20030811McKenzie Direct and Exhibits.pdf

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BEFORE THE IDAHO PUBLIC UTll..ITIES COMMISSION
CASE NO. A VU-E-
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DIRECT TESTIMONY OF RONALD L. MCKENZIE
REPRESENTING AVISTA CORPORATION
Please state your name, the name of your employer and your business address.
My name is Ronald L. McKenzie. I am employed by Avista Corporation at 1411
East Mission A venue, Spokane, Washington.
In what capacity are you employed?
I am employed by A vista as Manager of Regulatory Accounting in the Rates and
Regulation Department.
Please state your educational background and professional experience.
I graduated from Eastern Washington University in 1973 with a Bachelor of Arts
Degree in Business Administration, majoiing in AccourHilig. I joined the Company in September
I obtained a Master of Business Administration Degree from Eastern Washington1974.
University in 1989. I have attended several utility accounting and ratemaking courses and
workshops. I have held various accounting positions within the Company. I have served in the
Rates Department for the majority of my career with the Company.
What is the scope of your testimony in this proceeding?
My testimony provides a status report of the accounting entries and account
balances related to the Idaho Power Cost Adjustment (PCA) for the twelve months ended June
2003. The unrecovered deferral balance at June 30 2003 is $27 843 108. I explain that if the
Company s proposal to extend the surcharge is approved, there would be no change to the
Company s existing rate or to the existing PCA tariff, Schedule 66.
Are you sponsoring an Exhibit?
Yes. I am sponsoring Exhibit No. - (RLM-l), consisting of the existing PCA
tariff, Schedule 66.
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Would you please show the change in the unrecovered deferral balance from June
2002 to June 30, 2003?
Yes. The change in the unrecovered deferral balance from June 30, 2002 to June
30, 2003 is shown below:
Unrecovered balance at June 30 2002
Net Deferral Activity (July 2002 - June 2003) (see below)
Amortizations Related to Surcharge Revenues (July 2002 - June 2003)
Unrecovered balance at June 30, 2003
$45 600 228
789,503
24.546.623
$27.843.108
Would you please show the major components of the deferral account activity
amount of $6,789,503 shown above?
Yes. Listed below are the major components of the deferral account activity that
were recorded for the twelve-month period July 2002 through June 2003:
Deferral Activity Detail
Net Increase in Power Supply Cost
Centralia Capital and O&M Credit
PGE Monetization Accelerated Amortization
Transfer Small Generation Capital Costs and Interest
Intervenor Funding Payment
Interest
Net Deferral Activity (July 2002 - June 2003)
Would you please explain the components listed above?
$23,383 629
817 996
855 680
921 184
138
999.596
$6.789.503
Yes. The net increase in power supply cost of $23 383 629 represents the Idaho
jurisdictional share of 90% of the excess power costs incurred by A vista for the twelve months
ended June 30, 2003. Mr. Storro discusses the components that make up this amount. The
remaining 10% of the excess power costs were absorbed by the Company.
The Centralia capital and O&M credit of-817,996 reflects the removal of operation
and maintenance expense, depreciation, taxes, and return on investment as those costs no longer
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exist as a result of the sale of the plant. The credit is reflected at 100% in accordance with Order
No. 28876 dated October 11 , 2001 in Case No. A VU-Ol-l1.
The -$13 855,680 figure relates to the final amount of accelerated amortization of the
Portland General Electric (PGE) contract credit balance for the months of July 2002 through
December 2002. The Commission authorized the accelerated amortization at page 12 of Order
No. 28876. The normal amortization and the accelerated amortization of the PGE contract credit
balance ended December 31 , 2002.
The -$921 184 figure represents the removal from the PCA deferral account of capital
costs and associated carrying charges related La small generator options; This adjustment is in
accordance with page 17 of Order No. 29130 dated October 11 , 2002 in Case No. A VU-02-
and Attachment A to the Order.
The $1 138 relates to an intervenor funding payment that resulted from Order No. 29147
in Case No. GNR-02-1 dated October 31, 2002 dealing with the qualifications of PURPA
projects. Page 4 of the Order directed the three participating utilities to equally share the
intervenor funding amount, to book the payment as a purchased power expense and"... to
recover same in their next Power Cost Adjustment (PCA) filing or general rate case.
The $999,596 interest amount represents interest for the twelve-month period July 1
2002 through June 30, 2003. Interest has been calculated using the Customer Deposit Rate (July-
December 2002 of 4%, January-June 2003 of 2%). In Case No. A VU-03-04 the Company has
requested that the allowed interest rate to apply to PCA balances be 2% above the Customer
Deposit Rate beginning January 1 , 2003. The Company s Application in that case is still under
consideration.
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Was a notice supplied to customers regarding the Company s proposal to continue
the existing PCA surcharge for an additional twelve months?
