20100910AVU to Clearwater 1-9.pdf

Avista Corp.
1411 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170 l\i
AVISTJI.
Corp.
iOl8SEP l 0 AM 8: 13
August 25,2010 I
UTli.
Richardson & O'Lear, PLLC
Mr. Peter Richardson
515 N. 27th Street
Boise, il 83702
Re: Production Request of Clearater Paper Corporation in Case Nos. A VU-E-1O-03
Dear Mr. Richardson,
Enclosed are original copies of Avista's responses to Clearater Paper Corporation's production
requests in the above referenced docket. Included in ths mailng are Avista's responses to
production requests 01 through 09.
If there are any questions regarding the enclosed information, please contact me at (509) 495-
4584 or via e-mail atpau1.kimba1l~avistacorp.com
Enclosures
CC (Email):Dr.DonReadig(dreading~midsprig.com)
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
A VU-E-I0-03
Clearater Paper
Production Request
Clearwater-Ol
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMNT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Wiliam Johnson
Power Supply
[phone]
REQUEST:
The table on page 3 of the Direct Testimony of Wiliam G. Johnson indicates the "Change in Retail
Loads" contributes $2.9 milion to the net deferral surcharge of$16.4 milion.
(a) Please provide an explanation of how this value was derived, and whether this value is
associated with Avista's Retail Revenue Credit Rate.
(b) Please provide in electronic form the components that are used in derving this value.
(c) Does this value include transmission expenses?
(d) Please provide a history over the past 5 years of the impact of the "Change in Retail
Loads" on power supply expense filings and rate changes.
(e) Please explain why A vista believes ratepayers should compensate the Company for
loss of loads through the PCA, even though fewer kilowatt-hours were demanded by
customers.
RESPONSE:
a) Please see worksheet provided in electronic form showing how the impact ofload varation
in the PCA was derived, and how the Retail Revenue Credit Rate is incorporated into the
calculation. The $2.9 milion retail load change impact value is calculated by multiplying the
change in load (Idaho allocation) by the market price of electrcity and then netting this value with
the retail revenue credit. For the July 2009 through June 2010 period loads were lower, which
reduced power supply expense by approximately $7.4 milion (Idaho allocation). The retail
revenue credit was approximately $10.3 milion in the surcharge direction. Netted together the
impact of retail load change was approximately $2.9 milion in the surcharge direction.
b) See response to part a above.
c) Transmission expense is included to the extent that the retail revenue credit rate is the
average cost of production and transmission.
d) The table below shows the impact on the PCA of system load varation from the authorized
level calculated in a manner consistent with the calculation for the impact in the July 2009 through
June 2010 period. The table shows that in the three PCA years priors to the period in the case the
system loads were higher than the authorized level, and the impact on the PCA was in the
surcharge direction. The impact of load varation was not calculated for the Jul~005 tloughJune 2006 PCA perod. ? e;
-õ CI--j. c:ri1.... ..(!"-,,~.J C)
(2'.'(\ 0
PCAPeriod
System Load
Varation from
Authorized
Impact of
System Load
Varation 5t
co..
,:::i
Jul 05 - Jun 06 NA NA .r
,""
Response to Staff Request No. 349
Page 2
Jul 06 - Jun 07
Jul 07 - Jun 08
Jul 08 - Jun 09
Jul 09 - Jun 10
+92.0aM
+122 aMW
+5.9aM
-66.4 aM
$4,125,023
$5,785,986
$4,127,328
$2,910,762
e) The Company uses the average cost of production and transmission as the retail revenue
credit rate in the PCA. This was proposed by the Company in Case No. A VU-E-09-01. In the
Stipulation and Settlement of that case, the Company agreed to supply all the PCA authorized
values, including the retail revenue credit in a compliance filing. The Commission approved the
Stipulation and Settlement in Order No. 30856, dated July 17, 2009.
