20160425_4956.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER IMPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MICHAEL W.MORRISON
DATE:APRIL 18,2016
RE:AVISTA CORPORATION’S APPLICATION TO UPDATE ITS
ELECTRIC LINE EXTENSION SCHEDULE 51,
TARIFF ADVICE NO.16-01
BACKGROUND
On March 11,2016.Avista Corporation (“Company”)filed an Application with the Idaho
Public Utilities Commission (‘Commission”)proposing updates to the charges and allowances
outlined in its Line Extension,Conversion,and Relocation Schedule 51.In Order No.28562,
issued November 27,2000,the Commission directed Avista to update its Schedule 51 charges on
or before April 1 of each year.In Order No.33031,issued April 30,2014,the Commission
directed the Company to update its Schedule 51 allowances after each general rate case.The
Company’s last general rate case was concluded in December 2015.The purpose of this filing is
to update line extension charges and allowances that apply to new residential,commercial,and
industrial customers.The Company requests an effective date of May 2,2016.
STAFF ANALYSIS
Developers and individual customers requesting line extensions are assessed a basic cost
that may be partially or wholly offset by an allowance.In its Application,the Company explains
that it uses recent average actual costs of facilities such as transformers and conduit to establish
the basic costs set forth in Schedule 51.Customers may be assessed additional charges for
exceptional costs of labor and materials not reflected in the basic costs,for additional work
requested by the customer,or for the customer’s share of a previous extension.These costs may
DECISION MEMORANDUM -1 -APRIL 18,2016
be reduced when the Company is able to use lower cost construction methods,or when some
work,such as trenching,is performed by the customer.
The Company determines allowances using an embedded cost methodology designed to
ensure that the investment in each new customer’s distribution and terminal facilities will equal
those embedded costs used to calculate base rates.
Basic Costs
Basic costs have fixed and variable components,with variable components stated on a
cost-per-foot basis.Staff reviewed the Company’s proposed basic cost adjustments.The
increased costs of 45 foot poles,anchor plates,and down-guy kits were the primary causes of a
4.25 percent increase in Overhead Primary Circuit fixed costs.Underground Primary and
Secondary circuit fixed costs increased,respectively,4.26 percent and 6.39 percent.These
adjustments were due almost entirely to labor rate increases specified by a union labor contract
that became effective in mid-2015.Staff concurs with the Company’s Basic Cost adjustments.
Single Phase Present Proposed
Overhead Primary Circuit
Fixed Cost $3,926 $4,093
Variable Cost $7.63 $7.97
Underground Primary Circuit
Fixed Cost $1,737 $1,811
Variable Cost $9.91 $10.35
Underground Secondary Circuit
Fixed Cost $376 $400
Variable Cost $9.23 $9.38
Overhead Service Circuit
Variable Cost Only $3.08 $3.24
Underground Service Circuit
Variable Cost Only $8.33 $8.76
Overhead Transformer
Fixed Cost Only $2,296 $2,294
Padmount Transformer
Fixed Cost Only $2,983 $2,986
DECISION MEMORANDUM -2 -APRIL 18,2016
Allowances
Allowance can be used to offset basic and exceptional costs.The Company proposes a
12.5 percent increase in Schedule 1 (Residential)allowances,and increases of up to 4.95 percent
in the per-kWh rates used to compute allowances for Commercial and Industrial customers.The
Company explains that these changes are almost entirely due to changes in plant balances and
Cost-of-Service allocators that were updated as part of the Company’s last General Rate Case
(Case No.AVU-E-1 5-05).Staff carefully reviewed the Company’s methodology,and concurs
with the Company’s proposed allowances.
Service Schedule Present Proposed
Schedule 1 (Individual Customer)$1,550 $1,745
Schedule I (Duplex,per unit)$1,240 $1,395
Schedule 1 (Multiplex,per unit)$930 $1,045
Schedule 11/12 (per kWh)*$0.12868 $0.13505
Schedule 21/22 (per kWh)*$0.1 1874 $0.11839
Schedule 3 1/32 (per kWh)t $0.19279 $0.20217
*The total allowance for Commercial and Industrial customers is determined by multiplying
the customer’s estimated annual consumption by the per kwh allowance.
Residential Developments
For residential developments,the basic cost is computed by subtracting the average
service circuit cost from the average total cost per lot.The developer may apply for a rebate,
equal to the basic per-lot cost,for each customer taking service within five years of the date that
the extension was completed.
The builder is responsible for paying the difference between the average total cost per lot
and the applicable allowance.Currently,this payment is $155.Under the Company’s proposal,
the builder’s payment would become zero because the Company’s proposed allowance exceeds
the average total cost per lot.Staff analyzed the Company’s methodology,and determined that it
is consistent with the methodology prescribed by Commission Order No.28562.
DECISION MEMORANDUM -3 -APRIL 18,2016
Present
$1,705
$485
S 1.288
$1,288
$155
$1,550
Proposed
$1,731
$439
S 1.292
$1,292
$-
$1,745
Total Cost per Lot
Less:Service Cost
_______________
Developer Responsibility
______________
Developer Refundable Payment
Builder Non-Refundable Payment
Allowance
STAFF RECOMMENDATION
Staff believes the Company’s proposals to be reasonable,and in conformance with
Commission Order Nos.28562 and 33031.Staff recommends that the Company’s proposed
2016 Schedule 51 tariff update costs and allowances be adopted.
COMMISSION DECISION
Does the Commission wish to approve the Company’s proposed Schedule 51 tariff update
with an efThctive date of May 2,2016?
Udmemos/Avista Tariff MVICC 1601 dcc memo
DECISION MEMORANDUM -4-APRIL 18,2016