Avista Corporation · NYSE:AVA
Avista — 2025 Gas IRP Technical Advisory Committee Meeting No. 7
31 slides from Avista's conference presentation, Aug 21, 2024
Slide 1: 2025 Gas IRP TAC Meeting No. 7 Agenda
2025 Gas Integrated Resource Plan Technical Advisory Committee Meeting No. 7 Agenda Wednesday, August 21, 2024 Virtual Meeting Topic Time (PTZ) Staff Feedback from prior TAC 10:30 All Natural Gas Market Overview 10:40 Tom Pardee Natural Gas Price Forecast 11:20 Michael Brutocao Avoided Cost Methodol
Slide 2: Natural Gas Market Overview
Natural Gas Market Overview 2025 Gas IRP – TAC 7 Tom Pardee
Slide 3: Wood Mackenzie disclaimer
Wood Mackenzie does not warrant or represent that the Information is appropriate or sufficient for your purposes and has not taken into account the purposes for which you are preparing the Document or using the Information and you acknowledge and agree that if you use or rely upon the Information fo
Slide 4: Key assumptions
Key assumptions Key macro and oil assumptions Macro assumptions Geopolitics + Sanctions and bans on Russian exports remain in place through to 2030 but ease thereafter with ‘normality’ re-established from 2035. + While we continue to see an increase in bilateral conflicts, as per the recent events b
Slide 5: North America natural gas at a glance
North America natural gas at a glance Gas market expands by over 30% until early 2040s to reach over 160 bcfd Associated supply growth accelerates but LNG exports triple by 2050 despite near term delays in Henry Hub gas prices reach peaks by mid-2030s the US $6/mmbtu by late 2040s 50 8 40 Ss Z 30 20
Slide 6: Supply
Supply North America gas supply grows yearly by an average of 3.3 befd until the mid-2030s before stabilizing near 160 bcfd through 2050 Permian associated gas is the largest growth region over the next five years; however, the Haynesville is the largest growth area over the next ten years; Post-204
Slide 7: Supply
Supply North America has significant gas resource available for development In addition to commodity prices, factors such as demand, well economics, infrastructure, regulations, emissions considerations and investor sentiment will dictate how much resource is ultimately produced Remaining gas resour
Slide 8: Supply
‘Supply With appropriate technology development and policy frameworks, North America renewable natural gas (RNG) production will grow to over 4 bcfd by 2050 RNG production capacity has doubled since 2020, and more projects are expected to come online in the long term supported by ample landfill and
Slide 9: Demand
Demand Gas plays a pivotal role in the energy transition with its market share in the energy mix growing by 5% from 2025 to 2050 at the expense of coal and oil Gas represents about 40% of North American total energy demand in 2050 Primary energy demand mix* in North America ; + Gas demand continues
Slide 10: Demand
Demand North America domestic gas demand will continue to rise well into the 2040s Gas use in the power sector continues to be resilient, driven by the retirement of coal-fired plants in the near term and sustained power demand growth stemming from data centers and industry reshoring in the long ter
Slide 11: Demand
Demand Compared to prior outlook, North America sees about 5% higher overall power loads from data center buildout and re-shoring of semiconductor industry Decline of gas share in power stack is much slower as renewables see limited growth from challenges with interconnection queues and transmission
Slide 12: Market balances and trade flows
‘Market balances and trade flows US exports to Mexico almost double by 2050 as west coast Mexican LNG exports gain momentum while indigenous production declines The Biden administration’s DOE non-FTA permit approval pause delays some US LNG projects in the near term but the prospect for more pre-FID
Slide 13: North America LNG export facilities, existing and under construction
North America liquefied natural gas export facilities, existing and under construction a ela (2016-2027) LNG Canada Woodfibre LNG ?. Canada LNG terminals Existing @ United States United States Under construction @ Canada @ Mexico @ United States Cove Point@ Energia Costa Azul LNG 4 * Elba Island Fre
Slide 14: Price & margin outlook
13 Price & margin outlook Henry Hub prices reach $6/mmbtu by late 2040s Henry Hub prices rebound to $3.50/mmbtu by 2026 with rising LNG exports and restraints from non-associated producers on supply growth Gas price outlook $8 8 2024 real $/mmbtu £ 2020 Mackenzie Henry Hub prices from spiking up. nn
Slide 15: Price & margin outlook
14 Price & margin outlook AECO weakens in the long term as WCSB still requires piped exports to clear marginal supply despite new LNG exports Supply competition intensifies for Eastern Canada in the long term with stable market demand and the Northeast wins out with widening Eastern South Point-Dawn
