Order No 28698.pdf

Office of the Secretary
Service Date
April 5, 2001
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION, DBA AVISTA
UTILITIES, FOR AN ORDER APPROVING AN
ELECTRIC ENERGY BUY-BACK PROGRAM FOR
PUMPING SCHEDULES 31 & 32 CUSTOMERS.

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CASE NO. AVU-E-01-4

ORDER NO. 28698

On March 1, 2001, Avista Corporation dba Avista Utilities (“Avista”) filed an
Application requesting Commission approval of its Tariff 70-R, Buy-Back of Customer Power—
Pumping Service (“Irrigation Buy-Back Program” or “Program”). Avista has requested expedited
processing of its Application and seeks a Commission Order making the Program effective from
March 15, 2001. In response to this request the Commission ordered that this case would be
processed in an expedited manner using Modified Procedure. IDAPA 31.01.01.201-.204. Order No.
28662 at 2-3. However, the Commission suspended the proposed effective date for this Program
until March 30, 2001. Id. at 3. Because the Commission found that expedited processing was
appropriate it required that written comments be filed within ten (10) days of the Notice of
Application and Notice of Modified Procedure which required that. Order No. 28662 at 3. The
Commission Staff filed comments and the Company filed reply comments.
AVISTA’S IRRIGATION BUY-BACK PROGRAM
Avista states that the market price of electricity is expected to remain high for the 2001
irrigation season because of low snowpack, and projected low streamflows. Under these conditions
the Company believes its Irrigation Buy-Back Program has the potential to reduce its power supply
expense during the months of May through September of 2001.
Avista’s Program is delineated in the Company’s proposed Tariff 70-R attached to its
Application. This Tariff would provide Avista’s Schedules 31 and 32 irrigation customers who have
used at least 50,000 kWh during at least one previous irrigation season, the option to sell power back
to the Company by reducing their historical electric consumption. Avista estimates that it has sixty-
eight (68) customers in Idaho that meet the minimum eligibility requirements for participation in this
Program. Avista states that in mid-March it will notify these customers by phone and mail to
describe how this Program will operate.

ORDER NO. 28698 -1-
To participate, eligible irrigation customers must notify Avista by April 15, 2001 and
agree to reduce their energy consumption by a minimum of 50,000 kWh from May to September
2001.1 Avista states that a participating irrigation customer’s reduced energy usage will be
calculated by subtracting the customer’s total energy usage from May through September 2001 from
their average energy usage during these same months from the preceding five years. If a customer
does not have five years of prior billing history Avista will use the billing history that is available.
The Company states that participating customers who save 50,000 kWh or more will be paid 10¢ per
kWh saved. Irrigation customers providing savings of 25,000–50,000 kWh will receive 5¢ per kWh.
Finally, participants who do not save at least 25,000 kWh will receive no compensation from the
Company.
Avista Company states that after October 31, 2001 it will verify each participating
irrigation customer’s actual energy savings and then make payments to them. Avista proposes to
record these payments as a power supply expense in Account 555, as these payments will be made in
lieu of purchasing power on the wholesale market. Furthermore, the Company seeks recovery of an
“appropriate” amount of lost revenues or revenue impacts as a result of this Program.
Avista states in its Tariff that this Program will expire on October 31, 2001.
STAFF ANALYSIS AND RECOMMENDATION
The Commission Staff reviewed and analyzed Avista’s Application and Attachments and
made the following recommendations.
1. Purchase Price of Power and Program in General
Based on the Company’s direct contact with irrigation customers, and because the price
being offered is less than the projected spot market price, Staff believes the 10¢ per kWh is
reasonable.2 Furthermore, based on the forward prices in the wholesale market for 2001 and the
Company’s analysis, it makes economic sense to purchase power from irrigation customers through
Avista’s Program at the 10¢ per kWh level. Staff believes that this Program will help to reduce off-
system spot market purchases that the Company may have to make this summer to serve its
customers. Finally, if enough power is conserved through the Program the Company may be able to

1 Originally, Avista proposed that this Program would only be offered to its Idaho irrigation customers who could offer a
reduction of energy consumption of at least 100,000 kWh. The Company amended this amount to 50,000 kWh for the
Idaho Program so that it would be consistent with its Irrigation Buy-Back Program in Washington.
2 Although Staff believes 10¢ per kWh is reasonable it is unsure how much additional participation from irrigation

