20240731Application.pdf

11
RECEIVED
Avista Corp. 2024 July 31 AM 11:09
1411 East Mission P.O. Box 3727 IDAHO PUBLIC
Spokane. Washington 99220-3727 UTILITIES COMMISSION
Telephone [phone]
Toll Free 800-727-9170
July 31, 2024
State of Idaho
Idaho Public Utilities Commission
11331 W. Chinden Blvd
Bldg 8 Suite 201-A
Boise, ID 83714
Re: Case No. AVU-G-24-01
Natural Gas Fixed Cost Adjustment Annual Rate Filing of Avista Corporation
Dear Commission Secretary:
Enclosed for electronic filing with the Commission is Avista's natural gas Fixed Cost Adjustment
(FCA) annual rate adjustment filing. This filing consists of Avista's Application, Exhibit A (the
Company's proposed tariffs), Exhibit B (rate calculation), Exhibit C (12 months ended June 30,
2024 deferral), and Exhibit D (customer communications) in support of the Application. The
Company requests that the proposed tariff sheets be made effective November 1, 2024.
Electronic versions of the Company's filing were emailed to the Commission,and the Service List,
on July 31, 2024.
Please direct any questions on this matter to me at(509) 495-8620 or Joel Anderson at(509)495-
2811.
Sincerely,
/s/Pat Ehrbar
Patrick D. Ehrbar
Director of Regulatory Affairs
Enclosures

I DAVID J. MEYER
2 VICE PRESIDENT AND CHIEF COUNSEL FOR
3 REGULATORY AND GOVERNMENTAL AFFAIRS
4 AVISTA CORPORATION
5 1411 E. MISSION AVENUE
6 P. O. BOX 3727
7 SPOKANE, WASHINGTON 99220
8 PHONE: [phone], FAX: [phone]
9
10 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
11
12 IN THE MATTER OF THE FIXED COST )
13 ADJUSTMENT MECHANISM (FCA) ) CASE NO. AVU-G-24-01
14 ANNUAL RATE ADJUSTMENT FILING ) APPLICATION OF AVISTA
15 OF AVISTA CORPORATION ) CORPORATION
16
17
18 I. INTRODUCTION
19 In accordance with Idaho Code §61-502, Commission Order No. 33437, and RP
20 052, Avista Corporation, doing business as Avista Utilities (hereinafter "Avista" or
21 "Company"), at 1411 East Mission Avenue, Spokane, Washington, respectfully makes
22 application to the Idaho Public Utilities Commission ("Commission") for an order
23 approving the level of natural gas Fixed Cost Adjustment Mechanism (FCA) revenue
24 deferred during 12 months ended June 30, 2024 and authorizing FCA rates for natural gas
25 service from November 1, 2024 through October 31, 2025. The FCA rate for the
26 Residential Group (Schedule 101) is proposed to change from a present rebate rate of
27 1.219¢ to a proposed surcharge rate of 1.5060 per therm. The FCA rate for the Non-
28 Residential Group (Schedules I I I and 112) is proposed to change from a present rebate
29 rate of 0.6320 to a proposed surcharge rate of 1.0060 per therm. The Residential Group
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 1

I rate change represents a$2.0 million, or 2.3%increase to Schedule 101 customers, and the
2 Non-Residential Group rate change represents a $0.5 million, or 1.7%, increase. The
3 combined effect of expiring FCA rates and the proposed rates are shown on the table below.
4
Expiring Present Proposed FCA Proposed FCA
5 FCA Revenue Revenue Increase
Residential $ (900,745) $ 1,112,815 $ 2,013,559
6 Non-Residential $ 174,520 $ 277,795 $ 452,315
7 The Company has requested a November 1, 2024 effective date.
8 The Company requests that this filing be processed under the Commission's
9 Modified Procedure Rules (RP 201-204). Communications referencing this Application
10 should be addressed to:
11 David J. Meyer, Esq.
12 Vice President and Chief Counsel for
13 Regulatory & Governmental Affairs
14 Avista Corporation
15 P.O. Box 3727
16 MSC-10
17 1411 E. Mission Ave
18 Spokane, WA 99220-3727
19 Phone: [phone]
20 [e-mail]
21
22 Patrick D. Ehrbar
23 Director of Regulatory Affairs
24 Avista Utilities
25 P.O. Box 3727
26 MSC-27
27 1411 E. Mission Ave
28 Spokane, WA 99220-3727
29 Phone: [phone]
30 [e-mail]
31
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 2

