20030811Application.pdf

Avista Corp.
1411 East Mission PO Box3727
Spokane. Washington 99220-3727
Telephone [phone]
Toll Free 800-727-9170
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August 8, 2003
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State of Idaho
Idaho Public Utilities Commission
Statehouse
Boise, ill 83720
Attention: Ms. Jean Jewell, Secretary
Submission of PCA Status Report and
Application for Continuation of PCA Surcharge
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Enclosed for filing with the Commission are an original and seven copies of the Status Report of
A vista Corporation and Application for a Continuation of a Power Cost Adjustment (PCA)
Surcharge. The surcharge was originally authorized by the Commission in Order No. 28876 in
Case No. A VU-Ol-l1. Also enclosed are an original and nine copies of supporting testimony
and three copies of associated workpapers.
The existing tariff sheet Sixth Revision Sheet66 sets forth a 19.37% surcharge to recover power
costs in excess of costs presently included in base rates. The Company requests that the current
PCA surcharge be authorized for another 12 months, from October 12 2003 through October 11
2004. If continuation of the 19.37% surcharge is approved, there would be no change to existing
electric rates.
In addition to the items listed above, please find enclosed a Certificate of Service, a copy of the
Press Release the Company will be issuing on August 11 , 2003 , as well as a copy of the
Customer Notice. The Company will begin mailing the notice of the proposed surcharge
continuation to electric customers on August 12 2003.
Please direct any questions regarding this filing to Don Falkner at [phone] or Ron
McKenzie at [phone].
Sincerely,
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Kelly Nof(ood
Vice President, State and Federal Regulation
Enclosures
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have served Avista Corporation s filing related to the
Company s submission of a status report and request for the continuation of a
power cost adjustment (PCA) surcharge in retail electric rates, by mailing a copy
via overnight mail thereof, postage prepaid to the following:
Ms Jean D Jewell, Secretary
Idaho Public Utilities Commission
PO Box 83702
West 472 Washington
Boise, ID 83720-5983
Ralph Davisson
Potlatch Corporation
601 W. Riverside Ave.
Suite 1100
Spokane, WA 99201
(workpapers not included)
Conley Ward
Givens Pursley, LLP
277 North 6th Street, Suite 200
O. Box 2720
Boise, ID 83701
Dated at Spokane , Washington this 8th day of August 2003.
Patty Ols
Rates Coordinator
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Corp.
News Release
Contact: Media: Catherine Markson [phone] catherine.markson~avistacorp.com
FOR RELEASE:
August 11 , 2003
7:05 a.m. EST
A vista Files to Extend Current Power Cost Adjustment Surcharge in Idaho
Existing electric rates for Idaho customers would not change
Spokane, Wash.: Avista Corp. (NYSE:A V A) has filed with the Idaho Public Utilities Commission
(IPUC) a request to continue the existing power cost adjustment (PCA) electric surcharge of 19.4
percent for an additional twelve months. If approved, there would be no change to existing electric
rates.
In the fall of2001, the IPUC approved the current PCA and directed Avista to file annual
status reports related to continuing the 19.4 percent surcharge. This is the second status report A vista
has filed. A vista is requesting the surcharge be extended until Oct. 11 , 2004, in order to continue
recovering excess power costs that A vista has incurred to serve its customers.
A vista makes no profit from surcharge revenues and is required to absorb the first 10 percent
of excess power costs. The PCA is designed to recover or rebate changes in certain power supply
costs that differ from those costs included in Avista s base rates.
The extension ofthe PCA in Idaho would allow Avista to continue recovery of power costs
while offering our customers some of the lowest residential electric rates in the country," said Kelly
Norwood, A vista vice president of state and federal regulation.
Avista s request to extend the electric surcharge is a proposal, subject to both public review and a
decision by the IPUc. A copy of Avista s application is available for review at the offices of both the
IPUC and the company. A copy ofthe application is also available on the Avista Utilities web site at
www . avistautili ties. com/prices/rates
For more information on conservation tips, energy assistance programs, and bill payment
plans, visit the Avista Utilities website at www.avistautilities.com, or call [phone].
-more-
page 2 Avista Utilities Files to Extend Current Purchase Cost Adjustment in Idaho
A vista Corp. is an energy company involved in the production, transmission and
distribution of energy as well as other energy-related businesses. A vista Utilities is a company
operating division that provides electric and natural gas service to customers in four western
states. Avista s non-regulated subsidiaries include Avista Advantage and Avista Energy. Avista
Corp.' s stock is traded under the ticker symbol "AVA" and its Internet address is
www.avistacorp.com
Avista Corp. and the Avista Corp. logo are trademarks of Avista Corporation. All other
trademarks mentioned in this document are the property of their respective owners.
This news release contains forward-looking statements regarding the company s current
expectations. Forward-looking statements are all statements other than historical facts. Such
statements speak only as ofthe date of the news release and are subject to a variety of risks and
uncertainties, many of which are beyond the company s control, which could cause actual results
to differ materially from the expectations.
