28081.pdf

Office of the Secretary
Service Date
July 2, 1999
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ANNUAL REVISION)
AND UPDATED CALCULATION OF THE
ADJUST ABLE PORTION OF THE AVOIDED
COST RATES FOR A VISTA CORPORATION
DBAAVISTA UTILITIES-WASHINGTON
WATER POWER DIVISION, IDAHO POWER
COMPANY AND P ACIFICORP DBA UTAHPOWER & LIGHT COMPANY.
CASE NOS. A VU-99-
IPC-99-
UPL-99-
ORDER NO. 28081
On May 4, 1999 Avista Corporation dba Avista Utilities-Washington Water Power
Division (Avista; Water Power) filed with the Idaho Public Utilities Commission its annual
revised and updated calculations for the adjustable portion of avoided cost rates.A vista
submitted two sets of adjustable rate calculations: one for coal (Colstrip) and the other for gas
(Sumas). The Colstrip adjustments apply only to contracts executed between September 28
1990 and January 30, 1995. The Sumas adjustments apply to all contracts for projects , 1 MW
and less executed since January 31 , 1995. The annual adjustable rate calculation based on
Colstrip was addressed in Order Nos. 23349 and 26080, issued in Case Nos. WWP-89-6 and
WWP-95-3/IPC-95- 7/UPL-95-, respectively. The annual adjustable rate calculation
based on Sumas was addressed in Order Nos. 25883 and 26086, issued in Case No. WWP-93-
10.
Adjustable Rates-Colstrip
The adjustable portion under the previous-170 coal-fired Surrogate Avoided Resource
(SAR) methodology (Case No. U-1500-170) is based on the variable costs associated with the
operation of Colstrip, a coal-fired generating facility in southeast Montana. An annual filing is
required by Order No. 23349 (Water Power), Order No. 23357 (Idaho Power), and Order No.
23358 (PacifiCorp). Pursuant to the Commission s administrative determination of avoided cost
rates, the adjustable portion of avoided cost rates is the same for all of Idaho s major electric
utilities.
ORDER NO. 28081
By Order No. 23738 issued in Case Nos. WWP-89-, IPC-89-11 and UPL-89-
5 issued June 17, 1991 , the Commission approved the methodology utilized by Water Power
(now Avista) in annual Colstrip adjustable avoided cost rate submittals. The Commission
indicated that future adjustable rate updates would require only a single filing by Water Power
with copies and party status provided to Idaho Power and PacifiCorp. The Commission directed
that all applications for future or subsequent annual updates be filed by June 1 with the effective
date for the new adjustable rate to be July 1. Under the established practice, the revised updated
calculations set forth in Avista s May 4, 1999 filing are recognized as being submitted also for
approval for Idaho Power and PacifiCorp dba Utah Power & Light Company.
A vista represents that the Colstrip adjusted avoided cost rate calculated on actual
1998 costs changed from 10.00 milllkWh to 8.86 miIVkWh. Coal costs decreased 9.8% from
$7.72/MWh to $6.96/MWh. Variable O&M costs decreased 20%. Generation increased 32%.
Adjustable Rates-Sumas
By Order Nos. 25883, 25884 and 25882 issued in Case Nos. WWP-93-, IPC-
93-28 and UPL-93-3/UPL-93-7 on January 31 , 1995, respectively, the Commission
determined that the adjustable portion of avoided cost rates for future projects should be based
on annual average gas prices indexed at Sumas, Washington. The purpose of including an
adjustable component in the avoided cost rates is to capture annual changes in natural gas fuel
costs. Under the Commission approved SAR avoided cost methodology, the adjustable portion
of avoided cost rates is the same for all of Idaho s major electric utilities and an annual filing is
required.
