recently acknowledged Integrated Resource Plan (IRP). (In some cases, the
October 15 update provided the most recent version of the natural gas forecast used in
the most recently filed or soon-to-be-filed IRP. See Case Nos. IPC-E-14-25; IPC-E-17-
15.) Any changes to the source or calculation of the forecast have been primarily
reviewed and vetted through the IRP itself – not through changes to the October 15
annual update. See IPC-E-19-19 (adopting the use of the Platts forecast for the IRP);
and IPC-E-21-15 (adopting the use of the most recent Platts forecast after the
acknowledgement of the 2019 IRP). This is consistent with the intent and language of
Order No. 32697 – the gas price forecasts used in the IRP are updated between IRP
cycles, but other IRP variables and assumptions remain the same. Additionally, Staff
testimony from GNR-E-11-03 states,
Fuel price forecasts should be updated annually. I suggest
that the timing of the updates coincide with whatever schedule
is adopted for fuel price updates made under the SAR
methodology. Unlike the recommendation for use of the
DOE/EIA Annual Energy Outlook forecast for the SAR
methodology, however, I believe that utilities should be
permitted to use the same forecasts and sources (or
IDAHO POWER COMPANY’S REPLY COMMENTS - 4
combinations of sources) as they use in their IRPs for use with
the IRP methodology …

Case No. GNR-E-11-03, Sterling Direct, p 22, line 22 - p 23 line 6. The Commission
adopted this recommendation to annually update fuel price and load forecasts, and to
consider PURPA contracts that have been signed or terminated, but that other IRP
Methodology variables would remain fixed between IRP filings. Order No. 32697 at 22.
The important concept incorporated by this procedure is that the gas forecast
methodology used for avoided cost pricing remains consistent with that used by the utility
in its Integrated Resource Planning - but allowing the data (vintage) to be updated on an
annual basis, rather than every two years with the IRP. Accepting Staff’s
recommendation to use the NYMEX forward prices as the natural gas price forecast in
the near-term, rather than the Platts forecast used in the most recently acknowledged
IRP (and further accepted in the May gas price forecast update in IPC-E-19-15), would
be a stark departure from this precedent on the annual gas price forecast, and would lead
to the use of a forecast that has not been adequately considered in the IRP process. It
would inappropriately create a disconnect between the gas price forecast source in the
2019 IRP and the forecast used in the ICIRP methodology between IRPs. The forecast
sources are intended to be the same. Staff’s proposal to change the forecast source in
this proceeding based on a belief that the forecast is too low in the early years is
inconsistent with the intent of this proceeding.
Further, the change would be made without the same level of public review and
opportunity for comment as occurs within the IRP process. The use of the Platts forecast
in the IRP was reviewed and commented on extensively by stakeholders in the public
meetings leading up to the 2019 IRP and in the proceeding regarding the 2019 IRP (IPC-
E-19-19), and the Commission ultimately acknowledged the IRP with that forecast in
IDAHO POWER COMPANY’S REPLY COMMENTS - 5
Order No. 34959. The use of the Platts forecast in the IRP was again reviewed and
discussed in the public meetings during the development of the 2021 IRP over the past
year. It would not be appropriate to make a change of this magnitude – changing the
source of the gas price forecast to something other than what is used or even proposed
in the IRP – in this routine update proceeding, and particularly without adequate
opportunity for stakeholder review and comment. It is not proper to propose an entirely
new forecast methodology that does not align with the Company’s IRP in the October 15
update proceeding. Changes to the forecast methodology should be vetted through the
Company’s IRP process, and ultimately be consistent with the Company’s IRP. Idaho
Power has just completed its 2021 IRP development1 which incorporates Platts natural
gas forecast, and the Company continues to believe that Platts is the appropriate gas
price forecast for use in the IRP and for the ICIRP method of calculating avoided costs.
B. Staff’s Recommendation to Change the Forecast Source is Not Supported by
the Evidence. Staff’s recommendation to reject Idaho Power’s Platt’s forecast is “based
on two analyses it conducted: (1) a comparison of the nominal forecast in this case to an
earlier forecast submitted in IPC-E-21-15; and (2) a comparison of the Company’s Henry
Hub forecast to Rocky Mountain Power’s (“RMP”) and Avista’s Henry Hub forecasts
recently filed through their annual updates.” Staff Comments p. 3. Staff recommends
rejecting the Platts forecast because based on Staff’s two analyses, Staff believes Platts
is shown to be unresponsive to near term market shifts, and NYMEX based composites
are responsive. Idaho Power respectfully disagrees and believes that the differences
identified by Staff are solely due to the timing differences of when Platts and Avista’s and

