Idaho Public Utilities Commission
Avoided Cost Methodology
Avoided Cost The incremental cost to an electric u4lity of electric energy or capacity or both which, but for the purchase from the qualifying facility, such u4lity would generate itself or purchase from another source. Avoided Cost Methodologies Less Than 10 MW •  Based on Gas-­‐fired Combined Cycle Combus4on Turbine •  Same Rates for All Projects (“published rates”) •  Most Common Method 10 MW and Greater •  Based on Integrated Resource Plan Analysis •  Project-­‐specific Rates •  Recognizes Individual Project Characteris4cs INPUT
IPCO
DATA
DATA
FIRST DEFICIT YEAR:
2002
SURPLUS ENERGY COST ($/MWh):
N/A
SURPLUS COST BASE YEAR:
1994
"SAR" PLANT LIFE (YEARS):
30
"SAR" PLANT COST ($/kW):
1,313
BASE YEAR OF "SAR" COST:
2008
"SAR" CAPACITY FACTOR (%):
90.0%
HEAT RATE (BTU/kWh):
7,100
UTILITY WEIGHTED COST OF CAPITAL (%):
8.180%
RATEPAYER DISCOUNT RATE (%):
8.180%
"SAR" FIXED O&M ($/kW):
14.57
"SAR" VARIABLE O&M ($/MWh):
1.77
CURRENT YEAR GAS PRICE ($/MMBTU):
4.93
CURRENT YEAR FUEL COST ($/MWh):
35.01
BASE YEAR, O&M EXPENSES:
2008
BASE YEAR FUEL COST:
2006
ESCALATION RATE; "SAR" (%):
ESCALATION RATE; SURPLUS (%):
1.40%
N/A
ESCALATION RATE; O&M (%):
2.00%
ESCALATION RATE; FUEL (%):
2.70%
ADJUSTABLE PORTION ($/MWh):
0.00
CAPITAL CARRYING CHARGE (%):
11.931%
LEVEL CARRYING COST ($/MWh):
19.60
"TILTING" RATE (%):
1.40%
TYPE OF RATES:
NON-FUELED
CURRENT YEAR:
2010
GAS SAR 200 180 160 140 120 Integra4on 100 Fuel Variable O&M 80 Fixed O&M Capital 60 40 20 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 0 IDAHO POWER COMPANY
AVOIDED COST RATES FOR NON-FUELED PROJECTS
SMALLER THAN TEN MEGAWATTS
March 15, 2010
$/MWh
LEVELIZED
CONTRACT
NON-LEVELIZED
ON-LINE YEAR
LENGTH
CONTRACT
NON-LEVELIZED
(YEARS)
2010
2011
2012
2013
2014
2015
YEAR
RATES
1
56.67
60.06
63.78
67.32
71.13
75.21
2010
56.67
2
58.30
61.85
65.48
69.15
73.09
76.34
2011
60.06
3
59.99
63.53
67.22
71.01
74.46
77.43
2012
63.78
4
61.61
65.21
68.99
72.46
75.66
78.52
2013
67.32
5
63.23
66.91
70.44
73.72
76.80
79.60
2014
71.13
6
64.85
68.36
71.72
74.90
77.89
80.66
2015
75.21
7
66.27
69.64
72.91
76.01
78.95
81.75
2016
77.56
8
67.54
70.83
74.03
77.07
80.03
82.85
2017
79.87
9
68.72
71.94
75.09
78.13
81.10
83.96
2018
82.38
10
69.82
73.00
76.14
79.19
82.18
85.07
2019
84.85
11
70.87
74.04
77.18
80.24
83.25
86.19
2020
87.40
12
71.89
75.06
78.20
81.28
84.32
87.26
2021
90.42
13
72.89
76.06
79.21
82.31
85.35
88.30
2022
93.57
14
73.86
77.04
80.21
83.31
86.35
89.31
2023
96.83
15
74.82
78.01
81.18
84.27
87.32
90.29
2024
100.23
16
75.76
78.95
82.11
85.21
88.26
91.24
2025
103.76
17
76.66
79.85
83.01
86.11
89.18
92.20
2026
106.75
18
77.53
80.72
83.88
87.00
90.10
93.15
2027
109.85
19
78.37
81.56
84.73
87.88
91.00
94.08
2028
113.03
20
79.19
82.38
85.58
88.74
91.89
94.99
2029
116.32
2030
119.71
2031
124.27
2032
128.26
2033
132.39
2034
136.67
2035
141.10
Avoided Cost Chronology •  8/6/2009 -­‐-­‐ Order No. 30873 Opened Case No. GNR-­‐E-­‐09-­‐3 Review of Surrogate Avoided Resource (SAR) Methodology •  5/27/2010 -­‐-­‐ Staff Presented Wind SAR Straw Man •  11/3/2010 -­‐-­‐ Workshop to discuss the Straw Man Proposal Input Data
Surrogate
Avoided
Resource
Transmission
Plant Cost
Base Year
Plant Life
Escalation Rate; Plant Cost
Capacity Factor
Fixed O&M
Variable O&M
Base Year; O&M
Escalation Rate; O&M
Transmission Cost
Base Year
Escalation Rate; Transmission Cost
Transmission Losses
Units
$/kW
Years
%
%
$/kW
$/MWh
%
$/kW-mo
%
%
Production Tax
Credits
Production Tax Credit
Base Year
Escalation Rate; PTC
¢/kWh
REC Premium
Base Year
Escalation Rate; REC
$/MWh
RECs
Forecasting
Miscellaneous
Financial
Forecasting Cost
Base Year
Escalation Rate; Forecasting
General Inflation rate
"Tilting" Rate
Current Year
Utility Weighted Cost of Capital
Capital Carrying Charge
Level Carrying Cost
%
%
$/site
%
Idaho Power
Data
2,149
2006
25
1.40%
30.0%
40.93