Water Power (now Avista), in consultation with the Commission Staff, devised a
methodology for making annual adjustments, which was accepted by the Commission in Order
No. 26135 in Case Nos. WWP-95-3/IPC-95-7/UPL-95-2. As reported by Avista in its
annual filing of May 4, 1999, the 1998 annual average gas price indexed at Sumas, Washington
was $1.61/mmBtu resulting in a decrease of $0.09/mmBtu. The previously approved base gas
price of $2.35/mmBtu minus the $0.09/mmBtu decrease results in a gas price of $2.26/mmBtu
for 1999-2000 year. This by Staffs calculation, equates to an SAR fuel cost of 16.61 millslkWh
as used in the model. The difference in the Sumas average price and the new base gas price is
the result of a timing difference and the use of a trailing average. A proposed schedule of
ORDER NO. 28081
revised rates and a detailed sheet of variables for each utility was prepared by Staff and reviewed
by the utilities.
Cogeneration Partners
Also filed this year by Rupert Cogeneration Partners Ltd and Glenns Ferry
Cogeneration Partners Ltd (collectively Cogeneration Partners) are comments and a request for
modification of the methodology, specifically, the annual adjustable rate calculation based on
Colstrip. The Cogeneration Partners contend that significant recent changes in the operation
ownership, and recent mediation settlement involving the coal supplier have now eliminated
Colstrip s ability to "reasonably track energy cost escalation rates.
Montana Power Company s sale of its interest in Colstrip to a non-regulated, non-
utility, entity, Cogeneration Partners contend, will change the manner in which the plant is
operated, and in the competitive world may preclude continued access to verifiable data.
As further evidence suggesting Colstrip should not be used as an "index" of general
coal cost escalation rates, Cogeneration Partners note that in early 1997, the coal supplier
pursuant to a mediation settlement compensated the utility owners with lower coal costs
(approximately 30% lower) that are not associated with external or market coal price changes.
Cogeneration Partners state that they have no reason to believe that prior to 1997
Colstrip was not a reasonable surrogate as an index. Cogeneration Partners' recommended
solution uses 1996 as a starting point for the application of a generally accepted index
(specifically the Producer Price Index (PPI)) to measure changes in the market price of coal.
Cogeneration Partners request that the Commission reject Colstrip as the method for
indexing changes in the cost of coal and O&M and substitute the recommended PPI index or
another reasonable replacement that does not suffer from any of the identified deficiencies
associated with Colstrip.
Utility responses to the requested change of methodology by Cogeneration Partners
were filed on June 24 by Idaho Power Company and A vista Corporation.
Idaho Power
Regarding the change in ownership of Colstrip and its possible ramifications, Idaho
Power notes that A vista has not sold its share of Colstrip and suggests that before any decision is
ORDER NO. 28081
made to scrap the existing methodology that Avista be consulted to confirm (1) that there will be
material changes in the plant operation and (2) that A vista will not have continuing access to data
concerning the costs of coal and variable O&M at Colstrip.
Regarding the 1997 settlement negotiations and resulting price reductions for coal
Idaho Power contends that the pricing dispute arose because of changed economic conditions
and because the price of coal for Colstrip generation exceeded market prices. Rather than being
an extraordinary event, Idaho Power contends that the negotiations and settlement are similar to
pricing reductions obtained by other western utilities. Idaho Power itself notes that it and its co-
owners of coal-fired power plants have undertaken similar negotiations and obtained price
reductions at the Bridger, Boardman and Valmy projects. Idaho Power suggests again that
before any change is made A vista s input be solicited.
As to the proposed use of the identified Producer Price Indices for adjusting the
variable portion of the energy purchase price, Idaho Power contends that the proposed indices
are probably not the best indicators of current coal and variable O&M costs in the Powder River
Basin. The PPI index is national in scope and includes both eastern and mid western coal prices.
Further, Idaho Power is advised and apprises the Commission that the proposed index is a
discontinued series which the Bureau of Labor Statistics intends to retire.
Finally, Idaho Power reminds the Commission that it is the total avoided cost used to
set purchase prices paid to PURPA Qualifying Facilities (QFs) that must be determined. Federal
law, it states, precludes the Commission from ordering electric utilities to purchase power from
QFs at prices that exceed a utility s avoided costs. If there is some material error in the avoided
cost methodology, then the total purchase price, and both the fixed and variable component may
very well have to be reconsidered to ensure that the total payment does not exceed total avoided
cost.
