20190116final_order_no_34227.pdf

Office of the Secretary
Service Date
January 16,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FILING OF )AVISTA CORPORATION DBA AVISTA )CASE NO.AVU-G-18-05
UTILITIES'2018 NATURAL GAS )INTEGRATED RESOURCE PLAN )ACCEPTANCE OF FILING
)ORDER NO.34227
On August 31,2018,Avista Corporation dba Avista Utilities filed its 2018 natural gas
Integrated Resource Plan (IRP).Per Commission Order,the Companymust file an IRP biennially
-every even-numbered year.See Commission Order No.25342,Case No.GNR-G-93-2;and
Order No.32233,Case No.AVU-G-11-02.
The Commission issued a Notice of Filing and Notice of Modified Procedure that
sought comments on the IRP.See Order No.34149.Commission Staff timely filed the only
comments in the matter,and recommended that the Commission acknowledge the IRP and accept
it for filing.The Company did not file a reply.
A natural gas IRP describes a company's plans to meet its customers'future natural
gas needs.In Order No.25342,the Commission adopted IRP requirements for local gas
distribution companies in response to amended Section 303 of the Public Utility Regulatory
Policies Act of 1978 (PURPA).In Order No.27024,the Commission shortened the required
planning horizon from 20 years to at least 5 years.Order No.27098 removed any requirement
that IRPs formally evaluate potential demand-side management (DSM)programs,and instead
directed the companies to explain whether cost-effective DSM opportunities exist.Finally,in
Order No.32698,the Commission required the Company to offer a Technical AdvisoryCommittee
(TAC)or other public outreach meeting that is geographically convenient for Idaho customers.
In summary,these three Orders direct gas utilities to file an IRP every two years that
includes:
1.A forecast of future gas demand for each customer class,which includes the
number,type,and efficiency of gas end-users as well as effects from
economic forces on gas consumption;
2.An analysis of gas supply options for each customer class,which includes
a projection of spot market versus long-term purchases for both firm and
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interruptible markets,an evaluation of the opportunities for using company-
owned or contracted storage or production,an analysis of prospects for
company participation in a gas futures market,and an assessment of
opportunities for access to multiple pipeline suppliers or direct purchases
from producers;
3.An explanation of whether or not there are cost-effective DSM
opportunities;
4.The integration of the demand forecast and resource evaluations into a long-
range (at least a five-year)plan describing the strategies designed to meet
current and future needs at the lowest cost to the utility and its ratepayers;
5.A short-term (e.g.,two-year)plan outliningthe specific actions to be taken
by the utility in implementing the IRP;
6.A progress report that relates the new plan to the previouslyfiled plan;and
7.Public participation,includinginput from the TAC.
THE 2018 IRP
The Company's natural gas IRP is 185 pages long.The IRP contains an Executive
Summary,and chapters on Demand Forecasts;Demand-Side Resources;Supply-Side Resources;
Policy Considerations,the Company's Integrated Resource Portfolio;Alternate Scenarios,
Portfolios,and Stochastic Analysis;Distribution Planning;and the Company's Action Plan.The
following information is from the IRP's Executive Summary.Further detail may be obtained in
the IRP's remaining chapters and appendices.
In the IRP,the Company "identifies a strategic natural gas resource portfolio to meet
customer demand requirements over the next 20 years."IRP at 1.The IRP takes input from the
Company's TAC,which includes Commission Staff,peer utilities,customers,and other
stakeholders.Id.For the IRP,the Company discussed topics with the TAC,including "natural
gas demand forecasts,price forecasts,[DSM],supply-side resources,modeling tools,and
distribution planning."Id.According to the Company,the end result is "a resource portfolio
designed to serve our customers'natural gas needs while balancing cost and risk."Id.
The Company also discusses the IRP planning environment,noting that natural gas is
an abundant North American resource with expectations for sufficient supplies for many decades
because of continuing technological advancements in extraction.The Company states that the use
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of natural gas in liquefied natural gas exports,natural gas vehicles,power generation,and exports
to Mexico will add demand for natural gas.
The Company discusses its demand forecasts by defining eleven distinct demand areas
in its service territory,then recognizing and accounting for factors influencingnatural gas prices
and demand,including "weather,customer growth and use-per-customer,"as well as "population,
employment,age and income demographics,construction levels,conservation technology,new
uses (e.g.,natural gas vehicles),and use-per-customer trends."Id.at 2.
The Company states that it forecasts a 0.71%average annual growth rate (net of
projected DSM program savings),with average day,system-wide core demand increasing from an
average of 93,900 dekatherms per day (Dth/day)in 2018 to 94,205 Dth/day in 2037.The Company
forecasts that coincidental peak day,system-wide core demand will increase from a peak of
377,206 Dth/day in 2018 to 427,852 Dth/day in 2037.Id.at 3.
