HomeMy WebLinkAbout2000414_sw.docDECISION MEMORANDUM
TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
KATHY STOCKTON
KEITH HESSING
NANCY HARMAN
WORKING FILE
FROM:
DATE: APRIL 14 2000
RE: CASE NO. AVU-E-00-02 (Avista)
PCA REBATE ( $2,364,000)
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 Companys electric tariff Schedule 66temporary Power Cost AdjustmentIdaho. Avista requests that the Commission approve a $2,364,000, 1.973% rebate to Avistas Idaho customers. The rebate is being requested as a result of the trigger being reached and exceeded in Avistas Power Cost Adjustment (PCA) balancing account.
POWER COST ADJUSTMENT—BACKGROUND
The Companys 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 nine rebates totaling $23,184,000 and three surcharges totaling $6,769,000.
Water Powers 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 Companys 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.
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 Companys general revenue requirement. PURPA contract costs are the result of the Companys 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 Companys Application, the $2.2 million trigger was reached and exceeded in December 1999, based on actual data from the preceding month, November.
Under the Companys 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
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 Companys 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-00-02. The deadline for filing written comments was April 5, 2000. The Commission Staff was the only party to file comments (attached). Supplemental Comments were filed by Staff on April __, 2000 (attached).
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. A later date would coincide with the expiration of the existing rebate. August 1 is also the implementation date of the final step 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 re-allocation, 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-94-04, Order No. 25637.
Staff suggests that the appropriations of including Rathdrum in the PCA should now be revisited. The Company’s normalized base power supply costs since the Commission’s earlier Order No. 25637 have been reset. Reference general rate Case No. WWP-E-98-11, Order No. 28097. 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 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 “dispatched” 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 “dispatched” or a “actual” basis for past periods, but would be willing to include 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 power supply costs were updated. Staff recommends that any difference caused by including Rathdrum as a resource in the PCA calculation be deferred to the balancing account.
Staff concurs with the Company’s request to delay rebate implementation for three months (to August 01, 2000) but recommends that interest accrue for this period. The PCA, by Commission Order No. 22816, Case No. WWP-E-88-03, normally does not accrue interest on the deferred amount awaiting rebate or surcharge. The assumption in the Order was that rebates and surcharges would be processed using the same procedures and approximately equal amounts of time causing interest benefits to be offsetting. The three-month delay beyond the normal processing time for the proposed rebates, Staff contends, is not a normal process and to be fair the deferred balance should accrue interest to the benefit of ratepayers. Staff proposes that the interest rate be the rate currently authorized for customer deposits, 5% for the year 2000. Reference Order No. 28234.
Staff’s Consumer Division contends that the Company’s “customer notice” for PCA adjustments continues to be deficient. Rule No. 102 (IDAPA 31.21.02.102) Notices to Customers of Proposed Changes in Rates in the Utility Customer Information Rules, requires the utility to give each customer a statement or notice announcing the utility’s application. The Rule specifies the information that needs to be contained in the notice. Any rate change requires individual notice and Avista, the Staff contends, should be directed to include in its notices all of the required information. In this case Staff contends that the notice neglects to inform customers that the requested change in rates was filed with the Idaho Public Utilities Commission. Nothing is mentioned about the proposal being subject to public review and a Commission decision. Neither does the notice inform the customers where a copy of the Application can be reviewed. Staff concludes by noting that according to the Utility Customer Information Rules, any Application that changes rates can be returned as incomplete if the customer notice is not included.
Commission Decision
Does the Commission continue to find Modified Procedure to be appropriate in Case No. AVU-E-00-02?
Does the Commission concur that it is reasonable to defer the rebate effective date to August 1, 2000?
Does the Commission agree with Staff’s recommendation that interest accrue during the three-month delay?
Does the Commission agree that the Rathdrum turbine should be included as a PCA resource? If so, does the Commission find it reasonable to include Rathdrum on a “dispatch” or “actual” basis?
When should the inclusion of Rathdrum in the PCA methodology begin? For all months since base power supply costs were updated? For the current period of accrual? From the date of the Commission’s Order?
Should the Company be directed once again to provide proper notice to customers of PCA rate changes?
Scott Woodbury
Vld/M:AVU-E-00-02_sw2
DECISION MEMORANDUM 6