07112001.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
GENE FADNESS
DON HOWELL
RANDY LOBB
DAVE SCHUNKE
TONYA CLARK
RICK STERLING
BEVERLY BARKER
WORKING FILE

FROM: SCOTT WOODBURY

DATE: JULY 11, 2001

RE: CASE NO. AVU-E-01-10 (Avista)
AMENDMENT TO SCHEDULE 51—ELECTRIC LINE EXTENSION TARIFF

On June 5, 2001, Avista corporation dba Avista Corporation dba Avista Utilities—Washington Water Power Division, Idaho (Avista; Company), filed an Application with the Idaho Public Utilities Commission (Commission) for an Order approving proposed revisions to the Company’s Electric Line Extension Schedule 51 tariff.
On May 4, 2001, the Commission approved tariff changes to Schedule 51 to reflect updated costs associated with the installation of line extensions. The Commission requires that the costs be updated annually. The newly enacted changes reflected a significant increase in costs. The effect of these increased costs as they apply to residential developments, the Company states, is substantial. In fact, the Company states, it appears that Avista will no longer be in a position to compete for service to residential developments when the developer has a choice of service providers. For each development that the Company loses to another service provider, the Company states, it then becomes “locked out” of providing service to adjacent future developments under the (closest to) rules of the Electric Supplier Stabilization Act. Reference Idaho Code §§ 61-332 to 334B. The Company expects to lose all future developments that are competitive.
To address this “competitive disadvantage,” and to have a reasonable opportunity to compete for service to new competitive developments in the future, Avista proposes to collect the non-refundable cash payment, presently $305, from the builder rather than the developer. The cash requirement would be collected from the builder at the time the service to the home is installed. Whether this amount is collected from the developer or the builder, the Company reasons, the cost ultimately flows through to the home buyer. In order to ensure payment if the home is never built, the amount of the promissory note or credit instrument required from the developer, would be increased by $305 per lot, from $550 to $855 per lot. Under the proposed line extension rules, if a developer provides the ditching for the primary service and an appropriate credit instrument for $855 per lot, a non-refundable cash payment would not be required. However, if Avista provides the ditching within the development, a cash payment of $280 per lot would still be required from the developer, in addition to a credit instrument for $855 per lot.
Under the Company’s present accounting procedure, the non-refundable cash payment that is received from the developer is credited against the cost of the electric plant installed to serve the development. In order for the proposed change to have no effect on other customers’ rates in the future, the Company states that it will continue to credit electric plant when the primary service is run to a development and, instead of recording the receipt of cash from the developer, it will record an account receivable to be collected from the builder.

On June 19, 2001, the Commission issued Notices of Application and Modified Procedure in Case No. AVU-E-01-10. The deadline for filing written comments was July 6, 2001. The Commission Staff was the only party to file comments (attached). Staff acknowledges that the proposed change, if approved, would enhance Avista’s ability to compete without negatively impacting existing customers. Staff recommends that the Commission approve the proposed changes to Schedule 51.
Commission Decision
Does the Commission find it reasonable to approve Avista proposed revisions to the Electric Line Extension Schedule 51? If not, how does the Commission wish to proceed?

Scott D. Woodbury
bls/M:avue0110_sw2
DECISION MEMORANDUM 2