20040624Comments.pdf

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SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895
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UTILiTiES COt1t"!!SSlON
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FILING BY A VISTA
CORPORATION DBA A VISTA UTILITIES OF
ITS 2003 NATURAL GAS INTEGRATED RESOURCE PLAN (IRP).
CASE NO. A VU-03-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Filing, Notice of Comment Deadline issued on June 4, 2004, submits the following comments.
On December 23 2003, Avista Corporation, dba Avista Utilities (A vista; Company) filed
its year 2003 natural gas Integrated Resource Plan (IRP) with the Idaho Public Utilities
Commission (Commission). Staff delayed comment pending completion of the State of
Washington Benchmark case. Staff provides additional comments and recommendations
concerning the Benchmark at the end of its comments.
The Company s filing complies with the Commission s direction in Order No. 25342, Case
No. GNR-93-2 (reference PURPA Section 303(b)(3), Energy Policy Act of 1992). Pursuant to
the Commission s Order, the Company is required to file its IRP every two years. Commission
Order No. 25342, Case No. GNR-93-2 initiated Integrated Resource Plan (IRP) requirements
for local gas distribution companies (LDC) in accordance with amended Section 303 of the
STAFF COMMENTS JUNE 24, 2004
Federal Public Utility Regulatory Policy Act of 1978 (PURP A). In its order the Commission
listed the elements that should be contained in the IRP. The following is a listing of these
elements and policy requirements including Staff comments associated with each in regards to the
2003 IRP filed by A vista.
01. Purpose and Process
No Comments
02. Definition.
No Comments
03. Elements of Plan. Each gas utility shall submit to the Commission on biennial basis
integrated resource plan that shall include:
a. A range of forecasts of future gas demand in firm and interruptible markets for each customer
class for one, five, and twenty years using methods that examine the effect of economic forces
on the consumption of gas and that address changes in the number, type and efficiency of gas
end-uses.
Staff believes the Company s IRP satisfies this requirement.
Appendix 'A' of Avista s IRP provides the Company s natural gas sales forecast. The
Company s planning horizon appears to meet the planning time frame requirements. The
Company provides detail on 1 , 5 , 10, 15 and 20 year plans.
The Company uses Global Insight, Inc. (formerly Data Resources, Inc.) research services
for its overall economic forecast. The Company further enhances Global Insight's 2002
information with locally available housing and building growth information.
The forecast data is weather normalized using National Oceanic Atmospheric
Administration s 30-year average weather data. The weather data is included via heating degree-
days in the Company s SENDOUT model for overall system optimization and appears to be in
accordance with industry standards.
b. An assessment for each customer class of the technically feasible improvements in the efficient
use of gas including load management, as well as the policies and programs needed to obtain
the efficiency improvements.
Staff believes the Company s IRP satisfies this requirement. There are significant
improvements in the Company s Demand Side Management (DSM) program from the previous
STAFF COMMENTS JUNE 24, 2004
IRP. On February 16 2001 (O.N. 28646) the Commission approved the Company s requested
5% DSM tariff rider (Schedule 191). This funding mechanism provides approximately $0.
million annually for the Company s Idaho gas DSM. The program provides the following two
separate incentive structures. (See IRP filing page B-, B-4).
Standard Gas-Efficiency Measures
Customer Simple Payback Customer Direct Incentive
0 to 17 months $0.00 per first year therm18 to 47 months $2.00 per first year therm48 to 71 months $2.50 per first year therm72 months or more $3.00 per first year therm
Subject to a maximum paYment of 50% of the incremental cost
New Technology Gas-Efficiency Measures
Customer Simple Payback Customer Direct Incentive
0 to 47 months $2.50 per first year therm48 to 71 months $3.00 per first year therm72 months or more $3.50 per first year therm
Subject to a maximum paYment of75% of the incremental cost
The Company s DSM program are overseen by a non-binding oversight organization, the External
Energy Efficiency Board ("Triple-E" Board). This Board serves only in an advisory role and the
Company maintains full responsibility for its DSM programs.
