20090612Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KEMPTON
COMMISSIONER SMITH
CO MMISSI 0 NER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
DATE:JUNE 8, 2009
SUBJECT:CASE NO. GNR-09-02 (Idaho Power, Avista, PacifiCorp)
ADJUST ABLE PORTION OF AVOIDED COST RATE
REVISEDIUPDA TED CALCULATION FOR EXISTING CONTRACTS.
CASE NO. PAC-09-04 (PacifiCorp)
ANNUAL VARIABLE ENERGY RATE ADJUSTMENT-
1992 AMENDMENT QF CONTRACTS.
The Idaho Public Utilities Commission in Order No. 28708, Case No. GNR-99-
established a methodology for the annual adjustable rate portion of avoided costs for those QF
contracts using variable costs associated with Colstrip, a coal-fired generating facility in
southeast Montana. For those QF contracts with Colstrip-related fuel costs and variable O&M
future Colstrip variable cost adjustments are to be calculated by using FERC Form 1 Colstrip
Unit Coal Costs per megawatt hour (MWh) and adding $2.00/MWh (the average variable O&M
cost of Colstrip plus 20~/MWh for generation taxes plus a five percent (5%) adjustment for line
loss). As computed by Commission Staff, the Colstrip related adjustable rate should change
from 12.06 mill/kWh to 14.09 mill/kWh. The same calculated rate revision under the avoided
cost methodology is used by Avista, PacifiCorp dba Rocky Mountain Power and Idaho Power
Company. This change in the variable rate affects existing contracts under the previous SAR
methodology.
The adjustable portion of the avoided cost rates under Sumas-based methodology is
based on annual average gas prices indexed at Sumas, Washington. As reported by Avista, the
indexed gas prices have increased by $ 1. 82/mmbtu. The approved gas price of $7.18/mmbtu
DECISION MEMORANDUM
plus the $1.82/mmbtu increase results in a gas price of $9.00/mmbtu for the 2009-2010 year.
This equates to a SAR fuel cost of 63.90 mill/kWh using a heat rate of 7 100 btu/kWh as used in
the model for potential future contracts in accordance with Order No. 29124. For existing
contracts signed under an assumed heat rate of7 350 btu/kWh, this equates to a SAR fuel cost of
66.15 mill/k Wh.
The Commission Staff by letter (attached) dated May 13 , 2009, prepared by Staff
Engineer Rick Sterling, calculated changes to the annual adjustable rate portion of avoided costs
for those QF contracts using variable costs associated with Colstrip and Sumas for review by the
respective utilities. Avista, Idaho Power and PacifiCorp by letter responses (attached) indicated
that Staff s calculations are correct.
In accordance with Order No. 29316, the adjustable portion of the avoided cost rate
for existing PacifiCorp contracts with year 1992 amendments has also been recomputed:
Beginning on July 1 , 2003 , the adjustable portion for these contracts was ordered to be equal to
the average cost of fuel for the Carbon, Hale, Naughton, Huntington and Hunter generating
plants, including a variable O&M component of $1.51 but exclusive of generation taxes and a
line loss adjustment. The variable energy rate applicable to deliveries commencing July 1 , 2009
extending through June 30, 2010 has been computed by PacifiCorp to be $14.36/MWh, an
increase from $14.11 last year.
COMMISSION DECISION
Under avoided cost methodology the adjustable portion of avoided cost rates for
existing contracts is calculated annually for an effective date of July 1. A vista, Idaho Power and
PacifiCorp agree with Staffs proposed calculations. Also adjusted annually is the adjustable
portion of avoided cost rates for existing PacifiCorp contracts with year 1992 amendments.
PacifiCorp for those contracts has computed the new variable energy rate. Does the Commission
agree with the proposed changes in the variable rates?
