20181127Comments.pdf

SEAN COSTELLO
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8743
IN THE MATTER OF THE APPLICATION OF
ROCKY MOT]NTAIN POWER TO UPDATE
THE LOAD AND GAS FORECASTS USED IN
THE INTEGRATED RESOURCE PLAN
AVOIDED COST MODEL
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Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. PAC.E.18-09
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attomey of
record, Sean Costello, Deputy Attomey General, submits the following comments.
BACKGROUND
On October 15, 2018, Rocky Mountain Power, a division of PacifiCorp, filed its annual
update to certain components of its avoided cost rate calculation for qualifuing facilities (QF)
under the Public Utility Regulatory Policies Act of 1978 (PURPA). Specifically, Rocky
Mountain Power updated the load forecast, natural gas price forecast, and contract information
components that it uses to calculate avoided cost rates under the incremental cost Integrated
Resource Plan (IRP) method. Rocky Mountain Power asks the Commission to issue an Order
approving the updated information for inclusion in the Company's QF IRP avoided cost
calculations with an October 15,2018, effective date.
In ldaho, under PURPA, electric utilities must purchase electric energy from QFs at rates
approved by the Commission. 16 U.S.C. $ 824a-3; Idaho Power Co. v. Idaho PUC,l55
STAFF COMMENTS NOVEMBERz7,2OI81
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); l8 C.F.R. $ 292.101(b)(6)(defining "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) method; and (2) the IRP
method. See Order No. 32697 at7-8. The Commission uses the SAR method to establish what
are cofilmonly referred to as "published" avoided cost rates. 1d. Published rates are available for
wind and solar QFsr with a design capacity of up to 100 kilowatts (kW), and for QFs of all other
resource tlpes with a design capacity of up to l0 average megawatts (aMW). On the other hand,
if a QF's design capacity is above the published rate eligibility caps, the utility must use the QF
IRP method to negotiate a project-specific avoided cost rate with the QF. 1d. at2; Order
No. 32176. The QF IRP method accounts for "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 variables in Rocky Mountain Power's QF IRP method are at issue here.
With respect to the QF IRP method, the Commission requires utilities to update fuel price
forecasts and load forecasts each year on October 15. Order No. 32802 at 3. All other QF IRP
method variables and assumptions remain fixed between the biennial IRP filings. Order
No. 32697 at22. The Commission expects the utility's load and resource balance to account for
long-term contract commitments, and PURPA contracts that have terminated or expired. Id.
With this Application, Rocky Mountain Power updates its load forecast, natural gas price
forecast, and contract information. The Company explains that if the Commission approves the
updates, the Company will incorporate them into its QF IRP avoided cost model and use the
model to begin negotiating contractual avoided cost rates as of October 15, 2018. Application
at2.
Rocky Mountain Power's updated load forecast is from July 2018 and "shows a slight
increase in load compared to the July 2017 load forecast provided in Case No. PAC-E-17-13 and
approved by the Commission in Order No. 33952." 1d. Rocky Mountain Power provides both
the July 2018 and the July 2017 load forecasts for years 2018 through 2038. Id. at 4.
I See Order No. 33785 (regarding battery storage facilities).
2STAFF COMMENTS NOVEMBER27,2OI8
Rocky Mountain Power's updated natural gas price forecast was prepared on
September 28,2018, and "indicates gas prices [in the Company's most recent Official Forward
Price Curvel are down slightly initially then a little higher over the remaining years compared
to" its 2017 Offrcial Forward Price Curve. Id. at 3. Rocky Mountain Power provided both
its 2018 and the 2017 forecasts for years 2018 through 2037 . Id. at 5.
Regarding contract additions and terminations, Rocky Mountain Power explains that it
has signed 16 long-term contracts, eight of which are with QFs, for a total nameplate capacity
of 535.3 megawatts (MW). Id. at3. Eleven long-term contracts have expired and two were
terminated, for a total nameplate capacity of 201.1 MW. Id. The Company provides a list of the
contract additions and terminations in Table 3 to the Application. The Company indicates it
continuously includes new power purchase agreements, terminated or expired contracts, and new
contract pricing in its avoided cost IRP model. 1d.
STAFF ANALYSN
Staff recommends approval of the updated load forecast, natural gas price forecast, and
long-term contracts to be used in the QF IRP methodology. Staff finds that the difference
between this year's forecast and last year's forecast is reasonable for both load and natural gas
prices and that the contract information is accurate. Therefore, Staff recommends approval of
the updated load forecast, natural gas price forecast, and long-term contracts to be used in the
Company's QF IRP methodology with an effective date of October 15, 2018.
