HomeMy WebLinkAbout2000421_sw.docDECISION MEMORANDUM
TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
GINNY AMARAL
KEITH HESSING
KATHY STOCKTON
NANCY HARMAN
WORKING FILE
FROM:
DATE: APRIL 21, 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. 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 eight rebates totaling $20,820,000 and three surcharges totaling $6,769,000. 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%.
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) and the related implementing rules and regulations of the Federal Energy Regulatory Commission (FERC) 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 PCA tracks 100% of the changes in costs associated with PURPA contracts. The Company is allowed to record the difference between actual power supply costs and the level of those costs authorized by the Commission. When the total difference in costs exceed $2.2 million, the Company may request authority to implement a surcharge or 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. Commission Staff was the only party to file comments (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. 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-94-04, Order No. 25637.
Staff suggests that this matter should now be revisited.
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 (attached) Staff states that it continues to pursue its Rathdrum concerns with the Company. The Company, Staff notes, has raised other PCA concerns including the pending sale of Centralia. Any difference in power costs related to Rathdrum, once calculated, Staff recommends, should not be added to the proposed rebate but should be deferred to the PCA balance account. Staff recommends that the Company’s case and proposed rebate be processed without adjustment for Rathdrum.
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 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 it reasonable to process this case pursuant to Modified Procedure?
Should the proposed rebate in the amount of $2,364,000 be approved?
Is it reasonable to extend the proposed effective date of the rebate from May 1, 2000 to August 1, 2000? If so, should interest accrue for the three-month deferral period? Is Staff’s proposed interest rate reasonable?
How does the Commission wish to handle Staff’s proposal to include Rathdrum as a resource within the PCA calculation?
Does the Commission wish to comment on the Company’s failure to comply with Customer Information Rules?
vld/M:AVU-E-00-02_sw3
DECISION MEMORANDUM 3