~-=
Scott Woodbury
Deputy Attorney General
bls!M:GNR-O9-02 PAC-O9-04 sw
DECISION MEMORANDUM
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IDD:1j4"Y ?13 \0: 3L~
201 South Main, Suite 2300
Salt lake City, Utah 84111
May 28, 2009
liTVIA OVERNIGHT DELIVERY
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
Attention: Scott D. Woodbury
Deputy Attorney General
RE: Case No. P AC-09-
IN THE MATTER OF THE ANNUAL REVISION OF QF V ARIABLE ENERGY
PRICES IN ACCORDANCE WITH THE TERMS OF THE 1992 AMENDMENTS
TO POWER PURCHASE AGREEMENTS BETWEEN IDAHO QFS AND
PACIFICORP.
Dear Mr. Woodbury,
Thank you for your letter of May 13,2009 in which you provided an update to the adjustable rate
portion of avoided costs for QF contracts using variable costs associated with Colstrip and for
PacifiCorp contracts with 1992 amendments.
PacifiCorp has reviewed the proposed price update and agrees that the prices have been updated
correctly. The Company accepts the new schedules as accurate.
If you have any questions please contact Ted Weston at [phone] or email
Ted. W eston~Pacifi Corp.com
Sincerely,
~/~
Jeffrey K. Larsen
Vice President, Regulation
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May 28, 2009
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201 South Main , Suite 2300
Salt lake City, Utah 84111
VIA OVERNIGHT DELIVERY
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
Attention: Scott D. Woodbury
Deputy Attorney General
RE: Case No. GNR-E-O9-
IN THE MATTER OF THE ANNUAL REVISION AND UPDATED
CALCULATION OF THE ADJUSTABLE PORTION OF THE A VOIDED COST
RA TE(S) FOR EXISTING PURP A CONTRACTS FOR A VISTA CORPORATION
DBA A VISTA UTILITIES, FOR IDAHO POWER COMPANY, AND FOR
ACIFICORP DBA ROCKY MOUNTAIN POWER.
Dear Mr. Woodbury,
Thank you for your letter of May 13 2009 in which you provided the 2009-2010 updated prices
for the adjustable portion of the avoided costs rates under the present avoided cost methodology.
EacifiCQrp__hasJ1~YiewedJh~s(,u~rQPo~~du!lpdated prices andagree that the prices have been
updated correctly. The Company accepts the new schedules as accurate.
If you have any questions please contact Ted Weston at (80l) 220-2936 or email
Ted. Weston~PacifiCorp.com
Sincerely,~k-~/(!AJ
Jeffrey K. Larsen
Vice President, Regulation
IDAHOa..;!! POWER (ID
June , 2009
RECEIVED
21109 JUN - 8 PH 12:
IDAHO PUBLIC
UTtL1TtES COMMISSiON
An IDACORP Company
Randy C. Allphin
Senior Planning Administrator
Tel: [phone]
rail phin((vj dahopower. com
Idaho Public Utilities Commission
Attn: Scott Woodbury
PO Box 83720
Boise, ID 83720-0074
RE:CASE NOS. GNR-09-
IN THE MATTER OF THE ANNUAL REVISION AND UPDATED CALCULATION
THE ADJUSTABLE PORTION OF THE AVOIDED COST RATE(S) FOR EXISTING
PURPA CONTRACTS FOR AVISTA CORPORATION DBA AVISTA UTILITIES , FOR
IDAHO POWER COMPANY AND FOR P ACIFICORP DBA ROCKY MOUNTAIN
POWER..
We have reviewed the infonnation you have provided in your letter dated May 13 , 2009
notifying Idaho Power of revision of the adjustable portion of the Avoided cost rate(s) for existing
PURP A contracts.. Idaho Power concurs that the model and calculations used by the IPUC staff for
Idaho Power Company are consistent with IPUC Order 28708.
Sincerely,
12 f.I (andy C Allphin
Contract Administration
cc:Bart Kline (IPCo)
Donovan Walker (IPCo)
Page 1 of I
POBox 70 Boise, Idaho 83707 1221 W Idaho St. Boise, Idaho 83702
AliistaCorp.