1 Idaho Power’s 2021 IRP will be filed prior to the end of 2021, within days of the filing of these Reply
Comments.
IDAHO POWER COMPANY’S REPLY COMMENTS - 6
RMP’s forecast data was obtained relative to the upswing in market prices referenced by
Staff.
On Staff’s first analysis - comparison of Platt’s forecast from IPC-E-21-15 (March
2021 Platts forecast) and this case, IPC-E-21-35, (July 2021 Platts forecast) - Staff
concludes that because there was very little change from the March to July Platts
forecasts and that market fundamentals at this time “were causing an upswing in natural
gas spot market prices as shown in Figure No. 3”, that the July 2021 Platts forecast “may
not be responsive to short-term changes.” Staff Comments p. 3-4.
On Staff’s second analysis - comparison of RMP and Avista’s forecasts to July
2021 Platts forecast - Staff concludes that the composite forecasts used by Avista and
RMP that utilize NYMEX futures prices over the first few years of their forecasts were
better able to capture upward changes in the gas market leading up to October 15, 2021,
that per Staff’s first analysis Platts was not. Staff Comments p. 7. Staff also proposes
that it does not believe the near term discrepancy between Platts and the composite
forecasts of RMP and Avista is due the different timing of the three forecasts. Staff
Comments p. 7. Staff suggests that Avista’s NYMEX data was obtained in August 2021
and believes that RMP’s forward prices were obtained “around the same time as Avista’s.”
Id.
Using the information from both Avista’s and RMP’s filings, Idaho Power was able
to back into the pull-date for the Henry Hub pricing contained in their forecasts:
September 30, 2021, for RMP; and October 13, 2021, for Avista. Using the same graph
from Staff’s Comments identified as “Figure No. 3: U.S. Historical Natural Gas Prices”
(Staff Comments p. 5) it can be seen that the difference in timing between the data utilized
by the different forecast corresponds to the differences in near term prices seen by Staff.
IDAHO POWER COMPANY’S REPLY COMMENTS - 7
It also generally corresponds and shows why there would be little difference between a
Platts forecast from March 2021 to June 2021.

The difference between the Henry Hub (NYMEX) forecasts is due to the timing.
Even assuming, as did Staff, that both Avista’s and RMP’s forecasts were based on post-
August 2021 data, the Figure 3 graph shows how the timing difference capture the upward
trend. The timing difference explains the disparity between the updated Platts long-term
July forecast which does not capture the volatile price run-up that occurred from the end
of July through the end of November. Additionally, the spot market is different than the
forward market. Generally, changes in the spot or daily cash market are not factored into
a long-term (6+ years) forecast which shows one price annually. Also, changes in the
spot market are driven by any number of factors like seasonality, weather, and short-term
pipeline events which may not affect the long-term market fundamentals and should not
be factored into a long-term forecast.
IDAHO POWER COMPANY’S REPLY COMMENTS - 8
Henry Hub/NYMEX has been very volatile over the last 6 months both in the spot
and forward markets. The Henry Hub/NYMEX annual price for 2022 increased by 39%
from June 4, 2021, (the time when the Platts July forecast was developed), to September
30 (when RMP pulled pricing) and 41% from June 4, 2021, to October 13, 2021 (when
Avista pricing was updated in the 12/14/21 filing). From October 13 to December 23, that
price decreased by 19%.
Settlement Date
Henry Hub Annual 2022
Price 6/4/2021 $2.92 9/30/2021 $4.41 Pull Date for RMP's Filing
10/13/2021 $4.49 Pull Date for Avista's Filing
12/23/2021 $3.62 Recent Pull Date

