20140922_4486.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MATT ELAM
DATE:SEPTEMBER 19,2014
SUBJECT:ADVICE NO.14-04-E (AVISTA);RESIDENTIAL AND SMALL-FARM
ENERGY RATE ADJUSTMENT CREDIT
On July 30,2014,Avisla Corporation dba Avista Utilities (Avista)filed a Tariff Advice
with the Commission to revise its Tariff Schedule 59 Residential and Farm Energy Rate
Adjustment.In this Tariff Advice,Avista proposes that the rate credit be increased from the
existing 0.2450 per kilowatt-hour to 0.2780 per kWh to be effective October 1,2014.This
change will coincide with its electric rate changes proposed in the Power Cost Adjustment (PCA)
filing.
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 (lOUs)in the northwest to share in the benefits of the federal Columbia River
Power System.Avista passes these benefits to its qualifying customers through 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.
On July 26,2011,BPA adopted a Settlement Agreement that included the six IOU’s,the
three state commissions,BPA staff,and nearly all of the customer-owned utilities (COU5).The
Settlement Agreement fixed over a 17-year period the total amount of REP benefits to be paid to
DECISION MEMORANDUM 1 SEPTEMBER 19,2014
all lOUs.The fixed REP benefits are allocated to the different utilities based on each utility’s
relative qualifying load and Average System Cost (ASC).’
The Settlement Agreement also includes a “Lookback Adjustment”that reallocates
benefits among the lOUs in response to two Ninth Circuit cases that overturned the 2000
settlement among BPA,lOUs,and consumer-owned utilities (COUs).After BPA calculates the
ASC,it is further adjusted for the “Lookback Adjustment”to arrive at the final ASC.The
adjustment reallocates the REP benefits away from JOUs who paid back relatively less of their
“Lookback Amounts”to lOUs who paid back relatively more.Since BPA calculates the total
amount of REP benefits every two years in conjunction with a BPA rate case,the ASC is the
same as last year and will not change until next year.
The current rate includes changes from last year’s agreement between Staff and the
Company on the way REP benefits are allocated between Idaho and Washington.Specifically,it
was agreed that REP benefits would be allocated based on each state’s share of the qualifying
load used by BPA.Staff and the Company also agreed to only include uncollectable expenses in
the revenue conversion factor,which changed the way the revenue requirement is calculated for
REP benefits.
THE TARIFF ADVICE
The proposed increase in the rate credit reflects both the under-refunded balance relating
to the existing rate credit,and a recent change BPA made to the distribution of REP benefits paid
to each of the lOUs.Specifically,BPA recalculated the Portland General Electric (POE)FY
2014-2015 ASC to remove the costs and loads attributable to aNew Large Single Load (NLSL)
served by POE.2 Consequently,this changed Avista’s REP benefits even though the total
amount of REP benefits paid under the 2012 REP Settlement Agreement remain the same.
Avista’s share of the FY15 REP benefits is $8.063 million.Of this,$2601 million,or
32.26%is allocated to Idaho customers.The under refunded balance for Idaho customers from
the existing rate credit is $0.77 I million.This net benefit of $3372 million is then corrected for
uncollectable expenses,which results in $3.38 1 million of benefits to disburse.
When the ASC is higher than the PF Exchange rate,SPA purchases power from Avista at the higher ASC and,in
turn,Bonneville agrees to sell Avista power at BPA’s lower PF Exchange rate in an amount necessary to serve
eligible customers.
2 The Northwest Power Act prohibits the inclusion of costs to serve an NLSL in a utility’s Average System Cost
(ASC).
DECISION MEMORANDUM 2 SEPTEMBER 19,2014
Avista proposes to disburse the REP benefits to Idaho customers from October 1,2014
through September 30,2015.The projected usage during that time period is 1,214,769,099 kWh,
which leads to a rate credit of 0.2780 per kwh.For a customer using 930 kWh per month,the
new credit would result in a decrease in a monthly bill of $0.33,or approximately 0.40%.
STAFF ANALYSIS
Staff reviewed the Company’s proposal to determine whether the REP benefits were
calculated correctly.As part of its review,Staff confirmed the Company used the correct
qualifying load to allocate REP benefits between the two states,and confirmed the correct
revenue conversion factor was used to determine the proposed rate.
Avista asked for an effective date of October 1 in order to coincide with its electric rate
changes proposed in the Power Cost Adjustment (PCA)filing.Staff believes the proposed credit
amount of 0.278c per kWh is correctly calculated and recommends approval with an October 1,
2014 effective date.
COMMISSION DECISON
Does the Commission wish to approve Avista’s proposed change to its BPA residential
and small-farm energy rate adjustment credit from the existing 0.245 per kWh to 0.2780 per
kWh effective October 1,2014?
øc.
//%td c-c
Matt Elam /
Udmemos/Advice No 14-04-E Avista schedule 59 Dec Memo
DECISION MEMORANDUM 3 SEPTEMBER 19,2014