20150812AVU to Staff 55.docx

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATIONJURISDICTION:IDAHODATE PREPARED:07/30/2015CASE NO.:AVU-E-15-05/AVU-G-15-01WITNESS:Scott KinneyREQUESTER:IPUCRESPONDER:Pat Gorton/John LyonsTYPE:Production RequestDEPARTMENT:Energy ResourcesREQUEST NO.:Staff-055TELEPHONE:[phone]REQUEST:
Please explain how the Company analyzes the market risks due to short-, medium-, and long-term wholesale transactions (See Kinney DI, pg. 7, line 21). How does the Company ensure the risk policies are complied with?RESPONSE:
The Company has in place a number of processes and tracking tools to analyze market risks in the various time frames. First and foremost, the Company has an obligation to serve customer loads with physical power and manage variations within the hour per NERC Reliability Standards. The immediate time frame related to operation of generation and transactions during the current month is considered operational and is not the focus of the Avista Utilities Energy Resources Risk Policy (Risk Policy).
The Company plans for the current month using an analytic tool “Power Supply Hedge Requirements Report” (PSHRR). The PSHRR is updated daily for estimates of load and economic available generation. The report also pulls in all forward transactions and current forward market pricing to estimate a financial position. This daily analysis provides a framework for a process to systematically reduce open financial positions for the prompt month out to 41 months.
The Company also monitors credit exposure to and from all active counterparties on a daily basis. Credit exposure is a combination of current payables and receivables and all forward market exposure. The forward market exposure is the result of comparing all fixed priced forward transactions to current market prices.
The Company has in place controls related to risk policies, separation of duties and verification processes. All wholesale transactions for power and gas are entered into an energy transaction management system (Nucleus). Energy is scheduled in this system and counterparties are invoiced or paid based on transactions and pricing in the system. Employees responsible for wholesale transactions acknowledge annually that they are familiar with and adhere to the risk policies and specifically the Risk Policy.