20041129Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:RICK STERLING
DATE:NOVEMBER 26, 2004
RE:UPDATE TO THE PURP A AVOIDED COST RATES TO INCORPORATE
NEW FUEL PRICES AND NEW UTILITY COSTS OF CAPITAL
CASE NOS. A VU-04-, IPC-04-25 AND P AC-04-
Three recent events have triggered consideration of computation of new PURP
avoided cost rates-the conclusion of general rate cases for Idaho Power and A vista, and the
release of a new natural gas price forecast by the Northwest Power and Conservation Council
(NPCC)
The conclusion of a general rate case affects avoided cost rates because cost of
capital figures are used in avoided cost computations in accordance with the approved
methodology. Staff believes that the appropriate time to incorporate new cost of capital figures
is following a general rate case. A Final Order in Idaho Power s general rate case was issued on
May 25 , 2004 (Order No. 29505) and a Reconsideration Order was issued on September 28
2004 (Order No. 29601). A Final Order in Avista s general rate case was issued on October 8
2004 (Order No. 29602).
On Friday, September 24 2004, the Northwest Power and Conservation Council
released a new natural gas price forecast. Because the new forecast was released at about the
same time as the Idaho Power and Avista rate cases were concluded, Staff believes both the new
cost of capital figures and the new natural gas prices should be incorporated in the computation
of new avoided cost rates. Staff is not proposing to revise the cost of capital figures used for
PacifiCorp.
1 The Northwest Power Planning Council (NWPPC) is now known as the Northwest Power and Conservation
Council (NPCC).
DECISION MEMORANDUM - 1 -NOVEMBER 26, 2004
The practice of updating avoided cost rates due to new fuel price forecasts can be
traced to Order No. 29124. In that Order, the Commission adopted a fuel price forecast from the
draft Fifth Northwest Conservation and Electric Power Plan, April 25, 2002 of the Northwest
Power Planning Council (NWPPC) as a reasonable method for calculating a starting gas price in
the avoided cost methodology. The Commission stated that "natural gas prices can be updated
when a new NWPPC forecast become available." Order No. 29124 at 10. The Commission has
since approved updated gas prices based on an April 22, 2003 NWPPC forecast in December
2003. Order No. 29391.
The new rates computed using the Council's September 24 2004 natural gas price
forecast and Idaho Power s and Avista s revised costs of capital are approximately 5 mills/kWh
higher than the rates currently in effect for all three utilities. A copy of the revised fuel price
forecast, computation of starting year gas price and escalation rate, and Staff computation of the
resultant avoided cost rates was provided to PacifiCorp, Idaho Power and Avista for their review.
In its review of the draft rate computations, Idaho Power pointed out to Staff that an
updated general inflation rate of 2.9% had been used in the spreadsheet that calculates the initial
gas price and the gas price escalation rate. Idaho Power contends that updating the general
inflation rate is outside the scope of the fuel price and cost of capital changes outlined by the
Commission in establishing these dockets. Moreover, the general inflation rate is also one of
many other variables used in the avoided cost spreadsheet, yet none of those other variables are
being updated in these proceedings. Staff agrees with Idaho Power that the general inflation rate
should not have been changed. PacifiCorp in its comments concurs. Staff has re-computed the
avoided cost rates using a general inflation rate of 2.7%, which was used previously and as
established in Order No. 29124. No other errors or corrections were identified or recommended
by any of the utilities following their reviews.
COMMISSION DECISION
Pursuant to Commission approved avoided cost methodology (Order No. 29124)
natural gas prices are to be updated when a new Northwest Power & Conservation Council
forecast becomes available. The medium fuel price forecast prepared by the Northwest Power &
Conservation Council has changed. The resultant change in avoided cost rates is a simple
DECISION MEMORANDUM - 2-NOVEMBER 26 , 2004
arithmetic calculation. The new forecast includes a new starting gas price and fuel escalation
rate.
Pursuant to Order No. 29628, the Commission also ordered that the new avoided
cost computations incorporate the new cost of capital figures recently established for Idaho
Power and A vista in their respective rate cases. The new cost of capital figures have been
incorporated in the computation of the attached rates.
Staff recommends that the Commission approve the Staff calculated changes in the
avoided cost rates for Idaho Power, Avista and PacifiCorp for an effective date of December 1
2004.
udmemos/avoidedcost dm2
DECISION MEMORANDUM - 3 -NOVEMBER 26, 2004
AVISTA UTILITIES
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWA ITS
December 2004
mills/kWh
~ruEW;E&Ii"'
. ,
.;o"
..;,
\i"i, ,
. ',.,' '. .
