20150818AVU to Staff 80.doc

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/12/2015
CASE NO.: AVU-E-15-05/AVU-G-15-01 WITNESS: Tara Knox
REQUESTER: IPUC RESPONDER: Tara Knox
TYPE: Production Request DEPARTMENT: State & Federal Regulation
REQUEST NO.: Staff - 080 TELEPHONE: [phone]

REQUEST:

On pages 12 through 15 of Ms. Knox' testimony, the Company proposes changing the method it uses to classify and allocate production costs from its traditional replacement-cost-based peak credit methodology (traditional methodology) to a methodology based on system-wide load factor (load factor methodology). Under the traditional methodology, the costs of fuel, load dispatch, and water for power generation are classified as energy related costs. Under the load factor methodology, these costs would be allocated to both energy and demand using the Company's system wide load factor. Please answer the following:
a. Why does the Company believe it to be preferable to classify fuel, load dispatch, and water costs to both energy and demand under its proposed load factor methodology?
b. Did the Company consider continuing its practice of classifying these as energy related costs under the load factor methodology? If so, how did this affect the total cost allocation for each customer class?

RESPONSE:

One of the primary benefits of the load factor methodology is that one classification ratio is applied to all production costs, providing simplicity and stability. The load factor is a representation of the production function as a whole thereby providing a broader perspective that is intended to be applied across the board.
No. A continuation of the piecemeal classifications from the traditional methodology on selected items would defeat the purpose of using the load factor whole system based methodology and would over-emphasize the aspects being singled out. The Knox work papers (COS-178) included a comparison of the total costs assigned to each customer class using the proposed peak credit methodology versus the traditional peak credit methodology. Staff_PR_080 Attachment A provides copy of this work paper for your convenience.

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