ORDER NO. 28698 -2-
sell any excess on the spot market. As both of these scenarios would benefit Avista’s customers
Staff recommended approval of the Program.
2. Program Participation
Based on these interviews with eligible irrigation customers, Avista estimates that if
fourteen (14) Idaho customers participate in the Program the Company could save 2,512,974 kWh.
Staff believes these estimates are reasonable representations of what the scope of the Program will
be in Idaho.
3. Verification of Energy Savings and Payments
Avista states that participating irrigation customers’ reduced energy usage will be
calculated by subtracting a customer’s total energy usage from May through September 2001 from
their annual average energy usage during these same months from the preceding five years. If a
customer does not have five years of prior billing history Avista will use the billing history that is
available. The Company states that verification of energy savings will occur after October 31, 2001.
Staff believes through this process the Company can verify the energy savings an irrigation customer
has pledged. Staff also requested that the Commission address whether the Company should pay
interest to participating irrigation customers because Program payments would not be made to them
until after its conclusion.
4. Accounting Treatment and Revenue Recovery
Staff believes the Company should be allowed to record the costs and benefits, including
lost revenues of this Program in Account 555. Further, in order to monitor these costs and benefits
Staff recommends sub-accounts be established to specifically track the results of this Program. The
PCA filing should also include a separate line to identify these costs.
Because the PCA review is pending in Case No. AVU-E-01-1, and the results are not
determined at this time Staff believes that Avista and interested parties should develop and present a
proposal to the Commission recommending a procedure to calculate the amount of revenue impact
that should be allowed to pass through the Company’s PCA mechanism.
Finally, Staff stated that it would conduct a prudency review of the costs resulting from
this Program at its conclusion.
5. Contract Provision

customers Avista would obtain by raising the price per kWh.

ORDER NO. 28698 -3-
Staff had concerns regarding a contract provision contained in the proposed contract that
it will use with its Idaho irrigation customers. See, “Electric Energy Conservation Agreement”
Supplement to Application. Specifically, that:
[By signing the agreement the] Customer understands that the financial incentive
provided by AVISTA herein may be modified or withdrawn in the event
AVISTA determines that the major portion of Customer’s Reduction Level was
caused, primarily, by mandates by any local, State or Federal authority or
governing body or entity having jurisdiction over Customer’s water usage.

Contract at p.2, § 7.
While Staff believes there may be extreme, specific circumstances which may justify the
Company reducing payments to irrigation customers under these contracts, Staff feels the language
from the proposed contract quoted above appears much too broad.
COMMISSION FINDINGS
After review of the record in this case the Commission finds that this Program has value
to ratepayers and the Company. Accordingly, Avista’s Application for its Irrigation Electric Energy
Buy-Back Program for Pumping Schedules 31 and 32 is approved.
The Commission finds that because the Program is based on an irrigation customer’s
cumulative energy savings amount over five months as opposed to a program based on monthly
energy savings and because there is no penalty for an irrigation customer’s failure to save a specific
amount of kWh the Company shall not be required to pay interest on accumulated amounts it will
owe participating irrigation customers at the conclusion of this Program.
The Commission finds that the contract provision that the Commission Staff raised
concerns over is appropriate for this Program. However, the Commission shall require the Company
to advise the Commission if this clause is triggered so that a review may be conducted, if necessary.
The Commission also finds that the Company shall record the costs and benefits of this
Program in Account 555. Further, in order to monitor these costs and benefits the Company shall
establish sub-accounts to specifically track the results of this Program. The PCA filing should also
include a separate line to identify these costs.
Avista and interested parties shall develop and present a proposal to the Commission
recommending a procedure to calculate the amount of revenue impact that should be allowed to pass
through the Company’s PCA mechanism at the conclusion of this Program.

ORDER NO. 28698 -4-
O R D E R
IT IS HEREBY ORDERED that Avista’s Application for its Irrigation Electric Energy
Buy-Back Program for Pumping Schedules 31 and 32 is approved.
IT IS FURTHER ORDERED that Avista shall not be required to pay interest on
accumulated amounts it will owe participating irrigation customers at the conclusion of this
Program.
IT IS FURTHER ORDERED that if § 7 of Avista’s contract with an irrigation customer
is triggered the Company shall present the matter to the Commission so it may determine if it should
be applied.
IT IS FURTHER ORDERED that the Company shall record the costs and benefits of this
Program in Account 555. Further, in order to monitor these costs and benefits the Company shall
establish sub-accounts to specifically track the results of this Program. The PCA filing should also
include a separate line to identify these costs.
IT IS FURTHER ORDERED that Avista and interested parties shall develop and present
a proposal to the Commission recommending a procedure to calculate the amount of revenue impact
that should be allowed to pass through the Company’s PCA mechanism at the conclusion of this
Program.
THIS IS A FINAL ORDER. Any person interested in this Order or in interlocutory
Orders previously issued in this Case No. AVU-E-01-4 may petition for reconsideration within
twenty-one (21) days of the service date of this Order with regard to any matter decided in this Order
or in interlocutory Orders previously issued in this Case No. AVU-E-01-4. Within seven (7) days
after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code § 61-626.

ORDER NO. 28698 -5-

ORDER NO. 28698 -6-
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of April 2001

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

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