20240920Direct Testimony of Anderson.pdf

RECEIVED
Friday, September 20, 2024
IDAHO PUBLIC
UTILITIES COMMISSION
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY& GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
[e-mail]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-24-0_
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-24-0_
EXTENSION OF AVISTA'S ELECTRIC )
AND NATURAL GAS FIXED COST )
ADJUSTMENT MECHANISMS IN THE ) DIRECT TESTIMONY
STATE OF IDAHO ) OF
JOEL ANDERSON
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)

1 I. INTRODUCTION
2 Q. Please state your name, business address and present position with
3 Avista Corporation?
4 A. My name is Joel C. Anderson. My business address is 1411 East Mission
5 Avenue, Spokane, Washington. I am employed as a Regulatory Affairs Manager in the
6 Regulatory Affairs Department.
7 Q. Would you briefly describe your educational background and
8 professional experience?
9 A. I am a 2005 graduate of Eastern Washington University with a bachelor's
10 degree in Business Administration, majoring in Finance. In 2012, 1 became a Certified
11 Public Accountant in the State of Washington. I joined the Company in January 2013, after
12 spending seven years working in various accounting positions in the banking industry. I
13 started with Avista as an Internal Auditor. In January 2016, 1 joined the Regulatory Affairs
14 Department as a Regulatory Analyst. In my current role, I am responsible for the
15 Company's natural gas cost of service studies in all jurisdictions. I am also responsible for
16 Fixed Cost Adjustments reporting and annual filings, among other things.
17 Q. What is the scope of your testimony in this proceeding?
18 A. My testimony will provide an overview of the Company's electric and
19 natural gas Fixed Cost Adjustment Mechanisms ("FCA"or"FCA Mechanisms")that were
20 made effective on January 1, 2020, and which would expire on March 31, 2025 absent our
21 request to extend the life of the mechanisms in this proceeding.' The Company requests
22 that the Commission authorize the approval of the Company's electric and natural gas FCA
' In Order 34085 in Case Nos. AVU-E-15-05 and AVU-G-15-01, the Commission approved an all-party
settlement stipulation which extended the life of the FCA Mechanisms until the end of 2019. Then in order
34502 in case Nos.AVU-E-19-06 and AVU-G-19-03 the mechanism was extended to March 31,2025.
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Avista Corporation

I Mechanism tariff Schedule's 75 and 175 and extend the current FCA Mechanism through
2 August 31, 2029.
3 Q. In summary, why should the Commission extend the Mechanisms
4 through August 31, 2029?
5 A. Based on the proven benefits to both the customer and the Company that the
6 FCA Mechanisms have shown to date, as validated in the "Avista Decoupling Evaluation
7 Final Report" prepared by H. Gil Peach and Associates (Exhibit No. 1), and the lack of
8 adverse impacts associated with these Mechanisms,the Company requests the Commission
9 approve the continuation of the FCA Mechanisms. By extending the Mechanisms and
10 providing some certainty to the Company that it can recover a significant portion of its
11 fixed costs of providing service, the Company is able to maintain its central focus of being
12 a trusted energy advisor to its customers without adverse or uncertain financial impacts
13 from evolving customer choice in the future. The Company believes that the FCA
14 Mechanisms continue to be in the public interest, promote increased conservation and
15 customer choice as it relates to self-generation, and result in fair, just, reasonable, and
16 sufficient rates.
17 Q. Are you sponsoring any exhibits that accompany your testimony?
18 A. Yes. I am sponsoring Exhibit No. 1 which is the "Avista Decoupling
19 Evaluation — Final Report" prepared by H. Gil Peach & Associates LLC. I am also
20 sponsoring Exhibit No. 2, a copy of the PowerPoint presentation from the FCA Workshop
21 held at the Idaho Public Utilities Commission on April 10, 2024. A table of contents for
22 my testimony is as follows:
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Avista Corporation