These risks and uncertainties include, in addition to those discussed herein, all of the
factors discussed in the company s Annual Report on Form 10-K for the year ended Dec. 31
, 2002, and the Quarterly Report on Form 10-Q for the quarter ended March 31 2003.
03--
Important Notice for Idaho
Electric Customers
August/September 2003
Avista has filed with the Idaho Public Utilities
Commission (IPUC) a request to continue the
existing power cost adjustment (PCA) electric
surcharge of 19.4 percent for an additional twelve
months. If the request is approved, there would be
no change to your existing electric rates; they will
remain the same as they are now.
Last fall, the IPUC approved continuation of
the 19.4 percent electric surcharge for each major
customer class to expire on Oct. 11 2003. On an
annual basis the surcharge amounts to approxi-
mately $24 million. The IPUC directed Avista to file
a status report to support continuation of the 19.4
percent surcharge for an additional twelve-month
period. Avista has filed the status report and
requesting that the 19.4 percent surcharge be
extended until Oct. II , 2004, to recover excess power
costs that Avista has experienced to serve
its customers. Avista makes no profit from
surcharge revenues and actually is required to
absorb 10 percent of excess power costs.
The PCA mechanism was originally approved
by the IPUC in 1989. The mechanism allows the
company to surcharge or rebate changes in costs to
customers on a temporary basis based on the
difference between actual power supply. costs and
the level of those costs reflected in base retail rates.
Avista s request to extend the electric
surcharge is a proposal, subject to public review
and a decision by the IPUc. A copy ofthe
company s application is available for public review
at the offices of both the IPUC and the company. A
copy of the application is also available at our
website at www.avistautilities.com under "Energy
Prices
, "
Rates and Tariffs
If you would like infonnation on conservation
tips, energy assistance programs, and bill payment
plans, visit our website at www.avistautilities.com
or call us at 1-800-227-9187.
IDK:A/O803/58500
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Kelly O. Norwood
Vice President, State and Federal Regulation
1411 E. Mission Avenue
P. O. Box 3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TIER OF THE SUBMISSION OF THE
STATUS REPORT OF A VISTA CORPORATION
AND APPLICATION FOR A CONTINUATION OF
A POWER COST ADJUSTMENT (PCA)
SURCHARGE
CASE NO. AVU-E4.g.rtJ&
I. INTRODUCTION
A vista Corporation doing business as A vista Utilities (hereinafter A vista or Company), at
1411 East Mission Avenue, Spokane, Washington, respectfully files the status report as required by
the Commission! , and requests the Commission issue an order approving recovery of power costs
deferred through June 30, 2003 and granting continuation of the PCA surcharge of 19.4% currently
scheduled to expire on October 11 , 2003. The 19.4% surcharge was originally authorized by this
Commission in Order No. 28876 dated October 11 , 2001 in Case No. A VU-Ol-11 with a
continuation of the surcharge extended in Order No. 29130 dated October 11, 2002 in Case No.
A VU-02-
As stated by the Commission at page 16 of its Order No. 29130 dated October 11,2002 in Case No. A VU-02-
6: "As we did last year, we find it reasonable to continue a close monitoring of the Company s PCA decisions and
thus require the Company to file a PCA Status Report 60 days prior to the expiration of the PCA surcharge. As
before, if the Status Report and our review of the actual PCA deferral balance supports continuation of the surcharge
we anticipate continuation of the surcharge for an additional term.
A VISTA'S APPLICATION FOR PCA SURCHARGE CONTINUATION PAGE I
Pursuant to Order No. 29130, this filing, along with the attached testimony and associated
workpapers (incorporated herein by reference) serve as the status report, which is required to be filed
60 days prior to the expiration of the term of the surcharge. The Company has developed a
straightforward filing and requests that the status report and continuation request be processed under
the Commission s Modified Procedure rules. As the Company will explain in this filing,
continuation of the current surcharge is not only justified by the current level of unrecovered power
cost deferrals, but is essential to the continued improvement in the financial health of the Company.
The Company s credit ratings were lowered by credit rating agencies to below investment grade in
October of 2001 , and continuation of the surcharge is an important element in the Company s efforts
to regain an investment grade credit rating as soon as possible.
Communications in reference to this Application should be addressed to:
Kelly O. Norwood
Vice President
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. CONTINUATION REQUEST
On page 16 of Order 29130, the Commission directed the Company to file a "Status Report
60 days prior to the expiration of the PCA surcharge term and went on to state
, "
As before, if the
Status Report and our review of the actual PCA deferral balance supports continuation of the
surcharge, we anticipate continuation of the surcharge for an additional term." The current status
of the unrecovered Idaho PCA deferral balance as of June 30, 2003 is $27 843,108.
A VISTA'S APPLICATION FOR PCA SURCHARGE CONTINUATION PAGE 2
Through this filing, the Company is requesting that the Commission continue the PCA
surcharge for an additional 12 months, through October 11, 2004. Continuing the existing surcharge
for an additional 12 months would provide recovery of approximately $24 million.
