20070629final_order_no_30361.pdf

Office of the Secretary
Service Date
June 29, 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE REVIEW OF THE
POWER COST ADJUSTMENT (PCA)
METHODOLOGY OF A VISTA
CORPORATION DBA A VISTA UTILITIES
CASE NO. A VU-07-
ORDER NO. 30361
On October 31 , 2006, the Idaho Public Utilities Commission (Commission) in Case
No. A VU-06-05 issued Order No. 30161 announcing a review of Avista Corporation
(Avista; Company) Power Cost Adjustment (PCA) methodology and method of recovery.
A vista s PCA is used to track changes in revenues and costs associated with variations in
hydroelectric generation, secondary prices and changes in power contract revenues and expenses.
On March 2, 2007, the Commission opened Case No. A VU-07-01 to establish a
vehicle for review of Avista s PCA methodology and method of recovery. The Commission in
this Order approves changes to the PCA methodology and method of recovery and authorizes a
continuation of the existing 2.448% PCA surcharge to September 30, 2007.
Background
The context for the present docket is set forth in the Commission s Order No. 30161
Case No. A VU-06-05. In that Order the Commission made the following findings:
. . . We find it appropriate at this time to conduct the thorough review of PCA
methodology envisioned when we approved changes to the methodology in
2001. We find Staff s suggestion to hold one or more workshops to be an
acceptable vehicle for reviewing the Company s PCA methodology and
expect the Company at the conclusion of that review to file a report with the
Commission assessing the PCA methodology and providing justification for
mechanism modifications. It is only with this review of PCA methodology
that we authorize and continue the existing PCA surcharge of 2.448%.
In Order No. 30161 the Commission authorized Avista to continue the current PCA
surcharge of 2.448% until the deferral balance reaches zero or June 30, 2007, whichever occurs
first. The Commission further ordered that one or more PCA methodology workshops were to
be held and a report filed with the Commission by A vista on or before August 15, 2007
recommending continuation or proposed changes to the PCA methodology and method of
recovery.
ORDER NO. 30361
On March 19 2007, a workshop in Case No. A VU-07-01 was held in Boise, Idaho
to review Avista s PCA methodology and method of recovery. The workshop was attended by
representatives from A vista, Commission Staff, Potlatch Corporation and Idaho Power
Company.
VISTA REPORT AND RECOMMENDATIONS
On April 27, 2007, Avista filed a report in Case No. A VU-07-01 recommending
proposed changes to the PCA methodology and requesting a continuation of the existing 2.448%
PCA surcharge beyond the scheduled June 30, 2007 expiration (Order No. 30161 , p. 6) through
September 30 2007.
A vista in its report recommends three modifications to the PCA methodology and
method of recovery:
1. Single annual PCA rate adjustments rather than returning to triggers and
a cap.
2. Annual schedule for rate adjustments and review of prior PCA deferrals.
3. Method of recovery - rate spread for October 1 , 2007 and October
2008 PCA rate adjustments.
The Company proposes that it be allowed the flexibility to seek a departure from the
PCA methodology procedures adopted. Examples discussed at the workshop were (1) maintain
flexibility to do rate adjustments in addition to the annual PCA adjustment if the situation
warrants, (2) maintain flexibility to not do a PCA rate adjustment if the adjustment is too small
and (3) maintain flexibility to recover or rebate the PCA deferral balance over more than one
period. Of course, the Company concedes that it would be required to request authorization and
provide justification for any departure from the PCA rate mechanism procedures.
Single annual PCA rate adjustments
A vista proposes that the PCA methodology be modified to require an annual PCA
adjustment filing to recover or rebate the deferrals being reviewed in the annual PCA status
report filing. The PCA rate adjustment would be set each year on October 1 to recover the
previous June 30 deferral balance, would remain in place for 12 months, and would be replaced
by a new rate adjustment that is set based on the next 12 months of deferrals. Any over- or
under-recovered surcharge or over- or under-refunded rebate balance will be transferred to the
deferral balance that will be subject to the next rate adjustment.
ORDER NO. 30361
Schedule for rate adjustments and review of PCA deferrals
A vista has been making annual PCA review filings on or before August 15 of each
calendar year. The review filings cover power costs and the associated PCA deferrals that were
recorded during the immediately preceding 12-month period of July through June. The
Company proposes that these filings continue to be made and form the basis of the annual PCA
rate adjustment.
