Oregon and Idaho PUCs Issue Contradictory Orders on the Idaho Power Gas Price Forecasts

On May 16, 2018, the Idaho Public Utilities Commission (Idaho Commission) rejected Idaho Power Company’s (Idaho Power) proposal to use a low natural gas forecast as the basis to set avoided cost rates paid to qualifying facilities (QFs). On May 23, 2018, the Oregon Public Utility Commission (Oregon Commission) reached the opposite conclusion and allowed Idaho Power to use the same low natural gas price forecast. In Idaho, Idaho Power was required to use a more business as usual gas price forecast, which predicts higher natural gas prices and results in higher prices paid to QFs.  

The Idaho Commission requires the use of multiple methodologies for setting rates, including the Surrogate Avoided Resource (SAR) methodology for hydro electric and baseload QFs 10 average megawatts and below, and wind and solar QFs 100 kilowatts and below. QFs are non-utility electricity generators that sell their power to utilities, and the prices, terms and conditions of those sales are approved by state utility commissions. The SAR methodology is heavily dependent upon natural gas price forecasts, with lower natural gas price forecasts resulting in lower prices. Oregon also has different rate setting methodologies, with a “proxy” method for solar generation 3 megawatts and lower, and for all other generation types 10 megawatts and lower.

Idaho Power traditionally utilized the Energy Information Agency (EIA) “Reference Case, but recently proposed to use the EIA “High Oil and Gas Resource and Technology Case” in both its integrated resource plan and QF avoided cost rates. The Reference Case is a business-as-usual estimate, given known market, demographic and technological trends. Despite its name, the High Oil and Gas Resource and Technology Case actually predicts low natural gas prices due to assuming 50% higher ultimate recovery per well, 50% higher rates of technological improvements, and 50% higher technically recoverable undiscovered resources.

In both states, the Renewable Energy Coalition opposed Idaho Power’s proposal to use a low natural gas price forecast, and J.R. Simplot joined the Renewable Energy Coalition’s efforts in Idaho. The Renewable Energy Coalition argued that Idaho Power’s proposed natural gas price forecast was not a reasonable projection of future natural gas prices, and therefore did not accurately estimate Idaho Power’s full avoided costs.

The Idaho Commission denied Idaho Power’s proposal, but stated that Idaho Power could re-raise the issue in a future case. The Idaho Commission’s decision was generally consistent with its policies of setting avoided cost rates for small hydro and biomass that allows for their continued operation, but simultaneously ensuring that wind and solar QFs cannot be constructed. While granting Idaho Power’s request, the Oregon Commission also indicated that would take the issue up again. This was consistent with the Oregon Commission’s practice of allowing Idaho Power and PacifiCorp the freedom to set very low avoided costs, which has resulted very few (for Idaho Power) and almost no new (for Pacific Power) QFs being able to enter into contracts.

 

 

Disclaimer
These materials are intended to as informational and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.