20020924_269.pdf

TO:
FROM:
DATE:
RE:
DECISION MEMORANDUM
COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
RANDY LOBB
DON HOWELL
TERRI CARLOCK
DAVE SCHUNKE
NANCY HARMAN
ALDEN HOLM
MICHAEL FUSS
TONY A CLARK
BEVERL Y BARKER
GENE FADNESS
WORKING FILE
LISA NORDSTROM
SEPTEMBER 19, 2002
IN THE MATTER OF THE APPLICATION OF A VISTA CORPORATION
FOR AUTHORITY TO DECREASE ITS RATES FOR SERVICE. CASE NO.
A VU-02-
On September 16, 2002 , A vista Corporation filed a Purchased Gas Cost Adjustment
(PGA) Application with the Commission for authority to place new rate schedules into effect on
November 1 2002 that will decrease its annualized revenues by approximately $10 million. Ifits
Application is approved, Avista states that customer rates will decrease on average by 15.5%.
According to A vista, the proposed price reduction primarily reflects decreases in the cost of gas
purchased for customer use and will not affect its earnings as a result of the proposed decrease in
prices and revenues.
THE APPLICATON
Avista requests this rate reduction to true-up the differences between Avista s actual
weighted average cost of gas (W ACOG) purchased and the W ACOG embedded in rates that
have been deferred since September 1999. The Company has also deferred the revenue received
from Cascade Natural Gas for the release of storage capacity at the Jackson Prairie Storage
DECISION MEMORANDUM
Facility, various pipeline refunds or charges and miscellaneous revenue received from gas-
related transactions.
W ACOG:To incorporate these deferred costs and credits into rates, Avista proposes
to modify two rate schedules that will adjust the W ACOG and the deferral surcharge. First, the
Company advocates reducing the prospective natural gas cost component (the W ACOG)
included in the rates charged to customers via Rate Schedule 150 by 14.727 cents per therm to
$0.33098. This reduction is the result of netting the W ACOG reduction of 14.946 cents per them
against the demand-related increase of .219 cents per thermo
The chart below depicts gas prices for A vista s Rate Schedule 101 over the past five
years. Assuming the deferral is fully recovered in November 2003 and the W ACOG remains
proposed, Staff estimates a cost to customers of $0.6323 - which is reflected below as the
estimated price of gas in 2003. By comparison Natural Gas Monthly lists the year-to-date
average price of natural gas delivered to residential customers as 89.6 cents per therm in Idaho
versus 73.2 cents per therm nationally.
Deferral Surcharge:Second, A vista seeks to recover the previous timing differences
accumulated in the gas cost deferral account over the 12-month period of November 2002
through October 2003 through a surcharge. When the last PGA filing was approved by Order
No. 28827 on August 20 2001 , the gas deferral account totaled approximately $22.3 million and
was to be collected over a two and a half year period. As depicted on the graph below, Avista
I Energy Information Administration Nartural Gas Monthly August 2002.
DECISION MEMORANDUM
estimates the remaining balance to be $8.7 million as of June 30, 2002 and expects it to be fully
recovered by November 2003. The Company proposes increasing Schedule 155's amortization
rates to recover this amount. If approved, firm sales customers on Rate Schedules 101 , 111 , and
121 (General, Large General and Commercial) would experience a 0.79 cent per therm increase
and interruptible sales customers on Rate Schedule 131 would experience a 1.098 cents per
therm increase.
Avista Deferral Account
$25 000 000
000 000
$20 000 000
$15 000 000
$10 000 000
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Avista proposes that the large transportation and interruptible customers be given the
option of receiving/paying their portion of the deferred gas costs either through a lump sum
credit/charge or through an amortization rate as set forth in the Company s tariffs. If these
customers choose the lump sum method, Avista proposes to adjust these billings ' credits/charges
by the amount of interest that accumulates from the end of the test period used in this filing to
the date of actual settlement. The Company states that this proposal would clear out the small
residual balances related to interest charges that are carried forward between PGA filings for
large customers.
If the Application is approved, Avista states that the Company s estimated annual
natural gas revenue will decrease by approximately $10 030 000 (15.5%). Avista estimates that
the average residential customer using 75 therms per months would see their monthly bill
decrease by approximately $10.45 (14.8%). Larger commercial customers would experience an
average decrease between 16.4% and 17.3%, with the higher decrease percentages due to lower
DECISION MEMORANDUM
base rates.Incorporating its proposed changes to Rate Schedules 150 and 155, Avista
recommends the following annualized change in rates per customer class:
Proposed Estimated Proposed
Average Decrease Average Decrease Average Price
Customer Class Schedule $/Therm % Change $/Therm
General 101 $0.13937 14.$0.75816
Large General 111 $0.13937 16.4%$ 0.7089
Commercial 121 $0.13937 17.$ 0.6654
Large General 112 $0.14727 21.2%$ 0.5484
Interruptible 131 $0.13848 19.$0.58661
Interruptible 132 $0.14946 25.$0.44127
Transportation 146 none none $0.10574
The Company requests these rates be approved to become effective November 1
2002 and that this matter be handled under Modified Procedure pursuant to Rules 201-210 of the
Commission s Rules of Procedure.
STAFF RECOMMENDATION
Avista has informed Staff that all of its customers will have received individual notice
(i., bill stuffers) of the proposed rate decrease by October 15, 2002. Staff recommends the
Commission issue a final order utilizing the November 1 2002 effective date proposed by Avista
to allow customers the benefits of the proposed decrease as soon as possible in the winter heating
season. Anticipating that this case will be on the October 28 decision agenda, Staff recommends
that the Commission process the case under Modified Procedure and establish an October 23
comment deadline. To allow Avista an opportunity to respond to its comments without delaying
the Application s effective date, Staff intends to file its comments no later than October 18
2002.
COMMISSION DECISION
Does the Commission wish to process this case under Modified Procedure and
establish an October 23, 2002 comment deadline?
cf),U:J~./ O'f fiD
Lisa Nords
M: A VUGO202 In
DECISION MEMORANDUM