20081031Decision Memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER RED FO RD
CO MMISSI 0 NER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:T J GOLO
DON HOWELL
DATE:OCTOBER 31 2008
RE:VISTA TARIFF IPUC NO. 28, ELECTRIC SERVICE
RESIDENTIAL AND SMALL FARM ENERGY RATE ADJUSTMENT
CREDIT, CASE NO. A VU-08-
On October 1 , 2008, A vista Utilities filed a proposal with the Commission to modify
its tariff Schedule 59 - Residential and Small Farm Energy Rate Adjustment Credit. The
Company s proposed revision of Schedule 59 reflects a rate adjustment related to the Residential
Exchange Program (REP) benefits that A vista will receive under its new Residential Purchase
and Sale Agreement (RPSA) with the Bonneville Power Administration (BP A) dated September
, 2008. The REP benefits relate to BPA's 2009 fiscal year. Avista initially reported that its
share of the REP benefits applicable to Idaho s eligible residential and small farm customers was
$974 000. Initial Transmittal Letter.
On October 24, 2008, A vista amended its request. The Company explained that BP A
reduced the amount of REP benefits apportioned to the Company. A vista now reports the REP
amount for Idaho is $762 200. Amended Transmittal Letter. The Company renewed its request
for an effective date of November 2008.
DECISION MEMORANDUM - 1 -
THE APPLICATION
A vista noted that it is an understatement to say the Company is extremely
disappointed with BP A's decision to provide significantly-reduced benefits for A vista customers
for 2009. Additionally, BPA failed to deliver the benefits to Avista and the region s other
investor-owned utilities that were detailed in the Joint Settlement Recommendations of
November 2007, and as committed to by the majority of the region s public and investor-owned
utilities to resolve the residential exchange debacle.
The benefit amount to be received from BPA for FY 2009 is based on Avista s new
average system cost and BP A's Final Record of Decision in the WP-07 Supplemental rate case.
BPA reduced Avista s gross benefit amount from an initial amount of $22.09 million to $19.
million for FY 2009. From this subsequent amount, BP A further subtracted $15.11 million, to
extinguish the contested "Deemer Account" calculated by BP A under the 1981 RPSA. Of the
remaining balance of $4.54 million, BPA then assigns $2.18 million to BPA's "Lookback
Amount", leaving a total of$2.35 million to be distributed to Avista s electric customers in both
Idaho and Washington.
The recent RPSA that A vista signed with BP A includes a provision in Section 20 that
preserves "any arguments or claims it (A vista J has made or may make, or any rights or
obligations it has or may have" related to the calculation, implementation or settlement of REP
benefits to A vista s customers for any period of time. As the Commission is aware, the new
RPSA continues the deemer mechanism renamed as the "Balancing Account" in Section 12.
I The Lookback Amount represents BPA's determination of how much its preference customers were "overcharged"
pursuant to BPA's improper allocation of REP Settlement costs in the WP-02 case. The $2.18 million is the
Lookback Amount to be recovered from A vista for FY 2009.
DECISION MEMORANDUM - 2 -
A vista proposes that the existing interim REP credit from earlier this year be reduced
from 0.554~/kWh to 0.057~/kWh and be "passed through" to customers beginning November 1
2008 through October 31 , 2009. The proposed rate credit is 0.497~/kWh less than the existing
rate credit. Implementing the new, reduced REP credit of 0.057~/kWh will result in a net
monthly increase of $4., or a 6.63% increase for a customer using 000 kWh per month. The
actual increase will vary based on customer usage. The proposed rate credit will have no effect
on Avista s net income.
STAFF REVIEW
The Company submitted workpapers supporting the calculation of the REP credit.
The original filing on October 1 , 2008, had a total benefit amount of approximately $974, 000
and the proposed rate credit was 0.073~/kWh. After the Company filed its proposed tariff
A vista advised Staff that BP A subsequently reduced the total amount of A vista s credit.
Therefore, the total benefit amount applicable to Idaho customers is now $762 200 (a reduction
of$211 800) and the proposed rate credit is 0.057~/kWh.
Staff submitted a Decision Memorandum containing the Company s estimated rate
credit from BPA to the Commission on Friday, October 2008 for the Commission s decision
meeting on Monday, October 2008. This memorandum was "held" by the Commission until
the entire Commission could review Schedule 59. This present memorandum contains the final
rate credit data rather than the estimated REP credit data.
