20230817Comments of the Commission Staff.pdf

CLAIRE SHARP
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074
[phone]
IDAHO BAR NO.8026
Street Address for Express Mail:
11331 W.CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,IDAHO 83714
Attorneyfor the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA CORPORATION )DBA AVISTA UTILITIES'2023 NATURAL GAS )CASE NO.AVU-G-23-03INTEGRATEDRESOURCEPLAN("IRP"))
)COMMENTS OF THE
)COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission ("Staff),by and through its Attorney
of record,Claire Sharp,Deputy Attorney General,submits the followingcomments.
BACKGROUND
On March 31,2023,Avista Corporation dba Avista Utilities ("Company")filed its 2023
Natural Gas Integrated Resource Plan ("IRP").The Company files a natural gas IRP every two
years to describe the Company's plans to meet its customers'future natural gas needs.The IRP
must discuss the subjects required by Commission Order Nos.25342,27024 and 27098,and
Section 303(b)(3)of the Public Utility Regulatory Policies Act ("PURPA"),15 USC §3202.
The Company's natural gas IRP contains an Executive Summary,and chapters on
Demand Forecasts;Demand-Side Resources;Current Resources and New Resources Options;
Policy Issues;Preferred Resource Strategy ("PRS");Alternate Scenarios;Distribution Planning;
and the Company's Action Plan.The followinginformation comes from the IRP's Executive
STAFF COMMENTS 1 August 17,2023
Summary and Application.See generallyIRP,Filing.Further detail may be obtained in the
IRP's remaining chapters and appendices.
The IRP identifies a natural gas resource portfolio to meet expected customer demand
requirements over the next 20 years.Development of the IRP involved input from the
Company's Technical Advisory Committee ("TAC"),which includes Commission Staff,peer
utilities,customers,and other stakeholders.Topics discussed with the TAC included resources
to meet energy demand,energy policy compliance,specific planning topics,reviewing the
progress of planning activities,and soliciting input on IRP development and results.Id.at 22-23.
The Company stated the IRP process results in a resource portfolio designed to serve customers'
natural gas needs while balancing cost and risk.Id at 161.
STAFF REVIEW
Staff recommends acknowledgement of the Company's 2023 Natural Gas IRP as timely
filed and compliant with previous orders.Staff reviewed the Company's 2023 natural gas IRP to
affirm that it complies with requirements as specified by Commission orders.Based on its
review,Staff believes that the 2023 IRP contains the required information.Staff examined the
Company's natural gas demand forecasts,supply-side resources,Demand Side Management
("DSM"),resource and distribution planning,and action plans with each of these subjects
addressed in greater depth in sections below.
In this IRP,the Company used new modeling software called PLEXOS®I to perform its
natural gas planning.The Company represented the updated software allows for "unlimited
flexibility"and ran scenarios on "customer growth and customer natural gas usage to form
demand forecasts;existing and potential transportation and storage options and associated costs;
existing and potential natural gas supply availabilitypricing;revenue requirements on all new
asset additions;weather assumptions;and conservation."Id.at 24.Additionally,the Company
used increased features of PLEXOS®to analyze weather and price uncertainty,and adjusted its
weather planning standard,as discussed below.
I Energy Analytics and Decision Platform https://www.energyexemplar.com/plexos
STAFF COMMENTS 2 August 17,2023
Natural Gas Demand Forecast
Staff reviewed the Company's demand forecast assumptions,along with projections for
demand growth rates.Staff confirmed the Company's demand forecast is based on reasonable
assumptions using historical data over the planning horizon and provides a range of demand
projections to test the sensitivityof future resource investments.The demand forecast used in
development of the 2023 Natural Gas IRP is similar to the methodology used in the Company's
2023 Electric IRP.
The Company modeled different scenarios in its risk analysis by includingdifferent
levels of demand and natural gas price to determine how the resource plan changes.The
Company modeled 14 different scenarios and 14 differentdemand and price-influencingfactors
in its risk analysis.It included scenarios that assumed:three different PRS baseline scenarios,
varyinglevels of electrification,varyinglevels of supply,varyinglevels of customer growth,etc.
Table 7.1 in the 2023 IRP describes the different demand and price-influencingfactors the
Company analyzed.The Company indicated it would integrate additional information for risk
analysis on goals and legislation as they arise.