I Table of Contents
2 I. INTRODUCTION............................................................................................................ 1
3 II. BACKGROUND ............................................................................................................ 3
4 III. PURPOSE AND BENEFITS OF FCA MECHANISMS.............................................. 5
5 IV. FCA MECHANISM PERFORMANCE..................................................................... 10
6 V. INDEPENDENT REPORT FINDINGS AND RECOMMENDATIONS ................... 11
7
8 II. BACKGROUND
9 Q. Would you please provide the background of the Company's electric
10 and natural gas FCA Mechanisms?
11 A. Yes. On December 18, 2015, the Commission issued Order 33437 in Case
12 Nos.AVU-E-15-05 and AVU-G-15-01,approving a Settlement Stipulation("Stipulation").
13 Included in the approved Stipulation were electric and natural gas FCA Mechanisms,which
14 went into effect on January 1, 2016, for a three year term through December 31, 2018.
15 Later, in Order 34085, the Commission extended the Mechanisms through December 31,
16 2019, to allow "Staff and interested parties additional information and recommendations
17 from the third-party evaluation of Avista's decoupling mechanism in Washington along
18 with an additional year of data".2 Then in order 34502 in case Nos. AVU-E-19-06 and
19 AVU-G-19-03, the Mechanisms were extended to March 31, 2025.3
20 Q. Before proceeding further, when you discuss FCA Mechanisms in
21 Idaho, are those similar in almost all respects to the Company's Decoupling
22 Mechanisms in Washington and Oregon?
2 Order 34085,p. 1.
3 When the Mechanisms were extended,four modifications were made,including:
1) Extend the current FCA Mechanisms through March 31,2025;
2) Modify the upcoming deferral period to be from January 1,2020 through June 30,2021, so as to better
align the deferral periods and the rate adjustments;
3) Implement an annual true-up to the FCA Mechanisms;and
4) Extend the FCA Mechanism quarterly reporting requirement from 45 to 60 days.
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Avista Corporation

I A. Yes. But for small differences in Mechanism mechanics, the Company's
2 Decoupling Mechanisms in Washington and Oregon are almost identical to the FCA
3 Mechanisms in Idaho. In our view, the term FCA, or Fixed Cost Adjustment, is
4 synonymous with the term decoupling.
5 Q. Did the Company contract with an independent,third-party to evaluate
6 its Decoupling Mechanisms in the State of Washington?
7 A. Yes. As part of the approval of the Company's Decoupling Mechanisms in
8 Washington,the Washington Utilities and Transportation Commission(WUTC)required a
9 third-party evaluation, paid for by Avista shareholders, to be completed by the end of the
10 third full-year(2023) of the reauthorization of those mechanisms.
11 The WUTC required the Company to consult with its Energy Efficiency Advisory
12 Group ("Advisory Group") in the development of the Request for Proposals (RFP) and the
13 selection of the consultant to perform the evaluation. After incorporating input from the
14 Advisory Group (which includes members of Idaho Commission Staff and the Idaho
15 Conservation League), Avista was required to file its draft RFP, including the scope of the
16 evaluation query, with the WUTC for approval. At a minimum, the evaluation was to
17 address decoupling's effect on revenues,its impact on conservation,the extent to which the
18 allowed revenues are recovering their allocated cost of service by customer class, and the
19 extent to which fixed costs are recovered in fixed charges for the customer classes excluded
20 from the Washington Decoupling Mechanisms.
21 The Company filed its RFP on November 21,2022 with the WUTC. In preparation
22 of completing the RFP,the Company engaged with the Advisory Group in the development
23 of the RFP and included all requested edits, modifications, and suggestions into the RFP
24 document. The RFP was then issued to a group of consultants. H. Gil Peach&Associates
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Avista Corporation

I was ultimately selected as the consultant for this project. H. Gil Peach and Associates is a
2 consulting company with over 30 years of experience, who specialize in electric, natural
3 gas, and water program assessments. In addition to meeting the requirements set forth in
4 the Statement of Work contained within the RFP,H. Gil Peach&Associates had completed
5 similar decoupling evaluations for Avista and Puget Sound Energy, which in the
6 Company's view, added to their qualifications.
7 On January 18, 2024 the Company filed the final report conducted by H. Gil Peach
8 & Associates with the WUTC, as well as provided the report to the Advisory Group. The
9 final report, labeled"Avista Decoupling Evaluation—Final Report" is included as Exhibit
10 No. 1.
11 Q. Prior to preparing this filing, did the Company seek input from Idaho
12 Commission Staff and interested parties as to potential modifications to the FCA
13 Mechanisms?
14 A. Yes. In Case Nos. AVU-E-19-06 and AVU-G-19-03, the Company agreed
15 to the following:
16 The Company proposed to extend its electric and natural gas FCA mechanisms
17 through March 31, 2025, and committed to attending a workshop with Commission
18 Staff and interested persons and parties before June 30, 2024, to discuss the future
19 of its electric and natural gas FCA mechanisms.
20 Consistent with that agreement, Avista and Commission Staff met on April 10,
21 2024. Attached as Exhibit No. 2 is a copy of the PowerPoint presentation from the FCA
22 Workshop. At that workshop, Avista and Commission Staff reviewed and discussed the
23 FCA mechanisms.
24 III. PURPOSE AND BENEFITS OF FCA MECHANISMS
25 Q. What are the purpose and benefits of the FCA Mechanisms?
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Avista Corporation

