20130930_4181.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
FROM:CATHLEEN M.MCHUGH
DATE:SEPTEMBER 24,2013
SUBJECT:ADVICE NO.13-05-E (AVISTA);RESIDENTIAL AND SMALL-FARM
ENERGY RATE ADJUSTMENT CREDIT.
On July 30,2013,Avista Corporation dba Avista Utilities (Avista)filed a tariff advice with
the Idaho Public Utilities Commission (Commission)to revise its Tariff Schedule 59 Residential
and Farm Energy Rate Adjustment.On September 5,2013,Avista filed an updated tariff advice.
In this updated tariff advice,Avista proposes that the rate credit be decreased from the existing
0.3320 per kilowatt-hour (kWh)to 0.2450 per kWh to be effective October 1,2013.This change
will coincide with other electric rate chatiges proposed by Avista.
BACKGROUND
This rate credit is designed to pass through to qualifying customers the Residential
Exchange Program (REP)benefits Avista receives from the Bonneville Power Administration
(BPA).The REP was designed to allow the residential and small-farm customers of investor-
owned utilities (IOUs)in the northwest to share in the benefits of the Federal Columbia River
Power System.Avista passes these benefits through to its qualifying customers via a rate credit on
monthly electric bills.The rate credit applies to residential and small-farm customers served
under Schedules 1,12,22,32,and 48.
Historically,the total amount of REP benefits an IOU received ivas a function of the IOU’s
Average System Cost (ASC).the Priority Firm (PF)Exchange rate,and the IOU’s qualifying
load.’Accordingly,Avista’s REP benefits were calculated as Avista’s qualifying load multiplied
by the difference between Avista’s ASC and the applicable PF Exchange rate.This would then be
BPA calculates both the ASC and the PF Exchange rate.
DECISION MEMORANDUM 1 SEPTEMBER 24,2013
allocated between Avista’s Idaho and Washington customers according to each state’s share of the
qualifying load.
In FY09.BPA applied a “Lookback Adjustment”to REP benefits received by each IOU
(including Avista)in response to two Ninth Circuit cases that overturned the 2000 settlement
among BPA,lOUs,and consumer-owned utilities (COUs).BPA employed this adjustment to
withhold REP benefits from the lOUs in order to refund the COUs the REP benefits improperly
paid to the lOUs during the settlement.Consequently,Avista’s monthly REP benefits had been
reduced by the Lookback amount set by BPA.BPA’s Lookback Analysis was challenged in
multiple lawsuits.
On July 26,2011,BPA adopted a new Settlement Agreement that included the six lOUs,
the three state commissions.BPA staff,and nearly all of the COUs.The Settlement Agreement
fixed over a 17-year period the total amount of REP benefits to be paid to all IOUs.2 These fixed
REP benefits are allocated to the different utilities based on each utility’s relative qualifying load
as well as its relative ASC.Holding qualifying load constant,utilities with relatively high ASCs
will receive more REP benefits than utilities with relatively low ASCs.
Furthermore,under the new Settlement,the Lookback Adjustment was discontinued.
However,the Settlement did recognize that differences existed among the JOUs concerning how
much of their original Lookback amount had been repaid.Therefore,the Settlement established
real locations”among the lOUs.REP benefits are “reallocated”away from lOUs who paid back
relatively less of their Lookback amounts and to lOUs who paid back relatively more.The
reallocations are designed so that most JOUs both pay money into and receive money from the
system.3 Up to this point,Avista has owed approximately $2 million a year in reallocation to the
other JOUs and has received more than $100,000 a year in reallocations from the other lOUs.
After adjusting for the reallocation,Avista’s total benefits are distributed to their Idaho and
Washington customers according to each state’s share of the qualifying load.
THE TARIFF ADVLCE
The proposed decrease in the rate credit reflects both the FY14 REP benefits and the
under-refunded balance relating to the existing rate credit.Avista’s share of the FY14 REP
I An bC still has to have an ASC higher than the PP exchange rate in order to receive REP benefits.
The exceptions are Idaho Power and Puget Sound.Idaho Power only pays money into the system and Puget Sound
only receives money from the system.
