20040902Comments.pdf

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SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 1895
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
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-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the August
2004 Notice of Filing and Notice of Comment Deadline in Case No. A VU-04-, submits
the following comments.
BACKGROUND
On August 12 2004, Avista Corporation dba Avista Utilities (A vista; 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.
STAFF COMMENTS SEPTEMBER 2, 2004
ST AFF REVIEW
Audit Results
Staff has performed a review and audit of the amounts that went into the deferral balance
in the current filing. Staff s review covered expenses incurred for the period July 2003 through
June 2004. Staff was able to look at a representative cross section of transactions included in the
Purchased Power account (FERC 555), Thermal Fuel account (FERC 501), CT Fuel account
(FERC 547) and the Power Sales account (FERC 447). Based on its review of these sale
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.
Deferral Balance Components
The Company is requesting Commission approval for recovery of the Unrecovered
Deferral Balance of $26, 1 05 927 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.
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 3 , 2003
$27 843 108
890 298
128.627.4 79)
$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)
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.
STAFF COMMENTS SEPTEMBER 2, 2004
The largest component of the net deferral activity is the Net Increase in Power Supply
Cost. Since 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 - Thermal Fuel
3. FERC Account 547 - CT Fuel
4. 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 to
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
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 thermal 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
STAFF COMMENTS SEPTEMBER 2, 2004
therefore, does not take into account the natural gas needed to fuel these plants. The
positive amount is a cost to ratepayers.
4. Sales for Resale represents revenues the Company is able to generate through long-
term and short-term 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 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 p3 , In 6) in net fuel expense deferred in the current PCA filing ( July 30
2003 through June 30, 2004), $3 584 648 is associated with the fixed-price gas
contracts known as Deal A and Deal B. The costs associated with Deal A and Deal B
are discussed later in these comments 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 of 21.23 mills/kWh multiplied by the growth in load.
8. Wood Power operated a PURP A 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
buy-out over eight years was reasonable. This amount is the current year s amortization
of the buy-out of that contract.
STAFF COMMENTS SEPTEMBER 2, 2004
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. Parts of the utility s 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 of2002 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-
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
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.
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.
ST AFF COMMENTS SEPTEMBER 2, 2004
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
Bare $21 755 641 at the system level and $6 496 669 at 90% of the Idaho Jurisdictional level.
RECOMMENDATIONS
Staff proposes that the Commission accept the deferral balances as reflected in the filing.
Staff recommends that a PCA surcharge, as determined in the final order of the current rate case
A VU-04-, be continued until the next PCA filing. Staff also recommends any actual
remaining deferral balance at June 30, 2005 be subject to review by the Commission prior to
establishing a surcharge for an additional period of time, as provided for in Order No. 28876
Case No. A VU-Ol-11.
Respectfully submitted this day of September 2004.
Scott Woodbury
Deputy Attorney General
Technical Staff: Kathy Stockton
i: umisc: commen ts/ avueO4. 3 swkls
STAFF COMMENTS SEPTEMBER 2, 2004
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 2ND DAY OF SEPTEMBER 2004
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-04-, BY MAILING A COpy THEREOF POSTAGE PREPAID, TO
THE FOLLOWING:
DAVID J. MEYER
SR VP AND GENERAL COUNSEL
VISTA CORPORATION
PO BOX 3727
SPOKANE W A 99220-3727
E-mail dmeyer~avistacorp. com
KELLY NORWOOD
VICE PRESIDENT - STATE & FED. REG.
VISTA UTILITIES
PO BOX 3727
SPOKANE WA 99220-3727
E-mail Kelly.norwood~avistacorp.com
SECRETARY
CERTIFICATE OF SERVICE