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I Illustration No. 2: Natural Gas Residential Use-Per-Customer
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2 Absent the FCA Mechanisms, in periods of declining use-per-customer, Avista
3 would under-recover its fixed costs of providing service to its customers in the periods
4 between general rate case filings (given that a majority of the Company's fixed costs are
5 recovered in variable energy rates). To the extent use-per-customer declines from
6 programmatic and non-programmatic DSM, or distributed generation resources between
7 general rates cases, the FCA Mechanisms provide the Company recovery of its fixed costs
8 for providing service to its customers. These are the same fixed costs, on a revenue-per-
9 customer basis, that the Commission approves for recovery in a general rate case.
10 In addition,the FCA Mechanisms ensure that to the extent there is customer growth
11 in the rate year and beyond, the revenues are available to offset the growth in utility costs
12 following the test year. By allowing the Company to recover a significant portion of its
13 fixed costs of providing service, the Company is able to maintain its central focus of being
14 a trusted energy advisor to its customers, without uncertainty as to the financial impact
15 customer choice may have on the Company.
16 Q. Would you say that the FCA Mechanisms have provided benefits to
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Avista Corporation

I both the Company and its customers?
2 A. Yes. As further detailed in the analysis provided in the Independent Final
3 Report (Exh. No. 1), the FCA Mechanisms have proven to be vital and meaningful
4 programs for both the Company and its customers. Not only has the program accomplished
5 its original objectives of removing the disincentive for the Company to promote the
6 efficient end-use of energy through conservation, it has also been beneficial to customers
7 in times of a colder than normal winter,or a hotter than normal summer,when the Company
8 has returned those additional revenues back to customers. As described by the Alliance To
9 Save Energy:4
10 As consumers broadly engage in energy efficiency, all ratepayers may
11 benefit as the high costs of new power plants, transmission lines and
12 pipelines may be reduced or avoided. [FCA Mechanisms] may also reduce
13 volatility in energy bills due to weather and other factors, and it reduces
14 risk for utilities too. It preserves customers' incentive for efficiency while
15 removing utilities disincentives.
16
17 The Company has demonstrated, in a number of filings before this Commission,
18 that it has been aggressively pursuing all cost-effective conservation for a number of years.
19 The Company actively promotes technologies that are cost-effective,reliable, and feasible,
20 with the goal of meeting and exceeding its required targets.
21 Q. Please explain further how the FCA Mechanisms have provided
22 benefits to Avista and customers.
23 A. The FCA Mechanisms have been an essential means for providing the
24 Company revenue stability each year, without impacting utility operations. They have also
25 been vital in ensuring the Company is able to recover the fixed costs of providing service
26 to customers,therefore making the Company agnostic to the impacts of customers pursuing
4 www.ase.org/resources/utility-rate-decoupling-0
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Avista Corporation