Idaho Power notes that it has nine contracts representing 61 775 kW that are of a
vintage affected by the proposed change. The Cogeneration Partners, Idaho Power states
currently receive approximately 60 millslkWh for their energy. Market prices for energy are
currently 20 to 25 mills/kWh.
ORDER NO. 28081
A vista
A vista notes that Cogeneration Partners does not contend that the figures filed by
A vista fail to reflect the actual Colstrip variable operating costs. Because the filed figures
themselves are not challenged and because the approved methodology continues until changed
both A vista and Idaho Power recommend that the Commission approve the revision to the
variable avoided cost rate for 1999-2000, based upon the filed figures for effective date July 1
1999.
With respect to the proposed change in methodology, Avista represents that it has not
yet had the opportunity to fully analyze all the contentions of Cogeneration Partners. Both
A vista and Idaho Power recommend that if the Commission wants to consider changes to
methodology that it establish a separate docket and provide all affected parties the opportunity to
fully analyze and prepare their own recommendations.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case
Nos. A VU-99-, IPC-99-5 and UPL-99-including the comments of Cogeneration
Partners and the related reply comments of Avista and Idaho Power. We find that the issues
raised by Cogeneration Partners merit further development and exploration. As reflected in the
respective comments filed by Cogeneration Partners and Idaho Power, there are two sides to
every coin. Based on the existing record, we are not convinced that a change in Colstrip-related
methodology and movement to an indexed-based rate is warranted or that a stay of proceedings
to determine same is required. We find that the accuracy of the variable rate methodology
figures submitted by Avista in this case has not been challenged. We find that it is reasonable to
continue with the existing methodology until such time as a factual record is developed
supporting a change in methodology, including a determination as to whether the variable rate
methodology can be changed independent of the fixed rate.
In further consideration of the request of Cogeneration Partners, we find it
reasonable to establish a separate generic electric docket (GNR-99-1) as a place marker for
further investigation into the continued reasonableness of using actual Colstrip variable operating
costs for determining the adjustable portion of avoided costs for the specific generation of
existing contracts utilizing same. Also to be explored is the availability of a reasonable and
ORDER NO. 28081
acceptable substitute or index, the use of which would result in an avoided cost rate as defined in
Sections 201 and 210 of the Public Utilities Regulatory Policies Act of 1978 (PURPA) and the
implementing Rules and Regulations of the Federal Energy Regulatory Commission. Idaho
Power, Avista and PacifiCorp are directed to provide the Commission Secretary with an address
list of affected QF projects. Copies of the comments of Cogeneration Partners, the related
comments of Idaho Power and A vista, and this Order will be filed in the generic docket.
The methodology that this Commission has approved for determining the variable
components of the avoided cost rate is a relatively simple arithmetic recalculation. We find
based upon our review of the calculations of both the Colstrip and Sumas updates, that the
resulting adjustable rates are fair, just and reasonable. Attached to this Order as Appendices A
Band C are the tables showing the adjustable rates as updated by A vista s filing for A vista
Idaho Power and PacifiCorp, respectively.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over A vista Corporation dba
Avista Utilities-Washington Water Power Division, Idaho Power Company and PacifiCorp dba
Utah Power & Light Company, electric utilities, pursuant to the authority and power granted it
under Title 61 of the Idaho Code, and the Public Utility Regulatory Policies Act of 1978
(PURPA).
The Commission has authority under PURP A and the implementing regulations of
the Federal Energy Regulatory Commission (FERC) to set avoided costs, to order electric
utilities to enter into fixed term obligations for the purchase of energy from qualified facilities
and to implement FERC rules.
ORDER
In consideration of the foregoing and as more particularly described, IT IS HEREBY
ORDERED that the Colstrip related adjustable portion of the avoided cost rate for existing
contracts and the Sumas related adjustable portion of the avoided cost rates for A vista, Idaho
Power and PacifiCorp dba Utah Power & Light Company are changed effective July 1 , 1999, as
outlined in the attached schedules.
