20070530Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO 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 REVIEW OF THE
POWER COST ADJUSTMENT (PCA)
METHODOLOGY OF A VISTA CORPORATION)
DBA A VISTA UTILITIES
CASE NO. AVU-O7-
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 Notice of
Proposed Changes to PCA Methodology, Notice of Request for Continuation of Existing
Surcharge, Notice of Modified Procedure and Notice of Comment /Protest Deadline issued on
May 10, 2007, submits the following comments,
BACKGROUND
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 s (Avista;
Company) Power Cost Adjustment (PCA) methodology and method of recovery, Avista 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.
STAFF COMMENTS MAY 30, 2007
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 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 PC
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.3 0 161 the Commission authorized A vista 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 Avista on or before August 15 2007
recommending continuation or proposed changes to the PCA methodology and method of
recovery.
On March 19 2007, a workshop in Case No. A VU-07-01 was held in Boise, Idaho to
review A vista s PCA methodology and method of recovery. The workshop was attended by
representatives from A vista, Commission Staff, Potlatch Corporation and Idaho Power
Company.
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 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 1
2008 PCA rate adjustments.
STAFF COMMENTS MAY 30, 2007
The Company also proposed that it be allowed the flexibility to seek departure from the
PCA methodology approved by the Commission. The Company concedes that it would be
required to request authorization and provide justification for any such departure.
SINGLE ANNUAL PCA RATE ADJUSTMENTS
Company Proposal
Avista 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 would be transferred to the
deferral balance that would be subject to the next PCA rate adjustment.
Staff Comments
Staff agrees with the Company s proposal. Previously approved methodology that was
based on triggers and caps and allowed two surcharges or rebates to be in place at any given time
often required two PCA cases per year that produced two rate adjustments per year. The
Company s proposal in this filing provides for longer periods of rate stability and reduces the
administrative burden on all participants.
SCHEDULE FOR RATE ADJUSTMENTS AND REVIEW OF PCA DEFERRALS
Company Proposal
A vista has been making annual PCA review filings on or before August 15 of each 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.
Avista proposes the following dates for the Company filing, review and comments by
Staff and other interested parties, Commission Order, and effective date ofthe PCA rate
adjustment for 2007:
STAFF COMMENTS MAY 30, 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
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 1 , 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.
Staff Comments
Staff agrees with the proposed schedule. Staff also agrees that the proposed schedule be
adopted for all future years. The certainty of a permanent schedule provides administrative
advantages to both the Commission and the Company and benefits customer planning.
METHOD OF RECOVERY - RATE SPREAD FOR OCTOBER 1, 2007 AND
OCTOBER 1, 2008 RATE ADJUSTMENTS
Company Proposal
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.
Staff Comments
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
STAFF COMMENTS MAY 30, 2007
increases/decreases when the PCA deferral balance reached zero. In that order the Commission
said;
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. (Pg. 48)
Staff proposes that the change to equal cents/kWh occur with the next PCA rate change
that is proposed to occur on October 1 , 2007. The Company proposes that the change not take
place until a year later. Staff believes that when the Commission ordered this change 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. 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. Attachment A to these comments shows the rise and fall of the
balance. Attachment A also shows that the balance is rising again. Even if the Commission
waits another year there are no guarantees that the balance will reach zero. Staff sees no
advantage in further delaying the change to equal cents/kWh PCA rates.
REQUEST FOR CONTINUATION OF EXISTING SURCHARGE
Company Proposal
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 1
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 , 2008 rate adjustment will be lessened
STAFF COMMENTS MAY 30, 2007
by the amount of revenue received from the existing surcharge during the months of July,
August, and September 2007.
Staff Comments
Staff supports the Company proposal to continue the existing surcharge through
September 30, 2007.
The Company files monthly Power Cost Adjustment reports and through April 30, 2007
the deferral balance has grown to $11 143 952. Although this amount is un-audited, Staff has no
reason to believe that this amount is incorrect. 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.
The customers are likely facing an increase in the PCA surcharge percentage in
September due to higher power supply costs. Stopping the surcharge at the end of June will
simply increase the PCA deferral balance that customers ultimately will be responsible for at that
time.
RATE MECHANISM FLEXIBILITY
Company Proposal
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 approved PCA methodology.
STAFF COMMENTS MAY 30, 2007
Staff Comments
Staff agrees with the Company that it would be required to request authorization and
provide justification for any departure from Commission approved PCA methodology. Staff
would evaluate any filings that departed from the Commission approved PCA mechanism and
make recommendations to the Commission on a case-by-case basis.
SUMMARY OF RECOMMENDATIONS
In summary, Staff believes that the workshop held as part of this proceeding and that the
report filed with the Commission in this proceeding satisfy the requirements for PCA review and
reporting established in Commission Order No. 30161. Staff agrees with the Company s PCA
recommendations as summarized above except for the recommendation to not implement equal
cents per kWh rates until October 1 2008. For reasons previously stated in these comments
Staff believes that the change should occur on October 1, 2007.
Respectfully submitted this
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day of May 2007.
,.;!
Scott WoodBury
Deputy Attorney General
Technical Staff: Keith Hessing
Kathy Stockton
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STAFF COMMENTS MAY 30, 2007
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 30TH DAY OF MAY 2007 SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-07-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DAVID 1. MEYER
SR VP AND GENERAL COUNSEL
A VISTA CORPORATION
1411 EMISSION AVE, MSC-
SPOKANE W A 99220
KELLY NORWOOD
VICE PRESIDENT - STATE & FED. REG.
A VISTA UTILITIES
1411 EMISSION AVE, MSC-
SPOKANE W A 99220
CONLEY WARD
GNENS PURSLEY LLP
PO BOX 2720
BOISE ID 83701-2720
~r-SECRET
CERTIFICATE OF SERVICE