I distributed generation (net metering) resources and conservation. Having an electric FCA
2 positively affects how Avista views the proliferation of distributed generation on our
3 system. While Idaho customers have been slower to adopt distributed generation as
4 compared to our Washington customers, with the FCA there is no reason to discourage the
5 amount of net metering on our system,given the limited impact on cost recovery in between
6 general rate cases. The Company has been supportive of customer choice towards
7 distributed generation resources as an alternative generation resource, which satisfies
8 certain Customers desires and provides benefit to Avista's system.
9 The FCA Mechanisms also provide an important protection for customers. First, as
10 discussed earlier, by separating sales from revenues, the disincentive to promote
11 conservation is removed, as would any incentive for the utility to increase throughput.
12 Customers also benefit if the overall actual sales revenue collected by the Company on a
13 per-customer basis is greater than that approved by the Commission. For example, if a
14 winter is colder than normal, leading to loads that are higher than normal, the Company
15 rebates to customers all of the revenue collected above the allowed level.
16 The revenue provided to Avista through an FCA would not represent additional
17 revenue to the Company over and above what is needed to recover its costs; it represents
18 restoration of revenues that the Commission has already determined should be provided to
19 the utility from the last rate case, on a per-customer basis.
20 Customers also benefit through an annual rate increase limitation. The 3 percent
21 annual rate increase limitation ensures that the amount of an incremental rate adjustment
22 for any of the rate groups does not exceed more than 3 percent in any given year, reducing
23 the likelihood of rate shock.
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Avista Corporation

I IV. FCA MECHANISM PERFORMANCE
2 Q. How have the FCA Mechanisms performed?
3 A. The FCA Mechanisms have proven to work for both the customers' and the
4 Company, as intended. Table No. 1 provides the deferral balances for the Residential
5 Customer Groups for electric, which were in the surcharge direction for the 2020 deferral
6 period and in the rebate direction for the 2021 through 2023 deferral period. The Non-
7 Residential Groups for electric were in the surcharge direction for the 2020 and 2021
8 deferral periods and in the rebate direction for the 2022 and 2023 deferral periods.
9 For the Natural Gas Residential Group, the deferral balance was in the rebate
10 direction for the 2020 through 2023 deferral periods, while for the natural gas Non-
11 Residential Group, the deferral balance was in the rebate direction in 2020, 2021 and 2023
12 but in the surcharge direction for 2022. Over these four years, the Mechanisms in total are
13 working as intended, and showing both surcharges and rebates.
14 Table No. 1: Summary of Deferral Balances
15 Electric FCA Tariff Filing 2020 2021 2022 2023 Total
Res 1 Non-Res Res Non-Res Res Non-Res Res Non-Res
Deferred Revenue $ 337,502 $ 109,351 $(2,260,697) $2,011,841 $(5,039,128) $(246,046) $(7,180,059) $(555,724) $(12,822,959)
Add Prior Year Residual Balance $ (9,294) $ 7,242 $ (35,117) $ 18,516 $ 28,019 $(108,817) $ 351,473 $ 38,943 $ 290,965
16 Add Interest through 9/30 $ 8,208 $ 2,851 $ (16,130) $ 15,170 $ (35,731) $ (2,313) $ (99,787) $ (8,013) $ (135,745)
Add Revenue Related Expense Adj. $ (2,511) $ (2,761) $ 11,463) $ 3,802 $ (27,841) $ 1,621 $ (27,189) $ 1,115 $ (65,226)
Total Requested Recovery $ 333,905 $ 116,684 $(2,323,407) $2,049,329 $(5,074,681) $(355,554) $(6,955,562) $(523,679) $(12,732,965)
17 Customer Surcharge/Rebate Revenue 1$ 333,905 $ 116,684 $(2,323,407) $2,049.129 I$(5,074,681) $(355,554) $(6,955,562) $(523,679) $(12,732,965)
Carryover Deferred Revenue $ - $ - $ - $ - $ - $ - $ - $ - _
Surcharge/(Rebate)Rate $ 0.00028 $ 0.00011 $ (0.00189) $ 0.00197 $ (0.00405) $(0.00034) $ (0.00540) $(0.00048)
18
Natural Gas FCA Tariff Filing 2020 2021 2022 2023 Total
Res Non-Res Res Non-Res Res Non-Res Res Non-Res
19 Deferred Revenue $(517,162) $(175,310) $ (324,456) $ (130,431) $ (743,688) $ 99,328 $ (820233) $(L81,388) $ (2,793,339)
Add Prior Year Residual Balance $ 22,393 $ 2,617 $ (6,663) $ (918) $ 34,722 $ 2,930 $ (24,538) $ 9,991 $ 40,533
Add Interest through 10/31 $ (12,200) $ (4,347) $ (2,211) $ (964) $ (4,895) $ 741 $ (11,224) $ (2,589) $ (37,688)
20 Add Revenue Related Expense Adj. $ (2,830) $ (1,092) $ (1,536) $ (604) $ (3,419) $ 385 $ (3,552) $ (577) $ (13,224)
Total Requested Recovery $(509,799) $(178,131) $ (334,866) $ (132,916) $ (717,280) $ 103,384 $ (859,547) $(174,563) $ (2,803,718)
1Customer Surcharge/Rebate Revenue $(509,799) $(178,131) $ (334,866) $ (132,916) $ (717,280) $ 103,384 $ (859,547)1$(174,563) $ (2,803,718)
Carryover Deferred Revenue $ - $ - $ - $ - $ - $ - $ -
21 Surcharge/(Rebate)Rate $(0.00783) $(0.00687) $ (0.00493) $ (0.00490) $ (0.01020) $ 0.00381 $ (0.01219) $(0.00632)
A Positive rate represents a surcharge to customers and a negative rate represents a rebate to customers
22
23 The primary drivers of the changes in the deferral balances were deviations in use-per-
24 customer primarily driven by actual weather being different from normal weather in any
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Avista Corporation

