20040608Responses of Avista to Potlatch.pdf

Avista Corp.
1411 East Mission PO Box 3727
Spokane, Washington 99220-3727
Telephone [phone]
Toll Free 800-727-9170
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UTiLitiES COi'111ISStON
June 7, 2004
Conley E. Ward
GNENS PURSLEY LLP
601 W. Bannock Street
PO Box 2720
Boise, ill 83701-2720
Re:Production Request of Potlatch Corporation
in Case Nos. A VU-E.,.04-01 and A VU-04-
Mr. Ward
I have attached one copy of Avista s response to Potlatch Data Request No(s). 38-
Supplemental, and 58 through 70.
If you have any questions, please call me at [phone] or Don Falkner at (509) 495-
4326.
Mike Fi
Rate Analyst
Enclosures
Cc:S. Woodbury
D. Peseau
A. Yankel
(IPUC)
(Utility Resources, Inc.
(Yankel & Assoc, Inc.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-O4-01 / A VU-O4-
Potlatch
Data Request
38 (Supplemental)
DATE PREPARED:
WITNESS:
RESPOND ER:
DEPARTMENT:
TELEPHONE:
6/3/2004
Lafferty
Lafferty
Energy Resources
[phone]
REQUEST:
Please provide copies of all analyses, risk evaluations, gas market forecasts, memoranda
and all other documents prepared for or used in the evaluation of and justification of, the timing
and need for Deals A and B.
RESPONSE:
The reference to Exhibit No., Schedule No. 22 should have instead referenced Exhibit No.
Schedule No. 21.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-04-01 / A VU-04-
Potlatch
Data Request
DATE PREPARED:
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
5/27/2004
Lafferty
Lafferty
Energy Resources
[phone]
REQUEST:
Please provide all documentation necessary to establish that each physical and financial natural
gas transaction listed in Exhibit 7, Schedule 21 complied with all volumetric, open position, term
length, and signature and approval provisions contained in the Energy Resources Risk Policy.
RESPONSE:
The Company s Energy Resources Risk Policy has been provided in Exhibit No., Schedule 3 of witness
Richard Storro s Pre-filed Direct Testimony. Gary Ely authorized the two financial swap transactions
labeled as Deal A as well as the index-based firm delivered gas transaction with Petro-Canada as required
by the Risk Policy based on the length of delivery term. Kelly Norwood authorized the two financial
swap transactions labeled as Deal B as well as the index-based firm delivered gas transaction with A vista
Energy as required by the Risk Policy based on the length of delivery term.
Exhibit No., Schedule No. 31 of Robert Lafferty's Pre-filed Direct Testimony contains Position Report
documents from the time frame relevant to the financial fixed for floating swap transactions that include
sheets entitled "Time To Cure" which describe the time frames where positions are out of limits, their
Cure By" date and an indication in the comments section indicating that the Risk Management
Committee had suspended the cure date.
The Position Report functions as an operating tool for the Company to view its near term load and
resource position under forecasted or average conditions. On a planning basis, the Company looks to
other analyses and tools. As explained in pages 29 - 56 of the Pre-filed Direct testimony of Robert
Lafferty, the Company also considered its load and resource position under hydroelectric generation and
load variation conditions and under critical water variation conditions in its decision to fix the price of a
portion of its natural gas supply for generation with a medium-term transaction. Under the high and
volatile price conditions present in the electric energy market at that time, the risk and economic impact
of net position variability was very high.
In summary, from an operations perspective, the Position Report referenced above generally used average
water and average load conditions beyond the then current 2001 water year. This is contrast to longer-
tenn planning, which uses hydro/load variability confidence intervals or critical water as a basis for that
analysis.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU - E-04-0 1 / A VU -04-0 1
Potlatch
Data Request
DATE PREPARED:
WITNESS:
. RESPONDER:
DEPARTMENT:
TELEPHONE:
5/17/2004
Lafferty
Lafferty
Energy Resources
[phone]
REQUEST:
For the transactions listed in Exhibit 7, Schedule 21 , please provide the Avista documents
maintained during and after the transactions to ensure that Risk Policy measures were complied
with, including actual signatories to each transaction prior to the time the transaction was made.
