HomeMy WebLinkAbout20050826acceptance of filing.pdfOffice of the Secretary
Service Date
August 26, 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FILING BY
ACIFICORP DBA UTAH POWER & LIGHT
COMP ANY OF ITS 2004 ELECTRIC
INTEGRATED RESOURCE PLAN (IRP)
CASE NO. P AC-05-
ACCEPTANCE OF FILING
On January 21 , 2005 , PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed its 2004 Integrated Resource Plan (IRP) with the Idaho Public Utilities
Commission ( Commission).The Company s filing is pursuant to a biennial requirement
established in Commission Order No. 22299, Case No. U-1500-165. PacifiCorp states that its
IRP provides a framework for the prudent future actions required to ensure that PacifiCorp
continues to provide reliable, least cost service with manageable and reasonable risk to its
customers. The 2004 IRP provides guidance and rationale for significant resource procurements
over the next several years. The IRP was developed in a collaborative public process with
considerable involvement from customer interest groups, regulatory staff, regulators and other
stakeholders.
PacifiCorp serves approximately 1.6 million retail customers in a service territory
comprising about 136 000 square miles in portions of six western states:Utah, Oregon
Wyoming, Washington, Idaho and California.This service territory has diverse regional
economIes ranging from rural, agricultural and mining areas to urban, manufacturing and
government service centers.
Since the filing of the Company s 2003 IRP in January 2003, PacifiCorp has
procured two natural gas resources via the issuance of supply-side solicitations, issued a request
for proposal (RFP) for renewable resources, and selected three new cost-effective programs from
a demand-side management (DSM) RFP. Looking forward, PacifiCorp expects its obligations to
provide electricity to its customers will continue to grow, while at the same time its existing
resources will diminish. The 2004 IRP proposes a number of diverse actions over the first
years of the 20-year study horizon aimed to close the gap. Not taking action to close this gap,
the Company contends, would expose PacifiCorp and its customers to unacceptable levels of
cost, reliability and market risk.
ACCEPTANCE OF FILING
Regarding new resource needs, the Company s Preferred Portfolio proposes the
addition of 177 MW of Class 1 DSM and 2 629 MW of thermal generation capacity. In addition
to the resources identified in the Preferred Portfolio, PacifiCorp will continue to procure up to
1200 MW of shaped capacity through front office transactions on a rolling forward basis, expects
100 MW of capacity through qualified facilities (QF) contracts, and will continue to procure the
1400 MW of economic renewable resources that were first identified in the 2003 IRP.
Furthermore, PacifiCorp will procure 250MWa of base Class 2 DSM and pursue an additional
200 MWa of cost-effective DSM for a potential total for 450 MWa over the ten-year horizon.
Results and key findings in the Company s IRP include:
The 2 629 MW of thermal generation capacity consists of four thermal
units in the east (two fueled with coal and two with natural gas) and one
natural gas unit in the west.
The most robust resource strategy relies on total resources creating a
diverse portfolio of resources including renewables and demand-side
management combined with natural gas and coal-fired generating
resources.
Two major issues hang over the most significant resource choices that
PacifiCorp must make: (i) the future cost of natural gas and (ii) the future
cost of or constraints on air emissions and carbon dioxide emissions in
particular. PacifiCorp believes it has adequately addressed these risks in
the analysis, based on its current understanding of these issues.
Demand-side management continues to be an important and cost-
effective resource for PacifiCorp. DSM additions resulted in new
generating resources being delayed. The first two east side resources are
delayed one year each, and a west side resource is delayed two years
pushing it beyond the 10-year portfolio planning window.
The present value revenue requirement (PVRR) for the group of lowest-
cost, risk-adjusted portfolios differed by only $48 million or 0.4%. This
narrow cost range indicates a degree of flexibility in specifying and
procuring needed resources during the Action Plan time horizon.
In response to-stakeholder comments, a detailed study was conducted to
determine the optimal planning margin for the PacifiCorp system. The
results in this study found the optimal planning margin for the PacifiCorp
system to be 15%.
Also in response to stakeholder comments, an evaluation of the wind
resources providing energy to PacifiCorp s system was conducted to
ACCEPTANCE OF FILING
determine what the appropriate contribution to planning margin should be
for these resources. The evaluation resulted in a 20% contribution to
planning margin by wind resources.
PacifiCorp forecasts an average annual peak load growth rate of 3.80/0 in the east and
1.50/0 in the west, with a total peak growth of 3% per year over the forecast horizon. Given
uncertainties of economic growth and other factors, the net system growth in PacifiCorp s load
could vary. Over time, PacifiCorp expects its existing resources to diminish significantly
concurrent with an expected increase in supply obligations. Load and system peak growth
hydro relicensing and contract expirations will increase the gap between demand and supply.