I given year, and continued energy efficiency savings that were acquired beyond what was
2 built into the Company's test year. For electric use-per-customer,the primary driver of any
3 reductions is due to the cumulative effects of energy efficiency, especially for the less-
4 weather sensitive Non-Residential Group. For natural gas as shown on Table No. 3,
5 however, as one might suspect the largest driver for any change in use per customer for a
6 FCA Mechanism based on non-weather normalized results would be the effects of weather,
7 given natural gas' primary use as a heating fuel.
8 V. INDEPENDENT REPORT FINDINGS AND RECOMMENDATIONS
9 Q. Before discussing the findings and recommendations of the
10 Independent Final Report, do you believe the findings for the Company's Decoupling
11 Mechanisms in Washington are relevant to the Company's FCA Mechanisms in
12 Idaho?
13 A. Yes, I do believe the findings in the Washington Independent Final Report
14 have merit when evaluating the Idaho FCA Mechanisms. As the Commission is well aware,
15 Avista operates its electric and natural gas operations in Washington and Idaho generally
16 as a system given the interconnected operations with only a state border segmenting one
17 portion of the system from the other.As such,as I discuss the findings from the Independent
18 Final Report prepared for Washington purposes, I believe the findings are also applicable
19 to the Idaho FCA Mechanisms (also considering that Idaho parties participated in the
20 development of the RFP scoping materials that ultimately led to the hiring of H. Gil Peach
21 and Associates).
22 Q. What were the findings and recommendations from H. Gil Peach's
23 Independent Report, included at Exhibit No. 1?
24 A. The Independent Final Report issued by H. Gil Peach and Associates is
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Avista Corporation

I segmented into sections which were designed to address the requirements as fully described
2 in the Company's RFP. As described in the introduction of the Independent Final Report,
3 the evaluation was partly a compliance evaluation and partly a policy evaluation of Avista's
4 Decoupling (FCA) Mechanisms. The summary conclusion as stated on Page 1 of the
5 Independent Final Report states that "(w)e find that Avista's decoupling is working well
6 within the specific window of time examined." Sections 1 through 7 correspond to a
7 specific task and sections 8 through 10 correspond to specific topics and recommendations.
8 Excerpts of the summary of sections 1 through 9 and the report recommendations in Section
9 10 are detailed below:
10 Section 1 is a compliance evaluation: Did Avista comply with the specifics of the
11 decoupling order?
12 The overall result in this section of the analysis is that we find the deferrals and rates to
13 have been calculated by the Company in accordance with the Commission guidance as
14 operationalized by the methodological specification in Schedule 75 and Schedule 175.
15 Avista's View on Implications for Idaho — We believe that the consultant would have
16 come to a similar conclusion in Idaho. Also, Commission Staff has reviewed and approved
17 our deferral periods through June 2023.
18
19
20 Section 2 is concerned with revenue effects and billing impacts. Avista's decoupling
21 mechanism has had a stabilizing effect on revenue, reducing variability in half for electric
22 and by one-fifth for natural gas of variability without decoupling.
23
24 On the electric side, between 2018 and 2022 the 3% cap on annual rate increases from the
25 decoupling rate was reached once for residential and twice for non-residential. For natural
26 gas, the rate cap was reached once between 2018 and 2022 in each rate group, residential
27 and non-residential. Deferral balances are driven largely by differences in use per customer
28 from test year assumption. Much of the difference in use per customer is due to weather,
29 especially in electric residential, natural gas residential and natural gas non-residential.
30 Avista's energy efficiency programs have also worked to lower use per customer,
31 especially for the electric non-residential group.
32
33 Avista's View on Implications for Idaho—As discussed earlier,the FCA mechanisms are
34 functioning as intended, with some years showing surcharges, and other years showing
35 rebates. Overall, the rate changes in our view are relatively modest, with the 3% rate cap
36 helping to eliminate the potential for rate shock should a large surcharge balance form.
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Avista Corporation