ORDER NO. 28081
IT IS FURTHER ORDERED that the following generic docket be established for
further development and exploration ofthe issues raised by Cogeneration Partners:
Case No. GNR-99-
IN THE MATTER OF THE INVESTIGATION OF THE CONTINUED
REASONABLENESS OF USING VARIABLE COSTS ASSOCIATED
WITH THE OPERATION OF COLSTRIP FOR ANNUAL ADJUST-
ABLE RATE CALCULATIONS AS PREVIOUSLY AUTHORIZED IN
COMMISSION ORDER NOS. 23349 26080 AND 23738.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
I$. day of~1999.
cn~ -J &JL
MARSHA H. SMITH, COMMISSIONER
ATTEST:
fl:Ja)vh~ t'i /JJ\A,(J\D
Barbara Barrows
Assistant Commission Secretary
vld/O:A VU-99-3 _sw2
ORDER NO.
A VISTA CORPORATION
AVOIDED COST RATES FOR
FUELED PROJECTS
mills/kWh
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)1999 2000 2001 2002 2003 2004 YEAR RATES
23.24.25.27.28.29.1999 23.
24.25.26.27.28.30.2000 24.
24.25.26.28.29.30.2001 25.
25.26.27.28.30.31.2002 27.
25.26.28.29.30.31.2003 28.
26.27.28.29.31.32.2004 29.
26.27.29.30.31.31.2005 30.
27.28.29.30.30.30.2006 32.
27.28.30.30.29.29.2007 33.
28.29.29.43 29.43 29.28.2008 35.
28.28.28.28.28.28.2009 36.
28.28.28.28.28.28.2010 18.
27.28.02 28.28.28.28.2011 19.40
27.46 27.28.28.28.27.2012 20.
27.27.27.27.27.27.2013 20.
27.27.27.27.27.27.2014 21.
27.27.27.27.27.27.2015 22.
26.27.27.27.27.27.2016 23.
26.27.27.27.27.27.2017 23.
26.27.27.27.27.27.2018 24.
2019 25.
2020 26.
2021 27.
2022 28.
2023 29.
2024 30.40
EFFECTIVE DATE ADJUSTABLE COMPONENT
7/1/99-6/30/00 16.
Beginning in the year 2010, the annually adjustable component shall be added to each of the rates shown above.
Example 1. A 20 year levelized contract with a 2000 on-line date would receive the following rates:
Years Rate
27.
12-27.22 + Adjustable component in each year
Example 2. A 15 year non-Ievelized contract with a 2000 on-line date would receive the following rates:
Years Rate
Non-Ievelized rates from table above
18.75 + Adjustable component in year 2010
19.40 + Adjustable component in year 2011
20.09 + Adjustable component in year 2012
20.79 + Adjustable component in year 2013
21.52 + Adjustable component in year 2014
Note: As per Order No. 27212, Avista Corporation (Washington Water Power) is not required to offer contracts in excess of 5 years;
however, Avista may seek Commission approval for contracts exceeding 5 years should they be able to demonstrate that suchcontracts are in the best interests of its customers. ATTACHMENT A
ORDER NO. 2808'
PAGE 1 OF 2
AVISTA CORPORATION
AVOIDED COST RATES FOR
NON-FUELED PROJECTS
mills/kWh
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)1999 2000 2001 2002 2003 2004 YEAR RATES
23.24.25.27.28.29.1999 23.
24.25.26.41 27.28.30.2000 24.
24.25.26.28.29.30.2001 25.
25.26.27.28.30.31.2002 27.
25.26.28.29.30.31.2003 28.
26.27.28.29.31.32.2004 29.
26.63 27.29.30.31.34.40 2005 30.
27.28.29.30.33.35.2006 32.
27.28.30.32.34.37.2007 33.
28.29.31.33.35.38.2008 35.
28.47 30.32.41 34.37.39.2009 36.
29.43 31.33.43 35.38.40.2010 50.
30.32.34.36.39.41.2011 52.
31.33.35.37.40.42.2012 55.
31.33.36.38.47 41.43.2013 58.
32.34.36.39.41.88 44.2014 61.
