20241016Staff Comments .pdf

RECEIVED
Wednesday, October 16, 2024 10:09:27 AM
IDAHO PUBLIC
UTILITIES COMMISSION
ADAM TRIPLETT
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 10221
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION'S APPLICATION FOR ) CASE NO. AVU-G-24-02
APPROVAL OF A CHANGE IN RATES FOR )
PURCHASED GAS COSTS AND )
AMORTIZATION OF GAS-RELATED ) COMMENTS OF THE
DEFERRAL BALANCES ) COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Adam Triplett, Deputy Attorney General, submits the following
comments.
BACKGROUND
On July 31, 2024, Avista Corporation d/b/a/Avista Utilities ("Company") applied for
authority to change its rates for purchased gas costs and amortize its gas-related deferral
balances. The Company represents that, if the Application is approved as filed, its annual
revenue will decrease by approximately $32.3 million, or about 27.9%. The Company requested
processing of this matter via modified procedure with a November 1, 2024, effective date.
STAFF COMMENTS 1 OCTOBER 16, 2024

Overview of Proposed Rates
The Company proposes: (1) to pass any change in the estimated cost of natural gas for the
period of November 2024 through October 2025 to customers (Tariff Schedule 150); and(2)
revise the amortization rate(s)to refund or collect the balance of deferred gas costs (Tariff
Schedule 155). The Company proposes to change its PGA rates in this case for its customer
classes in Table No. 1 below:
Table No. 1: Proposed Annual PGA
Conunodity Demand Total Amortization Total PGA
Sch Change Change Sch 150 Change Rate Change
Service No. per therm per therm Change per therm per therm
General 101 $ (0.04984) $ 0.00111 $ (0.04873) $ (0.27015) $ (0.31888)
Lg. General 111 $ (0.04984) $ 0.00111 $ (0.04873) $ (0.27015) $ (0.31888)
Lg General 112 $ (0.04984) $ 0.00111 $ (0.04873) $ - $ (0.04873)
Interruptible 131 $ (0.04984) $ - $ (0.04984) $ - $ (0.04984)
Transportation 146 $ - $ - $ - $ - $ -
STAFF ANALYSIS
Staff examined the Company's Application and accompanying workpapers and
recommends the Commission approve the Company's Application to decrease natural gas
revenues in Idaho by approximately $32.3 million, or about 27.9%. Staff determined that the
Company's proposed Weighted Average Cost of Gas ("WACOG") request is reasonable, as is
the Company's reported Lost and Unaccounted for("LAUF") Gas volumes. Staff verified that
the Company's filing will not change the Company's earnings and confirmed that the proposed
changes to Tariff Schedules 150 and 155 accurately capture the Company's fixed(demand) and
variable (commodity) costs given the coming year's forecasted gas purchases, and properly
amortizes the deferral balance from the prior year.
Schedule 150—Purchased Gas Cost Adjustment
Tariff Schedule 150 is a portion of the PGA which consists of commodity costs and
demand costs. The Company's commodity costs are the variable costs that the Company incurs
to buy natural gas. The WACOG is an estimate of those costs.
STAFF COMMENTS 2 OCTOBER 16, 2024

The Company's demand costs are the costs for interstate transportation and underground
storage. The demand portion of Schedule 150 includes an increase for residential customers of
$0.00111 per therm, increasing from $0.08884 to $0.08995. This increase is due in part to the
Canadian exchange rate, updated demand forecast, and new pipeline rates for the upcoming PGA
year.
Weighted Average Cost of Gas
The WACOG includes fuel charges to move gas at the city gate, some variable transport
costs, Gas Research Institute funding, and some benefits associated with the Deferred Exchange
Contract. It does not include third party gas management fees. In this case, the Company
proposes a WACOG of$0.28834 per therm, which is a decrease of approximately 17.78% from
the current approved WACOG of$0.35070 per therm. Staff encourages the Company to update
its WACOG if gas prices materially deviate.
Schedule 155—Amortization of the Deferral Account
Tariff Schedule 155 reflects the amortization of the Company's deferral account. The
deferral consists of the difference in the price the Company paid for natural gas and the WACOG
established in the previous PGA. The Company's proposed amortization rate change for
Schedule 101 and Schedule I I I is a decrease of$.27015 per therm. The current amortization
rate for Schedule 101 and Schedule I I I is $.25281 per therm in the surcharge direction and the
proposed rate is $.01734 per therm in the rebate direction reflecting the $.27015 decrease.
Included in the deferral activity are two items that benefit customers: excess capacity
releases totaling $2,622,807, discussed in detail in the Procurement Plan section below, and the
benefits from the Deferred Exchange Contract totaling $1,738,219. The associated benefits,
along with the excess capacity releases, are included in the deferral activity shown in Table No.
2. The deferral also includes the monthly interest charges on the deferred balances.
The Company calculated the balance for amortization to be $1,716,780. On a per therm
basis, the net impact of the expiring amortization surcharge and the proposed amortization rebate
of$.01734 is a change of$.27015.
STAFF COMMENTS 3 OCTOBER 16, 2024

