20030519Application.pdf

Kelly o. Norwood
Vice-President, Rates and Regulation
1411 E. Mission Avenue
P. O. Box 3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
RECEIVED (IJFILED
2003 tMY 16 AM 10: 07
LJ,;;) Pl,oL!C
UTILITIES COril-1ISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
APPLICA nON OF A VISTA CORPORATION FOR
DETERMINATION OF THE INTEREST RATE TO
APPLY TO THE POWER COST ADJUSTMENT
(PCA) DEFFERAL BALANCE
CASE NO. A VU-03-l!.!/
I. INTRODUCTION
A vista Corporation, doing business as A vista Utilities (hereinafter A vista or Company), at
1411 East Mission Avenue, Spokane, Washington, respectfully requests that the Commission issue
an order setting forth the interest rate to apply to the Power Cost Adjustment (PCA) deferral balance.
Communications in reference to this Application should be addressed to:
Kelly O. Norwood
Vice President, Rates and Regulation
A vista Corporation
1411 E. Mission Avenue
Spokane, Washington 99220
Phone: [phone]
Fax: [phone]
David J. Meyer
Senior Vice President and General Counsel
A vista Corporation
1411 E. Mission Avenue
Spokane, Washington 99220
Phone: [phone]
Fax: [phone]
II. PROXY CURRENTLY BEING USED FOR INTEREST RATE
The Customer Deposit Rate is currently being used as the proxy for determination of the
interest rate that is applied to the Company s PCA deferral balance. The Customer Deposit Rate for
calendar year 2002 was 4% and for calendar year 2003 is 2%. Pursuant to Rule 106.02 the Customer
Deposit Rate is determined for each calendar year based on the twelve-month average of one-year
Treasury Bills for the previous November 1 through October 31 period, rounded to the nearest whole
A VISTA'S APPLICATION FOR DETERMINATION OF PCA INTEREST RATE PAGE 1
percent. The 2% Customer Deposit Rate for 2003 was approved at the Commission s Decision
Meeting held on Monday, November 25, 2002. The Company submitted a letter via fax prior to the
Decision Meeting addressing its concerns about applying the 2% Customer Deposit Rate to the PCA
and Purchased Gas Adjustment (pGA) balances. The Commission determined that an exception for
the rate to apply to the PCA and PGA balances could be addressed in a separate proceeding. In this
filing the Company is requesting an exception to the Customer Deposit Rate for the PCA deferrals
due to the size and the multi-year recovery of the PCA deferrals. The Company is not requesting an
exception for the interest rate that applies to PGA deferrals, since those deferrals are smaller and are
expected to be fully recovered sometime during 2003.
III. A 2% RATE IS WELL BELOW A VISTA'S COST OF BORROWING
The 2% Customer Deposit Rate for 2003 is much lower than A vista s cost of borrowing.
The Company cannot borrow funds at Treasury Bill rates. The Company s weighted cost of debt at
December 31 2002 is 8.88%. The PCA deferral balance is being recovered over multiple years to
mitigate the rate impact on customers and the Company has issued long-term debt to finance the
deferral balance. Even if the Company was able to finance the PCA deferral balance under its short-
term credit arrangement, the most recent borrowing on April 25th was at a 5% interest rate plus
basis points for fees.
The net PCA deferral balance was approximately $30.9 million at December 31 2002. An
interest rate drop from the rate for 2002 of 4% to the Customer Deposit Rate for 2003 of 2% amounts
to a reduction of approximately $618,000 annually in interest on a $30.9 million balance. Interest
amounts on the PCA deferral balance are significant and the Company requests an interest rate that
is closer to A vista s cost of borrowing.
A VISTA'S APPLICATION FOR DETERMINATION OF PCA INTEREST RATE PAGE 2
IV. SIZE AND MULTI-YEAR RECOVERY OF PCA DEFERRALS
The PCA deferral balances net of surcharge revenues are large and based on current
projections the deferral balance is not expected to be fully recovered until mid-2005. Listed below
is the actual year-end balance for 2002 and projected balances for the years 2003 through 2005:
$30 926 000
$23 633 000
$10 868 000
December 31 2002 (actual)
December 31 , 2003 (projected)
December 31 2004 (projected)
Mid- Year 2005 (projected)
The projections are based on a continuation of the existing surcharge and estimated power cost
deferrals. Actual hydro conditions, actual market prices and other factors could substantially affect
the projected balances shown above.
PCA interest is calculated monthly with interest for the current month being calculated by
applying the interest rate to the deferral balance net of accumulated surcharge revenue at the end of
the previous month. The Company is requesting an exception to the Customer Deposit Rate for PCA
interest and is requesting an interest rate that is closer to A vista s cost of borrowing as more fully
described below.
V. REQUESTED PCA INTEREST RATE
The Company requests that the allowed interest rate to be applied to the PCA deferral
balance be 200 basis points (2%) above the Customer Deposit Rate beginning January 1 , 2003. For
2003 the resultant interest rate would be 4%. While this rate is still below the Company s actual cost
of borrowing, applying the 2% adder to the Customer Deposit Rate produces a more reasonable rate.
The Company requests that the rate determined by adding 2% to the Customer Deposit rate continue
until the PCA deferral balance is fully recovered. At that time, the interest rate would revert back
to being the Customer Deposit Rate without the 2% adder.
A VISTA'S APPLICATION FOR DETERMINATION OF PCA INTEREST RATE PAGE 3
The Company submits that this filing is limited in scope and respectfully requests expedited
processing under the Commission s Modified Procedure rules.
Dated at Spokane, Washington this 15th day of May 2003.
A VISTA CORPORATION
BY
~,JX
c.J?n-
Kelly O. Norwood
Vice President, Rates and Regulation
A VISTA'S APPLICATION FOR DETERMINATION OF PCA INTEREST RATE PAGE 4
VERIFICATION
STATE OF WASHINGTON)
County of Spokane
Kelly O. Norwood, being first duly sworn on oath, deposes and says: That he is the
Vice President, Rates and Regulation of A vista Corporation and makes this verification for and on
behalf of said corporation, being thereto duly authorized;
That he has read the foregoing filing, knows the contents thereof, and believes the same to
be true,
/r/l ~r-d
SIGNED AND SWORN to before me this 15th day of May 2003, by Kelly O. Norwood.
,\\\,'111""'1',..~ OL~.:!"~
~ ~, '
.~:-~~~9!"~-
~ Q't-. ~\""nc;':'~~"",:s .ff'
""",,'
't!!!:.!it:: '0 t.. ~
:::
:(J ~OTAR,.. \
S CA PUBl\C ii!!:.;.4.
~_.~. ~~';-".
":'Ct22.'P'..:
. ~
.'.~~.ASIf: WA~"";~"~1/11",..\\\\\'
NOT AR Y P LIC In and for the State of
Washington, residing at Spokane.
Commission Expires:
:;;;.../
d.=L-/ 0
(/?
A VISTA'S APPLICATION FOR DETERMINATION OF PCA INTEREST RATE PAGE 5