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1411EastMission Box 3Z2-7' ,
Spokane, W ashi ngton~9220:372T
Telephone , 5O9-4B9,.O5!XJ,
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Toll Free 8O(H27-917q,
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Idaho Public Utilities Commission
A:~:Scott Woodbury
POBox 83720
Boise, ill 83720-0074
Dear Mr. Woodbury:
A vista is responding to the notice dated May 13 , 2009 regarding the annual revision and
updated calculation of the adjustable portion of the avoided cost rates. The Company has
reviewed and is in agreement with the Colstrip adjustable rate of 14.09 mill/kWh and the
annual average gas price of$9.00/MMBtu for the 2009-2010 year.
Thank you
&--\
Clint Kalich
Manager of Resource Planning and Power Supply Analyses
cc:Rick Sterling, IPUC
Michael Andrea, A vista
Linda Gervais, A vista
STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
LAWRENCE G. WASDEN
May 13 , 2009
Avista Corporation
Blair Strong
Paine, Hamblen, et al
717 W. Sprague Avenue, Suite 1200
Spokane, WA 99201-3505
Clint Kalich
A vista Utilities
1411 E. Mission
PO Box 3727
Spokane, W A 99220-3727
Michael Andrea
A vista Utilities
1411 E. Mission
PO Box 3727
Spokane, W A 99220-3727
Rocky Mountain Power
Mark Moench
Daniel Solander
Ted Weston
PacifiCorp dba Rocky Mountain Power
One Utah Center
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Greg Duvall
Hui Shu
Laren Hale
PacifiCorp dba Rocky Mountain Power
825 NE Multnomah Street
Portland, OR 97232
Idaho Power Company
Barton L. Kline
Idaho Power Company
PO Box 70
Boise, ID 83707-007
Randy Allphin
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
RE:Case Nos. GNR-O9-02; P AC-O9-
The Idaho Public Utilities Commission in Order No. 28708 , Case No. GNR-99-, established a methodology
for the annual adjustable rate portion of avoided costs for those QF contracts using, variable costs associated with
Colstrip, a coal-fired generating facility in southeast Montana. For those QF. contracts with Colstrip-related fuel
costs and variable O&M, future Colstrip variable cost adjustments are to be calculated by using FERC Form
Colstrip Unit Coal Costs per megawatt hour (MWh) and adding $2.00/MWh (the average variable O&M cost of
Colstrip plus 20~/MWh for generation taxes plus a five percent (5%) adjustment for line loss). As computed by
Commission Staff the Colstrip related adjustable rate will change from 12.06 mill/kWh to 14.09 mill/kWh. The
Contracts & Administrative Law Division, Idaho Public Utilities Commission
O. Box 83720, Boise, Idaho 83720-0074, Telephone: [phone], FAX: [phone], E-mail: IpucCi!!puc.state.id,
Located at 472 West Washington St., Boise, Idaho 83702
May 13, 2009
Page 2
same calculated rate revision under the avoided cost methodology is used by Avista, PacifiCorp dba Rocky
Mountain Power and Idaho Power Company. This change in the variable rate affects existing contracts under the
previous SAR methodology.
The adjustable portion of the avoided cost rates under the Sumas-based methodology is based on annual average
gas prices indexed at Sumas, Washington. As reported by Avista, the indexed gas prices have increased by
$ 1. 82/MMBtu. The approved gas price of$7.18/MMBtu plus the $1.82/MMBtu increase results in a gas price of
$9.00/MMBtu for the 2009-2010 year. This equates to a SAR fuel cost of 63.90mill1kWh as used in the model.