33.41 35.47 37.40.42.45.2015 64.47
34.36.38.44 40.43.46.2016 67.
34.36.39.41.44.47.2017 71.
35.37.39.42.45.47.2018 74.
2019 78.
2020 82.
2021 87.
2022 91.
2023 96.
2024 101.
Note: As per Order No. 27212, Avista Corporation (Washington Water Power) is not required to offer contracts in excess of 5 years;
however, Avista may seek Commission approval for contracts exceeding 5 years should they be able to demonstrate that such contracts
are in the best interests of its customers.
ATTACHMENT A
ORDER NO. 28081
PAGE 2 OF 2
IDAHO POWER COMPANY
AVOIDED COST RATES FOR
FUELED PROJECTS
mills/kWh
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)1999 2000 2001 2002 2003 2004 YEAR RATES
11.45 11.12.12.13.13.1999 11.45
11.12.12.47 12.13.13.2000 11.
11.12.12.13.13.14.2001 12.
12.12.44 12.13.13.14.2002 12.
12.12.13.13.14.14.49 2003 13.
12.12.13.13.14.14.2004 13.
12.13.13.46 13.14.42 14.2005 14.
12.13.13.14.14.15.2006 14.
12.13.13.14.14.15.2007 15.
13.13.14.14.15.15.2008 15.
13.13.14.14.15.15.2009 16.
13.13.14.40 14.15.42 15.2010 16.
13.14.14.15.15.16.2011 17.
13.14.14.15.15.16.2012 17.
13.14.41 14.15.44 15.16.2013 18.
14.14.15.15.16.16.2014 19.
14.14.15.15.16.16.2015 19.
14.14.15.41 15.16.17.2016 20.
14.15.15.16.16.17.2017 21.
14.15.15.16.16.17.43 2018 22.
2019 22.
2020 23.
2021 24.40
2022 25.
2023 26.
2024 27.
EFFECTIVE DATE ADJUSTABLE COMPONENT
7/1/99-6/30/00 16.
Beginning in the year 1999, the annually adjustable component shall be added to each of the rates shown above.
Example 1. A 20 year levelized contract with a 1999 on-line date would receive the following rates:
Years Rate
14.67+16.
14.67 + Adjustable component in each year
Example 2. A 4 year non-Ievelized contract with a 1999 on-line date would receive the following rates:
Years Rate
11.45 + 16.
11.85 + Adjustable component in year 2000
12.26 + Adjustable component in year 2001
12.69 + Adjustable component in year 2002
Note: As per Order No. 27111 , Idaho Power is not required to offer contracts in excess of 5 years; however, Idaho Power may seek
Commission approval for contracts exceeding 5 years should they be able to demonstrate that such contracts are in the best interests ofits customers. ATTACHMENT B
ORDER NO. 28081
PAGE 1 OF 2
IDAHO POWER COMPANY
AVOIDED COST RATES FOR
NON-FUELED PROJECTS
mills/kWh
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)1999 2000 2001 2002 2003 2004 YEAR RATES
28.29.30.32.47 34.35.1999 28.
28.30.31.33.34.36.2000 29.45
29.30.32.41 34.35.37.2001 30.
30.31.33.34.36.38.42 2002 32.47
30.32.33.35.37.39.2003 34.
31.41 32.34.36.38.40.2004 35.
32.33.35.37.39.41.2005 37.
32.34.40 36.37.39.41.2006 39.
33.42 35.36.38.40.42.2007 41.
34.35.37.39.41.43.2008 43.
34.36.38.40.42.44.2009 45.
35.42 37.39.41.43.45.2010 48.
36.37.39.41.43.46.2011 50.
36.38.40.42.44.47.2012 53.
37.39.41.43.45.47.2013 56.
38.39.41.44.46.48.2014 58.
38.40.42.44.47.49.2015 62.
39.41.43.45.47.50.41 2016 65.
39.41.44.46.48.51.2017 68.
40.42.44.47.49.49 52.2018 72.
2019 76.
2020 80.
2021 84.
2022 88.
2023 93.
2024 98.