In addition,the Company presents its natural gas price forecasts.The Company states
that gas prices are a "significant element to the total cost of a resource option,"thus affecting the
"avoided cost threshold for determining cost-effectiveness of conservation measures"and how
customers consume natural gas.Id.at 5.According to the Company,information about costs and
volumes of produced shale gas reflect that "production costs will remain low for quite some time
..even with increased incremental demand for [Liquefied Natural Gas (LNG)]exports,
transportation fuels,and increased industrial consumption."Id.The Company states that it
developed high and low price forecasts to "represent a reasonable range of pricing possibilities"
for its IRP analysis,providing variation needed to address the uncertainty of future prices.Id.at
6.
The Company discusses existing and potential natural gas supply resources.The
Company states it has a "diversified portfolio of natural gas supply resources,"includingcontracts
to buy gas from several supply basins,stored gas,and firm capacity rights on six pipelines.Id.at
6-7.In addition,the Company considers "incremental pipeline transportation,storage options,
distribution enhancements,and various forms of LNG storage or service"for potential resource
additions.Id.at 7.The Company states that,starting with its 2020 IRP,it "intends to include
conservation as a potential resource addition."Id.
Further,the Company discusses projected resource needs.The Company states that
Averageand Expected Case demand scenarios show it will not be resource deficient in the 20-year
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planning horizon.Id.The Company anticipates that,"where a resource deficiency is nearly
present,"it will have "time to carefully monitor,plan and take action on potential resource
additions."Id.
The Company states that uncertainty still exists,even with "the planning,analysis,and
conclusions reached in [its]IRP."Id.at 11.Thus,the Company states that it will diligently
monitor issues and challenges,including:(1)demand scenarios that will provide "insight into how
quickly resource needs can change if demand varies from the Expected Case";(2)price issues
arising from increased supply due to the increasingly efficient shale gas and drillingtechnology;
and (3)the effects on demand and price from LNG exports and the development of new pipeline
resources.Id.at 12-13.
The Company's IRP also includes a 2019-2020 Action Plan,outlining "activities for
study,development and preparation for the 2020 IRP."According to the Company,the purpose
of its Action Plan is "to position Avista to provide the best cost/risk resource portfolio and to
support and improve IRP planning."Id.Key ongoing components of the Action Plan include:
Incorporate an individual measure level for Dynamic DSM program
structure in the Company's 2020 IRP;
Work with Staff to clarify types of natural gas distribution system analyses
for possible inclusion in the 2020 IRP;
Work with Staff to clarify types of distribution system costs for possible
inclusion in the Company's avoided cost methodology;
Revisit coldest on record planning standard with TAC;
Provide additional information on resource optimization benefits and
analyze risk exposure;
Discuss integration of Energy Trust of Oregon (ETO)and Applied Energy
Group (AEG)/Conservation Potential Assessment (CPA)data into DSM,as
well as experience and knowledge of current and developing markets,and
future codes and standards;
Ensure that ETO has sufficient funding to acquire therm savings of the
amount identified and approved by Energy Trust Board;
Meet regularlywith Commission Staff to provide information on market
activities and significant changes in assumptions and/or status of Avista
activities related to the IRP or natural gas procurement practices;and
Appropriate management of existing resources including optimizing
underutilized resources to help reduce costs to customers.
Id.at 13-14.
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STAFF COMMENTS
Staff reviewed the Company's 2018 natural gas IRP and believes the IRP generally
complies with Order Nos.25342,27024,27098,and 32698.Staff thus recommended that the
Commission accept the IRP for filing.
Natural Gas Demand
Staff reviewed the Company's demand forecast methodology assumptions,along with
projections for demand growth rates.Staff confirmed the Company's demand forecast
methodology is based on reasonable assumptions over the planning horizon and provides a range
of demand projections to test the sensitivity of future resource investments.
The Company forecasts a 0.02%system-wide average annual daily demand increase
and a 0.71%increase in peak day demand (net of projected DSM program savings)projected to
occur in 2037.Id at 1-4.In the Washington/Idaho service territory,the number of customers is
projected to increase by an average of 1.30%per year.Id at 42-43.Staff explained these rates are
based on reasonable growth and consumption projections.
Besides the Average Case,which represents normal planning,and the Expected Case,
which represents the most likely scenario given peak weather conditions,the Company modeled
four additional demand scenarios-high growth/low price,low growth/high price,alternate
weather standard,and 80%below 1990 emissions-to account for variations in customer growth,
usage,weather,and carbon regulation.The Company also generated demand sensitivities from
different time periods for use-per-customer (e.g.2,3,and 5 year historical)and weather (e.g.20
year average,coldest on record,and coldest in 20 years)to account for variations in both.Staff
stated that performing multipledemand scenarios allows the Company to evaluate and plan for a
range of possible futures.