RESPONSE:
The Company s Energy Resources Risk Policy has been provided in Exhibit No., Schedule 3 of
witness Richard Storro s Pre-filed Direct Testimony. Please also see the response to Potlatch
Data Request No. 58.
Position Reports and associated documents are being provided with Avista s data response to
Potlatch, Data Request No. 59(C). The materials provided contain TRADE SECRET or
CONFIDENTIAL information and are separately filed under IDAPA 31.01.01 , Rule 067, and
Section 9-340D, Idaho Code.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-04-01 / A VU-04-
Potlatch
Data Request
DATE PREPARED:
WITNESS:
RESPOND ER:
DEPARTMENT:
TELEPHONE:
OS/28/2004
Bob Lafferty
Pat Gorton
Corporate Risk
[phone]
REQUEST:
Why were natural gas purchases indexed to a Malin NGI Index rather than alternative locations
such as Sumas, Opal (Rockies), Stanfield, Kingsgate or Coyote Springs? Please provide all
details, documents and notes supporting each Malin-indexed purchase and the justification
thereof.
RESPONSE:
Discussion regarding the purchase of index-priced natural gas delivered to Malin is contained in
the Pre-filed Direct testimony of Robert Lafferty. The documentation for the two physical
purchases of natural gas at NGI Malin Monthly Index has been provided in Robert Lafferty
Exhibit 7, Schedule 2l. The referenced natural gas purchases were indexed to Malin because
both transactions were for firm natural gas deliverable at Malin.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU - E-04-0 1 / A VU -04-0 1
Potlatch
Data Request
DATE PREPARED:
WITNESS:
RESPOND ER:
DEP ARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Pat Gorton
Energy Resources
[phone]
REQUEST:
Why were the natural gas financial trades entered into for 36 months and 17 months settled on
NGI prices at Malin as opposed to some other Pacific Northwest or Rockies' location? Please
provide all details documents and notes supporting each financial trade and the justification
thereof.
RESPONSE:
Please see response to Potlatch Data Request No. 60.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
AVU-04-01 / AVU-04-
Potlatch
Data Request
DATE PREPARED:
WITNESS:
. RESPONDER:
DEP ARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Lafferty
Energy Resources
[phone]
REQUEST:
Please provide all information, studies, analyses, and all supporting documents developed prior
to the time of the transactions by A vista that supports the conclusion that A vista Utilities should
fix the price for CS2 supply" (Exh. 7, Sch.21 page 9).
RESPONSE:
Please see response to Potlatch Data Request No. 38.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU - E-04-0 1 / A VU -04-0 1
Potlatch
Data Request
DATE PREPARED:
WITNESS:
. RESPONDER:
DEP ARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Lafferty
Energy Resources
[phone]
REQUEST:
Name the individual or individuals making the original recommendation to fix the price for CS2
supply and provide a detailed explanation and documentation of the analyses undertaken in
recommending the 36 month and 17 month financial positions.
RESPONSE:
Please see response to Potlatch Data Request No. 35 identifYing individuals involved in the
decision concerning the four hedge transactions and their respective roles. Please see the Pre-
filed Direct testimony and Exhibits of Robert Lafferty and also the response to Potlatch Data
Request No. 38 concerning explanation of and documentation of analyses associated the four
natural gas hedge transactions.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-04-01 / A VU-04-
Potlatch
Data Request
ATE PREPARED:
WITNES S
. RESPONDER:
DEPARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Gorton
Energy Resources
[phone]
REQUEST:
In entering the fixed for floating swaps in April and May 2001 , was A vista Utilities betting that
natural gas prices in subsequent months were going to rise? Please explain and provide all
documentation relied upon for any price view taken and provide all supporting natural gas price
forecasts relied upon.
RESPONSE:
A vista Utilities was not taking a position that natural gas prices in subsequent months were going
to either rise or fall. As explained further in the Pre-Filed Direct testimony of Robert Lafferty,
the Company s purpose was to fix a portion of its natural gas resource portfolio and to secure
some protection from the high and volatile electric power prices. Explanation and
documentation of market information regarding forward natural gas price can be found in the
Pre- filed Direct testimony and Exhibits of Robert Lafferty and also the response to Potlatch Data
Request No. 38.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-04-01 / A VU-04-
Potlatch
Data Request
DATE PREPARED:
WITNES S
. RESPONDER:
DEP AR TMENT:
TELEPHONE:
5/28/2004
Lafferty
Gorton
Energy Resources
[phone]
REQUEST:
In entering the fixed for floating swaps in April and May 2001 , was A vista Energy betting that
natural gas prices in subsequent months were going to fall? Please explain and provide all
documentation relied upon for any price view taken and provide all supporting natural gas price
forecasts relied upon.
