20081107final_order_no_30672.pdf

Offce of the Secreta
Service Date
November 7, 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA UTILITIES FOR AN
AMENDMENT OF ITS TARIFF NO. 28,
RESIDENTIAL AND FARM ENERGY RATE
ADJUSTMENT
)
) CASE NO. AVU-E-08-06
)
)
) ORDER NO. 30672
On October 1, 2008, A vista Corporation dba A vista Utilties fied an Application to
revise its electric service Schedule 59 (Residential and Farm Energy Rate Adjustment).
Schedule 59 represents the Residential Exchange Program (REP) benefits that A vista receives
under its Residential Purchase and Sales Agreement (RPSA) with the Bonnevile Power
Administration (BPA). The revised schedule relates to the REP credits available to residential
and small farm customers for fiscal year 2009. Avista requests an effective date of November 1,
2008 and recommends that this matter be processed under Modified Procedure. Transmittal
Letter at 3.
As explained in greater detail below, the Commission believes that this matter may be
properly processed as a tarff advice because A vista is merely "passing through" REP credits to
its customers pursuant to 16 U.S.C. § 839c(c)(3). Consequently, we approve the revisions to
Schedule 59 effective November 1, 2008, subject to the two conditions discussed below.
BACKGROUND
Section 5(c) of the Nortwest Power Act1 authorizes BPA to enter into power
exchanges with the six Pacific Northwest investor-owned utilities (lOUs) for the purpose of
providing rate relief to residential and small-farm customers. 16 U.S.C. § 839c(c). The REP is
the mechanism used to calculate the amount of monetar benefits for the exchanging utilties, in
ths case A vista. There are three components to the REP mechanism:
1. The calculation of each utilty's (e.g., Avista's) average system cost
(ASC) using the approved ASC methodology.
2. The establishment of BPA's priority firm power exchange (PF Exchange)
rate.
i Nortwest Electrc Power Planing and Conservation Act (the "Northwest Power Act").
ORDER NO. 30672 1
3. The RPSA which provides the contractual terms under which Avista's
residential and small-far customers receive their monthly REP benefits
or rate credits.
When Avista's ASC is higher than the PF Exchange rate, BPA "purchases" power
from Avista at the higher ASC and, in tu, Bonnevile agrees to "sell" Avista power at BPA's
lower PF Exchange rate in an amount necessar to serve Avista's eligible customers. In practical
terms, the "REP essentially acts as a cash rebate to the IOUs where the IOUs' power costs
exceed those of BPA." Portland General Electric Co. v. BPA, 501 F.3d 1009 (9th Cir. 2007)
cert. denied, _ U.S. _' 128 S.Ct. 2902 (2008) (hereinafter cited as "PGE"). The RPSA
provides the contractual terms under which Avista's residential and small-far customers wil
receive REP benefits. Attached to the Company's fiing was a copy of its recently executed
RPSA with Bonnevile dated September 26, 2008.
In May 2007, the U.S. Cour of Appeals for the Ninth Circuit issued two opinions
holding that BP A had improperly included REP Settlement Agreement costs in the rates paid by
BPA's preference customers. PGE, 501 F.3d at 1009; Golden Northwest Aluminum v. BPA, 501
F.3d 1037 (9th Cir. 2007), cert. denied sub nom. PGE v. Public Power Council, _ U.S. _'
128 S.Ct. 2902 (2008). Following the two circuit opinions, BPA suspended REP payments to
Avista and the other Pacific Northwest IOUs in June 2007. In Februar 2008, BPA offered
interim REP payments (subject to refund) to the IOUs through October 31, 2008. The interim
REP credit for Avista was 0.554t per kilowatt-hour. The interim payments for FY 2008 are to
be replaced with new REP payments following the recent conclusion of BPA's WP-07
Supplemental rate case.
In the WP-07 Supplemental rate case, BP A calculated that A vista would be eligible
for $22.09 milion in REP benefits for both Washington and Idaho. Initial Transmittl Letter;
BPA Table 15.6 in FS-BPA-08, p. 274. This initial benefit amount was subsequently reduced by
BPA for two main reasons. First, BPA subtracted $16.53 milion in REP benefits from Avista in
order to extinguish an outstading balance in a contested "Deemer Account." According to
BPA, the purorted balance in Avista's "Deemer Account" was accrued through a mechanism
derived from the 1981 Residential Purchase and Sale Agreement (RPSA) between BPA and
Avista. As held by BPA in its Final Record of Decision (ROD), a deemer balance accrues when
a utilty's ASC is less than the PF Exchange rate. The amount that the utilty would otherwise
ORDER NO. 30672 2
pay to BPA is tracked in a deemer account. A utility may receive REP payments only after its
deemer balance is reduced to zero. In the WP-07 Supplemental rate case, BP A calculated that
Avista's deemer balance for FY 2009 was $16.53 millon.
Second, in addition to the deemer adjustment, BP A determined in the WP-07
Supplemental rate case that A vista must retur its share of the REP over-payments (i.e., the
"Lookback Amount") that it received between 2000 and 2007 to BPA's preference customers,
the consumer-owned utilties. Avista's purorted FY 09 share of the Lookback Amount is $2.57
milion.2 In sumary, BPA initially calculated that Avista had an REP benefit amount for FY 09
of $22.09 millon. From this amount, BPA subtracted $16.53 milion for the Deemer Account
and $2.57 millon for the Lookback Amount, leaving a balance of $2.989 milion to be
distrbuted to Avista's eligible customers in both Idaho and Washington.
On October 24, 2008, Avista amended its Application to revise tariff Schedule 59.
