20001211_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
BILL EASTLAKE
RANDY LOBB
DON HOWELL
TONYA CLARK
BEV BARKER
TERRI CARLOCK
DAVE SCHUNKE
KEITH HESSING
RICK STERLING
WORKING FILE

FROM: SCOTT WOODBURY

DATE: DECEMBER 11, 2000

RE: CASE NO. AVU-E-00-10 (Avista)
AVISTA RULES AND REGULATIONS (Idaho) – RULE 26
BUY-BACK OF CUSTOMER POWER

On December 11, 2000, Avista Corporation dba Avista Utilities – Washington Water Power Division (Idaho) (Avista; Company) made a filing with the Idaho Public Utilities Commission (Commission) proposing a new Rule 26 – Buy-Back of Customer Power to the Company’s Idaho Rules and Regulations (attached). The purpose of the filing is to reduce the Company’s power supply expense during periods of extraordinarily high wholesale power costs. Participating customers would voluntarily reduce loads in exchange for a bill credit. All other customers benefit, the Company contends, because of increased reliability of the regional power system. The Company requests that the rule be approved on less than statutory notice to become effective on December 12, 2000 so that the rule may be implemented in December during which time power costs are expected to be extraordinarily high and to respond to potential regional energy shortages.
Avista in its Application notes that recent five-day weather forecasts are predicting temperatures in the inland Northwest and the western United States to be significantly below normal. These temperatures, in combination with other factors such as power plant availability, the Company states, have driven wholesale power prices to very high levels. Forward power prices for the last two weeks of December have hit highs of $3,000 per megawatt.
The proposed Rule 26 would allow customers supplied through one meter installation for a demand of not less than 3000 Kva to voluntarily reduce loads in exchange for a bill credit. Avista is proposing a buy back rate pricing power based on its value in the wholesale markets. If the pricing of the product changes within any one-day period (midnight to midnight), the highest price taken by any one customer will be provided to any other customer taken service during this same day. Such a “most favored nation” approach is intended to avoid discrimination among customers and to avoid customers “holding out” for a higher rate by delaying curtailment.
The rate offered by Avista under Rule 26, the Company states, will be less than 70% of the wholesale price of power on any given day. The Company anticipates that the credit amount offered to customers will be at approximately half of the wholesale market rate. The shared savings approach is intended to encourage participation and promote fairness.
The amount of curtailed energy for which payment is due will be calculated by comparing the difference between energy consumed each day during the load curtailment served and energy consumed on the 14 work week days immediately preceding the load curtailment. The Company states that it will perform engineering analyses to verify customer’s baseline usage data. Other methods of calculation may be utilized upon prior mutual written agreement between a customer and Avista’s account representative.
Although the Company indicates that it is presently unsure about the subscription level, it maintains that it is prudent to put the tariff into place to be prepared to respond to unprecedented winter power market conditions. The Company maintains that there is no revenue increase associated with its filing. The effect of the filing would be to reduce power supply expense over what would be the case in the event the filing was not in effect.
The Company commits to file a report with the Commission, describing participation, key aspects of the buy-back option, and efforts taken to avoid unintended consequences of such an offering including how the Company avoided situations in which customer loads would have been reduced for other reasons notwithstanding the buy-back offer.
Commission Decision:
• Staff recommends that the Company’s filing be approved for effective date December 12.
• Staff recommends, as in Washington, that the Company post offered curtailment prices on a publicly available website.
• Staff understands that in approving the Rule, the Commission makes no statement or finding regarding prudency of expenditures or potential cost recovery.
• Staff recommends that the Company file informational reports with Staff of individual transaction details when contracts are executed.
• Staff would like the opportunity to re-evaluate the program in 60 days.
-- Company status report
-- Including PCA deferral ramifications (if any)
• Staff understands that the Company intends to book these transactions in FERC Account 555 for Purchased Power – Staff recommends that a separate subaccount be established.

Scott D. Woodbury

bls/M:avue0010_sw

DECISION MEMORANDUM 3