A reconciliation of Tariff Schedule 155 deferral and amortization is shown in Table No. 2
below:
Table No. 2: PGA Deferral and Amortization Reconciliation
Amortization Balance as of July 31, 2023 $ (122,072)
Amortization Activity (21,876,706)
True-Up (November 1, 2023) 25,538,805
Interest on Unamortized Balance 281,902
Total Unamortized Balance $ 3,821,929
Current Year Deferral Activity
Deferral Balance as of July 31, 2023 $ 26,315,367
Deferral of Demand Costs 2,665,002
Deferral of Commodity Price Differences (1,154,951)
Interest on Deferrals 109,917
Excess Capacity Releases (2,622,807)
Deferred Exchange Contract (1,738,219)
Total Amortization Balance $ 1,955,830
Total Balance to be amortized via Rate Schedule 155 (1,716,779)
Market Fundamentals & Price Analysis
The Company hedged natural gas throughout the previous thirty-six months for the
forthcoming PGA year. Approximately 40% of the annual load requirements for this year's
PGA period(November 2024 through October 2025) have been hedged at a fixed price derived
from the Company's Procurement Plan. Through June, the hedged volumes for the PGA period
have been executed at a weighted average price of$3.20 per dekatherm, or$0.32041 per therm.
The Company used a 30-day historical average of AECO forward prices (ending July 30,
2024) to develop an estimated cost associated with index purchases. The index purchases
represent approximately 38% of estimated annual load requirements for the coming year. The
annual weighted average price for the volumes is $2.19 per dekatherm or$0.2186 per therm.
Last year the annual weighted average price was $2.25 per dekatherm, or $0.2247 per therm.
Staff also examined the forecasts of national and regional organizations to see how
perceived market conditions might vary from the NYMEX/NGX futures prices. Specifically,
STAFF COMMENTS 4 OCTOBER 16, 2024

Staff reviewed the forecasts from the Energy Information Administration("EIA"). t The EIA
Short-Term Energy Natural Gas Outlook' states:
Natural gas production
We expect U.S. dry natural gas production will remain relatively unchanged over
the next several months as some producers, particularly in the Marcellus and
Haynesville regions,continue to curtail production until prices rise.U.S.dry natural
gas production averages 104 Bcf/d in 4Q24 in our forecast and 105 Bcf/d during
2025. Most of the growth in natural gas production comes in late 2025 when we
expect new LNG export facilities to ramp up production. We forecast the Henry
Hub price to average around$2.20/MMBtu in 2024 and $3.10/MMBtu in 2025.
Natural gas inventories
We expect less natural gas storage injections than the five-year average (2019-
2023) through the remainder of this year's injection season (April—October).
Nevertheless, we expect inventories will end the injection season on October 31
with 5%more natural gas than the five-year average, down from a surplus of I I%
at the end of August. Our anticipation of a narrowing surplus to the five-year
average supports our expectation of rising prices in the coming months. If U.S.
natural gas production is less than our forecast and consumption increases, leading
to inventories ending the injection season closer to the five-year average, natural
gas prices could be higher than forecast. At the same time, with peak hurricane
season approaching, if LNG exports were disrupted because of a hurricane on the
Gulf Coast, resulting in more U.S. inventories than expected, natural gas prices
could be lower than in our forecast.
Based on Staff s review of the market fundamentals and trends, Staff believes that the
Company's cost of its current hedges and estimated cost of forward-looking index purchases are
reasonable.
Procurement Plan
The Company uses a diversified approach to procure natural gas for the coming PGA
year. The Company's Procurement Plan uses a structured approach to execute its hedges that
includes a range of possible hedge windows with varying long-term and short-term trigger
prices. However, its Procurement Plan also allows it to make discretionary decisions so it can
adjust to changes in market conditions.
'EIA website https://www.eia.jzov/outlooks/steo/report/natizas.php.
z Source h!Ws://www.cia.gov/outlooks/steo/report/natizas.php(last visited Sep.20,2024).
STAFF COMMENTS 5 OCTOBER 16, 2024

