20060814Comments.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
RECEIVED
200b AUG \ 4 PM 12: 03
IDAHO YUBL\Q ~
UTILITIES cOMt'11:sSION
Street Address for Express Mail:
472 WWASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR
AUTHORIZATION TO DEFER THE COST
OF A LOAN RELATED TO GRID WEST.
COMMENTS OF THE
COMMISSION STAFF
CASE NO. A VU-O6-
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 30081 on June 29
2006, submits the following comments.
BACKGROUND
On April 27, 2006, Avista Corporation filed an Application requesting an accounting
Order from the Commission authorizing the deferral of costs the Company incurred relating to
the development of a regional transmission organization (RTO). Avista alleges it participated in
efforts to develop an RTO, now called Grid West, pursuant to Orders issued by the Federal
Energy Regulatory Commission (FERC). The Application states that Pacific Northwest electric
utilities have been involved in the RTO development process since 2000, and that the costs
incurred by the utilities were to be repaid through surcharges on customers after the R
STAFF COMMENTS AUGUST 14 2006
became operational. It now appears the development of Grid West is unlikely, and Avista
requests authorization to defer the amounts it loaned to Grid West, with interest, in the
development process. An accounting Order authorizing deferral of costs does not represent the
final determination of reasonableness or the amount of the costs ultimately recovered in rates.
Avista states it provided startup costs to the RTO to retain experts and facilitators, and
that the current balance of Avista s loan to Grid West is $1 217 499., which includes interest
of$188 187.34. Avista estimates that the amount of the total that applies to the Idaho
jurisdiction would be $421 620.
STAFF REVIEW
Staff has reviewed the Company s Application as well as FERC Order No. 888 and
FERC Order No. 2000. FERC Order No. 888 instructs utilities to open their transmission lines
to competitors in an effort to reduce wholesale electricity prices and ultimately bring lower
prices to ratepayers. FERC Order No. 2000 placed the impetus on transmission owners to
develop an RTO or explain why such an organization could not be created. Staff is satisfied that
Avista s participation in Grid West was compliant with FERC's Orders and FERC's attempt to
protect and provide additional benefits to customers.
On a case-by-case basis, this Commission has allowed deferred accounting treatment for
expenses that are extraordinary and unusual in nature, mandated by regulatory authority and
which provide benefits to customers. Though Grid West ultimately provided no benefits to
customers, the expenses were extraordinary and unusual in nature and were mandated by FERC.
For those two reasons, Staff recommends that the Commission authorize Avista to book the
principal amount of the funding agreements with Grid West to account 182.3 (Other Regulatory
Assets). A separate sub-account should be maintained for the $1 029 311.92 total system cost
$356 450.72 for the Idaho jurisdiction, facilitating Staffs audit of these expenses in a future rate
case. Staff also recommends that the recovery of these costs and the amortization period used
for recovery be addressed in the Company s next general rate case filing. As the Commission
has previously noted on numerous occasions, a deferred accounting Order does not constitute
Commission approval to recover these costs from ratepayers.
The interest on the funding agreements with Grid West, carrying charges on deferred
balances, and amortization period absent a rate case are discussed separately below.
STAFF COMMENTS AUGUST 14 2006
Interest on Funding Agreements
A vista accrued interest on the loan amounts provided to Grid West at the rates established
by FERC for refunds, pursuant to 18 CFR 35 .19a. The total interest accrued through March 31
2006 is $188 187.34. Avista ceased accruing interest on the loans after that date. Staff believes
that A vista should not be allowed to defer for future recovery the amount of interest accrued on
the promissory notes to Grid West for two reasons. First, had Grid West been successful, the
interest on these loans would have been paid by Grid West as a return on A vista s investment in
the RTO. Since Grid West was not successful, customers should not be requested to pay for
Avista s return on a failed investment. Furthermore, Avista never had any cash outlay for the
interest portion, and the return of the actual expenditure is sufficient recovery for the utility
without interest accrual.
Carrying Charges
A vista does not request a carrying charge on the deferred balance. Deferred accounting
will allow A vista to request recovery of its prudent costs at a future date. Absent deferral, A vista
would not have an opportunity for recovery. Staff believes the opportunity for Avista to recover
these costs without interest is sufficient to the Company, thus eliminating the necessity of
accruing carrying costs on the deferred balance. If the deferral were not approved, no interest
would accrue and the recovery of any underlying costs would be questionable. The deferral
method facilitates later recovery of the amortization of these costs in rates.
Amortization Period
To prevent excessive deferrals from building up on the balance sheet, Staff recommends
that the Company begin amortization of the deferred balance at the conclusion of its next general
rate case or on January 1 , 2010, whichever occurs first. Amortization beginning no later than
January 1 , 2010 is warranted since the expenditures were incurred in response to FERC
directives. Immediate amortization would be appropriate for expenditures directly under the
Company s control. An amortization period beginning no later than 2010 will also allow any
continued efforts for an RTO to be better known. Staff believes that the initial amortization
period should be five years unless a different time period is supported by a party in a general rate
case and is approved by the Commission.
STAFF COMMENTS AUGUST 14, 2006
CONSUMER ISSUES
Staff received comments from one customer opposing the deferral on the grounds that
Avista is using its knowledge gained from Grid West for the new RTO Columbia West. The
customer believes that Columbia West should reimburse A vista for some of those costs. While
Staff finds some merit in the comment, Staff will further review the progress of Columbia West
when A vista files for rate relief.
STAFF RECOMMENDATIONS
1. Staff recommends that the Commission authorize A vista to book the principal amount
of the funding agreements for the Grid West start up costs into account 182.
(Regulatory Assets and Liabilities), utilizing a separate sub-account specifically for
these amounts.
2. Staff recommends the Commission not allow the deferral of accrued interest on the
Grid West loans.
3. Staff recommends the Commission not approve any carrying charges on the amounts
deferred.
4. Staff recommends that the Commission order amortization of the deferred amounts to
begin no later than January 1 , 2010 absent a rate case Order establishing different
treatment.
Respectfully submitted this \tfi-k day of August 2006
~)~
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Donn English
i: umisc :comments/ avueO6. 3 wsde
STAFF COMMENTS AUGUST 14, 2006
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 14TH DAY OF AUGUST 2006
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF" IN
CASE NO. A VU-06-, BY E-MAILING A COpy THEREOF AND BY MAILING A
COpy THEREOF, POSTAGE PREPAID, TO THE FOLLOWING:
DAVID J. MEYER
SR VP AND GENERAL COUNSEL
A VISTA CORPORATION
1411 EMISSION AVE, MSC-
SPOKANE W A 99220
E-mail dmeyer(0avistacorp.com
KELLY NORWOOD
VICE PRESIDENT - STATE & FED. REG.
A VISTA UTILITIES
1411 EMISSION AVE, MSC-
SPOKANE W A 99220
E-mail Kelly.norwood(0avistacorp.com
--bf~
SECRETARY
CERTIFICATE OF SERVICE