The IRP process starts with a demand forecast and an analysis of factors that affect
demand that could change the Company's resource plan.The Company uses historical data to
establish its forecasted demand baselines.The Company states that;"This IRP mitigates the
uncertaintyby considering a range of scenarios to evaluate and prepare for a broad spectrum of
potential outcomes."IRP at 2-1
The Company forecasted both increases in demand due to customer growth and decreases
in demand based on the electrification of natural gas customers from jurisdictionschanging
building codes to require electrification ("electrification").Id.at 30-31.The Company
anticipated growth from a current average of 379,669 core natural gas customers with
38,871,519 dekatherms (Dth)ofnatural gas to 469,703 core natural gas customers with
45,082,213 Dth of natural gas.Id.at 50.The Company estimated that electrification could
reduce demand 33%or 6.9 million Dth for residential customers by 2045.Id at 31.The
Company updated its weather planning standard by moving away from a static "coldest day on
record"standard to a standard based on a probability distribution of historic temperatures.In
addition to its peak-day design,the Company estimated use-per-customer and load forecasts
using weather variables as warming temperatures decrease average demand.Id.at 32,37.
STAFF COMMENTS 3 August 17,2023
The Company also developedadditional demand scenarios that represent different
expectations for the future and a range of possible outcomes based on current policies,codes,
and customer demand.Staff believes this scenario analysis is important due to the changing
policies in Oregon and Washington that will impact the Company's overall resource planning
and has the potential to directly impact Idaho.The Company asserts that scenario analysis of
demand is becoming more difficult to forecast due to the policy updates in both Oregon and
Washington and building code updates in Washington.Changes in total demand can drastically
change both the timing and resources selected,making it necessary to look at different future
expectations based on demand,costs,and resource availability.IRP at 2-22.The Company's
Table 2.8 shows the demand scenarios developed for this IRP.
Preferred Resource Case -Our expected case High Customer Case -A high demandbasedonassumptionsandcostswithaleastfiskcasetomeasureriskofadditonalcustomerandleastcostresourceselectionandmeetingouremissionsandenergy
obligationsElectrificationExpectedConversionCosts-Average Case -Non climate changeExpectedconversioncostscasetoshowtheriskprojected20-year history of average dailinvolvedwithenergydeliveredthroughthenaturalweatherandexcludespeakdaygasinfrastructuremovmototheelectricsystemHybridCase-Natural Gas used for space heat
below 40°F while transferring all other usage toelectricity.
Staff believes the demand scenarios included in this IRP are reasonable because they are
based on the most up-to-date information known during the IRP process.With the policy
changes occurring in Washington and Oregon,Staff expects these scenarios to be updated and/or
expanded,if necessary,in the next IRP to reflect potential demand scenarios for the Company's
system.The Average Demand Case represents the case used for normal planning purposes,such
as corporate budgeting,procurement planning,Purchased Gas Adjustments ("PGAs"),and
General Rate Cases.The Preferred Resource Demand Case reflects the expected demand and
available costs and resources the Company believes is most likelygiven expected peak weather
conditions.Id.The Electrification,Hybrid,and High Customer Demand Cases represent a range
of possible futures based on current or expected policies,codes,and customer demand.
STAFF COMMENTS 4 August 17,2023
Natural Gas Supply Resources and Options
Staff reviewed the Company's natural gas supply resources and price forecasts.The IRP
describes both existing and potential natural gas supply resources.The Company's portfolio of
gas supply resources includes contracts to purchase gas,stored gas,and firm pipeline capacity
rights.
The Company's PRS for Idaho includes using the least cost natural gas basin,and
storage,combined with energy efficiency("EE")to meet energy demand.The Company stated
Idaho's primary available hub has been the AECO basin because of its geographic proximity to
Idaho and it is the Company's largest access to pipeline capacity.Id.at 146.Staff believes the
Company's natural gas procurement and storage practices are sufficientto achieve required
volumes of natural gas at economic prices to support its customer's needs.
Current natural gas price forecasts show a long-term regional price advantage for
Western Canada and Rockies natural gas basins as the need for this gas diminishes.Historically
in the Northwest,high Canadian production combined with limited options for flowing natural
gas into demand areas resulted in discounted commodity prices as compared to the HenryHub.
Attractive commodity prices and abundant supplies of natural gas has resulted in the construction
of multipleLiquefied Natural Gas plants which are creating significant demand on the North
American supply of natural gas and upward pressure on commodity prices.