~!it~iQ~i:J;~EXiE'IZE '::d;::;~i:(,,\,;:vh..
ON-L/NE YEAR
CONTRACT NON-LEVEL/ZED200420052006200720082009YEARRATES
50.21 51.52.53.54.56.2004 50.50.51.53.54.55.56.2005 51.51.52.48 53.54.56.57.48 2006 52.51.53.54.55.49 56.58.2007 53.52.53.54.56.57.58.2008 54.52.54.55.56.57.59.2009 56.2553.54.55.57.58.46 59.2010 57.53.55.56.57.59.60.2011 58.54.55.56.58.59.60.2012 60.54.56.57.58.60.61.43 2013 61.55.29 56.57.59.60.61.2014 63.55.57.58.59.61.62.45 2015 64.4856.57.4 7 58.60.61.62.2016 65.56.57.59.60.61.63.42 2017 67.4857.58.59.61.62.45 63.2018 69.57.42 58.60.61.47 62.64.2019 70.57.59.60.61.63.64.2020 72.58.59.60.62.63.65.2021 73.58.59.61.62.64.65.2022 75.
58.60.61.63.64.66.2023 77.
2024 79.
2025 80.
2026 82.
2027 84.
2028 86.
2029 88.
AVISTA UTILITIES
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
December 2004
mills/kWh
~;~&~~~~~~:!~~"
ON-LINE YEAR
CONTRACT NON-LEVELIZED
2004 2005 200(;)2007 2008 2009 YEAR RATES
. 14.14.14.14.15.15.2004 14.
14.14.47 14.15.15.15.2005 14.
14.14.14.15.15.16.2006 14.
14.45 14.15.15.47 15.16.2007 14.
14.14.15.27 15.15.16.2008 15.
14.15.15.42 15.16.16.2009 15.
14.15.15.15.16.16.2010 16.
15.15.15.16.16.45 16.2011 16.41
15.15.15.16.16.16.2012 16.
15.15.15.16.16.17.2013 17.
15.41 15.16.16.16.17.2014 17.
15.15.16.26 16.17.17.41 2015 17.
15.16.16.16.17.17.2016 18.
15.16.16.16.17.28 17.2017 18.
15.16.16.17.17.41 17.2018 19.25
16.16.16.17.17.17.2019 19.
17 .16.16.49 16.17.17.18.2020 20.
16.22 16.16.17.17.18.2021 20.
16.16.17.17.48 17.18.29 2022 21.
16.43 16.17.17.17.18.41 2023 21.
2024 22.
2025 22.
2026 23.
2027 23.
2028 24.
2029 24.
EFFECTIVE DATE
12/1/2004
ADJUSTABLE COMPONENT
36.21
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tables
above.
Example 1. A 20-year levefized contract with a 2005 on-line date would receive the following rates:
Years Rate
16.80 + 36.42
16.80 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2005 on-line date would receive the following rates:
Years Rate
14.32 + 36.42
14.65 + Adjustable component in year 2006
14.98 + Adjustable component in year 2007
15.33 + Adjustable component in year 2008
IDAHO POWER COMPANY
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
December 2004
mills/kWh
ON-L/NE YEAR
CONTRACT NON-LEVEL/ZED200420052006200720082009YEARRATES
49.50.51.52.53.55.2004 49.
49.50.52.53.54.55.2005 50.50.51.45 52.53.55.56.2006 51.50 .50.52.53.54.42 55.56.2007 52.51.52.53.54.56.25 57.2008 53.51.53.54.29 55.56.82 -58.2009 55.52.53.54.56.57.58.2010 56.4152.54.55.56.57.5927 2011 57.53.54.55.57.58.47 59.2012 59.
53.55.56.57.59.60.2013 60.40
54.55.56.58.59.60.2014 61.
54.56.57.58.60.61.44 2015 63.
55.56.57.59.60.61.2016 64.
55.57.58.59.61.62.46 2017 66.
56.57.48 58.60.61.62.2018 67.
56.57.59.60.62.63.45 2019 69.26
57.58.59.61.62.49 63.2020 70.
57.4 7 58.60.61.62.64.40 2021 72.49
57.59.21 60.61.63.40 64.2022 74.58.59.60.62.40 63.65.2023 75.
2024 77.
2025 79.41
2026 81.
2027 83.
2028 85.
2029 87.
" ,
IDAHO POWER COMPANY
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
December 2004
mills/kWh
;;;
~j~~~~!~~1
~~~;:
ON-LINE YEAR
2004 2005 2006 2007 2008 2009
13.13.13.13.14.14.
13.13.45 13.14.14.40 14.
