20090930Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
LEGAL
WORKNG FILE
FROM:TJGOLO
DON HOWELL
DATE:JULY 9, 2009
A VISTA'S REQUEST FOR ELECTRIC SERVICE RESIDENTIAL AND
SMALL FARM ENERGY RATE ADJUSTMENT CREDIT,
TARFF ADVICE NO. 28.
RE:
On June 30, 2009, Avista Utilities fied a tariff advice requesting authority to modify its
Tarff Schedule 59 - Residential and Small Far Energy Rate Adjustment Credit. The
Company's proposed revision of Schedule 59 reflects a rate adjustment related to the Residential
Exchange Program (REP) benefits that Avista wil receive from Bonnevile Power
Administration (BPA) as a result of a settlement dated June 23, 2009. The settlement resolves
the long-standing dispute A vista had with BP A over the "Deemer Account" under the 1981
Residential Exchange contracts. Settlement of the Deemer issue wil increase the REP credit for
Avista's customers beginning with BPA's fiscal year 2009 (October 1,2008 - September 30,
2009). Avista reported that its share of the REP benefits applicable to Idaho's eligible residential
and small far customers is approximately $4.9 milion.
THE APPLICATION
The increased Exchange credit to be received from BP A for FY 2009 is a result of the
settlement agreement between Avista and BP A over the "Deemer" issue. Under the terms of the
Settlement Record of Decision (ROD), Avista's deemer balance is reduced from $85.6 milion to
$55 milion as ofFY 2002. This means that the $55 million deemer balance was extinguished in
FY 2008 and Avista's only remaining liabilty to BPA is the alleged Lookback amount (currently
pending appeal).
DECISION MEMORADUM - 1 -JULY 9, 2009
The current 0.057~ per kilowatt-hour rate Exchange credit was approved by this
Commission effective November 1,2008. The current REP credit was based on an assumed
level of payments from BPA of$2.35 milion related to BPA's 2009 fiscal year. The settlement
of the Deemer issue increases the REP benefit amount for the 2009 fiscal year to $8.9 milion.
Avista proposes that the existing REP credit be increased from 0.057~/kWh to
0.289~/kWh and be "passed through" to customers during the period of August 1,2009 through
October 31, 2010. The proposed rate credit is 0.232~/kWh more than the existing rate credit.
Assuming that the Commission approves the stipulated rate increase in the rate case, the new
REP credit ofO.289~/kWh wil result in a net monthly decrease of$0.79, or a 0.99% decrease for
a residential customer using 1,000 kWh per month. The actual decrease wil var based on
customer usage. The proposed rate credit wil have no effect on Avista's net income. The
proposed rate credit would also reduce the Company's Idaho electric revenue by approximately
$4.4 milion.
On November 7,2008, Order No. 30672 in Case No. AVU-E-08-06 ordered that the Staff
and the Company meet to resolve the inclusion ofuncollectibles and regulatory fees in the
revenue conversion factor. Staf and Company have agreed to remove regulatory fees from the
revenue conversion factor. The revenue conversion factor in the present fiing only reflects
uncollectibles. An adjustment to reflect the exclusion of regulatory fees of $1 ,393 from
amortizations related to the credit rate that was made effective November 1, 2008 was not made
as the amount is deminimus and would be to the detriment of customers.
STAFF REVIEW
The Company submitted workpapers supporting the calculation of the REP credit. This
fiing reflects estimated payments for the 2009 and 2010 fiscal year. The total benefit amount
applicable to Idaho's customer is approximately $4.9 milion. The proposed rate credit is
O.0289~ per kilowatt-hour.
The REP calculation starts with the benefit amount of $4,926,884 applicable to Idaho
customers. A vista adjusted this amount to include: (l) the over-refunded balance at the end of
the existing rate, July 31, 2009; (2) August and September 2009 amortization at old rate; and
(3) the revenue conversion factor of 0.997472, making the total amount of REP credit
$4,394,192. The conversion factor is the difference of revenue of 1.00 minus the uncollectible
DECISION MEMORANDUM - 2-JULY 9, 2009
fees of 0.002528. The Company's projected kilowatt-hours for all qualifying residential and
small far customers durng the period of August 1, 2009 through October 31, 2010 is
1,519,025,000 kilowatt-hours. The total credit amount is divided by the projected energy used to
obtain the proposed credit amount ofO.289~/kWh. Staff believes the proposed credit amount of
0.289~/kWh is reasonable.
The Company initially submitted the proposed tariff modifications to the Commission
and requested it to be processed under Modified Procedure. However, Staff recommends that
this filing be processed as a tariff advice under procedural Rule 134 because the rate adjustment
is a "pass-through" credit from BPA. 16 U.S.C. § 839c(c)(3). Public comments wil not affect
the amount of REP credit. The Company has issued an individual notice to the customers. Staff
believes that the proposed credit amount by the Company is accurate. Consequently, Staff
asserts that processing ths fiing as a taiff advice is reasonable.
STAFF RECOMMENDATION
Staf recommends that the Commission approve the new tariff rate ofO.289tlkWh
effective August 1, 2009. Staff fuher recommends that this matter be treated as a tariff advice
under Rule 134 to process the filing and "pass-through" the benefits of the REP credit to the
customers in a timely maner. The Commission exercises no jurisdiction over the calculation of
the total amount of REP credits.
COMMISSION DECISION
Does the Commission wish to approve Avista's proposed 0.289~/kWh "pass-through"
revision to its Tarff Schedule 59 - Residential and Small Farm Energy Rate Adjustment Credit,
with an effective date of August 1, 2009?
UTlL
Don Howell
u:dmemos/AVU electric service res and small fa energy rate adj
DECISION MEMORANDUM - 3 -JULY 9, 2009