The Company asserts that it closely monitors supply and pricing factors,but it cannot
precisely predict future prices across the 20-year planning horizon of the IRP.The Company
obtained price forecasts from several industryexperts which it used to develop price forecasts
considered in this IRP.The Company's Figure 4.2 below,depicts the annual average prices of
combined forecasts in nominal dollars and includes the expected price resulting from a blending
technique.Staff believes the Company's forecasts are reasonable and recognizes that recently
there has been a great deal of volatilityin the price of natural gas.The Company provides semi-
annual reviews to the Commission,which include a review of price forecasts as well as actuals.
STAFF COMMENTS 5 August 17,2023
$8 --Actuals o Expected Price NYMEX$7 --EIA/AEO --Consultant 1 --Consultant 2
e $3 -
Q.
$2 -
$1 -
Demand Side Management
In Chapter 3 of the IRP,the Company discussed DSM programs includingEE and
demand response ("DR")programs for Washington and Idaho.The Company stated its
commitment to "offering natural gas efficiency programs to residential,low income,commercial
and industrial customer segments"when feasible and cost-effective.Id.at 53.To estimate
potential EE savings,Applied Energy Group ("AEG")conducted a conservationpotential
assessment ("CPA")study for DR and EE programs for the Company's service territory.The
potential EE and DR measure level results are screened for technical,achievabletechnical,and
achievable economic potential.For Idaho,the Company identified its EE resource selections
using the Utility Cost Test ("UCT")achievable economic potential,estimating 46,414 Dth of
savings in 2023,and 1,278,511 Dth of savings by 2045 for Idaho.Id.at 57.The Company's
estimated conservation targets totaled 109,114 Dth for Idaho for 2024-2025.Id.at 58.
While not common,some natural gas DR pilotprograms have emerged across the U.S.
for natural gas fired end uses,although the market interest remains small.As part of the CPA,
AEG evaluated five potential natural gas DR programs for the Company's system-DirectLoad
Control Smart Thermostat;Third Party Contracts-Firm Curtailment;Behavioral (voluntary
reduction);Time-of-Use ("TOU")Rates Opt-in and Variable Peak Pricing ("VPP")Rates-and
the expected participating market segment,program participation rates,costs,and potential
savings for each option.Of these programs,the Behavioral,TOU,and VPP programs rely on the
implementation of Advanced Metering Infrastructure("AMI")gas meters.Currently
STAFF COMMENTS 6 August 17,2023
Washington is the only section of the Company's service territory with AMI meters.Id.at 63-
66.In its Response to Production Request No.6,the Company stated that it expects to begin
AMI installations in its Idaho service territoryin 2026.To reflect this situation,the CPA did not
include any AMI dependent natural gas DR programs in Idaho.For the remaining DR programs,
the CPA estimates an achievableeconomic potential across all sectors of 32 Dth by 2025 for
Idaho.2023 Natural Gas IRP Appendices at 182.Due to the small potential of natural gas DR,
Staff is concerned about the feasibilityand cost-effectiveness of potential natural gas DR
programs.If the Company were to propose a natural gas DR program,Staff will evaluate that as
part of the Energy Efficiency Advisory Group ("EEAG")and/or any necessary subsequent
filings required to implement a DR program for Idaho.
Avoided Cost
In order to select potential EE programs,the Company uses avoided costs to estimate the
value of program savings.Avoided costs are provided as an input into the CPA to define if
potential EE measures are cost-effective and to decrement those measures from the Company's
load forecast.The Company represents its avoided cost using the cost to serve the next unit of
demand or "marginal avoided costs."The Company states that the marginal avoided costs
include the commodity,distribution,storage,and transportation costs as well as potential region-
specific adders.Id.at 53.
Staff is concerned with the Company's use of marginal avoided costs to represent the
avoided costs of its DSM programs.When Staff attempted to verify the individualcomponents
and calculations of the avoided costs in Production Request No.7,the Company could only
provide hard-coded PLEXOS marginal avoided cost outputs.The avoided costs produced by the
IRP are a fundamental input for the planning and evaluation of the Company's EE programs.
Because of this dependency,Staff recommends that the Company work with its internal DSM
team,contracted third-partytool,and Commission Staff in the IRP planning to develop
supporting worksheets that detail the components and calculations used to derive the DSM
avoided costs and that the Company provide this worksheet as a supporting document in the next
IRP.
Staff notes,in this circumstance,the lack of verificationdoes not invalidate the
Company's filed avoided costs.Staff's comparison of the Idaho avoided costs provided in
STAFF COMMENTS 7 August 17,2023
Response to Production Request No.7 to the expected price of natural gas in Figure 4.3 of the
IRP,shows that the commodity component is a primary driver in the avoided cost.