The Washington and Idaho gas DSM programs achieved 476 065 first year therm savings
in 2001. However, the cost to achieve the savings, $1 383 268 or $2.906/therm exceeded the
annual revenue generated by the rider (IRP B-5). The combined Washington and Idaho gas DSM
rider balance as of the end of2001 was a negative $596 296. In order to bring the total rider
balance to zero, the Company s 2001 business plan limited gas and electric expenditures to 62%
of the tariff rider revenue. That business plan anticipated that the combined total balance would
zero out by the close of 2005.
Based on these results Staff believes that the Company is committed to pursuing DSM
measures. Even though the first year cost has exceeded annual rider revenues, the long-term
savings to the Company is estimated at over 2.5 million therms.
ST AFF COMMENTS JUNE 24, 2004
A detailed calculation of avoided costs for A vista is outlined in Appendix E of the IRP.
The avoided costs from the Company s past four IRPs are summarized as follows:
1995 1997 2000 2003
Annual Supply Avoided:
Load Factor 100%100%100%100%
Supply Cost per Therm 165 124 258 327
Transportation Component 029 032 032 032
Winter Supply Avoided:
Load Factor 56%56%56%56%
Supply Cost per Therm 195 124 284 336
Transportation Component 052 032 058 058
Avoided Cost Results:
(30 years levelized per therm)
Nominal:(key for WAllO OSM)
Annual 338 225 501 0.473
Winter 397 269 579 537
c. An analysis for each customer class of gas supply options, including: (1) a projection of spot
market versus long-term purchases for both firm and interruptible markets; (2) an evaluation
of the opportunities for using Company-owned or contracted storage or production; (3)
analysis of prospects for Company participation in a gas futures market; and (4)
assessment of opportunities for access to multiple pipeline suppliers or direct purchases from
producers.
Staff believes the Company s IRP satisfies this requirement.
(1) In IRP Appendix E the Company extensively uses its SENDOUT model program to
provide an analysis and projection of available supply components over the Company s twenty-
year planning horizon.
(2) The Company does not own any direct supplies of gas (i.e. wells). All gas is
purchased from gas suppliers through interstate pipelines. The Company s SENDOUT model
optimizes the use of its Jackson Prairie Underground Storage Facility and its PlYmouth LNG
station. The Company also explores other storage opportunities such as LNG facilities, propane-
air and underground storage facilities in southeast Washington State. The study defines a need for
additional design day transportation capacity for its northern service territory in 2007 and 2008
and 2010/11 in the southern division. The Company states that these facilities are not cost
ST AFF COMMENTS JUNE 24, 2004
effective at this time. Staff encourages the continued review of these facilities to optimize gas
purchase options.
(3) On February 1 2002 the Commission issued Order No. 28941 approving
modifications of the natural gas benchmark mechanism. The modifications included a hedge
purchase program. The Company s IRP indicates a continuation of the hedging program for a
portion of the heating season.
(4) The Company evaluates resources from all supply basins and available storage
resources. The Company continues to evaluate available resource options based on pipeline
constraints and resource availability.
d. A comparative evaluation of gas purchasing options and improvements in the efficient use of
gas based on a consistent method for calculating cost-effectiveness.
Staff believes the Company s IRP satisfies this requirement. Starting with the Company
1995 IRP the Company has used two targeted avoided cost calculations, annual and winter. They
use the same methodology in this filing. The Company also continues to use the SENDOUT
planning model to assist in establishing the two avoided cost calculations.
e. The integration of the demand forecast and resource evaluations into a long-range (e.
twenty-year) integrated resource plan describing the strategies designed to meet current and
future needs at the lowest cost to the utility and its ratepayers.
Staff believes the Company s IRP satisfies this requirement.