III. DEFERRAL ACTIVITY AND REPORTING
The deferral balance of $27.8 million at June 30, 2003 is shown below, together with the
changes in the balance since June 30 2002. Mr. McKenzie s testimony explains the changes in the
deferral balance and Mr. Storro s testimony provides additional explanation of the factors causing
the deferral entries related to the net increase in power supply costs for the period July 2002 through
June 2003.
Unrecovered balance at June 30, 2002
Net Deferral Activity (July 2002 - June 2003)
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
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)
$23 383 629
817 996
855 680
921 184
138
999,596
$6.789.503
Monthly reports have been filed with the Commission Staff regarding actual PCA deferral
entries to date. To facilitate Staff's review, additional copies of those reports have been included
with this filing and have also been provided to Potlatch Corporation who intervened in A VU-Ol-
11 and A VU-02-6. As already noted, the Company requests that this filing be processed under
Commission s Modified Procedure rules noting that the request is for a continuation of a previously
A VISTA'S APPLICATION FOR PCA SURCHARGE CONTINUATION PAGE 3
authorized surcharge under the long-standing PCA mechanism. The rates associated with this
surcharge would not change as a result of this filing.
Current projections indicate that with the continuation of the 19.4% surcharge, the PCA
deferral balance would reach zero in mid 2005.2 Therefore, A vista currently anticipates the need to
extend the surcharge for at least an additional, partial period beyond October 2004.
IV. FINANCIAL IMPLICATIONS
The unrecovered deferral balance has declined from the $45.6 million balance at June 30
2002 to the $27.8 million balance at June 30, 2003. Investor concerns surrounding cash flows
deferral balances and the ability to recover costs in a timely manner have had an impact on the
Company s financings that continues today.
As stated earlier, A vista s credit ratings are below investment grade. Because of A vista
present credit ratings, debt is more expensive. It is imperative for both the Company and our
customers that A vista continue to improve its financial condition so that investment grade credit
ratings can be restored. The Company s current credit ratings are summarized in the table below:
Standard & Poor Moody Fitch, Inc.
A vista Corporation
Corporate/Issuer rating BB+Bal BB+
Senior secured debt BBB-Baa3 BBB-
Senior unsecured debt BB+Bal BB+
Preferred stock BB-Ba3
On a positive note, the Company entered into a new committed short-term line of credit on
May 13, 2003, with various banks in the total amount of $245.0 million. The line of credit expires
on May 11 2004 and replaced the committed line of credit of $220.0 million line that would have
The actual point when the defelTaI balance reaches zero is dependent upon factors such as hydroelectric
conditions, wholesale market prices, contract changes, etc., during the relevant period.
A VISTA'S APPLICATION FOR PCA SURCHARGE CONTINUATION PAGE 4
expired on May 20, 2003. It is important for the Company to regain an investment grade credit
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 ratings will take time to be restored and
continuation of the current surcharge is one of the keys for the Company to continue to improve its
financial condition.
The Company needs continued access to capital on reasonable terms to continue operations
to refund maturing debt, and to pay for facilities to serve customers. Commission support and action
through continuation of the surcharge is important in that regard.
V. NO TARIFF CHANGES
The rates set forth under the proposed PCA Schedule 66 reflect an annual revenue surcharge
amount of approximately $24 million, or 19.4%. As proposed by the Company, the Schedule 66
rates would not change. 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 the IPUC based on the actual balance of deferred power
costs.
The Company proposes the continuation of the surcharge for a 12-month period, beginning
October 12, 2003 and continuing through October 11, 2004. The Company will file prior to the
expiration of that term and propose continuation of the surcharge, as necessary, to allow recovery
of any unrecovered PCA balance at that time.
The Company continues to offer a number of customer bill paying assistance options. These
assistance options are identified and explained in Mr. McKenzie s direct testimony.
A VISTA'S APPLICATION FOR PCA SURCHARGE CONTINUATION PAGE 5
VI. REQUEST FOR RELIEF
The Company respectfully requests the Commission for an order approving recovery of
power costs deferred through June 30, 2003 and granting continuation of the PCA surcharge of
19.4% through October 11 , 2004. The Company submits that this status report filing and request
for the continuation of the existing surcharge is straightforward and warrants expedited processing
under the Commission s Modified Procedure rules so that the surcharge would continue to allow
recovery of power supply costs incurred to serve our customers and thereby reduce the size of the
PCA deferral balance.
Dated at Spokane, Washington this 8th day of August 2003.
A VISTA CORPORATION
BY
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Kelly O. N ood
Vice President, State and Federal Regulation
A VISTA'S APPLICATION FOR PCA SURCHARGE CONTINUATION PAGE 6
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, State and Federal 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.
SIGNED AND SWORN to before me this 8th day of August 2003, by Kelly O. Norwood.
NOTARY P LIC in and for the State of
Washington, residing at Spokane.
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A VISTA'S APPLICA nON FOR PCA SURCHARGE CONTINUATION PAGE 7