20030821Final Order No 29323.pdf

Office of the Secretary
Service Date
August 21 , 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
VISTA CORPORATION FOR
DETERMINATION OF THE INTEREST RATE
TO APPLY TO THE POWER COST
ADJUSTMENT DEFERRAL BALANCE.ORDER NO. 29323
CASE NO. A VU-O3-
On May 16, 2003, Avista Corporation dba Avista Utilities filed an Application
requesting that the Commission issue an Order setting the interest rate that applies to the
Company s Power Cost Adjustment ("PCA") deferral balance at a higher level than the current
rate for customer deposits.The Commission issued Notice of Application and Modified
Procedure on June 12 2003. Order No. 29264. The Commission Staff and Avista filed written
comments.
After reviewing the record the Commission grants the Company s Application in the
manner discussed below.
THE APPLICATION
A vista requests that the Commission issue an Order allowing the Company to apply a
higher interest than the current customer deposit rate to its PCA deferral balance. A vista makes
this request because it claims the current interest rate applicable to its PCA deferral balance is far
below its cost of borrowing, the large size of the Company s PCA deferral balance, and the use
of a multi-year process to fully recover the balance.
Historically, the Commission has used the customer deposit rate as the interest rate
for utility PCA deferral balances. See Utility Customer Relations Rule 106, IDAP
31.21.01.106. For the calendar year 2003 the Commission set the customer deposit rate at 2%.
!d. at Rule 106.02. Avista requests that the Commission grant it an exception to application of
this rate and set the interest rate at 2% above it, i., 4% for its PCA deferral balance. Avista
requests that this interest rate be made effective back to January 2003. Avista also requests
1 The Company states that as of December 31 , 2002 its PCA deferral balance was $30 926 000. Through the multi-
year recovery process the Company projects this balance will shrink to $23 633 000 by December 2003
$10 868 000 by December 2004 and $0 sometime in 2005.
ORDER NO. 29323
that the interest rate applicable to any PCA deferral balance revert back to the customer deposit
rate as set annually by the Commission once the deferral balance is fully recovered.
SUMMARY OF COMMENTS
The comments filed by Staff and Avista cited two primary issues: 1) the interest rate
and 2) the time frame. Both Staff and A vista agreed that a 200 basis point increase would be
appropriate. The differences in positions come when determining what balance the rate should
be applied to and for how long. A vista argued it should apply to the full current balance for as
long as there is a net balance. Avista noted it is like using the last in first out (LIFO) method of
accounting for the surcharge. Staff's argument relied on the first in first out (FIFO) method of
accounting where the balances accrued first are paid first. Staff's position was that only the
balances left after a typical one-year recovery period should receive the higher interest rate.
Staff recommended the higher rate be applied to any carry-over balances for two years, 2003 and
2004. If the recovery period is longer, A vista could request an additional exemption.
Subsequent to filing comments, Staff and A vista discussed and agreed to a
compromise solution that allows a 200 basis point increase in the interest rate applied to year end
deferral balances during recovery based on the first in first out (FIFO) method of accounting.
The customer deposit interest rate would continue to apply to new deferral balances accrued
during the calendar year.
This interest rate methodology would begin January 2003 and continue through
June 30, 2005. Staff and Avista believed that allowing the interest rate increase in this manner
during the period proposed is reasonable given the structure of Avista s PCA mechanism and the
continued large balances of deferred costs to be recovered. Both parties also agreed that the
period the interest rate methodology remains in place may be reassessed if actual deferrals or
deferral recovery differ materially from current projections or from changes due to a general rate
case.
COMMISSION FINDINGS AND DECISION
After reviewing the record in this case the Commission shall adopt the agreement
reached between Staff and the Company. Accordingly, the Commission finds it is appropriate to
include a 200 basis point increase in the interest rate applied to Avista s year end deferral
balances during recovery based on the first in first out (FIFO) method of accounting. However
ORDER NO. 29323
the Commission also finds that the customer deposit interest rate would continue to apply to new
deferral balances accrued during the calendar year.
The Commission finds that this interest rate methodology shall be applied from
January 1 , 2003 and continue through June 30, 2005. The Commission finds that allowing this
interest rate increase is reasonable given the structure of Avista s PCA mechanism and the
continued large balances of deferred costs to be recovered. Finally, the Commission also finds
that the period the interest rate methodology remains in place may be reassessed if actual
deferrals or deferral recovery differ materially from current projections or from changes due to a
general rate case.
ORDER
IT IS HEREBY ORDERED that the Commission grants Avista s Application in
theory. Accordingly, a 200 basis point increase in the interest rate, raising it to 4% in 2003 , shall
be applied to Avista s year end deferral balances during recovery based on the first in first out
(FIFO) method of accounting. This rate shall apply starting from January 1, 2003 and continue
through June 30, 2005 or until the deferral balance is fully recovered.
IT IS FURTHER ORDERED that the current customer deposit interest rate shall
continue to apply to new deferral balances accrued during the calendar year.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. 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. 29323
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;J./
day of August 2003.
ATTEST:
Commission Secretary
O:A VUEO304jh
ORDER NO. 29323
, PRESIDENT