2001420_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
BILL EASTLAKE
TONYA CLARK

DON HOWELL
LYNN ANDERSON
DAVE SCHUNKE
MIKE FUSS
RANDY LOBB
GENE FADNESS
WORKING FILE FROM:
DATE:
APRIL 20, 2001 RE: CASE NO. AVU-E-01-06 (Avista)
TARIFF SCHEDULE 92—ALL CUSTOMER ELECTRIC ENERGY
BUY-BACK PROGRAM

On April 16, 2001, Avista Corporation dba Avista Utilities—Washington Water Power Division—Idaho (Avista; Company) filed an Application with the Idaho Public Utilities Commission (Commission) in Case No. AVU-E-01-06. The Company requests approval of a new Tariff Schedule 92—All Customer Electric Energy Buy-Back Program. The purpose of the program is to promote electric conservation by customers and displace higher cost energy that would otherwise be purchased at prevailing market prices. Conservation will be encouraged by providing customers with a financial incentive for energy savings in excess of 5% of the customer’s prior year’s usage.
As background for the program, the Company indicates that short-term market prices for electricity are expected to remain high during the remainder of 2001. The current low snow pack and resulting effect on hydro generation in the region, the Company states, will undoubtedly cause upward pressure on market prices during the coming summer months. Forward market prices range from a low of $258 per (light load) megawatt-hour during May, to a high of $511 per (heavy-load) megawatt-hour during August. During this period, the Company states that conservation is obviously the most cost-effective means of minimizing power costs.
Program Description
All metered customers who have lived at the same address, or who have had the same place of business for the past 12 consecutive months are eligible for the program. The program is designed to provide an additional incentive for each customer to reduce the amount of energy they use.
The program will apply only to a customer’s energy usage (kilowatt hour meter). The customer’s energy savings and potential bill credit will be calculated independently for each meter. Customer energy usage that is not metered, but billed on a flat rate will not be eligible. Customers who are participating in the Company’s other buy-back programs will not be eligible for the period that they are participating in that other program.
Customers will receive a bill credit each month if they reduce their usage by more than 5% as compared to the same month in the prior year. The bill credit will be 5¢ for each kilowatt hour savings in excess of the 5% threshold/dead band. The 5% dead band is adopted in lieu of adjusting usage for weather and other factors.
As proposed, the Schedule 92 program will begin with customer meter readings on May 15, 2001 and end with meter readings on October 12, 2001. The effective period is designed to provide all customers five monthly billings under the program. The Company is proposing that customer meter readings on and after May 15 would include the incentive calculation on their bill based on the entire prior month usage.
Coincident with the Company’s filing, and continuing through the remainder of April, the Company will provide a customer bill insert describing the proposed program. A special newsletter will be provided in all customers’ bills in May containing similar information shown on the insert. On Commission approval of the program, the Company states that it will begin running several television, radio and newspaper adds describing the program. The Company’s web site will also contain information about the program and ways customers can save energy.
Proposed Accounting Treatment
The Company proposes to include the amount paid/credited customers under the program, as well as the total reduction of revenue (lost revenue) experienced by the Company during the program in its Power Cost Adjustment deferral account. Under the Company’s proposed changes to the PCA methodology in Case No. AVU-E-01-01, “excess” power costs incurred by the Company would be deferred. The Company’s proposed deferral mechanism includes a revenue adjustment mechanism that would capture lost revenue during the term of the program. The amount associated with bill credits provided under the program would be charged to the deferral account. The Company also requests that it be allowed to defer incremental costs associated with the program promotion and necessary revisions to the Company’s billing system. Any costs associated with Company employees, time spent designing, implementing, or administering the program would not be deferred.
Implementation of the program, the Company states, will serve to reduce the balance in the PCA deferral account as opposed to purchasing energy at market prices to serve higher customer energy requirements that would occur without the program. All energy savings by customers that are less than 5% would only impact the deferral account by the amount of lost revenue, an average system level of about 5¢ per kilowatt-hour. For those energy savings that are in excess of 5%, the effective price per kilowatt-hour is about 10¢ (5¢ payment under the program and 5¢ for lost revenue). The potential deferred amount per kilowatt-hour under the program, including lost revenue, the Company contends, obviously represents a substantial savings to customers as compared to purchasing energy at expected market prices of 26¢ to 51¢ per kilowatt hour during the period. All revenue from any excess generation sold into the market by the Company will be credited against the costs in the deferral account.
Avista requests approval of the proposed tariff on or before May 15, 2001.
Commission Decision
The Company has requested a May 15, 2001 effective date. Staff recommends that the matter be processed under Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission’s Rules of Procedure, IDAPA 31.01.01.201-204. Compliance with the Company’s proposed effective date necessitates a shortened comment period—May 09, 2001. The Company reports that it is presently spending approximately $400,000 per day on market purchases and is paying an average price of 40¢/kWh. What is the Commission’s preference regarding procedure? If Modified Procedure is appropriate, is a May 9 comment deadline (approximately 2 weeks) reasonable?

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DECISION MEMORANDUM 3