In accordance with Order No. 29316, the adjustable portion of the avoided cost rate for PacifiCorp contracts with
1992 amendments has also been recomputed. Beginning on July 1 , 2003 , the adjustable portion for these
contracts was ordered to be equal to the average cost of fuel for the Carbon, Hale, Naughton Huntington and
Hunter generating plants, including a variable O&M component of $1.51 but exclusive of generation taxes and a
line loss adjustment. The variable energy rate applicable to deliveries commencing July I , 2009 extending
through June 30, 2010 has been computed to be $14.36/MWh, an increase from $14.11 last year.
Accompanying this letter are worksheets showing the computation of the revised adjustable rates for the various
affected contracts. If after reviewing the revisions, you accept them as accurate please indicate your approval by
letter (or other filing) directed to the Commission in the reserved case docket numbers identified above. The
case heading for the generic adjustment, Case No. GNR-09-, will read as follows:
IN THE MATTER OF THE ANNUAL REVISION AND UPDATED CALCULATION OF
THE ADmSTABLE PORTION OF THE AVOIDED COST RATE(S) FOR EXISTING
PURPA CONTRACTS FOR AVISTA CORPORATION DBA AVISTA UTILITIES, FOR
IDAHO POWER COMPANY AND FOR PACIFICORP DBA ROCKY MOUNTAIN
POWER.
The case heading in the PacifiCorp case for PacifiCorp QF contracts with 1992 Amendment language, Case No.
P AC-09-, is as follows:
IN THE MATTER OF THE ANNUAL REVISION OF QF VARIABLE ENERGY PRICES IN
ACCORDANCE WITH TERMS OF THE 1992 AMENDMENTS TO POWER PURCHASE
AGREEMENTS BETWEEN IDAHO QFS AND P ACIFICORP.
Please file your respective responses with the Commission on or prior to June 5 , 2009.
Thank you for your cooperation. Please feel free to contact me, or Rick Sterling, if you have any questions.
Sincerely,
Scott D. Woodbury
Deputy Attorney General
Enclosures
bls/L:GNR-09-P AC-09-sw _avoided cost
COLSTRIP ADJUSTABLE RATE CALCULATION
For Period 7/1/09-6/30/10
Colstrip Fuel Cost from Avista FERC Form 1 for CY 2008
line 12
line 20
Net Generation (kwh)
Fuel
Fuel cost per kwh
Fuel Cost per MWh
Variable O&M, Gen. Tax, 5% line loss per MWh
Total Colstrip Adjustable Rate
Reference GNR-99-N. 28708 4/17/2001
Colstrip_09-10.xls
757 659 000
$21 253 774
$0.012092
$12.0921
$2.0000
$14.0921
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RECEiVED
Average Gas Prices at Sumas, Washington from Inside FERC pu4M.~JiiNnI6 11M 8: ($/MMBtu) ;T'1!,wr, fJ' ;'
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Calculating the 2009-2010 Avoided Cost Adjustable Rate
2007 2008
Jan $6.41 $7.48
Feb $6.$8.
Mar $7.$8.46
Apr $6.$8.
May $6.$10.
Jun $6.$10.
July $6.$11.69
Aug $5.22 $7.
Sep $4.$6.
Oct $5.$6.23
Nov $7.45 $6.28
Dec $8.$6.
Average $6.$8.
Actual Annual Adjustment:
$7.18 - ($6.52-$8.33) = $9.
Note:
$2.00/MMBtu = 1997-98 Approved Rate
$2.35/MMBtu = 1998-99 Approved Rate
$2.26/MMBtu = i 999-00 Approved Rate
$2.80/MMBtu = 2000-01 Approved Rate
$4. 82/MMBtu = 2001-02 Approved Rate
$5.23/MMBtu = 2002-03 Approved Rate
$3.33/MMBtu = 2003-04 Approved Rate
$5.31/MMBtu = 2004-05 Approved Rate
$5.92/MMBtu = 2005-06 Approved Rate
$7.80/MMBtu = 2006-07 Approved Rate
$6.94/MMBtu = 2007-08 Approved Rate
. $7; 18/MMBtu = 2008-09 Approved Rate