Order No 28366.pdf

Office of the Secretary
Service Date
May 2, 2000
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION DBA AVISTA
UTILITIES—WASHINGTON WATER POWER
DIVISION FOR AUTHORITY TO REVISE
ELECTRIC TARIFF SCHEDULE 66—TEMPO-
RARY POWER COST ADJUSTMENT—IDAHO
AND TO IMPLEMENT A RELATED REBATE.
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CASE NO. AVU-E-00-2

ORDER NO. 28366

On March 1, 2000, Avista Corporation dba Avista Utilities—Washington Water Power
Division (Avista; Company) in Case No. AVU-E-00-2 filed an Application with the Idaho Public
Utilities Commission (Commission) proposing a revision to the Company=s electric tariff Schedule
66Ctemporary Power Cost AdjustmentCIdaho. Avista requests that the Commission approve a
$2,364,000, 1.973% rebate to Avista=s Idaho customers. The rebate is being requested as a result of
the Atrigger@ being reached and exceeded in Avista=s Power Cost Adjustment (PCA) balancing
account.

POWER COST ADJUSTMENT—BACKGROUND
The Company=s PCA mechanism was first established in Case No. WWP-E-88-3, Order
No. 22816 issued October 31, 1989, and has been extended, modified and clarified in a number of
subsequent cases (WWP-E-93-3, Order No. 24874; WWP-E-94-4, Order No. 25637; WWP-E-97-
10, Order No. 27202; and WWP-E-98-4, Order No. 27824). Since its inception to date of filing,
there have been eight rebates totaling $20,820,000 and three surcharges totaling $6,769,000.
Water Power=s PCA is used to track changes in revenues and costs associated with
variations in hydroelectric generation, prices in the secondary market, and changes in PURPA
power expenses. The PCA rate adjustment mechanism is designed to recover/rebate variances in
power supply expenses incurred by the Company. The PCA mechanism tracks changes in the
Company=s power supply costs associated with abnormal weather and stream flows. The weather-
related portion of the PCA tracks 100% of the variation in hydro generation from the hydro
generation authorized, variation in secondary prices from those authorized, and the related variation
in thermal generation.

ORDER NO. 28366 1
The PCA is also designed to recover contract costs incurred pursuant to the Public
Utilities Regulatory Policies Act of 1978 (PURPA) beyond the level included in the Company=s
general revenue requirement. PURPA contract costs are the result of the Company=s federally
mandated obligation to purchase the output of qualifying small power and cogeneration facilities
and, therefore, are largely outside the control of Avista.
The Company is allowed to record the difference between actual power supply costs and
the level of power supply costs authorized by the Commission. When the total difference in costs
exceed $2.2 million, the Company is to notify the Commission and initiate a surcharge or rebate
proceeding. The PCA-related rate changes are limited to no more than two consecutive surcharges
or rebates during any 12-month period, July 1 to June 30, and the annual rate change during any 12-
month period is limited to 5%.

PROPOSED $2,364,000 OR 1.973% REBATE
As reflected in the Company=s Application, the $2.2 million trigger was reached and
exceeded in December 1999, based on actual data from the preceding month, November.
Under the Company=s proposal in this case, the monthly energy charges of the individual
electric rate schedules are to be decreased by the following amounts:

Type of Service
Present
Sch 66 Rebate
Effective 8/1/99; Expires 7/31/00
(2.503%)

Proposed
Sch 66 Rebate
(1.973%)

Schedules 1, 3A-D, & 15
(Residential)

Schedules 11, 12, 13A-D, & 16
(General)

Schedules 17, 21, 22, & 23A-D
(Large General)

Schedule 25
(Extra Large General)

Schedules 18, 31, 32, & 33A-D
(Pumping)

0.115¢/kWh

0.153¢/kWh

0.114¢/kWh

0.077¢/kWh

0.107¢/kWh

0.101¢/kWh

0.137¢/kWh

0.095¢/kWh

0.065¢/kWh

0.081¢/kWh

ORDER NO. 28366 2
Flat rate charges for Company-owned or customer-owned street lighting and area lighting service
(Schedules 41-49) under the present rebate are reduced by 2.503% and under the proposed rebate
will be reduced by a further 1.973%. Implementation of the proposed rebate will result in an overall
decrease of 1.973% in the Company=s Idaho electric rates or $1.01 in the monthly bill of an average
residential customer using 1,000 kWh. The combined effect of both the existing and proposed
rebates is an overall decrease of 4.476%, or $2.16 in the monthly bill of an average residential
customer using 1,000 kWh. The existing rebate, however, will expire on July 31, 2000.
Avista requested that its Application be processed under Modified Procedure, i.e., by
written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA
31.01.01.201-204. The Company, as part of its Application, has filed supporting testimony and
exhibits.
On March 15, 2000, the Commission issued Notices of Application and Modified
Procedure in Case No. AVU-E-00-2. The deadline for filing written comments was April 5, 2000.
Commission Staff was the only party to file comments.
Also filed by the Company during the comment period was a March 23, 2000, letter
requesting deferral of the proposed PCA rebate effective date from May 1, 2000 (the date requested
in the Application) to August 1, 2000. The later date, the Company contends, would coincide with
the expiration of the existing rebate. August 1 is also the date of a previously authorized cost-of-
service rate adjustment. Reference Case No. AVU-E-98-11, Order No. 28097.
Commission Staff in its comments recommends that the Company’s Rathdrum Turbine
be included as a resource in the PCA. Staff notes that the Commission rejected such a proposal in
1994 stating:
For the first time Water Power seeks to include costs related to CTs in its
PCA. We reject that request, at this time. By their nature, CTs are
relatively lower capital cost and higher fuel cost resources than either hydro
or coal-fired resources. Allowing CT fuel costs to be included in the PCA,
therefore presents the potential for a shifting of risk from shareholders to
ratepayers in comparison to other resources. Until we know more about the
reality or magnitude of this potential risk reallocation, we find that it is
appropriate to exclude CT costs from Water Power’s PCA. The Company
is free to present this issue for our consideration in another proceeding
where a more complete record can be developed.

