20041008Final Order No 29605.pdf

Office of the Secretary
Service Date
October 8, 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE SUBMISSION OF
THE POWER COST ADJUSTMENT (PCA)
STATUS REPORT OF A VISTA CORPORATION )
AND REQUEST FOR RECOVERY OF POWER
COSTS DEFERRED THROUGH JUNE 30, 2004.
CASE NO. A VU-04-
ORDER NO. 29605
On August 12 2004, Avista Corporation dba Avista Utilities (Avista; Company) filed
a Power Cost Adjustment (PCA) status report with the Idaho Public Utilities Commission
(Commission) and requested authorized recovery of power costs deferred through June 30, 2004.
The existing PCA surcharge of 19.4% is currently scheduled to expire October 11 , 2004. Avista
has requested in its pending general rate case, Case No. A VU-04-, that the existing PCA
surcharge be reduced at the time that new base tariff rates are made effective at the conclusion of
the general rate case.
The present 19.4% surcharge was originally authorized by the Commission in Order
No. 28876 on October 11 , 2001 , in Case No. A VU-Ol-l1. The surcharge was extended by
Order No. 29130 in Case No. A VU-02-6 and by Order No. 29377 in Case No. A VU-03-
Pursuant to Commission Order No. 29377, Avista was directed to file a PCA status report 60
days prior to expiration of the authorized surcharge. Avista s filing in Case No. A VU-04-3 is
the Company s PCA status report and is accompanied by testimony and associated workpapers.
The status report reflects a PCA deferral balance of $26.1 million at June 30, 2004, as
reflected below:
Amortizations related to surcharge revenues (July 2003-June 2004)
Unrecovered balance at June 30, 2004
$27 843 108
890 298 *
28.627.479
105 927
Unrecovered balance at June 30, 2003
Net deferral activity (July 2003-June 2004)
*Deferral Activity Detail
Net increase in power supply costs
Centralia capital and O&M credit
Interest
$28 664 583
817 996
1.043.711
$26 890 298Net deferral activity (July 2003-June 2004)
ORDER NO. 29605
Monthly reports have been filed with the Commission by the Company regarding
actual PCA deferral entries to date. As reflected in the Company s filing, PCA surcharge rates
will not change as a result of this filing. The level of PCA surcharge that will be approved on an
ongoing basis is being addressed in the Company general rate case filing, Case
No. A VU-04-1. In that case the Company is requesting that the existing PCA surcharge be
reduced at the time that new base tariff rates are made effective, i., at the conclusion of the
general rate case.
The Company in its status report filing discusses the financial implication of the
unrecovered PCA deferral balance and recounts the available customer bill paying assistance
options.
On August 19, 2004, the Commission issued a Notice of Filing and Comment
Deadline in Case No. A VU-04-3. The Commission acknowledged that the Company s filing
was a PCA status report only and that no changes in rates will result from the filing. The
deadline for filing comments was September 3 2004. The Commission Staff was the only party
to file comments.
Staff performed a review and audit of amounts that went into the PCA deferral
balance in the current filing period. Staffs review covered expenses incurred for the period July
2003 through June 2004. Staff looked at a representative cross section of transactions included
in the Purchase Power Account (FERC 555), Thermal Fuel Account (FERC 501), CT Fuel
Account (FERC 547) and the Povv'er Sales Account (FERC 447). Based on its review of these
sales transactions , Staff concludes that the transactions appear reasonable at the time they were
entered. Staff finds the amounts recorded to be correct and recommends that they be included in
the deferral balance as of June 30, 2004.
Staff provides the following analysis regarding the Company s deferral balance
components: The Company is requesting Commission approval for recovery of the Unrecovered
Deferral Balance of$26 105 927 as of June 30, 2004. The Unrecovered Deferral Balance at June
, 2004 is calculated by starting with the Unrecovered balance at June 30, 2003 , adding in the
net deferral activity for the current period of July 1 , 2003 through June 30, 2004~ and subtracting
the amortizations related to surcharge revenues.
ORDER NO. 29605
Unrecovered Balance at June 30, 2003
Net Deferral Activity (July 2003 - June 2004)
. Amortizations Related to Surcharge Revenues (July 2003 - June 2004)
Unrecovered Balance at June 30, 2003
$27 843 108
890 298
(28.627.479)
$26 105 927
The net deferral activity consists of several pieces. The Company s Application lists the
deferral activity detail that goes into the Net Deferral Activity (July 2003 - June 2004) in the
amount of $26 890 298. The net deferral activity is comprised of the follow items and amounts:
Net Increase in Power Supply Cost
Centralia Capital and O&M Credit (Order No. 28876)
Interest
$28 664 583
($2 817 996)
$1 ,043 711
The Centralia Capital and O&M Credit reflects the Centralia capital costs such as
return on investment and Centralia O&M expense. Since base rates were set, the Centralia
power plant has been sold. The Centralia credit is designed to offset the Centralia revenue
requirement that is still part of base rates. The Centralia credit is not subject to 90/10 sharing.
