20061030_1720.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:OCTOBER 24, 2006
SUBJECT:CASE NO. AVU-06-8 (Avista)
PROPOSED ELIMINATION OF CENTRALIA GAIN RATE CREDIT
On September 14, 2006, Avista Corporation dba Avista Utilities (Avista; Company)
filed an Application with the Idaho Public Utilities Commission (Commission) requesting
authority to eliminate or zero-out the temporary rate adjustment credits (tariff Schedule 65) that
have been used to pass through the customer portion of the gain on the sale of the Centralia
Power Plant. The Company expects that the customer portion of the gain on the sale of the
Centralia Power Plant will be fully refunded to customers by November 1 , 2006. The proposed
effective date is November 1 2006.
Elimination of the rate credit will result in an overall annual increase in Idaho electric
revenue of approximately $2.5 million or 1.45% and will affect all electric customers. Energy
charges for the individual rate schedules are to be increased by the following amounts:
Schedule 1 091 ~
Schedule 11 and 12 124~
Schedule 21 and 22 085~
Schedule 25 059~
Schedule 31 and 32 073~
Flat rate charges for Street and Area Lighting Service (Schedules 41-49) are to be increased by
777%.
DECISION MEMORANDUM
BACKGROUND
On March 7, 2000, the Commission approved the sale of the Company s interest in
the Centralia Power Plant. Reference Order No. 28297, Case No. A VU-99-6. The customer
portion of the gain was deferred and was originally to be passed on to customers over an eight-
year period. Potlatch's Lewiston facility was initially exempted from receiving any portion of
the gain as the facility was served under a special service contract. The Centralia gain rate
credits contained on Original Sheet 65 were effective August 1 , 2000. Beginning January 1
2002, Potlatch began receiving service under Schedule 25 - Extra Large General Service and
began receiving and has continued to receive the Centralia gain credit applicable to Schedule 25.
In 2004 the Commission approved the sale of A vista s interest in the Skookumchuck
hydroelectric generation facility, which is operated to supply cooling water to the Centralia
Power Plant. Reference Order No. 29484, Case No. A VU-04-2. As proposed by the
Company and approved by the Commission, the customer portion of the gain on the sale of
Skookumchuck was deferred and added to the deferred gain on the Centralia Power Plant.
The customer portion of the net of tax Centralia gain amounted to approximately
507 000 and the customer portion of the net of tax Skookumchuck gain amounted to
approximately $154 000. The Company expects that the total amount of the net of tax gains of
approximately $7 661 000, and the benefit of a carrying cost on the unamortized gains, will have
been passed on to customers at the end of October 2006. The shorter pass-through period is due
primarily to having Potlatch receive the gain credit applicable to Schedule 25 beginning January
, 2002. In addition, customer loads have grown since the gain credits were made effective on
August 1 , 2000, also resulting in a shorter pass-through period. The Company proposes that any
under-refunded or over-refunded balance on November 1 , 2006 be transferred to the deferred
Power Cost Adjustment (PCA) deferral account as well as the remaining balance of associated
deferred federal income tax.
A vista proposes that the Centralia gain temporary rate credits be eliminated effective
November 1 , 2006. Elimination of the temporary rate credits will result in an overall increase in
annual revenue of approximately $2.5 million. A residential customer using 1 000 kilowatt-
hours per month will see an increase of $0.91 or 1.45% in their monthly bill due to the
elimination of the temporary rate credit.
DECISION MEMORANDUM
On September 28 , 2006, the Commission issued Notices of Application and Modified
Procedure in Case No. A VU-06-8. The deadline for filing written comments was October 19
2006. Comments were filed by a customer of the Company who is retired and on a fixed income
and cannot afford continuous rate increases. Comments were also filed by Commission Staff.
Staff performed an on-site audit of the journal entries associated with the Centralia gain credit.
Staff contends that the calculation of the monthly Centralia gain credit was properly calculated
and accounted for.Staff concurs in the Company s proposal to eliminate or zero out the
temporary Centralia (Skookumchuck) tariff Schedule 65 rate adjustment credit for a November
, 2006 effective date. Staff recommends that any under-refunded or over-refunded balance on
November 1 2006 be transferred (as well as the remaining balance of associated deferred federal
income tax) to the deferred PCA deferral account. Staff further recommends that the Company
include the Centralia gain credit balance as a line item in the PCA deferral account.
CO MMISSI 0 N D ECISI
A vista has filed an Application seeking to eliminate or zero out the temporary rate
adjustment credits (tariff Schedule 65) that have been used to pass through the customer portion
of the gain on the sale of the Centralia power plant (also Skookumchuck). The proposed
effective date is November 1 2006. Elimination of the credit results in an increase to customers
and an increase in annual revenue of approximately $2.5 million. Staff recommends approval.
One customer opposes the resultant increase in rates. Does the Commission find it reasonable to
grant the Company s proposal? Does the Commission find it reasonable that any under-refunded
or over-refunded balance on November 1 , 2006 be transferred (as well as the remaining balance
of associated deferred federal income tax) to the deferred PCA deferral account and that gain
credit balance be included as a line item in the PCA deferral account?
Scott Woodbury
bls!M:A VU-O6-08 sw2
DECISION MEMORANDUM