I II. BACKGROUND
2 The purpose of the natural gas FCA is to adjust the Company's Commission-
3 authorized revenues from therm sales, such that the Company's revenues will be
4 recognized based on the number of customers served under the applicable natural gas
5 service schedules. The FCA allows the Company to: 1)defer the difference between actual
6 FCA-related revenue received from customers through volumetric rates, and the FCA-
7 related revenue approved for recovery in the Company's last general rate case on a per-
8 customer basis; and 2) file a tariff to surcharge or rebate, by rate group, the total deferred
9 amount accumulated in the deferred revenue accounts for the prior January through
10 December time period.
11 In Case Nos. AVU-E-15-05 and AVU-G-15-01, the Commission in Order No.
12 33437 approved for Avista a Fixed Cost Adjustment Mechanism. On page 10 of Order
13 No. 33437, the Commission stated:
14 The parties have also agreed upon a three-year' FCA pilot for electric and natural
15 gas operations. The FCA will compare actual FCA revenues to allowed FCA
16 revenues determined on a per-customer basis. Any differences will be deferred for
17 a rebate or surcharge. There are a number of customer safeguards,including that an
18 FCA surcharge cannot exceed a 3% annual rate adjustment. Any unrecovered
19 balances will be carried forward to recover in future years. Further,there is no limit
20 to the level of the FCA rebate. As part of the Stipulation, Staff and other interested
21 parties, will review the efficacy of the FCA after its second full year to ensure it is
22 functioning as intended. Fixed cost adjustment mechanisms are intended to
23 encourage conservation and allow customers more control over their bills. Further,
24 the proposed FCA will remove any financial disincentive of the Company to
25 encourage energy conservation.
26
27 The Section 13 of the Stipulation and Settlement, as amended by Addendum to the
1 On June 15, 2018, the Idaho Public Utilities Commission approved an Addendum to the Stipulation
which extended the term of the pilot for an additional year by Order No. 34085.
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 3

I Stipulation approved by the Commission in Order No. 34085 on June 15, 2018, provided
2 further details, reproduced below, regarding the mechanics of the fixed cost adjustment
3 mechanism.
4 A. FCA Mechanisms Term. The Parties agree to an initial FCA term of 4 years,
5 with a review of how the mechanisms have functioned conducted by Avista, Staff,
6 and other interested parties following the end of the third full-year. Avista may
7 seek to extend the term of the mechanism prior to its expiration.2
8
9 B. Rate Groups. There will be two rate groups established for both the electric
10 FCA and natural gas FCA:
11
12 Electric Customer Rate Groups:
13 1. Residential— Schedule 1
14 2. Commercial— Schedules 11, 12, 21, 22, 31, 32
15
16 Natural Gas Rate Groups:
17 1. Residential— Schedule 101
18 2. Commercial— Schedules I I I and 112
19
20 C. Existing Customers and New Customers. The Parties have agreed that revenue
21 related to certain items discussed below would not be included in the FCA for new
22 customers. The result is that the Fixed Cost Adjustment Revenue-Per-Customer
23 for new customers will be less than the Fixed Cost Adjustment Revenue-Per-
24 Customer for existing customers. For new electric customers added after the test
25 period, recovery of incremental revenue related to fixed production and
26 transmission costs would be excluded from the electric FCA. For new natural gas
27 customers added after the test period, recovery of incremental revenue related to
28 fixed production and underground storage facility costs would be excluded. These
29 modifications are included in Appendices B and C to the Stipulation.
30
31 D. Quarterly Reporting. Avista will file,within 45 days of the end of each quarter,
32 a report detailing the FCA activity by month.3 The reporting will also include
33 information related to the deferrals by rate group, what the deferrals would have
34 been if tracked by rate schedule, use and revenue-per-customer for existing and
35 new customers,and other summary financial information. Avista will provide such
2 Review of the mechanisms took place at a workshop March 27,2019,and the Company filed a separate
application with the Commission which extended the term of the FCA Mechanisms through March 31,2025.
See also discussion starting at page 6 of this application.
3 As stated in Order No. 34502 Case No.AVU-G-19-03,the Company altered its quarterly reporting from
45 days to 60 days from the end of each quarter.
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 4