In Appendix E the Company provides an extensive review of supply resources. It includes
numerous SENDOUT Model outputs for various supply resources throughout the planning
horizon. The Model takes into account input data from demand forecasts for a given area by
customer type, weather pattern information, transportation data including distribution network and
the physical movement of gas and pipeline costs. It takes into account supply options consisting
of gas contract prices, minimum and maximum take requirements, gas storage options, and
capacity release data. The Model output is used extensively by the Company for planning
purposes. The use of "what-if' scenarios within the Model allows the Company to make educated
economic supply decisions across the planning horizon and demand forecasts.
ST AFF COMMENTS JUNE 24, 2004
A short-term (e., two-year) plan outlining the specific actions to be taken by the utility in
implementing the integrated resource plan.
Staff believes the Company s IRP satisfies this requirement.
The 2003 action plan (Appendix ') includes the following six areas.
(1) Sales Forecasting: Avista will continue to track customer price elasticity over the
action plan period.
(2) Modeling Daily Forecasting: Avista will continue to use its SENDOUT (g) Gas
Planning and Nostradamus
(g)
Forecasting Models.
(3) Supply 1 Capacity: Avista will continue to analyze the need for additional interstate
pipeline capacity and evaluate the renewal of transportation contracts as they
expire. A vista also proposes to continue to monitor A vista Energy as part of the
Benchmarking agreement.
This agreement will no longer exist as of April 2005 in Idaho and therefore additional
action is necessary. Staff has provided additional comments under Additional General Comments.
(4) Demand Side Management: The Company proposes to work toward achieving
available cost-effective gas-efficiency opportunities while simultaneously bringing
the tariff rider balance back to zero in a timely manner.
(5) Distribution Planning: Avista will continue to use the Stoner Workstation and its
GIS system for distribution planning activities.
(6) Public Involvement: A vista Utilities will continue to participate in the energy
planning efforts of other organizations in the Northwest as well as any national
studies that may occur. The Company will also look to other utilities in the
northwest to find better ways to get active, meaningful participation in its Technical
Advisory Committee (T AC).
04. Relationship Between Plans. All plans following the initial integrated resource plan shall
include a progress report that relates the new plan to the previously filed plan.
Staff believes the Company s IRP satisfies this requirement.
In Appendix 'G' the Company provides an action plan review and reports on the outcome
of the previous action plan. In general the Company has followed the previous action plan.
STAFF COMMENTS JUNE 24, 2004
The Company has provided comparison between previous IRPs throughout the text. The
Company states improvements in the degree day calculations and evaluation of customer price
elasticity with the addition ofNostradamus(g) forecasting software. The Company DSM goals
were greatly exceeded. The External Energy Efficiency board is in place and continues to provide
program and evaluation advice on cost effective DSM opportunities. The Company is also
continuing with its Stoner Workstation modeling for distribution planning.
05. Plans to Be Considered in Rate Cases.
Concurrent with this filing the Company has filed a natural gas rate case A VU-04-
Staff is currently evaluating the merits of the rate case and the IRP implications.
06. Public Participation. In formulating its plan, the gas utility must provide an opportunity for
public participation and comment and must provide methods that will be available to the
public of validating predicted performance.
Staff believes the Company s IRP satisfies this requirement.
The public participation element is outlined in Appendix 'The Company held two
public Technical Advisory Committee (TAC) Meetings to review different phases of the plan
during 2002. Meetings were held on September 24 and December 4, 2002 in Spokane
Washington.
07. Legal Effect of Plan.
No Comments on this Section.
ADDITIONAL GENERAL COMMENTS
Benchmark
The Natural Gas Benchmark Mechanism is a tariffed program where Avista Energy
manages all of Avista Utilities natural gas marketing and storage facilities. The program
establishes the cost of natural gas for the states of Washington, Idaho and Oregon. It prices
natural gas at the first of the month price based on an artificial weighting of the three supply basins
serving the northwest regardless of actual purchase price or delivery location. The Benchmark
STAFF COMMENTS JUNE 24, 2004
Mechanism also includes storage management, a hedging program and sharing of capacity
releases between A vista Energy and A vista Utilities for all three states.
