20081027_2387.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TJGOLO
DATE:OCTOBER 24, 2008
RE:VISTA TARIFF IPUC NO. 28, ELECTRIC SERVICE RESIDENTIAL
AND SMALL FARM ENERGY RATE ADJUSTMENT CREDIT
On September 30 2008 , Avista 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 Tariff Sheet No. 59 reflects a rate adjustment related to the
Residential Exchange Program (REP) benefits or credits that A vista will receive under its new
Residential Purchase and Sale Agreement (RPSA) with the Bonneville Power Administration
(BPA) dated September 26 2008. The REP benefit relates to BPA's 2009 fiscal year. Avista
share of the benefit applicable to Idaho s eligible residential and small farm customers amounts
to approximately $763 000. The Company requests a tariff effective date of November 1 , 2008.
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, BP A failed to deliver the benefits to A vista 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.
DECISION MEMORANDUM - 1 -
BPA has reduced Avista s gross benefit amount of$19.65 million for 2009, by $15.
million, to extinguish the contested "Deemer Account" calculated by BP A under the 1981
RPSA. The benefit amount to be received from BP A for fiscal year 2009 is based on A vista
new Average System Cost and BPA's new PF Exchange rate set in the WP-07 Supplemental rate
case. Of the remaining balance of$4.54 million, BPA then assigns $2.18 million to BPA'
Lookback Amount j leaving a total of about $2.35 million to be distributed to Avista s electric
customers in Idaho and Washington.
The new RPSA that A vista signed with BP A includes a provision in Section 20 that
preserves "any arguments or claims it (Avista) has made or may make, or any rights or
obligations it has or may have" related to the calculation, implementation or settlement ofREP
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.
Avista proposes that the existing interim REP credit be reduced from 0.554~IkWh to
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 ofO.057~/kWh will result in a net monthly increase
of$4., or a 6.63% increase for a customer using 1 000 kWh per month. The actual increase
will vary based on customer usage. The proposed rate credit will have no effect on A vista s net
mcome.
I The Lookback Amount represents BP A's determination of how much its preference customers were "overcharged"
pursuant to BP A's improper allocation ofREP Settlement costs in the WP-02 case. The $2.18 million is the amount
that is to be recovered from A vista for FY 2009.
DECISION MEMORANDUM - 2 -
ST AFF REVIEW
As part of Avista s filing for the proposed rate changes, the Company submitted
workpapers supporting the calculation of the rate credit. The original filing on October 1 , 2008
had a total benefit amount of approximately $974 000 and the proposed rate credit is
073~/kWh. After the Company filed its proposed tariff, Avista advised Staff that BPA is
reducing the total amount of Avista s credit. Therefore, the total benefit amount applicable to
Idaho customers is now approximately $763 000 and the proposed rate credit will be
057 ~/kWh. The Company will file an amendment to this tariff advice when BP A confirms the
amount - hopefully today (Friday).
Due to the timing of the discovery, Staff believes that it is more appropriate to present the
most recent rate credit data to the Commission. Staff expects that the proposed rate credit of
057~/kWh will be similar to the Company s final proposed rate credit when it files the
amendment to this filing. If the two rate credits are different, the true-up amount at the end of
the benefit period will make up the difference.
The calculation starts with the benefit amount of $762 575 applicable to Idaho customers
received from BP A. This amount is adjusted to include the over-refunded balance at the end of
the existing rate, additional interest of 5% applied to about 50% of the balance during the 12-
month refund period, and the revenue conversion factor of 0.995358, making the total amount of
$709,433. The conversion factor is the difference of revenue of 1.00 minus the sum of: (1)
uncollectible fees; and (2) IPUC regulatory fees of 0.004642. The Company s projected
kilowatt-hours for all qualifying residential and small farm customers during the refund period is
245 598 000 kilowatt-hours. The total credit amount is divided by the project energy used to
DECISION MEMORANDUM - 3 -
obtain the proposed credit amount ofO.057~IkWh. With the two exceptions noted below, Staff
believes the proposed credit amount ofO.057~/kWh is reasonable.
STAFF RECOMMENDATION
The Company submitted the proposed tariff modifications to the Commission and
requested it to be processed under Modified Procedure. The 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 US.C. 9839c(c)(3). The Company has issued an individual notice to the
customers. Staff believes that the proposed credit amount by the Company is accurate.
Consequently, Staff agrees that the processing of this filing as a Tariff Advice is reasonable.
During the review of this filing, Staff noticed that uncollectible fees and IPUC fees were
applied to the revenue conversion factor which affects the credit amount "passed through" to the
customers. These fees should only be applied to the operating revenue of the Company. Staff
believes these two fees should not be applied because the BP A credit is not "operating revenue
for the Company. The Commission s annual regulatory assessment is based upon "intrastate
operating revenue" which the REP credit is not. Idaho Code 9 61-1003. This adjustment may
only be about $5 000. Likewise, Staff believes that imposing and "uncollectible" adjustment is
inappropriate because this REP account is rebalanced annually. Consequently, Staff still
recommends that the Commission approve the new tariff rate ofO.057~/kWh but reserve these
two for a future decision. Reserving the issues will allow the new credit to go into effect, and
allow Staff and the Company to resolve these issues for later true-up.
As of2:30 p.m. on Friday, October 24 2008, Staff has not received the final proposed
tariff sheet for Schedule 59 from the Company but still recommends that the Commission adopt
the new tariffrate ofO.057~/kWh. This rate will be close to the final proposed rate when the
DECISION MEMORANDUM - 4 -
Company files its amendment. Staffwill notify the Commission if there is a difference between
the rates.
COMMISSION DECISION
Does the Commission wish to approve A vista s proposed "pass-through" revision to its
Tariff Schedule 59 - Residential and Small Farm Energy Rate Adjustment Credit, with an
effective date of November 1 2008 but reserve the two Staff issues for further review?
TJ Gola I f
Attachments
AVU BPA
DECISION MEMORANDUM - 5 -
Avista Corporation
Residential Exchange - State of Idaho
Proposed Rate
November 1 , 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)
Subtotal
Conversion factor - revenue related items
Revenue requirement
Projected kWh 11/1/08-10/31/09
Proposed rate credit
Rate Impact
Proposed rate credit above
Existing rate credit
Difference
Increase in bill for 1 000 kWh
Bill for 1 000 kWh at Stipulation rates with all adders
Proposed rate increase
Percent increase
350 000
32.45%
$762 575
658
688 917
223
$706 140
995358
$709,433
245 598 000
$0.00057
$0.00057
$0.00554
$0.00497
$4.
$74.
$4.
63%