Prompt and focused attention is needed to close this gap. Beginning in fiscal year 2009 the
system becomes capacity deficient and the deficit steadily grows to approximately 2800 MW by
fiscal year 2015.
The Company s IRP focuses on the candidate options that are considered realistic
feasible alternatives for balancing resource supply with electricity demand. Key resources that
may be economical and could feasibly be procured by PacifiCorp to meet customer needs
include:
Demand-side management programs
Distributed generation
Standby generation
Combined heat and power (CHP)
Supply-side resources
Renewables (wind-geothermal)
Coal (pulverized and integrated gasification combined cycle)
Natural gas (SCCT, CCCTwith DF, IC aero SCCT)
Compressed air energy storage
Hydro pumped storage
Market purchases
Transmission
PacifiCorp intends to implement many elements of its Action Plan utilizing a formal
and transparent procurement program. The IRP has determined a need for resources with
considerable specificity, and identified the desired portfolio and timing of need. The IRP has not
identified specific resources to procure, or even determined a preference between asset
ownership versus power purchase contracts. These decisions will be made subsequently on a
case-by-case basis with an evaluation of competing resource options. These options will be fully
ACCEPTANCE OF FILING
developed using a robust procurement process, including, when appropriate, competitive bidding
with an effective request for proposal (RFP) process.
Prior to the issuance of any supply-side RFP, PacifiCorp will determine whether the
RFP should be "all-source" or if the RFP will have limitations as to amount, proposed
structure(s), fuel type or other such considerations. Benchmarks will also be determined prior to
an RFP being issued and may consist of the then-current view of market prices, a self-build
option, a contractual arrangement, or such other benchmark alternatives. Externalities will be
determined based on the form and format of each procurement process and it is anticipated that
the assumptions utilized will be consistent with what is in the IRP unless such assumptions are
not applicable or newly updated information becomes available to inform the process.
The combination of new resources identified in the Company s Preferred Portfolio
and the existing and planned resources results in a more diversified resource portfolio for
PacifiCorp. The capacity of PacifiCorp s existing, planned and IRP resources as a percent of
peak obligation (peak load plus firm sales) for fiscal year 2015 is as follows: coal 50%, gas 27%
purchases 10%, hydro 6%, DSM 4%, and renewables 3%.
On June 30, 2005 , the Commission issued a Notice of Filing in Case No. P AC-05-
2 and established a comment deadline of July 29, 2005. Comments were filed by Commission
Staff and Mr. Jerry Williams of Nampa, Idaho. Mr. Williams believes that wind or solar
resources are the only viable course until hydrogen can be converted into power. He supports
the need for natural gas and coal for emergencies. The Commission Staff believes that the
process followed by PacifiCorp satisfies the Commission s IRP requirements. Staff recommends
that PacifiCorp s 2004 IRP filing, including the Action Plan, be acknowledged by the
Commission. Staff also recommends that PacifiCorp be directed to provide regular progress
reports to keep the Commission and Staff informed as to.the Company s activities and progress
on any request for proposals that are issued or any generation proj ects the Company is pursuing.
Staff strongly believes that each new biennial IRP cycle presents both an opportunity
and an obligation to refresh assumptions, to incorporate new information, consider different
alternatives, and change course if necessary. In its comments on the Company s 2003 IRP, Staff
expressed concern about whether the aggressive pace and quantity of wind acquisition
envisioned by PacifiCorp could be realized. In February 2004 PacifiCorp issued an RFP seeking
to acquire up to 100 MW of renewable generation. It is unclear to Staff as to whether the
ACCEPTANCE OF FILING
Company will be able to acquire the quantity it is seeking. Staff recommends that a more
explicit contingency plan be developed explaining what actions the Company will take if
planned resources cannot be acquired in the timeframe or at the price envisioned.
In addition to the renewable resources the Company is currently seeking to acquire
the 2003 IRP identified the need to procure two gas-fired supply side resources. The Currant
Creek and the Lakeside projects were selected through RFP processes. Both projects are under
construction. The Currant Creek facility is nearly complete while the Lakeside project is
expected to be operational in the summer of 2007. Staff notes that PacifiCorp has failed to keep
the Commission and Staff apprised of key resource activities, including progress on the
procurement program. The Company anticipated providing procurement program status reports
approximately every six months. Staff notes that no such reports have ever been provided.
Although PacifiCorp gives some consideration to transmission constraints and the
cost of adding or upgrading transmission when evaluating generation alternatives, Staff
hopeful that a more comprehensive examination of transmission could be included in future
IRPs. Staff encourages the Company to continue to strive to improve its ability to address the
relative costs and risks of transmission investments, and align its transmission planning and
generation resource planning efforts.While not a resource, transmission, Staff notes, can
provide access to a greater variety of market purchases and to lower cost generation alternatives.
