20150831_4757.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER RAPER
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MARK ROGERS
DATE:AUGUST 28,2015
SUBJECT:AVISTA ADVICE NO.15-03-E;RESIDENTIAL AND SMALL-FARM
ENERGY RATE ADJUSTMENT CREDIT
On July31,2015,Avista 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 decreased from the
existing 0.2780 per kilowatt-hour to 0.021 per kWh to be effective October 1,2015.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 quali’ing 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,the BPA adopted a settlement agreement that included the six IOUs,
the three state commissions,the BPA staff,and nearly all of the customer-owned utilities
(COUs).The settlement agreement fixed over a 17-year period the total amount of REP benefits
to be paid to all lOUs.The fixed REP benefits are allocated to the different utilities based on
DECISION MEMORANDUM 1 AUGUST 28,2015
each utility’s relative quali’ing load,their Average System Cost (ASC),as well as the Priority
Firm (PF)Exchange Rate determined by the BPA.’
Avista’s current rate includes changes from the 2013 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 the 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 decrease in the rate credit reflects both the FY16 REP benefits as well as an
over-refunded balance from the existing rate credit.Avista’s share of the FY16 REP benefits is
SI .25 million;roughly 0.6%of the total REP benefits.2 Of this SI .25 million,33.21%,or 50.404
million,is allocated to Idaho customers.The S0.141 million over-refunded balance for Idaho
customers from the existing rate credit is deducted from the Idaho allocated S0.404 million.The
resulting benefit of 50.263 million is then corrected for uncollectable expenses3,which results in
50.264 million of benefits to disburse.
Avista proposes to disburse the REP benefits to Idaho customers from October 1,2015
through September 30,2016.The projected usage during that time period is 1,243,945,858
kWhs,which leads to a rate credit of 0.0210 per kwh.Since the previous existing rate credit was
0.2780 per kwh,the current rate ofo.021Ø per kWh reduces the benefits received by residential
customers by approximately $3.1 million,or 0.2570 per kwh.For the average Avista customer
using 929 kWh per month,the reduction in credit would result in an increased monthly bill of
$2.39,or approximately 2.80%.The actual increase will vary based on customer usage.
When the ASC is higher than the PP 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.The BPA calculates each IOU’s ASC,and PP Exchange Rate.
2 The BPA reports a total FYI6-17 REP benefit ofS2l4.10 Million.This can be found in SPA table2.4.1 I online at
https://www.bpa.gov/Pinnnce/ResidentialExchangeProgram/Documents/BPJ6_Table%202.4.II .pdf.
The conversion factor for uncollectible expenses is 0.99735.
DECISION MEMORANDUM 2 AUGUST 28,2015
STAFF ANALYSIS
The total REP benefits received by Avista from the BPA decreased nearly 85%from the
previous REP calculation in FY14-15.4 Table 1 below shows the reduction of REP benefits due
to the large decrease in Avista’s ASC.In Avista’s case,the ASC decreased significantly due to
an 11%decrease in both production and transmission costs.5
Table I:Comparison of Avista’s ASC,PF Exchange Rate and Total REP,FYI4-15 versus FY16-17
1 ASC (per MWh)
2 Priority Firm Exchange Rate (per MWh)
3 Exchange Loads (per MWh)
4 Total REP Credit ((12)*3)
FY14-15 FV16-17
S 57.05 $50.87
S 54.97 $50.55
3,867,544 3,897,338
S 8,053,387 $1,254,163
Of all six lOUs participating in the REP,Avista has the lowest ASC.Figure 1 below shows
that all IOUs increased their ASC since FYI4-15,with the exceptions of Avista with an 11%
decrease,and Puget Sound Electric with a 2%decrease.The effect of these changes now means
that Avista’s ASC is 24%below the ASC average of all six lOUs.
Figure 1:Average System Costs (ASCs),FYI4-15 versus FYI6-l7
A NorthWestern
_______________
X PacifiCorp
X Portland General
Averages Puget Sound -
•Idaho Power
•Avi5ta
FY16-17
Line 4 of Table I shows a decrease in REP from $8053 million to $1254 million.The BPA calculates REP benefits
every two years (in conjunction with a BPA rate case).Benefits were calculated for FYI4-15 in 2013 and for FY16-
17 in 2015.
The ASC calculation is comprised of the sum of company’s production costs and transmission costs divided by the
contract system load.Production costs decreased from $468.6 million in FYI4-15 to $415.3 million in FYI6-17.
Transmission costs decreased from $85.8 million in FYI4-l5 to $76.6 million in FYI6-17.The contract load stayed
roughly constant at 9,319,245 MWh.
$75.00 f-—-—-
S 65 .00
ciU,
CU
Eci4-
U,
cibLft
ci
Portland GeneralNorthWestern•Puget Sound
_XPacifiCorp --
_____
—Average
•Avista
$55.00
•Idaho Power
$45.00 4 -.--—___
FY14-15
DECISION MEMORANDUM 3 AUGUST 28,2015
For Avista’s Idaho customers,this decrease in REP benefits is exacerbated because of an
over-refunded balance of S0.141 million in the REP balancing account.6 Thus,for Idaho
customers,REP benefits will decrease by 84%due to the reduced ASC arid an additional 6%due
to the over refunded balance for a total decrease of roughly 92%.
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 ofo.021Ø per kWh is correctly calculated and recommends approval with an October 1,
2015 effective date.
COMMISSION DECISION
Does the Commission wish to approve Avista’s proposed change to its BPA residential
and small-farm energy rate adjustment credit from the existing 0.2780 per kWh to 0.0210 per kWh
effective October 1,2015?
/%zYSil 4t1%
Mark Rogers “
Udmcmos/Avisca Scticdu(c 59 Dcc Mcrno
6As discussed above,the over-refunded balance at the stan of FY16 will be $0141 million.
DECISION MEMORANDUM 4 AUGUST 28,2015