20150818AVU to Staff 81.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 - 081 TELEPHONE: [phone]

REQUEST:

Under the Company's traditional methodology, the costs of peaking units are classified entirely as demand related, and the costs of hydro and thermal base generating units are classified as both energy and demand related. Under the load factor methodology, all production plant costs would be allocated to energy and demand using the Company's system-wide load factor. Please answer the following questions:
a. Why does the Company believe it to be preferable to classify peaking unit costs to both energy and demand under its proposed load factor methodology?
b. Did the Company consider continuing its practice of classifying peaking unit costs to demand under the load factor methodology? If so, how would this affect the costs allocated to 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. A copy of this work paper was also provided as an attachment to the Company’s response to Staff_PR_080.

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