The average production and transmission cost represents the power component of retail rates,
and is the revenue collected from customers to recover power and transmission costs. Using the
average cost of production and transmission as the retail revenue credit in the PCA ensures that the
actual revenue collected from customers, when retail sales are higher than the authorized level, is
credited back against the increased power supply expense and only the difference between the
actual cost of power and the amount of revenue collected from customers is included in the PCA.
The average production cost also works equally well when actual sales are lower than the
authorized sales. In that case, actual power supply expense is lower because loads are less than the
authorized leve1. The retail revenue credit adjusts for the increased wholesale revenue the
Company received and that is credited to customers in the PCA. To not include a retail revenue
credit when loads are less than the authorized level would equate to customers receiving all the
value of increased wholesale revenues without having to pay for any of the expense of generating
the energy that is sold.
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A VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
AVU-E-10-03
Clearater Paper
Production Request
Clearwater-02
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Wiliam Johnson
Power Supply
[phone]
REQUEST:
If the $2.9 milion amount specified in Request NO.1 does not account for Avista's Retail Revenue
Credit Rate, please provide the following:
.
(a) Please provide the rate impact of Avista's Retail Revenue Credit Rate in this PCAcase,
and an explanation of how this value was derived.
(b) Please provide in electronic form the components that are used in deriving this value.
( c) Does this value include transmission expenses?
(d) Please provide a history over the past 5 years of the impact of Avista's Retail
Revenue Credit Rate on power supply expense filings and rate changes.
(e) Please explain why the Avista believes ratepayers should compensate the Company for
loss of loads through the PCA, even though fewer kilowatt-hours were demanded by
customers.
RESPONSE:
The $2.9 milion amount specified in Request NO.1 does account for Avista's Retail
Revenue Credit Rate.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
AVU-E-10-03
Clearwater Paper
Production Request
Clearater-03
DATE PREPARD:
WITESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Wiliam G. Johnson
Energy Resources
[phone]
REQUEST:
Reference IPUC Order No. 31033, at p. 12. In PacifiCorp's 2010 PCA, the Commission stated
that in times of declining loads PacifiCorp's load growth adjustment mechanism "appears to
operate much the same as a decoupling mechanism reimbursing the Company for lost revenue for
reductions in customer usage (sales)."
(a) Is Avista's Retail Revenue Credit Rate operating much the same as a decoupling
mechanism in this PCA case? Please explain.
(b) What power supply cost is the Company recovering with its Retail Revenue Credit Rate
in this case (e.g., gas costs, power purchase costs, retu on rate base, etc.)?
(c) Please explain the rationale for utilzing Avista's Retail Revenue Credit Rate for the
deferral period in this case where loads are declining.
(d) Please cite or provide the Commission order authorizing A vista to utilze the Retail
Revenue Credit Rate during a deferral period with declining loads.
RESPONSE:
(a) No. The retail revenue credit in the PCA deferal calculation does not operate as a
decoupling mechanism. A decoupling mechanism normally is designed to eliminate or minimize
changes in total retail revenues due to changes in loads. Avista's retail revenue credit in the PCA
does not do that.
The retail revenue credit only accounts for changes in power production costs and
revenues, and not in changes to the entire retail revenues. Prior to October 2008 the retail revenue
credit in the PCA was based on the marginal cost of power. The retail revenue credit was based on
the average cost of production for the months of October 2008 through December 2008, and
returned to being the marginal cost of power in January 2009. Then, beginning in August 2009,
the retail revenue credit rate was based on the average cost of production and transmission. The
August 2009 rate was less than the rate that it replaced. The rate went from $0.05363 to $0.04323
per kilowatt-hour.
(b) The retail revenue credit is based on the average cost of production and transmission. All
production and transmission costs, including return on rate base are included.
(c) The retail revenue credit is designed and authorized to operate when retail loads are higher
or lower than authorized retail loads. When loads are higher than authorized, the additional
production and transmission related revenue received from customers is credited back against the
increased power supply costs to serve the additional load. Likewise, when loads are lower than
authorized, the lost production and transmission related revenue is charged against the lower
power supply costs to serve the reduced load.