I other information as may be reasonably requested, from time to time, in the future
2 quarterly reports.
3
4 E. Annual Filings. On or before July 1, the Company will file a proposed rate
5 adjustment surcharge or rebate based on the amount of deferred revenue recorded
6 for the prior January through December time-period.4 The rate adjustment would
7 be calculated separately for each Rate Group, with the applicable surcharge or
8 rebate recovered from each group on a uniform cents per kWh or per therm basis.
9 The proposed tariff (Schedule 75 for electric, Schedule 175 for natural gas)
10 included with that filing would include a rate adjustment that recovers/rebates the
11 appropriate deferred revenue amount over a twelve-month period effective on
12 October 1 for electric (to match with Power Cost Adjustment and Residential
13 Exchange annual rate adjustments time period) and November 1 st for natural gas
14 (to match with the annual Purchased Gas Cost Adjustment rate adjustment time
15 period). The deferred revenue amount approved for recovery or rebate would be
16 transferred to a balancing account and the revenue surcharged or rebated during the
17 period would reduce the deferred revenue in the balancing account. After
18 determining the amount of deferred revenue that can be recovered through a
19 surcharge (or refunded through a rebate) by Rate Group, the proposed rates under
20 Schedules 75 and 175 would be determined by dividing the deferred revenue to be
21 recovered by Rate Group by the estimated kWh sales (Electric FCA)or therm sales
22 (Natural Gas FCA) for each Rate Group during the twelve-month recovery period.
23 Any deferred revenue remaining in the balancing account at the end of the
24 amortization period would be added to the new revenue deferrals to determine the
25 amount of the proposed surcharge/rebate for the following year.
26
27 F. Interest. Interest will be accrued on the unamortized balance in the FCA
28 balancing accounts at the Customer Deposit Rate.
29
30 G. Accounting. Avista will record the deferral in account 186 — Miscellaneous
31 Deferred Debits. The amount approved for recovery or rebate would then be
32 transferred into a Regulatory Asset or Regulatory Liability account for
33 amortization. On the income statement, the Company would record both the
34 deferred revenue and the amortization of the deferred revenue through Account 456
35 (Other Electric Revenue), or Account 495 (Other Gas Revenue), in separate sub-
36 accounts. The Company would file quarterly reports with the Commission showing
37 pertinent information regarding the status of the current deferral. This report would
38 include a spreadsheet showing the monthly revenue deferral calculation for each
39 month of the deferral period (January - December), as well as the current and
40 historical monthly balance in the deferral account.
41
4 As stated in Order No. 34502 Case No.AVU-G-19-03,The company altered the deferral period of its
FCA extension to July through June by using a one-time 18-month deferral period of January 1,2020
through June 30,2021. See also discussion starting at page 6 of this application.
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 5

I H. 3% Rate Increase Cap. An FCA surcharge, by rate group, cannot exceed a 3%
2 annual rate adjustment, and any unrecovered balances will be carried forward to
3 future years for recovery. There is no limit to the level of the FCA rebate.
4
5 III. DRIVERS OF NATURAL GAS FCA DEFERRALS
6 The FCA deferral for Residential and Non-Residential customers for 12 months
7 ended June 30, 2024 was the result of lower monthly use-per-customer than was embedded
8 in the 2022 test year(i.e., the FCA base).
9 Since the 2022 test year used to set 2023 rates, Idaho customers have achieved
10 energy efficiency savings from participation in the Company's Demand Side Management
11 programs.
12
13 IV. RESIDENTIAL GROUP RATE DETERMINATION
14 The Company recorded $1,085,515 in the surcharge direction in deferred revenue
15 for the natural gas residential customer group for 12 months ended June 30, 2024. The
16 proposed rate of 1.506 cents per therm is designed to recover $1,112,815 from the
17 Company's residential natural gas customers served under rate Schedule 101. The
18 following table summarizes the components of the Company's request to rebate:
19 Summary
07.2023 - 06.2024 Deferred Revenue $1,085,515
20 Add Prior Year Residual Balance ($13,999)
Add Interest through 10/31/2025 $36,493
21 Add Revenue Related Expense Adj. $4,806
Total Requested Recovery $1,112,815
22 Customer Surcharge Revenue $1,112,8151
23 Carryover Deferred Revenue $0
24 Exhibit B, page 1 shows the derivation of the proposed rate to recover revenue of
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 6