National Carbon Tax
In addition to the avoided cost components discussed above,the Company also described
several values that can be included in the avoided costs as adders such as the social cost of
greenhouse gas.These adders are most commonly used in the Company's service territory in
Washington and Oregon where it is mandated by state policy.However,in its 2023 Natural Gas
IRP section on policy considerations,it states that "[the Company]does not anticipate any
greenhouse gas policies in Idaho for the planning horizon.Because Idaho customers are at risk
of a federal policy regulating greenhouse gas emissions in the future,this plan includes a risk
adder of a federal policy"beginning in 2030.Id.at 109.
Staff disagrees with the Company's decision to include a national carbon tax in the 2023
IRP for several reasons.Firstly,in support of a national carbon tax,the Company referenced
only a single consultant's estimation.Id.at 109.Staff believes that this is not adequate
justification for the addition of a national carbon tax.With the majority of measures identified in
the CPA having measure lives greater than 7 years,the addition of a national carbon tax
overstates the avoided costs and could result in the selection of DSM programs that would not
otherwise be cost-effective.Also,the inclusion is inconsistent with both previous natural gas
IRP assumptions and current state policy regarding greenhouse gas adders.For these reasons,
Staff recommends that the Commission order the Company to submit a compliance filing
containing an updated IRP avoided cost table that does not include a national carbon tax.
Additionally,Staff recommends that the Company consider this compliance filing as the "most
recently filed IRP avoided cost"for the purposes of DSM program planning and future cost-
effectiveness evaluations.
Staff notes that this carbon tax is also present in the PRS scenario.Id.at 159.Staff is
comfortable leaving this unchanged as the identified upgrades are driven by capacity and most
upgrades occur in the short term before the 7-year period as described in the resource evaluation
section below.Staff believes the Company should exclude a carbon tax in its next IRP.
STAFF COMMENTS 8 August 17,2023
Resource Evaluation
Staff reviewed the Company's gas supply,transportation capacity,and distribution plans
and believes each is sufficientto meet demand.The Company evaluated its ability to obtain
adequate natural gas supply and ensure sufficientpipeline transportation capacity to its city gates
to meet demand.The Company evaluates and monitors its distribution system to ensure it is
sufficient to meet demand and projected load growth requirements.
Gas Supply and Transportation Capacity
The Company's management of natural gas procurement is done on a system-wide basis
using regional supply options to serve customers.The Company's supply options include
storage,firm and non-firm supplies,and firm and interruptible transportation interstate pipelines.
The Company manages these resources depending on demand and operating conditions in its
service territories in a reliable and economic manner includingthe capability to respond to and
fulfill peak day requirements.During a peak day,the Company can use its storage resources as
well as transportation resources.When the Company considers a transportation option to meet
demand,it uses PLEXOS®to pair natural gas supply with transportation to model prices.The
Company continues to enhance its demand and procurement modeling through the use of
PLEXOS®.Staff looks forward to the Company's continued enhancement of its modeling tools
and techniques and updates during semi-annual reviews with the Commission.
Distribution Planning
When the Company conducts distribution planning,it primarily focuses on capacity
requirements and system integrity assessments.In this IRP,the Company discussed
enhancements to its distribution system includingpipelines,regulators,and compressors,along
with targeted conservation resources that may "reduce or delay"the need for these
enhancements.Id.at 185.The Company states,"Securing adequate natural gas supply and
ensuring sufficientpipeline transportation capacity to Avista's city gates becomes a secondary
issue if distribution system growth behind the city gates increases faster than expected and the
system becomes severely constrained."Id.at 181.
The Company's Idaho distribution system contains approximately 3,300 miles of service
and main pipelines.Transportation-onlycustomers are excluded in long-term capacity planning
exercises but are included in distribution planning because they use the Company's distribution
STAFF COMMENTS 9 August 17,2023
system.The Company uses a modeling tool to assess distribution system growth and needs.2
The tool provides a graphic representation of the Company's system,which behaves very similar
to the actual system allowingthe Company to simulate and model alternatives.
