20050922Comments.pdf

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WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
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JT'!LITIES COf'1r'1!SStON
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 APPLICATION OF
VISTA CORPORATION FOR AN ORDER
APPROVING RECOVERY OF DEFERRED POWER COSTS.
CASE NO. A VU-O5-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Weldon B. Stutzman, Deputy Attorney General, in response to Order No.
29861 , the Notice of Application and Notice of Modified Procedure in Case No. A VU-05-
issued on September 1 2005 , and submits the following comments.
BACKGROUND
On August 11 , 2005, Avista Corporation filed an Application for a Commission Order
approving recovery of power costs deferred through June 30, 2005. Avista explains in its
Application that, pursuant to Commission Order No. 29605 entered in Case No. A VU-04-, its
Application serves as the PCA Status Report for 12 months ended June 30, 2005. The deferral
balance was $26.1 million at June 30, 2004, but the deferral balance was reduced to $5.9 million
as of June 30, 2005. The existing PCA surcharge produces annual revenues of approximately
ST AFF COMMENTS SEPTEMBER 22, 2005
268 000. The Company requests that the Commission process its Application by Modified
Procedure.
The PCA surcharge for Avista currently is 2.448%, and was approved by the Commission
in Order No. 29752, effective April 15 , 2005. The Company proposes that the existing surcharge
remain in place and that the surcharge rates be reviewed again when the PCA Status Report is
filed next year covering the July 2005 through June 2006 period. Avista also suggests in its
Application that its annual PCA Status Report be filed on or before August 15 each year, rather
than by a variable schedule as occurred in recent years.
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 2004 through
June 2005. Staffwas 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 transactions
Staff concludes that the transactions appear reasonable at the time they were made. Staff also
reviewed the other PCA calculations and amounts. Staff finds the amounts recorded to be correct
and recommends that they be included in the deferral balance as of June 30, 2005.
Deferral Balance Components
The Company is requesting Commission approval for recovery of the Unrecovered
Deferral Balance of $5 935 324 as of June 30, 2005. The Unrecovered Deferral Balance at June
, 2005 is calculated by starting with the unrecovered balance at June 30, 2004, adding in the net
deferral activity for the current period of July 1 , 2004 through June 30, 2005, and subtracting the
amortizations related to surcharge revenues, interest on the deferral balance, plus other items as
directed by Commission orders. In this deferral year, two other items affected the deferral
balance: the Write-offs of Deal A and B along with the applicable interest, and the Intervenor
Funding Amount from the recent general rate case (Case No. A VU-04-, Order No. 29602 and
Order No. 29638).
ST AFF COMMENTS SEPTEMBER 22, 2005
Unrecovered Balance at June 30, 2005
$26 105 927
337 109
877 581
263
378 011
264.743
$5.935 324
Unrecovered Balance at June 30, 2004
Net Deferral Activity (July 2004 - June 2005)
Amortizations Related to Surcharge Revenues (July 2004 - June 2005)
Intervenor Funding Amount
Write-offs (Deal A and Deal B)
Interest (net of Deal A and Deal B interest)
Net Deferral Activity
The net deferral activity represents the Idaho jurisdictional share of the excess power costs
and associated revenue adjustments deferred under the PCA mechanism by A vista for the twelve
months ended June 30, 2005. The main component of the net deferral activity is the Net Increase
in Power Supply Costs. Because power plants are economically dispatched, these PCA accounts
also reflect additional power purchases when market prices are lower than generation costs. The
associated reduced generation costs are also captured along with off-system sales revenues. The
total net increase in power supply cost, $3 979 211 , is comprised of the following items:
Total
$33 764 327
534 629
2,431 660
243 382
828 503
502,408
289 070
176.400
979.2
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
1. Purchased Power costs are the difference in costs the Company incurred for power
purchases in the review period compared to normalized purchased power costs included in base
rates. In the review period the Company incurred more purchased power costs than are included
in base rates. The positive amount represents a cost to ratepayers.
ST AFF COMMENTS SEPTEMBER 22, 2005
2. Thermal Fuel, primarily coal, is used to produce electricity. The amount is the
difference in costs the Company incurred for thermal fuel compared to the normalized amount
included in base rates. In the review period the Company used less coal than is currently included
in base rates. The negative amount represents a benefit to ratepayers.
3. CT Fuel is natural gas burned in the Company s combustion turbines. This amount
represents the difference in costs the Company incurred for CT fuel compared to the amount
included in normalized base rates. In the review period the Company burned more natural gas
than is currently included in base rates. The positive amount is a cost to ratepayers.
