HomeMy WebLinkAbout20001130_sw.docDECISION MEMORANDUM
TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
DON HOWELL
RANDY LOBB
DAVE SCHUNKE
TONYA CLARK
TERRI CARLOCK
ALDON HOLM
WORKING FILE
FROM: SCOTT WOODBURY
DATE: NOVEMBER 30, 2000
RE: CASE NO. AVU-G-00-4 (AVISTA)
INTEREST RATE – DEFERRED GAS COSTS
On November 29, 2000, Avista Corporation dba Avista Utilities – Washington Water Power Division – Idaho (Avista) filed an Application with the Idaho Public Utilities Commission (Commission) requesting a change in the interest rate applied to deferred gas costs, costs recorded monthly in Accounts 191.30 and 191.31. The interest rate presently applied to the balance in these accounts is the customer deposit rate, a rate that is published annually by the Commission. The current customer deposit rate is 5.0%. Avista indicates that this rate is substantially less than its short term borrowing rate. Short term borrowings, the Company states, are used to finance the balance of deferred gas costs. The Company proposes to utilize a rate that is representative of its short term borrowing costs.
As represented by the Company, its present (variable) short term borrowing cost is approximately 7.5%, excluding fixed charges and fees. Fixed charges and fees currently add about 1% to the rate. Recent increases in gas prices, the Company states, have caused the Company’s deferral balance to increase substantially. Without a compensatory rate applied to the deferred balance, the Company states that it has a financial incentive to collect a deferred balance owing the Company as quickly as possible and to refund a balance owing customers as slowly as possible.
In order to simplify the monthly calculation of the rate to be applied to deferred gas costs and to provide a reasonable audit trail, the Company proposes to use an average of the variable rate under its line of credit for the first and last day of each month. The Company receives a bank confirmation showing the effective variable interest date for each day it borrows funds under its credit line, and therefore contends that the rate applied to the gas deferral balances will be simple to calculate and supported by just two documents each month.
The Company requests that its Application be approved on or before December 15, 2000.
Commission Decision:
Avista states that it is the only regulated gas company in Idaho presently applying the customer deposit rate to deferred gas costs. Staff does not dispute the Company’s contention but indicates to the Commission that it is Staff’s intention to recommend a change in this practice. Staff therefore recommends that this case be processed pursuant to Modified Procedure and the proposed implementation date be suspended. Does the Commission agree with Staff’s proposed procedure? If not, what is the Commission’s preference?
Scott D. Woodbury
bls/M:avug004_sw
DECISION MEMORANDUM 2