Note: As per Order No. 27111, Idaho Power is not required to offer contracts in excess of 5 years; however, Idaho Power may seek
Commission approval for contracts exceeding 5 years should they be able to demonstrate that such contracts are in the best interests ofits customers. ATTACHMENT B
ORDER NO. 28081
PAGE 2 OF 2
PACIFICORP
AVOIDED COST RATES FOR
FUELED PROJECTS
mills/kWh
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)1999 2000 2001 2002 2003 2004 YEAR RATES
11.12.12.13.13.47 13.1999 11.
11.12.12.13.13.14.2000 12.
12.12.12.13.13.14.41 2001 12.
12.12.13.13.14.14.2002 13.
12.12.13.40 13.14.14.2003 13.47
12.13.13.14.14.15.2004 13.
12.13.13.14.14.15.2005 14.43
13.13.13.14.47 14.15.2006 14.
13.13.14.14.15.15.2007 15.
13.13.14.14.15.15.2008 16.
13.14.14.15.15.16.2009 16.
13.14.14.15.15.16.2010 17.
13.14.14.15.15.16.2011 17.
14.14.15.15.16.16.2012 18.
14.14.15.15.16.16.2013 19.
14.14.15.15.16.17.2014 19.
14.15.15.16.16.17.2015 20.
14.15.15.16.16.17.2016 21.
14.15.15.16.16.17.2017 21.
14.15.15.16.17.17.2018 22.
2019 23.
2020 24.
2021 25.
2022 25.
2023 26.
2024 27.
EFFECTIVE DATE ADJUSTABLE COMPONENT
7/1/99-6/30/00 16.
Beginning in the year 1999, the annually adjustable component shall be added to each of the rates shown above.
Example 1. A 20 year levelized contract with a 1999 on-line date would receive the following rates:
Years Rate
14.
14.91 + Adjustable component in each year
Example 2. A 4 year non-Ievelized contract with a 1999 on-line date would receive the following rates:
Years Rate
11.
12.15 + Adjustable component in year 2000
12.58 + Adjustable component in year 2001
13.02 + Adjustable component in year 2002
Note: As per Order No. 27213, PacifiCorp is not required to offer contracts in excess of 5 years; however, PacifiCorp may seek
Commission approval for contracts exceeding 5 years should they be able to demonstrate that such contracts are in the best interests ofits customers. ATTACHMENT C
ORDER NO. 28081
PAGE 1 OF 2
PACIFICORP
AVOIDED COST RATES FOR
NON.FUELED PROJECTS
mills/kWh
CONTRACT ON-LINE YEAR
LENGTH CONTRACT NON-LEVELIZED
(YEARS)1999 2000 2001 2002 2003 2004 YEAR RATES
28.29.31.32.34.44 36.1999 28.
29.30.46 31.33.35.37.2000 29.
29.31.32.34.36.37.2001 31.
30.31.33.46 35.36.38.2002 32.
31.32.34.35.37.39.2003 34.
31.33.34.36.38.40.2004 36.
32.33.35.37.39.41.2005 38.
33.34.36.40 38.40.42.2006 39.
33.35.37.38.40.43.2007 41.
34.36.37.39.41.43.2008 44.
34.36.38.40.42.44.2009 46.
35.37.39.41.43.45.2010 48.
36.38.39.41.44.46.2011 51.
36.38.40.42.44.47.2012 53.
37.42 39.41.43.40 45.47.2013 56.
38.02 39.41.44.46.48.2014 59.48
38.40.42.44.47.49.49 2015 62.
39.41.43.45.47 47.50.2016 65.
39.41.43.46.48.50.2017 69.
40.42.44.46.49.51.2018 72.
2019 76.
2020 80.
2021 84.
2022 89.
2023 94.
2024 99.
Note: As per Order No. 27213, PacifiCorp is not required to offer contracts in excess of 5 years; however, PacifiCorp may seek
Commission approval for contracts exceeding 5 years should they be able to demonstrate that such contracts are in the best interests ofits customers. ATTACHMENT C
ORDER NO. 28081
PAGE 2 OF 2