ModProc_app.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE SUBMISSION OF THE STATUS REPORT OF AVISTA CORPORATION AND APPLICATION FOR A CONTINUATION OF A POWER COST ADJUSTMENT (PCA) SURCHARGE. )
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CASE NO. AVU-E-02-06

NOTICE OF APPLICATION

NOTICE OF MODIFIED PROCEDURE

NOTICE OF COMMENT/PROTEST DEADLINE

YOU ARE HEREBY NOTIFIED that on August 9, 2002, Avista Corporation doing business as Avista Utilities (Avista; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting a continuation of the electric Schedule 66 Power Cost Adjustment (PCA) surcharge of 19.4% ($23.6 million) currently scheduled to expire on October 11, 2002. As reflected in this filing, Avista states that the current status of the unrecovered PCA deferral balance as of June 30, 2002, is $45,600,228 for its Idaho jurisdiction. Avista is requesting that the Commission continue the PCA surcharge for an additional 12 months, through October 11, 2003.
The Company’s present surcharge was authorized by the Commission in Order No. 28876 in Case No. AVU-E-01-11. In approving the existing 12-month surcharge, the Commission directed the Company to file a status report 60 days prior to expiration of the authorized surcharge period. Avista in that case estimated that the $30 million deferral balance on June 30, 2001, absent rate recovery, would increase to $69 million by December 2001, $72 million by the end of 2002 and $88 million by the end of 2003. The Company requested a 27-month surcharge period through December 2003. In its Order, the Commission stated, “If the status report and our review of the actual PCA deferral balance (at the end of 12 months) support continuation of the surcharge, we anticipate continuation of the surcharge for an additional period.”
As reported by the Company the PCA deferral balance was $45.6 million as of June 30, 2002. The deferred cost balances as reflected in the Company’s PCA account are as follows:
Deferral balance as of June 30, 2001 $30,007,057 Deferrals July 2001 through June 2002 48,442,371 Transfer of under-rebate (49,073) Transfer of under-surcharge 342,069 PGE monetization accelerated amortization (20,783,521) Interest 2,764,590 SubTotal—Account 186.38 balance as of June 30, 2002 60,723,493 Revenues collected October 12, 2001—June 30, 2002 (15,123,265) Unrecovered balance as of June 30, 2002 $45,600,228
As reflected in the Company’s previous PCA filing, hydroelectric generation through June 2001 for Avista was the lowest in the 73 years of record. The Company reports that it continued to experience those very low stream flow conditions through the remainder of 2001. The record low hydroelectric conditions in 2001, the Company states, required it to purchase energy in the forward short-term wholesale market to replace the lost generation and cover its energy deficiencies. These purchases, the Company contends, were made at unprecedented high wholesale market prices and caused deferral balances to increase substantially. The extraordinary power supply circumstances through mid-2001, especially the record low stream flows, the Company contends, continued to impact the Company’s power cost deferral balances for the remainder of the year and into 2002. In fact, the Company states that of the deferrals of $48.4 million recorded between July 2001 and June 2002, approximately $46 million occurred during the last half of 2001 with the remaining $2 million occurring in the first half of 2002.
To mitigate the increased power costs, Avista states that it has increased operation of its thermal resources and has aggressively pursued conservation and load curtailment programs. However, the Company states that the costs associated with the hydroelectric conditions, the cost of short-term power market purchases and increased thermal fuel costs have exceeded the benefits these measures provided.
The Company contends that investor concern surrounding its cash flows, deferral balances and the ability to recover costs in a timely manner have had an impact on the Company’s finances that continues today. Avista’s credit ratings, it states, are presently below investment grade and the rating agencies characterize the Company’s outlook as negative. Avista contends that it is important for the Company to regain an investment grade rating as soon as possible so that longer- term debt can be refinanced on more reasonable terms, benefiting customers with lower debt-related costs. Credit rates, the Company contends, will take time to be restored and continuation of the current surcharge, the Company contends, is one of the keys for Avista to continue to improve its financial condition.
Avista requests that the carrying charge applied to the unamortized PCA deferral balance be increased from the current customer deposit rate to a level that it contends is more reflective of the longer-term nature of the recovery period. Avista reports that the Company’s embedded cost of debt as of June 30, 2002, is 8.88% , incorporating both long- and short-term debt. The Company proposes that the carrying charge be increased to a rate of 6%, as was recently authorized for Idaho Power.
The rates set forth under the proposed PCA Schedule 66 reflect an annual revenue surcharge amount of $23.6 million, or 19.4%. As proposed by the Company, the Schedule 66 rates would not change. The use of the deferred credit related to the monetization of the Portland General Electric (PGE) Sale Agreement as an offset to the power deferral balance to reduce the overall rate impact to customers, the Company notes, will continue through the end of 2002. After that point, the ongoing PCA deferral entries will be adjusted to reflect the fact that the PGE credit has been fully returned to customers.
The Company proposes the continuation of the surcharge for a 12-month period, beginning October 12, 2002, and continuing through October 11, 2003. Prior to expiration of that term, the Company would file a status report with the Commission and request a continuation of the surcharge, as necessary, to allow recovery of any un-recovered PCA balance.
YOU ARE FURTHER NOTIFIED that the Commission has preliminarily found that the public interest in this matter may not require a hearing to consider the issues presented and that the issues raised by the Company’s filing may 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.
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or protests with respect to Avista’s Application and the use of Modified Procedure in Case No. AVU-E-02-06 is Wednesday, September 18, 2002. Persons desiring a hearing must specifically request a hearing in their written protests or comments.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are received within the deadline, the Commission may consider the matter on its merits and may enter its Order without a formal hearing. If comments or protests are filed within the deadline, the Commission will consider them and in its discretion may set the matter for hearing or may decide the matter and issue its Order on the basis of the written positions before it. Reference IDAPA 31.01.01.204.
YOU ARE FURTHER NOTIFIED that written comments concerning Case No. AVUE-02-06 should be mailed to the Commission and the Company at the addresses reflected below.

COMMISSION SECRETARY
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074

Street Address for Express Mail:

472 W WASHINGTON ST
BOISE, ID 83702-5983 KELLY O. NORWOOD
VICE PRESIDENT
RATES AND REGULATION
AVISTA CORPORATION
1411 E MISSION AVE
PO BOX 3727
SPOKANE, WA 99220
[e-mail]

DAVID J. MEYER, ESQ.
SENIOR VP AND GENERAL COUNSEL
AVISTA CORPORATION
1411 E MISSION AVE
PO BOX 3727
SPOKANE, WA 99220
[e-mail]
All comments should contain the case caption and case number shown on the first page of this document.
Persons desiring to submit comments via e-mail may do so by accessing the Commission’s homepage located at www.puc.state.id.us under the “Comments and Questions” icon. Once at the “Comments or Questions” icon, fill in the case number as it appears on the front of this document, and enter your comments. These comments should also be sent to the Company at the e-mail addresses listed above.
YOU ARE FURTHER NOTIFIED that the Company’s Application in Case No. AVU-E-02-06 may be viewed at www.puc.state.id.us by clicking on “File Room” and “Electric Cases,” or can be viewed during regular business hours at the Idaho Public Utilities Commission, 472 West Washington Street, Boise, Idaho and at the Idaho offices of Avista Utilities
DATED at Boise, Idaho this day of August 2002.

Jean D. Jewell
Commission Secretary

Vld/N:AVUE0206-sw

NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE 1

Office of the Secretary
Service Date
August 28, 2002