Case No. WWP-E-94-4, Order No. 25637.

Staff suggests that this matter should now be revisited.

ORDER NO. 28366 3
In Case No. WWP-E-98-11, Order No. 28097, the Commission, Staff notes, reset the
Company’s normalized base power supply costs. The normalized cost of the Rathdrum turbine
(including the fixed cost purchase contract, the fuel costs, the purchase power costs and offsetting
secondary sales revenues), are now, in contrast to the Commission’s earlier consideration of
Rathdrum, all being paid for by ratepayers in their base rates. If Rathdrum, Staff contends, is not
included as a resource in the PCA, then ratepayers pay the normalized costs of the turbine in base
rates but are denied the cost saving benefits of including it in the PCA calculation. This, Staff
contends, is an unacceptable mismatch that disadvantages ratepayers.
The Company and Staff have discussed two ways of including Rathdrum as a resource in
the PCA. Rathdrum could be included as a “dispatch” resource using fuel costs and other
characteristics established in the base case. If Rathdrum were to be included in this way, Staff
calculates the Idaho ratepayer benefit over the five-month period included in the Company’s PCA
filing to be $1,354,000. Avista believes that if Rathdrum is included in the PCA, it should be
included on an “actual fuel cost and actual revenue basis” due largely to the fluctuations in natural
gas prices that affect when the unit can economically be operated. This calculation is not currently
available.
It is Staff’s understanding that the Company is opposed to including Rathdrum on either
a “dispatch” or “actual” basis for past periods, but would support including the unit on an “actual”
basis going forward. It is Staff’s position that Rathdrum needs to be included in the PCA for all
months since the base was updated. In supplemental comments, Staff states that it is continuing to
pursue its Rathdrum concerns with the Company. The Company, Staff notes, has raised other PCA
concerns including the PCA treatment of Kettle Falls and Centralia. Staff recommends that any
difference in power costs related to Rathdrum be deferred to the PCA balance account. Staff
recommends that there be no dollar adjustment for Rathdrum in this case as pertains the proposed
rebate amount.
Staff concurs with the Company’s proposal to delay rebate implementation for three
months but recommends that interest accrue for this period, noting that the three-month delay is
beyond the normal processing time for PCA trackers. Staff proposes that the interest rate be the rate
currently authorized for customer deposits, i.e., 5% for the year 2000 (reference O.N. 28234).
In its comments Staff points out that the Company’s notice to customers in this case was
once again deficient. Reference Utility Customer Information Rule 102, IDAPA 31.21.02.102
Notices to Customer of Proposed Changes in Rates. Staff reminds the Company that according to

ORDER NO. 28366 4
the Utility Customer Information Rules, any application that changes rates can be returned as
incomplete if the customer notice is not included.
Commission Findings
The Commission has reviewed and considered the filings of record in Case No. AVU-E-
00-2 including the comments of Commission Staff and the Company’s letter request to defer
implementation of the PCA rebate from May 1 to August 1, 2000.
We find the Company’s proposal to defer implementation of the proposed PCA rebate
($2,364,000) to be reasonable. A deferred implementation date will lessen the number of individual
rate changes, will provide some offset to the cost of service adjustment and will lessen confusion
among customers. Although we issue today no final order regarding the rebate in Case No. AVU-
E-00-2, we find Staff’s recommendation that interest accrue on the proposed rebate amount for the
three month period of deferral to be reasonable, including use of the same interest rate the Company
pays on customer deposits, currently 5%. In so doing, we find that the three month deferral period
is an exception to the standard timeframes used in processing PCA rebates and surcharges.
The Commission notes, as Staff represents, that the Rathdrum turbine is now included as
a dispatchable resource in the Company’s power supply model. Reference Case No. WWP-E-98-
11, Order No. 28097 issued July 29, 1999. Arguably the Rathdrum turbine should be included in
the PCA calculation to balance the equation. We find, however, that we do not have sufficient
information regarding Rathdrum vis-a-vis the PCA methodology. Specifically, we would like the
Company and Staff to present additional information to the Commission prior to June 30, 2000
regarding the suggested methods for including Rathdrum as a PCA resource (dispatch versus
actual), the calculated economic benefits/cost to ratepayers/company of including Rathdrum in the
PCA methodology since the base was updated (the five month period included in the Company’s
PCA filing) and for the present accrual period.
By way of further guidance the Commission informs the parties that it does not consider
the present docket to be an appropriate forum for considering additional adjustments to the PCA
methodology, i.e., Kettle Falls or Centralia. The Commission believes that any such adjustments
should be presented in a separate application to modify the PCA methodology.
O R D E R
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby approve the proposed change of
implementation date for rebate in Case No. AVU-E-00-2 from May 1, 2000 to August 1, 2000. The

ORDER NO. 28366 5

ORDER NO. 28366 6
Commission further orders that interest should accrue on the deferred amount for the three month
deferral period at the same rate as interest accrues for customer deposits.
IT IS FURTHER ORDERED and the Company and Staff are directed to report back to
the Commission regarding the issue of the Rathdrum turbine on or prior to June 30, 2000.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of April 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

bls/O:aveu002_sw