20041101_977.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:OCTOBER 28, 2004
RE:UPDATE TO THE PURP AVOIDED COST RATES TO INCORPORATE
NEW FUEL PRICES AND NEW UTILITY COSTS OF CAPITAL
Three recent events have triggered consideration of computation of new PURP A
avoided cost rates-the conclusion of general rate cases for Idaho Power and A vista, and the
release of a new natural gas price forecast by the Northwest Power and Conservation Council
(NPCC) 1
The conclusion of a general rate case affects avoided cost rates because cost of
capital figures are used in avoided cost computations in accordance with the approved
methodology. Staff believes that the appropriate time to incorporate new cost of capital figures
is following a general rate case. A final Order in Idaho Power s general rate case was issued on
May 25, 2004 (Order No. 29505) and a Reconsideration Order was issued on September 28
2004 (Order No. 29601). A final Order in Avista s general rate case was issued on October 8
2004 (Order No. 29602).
On September 24 2004, the Northwest Power and Conservation Council released a
new natural gas price forecast. Because the new forecast was released at about the same time as
the Idaho Power and A vista rate cases were concluded, Staff believes both the new cost of
capital figures and the new natural gas prices should be incorporated in the computation of new
avoided cost rates. Staff is not proposing to revise the cost of capital figures used for PacifiCorp.
1 The Northwest Power Planning Council (NWPPC) is now known as the Northwest Power and Conservation
Council (NPCC).
DECISION MEMORANDUM - 1 -
The practice of updating avoided cost rates due to new fuel price forecasts can be
traced to Order No. 29124. In that Order, the Commission adopted a fuel price forecast from the
draft Fifth Northwest Conservation and Electric Power Plan, April 25, 2002 of the Northwest
Power Planning Council (NWPPC) as a reasonable method for calculating a starting gas price in
the avoided cost methodology. The Commission stated that "natural gas prices can be updated
when a new NWPPC forecast become available." Order No. 29124 at 10. The Commission has
since approved updated gas prices based on an April 22, 2003 NWPPC forecast in December
2003. Order No. 29391.
The new rates computed using the Council's September 24, 2004 natural gas price
forecast and Idaho Power s and Avista s revised costs of capital are approximately 5 mills/kWh
higher than the rates currently in effect for all three utilities. A copy of the proposed new rates
for each utility is attached. The computations of new rates using revised gas prices and costs of
capital must be reviewed by the utilities before they can be adopted by the Commission.
Computation of the rates is a ministerial task done in accordance with prior Commission orders;
nevertheless, past practice has been for the Staff s computation of the rates to be reviewed by the
utilities to insure mathematical accuracy.
COMMISSION DECISION
Staff recommends that the Commission open a new docket for the purpose of
incorporating into the avoided cost rates the new natural gas price forecast recently released by
the Northwest Power and Conservation Council. Staff recommends that the Commission
incorporate in the avoided cost calculations the new cost of capital figures recently established
for Idaho Power and A vista in their respective general rate cases. Staff recommends that this
matter be processed under Modified Procedure? Does the Commission agree?
Scott Woodbury
M:A voided Cost Rates sw rs
DECISION MEMORANDUM - 2 -
AVISTA UTILITIES
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
11/XX/2004
mills/kWh
DRAFT
ON-LINE YEAR
CONTRACT NON-LEVELIZED
2004 2005 2006 2007 2008 2009 YEAR RATES
14.14.14.14.15.15.2004 14.
14.14.47 14.15.15.15.2005 14.
14.14.14.15.15.16.2006 14.
14.45 14.15.15.4 7 15.16.2007 14.
14.14.15.15.15.16.2008 15.
14.15.15.42 15.16.16.2009 15.
14.15.15.15.16.16.2010 16.
15.15.15.16.16.45 16.2011 16.41
15.15.. 15.16.16.16.2012 16.
15.15.15.16.16.. 17.2013 17.
15.41 15.16.16.16.17.2014 17.
15.15.16.16.17.17.41 2015 17.
15.16.16.16.17.17.2016 18.
15.16.16.16.17.17.2017 18.
15.16.16.17.17.41 17.2018 19.
16.16.16.17.17.17.2019 19.
16.16.49 16.17.17.18.2020 20.
