20040601Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLAND ER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:MAY 24, 2004
RE:CASE NO. A VU-03-2 (A vista)
2003 NATURAL GAS INTEGRATED RESOURCE PLAN (IRP)
On December 30, 2003, Avista Corporation, dba Avista Utilities (Avista; Company)
filed its year 2003 natural gas Integrated Resource Plan (IRP) with the Idaho Public Utilities
Commission (Commission). The Company s filing complies with the Commission s direction in
Order No. 25342 , Case No. GNR-93-2 (reference PURP A Section 303(b )(3), Energy Policy
Act of 1992). Pursuant to the Commission s Order, the Company is required to file every two
years.
Integrated Resource Planning, the Company states, is a comprehensive, long-range
planning tool that fully integrates forecasted energy requirements with potential energy
resources. The process determines the most cost-effective means for the Company to meet
projected firm load requirements.
The Company s Integrated Resource Plan is presented in a combined format to
provide the reader with an overall view of the Company s total natural gas operations and
planning processes. In addition to Idaho, the Company s IRP is filed with the regulatory
authorities in Washington and Oregon. A vista Utilities prepares its natural gas forecasts
concurrently with its electric operations forecast where electricity and natural gas are both
provided to customers, thus utilizing common assumptions for both energy products.
Avista s 2003 natural gas IRP addresses the following subject areas: natural gas sales
forecast demand side management, supply side resources, distribution planning, integrated
resource portfolio, public involvement and action plan.
DECISION MEMORANDUM
A vista s gas and electric energy efficiency activities in Idaho and Washington have
been funded under a Tariff Rider mechanism since 1995. This allows for the funding of energy
efficiency activities without creating a regulatory asset. The gas Tariff Rider is currently set at
5%. This funding mechanism yields approximately $1 million in annual revenues. The four
year (2002-2005 inclusive) business plan calls for combined gas and electric DSM expenditures
to be limited to approximately 62% of Tariff Rider revenues.
Electric and gas DSM programs are subdivided into three portfolios: non-residential
residential and limited income. Within the non-residential portfolio there is a heavy reliance
upon site specific calculations of energy savings. Residential segment gas DSM is composed of
prescriptive programs. Prescriptive residential gas efficiency programs for programmable
thermostats, high-efficiency gas furnaces, high-efficiency gas water heating and weatherization
(duct, floor, wall, ceiling and attic) are currently available. Qualified limited income customers
are eligible for incentives implemented through five separate community action program (CAP)
agencies within the A vista service territories.
The supply options of A vista s integrated resource portfolio consist of various
components. These include firm and non-firm supplies contracted for on a long-term and short-
term basis, firm and interruptible transportation on seven interstate pipelines, and three storage
services. A diversity of delivery points and load requirements add to the options available to
meet customer needs. The utilization of these components varies depending on demand and
operating conditions.
The Company notes that it entered into an agreement with A vista Energy in 1999 to
have A vista Energy manage all the supply and transportation needs of A vista Utilities (except
California). The pricing and sharing structures vary between the states. The current mechanism
is approved in Oregon and Idaho until March 31 , 2005 and until January 29, 2004, in
Washington. At the time of its IRP filing, A vista was awaiting the WUTC Order to determine
the future status of the "benchmarking" mechanism.
In 2000, the industry experienced the highest prices ever seen. In response, A vista
Utilities, through Avista Energy, has established a schedule to lock-in hedges and volumes for
price stability. The hedging schedule provides for both structure and flexibility for both timing
and volumes. A vista has established a base line that approximately 50% of annual monthly loads
DECISION MEMORANDUM
will be hedged prior to entering into the heating season, that being November 15 , with fixed
priced natural gas.
The Company in its resource management activities also considers other potential
resources. These potential resources include those requiring physical assets and those dependent
upon contractual or financial arrangements, e., Jackson Prairie Storage Project; pipeline
capacity; capacity release; additional storage facilities. The Company holds several long-term
contracts for supplies from three separate supply basins. These supplies are for annual and
seasonal core customer needs. The Company does not make long-term firm commitments to
serve interruptible customers.
A vista contends that its firm and interruptible transportation contracts provide the
Company with sufficient available capacity to meet current and future core load demands. Based
on the current forecast, the Company s north operating division (Washington and Idaho) will
need to acquire additional transportation by the 2007/2008 heating season. As reflected in its
filing, the Company s strategy is to contract for a reasonable amount of transportation to serve
firm customers should a designed peak day occur in a seven- to ten-year period. Too much firm
transportation could keep the Company from achieving its goal of being a low-cost energy
provider. The ability to release capacity, however, acts to offset the cost of holding under-
utilized capacity. Too little firm transportation impairs the Company s goal of being a reliable
energy provider.
A vista s analysis and selection of resource options in the context of the IRP for its
natural gas operations as well as the resulting strategies employed to develop an Integrated
Resource Plan are comprised of:
- Resource options summary
Gas resource model
Analysis framework
Weather data
Avoided cost
Environmental externalities
Portfolio integration
The foundation for the selection of resources for the Company s integrated resource portfolio is
the annual and peak day load forecast requirements.
DECISION MEMORANDUM
The objective of Avista s 2003 Action Plan is to continue to further integrate the
objectives of integrated resource planning and least cost planning into the Company s daily
operations. The 2003 Action Plan is focused on six key areas: sales forecasting;
modeling/forecasting; supply/capacity; DSM; distribution planning and public involvement.
COMMISSION DECISION
A vista s 2003 Integrated Resource Plan was filed with the Commission on
December 30, 2003. Pursuant to the request of the Company, proceedings were informally
stayed pending the WUTC benchmarking decision. On February 13 2004, the WUTC issued an
Order in Docket No. UG-021584 canceling Avista s natural gas benchmark mechanism with 60
days ' notice. On April 2 , 2004, the WUTC issued a seventh supplemental order extending the
expiration of the benchmark mechanism to April 30, 2004, and approving Avista s compliance
filing for the transition from purchasing natural gas through the benchmark program to A vista
Utilities directly purchasing natural gas for its customers. The transition plan calls for A vista
Utilities to contract with Avista Energy to purchase natural gas based on Avista Utilities
purchase decisions until March 2005. A vista Utilities proposed to acquire and train additional
personnel and return to internally purchasing natural gas for all of its natural gas customers in all
states on or before March 31 , 2005.
Avista and Staff recommend that the Company s 2003 IRP be processed pursuant to
Modified Procedure, i., by written submission rather than by hearing. Reference Commission
Rules of Procedure, IDAPA 31.01.01.201-204. Does the Commission agree?
Scott Woodbury
VldJM:A VUGO32 sw
DECISION MEMORANDUM