The largest component of the net deferral activity is the Net Increase in Power Supply
Cost. Because power plants are economically dispatched, the PCA accounts also reflect
additional power purchases when market prices are lower than generation costs. The reduced
generation costs are also captured. The total net increase in power supply cost, $28 664 583 , is
comprised of the following items:
1. FERC Account 555 - Purchased Power
2. FERC Account 501 - Thennal Fuel
3. FERC Account 547 - CT Fuel4. FERC Account 447 - Sales for Resale
5. All Potlatch Revenues and Expenses
6. Net Fuel Expense - Loss on Natural Gas Resold
7. Idaho Retail Revenue Adjustment
8. Wood Power Inc. Amortized Expense
Total
308 469
($5 459 707)
800 403
$21 380 467
536 932
066 392
($1 321 161 )
$352.788
$28 66~
1. Purchased Power represents the difference in costs the Company incurred for power
purchases when compared to base rates. The positive amount represents a cost
ratepayers - the Company bought more power in the market than is currently built into
base rates. This is in part, due to the fact that the authorized case is based on the
ORDER NO. 29605
contracts and resources for the period July 1999 through June 2000, and will be updated
as a result of the current rate case being concluded and new base rates being set.
2. Thermal Fuel is the amount spent for fuel, primarily' coal, used to produce electricity.
This item is the difference in costs the Company incurred for thennal fuel when
compared to base rates. The negative amount represents a benefit to ratepayers - the
Company bought less coal than is currently built into base rates. Thermal fuel expense
for the Colstrip and the Kettle Falls plants were lower than the authorized amounts.
3. CT Fuel is the cost of natural gas burned in the Company s combustion turbines. This
amount represents the difference in costs the Company incurred for CT fuel when
compared to base rates. Since the last general rate case in 1998, the Company has added
combustion turbines as another means of producing electricity. The amount currently
built into rates does not reflect the addition of these plants, and therefore, does not take
into account the natural gas needed to fuel these plants. The positive amount is a cost toratepayers.
4. Sales for Resale represents revenues the Company is able to generate through long-term
and short-tenn off-system sales. These revenues reduce the revenue requirement for
ratepayers. The positive amount represents a decrease in off-system sales. This amount
represents an increased cost to customers over what is currently built into rates.
5. The Potlatch component is a direct assignment to Idaho of Potlatch costs and revenues
(Lewiston facility).
6. Net Fuel Expense results when natural gas purchased for the CT plants is sold when it is
less expensive to sell the gas and purchase electricity than it is to generate power with the
gas. The loss on the sale of the gas is included in the PCA. Of the $4 million (Schedule
, In 6) in net fuel expense deferred in the current PCA filing ( July 30, 2003 through
June 30, 2004), $3 584 648 is associated \vith the fixed-price gas contracts kno\vn as Deal
A and Deal B. The costs associated with Deal A and Deal B are discussed later in this
Order and will be settled with the conclusion of the current general rate case.
7. The Idaho Retail Revenue Adjustment is an adjustment for changes in load. If the load
grows, revenue is added, if the load declines, there is an adjustment: to reflect the
decreased load. A revenue credit of retail load is computed using a variable cost of
power supply of21.23 mills/kWh multiplied by the growth in load.
8. Wood Power operated a PURPA qualified wood waste powered generation facility at
Plummer, Idaho. Washington Water Power, Avista s predecessor, entered into a power
sales agreement with Wood Power on August 19, 1982 to purchase the energy and
capacity from that facility. On September 30, 1996, Washington Water Power entered
into an agreement with Wood Power and Rayonier terminating the 1982 power sales
agreement. In Order No. 26751 , Case No. WWP-96-, the Company received
authorization for rate making and accounting treatment of the buy-out of the Wood
Power, Inc. contract. The Commission found that the deferral and amortization of the
ORDER NO. 29605
buy-out over eight years was reasonable. This amount is the current year s amortization.
of the buy-out of that contract.
As was the case in the last Avista filing (A VU-03-6), a significant portion of the net
increase in Power Supply Costs is due to the expiration of long-term power sales contracts. The
expiration of profitable contracts reduced Sales for Resale revenue dramatically. In the PCA
Sales for Resale revenue is an offset to Power Supply Costs. The loss of revenue from expired
contracts is partially offset by reductions in fuel costs and Purchased Power costs.
