20181026Decision Memo.pdf

DECISION MEMORANDUM
TO COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:SEAN COSTELLO
DEPUTY ATTORNEY GENERAL
DATE: OCTOBER 25,2018
SUBJECT:THE APPLICATION OF ROCKY MOUNTAIN POWER TO UPDATE
LOAD AND GAS FORECASTS USED IN THE INTEGRATED
RESOURCE PLAN AVOIDED COST MODEL; CASE NO. PAC-E-18-09.
On October 15, 2018, Rocky Mountain Power, a division of PacifiCorp, filed an
Application with the Commission to update the load forecast, natural gas forecast, and contract
components of the incremental cost Integrated Resource Plan (IRP) avoided cost methodology
for qualifying facilities (QF) under the Public Utility Regulatory Policies Act (PURPA).
Application at l-2. Rocky Mountain Power indicated that the filing is in compliance with Order
Nos. 32697 and32802. Id. at l.
BACKGROUND
Under PURPA, electric utilities must purchase electric energy from qualifying facilities
(QFs) at rates approved by the applicable state agency-in Idaho, this Commission. 16 U.S.C. $
824a-3; Idaho Power Co. v. Idaho PUC,l55 Idaho 780,780,316 P.3d 1278,1287 (2013). The
purchase or "avoided cost" rate shall not exceed the "'incremental cost' to the purchasing utility
of power which, but for the purchase of power from the QF, such utility would either generate
itself or purchase from another source." Order No. 32697 at 7, citing Rosebud Enterprises v.
Idaho PUC, 128 Idaho 624,917 P.2d 781 (1996); 18 C.F.R. S 292.101(bx6xdefining "avoided
cost").
The Commission has established two methods of calculating avoided cost, depending on
the size of the QF project: (l) the surrogate avoided resource (SAR) methodology; and (2)the
IRP methodology. See Order No. 32697 at7-8. The Commission uses the SAR methodology to
establish what is commonly referred to as "published" avoided cost rates. 1d Published rates are
DECISION MEMORANDUM I
available for wind and solar QFsr with a design capacity of up to 100 kilowatts (kW), and for
QFs of all other resource types with a design capacity of up to 10 average megawatts (aMW).
For QFs with a design capacity above the published rate eligibility caps, avoided cost
rates are "individually negotiated by the QF and the utility using the [IRP methodologyl." Id. at
2; Order No. 32176. The IRP methodology "takes into account many different variables and
produces a[n avoided cost] result based on each individual utility's need for energy." Order No.
32697 at 17. The IRP methodology's variables are at issue here.
The Commission has stated "utilities must update fuel price forecasts and load forecasts
annually-between IRP filings. We find it reasonable that all other variables and
assumptions utilized within the IRP Methodology remain fixed between IRP filings (every two
years)." Id. at 22. The Commission directed that the update to fuel price forecasts and load
forecasts should occur on October I 5 of each year. Order No. 32802 at 3. The Commission also
found it appropriate to consider long-term contract commitments, as well as PURPA contracts
that have terminated or expired, in the utility's load and resource balance. Order No. 32697 at
22.
THE APPLICATION
Rocky Mountain Power provided its updated load forecast, natural gas forecast, and
contract information, and explained that if approved, the information will be incorporated into
Rocky Mountain Power's IRP avoided cost model and that the model will be used as the starting
point for the negotiation of its contractual avoided cost rates as of October 15, 2018. Application
at2.
Rocky Mountain Power's July 2018 long-term load forecast update "shows a slight
increase in load compared to the July 2017load forecast provided in Case No. PAC-E-17-13 that
was approved in Commission Order No. 33952." /d. Rocky Mountain Power provided both the
July 2018 and the July 2017 load forecasts for years 2018 through 2038. Id. at 4.
Rocky Mountain Power's updated natural gas forecast was prepared on September 29,
2018, and indicated that "gas prices [in the Company's most recent Official Forward Price
Curve] are down slightly initially then a little higher over the remaining years compared to" its
2017 Official Forward Price Curve. Id. at 3. Rocky Mountain Power provided both its 2018 and
the 20 I 7 forecasts for years 20 I 8 throu gh 2037 . Id. at 5 .
I See Order No. 33785 (regarding battery storage facilities).
2DECISION MEMORANDUM
Finally, Rocky Mountain Power summarized the contract termination, expiration and
additions it has experienced since its 2017 update. Id. at 3. The Company provided the new,
terminated, or expired contracts in Table 3 to the Application. 1d
Rocky Mountain Power requests the Commission issue an Order approving the updated
information in the Application for inclusion in the Company's IRP avoided cost calculations for
the negotiation of its contractual avoided cost rates beginning October 15, 2018.
STAFF RECOMMENDATION
Staff recommends that the Commission issue a Notice of Application and Notice of
Modified Procedure, with comments due November 27,2018, and reply comments, if any, due
December 4,2018.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application and a Notice of Modified
Procedure, with comments due November 27,2018, and reply comments, if any, due December
4,2018?
Sean Costello
Deputy Attorney General
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