Response to Clearater Paper NO.3
Page 2
It is not appropriate to exclude changes in costs and revenues from the retail revenue credit
when loads are less than authorized, but include the costs and revenues when loads are higher than
authorized. Such a one-way ratchet mechanism would virtally assure under-recovery of
expenses if only one month during a PCA period had loads lower than the authorized leveL. With
the retail revenue credit, the Company is stil at risk for all non-power supply related cost and
revenue changes.
(d) The most recent retail revenue credit of $0.04323 per kilowatt-hour was submitted to the
Commission per the Stipulation and Settlement approved in Case No. A VU-E-09-0l by Order No.
30856 dated July 17, 2009.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMTION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
A VU-E-1O-03
Clearater Paper
Production Request
Clearater-04
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Wiliam Johnson
Power Supply
[phone]
REQUEST:
Footnote 3, page 2, of the Direct Testimony of Wiliam G. Johnson states:
The PCA tracks 100% of the varation in Clearater Paper generation power
purchase expense and Clearater Paper retail revenue related to their
generation leve1. Clearwater Paper's generation durng the review period was
less than the authorized level, which results in a PCA deferral in the rebate
direction because the reduction in the power purchase expense exceeded the
reduction in the retail revenue related to the generation leve1.
Please provide in electronic form the data used to calculate the Clearater Paper adjustment of
$19,299 referenced in footnote 3.
RESPONSE:
The data used to calculate the Clearwater Paper adjustment of$19,299 in the rebate direction
referenced in footnote 3 is contained on page 1 of Mr. McKenzie's workpapers. It is the sum of the
lines labeled "Clearwater Purchase" and "Clearwater Revenue", located 6 and 5 rows from the
bottom of the worksheet.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
A VU-E-I0-03
Clearater Paper
Production Request
Clearater-05
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Wiliam G. Johnson
Energy Resources
[phone]
REQUEST:
The Direct Testimony of Wiliam G. Johnson states, on page 4, "Retail loads were 66.4 aM
below the authorized level due primarly to winter temperatures that were significantly warer
than norma1."
(a) Please provide temperatures and consumption data monthly for July 2009 through June
2010, or other data supporting this asserion.
(b) Please provide normal temperatues for those same months.
(c) Are there any other possible causes of retail loads being 6.1 % lower than authorized
levels during the deferral period? Please explain.
RESPONSE:
(a)See table below showing actual and normal heating degree days, actual and normal cooling
degree days and actual and authorized Idaho retail consumption from July 2009 through
June 2010.
Month Actual Actual Normal Normal ActualID Authorized ID
DDH DDC DDH DDC Retail Sales Retail Sales
Jul2009 17 245 35 178 239,283,357 254,119,373
Aug 2009 23 196 34 159 236,585,985 263,717,525
Sep 2009 103 78 185 34 224,629,398 242,515,323
Oct 2009 668 0 540 1 244,591,001 259,188,313
Nov 2009 834 0 889 0 263,694,870 268,154,172
Dec 2009 1,252 0 1,157 0 305,575,940 300,014,410
Jan 2010 919 0 1,120 0 284,153,641 301,203,142
Feb 2010 751 0 913 0 253,896,693 281,271,855
Mar 2010 733 0 776 0 241,128,536 271,575,780
Apr 2010 538 0 542 0 224,898,190 259,299,453
May 2010 420 4 323 14 226,908,772 256,228,002
Jun 2010 190 19 143 48 214,683,435 238,146,919
Total 6,448 542 6,657 434 2,960,029,818 3,195,434,267
(b) See table above showing normal heating and cooling degree days from Case No.
A VU-E-I0-0L. These values represent the mathematical average of the past 30 years
monthly heating and cooling degree days reported for the Spokane Interational Airport
National Weather Service weather station.