In the 2021 IRP,the Company did not project any Idaho specific distribution
enhancement spending and Staff verified that there were no significant enhancement projectsimplementedsincethelastIRP.In this IRP,there are two estimated distribution system
enhancements for Idaho.The Company estimates that it will increase capacity at its gate station
located in Rathdrum,Idaho at a projected cost of $1,000,000 in 2023.Staff learned that the
project has been delayed until 2024.3 The Company is also planning a reliability rebuild at the
Coeur d'Alene gate station with a projected cost of $200,000 in 2023.The project is in process
and year-to-date spending is $12,017.The Company expects partial completion of the project
with a field installation of the regulator station this Fall and does not expect the estimated cost to
equal the projected cost.
Staff appreciates the Company's commitment to assess the need for enhancement
projects in order to achieve sufficient capacity to meet demand,and providing currentinformationanddetailsintheIRP.
Action Plans and Progress
The IRP contains an Action Plan section that describes status of Action Items from the
Company's 2021 IPR and 2023-24 actions for the Company to "provide the best cost/risk
resource portfolio to support and improve IRP planning."Id.at 191.
The Company's 2021 IRP Action Items included items for eachjurisdiction (Oregon,
Washington,and Idaho.The 2021 IRP Action Plan items related to Idaho include the following:
Investigate new resource plan modeling software and integrate Avista's system
into software to run in parallel with Sendout.Avista procured a commercial off
the shelf product called PLEXOS®from Energy Exemplar in May 2021.This
software was built and verified using Sendout for initial model build.As
mentioned during the TAC process the additional complexitybrought into the
natural gas model with the climate policies in Oregon and Washington made a
2 GL Noble Denton Synergi modeling tools.*The Company stated that GTN TransCanada,the interstate pipeline,has not been able to schedule the Rathdrumrebuildandwillmakeadjustmentsasneededduringpeakdemands.
STAFF COMMENTS 10 August 17,2023
parallel run impossible.The additional functionalityof PLEXOS®to model
these new program requirements was a primary reason Avista made the
investment in the PLEXOS®application;and
Exploring the feasibilityof using projected futureweather conditions in its design
day methods.
Staff believes the Company reasonably accomplished its Idaho specific action items.
The Company's 2023-24 IRP Action Items includes items for each jurisdiction (Oregon,
Washington,and Idaho.The 2023-24 IRP Action Plan items related to Idaho include the
following:
Exploring end use modeling techniques for forecasting customer demand;and
Considering contracting with an outside entity to help value supply side resource
options such as synthetic methane,renewable natural gas,carbon capture,and
green hydrogen.
Public Participation
MultipleStaff members participated in the five TAC meetings conducted by the
Company from February 2022 to December 2022.During these meetings,the Company
provided details on the mechanics of its planning strategies,tools,and results.Meetings were
conducted in an interactive manner to include feedback and input from TAC team members as
well as stakeholders.
In addition to TAC meetings,the Company conducted two public meetings where the
Company reviewed its selection of preferred resources to meet energy demand and energy policy
compliance in Oregon and Washington.These meetings allowed meeting participants to interact
directlywith the Company's subject matter experts.Staff appreciates the Company's level of
public engagement and participation in the development of its IRPs.
STAFF RECOMMENDATIONS
Staff believes that the Company's 2023 Natural Gas IRP satisfies the requirements for a
natural gas IRP set forth in Commission Order Nos.25342,27024,27098,32233,and 32698.
l.)Staff recommends the Company's 2023 Natural Gas IRP be acknowledged and
accepted for filing contingent on the Company submitting a compliance filing with an
STAFF COMMENTS 11 August 17,2023
updated DSM Avoided Cost table that does not include a National Carbon Tax
starting in 2030;and
2.)Staff recommends that the Commission require the Company to include updates on
PLEXOS®implementation,model validation,and enhancements in its semi-annual
Natural Gas Updates with the Commission.
Respectfully submitted this /day of August 2023.
Claire Sharp
Deputy AttorneyGeneral
Technical Staff:Kevin Keyt
Jason Talford
Michael Eldred
i:umisc/comments/avug23.3cskkjjtmecomments
STAFF COMMENTS 12 August 17,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 17th DAY OF AUGUST 2023,SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF TOAVISTACORPORATION,IN CASE NO.AVU-G-23-03,BY E-MAILING A COPYTHEREOF,TO THE FOLLOWING:
PATRICK EHRBAR DAVID J MEYERDIROFREGULATORYAFFAIRSVP&CHIEF COUNSELAVISTACORPORATIONAVISTACORPORATIONPOBOX3727POBOX3727SPOKANEWA99220-3727 SPOKANE WA 99220-3727E-MAIL:[e-mail] E-MAIL:david.meyer [e-mail]
SECRETARY
CERTIFICATEOF SERVICE