20190412Decision Memo.pdf

DECISION MEMORANDUM
TO COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAF'F
LEGAL
FROM:EDWARD JEWELL
DEPUTY ATTORNEY GENERAL
DATE: APRIL 12,2019
SUBJECT: IN THE MATTER OF UPDATES TO PUBLISHED AVOIDED COST
RATES; CASE NOS. IPC-E-19-13, PAC-E-19-05, AVU-E-19-05.
Pursuant to the Public Utility Regulatory Policies Act of 1978 ("PURPA") and the
implementing regulations of the Federal Energy Regulatory Commission ("FERC"), the Idaho
Public Utilities Commission ("Commission") has approved a Surrogate Avoided Resource
("SAR") methodology for calculating the published avoided cost rate at which PURPA qualifying
cogeneration and small power production facilities ("QFs") are paid by Idaho Power, Avista, and
PacifiCorp. Avoided cost rates are the purchase price paid to QFs for purchases of QF capacity
and energy.
STAFF'S UPDATES TO PUBLISHED AVOIDED COST RATES
In Order No. 32697, the Commission found that the final release by the U.S. Energy
Information Administration ("EIA") of the Annual Energy Otrtlook natural gas price forecast
automatically triggers a recalculation of the published avoided cost rates. In Order No. 32802, the
Commission clarified that an update should occur on June 1 or within 30 days of the final release
of the Annual Energy Outlook natural gas price forecast, whichever is later. The Annual Energt
Outlook 2019 was released on January 24,2019.
This year, there are additional updates to be made to the published avoided cost rates.
The federal Tax Cuts and Jobs Act of 2017 changed the federal corporate tax rate and Idaho House
Bill463 changed Idaho's corporate tax rate, both of which impact the published avoided cost rates.
Further, the conclusion of Avista's most recent general rate case, AVU-E-17-01, requires an
update to Avista's cost of capital input in the avoided cost computation.
IDECISION MEMORANDUM
Staff sent letters via email to Idaho Power, Rocky Mountain Power, and Avista on April
12,2019. Attached to the letters was an updated version of the published avoided cost model with
updated inputs for the natural gas price forecast, tax rates, and, for Avista, cost of capital figures.
Staff asked the utilities to each review the model and file comments with the Commission by May
16,2019 regarding whether the inputs were updated and included in the model correctly.
STAFF RECOMMENDATION
The Commission has historically processed updates to natural gas forecasts without a
public comment period because it has determined the process to be a "simple arithmetic
calculation" and an "administrative and ministerial act." Order Nos. 31025,31057. The same
rationale arguably extends to the update to tax rates and Avista's cost of capital. However, the
update to natural gas forecasts is a much more regular occurrence, and Commission orders
explicitly state that the update shall occur at a specific time each year through a determined
methodolo gy. See Order No. 32697 , 32737 . The update to tax rates and Avista's cost of capital
is a less regular occurrence and Staff could not find an explicit directive in prior Commission
orders mandating the update based on a defined methodology. Additionally, parties have sought
to hle comments in previous published avoided cost updates, despite no comment period being
established. See IPC-E-18-05. Therefore, Staff recommends the Commission process these cases
by modified procedure and set a comment deadline of May 16,2019, and a reply comment deadline
of May 23,2019.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application and Notice of Modified
Procedure that sets a comment deadline of May 16,2019, and a reply comment deadline of May
23,2019 in each case?
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Deputy .N,Jrn.y General
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2DECISION MEMORANDUM