13.29 13.13.14.23 14.14.
13.43 13.14.14.14.15.
13.13.14.20 14.14.15.
13.14.14.14.15.15.
13.14.14.49 14.15.15.
13.14.14.14.15.15.
14.14.43 14.15.15.46 15.
14.23 14.14.15.15.15.
14.14.15.15.1"5.16.
14.49 14.82-15.15.15.16.
14.14.15.15.16.16.
14.15.15.42 15.16.16.
14.15.15.15.16.28 16.
14.15.15.16.16.40 16.
15.15.43 15.16.16.16.
15.15.15.16.27 16.17.
15.15.16.16.16.17.
15.41 15.16.16.16.17.
EFFECTIVE DATE
12/1/2004
!~,~;~~.~~~~~!~~:p
CONTRACT
YEAR
NON-LEVELIZED
RATES
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
13.
13.
13.
13.
14.24
14.
14.
15.
15.
15.
16.
16.
17.
17.
17.
18.
18.
19.19 -
19.
20.
20.56
21.
21.
22.
22.
23.
ADJUSTABLE COMPONENT
36.21
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tablesabove.
Example 1. A 20-year levelized contract with a 2005 on-line date would receive the following rates:
Years Rate
15.76 + 36.42
15.76 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2005 on-line date would receive the following rates:
Years Rate
- 13.30 + 36.42
13.61 + Adjustable component in year 2006
13.92 + Adjustable component in year 2007
14.24 + Adjustable component in year 2008
PACIFICORP
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
December 2004
mills/kWh
."..~~!
:~:~:1~~~~,
~'~" .
ON-L/NE YEAR
CONTRACT NON-LEVELIZED200420052006200720082009YEARRATES
50.51.41 52.53.55.56.2004 50.2550.51.53.54.55.56.2005 51.4151.52.53.54.56.23 57.2006 .52.51.53.54.55.56.58.2007 53.52.53.54.56.57.58.2008 55.52.54.55.56.57.59.2009 56.53.54.55;57.58.46 59.2010 57.53.55.56.57.58.60.2011 58.54.55.56.58.59.60.2012 60.54.56.57.58.60.61.2013 61.55.56.49 57.59.60.48 61.2014 63.55.56.58.24 59.60.62.2015 64.56.57.58.60.61.40 62.2016 66.56.47 57.59.60.45 61.63.2017 67.56.58.59.60.62.63.2018 69.57.58.59.61.62.64.2019 70.57.58.60.61.63.64.2020 72.57.59.28 60.62.63.46 64.2021 73.
. 58.59.60.62.40 63.65.2022 75.58.59.61.62.64.65.2023 77.42
2024 79.
2025 81.
2026 82.
2027 84.
2028 86.
2029 88.
PACIFICORP
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
December 2004
mills/kWh
;+i
~;~~~~~~~!~~;~~ '
~LEEV;E;li1Z~'
;' '/~;"'
",?jW"C);';)"\'\)t;
ON-LINE YEAR
2004 2005 2006 2007 2008 2009
14.14.14.15.15.15.
14.14.14.15.15.15.
14.14.15.15.15.16.14.49 14.15.15.15.16.
14.14.15.15.16.16.40
'14.15.15.46 15.16.16.
14.15.26 15.15.16.16.
15.15.15.16.16.48 16.
15.15.15.16.16.17.
1 0 15.15.16.16.16.17.15.43 15.16.16.16.17.
15.15.16.16.17.17.42
15.16.16.16.17.17.
15.16.16.16.17.17.
15.16.16.17.17.40 17.
15.16.16.17.17.17.
16.16.46 16.17.23 17.18.
16.16.16.17.17.18.
16.28 16.17.17.43 17.18.
16.16.17.17.17.18.
EFFECTIVE DATE
12/1/2004
CONTRACT
YEAR
NON-LEVEL/ZED
RATES
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027'
2028
2029
14.
14.
14.
15.
15.
15.
16.
16.46
16.
17.23
17.
18.
18.45
18.
19.
19.
20.
20.
21.
21.
22.
22.
23.
23.
24.
24.
ADJUSTABLE COMPONENT
36.
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tablesabove.
Example 1. A 20-year levelized contract with a 2005 on-line date would receive the following rates:
Years Rate
16.75 + 36.42
16.75 + Adjustable component in each year
Example 2. A 4-year non-Ievefized contract with a 2005 on-fine date would receive the fofJowing rates:
Years Rate
14.36 + 36.42
14.69 + Adjustable component in year 2006
15.03 + Adjustable component in year 2007
15.38 + Adjustable component in year 2008