The REP calculation starts with the benefit amount of $762 575 applicable to Idaho
customers. Avista adjusted this amount to include: (1) the over-refunded balance at the end of
the existing rate; (2) additional interest of 5% applied to about 50% of the balance during the 12-
month refund period; and (3) the revenue conversion factor of 0.995358, making the total
DECISION MEMORANDUM - 3 -
amount of REP credit $709 433. The conversion factor is the difference of revenue of 1.00
minus the sum of uncollectible fees and IPUC fees of 004642. The Company s projected
kilowatt-hours for all qualifying residential and small farm customers during the 12-month
refund period is 1 245 598 000 kilowatt-hours. The total credit amount is divided by the project
energy used to obtain the proposed credit amount of 0.057~/kWh. With the two exceptions
noted below, Staff believes the proposed credit amount ofO.057~/kWh is reasonable.
The Company initially submitted the proposed tariff modifications to the Commission
and requested it to be processed under Modified Procedure. However, Staff recommends that
this filing be processed as a tariff advice under Rule 134 because the rate adjustment is a "pass-
through" credit from BPA. 16 U.C. ~ 839c(c)(3). Public comments will not affect the amount
of REP credit. The Company has issued an individual notice to the customers. Staff believes
that the proposed credit amount by the Company is accurate. Consequently, Staff asserts that
processing this filing as a tariff advice is reasonable.
During the review of this filing, Staff also noticed that uncollectible fees and
regulatory fees were applied to the revenue conversion factor that affects the credit amount
passed through" to the customers. Staff believes these fees should only be applied to the
operating revenue of the Company. These two fee adjustments should not be applied because the
REP credit is not "operating revenue" from intrastate operations. The Commission s annual
regulatory assessment is based upon "intrastate operating revenue" and the REP credit is not.
Idaho Code 61-1003. This adjustment may only be about 000. Likewise, Staff believes that
imposing and "uncollectible" adjustment is inappropriate because over/under-collection of the
REP account is rebalanced at the end of each credit year.
DECISION MEMORANDUM - 4 -
STAFF RECOMMENDATION
Staff recommends that the Commission approve the new tariff rate of 0.057~/kWh
effective November 1 , 2008 , but reserve the two Staff issues for future resolution. Reserving the
two issues will allow the new REP credit to go into effect, and allow Staff and the Company time
to resolve these issues. The outcome of the two issues can be trued-up at the end of the REP
year. Staff further recommends that this matter be treated as a tariff advice under Rule 134 given
the press of time and the "pass-through" nature of the REP credit. The Commission exercises no
jurisdiction over the calculation of the total amount ofREP credits.
CO MMISSI ON D ECISI
1. Does the Commission wish to approve Avista s proposed 0.057~/kWh "pass-
through" revision to its Tariff Schedule 59 Residential and Small Farm Energy Rate
Adjustment Credit, with a retroactive effective date of November 2008?
2. Does the Commission desire to reserve the two Staff issues for further review?
TJ Golo
Don Howell
Attachments
A VU-O8-tLdh
DECISION MEMORANDUM - 5 -
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~e;TarifflP.C. No. 28, Electric Service
Residential and Small Farm Energy Rate Adjustment Credit
Substitute Ta,riffFiling
Dear Ms. Jewell:
Attached for filing with the Commission is one copy of the following tariff sheet:
Substitute Ninth Revision Sheet 59 Canceling Eighth Revision Sheet 59
Please substitute the attached tariff sheet for Ninth Revision Sheet 59 that was issued
September 30,2008. Avista requests that the proposed substitute tariff sheet be approved
to become effective on November 1, 2008, as the existing credit on Eigb.th Revision Sheet
59 expires 011 October 31,2008. AlsQenc1osed is a tariffsheet showing changes by using
strikeouts and underlining.
The proposed substitute tariff sheet reflects a rate adjustment related to a revised, lesser
amount of residential exchange program benefits that Avista is expected to receive from
the Bonneville Power Administration (BP A) related to BP A's 2009 fiscal year. A vista'
prior tariff filing was b3$ed on a $973,500 benent applicable to Idaho qualifying
residential and small farm customers. The benefit has been revised downward from
$973,500 to $762 600.
Attachment A is a spreadsheet prepared by BP A showing the calculation of the revised
benetit amount of$2.35 million to be distributed to electric customers we serve in both
our Idaho and Washington jurisdictions. The Idaho share of the $2.35 -million amounts to
$762,600.
Attachment B consists of workpapers that show the derivation of the proposed 0.051 per
kilowatt-hour rate credit to pass through the revised program benefit amo~t during the
period of November 1 2008 through October 31 2009. The proposed rate credit of
057~' is OA97~ less than the existing rate credit of 0.554~, which the new credit will
replace. Implementing the new, lower rate creditofO.O57~ per kilowatt-hour would
result in a monthly increase of $4., or a 6.63% increase for a customer-using 1 .000
kilowatt-hours per month as compared with existing rates. The actual increase will vary
based On customer usage. The proposed rate credit will have no effect on Avista's net
tnC()me.
A vista infonned customers" of the initial rate filing using a customer notice as a bill insert.