Staff notes that PacifiCorp based its IRP analysis on a planning margin of 15%. The
planning margin is expected to cover WECC operating requirements (6-7%), regulating margin
(1-2%), deviations in expected load, and unplanned outages. While the Company s current
planning margin is significantly less than 15%, Staff believes that a 15% planning reserve
margin is reasonable.
Staff agrees with the Company s decision to include CO2 regulatory costs in its base
case assumptions despite the fact that no CO2 legislation has yet been passed. Staff further
believes that the level of CO2 costs assumed by PacifiCorp for the base case is reasonable.
Probably the single most controversial element of the 2004 IRP, Staff states, is the
Company s plan to procure 575 MW of coal generation in 2011. The plan consists of an
additional generating unit at an existing plant (i.e.
, "
brownfield"), most likely at the Hunter plant
in Utah. The IRP Preferred Portfolio also includes a second brownfield coal plant in Wyoming
in 2014. Coal generation, Staff contends, has the advantage that PacifiCorp currently owns or
ACCEPTANCE OF FILING
controls the existing thermal sites with room for expansion and can make use of existing
transmission corridors. The Company, Staff states, also has experience with building, owning
and operating thermal facilities. Coal currently has a cost advantage over other types of base
load generation and exhibits less fuel cost risks than gas. Staff believes that PacifiCorp has fairly
weighed the positive and negative aspects of coal and that coal generation is an important and
appropriate piece of the Company s Preferred Portfolio. Staff also recognizes that the cleaner
coal technologies (e.integrated gasification combined cycle) are rapidly emerging
technologies. Staff recommends that PacifiCorp continue to evaluate and investigate IGCC in its
next IRP.
Gas-fired generation, Staff notes, is also included in PacifiCorp s analysis. The
Preferred Portfolio includes two gas-fired plants on the east side of the Company s system - one
in 2009 and another in 2013. One gas-fired unit would be added on the west side of the system
in 2012. Gas-fired generation, Staff contends, is less capital intensive, quicker to construct and
relatively easy to site; but it is subject also to fuel cost volatility. Staff believes that PacifiCorp
fairly weighed trade-offs associated with gas-fired generation in its IRP analysis.
Staff notes with approval that PacifiCorp plans to expand its offering of conservation
programs in Idaho to be comparable to those in other states. The Company intends to procure
200 aMW of Class 2 DSM (non-dispatchable conservation) over the next ten years, in addition to
the 250 aMW of conservation programs the Company is already pursuing as a result of the 2003
IRP. The Preferred Portfolio also includes 88 MW of load control in 2008 and an additional 89
MW in 2013.Dispatchable load control (Class 1 DSM) programs would most likely be
associated with summer time air conditioning. The Company also plans, Staff notes, to continue
its highly successful irrigation load control program in Idaho.
Staff believes the Action Plan for the Preferred Portfolio (reference Attachment) is
appropriate given conclusions reached in the Company s 2004 IRP.
Commission Findings
The Commission has reviewed the filings of record in Case No. PAC-05-
including the Company s 2004 Integrated Resource Plan and related comments. We find that the
Company s IRP contains the required information and is in the appropriate format as directed by
the Commission in Order No. 22299. The IRP, we continue to note, is a utility planning
document that incorporates assumptions and projections as of a point in time. It is an ongoing
ACCEPTANCE OF FILING
planning process that we acknowledge, not the conclusions or results.We recognize and
commend the Company for the plan that it has presented and for the public process that it used to
produce the plan.
We note as Staff did that the Company previously committed to provide the
Commission with semi-annual procurement program status reports and has failed to do so. As
we indicated in our acceptance of the Company s 2003 Electric IRP filing, in addition to being
apprised through periodic status reports of supply resources the Company is actually building or
contracting for and demand side programs the Company is implementing, the Commission
expects to receive periodic updates as to the Company s specific plans for issuing requests for
proposals (RFPs).
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Utah
Power & Light Company, an electric utility, pursuant to Title 61 of the Idaho Code and the
Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ACCEPTANCE OF FILING
Based on our review, we find it reasonable to accept and acknowledge the
Company s filed 2004 Electric Integrated Resource Plan. Our acceptance of the 2004 IRP
should not be interpreted as an endorsement of any particular element of the plan, nor does it
constitute approval of any resource acquisition contained in the plan.
ACCEPTANCE OF FILING
DATED at Boise, Idaho this ~(P +' day of August 2005.
MARSHA H. SMITH, COMMISSIONER
ENNIS S. HANS N , COMMISSIONER
ATTEST:
~~.
. D. Jewell
C6thmission Secretary
bls/O:PAC-05-02
ACCEPTANCE OF FILING
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