1 $1,112,815 based on projected sales volumes for Schedule 101 customers during the
2 amortization period(November 2024 through October 2025). As identified on tariff Sheet
3 175B under Step 6 of"Calculation of Monthly FCA Deferral", interest on the deferred
4 balance accrues at the Customer Deposit Interest Rate.S If the proposed surcharge is
5 approved by the Commission, the 12 months ended June 30, 2024 deferral balance, plus
6 interest through October, will be transferred into the regulatory asset balancing account.
7 The balance in the account will be reduced each month by the surcharge received from
8 customers under the tariff.
9
10 V. NON-RESIDENTIAL GROUP RATE DETERMINATION
11 The Company recorded$299,626 in the surcharge direction in deferred revenue for
12 the natural gas Non-Residential Group for 12 months ended June 30, 2024. The proposed
13 surcharge rate of 1.006 cents per therm is designed to recover $277,795 from the
14 Company's commercial and industrial customers served under rate Schedules I I I and 112.
15 The following table summarizes the components of the Company's request for recovery:
16 Summary
07.2023- 06.2024 Deferred Revenue $299,626
17 Add Prior Year Residual Balance ($30,424)
Add Interest through 10/31/2025 $4,084
18 Add Revenue Related Expense Adj. $4,509
Total Requested Recovery $277,795
19 Customer Surcharge Revenue $277,795
20 Carryover Deferred Revenue $0
21 Exhibit B, page 3 shows the derivation of the proposed rate to recover revenue of
s The Customer Deposit Interest Rate was 2.00%beginning January 2023 and was 5.00%beginning January
2024. The current rate of 5.00%has been used as an estimate for purposes of this rate determination.
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 7

1 $277,795 based on projected sales volumes for Schedules 111 and 112 during the
2 amortization period (November 2024 through October 2025). As identified on the tariff
3 Sheet 175B under Step 6 of "Calculation of Monthly FCA Deferral", interest on the
4 deferred balance accrues at the Customer Deposit Interest Rate. If the proposed surcharge
5 is approved by the Commission,the deferral balance,plus interest through October will be
6 transferred into the regulatory asset balancing account. The balance in the account will be
7 reduced each month by the surcharge received by customers under the tariff.
8 Support showing the monthly calculation of the 12 months ended June 30, 2024
9 deferral balances for both the Residential and Non-Residential Groups is provided as
10 Exhibit C. These calculations were also provided to the Commission in quarterly reports
11 (except April through June 2024 which will be provided in the Q2 report by the end of
12 August).
13
14 VI. 3% ANNUAL RATE INCREASE TEST
15 FCA rate adjustment surcharges are subject to a 3%annual rate increase limitation.
16 There is no limit to rebate rate adjustments. As described in tariff Schedule 175, the 3%
17 annual rate increase limitation will be determined by dividing the incremental annual
18 revenue to be collected(proposed surcharge revenue less present surcharge revenue)under
19 this Schedule by the total"normalized"revenue for the two Rate Groups for the most recent
20 January through December time-period. Normalized revenue is determined by multiplying
21 the weather-corrected usage for the period by the present rates in effect. If the incremental
22 amount of the proposed surcharge exceeds 3%, only a 3%incremental rate increase will be
23 proposed, and any remaining deferred balance will be carried over to the following year.
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 8

I Exhibit B, page 6 shows the 3% test for the two rate groups. The incremental
2 change from the existing rebate to the proposed surcharge for the residential group is an
3 increase of $2.0 million or approximately 2.3%. For the Non-Residential group, the
4 incremental change from the existing rebate to the proposed surcharge is an increase of
5 $0.5 million or approximately 1.7%. As both the Residential deferral and the Non-
6 Residential deferral are less than 3%, they are not subject to the 3%incremental surcharge
7 test. There is no proposed carry over for either rate class.
8
9 VII. EXISTING CUSTOMERS AND NEW CUSTOMERS
10 The Settlement Stipulation approved by the Commission requires that natural gas
11 customers that have been added since the test year are subject to an FCA Revenue-Per-
12 Customer that excludes incremental revenue related to fixed production and underground
13 storage facility costs. Separate calculations for new versus existing customers are clearly
14 identified in the FCA base that was approved in Order No. 35909 for rates effective since
15 September 1, 2023.
16 Due to this segregation, Avista tracks the usage of new customers since January 1,
17 2021 as compared with existing customers.6 In general, the average usage of new natural
18 gas customers is comparable to the average usage of existing customers. Avista will
19 continue to track the usage of new customers over the Fixed Cost Adjustment term.
20
6 "Existing customers"were part of the test year used to set the September 1, 2023 rates (2022 calendar
year). "New customers"consist of all new hookups after the test year.
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 9