Load Forecast
Staff has compared the Company's annual system load forecast in this filing to last year's
filing in Case No. PAC-E-17-13 and finds the new forecast is reasonable based on the
comparison. The economic conditions in Rocky Mountain Power's service territory have not
significantly changed in the past year, and the analysis shows a slight increase in load in the
proposed forecast load. Specifically, the comparison shows the Company's 2018 forecast
exceeds the 2017 forecast by 3 .7%. The is due to the following: ( I ) increases in industrial usage
in Washington, Oregon, Idaho, and California; (2) increases in commercial usage in Utah,
Oregon, Washington, and Califomia; (3) increases in central air conditioning use in all states
served by the Company except Washington and Califomia; (a) the net effect of increases in the
number of households and decreases in household size; (5) increases in the number of electric
JSTAFF COMMENTS NOVEMBERZ7,2OI8
vehicles (1.6% of the customers currently own an electric vehicle); and (6) increases in the
number of customers with indoor agricultural equipment.
Staffbelieves the new forecast is reasonable and acceptable and that the increase in load
from last year should not result in any significant change in QF [RP-based avoided cost rates.
Natural Gas Price Forecast
Staff believes that the Company's natural gas price forecast for Henry Hub is reasonable
for purposes of determining avoided cost in IRP-based PURPA contracts. Staff s conclusion is
based on two types of analysis: a comparison of the Company's proposed price forecast to last
year's forecast in Case No. PAC-E-17-13 and a comparison of the Company's forecast to EIA's
natural gas price forecasts and to Idaho's other two regulated electric utility price forecasts.
The comparison between the 2018 Henry Hub price forecast and the 2017 pice forecast
showed annual differences that range from -7 .04o/o to 23.23Yo from years 2019 throu gh 2037
which are illustrated in Figure 1. Staff believes this range is acceptable given the differences that
often exist between reasonable forecast scenarios.
Rocky Mountain Power
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Figure 1 Rocky Mountain Power's 2018 Forecast and 2017 Forecast for Henry Hub Prices
Staff also compared Rocky Mountain Power's Henry Hub price forecast to Idaho
Power's, Avista's, and two of the U.S. Energy Information Administration (EIA)'s Henry Hub
price forecasts (see Figure 2). Although all the price forecasts reflect a similar trend and show
4STAFF COMMENTS NOVEMBER27,2OI8
natural gas prices at Henry Hub increasing over time, it correlates heavily with Avista's natural
gas price forecast, which uses futures market pricing during the first two to three years. This is
important because IRP-based PURPA contracts are capped at a two-year contract length, and the
avoided costs in any new contract will reflect this early pricing. In this case, futures market
prices reflect continued strong natural gas market fundamentals with low near-term natural gas
prices, which Staff finds reasonable.
As a result of this analysis, Staff believes the Company's natural gas price forecast is
reasonable and acceptable for use in the QF IRP avoided cost rate calculation.
Henry Hub Natural Gas Price Forecasts by Three Utilities
Compared to EIA Price Forecasts
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Figure 2 Comparing Three Utilities' Henry Hub Price Forecasts to EIA's Henry Hub Price Forecasts
5STAFF COMMENTS NOVEMBER 27,20I8
Contract Terminations, Expirations, and Additions
Staff has verified the contract information contained in the Company's Application and
finds it accurate. Since filing Case No. PAC-E-17-13, the Company has signed l6 longterm
contracts, including eight long-term contracts with qualifuing facilities, for a total nameplate
capacity of 535.3 megawatts. Eleven long-term contracts have expired and two long-term
contracts were terminated, for a total nameplate capacity of 201.1 megawatts. New contracts,
terminated, or expired contracts, as well as new contract pricing are all included in the IRP
model on a continuous basis.
STAFF RECOMMENDATIONS
Staffbelieves the load forecast, the natural gas price forecast, and the contract
information submitted by Rocky Mountain Power reflect their most recent estimates and comply
with Order Nos. 32697 and32802. Staff recommends approval of the updated load forecast,
natural gas price forecast, and long-term contracts to be used to calculate avoided cost rates in
the Company's QF IRP methodology rate calculation with an effective date of October 15, 2018.
Respecttully submitted this 2/4 day of November 2018
(
Costello
Deputy Attorney General
Technical Staff: Yao Yin
Bentley Erdwurm
i:umisc/comments/pace I 8.9scyybe comments
6STAFF COMMENTS NOVEMBERZT,2018
CBRTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 27TH DAY OF NOVEMBER 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-18-09, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
TED WESTON
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 841 16
E-MAIL: [e-mail]
DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
datareq ue st@paci fi corp. c om
DANIEL E SOLANDER
MICHAEL S SNOW
ROCKY MOLINTAIN POWER
1407 WN TEMPLE STE 320
SALT LAKE CITY UT 84116
E-MAIL: Daniel.solander@pacificorr:.com
michael. snow@pacificoro. com
b
SECRETARY
CERTIFICATE OF SERVICE