20180615Decision Memo.pdf

DECISION MEMORANDUM
TO COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:YAO YIN
SEAN COSTELLO, DAG
DATE: JUNE 14,2018
SUBJECT:CASE NO. GNR.E.I8.O2
ANNUAL REVISION AND UPDATED CALCULATION OF THE
ADJUSTABLE PORTION OF THE AVOIDED COST RATE FOR
EXISTING PURPA CONTRACTS FOR AVISTA CORPORATION DBA
AVISTA UTILITIES, FOR IDAHO POWER COMPANY, AND FOR
PACIFICORP DBA ROCKY MOUNTAIN POWER
CASE NO. PAC.E.18-05
ANNUAL REVISION OT QF VARIABLE ENERGY PRICES PURSUANT
TO TERMS OF THE T992 AMENDMENTS TO POWER PURCHASE
AGREEMENTS BETWEEN IDAHO QFS AND PACIFICORP
The Idaho Public Utilities Commission in Order No. 28708, Case No. GNR-E-99-1,
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 I Colstrip
Unit Coal Costs per megawatt hour (MWh) and adding $2.00/MWh (the average variable O&M
cost of Colstrip plus 20plMWh 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
17.61 milllkWh to 16.54 mill/kWh (see Attachment l). 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.
DECISION MEMORANDUM I
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 $0.59/MMBtu. The approved gas price of $2.85/MMBtu
plus the $0.59/MMBtu results in a gas price of $3.44lMMBtu for the 2018-2019 year (see
Attachment 2). This equates to a SAR fuel cost of 24.42 mill/kWh as used in the model.
The Commission Staff calculated changes to the annual adjustable rate portion of
avoided costs for those QF contracts, using variable costs associated with Colstrip and Sumas,
and provided the respective utilities with the updates for review by letter dated May 30,2018.
Avista, Idaho Power, and PacifiCorp responded by letter that Staff s calculations are correct.
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 1,2018 extending through
June 30,2019 has been computed to be$23.67lMWh, an increase from $23.294{Wh last year.
Staff confirmed that PacifiCorp's calculations are correct (see Attachment 3).
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 l. Avista, 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. For
those contracts, PacifiCorp has correctly computed the new variable energy rate. Does the
Commission agree with the proposed changes in the variable rates?
Sean Costello
Deputy Attorney General
CNRE | 802_PACE I 805-Dec Memo__yy-sc
2DECISION MEMORANDUM
COLSTRIP ADJUSTABLE RATE CALCULATION Updated
For Period 7 11 118-6130/19
Colstrip Fuel Cost from Avista FERC Form 1 lor CY 2017
line 12 Net Generation (kwh)
line 20 Fuel
Fuel cost per kwh
FuelCost per MWh
Variable O&M, Gen. Tax, 57o line loss per MWh
Total Colstrip Adjustable Rate
ReferenceGNR-E-99-l O.N.28708 4117l2OO1
1 ,423,319,000
$20,697,118
$0.014541
$14.5414
$2.oooo
$16.5414
Colstrip_'18-19
Attachment I
Average Gas Prices at Sumas, Washington from Inside FERC publication
($/MMBtu)
Calculating the 2017-2018 Avoided Cost Adjustable Rate
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
2016
s2.57
$2.1 0
$ l.4l
$r.42
$ 1.34
s1.46
$2.28
s2.34
$2.63
$2.64
$2.62
s3.27
2017
$4.8s
$3. l7
$2.20
$2.34
s2.42
$2.70
s2.29
$2.48
$2.s6
$2.3s
s2.65
$3.1s
Average $2.173 $2.763
Ac@
$2.850 - ($2. 173 - $2.7 63) : $3.440
Note:
$6.94lMMBtu : 2007-08 Approved Rate
$7. I 8/MMBtu : 2008-09 Approved Rate
$9.00/MMBtu : 2009- 10 Approved Rate
$4.62lMMBtu : 2010-1 1 Approved Rate
S4.99lMMBtu : 201 1-12 Approved Rate
$4.60/MMBtu : 2012-13 Approved Rate
$3.45lMMBtu : 201 3- 14 Approved Rate
S4.35/MMBtu : 2014-15 Approved Rate
$5. lO/MMBtu : 201 5- 16 Approved Rate
53.092/MMBtu = 2016-17 Approved Rate
$2.850/MMBtu : 2017 -18 Approved Rate
Attachment 2
PacifiCorp
Total Variable Energy Rate
for 2018 , 2019
Carbon Naughton
$ 105,045,552
Huntington
$ 138,300,998
Hunter
s 145,938,639
Totals
$ 389,28s,189Fuel Cost ($) $
2017 FERC FORM I - Page 402 Linc 20
Generation (MVVH)
2017 FERC FORM 1 - Pagt 402 Linc 12
Average Fuel Cost ($/MVWI
Variable O&M
Total Variable Energy Rate for 201812019
For deliveries commencing July 1, 2018 extending through June 30, 2019
12 PacifiCorp/QFs contracts with approved 1992 amendment language
4,740,158 5,399,777 7 ,429,297 17,569,232
22.16
't.51
23.67
S
S
$
/MV1/l-l
/M\ /t-l
/MV1/t-l
Attachment 3