Yes.A notice is being provided as a bill insert to Idaho electric customers
beginning August 12, 2003. The notice indicates that the Company has filed a request with the
Commission to continue the existing 19.4% surcharge for an additional twelve months. The
existing surcharge amounts to approximately $24 million on an annual basis.
Is the Company continuing with its customer bill paying assistance programs?
Yes. The Company has several programs available to assist customers with paying
their bills. Avista s -comfort level billing program offers customers the option of averaging their
bills and paying the same monthly amount all year long in order to smooth out the seasonal highs
and lows.Under the c.A.R.E.S. (Customer Assistance Referral and Evaluation Service)
program, specially trained customer service representatives provide referrals to area agencies and
churches for customers with special needs for help with housing, utilities, medical assistance, etc.
LIHEAP (Low Income Heating Energy Assistance Program) is a Federal program aimed to help
low income customers pay their electric and gas bills. These funds are distributed through local
agencies. Idaho customers who have children, elderly or infirmed in the household may qualify
for the winter moratorium plan. From December 1 through February 28, customers are not
required to pay their bills in full and can defer payment or make partial payments. The Company
also works out payment arrangements with customers having difficulty paying their bills.
In addition, the Company has convenience options that help those who need flexibility,
but are generally able to pay. APS, or automatic payment service (money is deducted from
checking account automatically each month), is a good example. Other popular services include
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debit and credit card service, check-by-phone or over the web, preferred due date (the customer
picks a more convenient date to pay than the one the Company states on the bill), and e-billing.
If the Company s proposal to extend the surcharge is approved, would it require a
change to the current PCA tariff, Schedule 66?
No. In fact, the Company is proposing that the current Schedule 66 remain in place
as currently on file. The existing Schedule 66 contains the currently effective surcharge rates that
the Company is requesting be extended for an additional twelve months. Under the Special
Terms and Conditions on the tariff is a statement that
, "
The rates set forth under this Schedule
are 'subject to periodic review and adjustment by (heIPlJC based on the actual balance of
deferred power costs." Page 1 of Exhibit No. - (RLM-l) is a copy of Schedule 66.
What do current projections show regarding recovery of the power cost deferral
balance?
Current projections indicate that with the continuation of the, 19.4% surcharge, the
PCA deferral balance would reach zero in mid 2005. Therefore, Avista currently anticipates the
need to extend the surcharge for at least an additional, partial period beyond October 2004. The
actual point when the deferral balance reaches zero is dependent upon factors such as
hydroelectric conditions, wholesale market prices , contract changes, etc., during the relevant
period.
Does that conclude your testimony?
Yes it does.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. A VU-E- (j J
& ?
EXHIBIT NO. (RLM-
WITNESS: RONALD L. MCKENZIE, A VISTA CORPORATION
I.P.C. No.
IDAHO PUBLIC UTILITIES COMMISSIONApproved Effective
Sixth Revision Sheet 66 October 12 2001 October. 12 2001Canceling Per. O.N. 28876Fifth Revision Sheet 66 Jean D. Jewefi6 Secretary
AVISTA CORPORATION
d/b/a Avista Utilities
SCHEDULE 66
TEMPORARY POWER COST ADJUSTMENT - IDAHO
APPLICABLE:
To Customers in the State of Idaho where the Company has electric service
available. This Power Cost Adjustment shall be applicable to all retail customers for
charges for electric energy sold and to the flat rate charges for Company-owned or
Customer-owned Street Lighting and Area Lighting Service. This Rate Adjustment is
designed to recover or rebate a portion of the difference between actual and allowed
net power supply costs.
MONTHLY RATE:
The energy charges of the indb.iidual rate schedules are to be increased bY the
following amounts:
Schedule 1
0 - 600 kwhs
over 600 kwhs
Schedules 11 & 12
Schedules 21 & 22
Schedules 25
Schedules 31 & 32
939g; per kwh
092g; per kwh
391 g; per kwh
011 g; per- kwh
607g; per kwh
888g; per kwh
Flat rate charges for Company-owned or Customer-owned Street Lighting and
Area Lighting Service are to be increased (decreased) by the following percentage:
Schedules 41-49 19.37%
SPECIAL TERMS AND CONDITIONS:
The rates set forth under this Schedule are subject to periodic review and
adjustment by the IPUC based on the actual balance of deferred power costs.
Service under this schedule is subject to the Rules and Regulations contained
in this tariff.
The above Rate is subject to increases as set forth in Tax Adjustment
Schedule 58.
Issued July 17, 2001 Effective October 12, 2001
Issued by Avlsta Utilities
Thomas D. Dukich , Director of Rates & Regulatory Affairs
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Exhibit No. - (RLM-
Case No. AVU-
Avista
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