A vista proposes the following dates for the Company filing, review and comments by
Staff and other interested parties, Commission Order, and effective date of the PCA rate
adjustment for 2007:
August 1 , 2007 Company filing for July 2006 - June 2007
deferral period
September 1 , 2007 Review and comments by Staff and other
interested parties
October 1 , 2007 Commission Order and effective date of PCA
rate adjustment
Under the Company s proposal the current PCA surcharge of 2.448% would be
extended and would expire on September 30 2007. The PCA surcharge would be replaced by an
October 1 , 2007 rate adjustment designed to recover deferrals for the July 2006 - June 2007
period that would expire on September 30, 2008 , which, in turn, would be replaced by a October
, 2008 rate adjustment designed to recover deferrals for the July 2007 - June 2008 period that
would expire on September 30 , 2009. The process would continue in the future, unless it is
modified.
Method of Recovery - Rate spread for October 1, 2007 and October 1, 2008 rate
adjustments
The Company proposes that the October 1 , 2007 rate adjustment be spread on a
uniform percentage basis and that the October 1 , 2008 rate adjustment and subsequent
adjustments be spread on a uniform cents per kilowatt-hour basis. In supporting its
recommended delay in switching from uniform percentage to cents per kilowatt-hour the
Company notes that the deferral balance did not actually reach zero.
ORDER NO. 30361
Request for continuation of existing surcharge
Avista requests that the existing 2.448% PCA surcharge not expire on June 30, 2007
(as per Order No. 30161) but be allowed to continue through September 30, 2007. Based on
current estimates, A vista contends that it is likely that the PCA surcharge rate will increase from
2.448% to about 4% on October 1 2007. Rather than have the PCA surcharge go to zero on July
, 2007, leaving the existing surcharge in place through September 30, 2007, the Company
contends, will minimize the rate increase impact that occurs on October 1 , 2007. Also, if the
existing surcharge is allowed to continue, the October 1 , 2007 rate adjustment will be lessened
by the amount of revenue received from the existing surcharge during the months of July,
August, and September 2007.
On May 10, 2007, the Commission in Case No. A VU-07-01 issued a Notice of
Proposed Changes to PCA Methodology and Request for Continuation of Existing Surcharge.
Also issued on May 10 was a Notice of Modified Procedure. The deadline for filing comments
was May 31 , 2007. Comments were filed by Commission Staff and two of the Company
residential customers. The comments can be summarized as follows:
Customer Comments
The first customer objects to both the continuation of the existing surcharge and the
requested increase. The customer notes that she has read the articles regarding executive
bonuses and recommends that if the Company needs better cash flow, it should look in-house
and not to customers.
The second customer queries why Idaho Power customers received a $120 million
rate reduction last year while A vista, which experienced a substantial profit, credits the profit to
good management and now requests to extend an increase and surcharge. It seems to this
customer that the two service areas are similar in many ways, but treat their customers
differently.
Commission Staff Comments
Staff agrees with the Company s proposal to replace the trigger and cap mechanism
in the PCA methodology with an annual PCA adjustment filing and concurs with the Company
scheduling proposal for PCA filings. Staff believes these changes will provide for longer periods
of rate stability, will benefit customer planning, and will provide greater ease in tariff
ORDER NO. 30361
administration. Staff also agrees that the Company should be provided the flexibility to request
authorization and provide justification for any departure from the PCA rate mechanism
procedures.
Staff disagrees with the Company s recommendation to delay changing until year
2008 the method of PCA deferral recovery from a uniform percentage basis to a uniform cents
per kWh basis. Staff contends that the change should occur with the Company s next PCA rate
change on October 1 , 2007. As reflected in its comments, Staff notes that in Order No. 29602
issued in Case No. A VU-04-1 the Commission ordered Avista to change PCA rates from equal
percentage increases/decreases to equal cents per kWh increases/decreases when the PCA
deferral balance reached zero. Staff believes that when the Commission ordered this change in
recovery method to occur when the deferral balance reached zero, it was done for the purpose of
allowing the relatively large deferral balance that existed at that time to be passed on to
customers under the rate spread methodology that was in place at the time the balance
accumulated. Reference Order No. 30161 , p. 6. Staff believes that for all practical purposes that
occurred March 30, 2006 when the deferral balance dropped from a high of$45.6 million to $1.5
million.