RESPONSE:
A vista Energy provided quotes to A vista Utilities based on market information available at the
time. A vista Utlilties used that information as well as other information regarding natural gas
market conditions. Please see the Pre-filed Direct testimony and exhibits of Robert 1. Lafferty as
well as response to Potlatch Data Request No. 38 and 38 (Supplemental), for information
concerning natural gas market conditions.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-04-01 1 A VU-04-
Potlatch
Data Request
DATE PREPARED:
WITNESS:
RESPOND ER:
DEP ARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Gorton
Energy Resources
[phone]
REQUEST:
Please indicate whether the financial settlement gains realized by A vista Energy from the fixed
for floating swaps with A vista Utilities were used to offset PCA balances.
RESPONSE:
No. Please also see response to Potlatch Data Request No. 67.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-04-01 1 A VU-04-
Potlatch
Data Request
DATE PREPARED:
WITNESS:
. RESPONDER:
DEP ARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Gorton
Energy Resources
[phone]
REQUEST:
Please explain the exact, detailed accounting for the financial settlement gains realized by A vista
Energy from the fixed for floating swaps with A vista Utilities.
RESPONSE:
A vista Energy does not track the individual net benefits of natural gas purchase and sale
transactions, but rather manages its entire portfolio of transactions. Consequently, A vista Energy
did not determine specific gains or losses associated with the fixed for floating swaps with
A vista Utilities. A vista Energy tracks gains or losses based on its entire net natural gas purchase
and sale portfolio.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-04-01 1 A VU-04-
Potlatch
Data Request
DATE PREPARED:
WITNES S
. RESPONDER:
D EP AR TMENT:
TELEPHONE:
5/28/2004
Lafferty
Lafferty
Energy Resources
[phone]
REQUEST:
Please list and provide all details of all other fixed for floating swaps entered into by either
A vista Utilities or A vista Energy from January 1 , 2000 to date.
RESPONSE:
Please see response to Potlatch Data Request No. 34(C) pertaining to fixed for floating swap
transactions performed by A vista Energy for A vista Utilities. Details regarding the A vista
Energy fixed for floating swap transactions relevant to natural gas for electric generation are
included in Exhibit No., Schedule No. 21. Please see response to Staff Data Request No. 27
(Supplemental) for details regarding A vista Energy fixed for floating swap transactions relevant
to A vista Utilities core natural gas distribution system customers.
Note that on June 20, 2002 A vista Utilities converted the two financial swap transactions which
had A vista Energy as the counterparty, referred to as Deal B, along with the original physical
purchase at Malin Monthly Index, which was related to Deal B, to one combined physical
purchase at an equivalent fixed price. The conversion transaction saved A vista Utilities the
value of a monthly delayed cash payment on the financial swaps from the 6th working day of the
current month to the 25th of the month following delivery of the gas, or approximately 40 days.
There was no benefit to A vista Energy from this conversion. This conversion also eliminated the
monthly settlement as would normally occur with a financial swap transaction.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU - E-04-0 1 / A VU -04-0 1
Potlatch
Data Request
DATE PREPARED:
WITNESS:
. RESPONDER:
DEP ARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Lafferty
Energy Resources
[phone]
REQUEST:
Please indicate whether any other party served as a sleeve for financial transactions between
A vista Utilities and A vista Energy and, if so, identify the party.
RESPONSE:
The Company is not aware of any party as having served as a sleeve for financial transactions
between A vista Utilities and A vista Energy.
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
Idaho
A VU - E-04-0 1 1 A VU -04-0 1
Potlatch
Data Request
DATE PREPARED:
WITNESS:
RESPOND ER:
DEPARTMENT:
TELEPHONE:
5/28/2004
Lafferty
Gorton
Corporate Risk
[phone]
REQUEST:
Please indicate whether A vista Energy served as a sleeve for financial transactions between
A vista Utilities and any another party.
RESPONSE:
No.
CONFIDENTIAL
ATTACHMENTS