ORDER NO. 97-075

ENTERED MAR 3 1997

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

LC 16

DISPOSITION: LEAST-COST PLAN AMENDMENT ACKNOWLEDGED

On December 16, 1996, PacifiCorp, dba Pacific Power & Light Company (Pacific or the company) filed a RAMPP-4 Update. This Update is an Amendment of its original fourth least-cost plan entitled Resource and Market Planning Program (RAMPP-4), which was filed on November 22, 1995 and which was acknowledged by the Public Utility Commission of Oregon (Commission) in Order No. 96-159. The original filing was in accordance with Order No. 89-507 which directed all energy utilities to prepare least-cost plans every 2 years. The purpose of this Amendment is to assess changing market conditions and provide an up-to-date assessment of cost-effective DSM and the timing of resource decisions.

Order No. 89-507 requires regulated utilities to involve the public in the planning process. Pacific’s Advisory Group participated in five meetings with the company as the input assumptions were being developed for this Amendment.

The Commission acknowledged the Amendment to the plan at its February 18, 1997, public meeting.

PROVISIONS OF THE AMENDMENT AND PARTY COMMENTS

Benchmarks

The company established benchmarks in its November 1995 RAMPP-4 report, consisting of: load growth, gas prices, market prices, government actions, and renewable prices. Changes in these benchmarks, the company maintained, would warrant a re-examination of its action plan. The only benchmark triggered since the RAMPP-4 report was prepared was in market prices.

The RAMPP-4 action plan set benchmarks for load growth to be within a range of 1.5 percent to 2.5 percent. The 1994 to 1996 average load growth was approximately 2 percent per year, which is on track with the RAMPP-4 medium load forecast.

The benchmark for gas prices in RAMPP-4 is for increases from 0 percent to 4 percent. Accepted gas price forecasts indicate prices will rise by an average of 1.5 percent per year over the study period.

In RAMPP-4, analysis indicated that the company’s action plan would need to be changed if non-firm market prices increased or decreased more than 25 percent. During 1996, there was a decrease in market price of 36 percent during low-load hours.

The government action benchmark would have been triggered in 1996 if the federal government had passed some form of CO₂ emissions controls or tax. There was no such legislation passed in 1996, and staff does not expect such legislation in the near future.

The renewable benchmark would be triggered if one of the renewable technologies achieved costs within 10 percent of the cost of acquiring gas-fired resources at the time a decision would be made. As of November 1996, none of the renewable technologies had achieved costs that were within 10 percent of the cost of acquiring gas-fired resources.

Modeling Inputs

The company updated the input assumptions and data since the November 1995 RAMPP-4 report. The new base case shows a need for a new cogeneration unit in 2002 and 15.7 MWa of DSM in 1997. The major updated input assumptions are discussed below.

The company changed the planning reserve margin from 12 percent in RAMPP-4 to 10 percent in the Amendment. A lower reserve margin was adopted because better access to market power to meet short-term capacity needs and a more efficient power market results in less need for reserves.

The company changed the specification of the geographic areas and transmission limits by creating a new region in the Idaho area. This split the RAMPP-4 Utah load into a Utah area and an Idaho area. The transmission paths are now from Bridger (located in Wyoming) to Idaho and from Utah to Idaho. This allows the model to capture a significant transmission constraint between Utah and the southern Idaho load.

Several data inputs to the existing system were updated as follows:

RAMPP-4 and RAMPP-3 assumed 122 MW of QF summer capacity. Based on a thorough company review of all its QF contracts, the Amendment increases the QF contribution to the summer peak to 180 MW.

RAMPP-4 assumed 10 MW of wind capacity in 1997 and beyond. Because of the indefinite postponement of the Columbia Hills Project, the Amendment assumes only 6 MW of wind capacity.

RAMPP-4 assumed 150 MW of new capacity from simple-cycle combustion turbines to be located in Arizona Public Service Company’s territory. Based upon a revised economic analysis, these turbines have been indefinitely postponed and the Amendment does not include them.

The Amendment shows Hermiston capacity increasing from 434 to 454 MW.

The net result is an increase in resources for each year of the study period. For 1997, RAMPP-4 anticipated 10,739 MW of summer capacity from the existing system and purchased power contracts; the Amendment includes 11,095 MW.

The load forecast for this Amendment also includes the impact of the change-over from 40- to 34-watt lamps for existing commercial buildings. RAMPP-4 included savings from this change-over in the DSM potential rather than in the load forecast.

The supply-side options for the Amendment include several additions, such as: microturbines and fuel cells, pressurized fluidized bed combustion, solar thermal hybrid, Stirling engine technology, photovoltaics, plantation biomass, and storage systems.

The real cost of capital declined from RAMPP-4’s 5.1 percent to 4.8 percent. Inflation came down from 3.3 percent to 3.0 percent. That translates to nominal rates of 8.57 percent for RAMPP-4 and 7.94 percent for this Amendment.

RAMPP-4 Action Plan Revisions

The only change the company is making to its action plan is a reduction in the DSM target for 1997. The new modeling identifies 15.7 MWa of DSM as being cost-effective for 1997, rather than the 25 MWa identified in modeling for RAMPP-4.

The company believes the reduction in cost-effective DSM is the result of several factors: lower reserve margin requirements, lower market prices, lower gas prices, and lower capital costs for new gas-fired resources.

Comments of Parties

Staff invited comments on the Amendment from all LC 16 parties, but none were submitted. Staff has reviewed Pacific’s RAMPP-4 Amendment and recommends Commission acknowledgment.

OPINION

Jurisdiction

Pacific is a public utility in Oregon, as defined by ORS 757.005, that provides electric service to the public.

On April 20, 1989, pursuant to its authority under ORS 756.515, the Commission issued Order No. 89-507 in Docket UM 180 adopting least-cost planning for all energy utilities in Oregon.

This order does not constitute a determination on the rate-making treatment of any resource acquisition or other expenditures undertaken pursuant to Pacific’s RAMPP-4 Amendment report. As a legal matter, the Commission must reserve judgment on all rate-making issues.

Notwithstanding these legal requirements, we consider the least-cost planning process to complement the rate-making process. In rate-making proceedings in which the reasonableness of resource acquisitions is considered, the Commission will give considerable weight to utility actions which are consistent with acknowledged least-cost plans. Utilities will be expected to explain actions they take which are inconsistent with acknowledged least-cost plans or which the Commission has not acknowledged. Utilities will also be expected to pursue unanticipated least-cost opportunities beneficial to ratepayers which arise after Commission acknowledgment or, alternatively, explain why such opportunities were not pursued.

CONCLUSIONS

1. Pacific is a public utility subject to the jurisdiction of the Commission.
2. Pacific’s RAMPP-4 Amendment should be acknowledged.

ORDER

IT IS ORDERED that the Amendment to the fourth Resource and Market Planning Program report (RAMPP-4) filed by Pacific dated December 16, 1996, is acknowledged.

Made, entered and effective _______________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be order to a court pursuant to ORS 756.580. The request must be filed with the Commission within 60 days of the date of service of this order. A party may appeal this order to a court pursuant to ORS 756.580.