DECISION MEMORANDUM 2 SEPTEMBER 24.2013
benefits is S8.053 million.Of this,$2598 million is allocated to Idaho customers.The under-
refunded balance for Idaho customers from the existing rate credit is 50.333 million.This net
benefit of $2.93 I million is then corrected for uncollectables,1 which results in 52.939 million of
benefits to disburse.
Avista proposes to disburse the REP benefits to Idaho customers from October 1,2013
through September 30,2014.The projected usage during that time period is 1,198,206,000 kWh,
which leads to a projected rate credit of 0.2450 per kwh.For a customer using 930 kWh per
month,the new credit would result in an increase in a monthly bill of$0.81 or 1.0%.The actual
increase will vary based on customer usage.
STAFF ANALYSIS
During Staff’s review of the original proposal,it entered into discussions with Avista on
how to best allocate REP benefits between Idaho and Washington customers.It was agreed that
REP benefits would be allocated based on each state’s share of the qualifying load used by BPA to
calculate the benefits.This led to Avista filing a substitute proposal with a credit slightly higher
(0.005c per kWh)than their original proposal.
The total REP benefits received by Avista from BPA decreased 32%between FYI2-FYI3
and FYI4-FYI5.5 As discussed above,REP benefits are allocated to the IOUs based on their
relative qualifying loads and relative ASCs.Changes in relative qualifying loads or relative ASCs
over time will lead to changes in REP benefits received.
While each IOU’s share of the total qualifying load stayed more or less constant between
the two time periods,there were significant changes in the growth of ASCs across the IOUs.
Figure 1 shows each IOU’s ASC for FYI2-FYI3 and FY14-FYI5.Both Avista and PGE had
fairly constant ASCs.6 However,there were large changes in the ASCs for the other lOGs.
Specifically,the ASC growth rate was:28 percent for Northwestern Energy,16 percent for Puget
Sound Energy,10 percent for Idaho Power Company,and 8 percent for PacifiCorp.Therefore,
while there was little absolute change to Avista’s ASC between FYI2-FYI3 and FY14-FYI5,
there was substantial change in how it compared to the ASCs of the other IOUs.In FY12-FYI3,
The conversion factor for uncollectibles is 0.99735.
BPA calculates REP benefits every two years (in conjunction with a BPA rate case).Benefits were calculated for
FYI2-FYI3 in 2011 and for FYI4-FYI5 in 2013.
6 Avista’s ASC decreased by I percent while PGE’s ASC increased by I percent.
DECISION MEMORANDUM 3 SEPTEMBER 24,2013
Avista’s ASC was in the middie of the distribution —it was $11.02 less than the largest ASC and
$11.67 more than the smallest ASC.By FYI4-FYIS,Avista’s ASC was more towards the bottom
of the distribution —it was $19.78 less than the largest ASC and only $6.83 more than the smallest
ASC.This change in relative ASC led to a decrease in the REP benefits allocated to Avista.
Figure 1:Average System Costs (ASCs),FY12-FYI3 versus FYI4-FYI5
•Puget Sound
575.00 ---
__________
--.--
A Northwestern
XPGE XPGE
•Puget Sound X PaciflCorp
,$65.00 --Average
a
X Paci[iCorp
Average
•Avista •Avista
<$55.00 -_-t Northwestern
•Idaho Power
45 •kiaho Power -
FY12-13 FY14-15
For Avista’s Idaho customers,their decrease in REP benefits was mitigated by the positive
balance in their REP balancing account.Thus,for Idaho customers,the REP rate credit will not
decrease by the full 32 percent —instead,it will decrease by 26 percent (from 0.3320 per kWh to
0.245ë per kWh).
Avista asked for an effective date of October 1st in order to coincide with other electric
rate changes it proposed.Staff believes the proposed credit amount of 0.2450 per kWh to be
correctly computed by Avista and recommends approval with an October 1,2013 effective date.
‘As discussed above,the under-refunded balance at (he start of FY14 will be SO.333 million.
DECISION MEMORANDUM 4 SEPTEMBER 24,2013
COMMISSION DECISION
Does the Commission wish to approve Avistas proposed change in its BPA residential and
small-farm energy rate adjustment credit from the existing 0.3320 per kWh to 0.2450 per kWh
effective October 1,2013?
Cathleen M.Mci-high
i:udmemos!dccision memo 13-05-ti doc
DECISION MEMORANDUM SEPTEMBER 24.2013