Capacity Releases
The Company buys the right to transport gas through several interstate pipelines. This
enables the Company to buy gas from a variety of supply basins,both in the U.S. and in Canada,
and then transport to its jurisdiction. Whenever the Company has surplus capacity on the
pipelines that serve its jurisdictions, surplus capacity is sold to other pipeline users. The
Company's total excess capacity release revenue this year for Idaho was $2,622,807.
Lost and Unaccounted for Gas3
Staff reviewed the Company's LAUF gas rate and compared it to previous years. The
Company reported a LAUF gas rate of 0.65% found gas. Staff examined the Company's
supporting LAUF gas workpapers and reconciled this data with the information reported to the
Pipeline and Hazardous Material Safety Administration. Staff notes that the five-year average is
(0.13)% found gas.
Reporting
Staff recommends the Company continues the quarterly submission of the WACOG
report, the GADD report, and deferred costs report with a journal entry as they have been.
Additionally, Staff recommends the Company continue to submit the deferral calculation
workbook("DCW") in Excel format. The workbook summarizes the numbers in the GADD and
ties them to the PGA workpaper. The DCW workbook needs to be filed with the last quarterly
report before the PGA Application.
The reports requested have provided Staff with an opportunity to improve efficiencies,
decrease turnaround time of data requests, and decrease the number of Staff s audit/production
requests.
s The American Gas Association describes unaccounted for natural gas in the utility system is defined as follows:At
a city gate,natural gas is transferred from an interstate or intrastate pipeline to a local natural gas utility. At that
moment,some utilities measure the volume of gas using highly sophisticated technology that can quickly and
precisely take into account a variety of factors,including temperature and pressure. The utility reports the volume
of gas sold to customers as represented on their bills. The difference between the city-gate measurement and the
volume of gas sold is treated as unaccounted-for gas by regulators,who build a form of reimbursement for this gas
into the utility's rate structure.
STAFF COMMENTS 6 OCTOBER 16, 2024

Customer Comments,Notice, and Press Release
The Company's press release and customer notice were included with its Application.
Each document addresses the following cases: (1) this case(AVU-G-24-02), (2) the natural gas
FCA(AVU-G-24-01), (3) the electric PCA (AVU-E-24-07), and(4) the electric FCA (AVU-E-
24-08). Staff reviewed the documents and determined both meet the requirements of Rule 125 of
the Commission's Rules of Procedure. See IDAPA 31.01.01 .125. The notice was included with
bills mailed to customers beginning August 2, 2024, and ending August 30, 2024, providing
customers with a reasonable opportunity to file timely comments with the Commission by the
October 16, 2024, deadline. As of October 15, 2024, no customer comments had been filed.
STAFF RECOMMENDATION
After examining the Company's Application, natural gas purchases, and deferral activity
for the year, Staff recommends the Commission:
1. Approve the Company's proposed Tariff Schedule 150, with the proposed WACOG
of$0.23850 per therm and demand charge of$0.08995 per therm, for a total of
$0.32845 per therm, as filed;
2. Approve the Company's proposed Tariff Schedule 155, with the proposed
amortization rebate rate of$0.01734 per therm, as filed;
3. Direct the Company to continue filing WACOG reports, GADD reports, and deferred
costs report with journal entries quarterly, as they have been, and the DCW workbook
in Excel format with the last quarterly report before the next PGA filing; and
4. Consider late-filed comments from customers.
Respectfully submitted this 16th day of October 2024.
Adam Triplett
Deputy Attorney General
Technical Staff: Vicki Stephens
Leena Gilman
James Chandler
Curtis Thaden
I:\Utility\UMISC\COMMENTS\AVU-G-24-02 Comments.docx
STAFF COMMENTS 7 OCTOBER 16, 2024

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 161h DAY OF OCTOBER 2024,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN CASE
NO. AVU-G-24-02, BY E-MAILING A COPY THEREOF TO THE FOLLOWING:
PATRICK EHRBAR DAVID J MEYER
DIR OF REGULATORY AFFAIRS VP & CHIEF COUNSEL
AVISTA CORPORATION AVISTA CORPORATION
PO BOX 3727 PO BOX 3727
SPOKANE WA 99220-3727 SPOKANE WA 99220-3727
E-mail: patrick.ehrbarkavistacorp.com E-mail: david.meyerkavistacorp.com
docketskavistacorp.com
PATRICIA JORDAN, SECRETARY
CERTIFICATE OF SERVICE