16.16.16.17.17.18.2021 20.
16.16.17.17.48 17.18.2022 21.09.
16.43 16.17.17.17.18.41 2023 21.
2024 22.
2025 22.
2026 23.
2027 23.
2028 24.
2029 24.
EFFECTIVE DATE ADJUSTABLE COMPONENT
11 /XX/2004 36.42
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tablesabove. .
Example 1. A 20-year levelized contract with a 2005 on-line date would receive the following rates:
Years Rate
16.80 + 36.42
16.80 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2005 on-line date would receive the following rates:
Years Rate
14.32 + 36.42
14.65 + Adjustable component in year 2006
14.98 + Adjustable component in year 2007
15.33 + Adjustable component in year 2008
AVISTA UTILITIES
AVOIDED COST RATES FOR NON-FUELED PROJECTS
DRAFTSMALLER THAN TEN MEGAWATTS
11/XX/2004
mills/kWh
NON~LEVELJZEDu u
ON-LINE YEAR
CONTRACT NON-LEVELIZED
2004 2005 2006 2007 2008 2009 YEAR RATES
50.42 51.52.54.55.56.2004 50.42
51.52.53.54.56.57.2005 51.
51.52.54.55.46 56.58.2006 52.
52.53.43 54.56.57.45 58.2007 54.
52.54.55.56.58.59.49 2008 55.
53.54.55.57.58.60.2009 56.
53.55.56.47 57.59.60.2010 58.
54.55.57.58.42 59.61.2011 59.
54.56.57.58.60.42 61.2012 61.
55.56.58.59.60.62.48 2013 62.
55.57.58.60.61.63.2014 64.
56.57.59.60.62.63.2015 65.
56.58.59.61.62.64.2016 67.
57.58.60.61.63.64.2017 69.
57.59.60.62.63.65.2018 70.
58.59... 61.62.64.65.2019 72.44
58.60.61.49 62.64.66.2020 74.
59.60.44 61.63.44 64.66.2021 76.
59.40 60.62.63.65.43 67.2022 77.
59.61.62.64.65.67.2023 79.
2024 81.
2025 83.
2026 85.
2027 87.
2028 90.
2029 92.
IDAHO POWER COMPANY
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
11/XX/2004
mills/kWh
DR AFT
ON-LINE YEAR
CONTRACT NON-LEVELIZED
2004 2005 2006 2007 2008 2009 YEAR RATES
13.13.13.13.14.14.2004 13.
13.13.45 13.14.14.40 14.2005 13.
13.13.13.14.14.14.2006 13.
13.43 13.14.14.14.15.2007 13.
13.13.14.14.14.15.2008 14.
13.14.14.14.15.15.2009 14.
13.14.14.49 14.15.15.2010 14.
13.14.14.14.15.15.2011 15.
14.14.43 14.15.15.46 15.2012 15.
14.14.14.15.15.15.2013 15.
14.14.15.15.15.16.2014 16.
14.49 14.15.15.15.16.2015 16.
14.14.15.15.16.16.2016 17.
14.15.15.42 15.16.16.2017 17.
14.15.15.15.16.16.2018 17.
14.15.15.16.16.40 16.2019 18.
15.15.43 15.16.16.16.2020 18.
15.15.15.16.16.17.2021 19.
15.15.16.16.16.17.2022 19.
15.41 15.16.16.16.17.2023 20.
2024 20.
2025 21.
2026 21.
2027 22.
2028 22.
2029 23.
EFFECTIVE DATE ADJUSTABLE COMPONENT
11 /XX/2004 36.42
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tables
above.
Example 1. A 20-year levelized contract with a 2005 on-line date would receive the following rates:
Years Rate
15.76 + 36.42
15.76 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2005 on-line date would receive the following rates:
Years Rate
13.30 + 36.42
13.61 + Adjustable component in year 2006
13.92 + Adjustable component in year 2007
14.24 + Adjustable component in year 2008
IDAHO POWER COMPANY
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
11/XX/2004
mills/kWh
DRAFT
ON-LINE YEAR
CONTRACT NON-LEVELIZED
2004 2005 2006 2007 2008 2009 YEAR RATES
49.42 50.51.53.54.45 55.2004 49.42
50.51.52.48 53.55.56.44 2005 50.