C. Platts Updated December 2021 Forecast Corresponds to RMP’s and Avista’s
Forecasts. Platts published an updated Platts Long-Term Gas Forecast, in December,
2021, which does factor in increased prices and the first 5 years of the forecast show a
22% increase over the July, 2021 forecast. This again, reinforces the effect of the timing
of the relative forecasts in relation to the run-up in gas pricing referenced by Staff, which
occurred from approximately late July through November 2021. The most recent Platts
forecast available to Idaho Power to make the October 15 Compliance filing was the July
Platts forecast which, as Staff points out, does not capture the run-up in pricing reflected
in the other utility’s forecasts.
As an alternative to Staff’s recommended rejection of the Platts forecast and
implementing a NYMEX forwards-based methodology change that is inconsistent with
Idaho Power’s IRP, the Company proposes as an alternative updating the gas forecast
with the Platts December 2021 update. Confidential Attachment No. 1 includes: Table 1
- the Natural Gas Forecast Pricing based on Platts December 2021 update, Graph 1 -
IDAHO POWER COMPANY’S REPLY COMMENTS - 9
showing the relative change in the Platts forecasts, and Table 2 - Henry Hub Annuals
from Platts December forecast, which is the same table Staff requested for the Platts July
forecast in discovery.
IV. JANUARY 1 EFFECTIVE DATE
Idaho Power disagrees with Staff’s proposal that this update take effect on January
1, 2022, and that future load and gas price forecast updates for the ICIRP methodology
take effect January 1 following the October 15 filing. The October 15 update to the load
and natural gas price forecasts is intended to be a routine update to those limited
assumptions, with the underlying source or methodology vetted in the IRP process, not
in the update proceedings. Further, the Commission has historically approved these
updates with an effective date of October 15. The October 15 effective date is critical to
ensure that projects that may enter the energy sales agreement queue after October 15
are priced appropriately based on the most updated information. Indeed, the Commission
has regularly approved past October updates effective as of October 15 of the applicable
year, even though the order may be dated after that date. See, e.g., Order Nos. 32941,
33182, 33417, 33646, 33957, 34217, and 34510.
Creating a lag between the update filing date and the effective date creates the
potential for projects to try to anticipate the impact the update will have on avoided cost
pricing. If projects believe the update will result in lower avoided cost pricing, there may
be the potential for claims that projects have established legally enforceable obligations
as they try to remain eligible for the old pricing. Moving the effective date to January 1
thus creates the potential for increased litigation, does not create any benefit, and is
unnecessary. This is not simply conjecture. Idaho Power and the Commission has seen
past “runs on the bank” when multiple and numerous projects will try to all come in during
a specific period of time seeking to stake a claim to what they perceive as higher rates,
IDAHO POWER COMPANY’S REPLY COMMENTS - 10
or more beneficial contract terms when they foresee the prospect of a change. For
example, in the past Idaho Power has seen several “run-on-the-bank” situations ranging
from approximately 200-700 MW of wind over the course of several months and more
than 1,000 MW of proposed solar projects over the course of approximately one-months’
time. Creating a lag from October 15 to January 1 every year with the natural gas and
load forecast update unnecessarily opens up what should be a routine Compliance filing
into a potential driver of controversy and additional litigation over pricing and avoided cost
rate eligibility. Idaho Power recommends that the Commission maintain its current
practice of utilizing an October 15 effective date for the October 15 annual update filings.
V. CONCLUSION
The Company appreciates and accepts Staff’s recommendations to approve the
Load Forecast, Contract Changes, Peak Hours, and Premium Peak Hours. However,
rather than reject the Platts forecast as recommended by Staff, Idaho Power recommends
that the Commission approve its compliance filing as submitted - or in the alternative that
it utilize the updated December 2021 Platts forecast submitted with these Reply
Comments. The differences identified by Staff in the gas forecasts are due simply to the
timing associated with different points in time that the various forecasts pulled market
data in relation to a July through November 2021 run-up in gas prices. The Commission
should not abandon the precedent and procedure of the October 15 update being a true
update to the gas forecast utilized by the Company in its IRP. The October 15 update
should update the vintage of the forecast and not change the source or methodology of
the gas forecast. Similarly, the Commission should maintain the precedent of implanting
the October 15 update with an effective date of October 15, and not create a period of
uncertainty and delay effectiveness to January 1 each year. Doing so would invite
potential claims and additional litigation over avoided cost pricing eligibility and legally
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enforceable obligation claims.
Respectfully submitted this 28th day of December 2021.

DONOVAN E. WALKER
Attorney for Idaho Power Company

IDAHO POWER COMPANY’S REPLY COMMENTS - 12
CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on the 28th day of December 2021 I served a true and
correct copy of the within and foregoing Idaho Power’s Reply Comments upon the
following named parties by the method indicated below, and addressed to the following:

Riley Newton
Idaho Public Utiilities Commisson
P.O. Box 83720
11331 West Chinden Blvd, Bldg 8
Suite 201-A
Boise ID 83714
Emailed to:
[e-mail]

________________________________
Christy Davenport, Legal Assistant