( c) The authorized Idaho retail loads were from the forecast of expected Idaho retail loads
directly associated with the system total power supply loads used to deterine the
authorized power costs. Forecasts are not perfect and actual results may be higher or lower
than any given forecast even under normal weather conditions, however, weather is always
an integral component in usage consumption varabilty for non-industral customer
groups.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
A VU-E-I0-03
Clearater Paper
Production Request
Clearwater-06
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Wiliam Johnson
Power Supply
[phone]
REQUEST:
In support of allocating PCA costs on an equal cents per kWh basis, Commission Staff testified
that varable "power supply costs that are captued in the PCA mechanism are directly related to
the variable costs of providing energy. Thefìxed costs of power supply are not captured in the
PCA." Direct Testimony of Keith Hessing, Commission Staff, Case Nos. A VU-E-04-1 and
A VU-G-04-1, at p. 23 (June 21,2004). But in this case the Direct Testimony of Wiliam G.
Johnson, at page 3, indicates that the Company's fiing includes a request for recover of 100% of
the Lancaster fixed costs for the deferral period - a quantity of approximately $6 milion. Does
A vista believe it is appropriate to allocate such fixed costs among customer classes on a equal
cents per kWh basis rather than as a uniform percentage of revenue basis per customer class?
Please explain.
RESPONSE:
The Lancaster fixed costs are not the same as the fixed costs of Company owned generating
resources. All the Lancaster "fixed costs" fall into FERC Accounts normally tracked by the PCA,
including Account 555 for the power purchase agreement charges, 565 for the BPA transmission
expenses and 547 for the Lancaster gas transportation expenses. They are termed "fixed costs"
because, in general, their levels don't vary with changes in generation. In fact, all Lancaster's
expenses and revenues are included in accounts normally tracked by the PCA, so there aren't any
Lancaster fixed costs in the way the term was used in Mr. Hessing's testimony. Therefore it is
appropriate to allocate all Lancaster costs among customer classes on an equal cents per kWh as is
the case with other normal power supply costs that are captued in the PCA mechanism.
A VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMTION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
AVU-E-I0-03
Clearater Paper
Production Request
Clearater-07
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Ronald L. McKenzie
State & Federal Regulation
[phone]
REQUEST:
The table on page 3 of the Direct Testimony of Wiliam G. Johnson indicates the "Centralia
Refud Adjustment" reduces the deferral surcharge by $189,607 milion. Please explain the
derivation of this value.
RESPONSE:
The dervation ofthe Centralia Refund Adjustment is explained in Mr. McKenzie's testimony,
beginning on page 3, line 22.
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
REQUEST:
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
IDAHO
A VU-E-I0-03
Clearater Paper
Production Request
Clearwater-08
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Wiliam G. Johnson
Wiliam Johnson
Power Supply
[phone]
The Direct Testimony of Wiliam G. Johnson, on p. 3, indicates that the change in market
prices on net power purchase expense is negative $1,795,124. Please explain the dervation of this
value.
RESPONSE:
Please see the worksheet provided in electronic form in Clearater Data Request No, 1, which
shows the calculation of the impact ofthe change in market prices on power supply expense in the
PCA.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUSDICTION:
CASE NO:
REQUESTER:
TYE:
REQUEST NO.:
IDAHO
A VU-E-IO-03
Clearater Paper
Production Request
Clearater-09
DATE PREPARD:
WITSS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
08/24/2010
Ronald L. McKenzie
Paul Kimball
State & Federal Regulation
[phone]
REQUEST:
Please provide copies of all discovery responses A vista makes to the Idaho Public Utilties
Commission Staff and any other intervenor.
RESPONSE:
IPUC Staff came to Avista's main office durng the week of August 2nd to conduct an audit related
to Avista's PCA filing. Avista has not received any data requests at this time, but Avista wil
provide copies of data requests, along with corresponding data responses, from all parties to this
proceeding as they are received.