Slide 16: Price and margin outlook
15 Price and margin outlook Price risks North American gas prices Restrained spending by non-associated producers * Continued re-shoring of Early terminati DOE's non-FT, rmitting in more US power-intensive industries Pipeline development and data center growth delays in the Haynesville Prices upside
Slide 17: Natural Gas Market Price Forecast
Natural Gas Market Price Forecast Michael Brutocao, Natural Gas Supply Analyst Technical Advisory Committee Meeting No. 7 August 21, 2024
Slide 18: Henry Hub Expected Case Price Forecast
Henry Hub Expected Case Price Forecast $12 100% • Levelized Price: $4.95 • Data Sources $10 – NYMEX forward market prices on 75% August 5, 2024 – Annual Energy Outlook 2023 $8 – Consultants 1 & 2 monthly price $ / Dth - Nominal forecast $6 50% • Methodology – Average price of forecasts – Decreasing
Slide 19: Henry Hub Stochastic Price Forecast
Henry Hub Stochastic Price Forecast $16 $16 • Stochastic Inputs $14 $14 – Expected Case Forecast $12 $12 • Data Source: See previous slide $ / Dth - Nominal – Autocorrelation (94.31%) $10 $10 • Data Source: Historical monthly prices at Henry Hub – Standard Deviation of Errors $8 $8 • Data Source: Hi
Slide 20: Henry Hub Stochastic Price Forecast - Levelized
4 0% 4% 6% 10% 12% 14% 16% 18% 20% 2% 8% $3.25 - $3.50 $3.50 - $3.75 $3.75 - $4.00 $4.00 - $4.25 $4.25 - $4.50 $4.50 - $4.75 $4.75 - $5.00 $5.00 - $5.25 $5.25 - $5.50 Data Source: Consultant 2 percent basis price differential to Henry Hub forecast $5.50 - $5.75 $5.75 - $6.00 $ / Dth - Nominal $6.00
Slide 21: All Basins Expected Case Price Forecast
All Basins Expected Case Price Forecast $10 $10 $9 $9 $8 $8 $7 $7 Levelized Prices $ / Dth - Nominal $6 $6 Henry Hub $4.95 $5 $5 AECO $3.67 $4 $4 Sumas $4.30 $3 $3 Malin $4.38 $2 $2 Stanfield $4.21 $1 $1 $- $- Jan-2031 Jan-2026 Jan-2027 Jan-2028 Jan-2029 Jan-2030 Jan-2032 Jan-2033 Jan-2034 Jan-2035
Slide 22: Avoided Cost Methodology
Avoided Cost Methodology 2025 Gas IRP – TAC 7 1
Slide 23: EE Rules guidance - Idaho
EE Rules guidance - Idaho • Include commodity, Interstate transport costs and current policy and distribution component, if measurable to avoid, in the avoided cost calculation • The distribution component calculation once determined must be presented to the Commission for approval and included in t
Slide 24: EE Rules guidance - Oregon
EE Rules guidance - Oregon OAR 860-030-0007 Gas Utility Avoided Costs • (1) Investor-owned gas utilities shall file a proposed avoided-cost method and draft avoided costs with their integrated resource plans pursuant to Order No. 89-507. The avoided-cost method filed should be appropriate for determ
Slide 25: EE Rules guidance - Washington
EE Rules guidance - Washington Gas companies—Conservation targets. (1) Each gas company must identify and acquire all conservation measures that are available and cost-effective. Each company must establish an acquisition target every two years and must demonstrate that the target will result in the
Slide 26: Standard Cost Effectiveness Tests
Standard Cost Effectiveness Tests Total Utility Resource Measures the cost to all Considers the impact to Cost Test the utility Cost involved Societal in nature Determines if programs are deferring capital Adjusting incentive does investments not impact TRC We can adjust incentive to impact UCT* 5 *
Slide 27: Cost Effectiveness Items
Cost Effectiveness Items Benefits Costs 6
Slide 28: Idaho - Avoided Costs Input (Res, Com, Ind)
Idaho - Avoided Costs Input (Res, Com, Ind) Interstate Pipeline Commodity Local Distribution Contracts*** Natural Gas Variable Costs If capital costs are forecast Hydrogen Fuel Costs Methanation Valued at peak Reservation costs hour RNG *Interstate Pipelines include GTN, NWP, NIT, Foothills, West Co
Slide 29: Oregon and Washington - Avoided Costs Input (Res, Com, Ind)
Oregon and Washington - Avoided Costs Input (Res, Com, Ind) Interstate Local Commodity Pipeline Carbon Adder Distribution*** Contracts* NWPCC 10% Include Natural Gas Variable Costs If capital Upstream costs are Emissions forecast Hydrogen Fuel Costs NEI CPP (OR) Methanation Valued at Reservation SCC
Slide 30: Oregon and Washington - Avoided Costs Input (Transport)
Oregon and Washington - Avoided Costs Input (Transport**) Interstate Local Commodity Pipeline Carbon Adder Distribution**** Contracts* NWPCC 10% Include Natural Gas Variable Costs If capital Upstream costs are Emissions forecast Hydrogen Fuel Costs NEI CPP (OR) Methanation Valued at Reservation SCC
Slide 31: Avoided Cost (example only)
Avoided Cost (example only) $6.00 Total Avoided Cost: $5.39 $5.00 Carbon Adder, $1.00 NEI, $0.10 Distribution, $0.30 $4.00 NWPCC 10%, $0.49 $ per Dth Interstate PL, $0.50 $3.00 $2.00 Commodity, $3.00 $1.00 $- Avoided Cost 10
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