Customers will be infonned of the lower benefit level and the resulting lower rate credit
through newsletters included as bill inserts. The proposed tariff is also available on
Avista's website at www.avistautilities.com. Please direct any questions regarding this
filing to Roil McKenzie at [phone].
Sincerely,
J,,
Kelly Norwood
Vice President State and Federal Regulation
Attachments
Avi$t(;i Corporation
Residential Exchange - State of Idaho
Proposed Rate
November t 2008 - October 31. 2009
FY'09 expected payments - total system
Idaho percentage
Idaho share
Estimated over-refunded balance at end of existing rate
Net benefit for rate adjustment
Estimated interest during 12-month refund period
(5.0% applied to 50% of balance)
Subtota1
C~mversiQn f(:lctor - revenue related items
Revanue requirement
Projected kWh 11 f1/0&-1 0/31/09
Proposed rate credit
Rate Impact
Proposed rate credit above
Existing rate credit
Difference
In(:rease hi bill for 1,000 kWh
Bill for 1 000 kWh at Stipulation rates with all adders
Proposed rate increase
Percent increase
Attachment B
Pag~ 1 of2
350 000
32.45%
$762.575
73,658
-688 917
17,223
$706,140
995358
$709,433
245 598 000
$0.00057
$0.00057
$0.00554
$0.00497
$4.
$74.
$4.
63%
J.P.C. No. 28
Substitute Ninth Revision Sheet 59
Canceling
Eighth Revision Sheet 59
AVISTA CORPORATION
dba Avista Utilities
SCHEDULE 59
RESIDENTIAL AND FARM ENERGY RATE ADJUSTMENT - IDAHO
APPLICABLE:
To Residential Customers in the State of Idaho where Company has electric
service available. This rate adjustment results from an Agreement between the
Company and Bonneville Power Administration (BPA) covering Residential
Exchange Program benefits. The rate adjustment in this schedule shall be
applicaple to customers served under Schedules 1 , 12, 22 , 32 and 48.
MONTHLY RATE:
The energy charges for all blocks of electric Schedules 1 , 12, 22 and 32 and
the charges for area lights based on the energy usages of the lights on Schedule
48 are to be reduced by O.O57~ per kWh.
SPECIAL TERMS AND CONDITIONS:
The rate adjustment under this schedule is subject to revision to reflect the
true up from estimated to actual benefits and to reflect projected future benefits. In
the event the credits applied under this schedule exceed the benefits; the
Company will adjust the rate on this schedule to recover that difference.
The energy credit applied to Schedule 32 for farm irrigation and pumping
load , for each billing period, shall not exceed the amount of energy determined by
the following formula:
400 x 0.746 x days in the billing period x 24
In no instance shall any qualifying irrigation and pumping load for any month
exceed 222 000 kWh.
Service under this schedule is subject to the Rules and Regulations
contained in this tariff.
The above rate is subject to the provisions of Tax Adjustment Schedule 58.
Issued October 24, 2008 Effective November 1. 2008
Issued by Avista Utilities By
:NI'L
Kelly Norwood - Vice President, State and Federal Regulation
I.P.C. No. 28
Eighth Revision Sheet 5,
Canceling
Seventh Revision Sheet 59
AVISTA CORPORATION
dba Avista Utilities
SCHEDULE 59
RESIDENTIAL AND FARM ENERGY RATE ADJUSTMENT - IDAHO
APPLICABLE:
To Residential Customers in the state of Idaho where Company has electric
service available. This rate adjustment results from an Agreement between the
Company and Bonneville Power Administration (BPA) covering Residential
Exchange Program benefits. The rate adjustment in this sch~ule shall be
applicable to customers served under Schedules 1 , 12, 22, 32 and 48.
MONTHLY RATE:
The energy charges for all blocks of electric Schedules 1 , 12 , 22 and 32 and
the charges for area lights based on the energy usages of the lights on Schedule
48 are to be reduced by 554~per kWh. O.057
SPECIAL TERMS AND CONDITIONS:
The rate adjustment under this schedule is subject to revision to reflect the
true up from estimated to actual benefits and to reflect projected future benefits. In
the event the credits applied under this schedule exceed the benefits; the
Company will adjust the rate on this schedule to recover that difference.
The energy credit applied to Schedule 32 for farm irrigation and pumping
load, for each billing period, shall not exceed the amount of energy determined by
the following formula:
400)( 0.746 x days in the billing period x 24
In no instance shall any qualifying irrigation and pumping load for any month
exceed 222,000 kWh.
Service under this schedule ;s subject to the Rules and Regulations
contained in this tariff.
The above rate is subject to the provisions of Tax Adjustment Schedule 58.
Issued March 12 2008 Effective April 11 , 2008
Issued PY Avista Utilities
Kelly Norwood - Vice President. State and Federal Regul~tlon