50.51.53.54.55.57.2006 51.
51.52.40 53.55.56.57.2007 53.
51.52.54.55.56.58.2008 54.45
52.53.54.56.57.59.2009 55.
52.54.55.44 56.58.59.2010 57.
53.54.56.57.58.60.2011 58.
53.55.56.57.59.60.2012 59.
54.42 55.57.58.59.61.43 2013 61.46
54.56.57.59.60.62.2014 62.
55.45 56.58.20 59.61.62.2015 64.
55.57.58.60.61.63.2016 66.
56.44 57.59.60.62.63.2017 67.
56.58.59.61.62.64.2018 69.
57.58.60.61.63.64.2019 71.
57.59.60.62.63.65.2020 72.
58.59.61.62.64.65.2021 74.
58.60.61.63.64.66.2022 76.44
59.60.62.63.65.66.2023 78.
2024 80.
2025 82.
2026 84.
2027 86.
2028 88.42
2029 . 90.
PACIFICORP
AVOIDED COST RATES FOR FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
11/XX/2004
mills/kWh
DRAFT
ON-LINE YEAR
CONTRACT NON-LEVELIZED
2004 2005 2006 2007 2008 2009 YEAR RATES
14.14.14.15.15.15.2004 14.
14.14.14.15.15.15.2005 14.
14.14.15.15.15.16.2006 14.
14.49 14.15.15.15.16.2007 15.
14.14.15.15.16.16.40 2008 15.
14.15.15.46 15.16.16.2009 15.
14.15.15.15.16.16.2010 16.
15.15.15.16.16.48 16.2011 16.46
15.15.15.16.16.17.2012 16.
15.15.16.16.16.17.2013 17.
15.43 15.16.16.16.17.2014 17.
15.15.16.16.17.17.42 2015 18.
15.16.16.16.17.16 .17.2016 18.45
15.16.16.16.17.17.2017 18.
15.16.16.17.17.40 17.2018 19.
15.16.16.17.17.17.2019 19.
16.16.46 16.17.17.18.2020 20.
16.16.16.17.17.18.2021 20.
16.16.17.17.43 17.18.2022 21.
16.16.17.17.17.18.2023 21.
2024 22.
2025 22.
2026 23.
2027 23.
2028 24.
2029 24.
EFFECTIVE DATE ADJUSTABLE COMPONENT
11 /XX/2004 36.42
The total avoided cost rate in each year is the sum of the adjustable component and the fixed component from either of the tables
above.
Example 1. A 20-year levelized contract with a 2005 on-line date would receive the following rates:
Years Rate
16.75 + 36.42
16.75 + Adjustable component in each year
Example 2. A 4-year non-Ievelized contract with a 2005 on-line date would receive the following rates:
Years Rate
14.36 + 36.42
14.69 + Adjustable component in year 2006
15.03 + Adjustable component in year 2007
15.38 + Adjustable component in year 2008
PACIFICORP
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
11/XX/2004
mills/kWh
DRAFT
ON-LINE YEAR
CONTRACT NON-LEVELIZED
2004 2005 2006 2007 2008 2009 YEAR RATES
50.46 51.52.54.55.56.2004 50.46
51.52.53.54.56.57.2005 51.
51.52.54.55.56.58.2006 52.
52.53.46 54.56.57.48 58.2007 54.
52.54.55.56.58.59.2008 55.
53.54.55.57.58.60.2009 56.
53.55.56.47 57.59.60.2010 58.
54.55.57.58.41 59.61.2011 59.
54.56.57.58.60.61.2012 61.
55.56.58.59.47 60.62.42 2013 62.
55.57.58.59.61.45 62.2014 64.
56.57.59.60.48 61.63.47 2015 65.
56.58.59.60.62.45 63.2016 67.43
57.58.59.61.43 62.64.47 2017 69.
57.58.60.40 61.63.64.2018 70.
57.59.60.62.63.65.40 2019 72.
58.59.61.62.64.65.2020 74.
58.60.61.63.64.66.27 2021 76.
59.60.62.63.65.66.2022 77.
59.45 60.62.63.65.48 67.2023 79.
2024 81.
2025 83.
2026 85.
2027 87.
2028 90.
2029 92.