I Section 3 examines the recovery of fixed cost for both Non-Decoupled and Decoupled
2 customer classes. Fixed costs can be recovered in the customer charge or in the variable
3 portion of bills, driven by energy use. To what extent are fixed costs recovered in fixed
4 charges for the customer classes that are excluded from the Mechanisms?
5
6 For the electric rate classes not included in decoupling, Avista recovers 16% of fixed
7 charges for Extra Large General Service and 100% of fixed charges for Street and Area
8 Lighting through the customer charge. In comparison, overall (system total), Avista
9 recovers about 14% of total electric fixed cost through fixed customer charges. The
10 percentage runs lower for residential and larger for non-residential.
11 For natural gas rate classes not included in decoupling, Avista recovers no fixed charge
12 revenue for Interruptible Service and 7% of fixed charges for Transportation Service
13 through the customer charge. In comparison, Avista recovers 32% percent of fixed costs
14 through the customer charge overall (system total), with a slightly higher percentage of
15 recovery in the residential customer class than non-residential customer classes.
16
17 Avista's View on Implications for Idaho—In Idaho,the Company's fixed costs recovered
18 through fixed customer charges is approximately 20% for electric operations. For natural
19 gas, 64% of fixed costs are recovered in fixed charges. In the end, approximately 80% of
20 electric fixed costs and 36% of natural gas fixed costs are recovered in volumetric rates.5
21
22
23 Section 4 is focused on conservation trends and performance. In the big picture, overall
24 electrical savings are trending downwards while costs are trending upwards. Overall natural
25 gas savings are trending level while cost is trending upwards. For residential electric low-
26 income households, savings are trending up while cost is trending level. For residential
27 natural gas households, savings are trending up, while cost is trending up. With regard to
28 decoupling, there is no evident impact of decoupling on energy conservation savings. This
29 result is neither unusual nor unexpected. Decoupling is generally not considered to be a
30 driver of energy conservation. Rather, decoupling removes a potential barrier to energy
31 conservation, which is different than driving a direct savings effect.
32
33 Avista's View on Implications for Idaho—In Idaho,I believe the findings to be the same.
34 Earlier I discussed how Avista essentially operates as an integrated system, with a border
35 being the only separation between our service territories. As such we have offered, where
36 possible, the same energy efficiency programs in Idaho as we do in Washington, so as to
37 minimize customer confusion given our adjoined service territories. The Company has also
38 demonstrated that it has been aggressively pursuing all cost-effective conservation for a
39 number of years. The Company actively promotes technologies that are cost-effective,
40 reliable, and feasible, with the goal of meeting and exceeding its required targets. The
41 presence of the FCA Mechanisms helps us do just that.
42
43 Section 5 is an analysis of new customers. New customers are meaningfully different
44 from existing customers in both use per customer and decoupled (distribution) revenue
5 These percentages are based on 12 months ended June 30,2024. Basic charges increased to$15 on 9/l/2023
and increased again on 9/1/2024 to $20, and, as such, we would expect these numbers to be significantly
higher in the near future.
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Avista Corporation