The Company shows it will have sufficient resources for the next 20 years in all cases
but the high growth/low price modeling scenario.Under the high growth/low price scenario,
existing resources would be inadequate to meet peak demand starting in year 2032.The Company
has not recommended resource options to meet the 2032 deficiency.Staff believes this is a
reasonable approach because the deficiency occurs well past the five-year planning horizon,which
gives the Company sufficient time to explore and analyze alternatives as needed.
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Natural Gas Supply Resources and Options
The IRP describes both existing and potential natural gas supply resources.The
Company's portfolio of gas supply resources includes (1)contracts to purchase gas,(2)stored gas,
and (3)firm pipeline capacity rights.
Staff stated that,as prices are a significant part of the resource cost,they affect the
avoided cost threshold for determining the cost-effectiveness of conservation measures and how
customers consume natural gas.The Company developed high,expected,and low price forecasts
to represent a reasonable range of natural gas pricing possibilities over the next 20 years.Staff
believes the expected price forecast is reasonable.
Distribution Planning
The Company's Idaho distribution system contains approximately 3,300 miles of
service and main pipelines.Transportation-only customers are excluded in long-term capacity
planning exercises but are included in distribution planning because they use the Company's
distribution system.The Company models its distribution system growth and needs with tools that
graphically represent the Company's system.
The Company is working on a project known as the Coeur d'Alene High Pressure
Reinforcement-Post Falls Phase.The Company started to build the project in 2018,and expects
to spend $4,000,000 to install about 14,600 feet of high pressure steel gas main pipe from
Rathdrum to Post Falls.
The Company also plans two more projects to help serve increased or new commercial
demand.The Company would start to build these projects-Schweitzer Mountain Road and
Warden High Pressure Reinforcements-when distribution constraints occur in 2020 or later.
Schweitzer Mountain Road should cost about $1,500,000.Warden High Pressure Reinforcements
should cost about $6,000,000.
Staff was concerned that the Company's IRP identified these projects without
explaining the analysis that lead the Company to select them.Accordingly,Staff recommended
that the Company's future IRPs show its analysis and justification for choosing the particular
projects the Company selects.
Demand-Side Management
In 2017,the Company retained AEG to complete a CPA of its DSM potential.The
primary cost-effectiveness measure used in Idaho is the UCT (Utility Cost Test),which assesses
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resource value from the utility's perspective.If a measure's benefits exceed its costs,the UCT
will be 1.0 or greater.Only measures with a UCT of 1.0 or greater were included in AEG's
cumulative achievableeconomic potential.
In its 2016 IRP,the Company expressed its intent to use a new DSM modeling method
known as Dynamic DSM in its 2018 IRP.In April 2018,the Company told Staff that SENDOUTI
could not provide Dynamic DSM modeling.The Company confirmed,however,that it is
developing an Excel-based add on function for SENDOUT that can provide Dynamic DSM
modeling in the 2020 IRP.Staff encouraged the Company to continue this work and to keep Staff
updated on its progress.
In the Company's 2016 IRP,conservation programs were discussed as a potential way
to delay or defer supply-side investments in distribution system constraint areas.The Company's
2018 IRP does not mention this work.In response to discovery requests,the Company stated it
has identified no projects where targeted location conservation benefits would offset needed
enhancements,but that it would continue to consider targeted conservation and all cost-effective
DSM programs in the future.Staff recommended that the Company include updates on this work
for the 2020 IRP and associated TAC meetings.
2019-2020Action Plan
The IRP 2019-2020 Action Plan contains activities identified by the Company's IRP
team with input from Company management and TAC members.Staff believes these action items
are reasonable.
Public Participation
The Company conducted four TAC meetings at its headquarters in Spokane,
Washington.Participants could attend the meetings in person,by phone,or online.The Company
explained the mechanics of its planning strategies,tools and results.Meetings included feedback
and input from TAC team members and stakeholders.
DISCUSSION
The Commission has reviewed Avista's IRP and Staff's comments.We appreciate
Staff's thorough review and input in this matter.We find that the Company's IRP contains the
required information and is appropriately formatted,consistent with Order Nos.25342,27024,
i SENDOUT is a linear programming-based model used to solve natural gas supply,storage,and transportation
optimization problems.
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27098,and 32698,as well as Section 303(b)(3)of PURPA.We therefore acknowledge the
Company's 2018 natural gas IRP and accept it for filing.
Our acceptance of the IRP should not be interpreted as an endorsement of,or judgment
of prudence as to any particular element of the plan,nor an approval of any resource acquisition
or proposed action included in the IRP.We recognize the Company's ongoing efforts to keep
customers informed,including through TAC meetings and other forms of public outreach.We
encourage the Company to continue in its efforts to engage affected and interested persons.
ORDER
IT IS ORDERED that the Company's 2018 natural gas IRP is acknowledged and
accepted for filing.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §§61-626.
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DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this/
of January,2019.
PAUL K LLAN R,PRESIDENT
KRIS NE RAPER,C MMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I\Lega]\GAS\AVU-G-18-05\orders\AVU-G-18-05_final_ep.docx
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