Staff supports the Company s proposal to continue the existing surcharge beyond
June 30, 2007 through September 30, 2007. Staff states it has no reason to believe that
Company-reported PCA deferral balances are incorrect. Through April 30, 2007 the deferral
balance has grown to $11 143 952. The average monthly surcharge collected from October 2006
through April 30, 2007 is $410 141. Ending the surcharge early means a delay in paying down
the surcharge, and incurring additional interest on the amount in the deferral balance that would
have been paid if the surcharge were kept in place.
Commission Findings
The Commission has reviewed the filings of record in Case No. A VU-07-, the
Company-proposed changes in PCA methodology, the Company s request for a continuation of
the existing surcharge beyond June 30, 2007 and the related comments of Commission Staff and
customers. Based on our review of the record, we continue to find it reasonable to process this
case pursuant to Modified Procedure. IDAPA 31.01.01.204.
A vista recommends proposed changes to its PCA methodology and requests a
continuation of the existing 2.448% surcharge beyond the scheduled expiration date of June 30
ORDER NO. 30361
2007 to September 30, 2007. Reference Order No. 30161. Both customers commenting object
to continuation of the existing surcharge. Commission Staff concurs with the proposed PCA
methodology changes with the exception of the Company-proposed delay in moving to a cents
per kWh method of recovery. Staff concurs in the Company s proposal to continue the existing
surcharge through September 30 2007.
The Company s April 27, 2007 report filing in this case follows a March 19, 2007
PCA methodology workshop. With the exception of the Company-proposed date for changing
the method of PCA deferral recovery/credit from uniform percentage to cents per kWh, we find
the Company-proposed changes to PCA methodology including program flexibility to be both
reasonable and acceptable. We accordingly approve a change from a trigger and cap mechanism
to a single annual PCA rate adjustment and find the Company-proposed 60-day schedule for
filing, review and effective date, subject to Commission calendaring constraints, to be an
administratively and procedurally workable plan.
We find the Company s proposal to delay the change in the method of PCA deferral
recovery (both increases and decreases) from the present uniform percentage basis to a uniform
cents per kWh basis until the year 2008 PCA adjustment to be unacceptable. We find the
Company s rationale for the delay to be unpersuasive. In Order No. 29602 we stated:
The Commission finds that a cents per kWh recovery method for the PCA is
superior to the percentage basis currently used. While we recognize the
difficulties pointed out by Potlatch, we find the cents per kWh rate more
equitable to all customers than the percentage allocation. We recognize that
the variable cost of energy fluctuates from year to year based on the amount
of energy consumed and should therefore be surcharged or credited on an
equal cents per kWh basis. We authorize the change to an equal cents per
kWh when the present deferral balance is eliminated. Order No. 29602
, p.
48.
We agree with Staff s contention that for all practical purposes the PCA deferral balance was
eliminated on March 30, 2006, when the deferral balance dropped from a high of $45.6 million
to $1.5 million. We find it reasonable that the change in recovery method occur with the
Company s year 2007 PCA adjustment (tentatively October 1 2007).
The Commission also supports and finds reasonable the Company s proposal to
extend the existing surcharge beyond the scheduled June 30, 2007 expiration through September
ORDER NO. 30361
2007. Our decision in this regard is supported by our recognition of the present PCA account
reports filed with the Commission, which although unaudited, we have no reason to dispute.
CONCLUSIONS OF LAW
The Commission has jurisdiction over Avista Corporation dba Avista Utilities, an
electric utility, and the issues presented in this case pursuant to the power and authority granted
in Title 61 of the Idaho Code, and pursuant to the Commission s Rules of Procedure, IDAP A
31.01.01.000 et seq.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above, IT IS HEREBY ORDERED and the Commission does hereby approve the proposed
change in PCA methodology from a trigger and cap mechanism to a single annual PCA rate
adjustment filing requirement.
IT IS FURTHER ORDERED and the Commission does hereby approve the
Company-proposed procedural schedule for administering annual PCA filings.
IT IS FURTHER ORDERED that the change in method of PCA deferral recovery
from the present uniform percentage basis to a uniform cents per kWh basis is to occur with the
Company s year 2007 PCA adjustment.
IT IS FURTHER ORDERED and the Commission does hereby authorize a
continuation of the present 2.448% PCA surcharge beyond the scheduled June 30, 2007
expiration to September 30 2007.
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 ~ 61-626.
ORDER NO. 30361
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this :r/t4-
day of June 2007.
&t~
MARSHA H. SMITH, COMMISSIONER
1\ .
MACK A. REDFORD, COMMI SIONER
ATTEST:
/'l ~well
CoMmission Secretary
bls/O:A VU-07-01 sw
ORDER NO. 30361