4. Sales for Resale are long-term and short-term off-system sales. The negative amount
represents an increase in off-system sales revenues above the amounts included in base rates. This
negative amount represents a decrease in costs during the review period and is a benefit to
customers.
5. The Potlatch component is a direct assignment to Idaho of the difference in Potlatch
costs and revenues (Lewiston facility) relative to the normalized Potlatch costs and revenues
established in the Company s last general rate case. The negative net amount indicates that
during the review period, the cost of serving Potlatch was less than the amount included in base
rates and that produces a PCA benefit to Idaho customers.
6. Net Fuel Expense results when natural gas purchased for use in generating plants is
sold because it is less expensive to sell the gas and purchase electricity than is to generate power
with the gas. The gain or loss on the sale of the gas is included in the PCA. The loss during the
review period is a cost to Idaho customers.
7. The Idaho Retail Revenue Adjustment has three components. The load change
adjustment is an adjustment to revenues to reflect the cost of serving loads that differ from
normalized base loads. If the load grows, revenue is added, if the load declines, there is an
adjustment to reflect the decreased load. The revenue credit for retail load growth is computed
using the marginal cost of power supply. This amount is established whenever base power supply
costs are reset. The current review period includes three different base periods with corresponding
marginal power supply costs of 21., 36.38 and 36.31 mills/kWh. Marginal power supply costs
are multiplied by the growth in load to produce the credit. The other two revenue credits are a
credit associated with Schedule 95 wind revenue and a credit for the purchase of Potlatch
generation. The negative amount represents a benefit to ratepayers.
ST AFF COMMENTS SEPTEMBER 22, 2005
8. Wood Power operated a PURP A qualified wood waste powered generation facility at
Plummer, Idaho. Washington Water Power, A vista 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 agreement. In Order No. 26751 , Case No.
WWP-96-, the Company received authorization for ratemaking and accounting treatment of
the buy-out of the Wood Power, Inc. contract. The Commission found that PCA deferral and
amortization of the buy-out over eight years was reasonable. This amount is the current year
amortization of the buy-out of that contract. The amortization was completed in December 2004.
In the Company s Application, the deferral activity detail that goes into the Net Deferral
Activity (July 2004 - June 2005) is $3 337 109. The net deferral activity is comprised of the
follow items and amounts:
Coyote Springs II Transmission Credit
Centralia Capital and O&M Credit (Order No. 28876)
Total
979 211
109 814
532.288
$3.337 109
Net Increase in Power Supply Costs (detailed above)
The Coyote Springs II Transmission Credit began after the Company purchased the second
half of Coyote Springs II and began including it in the PCA calculation in April 2005. The
transmission credit for the second half of Coyote Springs II is equal to the transmission cost for
the second half of Coyote Springs II that is included in base rates. This credit is included because
the transmission for the second half of Coyote Springs II is not being provided through the
purchase of transmission, but rather through a sale and purchase arrangement. The net cost of the
sale and purchase arrangement is included in the actual power supply expenses in the PCA
deferral. If the credit were not included, the Company would collect twice for transmission costs
for the second half of Coyote Springs II.
The Centralia Capital and O&M Credit reflects the Centralia capital costs such as return on
investment and Centralia O&M expense. After base rates were set in August of 1999
(WWP- E-98-11), the Centralia power plant was sold. The Centralia credit is designed to offset the
Centralia revenue requirement that was still part of base rates until rates were reestablished in the
STAFF COMMENTS SEPTEMBER 22, 2005
Company s most recent general rate case, Case No. A VU-04-, Order No. 29602. As of the
implementation of the new rates on September 9 2004, that do not include Centralia costs, the
Centralia Capital and O&M credit is no longer a part of the PCA deferral calculation. The
Centralia credit is not subj ect to 90/1 0 sharing.
Amortizations Related to Surcharge Revenues
During different portions of the July 2004 through June 2005 review period three different
PCA surcharges were in effect. A 19.4% surcharge was originally authorized by the Commission
in Order No. 28876, Case No. A VU-Ol-ll. The surcharge was extended by Order No. 29130
Case No. A VU-02-, and again by Order No. 29377, Case No. A VU-03-
The surcharge was reduced to 4.385% effective September 9 2004 as a result of the
general rate increase authorized in Case No. A VU-04-, Order No. 29602 and Order No. 29588.