Avista reported that BP A furher reduced the gross benefit amount of $22.09 milion for FY
2009 to $19.65 milion. After adjusting for the Deemer Account and the Lookback Amount,
Avista asserts that its FY 2009 REP benefit amount is now $2.35 milion. Amended Transmittal
Letter at 1. "The Idaho share of the $2.35 millon amounts to $762,600." Id
With its subsequent amendment to Schedule 59, Avista now proposes that the interim
REP credit for eligible residential and small-far customers be reduced from 0.554t per
kilowatt-hour to 0.057t per kilowatt-hour beginning November 1, 2008 through October 31,
2009. On average, the reduction in REP credits wil result in an overall monthly 6.11 % increase
of approximately $4.97; or 6.63% for a residential customer using 1,000 kWh per month. The
actul change wil var based upon customer usage. Because the REP credit is passed directly to
Avista's eligible customers, the proposed rate credit wil have no effect on Avista's rates as set
by the Commission, nor will it affect the Company's net income. Id
STAFF COMMENTS
Based upon its review of Avista's initial and amended Application, Staff concurs with
the Company's calculations with two exceptions. During Staffs audit, it noticed that Avista
made two adjustments to the REP amount. More specifically, Avista made an adjustment for
"uncollectibles" and for the Commission's regulatory fee. These two adjustments were included
2 BPA calculates that the remaining Lookback Amount at the end ofFY 09 for Avista is $76.52 milion.
ORDER NO. 30672 3
in the revenue conversion factor which affected the total amount of REP credits "passed
through" to eligible customers.
Staff believes that the Commission's regulatory fee should not be applied to the REP
amounts because the Commission's regulatory fee applies only to "gross operating revenues
from (Avista's) intrastate utilty" business. Idaho Code § 61-1003. The REP amount to be
passed through to customers is not operating revenue. The REP benefits are calculated pursuant
to Section 5(c) of the Northwest Power Act and "shall be passed through directly to such utility's
residential loads within" each state. 16 U.S.C. § 839c(c)(3). Thus, Staff asserts the REP amount
is clearly not operating revenue.
Second, Staff believes that imposing an "uncollectible" adjustment is inappropriate
because the REP "pass-through" is not an operating revenue arising from billng customers for
usage and is, thus, unelated to Avista's level of uncollectible accounts. As with the
Commission's regulatory fee, Staff asserts that the uncollectible adjustment should not be
applied to the REP credits.
Given the press of time, Staff recommends that the Commission approve the new
REP Schedule 59 credit ofO.057t per kWh and reserve the two Staff issues for future resolution.
Staf proposes that the Commission retroactively approve Schedule 59 effective November 1,
2008 and direct the Staff and Company to address resolving the two remaining issues. Finally,
because this is a federal "pass-through," pursuant to 16 U.S.C. § 839c(c)(3), Staff recommends
that the Company's Application be processed as a tarff advice. Rule 134, IDAPA 31.01.01.134.
DISCUSSION AND FINDINGS
After reviewing the initial Application, the amended Application and Staffs
comments, we grant Avista's Application to amend its Schedule 59 conditioned on our
subsequent review of the two issues identified by Staff. We find that this matter may be
appropriately processed as a tariff advice under Rule 134 because this is a direct "pass-through"
of REP credits to Avista's eligible residential and small-farm customers. The reduction in REP
credits results in a higher montWy bil, as the benefit from the federal system is reduced.
However, the Commission-established rates wil not change and the revenues of the Company
wil remain unchanged. Consequently, we find that it is reasonable and appropriate to process
the Company's Application under Rule 134.
ORDER NO. 30672 4
Based upon our review of the amended Application, we find it is appropriate to grant
the Company's Application to amend its Schedule 59 to reflect the new REP benefits for
Avista's customers. We further find that there is good cause to approve the amended Schedule
59 to provide an REP credit ofO.057t per kilowatt-hour effective November 1,2008, but reserve
the two Staff issues for later resolution. Given the press of time and the fact that REP credits are
rebalanced at the end of the REP year, we find that Staff has raised legitimate concerns regarding
the uncollectible and regulatory fee adjustments. Consequently, we direct the Company and
Staff to address these issues. The paries are directed to notify the Commission regarding the
resolution of these two issues.
ORDER
IT is HEREBY ORDERED that Avista's amended Application to approve Schedule
59 is granted, subject to the two exceptions noted above. Schedule 59 shall become effective on
November 1, 2008. The monthly REP credit for residential and small-farm customers shall be
0.057t per kilowatt-hour.
IT is FURTHER ORDERED that the Staff and the Company meet and discuss
resolution of the Staffs uncollectible and regulatory fee issues. The paries shall advise the
Commission of their proposed resolution of these two issues. Any adjustment in the total
amount of REP credit available to Idaho customers shall be trued-up at the end of the REP
period. In the event the paries are unable to resolve the two issues, either pary may apprise the
Commission and the Commission wil subsequently determine the appropriate course of action.
THIS is A FINAL ORDER WITH TWO RESERVATIONS. Any person interested
in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously
issued in this case may petition for reconsideration within twenty-one (21) days of the service
date of this Order with regard to any matter decided in this Order or in interlocutory Orders
previously issued in this case. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-
626.
ORDER NO. 30672 5
DONE by Order of the Idaho Public Utilties Commission at Boise, Idao this 7 l~
day of November 2008.
~A~~
MACK A. REDFORD, PRESIDENT
ARSHA H. SMITH, COMMISSIONER
~//~;6JI ~MP~ iSSIONER
ATTEST:
~eíi~
C ission Secretary
bls/O:AVU-E-08-06_dh
ORDER NO. 30672 6