2.05
2010
1.90%
1.80
2010
2.00%
1.90%
2.1
2010
1.90%
0.00
2010
2.70%
3,500
2010
1.90%
%
%
1.9%
0.00%
2010
%
%
$/MWh
8.180%
10.857%
61.29
WIND SAR 200 180 160 140 Integra4on 120 Transmission O&M 100 Capital Forecas4ng 80 RECs 60 Prod Tax Credits Current Rates 40 20 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 0 Workshop Issues •
•
•
•
•
•
•
•
•
•
REC Ownership Integra4on Charge Discount Capacity Factor Lack of Dispatchability Transmission Cost in QF Rate Contract Liquida4on Damages Interconnec4on Process Transmission Back Bone Costs Rate Update Schedule Actual Cost of the U4lity’s Own Resources •  Disaggrega4on of Large Wind into Small Published Rate Contracts Avoided Cost Chronology •  11/8/2010 -­‐-­‐ Joint Applica4on of Idaho Power, Avista and Pacificorp to Reduce Published Rate Eligibility •  12/3/2010 -­‐-­‐ Order No. 32131 No4ced Case No. GNR-­‐10-­‐04 set Comment, Oral Argument and Decision Effec4ve dates Joint Applica4on of Idaho Power, Avista and Pacificorp •  Open a docket to address issues iden4fied at the Workshop •  Immediately reduce the Published rate eligibility from 10aMw to 100kW on an interim basis un4l inves4ga4on is complete •  Reasons Cited for Immediate Ac4on: The number of wind QF projects The combined total of Mw under contract or requested for contract The dollar impact on customers Commission Order No. 32131 12/3/2010 •
•
•
No4ces the U4lity Applica4on Declines to immediately lower the Published rate threshold Sets a comment and Oral argument schedule on three issues: 1) The advisability of reducing the published avoided cost eligibility cap 2) If the eligibility cap is reduced, the appropriateness of exemp4ng non-­‐wind QF projects from the eligibility cap 3) The consequences of dividing larger wind projects into 10aMw projects to u4lize the published rate •
•
•
Sets comment deadline of December 22, 2010 Sets comments reply deadline of January 19, 2011 Sets Oral Argument January 27, 2011 •
The Commission’s decision on the joint mo4on to reduce the published rate eligibility cap will be effec4ve December 14, 2010. •
Commission will address other iden4fied avoided cost issues in phase two of this case. IPC QF Projects 800 700 Capacity in kW 600 500 400 300 200 100 0 Online Contract Year Discussion IPC Wind Projects 700,000 600,000 Capacity in kW 500,000 400,000 300,000 200,000 100,000 0 2004 2005 2006 2007 Year 2008 2009 2010 Staff PosiSon •  Support reduc4on in published rate eligibility from 10aMw to 100kW due to the disaggrega4on of large wind projects into 10aMw projects. •  Recommends that the Reduc4on in Eligibility only Apply to Wind Projects •  Modify Published Rate/Avoided Cost Methodology Add New Genera4on to Methodology to Modify Available Rate Smaller cap of 3-­‐ 5 aMw Five Mile Separa4on Rule New Large Project Methodology •  Threshold Reduc4on Apply to All U4li4es Northwest and Intermountain Power Producers CoaliSon (NIPPC) PosiSon
•
Oppose reduc4on in the Published Rate Eligibility •
Maintains that the IRP Methodology for determining Avoided Cost is flawed and Illegal •
Reduc4on of the Published Rate Cap Violates the Intent of PURPA •
The Procedural Schedule (December 14, 2010 effec4ve date) cons4tutes retroac4ve ratemaking and is illegal •
ICIP maintains that the schedule creates uncertainty and will chill QF development •
ICIP maintains that a hearing is necessary before a change in the eligibility should be considered. •
ICIP maintains that aggrega4on/disaggrega4on of small wind projects is appropriate because it is at the avoided costs rate. Other PosiSons/Issues •  Non wind resources should be excluded from reduced published rate eligibility •  The Commission should dis4nguish between firm and intermikent resources Conclusion •
•
•
•
Change in the Published Rate Availability? All Resource Types? Impact on developers/U4lity Customers? Future Process/Future Methodology?