20150911AVU to Staff 120.doc

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 09/10/2015
CASE NO.: AVU-E-15-05/AVU-G-15-01 WITNESS: Patrick Ehrbar
REQUESTER: IPUC RESPONDER: Patrick Ehrbar
TYPE: Production Request DEPARTMENT: State & Federal Regulation
REQUEST NO.: Staff - 120 TELEPHONE: [phone]

REQUEST:

The Company’s FCA proposal assumes it incurs and therefore should recover the full embedded fixed costs for each new customer. Please provide evidence to support the position that each new customer causes the Company to incur additional expenses (e.g. generation and transmission). Furthermore, please explain how additional fixed costs recovered through the FCA will be verified between rate cases.

RESPONSE:

The Commission approves rates at the end of a general rate case that are designed to provide for the recovery of the Company’s costs. These rates are applicable not only to existing customers but also new customers that are added to the system after rates go into effect. The margin from new customers is used not only to recover the cost of their line extension, but also to recover increases in costs that occur in between general rate cases. Pro forma adjustments are not made in a rate case for all changes in operating expenses, and growth in margin is necessary to cover these increases in costs. Because the new and existing customers pay the same rates to recover embedded and new costs, the Company believes that applying the same FCA components to new and existing customers is a reasonable approach.

However, the Company understands that Staff is concerned about the application of fixed generation and transmission costs to new customers that are hooked up after the test year. While the Company believes that fixed generation and transmission costs should be included, it has prepared and is willing to consider, a modified electric Fixed Cost Adjustment mechanism where new customers are tracked as a separate group from the test year level of customers. The Fixed Cost Adjustment Revenue per Customer for the new customer group would be based only on distribution and common fixed costs (see the Company’s response to Staff -125 for the calculation of those values).

Provided as Staff_PR_120 Attachment A is a revised version of Exhibit No. 15, Schedule 7, which incorporates the proposed changes.

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