The surcharge was reduced to partially offset an increase in base rates.
The surcharge was again reduced to the existing level of 2.448% effective April 15, 2005
Case No. A VU-05-1. This second reduction of the PCA rate coincided with the approval for
purchase and rate base treatment of the second half of the Coyote Springs II generating facility.
The reduction allowed the facility to be included in base rates with no overall increase to
customers.
The amount for amortizations related to surcharge revenues represents the amount of
surcharge revenues for the twelve months ended June 30, 2005 net of the revenue related expenses
of commission fees and uncollectibles. Staff reviewed the amount of monthly surcharge revenues
and found them to be appropriately calculated and recorded. Staff notes that the amount of
surcharge revenues decreased significantly over prior years due to the previously described
decrease in PCA rates. The Company estimates that the existing surcharge rates will produce
annual revenues of approximately $4 268 000.
Intervenor Funding
In Case No. A VU-04-, Order No. 29602, page 47 , the Commission approved
intervenor funding in the amount of$12 623 and assigned the recovery of that amount to the
Residential Customer Class. This amount is included in the review period as a cost that is
normally recovered from all ratepayers. Since neither the Company nor Staff proposed that rates
STAFF COMMENTS SEPTEMBER 22, 2005
change as a result of this proceeding, Staff proposes that treatment of this amount be carried over
to the next PCA case that changes rates. The intervenor funding amount is quite small and would
only cause a single digit change in the last decimal place of the residential rate. The Company
current accounting practices are not set up to track a PCA deferral that is assigned to a specific
customer class. Staff recommends that the Company make a proposal for treatment of the amount
in its next PCA filing.
Write-offs (Deal A and Deal B)
The Company has removed the amount of the losses associated with Deal A and Deal B
from the PCA deferral balance. These amounts were excluded from PCA recovery as directed in
Order No. 29602 and Order No. 29638. Staff has reviewed the amounts presented in the
Company s filing and believes they are accurate.
Interest
The Company calculates interest on the deferral balance per Commission Order No. 29323
Case No. A VU-03-4. Staff reviewed the calculation of the interest, including the amount of the
interest associated with Deal A and B that was reversed and found the amounts included in the
filing to be correct. The Company uses the Customer Deposit Rate on current year deferrals and
the Customer Deposit Rate plus 2% on carryover balances from one year to the next. The
Customer Deposit Rate for 2004 was 1 % and the Customer Deposit Rate for 2005 is 2%.
CONSUMER ISSUES
A vista filed its electric Power Cost Adjustment (PCA) on August 2005. Ordinarily, the
Company would include a copy of its Customer Notice with the filing but because Avista is not
proposing to raise or lower its rates with this filing, it is not required to notify customers through
the customer notice procedure as required by IDAP A 31.21.02.102.
Customers were given until September 22, 2005 to file comments. Three comments were
received. However, none of the comments related to Avista s proposal. One customer wrote
about being upset that rates were being increased; unfortunately, the customer misunderstood what
the Company was proposing with this year s PCA filing.
ST AFF COMMENTS SEPTEMBER 22, 2005
RECOMMENDATIONS
Staff proposes that the Commission accept the deferral balances presented in the
Company s filing. Staff recommends that the PCA surcharge, currently 2.448%, and the
associated customer class rates, be continued for one year. Staff also recommends any actual
remaining deferral balance at June 30, 2006 be reviewed by the Commission prior to establishing
a new surcharge or continuing the current surcharge for an additional period of time. In that filing
Staff recommends that the Company be directed to address ratemaking treatment of the $12 263 of
intervenor funding included in this review period. Staff also recommends approval of the
Company s proposal that its next status report be filed on or before August 15, 2006, and address
the review period July 1 , 2005 through June 30, 2006.
Respectfully submitted this 2.Zw!day of September 2005.
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Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Keith Hessing
Kathy Stockton
MarilYn Parker
i: umisc/ commen ts/ avueO5. 6wskhklsmp
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STAFF COMMENTS SEPTEMBER 22, 2005
CERTIFICA TE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 22ND DAY OF SEPTEMBER 2005
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. A VU-05-, BY MAILING A COpy THEREOF POSTAGE PREPAID, TO
THE FOLLOWING:
DAVIDJ. 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.
AVIS T A UTILITIES
PO BOX 3727
SPOKANE WA 99220-3727
E-mail Kelly .norwood~avistacorp. com
CERTIFICATE OF SERVICE