I generated per customer. Although the effect is stronger for electric service, and not as
2 pronounced for natural gas service,new Residential customers use substantially less energy
3 per customer and generate less revenue per customer than existing residential customers.
4 Because the number of new customers is small relative to existing customers, the overall
5 impact on deferred revenue is limited, but still meaningful.
6
7 For electric service, had new customers been included over the 2020-2022 period, electric
8 Residential customers would have received a smaller refund; electric Non-Residential
9 customers would have received a higher charge through application of the decoupling tariff
10 (RS 75).
11
12 For natural gas service, had new customers been included over the 2020-2022 period,
13 Residential customers would have experienced a higher charge, but Non-Residential
14 customers would have received a lower charge through the decoupling tariff(RS 75).
15
16 Avista's View on Implications for Idaho—We do not believe that the independent review
17 would have different findings in Idaho as compared to Washington.
18
19 Section 6 is an analysis of alternative calculations of normal weather. Heating Degree
20 Days(HDDs)are decreasing,and Cooling Degree Days(CDDs)are increasing.This means
21 more and more cooling is needed to counter the increasing heat. The problem of ever-
22 increasing heat is now a physical feature of the planet, and the assumption of a stable
23 weather environment does not work. As directed by the WUTC, Avista has carried out
24 alternative calculations for "normal" weather. Each calculation uses an identical
25 mathematical method but employs rolling average data sets of 30-years,20-years,15-years,
26 and 10-years. Tabled results of these calculations include HDDs, CDDs, energy usage
27 adjustment, and deferred decoupled revenue adjustment for Residential and Non-
28 Residential customer groups for both electric service and natural gas service. In
29 examination of these calculations, we find that the calculations were correctly performed,
30 and we find cause to rule out using the alternative of 10-years or less. We also found cause
31 to rule out 30-years. This leaves the 20-year and 15-year calculations as the remaining
32 alternatives. The 15-year data window is the shortest period that still produces somewhat
33 stable results of somewhat reasonable accuracy and precision over the observed data and
34 calculations. The 20-year data window is the longest viable period;beyond this, analysis is
35 overly weighted toward older weather that, given the advancing climate trend, is now
36 abnormal.
37
38 Deferred decoupled revenue adjustment continues to remove a barrier to more aggressive
39 energy conservation/energy efficiency and continues (for those fixed costs included in
40 decoupling) to improve revenue stability without changing total collections. However, for
41 weather adjustment, the main driver now is climate change with conservation/energy
42 efficiency secondary. The decoupling weather adjustment should be recognized as
43 primarily a climate change methodological practice to support regular utility revenue in the
44 era of climate change.
45
46 Avista's View on Implications for Idaho—Nothing further to add.
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Avista Corporation

1
2 Section 7 is a CAP analysis. The use of a decoupling rate cap on customer surcharges has
3 the advantage of smoothing out rates and the disadvantage of prolonging revenue recovery.
4 Raising the rate cap to 5% will sometimes increase bills for the next rate year, while
5 lowering bills for the year after that. Going to no-Cap provides quickest recovery.
6
7 Avista's View on Implications for Idaho—Nothing further to add.
8
9 Section 8 is a check-analysis on theoretically possible adverse effects of decoupling.
10 We find no conclusive evidence of any current adverse impact of decoupling on cost
11 control, operational efficiency, price signals, or service quality.
12
13 Avista's View on Implications for Idaho—Nothing further to add.
14
15 Section 9 provides a short list of recommendations that are applicable to Idaho.
16 (1) Continuation. The decoupling mechanisms have worked as expected to stabilize revenue
17 without impacting utility operations and energy efficiency programs. We also found no
18 evidence of adverse impacts to any customer groups. Since the program continues to work as
19 planned in this second evaluation, we recommend the electric and natural gas mechanisms be
20 continued.
21 Q. Is Avista proposing to modify its FCA Mechanisms in this case?
22 A. No. As discussed earlier, the Company's FCA Mechanisms are working
23 well and have performed as intended. At this time, we are not recommending any
24 modifications to the mechanisms.
25 Q. In summary,why should the Commission approve Avista's request for
26 an extension of its FCA Mechanisms through August 31, 2029?
27 A. As I discussed earlier, the FCA Mechanisms have provided proven benefits
28 to both the customer and the Company, with a lack of adverse impacts. By extending the
29 mechanisms and providing some certainty to the Company that it can recover a significant
30 portion of its fixed costs of providing service, the Company is able to maintain its central
31 focus of being a trusted energy advisor to its customers, without adverse or uncertain
32 financial impacts from evolving customer choice in the future. The Company believes that
33 the FCA Mechanisms continue to be in the public interest,promote increased conservation
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Avista Corporation

I and customer choice as it relates to self-generation, and result in fair,just, reasonable, and
2 sufficient rates.
3 Q. Does this conclude your pre-filed, direct testimony?
4 A. Yes, it does.
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Avista Corporation