I VIIL PROPOSED RATES TO BE EFFECTIVE NOVEMBER 1, 2024
2 The Company is proposing a per therm FCA surcharge rate of 1.506¢ for the
3 Residential Group, and a per therm FCA surcharge rate of 1.0060 for the Non-Residential
4 Group,both to become effective November 1,2024. Exhibit B to this Application provides
5 the Residential and Non-Residential Rate Calculation, and Exhibit C provides the support
6 for the deferrals for the July 1, 2023 through June 30, 2024 deferral period. Exhibit A is a
7 copy of the proposed tariff, Schedule 175,which contains the proposed FCA rates. Exhibit
8 A also includes the proposed changes to Schedule 175 in strike/underline format.
9 Residential customers using an average of 64 therms per month would see their
10 monthly bills increase from $78.03 to $79.77, an increase of$1.74 per month, or 2.2%.
11
12 IX. COMMUNICATIONS AND SERVICE OF APPLICATION
13 In conformance with RP 125, this Application will be brought to the attention of
14 the Company's customers. First, the Company has served a copy of this Application upon
15 the service list in Case Nos. AVU-E-15-05 and AVU-G-15-01, the cases that gave rise to
16 the FCA mechanisms. Second, a copy of Company's news release and customer notice is
17 provided as Attachment D. The news release will be issued in July and the customer notice
18 will be inserted in customer bills starting in August and run for a full billing cycle.
19
20 X. REOUEST FOR RELIEF
21 The Company requests that the Commission issue an order approving recovery of
22 FCA deferrals for the period July 1, 2023 through June 30, 2024 and approve a per therm
23 FCA surcharge rate of 1.5060 for the Residential Group, and a per therm FCA surcharge
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 10

I rate of 1.0060 for the Non-Residential Group,both to become effective November 1,2024.
2 The Residential Group surcharge represents a $2.0 million, or 2.3% incremental increase
3 to schedule 101 customers, and the Non-Residential Group surcharge represents a $0.5
4 million, or 1.7% incremental increase to Schedule 111 and 112 customers. The Company
5 requests that the matter be processed under the Commission's Modified Procedure rules
6 through use of written comments.
7 Dated at Spokane, Washington this 31 st day of July 2024.
8 AVISTA CORPORATION
9
10 BY /s/Patrick Ehrbar
11 Patrick D. Ehrbar
12 Director of Regulatory Affairs
AVISTA'S NATURAL GAS FCA ANNUAL RATE ADJUSTMENT FILING PAGE 11

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 3 1" day of July 2024, served the Application of Avista
Corporation — Fixed Cost Rate Adjustment, upon the following parties, by mailing a copy
thereof,properly addressed with postage prepaid to:
Idaho Public Utilities Commission
11331 W. Chinden Blvd
Bldg 8 Suite 201-A
Boise,ID 83714
Karl Klein Peter J. Richardson
Brandon Karpen Greg M.Adams
Deputy Attorneys General Richardson Adams
Idaho Public Utilities Commission 515 N. 27t' Street
472 W.Washington PO Box 7218
Boise,ID 83702-0659 Boise, ID 83702
karLklein(c,puc.idaho.gov petergrichardsonadams.com
Brandon.karpen(&puc.idaho.gov gregArichardsonsdams.com
Bradley R. Mullins Andrew Moratzka
Principal Consultant MW Analytics Stoel Rives LLP
Tietotie 2, Suite 208 33 S. Sixth Steet Springs
Oulunsalo,Finland FI-90460 Minneapolis,MN 55402
brmullinskmnanalytics.com andrew.moratzka&stoel.com
Larry A. Crowley Marie Callaway Kellner
The Energy Strategies Institute,Inc. Brad Heusinkveld
3738 S. Harris Ranch Ave. Idaho Conservation League
Boise,ID 83716 710 N. 6th St.
crowleylakaol.com Boise, ID 83702
mkellnergidahoconservation.org
bheusinkveld(c�idahoconservation.org
Dr. Don Reading Clearwater Paper
280 S. Silverwood Way carol.haugen(&clearwaterpaper.com
Eagle,Idaho 83616 nathan.smithAclearwaterpaper.com
dreading(kmindspring com Jamie.mcdonald(c-r�,clearwaterpaper.com
/s/Paul Kimball
Paul Kimball
Manager of Discovery& Compliance