On February 13 2004 the Washington Utilities and Transportation Commission (WUTC)
in Docket No. UG-021584 found that Avista s Benchmark Mechanism proposal had not provided
adequate safeguards in affiliate transactions between A vista and A vista Energy nor were there
significant measurable benefits to ratepayers. The WUTC rejected Avista s proposed
modifications to the natural gas Benchmark Mechanism and extended the current mechanism for
60 days for A vista to submit a transition plan. On April 2, 2004 the WUTC extended the
expiration of the Benchmark Mechanism to April 30, 2004 and approved A vista s plan for
transitioning from purchasing natural gas through A vista Energy and the Benchmark Program to
the direct purchase of natural gas by A vista Utilities. The transition plan calls for A vista Utilities
to contract with A vista Energy to purchase natural gas based on A vista Utilities purchase
decisions until March 2005. A vista Utilities proposes to acquire and train additional personnel
and return to internally purchasing natural gas for all of its natural gas customers in Oregon and
Idaho effective April 1 , 2005.
A vista s 2003 IRP only briefly mentions the pending actions of the Washington
Commission in Appendix G, under evaluation of the previous plan, supply/capacity. Staff
believes this is a significant event that should be addressed greater in the IRP or in a supplemental
filing associated with the IRP. Staff admits that the change should not affect the overall demand
for natural gas. However, the change will affect the way the Company buys natural gas. Changes
will also occur in personnel costs as well as in transportation and storage planning. Furthermore
the overall strategy for hedge purchasing and storage management is subject to change, because it
is an integral part of the current Benchmark Mechanism.
Staff believes that Idaho customers have benefited from some of the Benchmark
components. Staff is concerned that with the loss of the Benchmark Mechanism, beneficial
programs may be lost and additional costs may be shifted to Idaho. Staff recommends that the
Company be directed to provide Staff copies of all Benchmark transition documents submitted in
other states.
Pursuant to Commission Order in Case No. A VU-01-, the Company is to file an
analysis of the Benchmark program detailing the costs and benefits to customers, to the Company
and to A vista Energy seven (7) months (on or before August 31 , 2004) prior to the contract'
STAFF COMMENTS JUNE 24, 2004
termination on March 31 , 2005. Order No. 28941 at 7. Staffwill review the required filing and
continue to monitor the Company s transition actions closely.
SUMMARY & RECOMMENDATION
The A vista 2003 natural gas Integrated Resource Plan provides the Company s load growth
and pricing forecasts. It provides insight into the Company s use of integrated resources by
analyzing supply alternatives, including spot, firm and interruptible markets. The IRP further
includes the use of storage futures options, multiple pipeline purchases, and demand side
management to provide an integrated look at the Company s natural gas resources.
Staff believes that Avista s 2003 Natural Gas IRP satisfies the technical requirements of
Commission Order No. 25342. Staff recommends that the Company s filing be acknowledged and
accepted. Staff s recommendation should not be interpreted as approval, or as a judgment of
prudence of the IRP or the prudence of following or not following the plan.
Staff anticipates a significant change in the Company s gas purchasing strategy. The
elimination of the Benchmark has the potential for significant ramifications to Idaho. Staff
recommends that A vista be directed to provide Staff copies of all Benchmark transition documents
submitted in the Company s other jurisdictional states.
Dated at Boise, Idaho, this QJ'I11ay of June 2003.
Scott Woodbury
Deputy Attorney General
Technical Staff: Michael Fuss
i :/umisc/comments/avugO3 .2swmfuss
STAFF COMMENTS JUNE 24, 2004
CERTIFICA TE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF JUNE 2004
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-03-, BY MAILING A COpy THEREOF POSTAGE PREPAID, TO THE
FOLLOWING:
RICHARD T. WINTERS KELLY NORWOOD
SR NATURAL GAS PLANNING ANALYST VICE PRESIDENTVISTA CORPORATION VISTA CORPORATIONPO BOX 3727 PO BOX 3727
SPOKANE W A 99220-3727 SPOKANE W A 99220-3727
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SECRETARY
CERTIFICATE OF SERVICE