20150911AVU to Staff 127.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 - 127 TELEPHONE: [phone]

REQUEST:

In general, one concern with FCA mechanisms has been the layering effect of unverified fixed costs between rate cases. Because FCA mechanisms provide additional revenue beyond the rate case approved total revenue requirement, did the Company consider alternative FCA approaches or reporting requirements to resolve this concern (i.e., Unbundling Reports)? If not, explain why not.

RESPONSE:

In a general rate case, the final approved revenue requirement is set to be recovered from rates that are based on the Commission approved rate design and billing determinants. While the approved revenue requirement is a static number, actual revenues will vary once the new rates go into effect. The effects of energy efficiency, weather, as well as the addition of new customers, can lead to an increase, or decrease, in actual Company revenue. For example, if the Company added 1,000 new customers after new rates went into effect, the Company would use that additional revenue to cover the increased costs associated with serving them, as well as other increases in costs that are not pro formed in a general rate case. In short, changes in customer usage already provide a different level of revenue “beyond the rate case approved total revenue requirement”.

What the FCA mechanism is intended to do is track, on a per customer basis, how much of the Company’s approved level of fixed costs, recovered in variable energy rates, were actually received in a given time period. If the Company received actual fixed cost revenue in excess of what was allowed, under the FCA it would set aside that money for later rebate.

While the Company has not otherwise considered other FCA approaches, it has calculated an alternative method of its filed FCA in its response to Staff Request No. 120.

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