Net Fuel Expense - Deal A and Deal B
A vista Utilities has an obligation to provide electrical service to its customers. To
satisfy this obligation, the Company both generates and buys electricity. Some of the utility
generating resources are fueled by natural gas. When gas prices are low enough that electricity
can be generated at a cost below the cost of buying electricity on the market, the Company buys
gas and uses it to produce electricity.
In the last two PCA cases, A VU-02-6 and A VU-03-, Staff questioned the
circumstances surrounding acquisition and later sale of natural gas purchased by the Company.
Specific fixed purchases are referred to as Deal A and Deal B.
In Case No. A VU-02-, Staff proposed that the Commission withhold judgment on
$578 748 at 90% of the Idaho Jurisdictional level in net fuel expense incurred in June of 2002 to
serve Coyote Springs until a more complete evaluation was conducted regarding anticipated
online dates, reasons for the operational delay and timing of the sale of gas acquired for use at
the plant. Pending further investigation, the Commission in its Order removed the $578 748.
The Commission allowed recovery of the losses associated with Deal A in the amount of
$18 876 448 at the system level and $5 636 885 at 90% of the Idaho Jurisdictional level.
In Case No. 'A VU-03-, Staff proposed that the Commission allow recovery of
Deal A but not recovery of Deal B. The Commission decided to withhold their decision on the
recovery of both Deal A and Deal B until the completion of the current rate case, Case No.
A VU-04-1. In Case No. A VU-03-, the losses deferred for recovery associated with Deal A
were $19 877 934 at the system level, and $5 935 949 at 90% of the Idaho Jurisdictional level.
The losses deferred for recovery associated with Deal B were $19 587 100 at the system level
and $5 849 100 at 90% of the Idaho Jurisdictional level. The amounts for Deal B include what
had previously been set aside for further investigation in the A VU-02-6 case.
ORDER NO. 29605
In this current PCA status report filing, the losses deferred for recovery associated
with Deal A are $9 835 506 at a system level and $2 937 079 at 90% of the Idaho Jurisdictional
level. The losses deferred for recovery associated with Deal Bare $2 168 541 at the system level
and $647 570 at 90% of the Idaho Jurisdictional level.
The total losses included in the total deferral balance pending approval for
recovery for Deal A are $29 713,440 at the system level and $8 873 027 at 90% of the Idaho
Jurisdictional level; the total losses included in the total deferral balance pending approval for
recovery of Deal B are $21 755 641 at the system level and $6,496 669 at 90% of the Idaho
Jurisdictional level.
Staff proposed in comments1 that the Commission accept the deferral balances as
reflected in the Company s filing. Staff recommends that the PCA surcharge authorized in the
final Order of the Company s current rate case, A VU-04-, continue until the Company s next
PCA filing. Staff also recommends the remaining PCA deferral balance on June 20, 2005 , be
subj ect to review by the Commission prior to establishing a surcharge for an additional period of
time.
COMMISSION FINDINGS
The Commission has reviewed the filings of record in Case No. A VU-04-
including the comments and recommendations of the Commission Staff. The Commission also
takes notice of the Deal A and Deal B adjustment/recovery issues being separately decided in
Avista general rate case A VU-04-1. The Commission finds it reasonable to enter our Order in
this case without further procedure. The Commission accepts the deferral balances as reflected
in the Company s filing subject to the Deal A and Deal B adjustments (including an adjustment
to accrued interest) to be made in the Company s electric general rate case, A VU-04-1. The
actual remaining PCA deferral balance as of June 30, 2005 , will be subject to review by this
Commission prior to establishing a surcharge for any additional period of time. Reference Order
No. 28876, Case No. A VU-01-11.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over A vista Corporation dba
Avista Utilities and the issues raised in Case No. A VU-04-3 pursuant to the authority granted
the Commission in Idaho Code, Title 61 and pursuant to the Commission s Rules of Procedure
IDAPA 31.01.01.000 et seq.
ORDER NO. 29605
ORDER
In consideration of the foregoing and as more particularly described above, IT
HEREBY ORDERED and the Commission does hereby accept the PCA deferral balances as
reflected in the Company s filing, subject to the adjustment and recovery method authorized in
A vista electric General Rate Case A VU - E-04-The Commission approves subject to
adjustment in Case No. A VU-04-, an unrecovered Idaho PCA deferral balance as of June 30
2004 of$26 105 927.
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 9 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ~.fA'
day of October 2004.
MARSHA H. SMITH, COMMISSIONER
S S. HANSEN, COMMISSIONER
ATTEST:
vld/O:A VUEO43 sw
ORDER NO. 29605