20070531final_order_no_30327.pdf

Office of the Secretary
Service Date
May 31 , 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA CORPORATION TO REVISE
THE RESIDENTIAL AND SMALL FARM
ENERGY RATE ADJUSTMENT CREDIT,
SCHEDULE 59.ORDER NO. 30327
CASE NO. A VU-07-
On May 22 2007, Avista Corporation (Company) filed a Tariff Advice to revise the
Residential and Small Farm Rate Adjustment Credit, Schedule 59. The Company requested
expedited treatment of its filing. The Commission finds good cause to act on the Company
filing in an expedited manner, and approves it as set out below.
THE RESIDENTIAL EXCHANGE PROGRAM
All citizens of the Pacific Northwest are entitled to share in the benefits from the
region s federal hydroelectric power system. See 16 D.C. 99 832, 837-839. As a regional
utility, A vista is entitled to participate in the Residential Exchange Program (REP), which is the
mechanism designed to extend the benefits of low-cost federal power to residential and small
irrigation customers served by investor-owned utilities in the region. 16 D.C. 9 839c.l The
REP is administered by the Bonneville Power Administration (BP A), the federal agency tasked
with marketing the power generated by the federally owned dams on the Columbia River.
BPA's public power utility customers, such as municipalities, cooperatives, and
public utility districts, typically benefit from the federal hydroelectric system through their
preferential access to low-cost federal power provided by BP A. The residential and irrigation
customers of the regional investor-owned utilities, such as PacifiCorp, Idaho Power, and A vista
share in the benefits of the federal hydroelectric system through the REP, by receiving credits on
their electric bills. The investor-owned utilities provide electricity to approximately 60% of the
Northwest's population. BP A uses formulas based on various factors, including a utility
average system cost for producing power, to distribute benefits through the REP. In application
the REP acts as a cash rebate to the residential and small farm customers of the investor-owned
utilities as required by the Northwest Power Act (NWP A).
1 16 u.S.C. ~~ 839-839h (2000) is titled the Pacific Northwest Electric Power Planning and Conservation Act of
1980, and is commonly referred to as the "Northwest Power Act" (NWP A).
ORDER NO. 30327
In 2000, BP A offered the region s investor-owned utilities the option of entering into
a settlement of the REP (2000 REP Settlement) in lieu of the traditional REP calculation. The
entire region s investor-owned utilities, including Avista, entered into the REP Settlement with
BPA. Payments to Idaho s regional utilities under the REP Settlement totaled approximately
$259 million for the 2002-2006 term, and $35 million for the first four months of 2007. As
previously stated, these payments were passed through directly to customers as credits on their
electric bills.
THE 9TH CIRCUIT DECISIONS
On May 3 , 2007, the 9th Circuit Court of Appeals issued two opinions in 18
consolidated appeals concluding that certain BP A actions in entering the 2000 REP Settlement
with the region s six investor-owned utilities, including Avista, Idaho Power, and PacifiCorp,
were "not in accordance with law.Portland General Electric Co. v. Bonneville Power Admin.
F.3d , 2007 WL 1288786 (9thCir); Golden Northwest Aluminum, Inc. v. Bonneville Power
Admin., 2007 WL 1289539 (9thCir) (Court Decisions). Consequently, on May 21
2007, BP A issued letters to A vista, Idaho Power, and Pacifi Corp indicating that because of the
Court Decisions it was suspending the monthly payments or credits that it was making pursuant
to the REP settlements.
THE COMPANY'FILING
On May 22, 2007, Avista Corporation (Company) filed a Tariff Advice to revise the
Residential and Small Farm Rate Adjustment Credit, Schedule 59. The revised tariff sheet
eliminates the Residential and Small Farm Energy Rate Adjustment Credit of 0.459 cents per
kilowatt-hour and establishes a proposed charge of 0.144 cents per kilowatt-hour rate to recover
the over-refunded exchange credit balance over a 12-month period.
The Company stated that it uses a balancing account for the receipt of REP benefits
from BPA. At the end of April 2007, there was an over-refunded balance and associated interest
of approximately $913 000 for Idaho customers. The existing Schedule 59 rate credit of 0.523
cents per kilowatt-hour will continue until the rate is eliminated. The longer the existing rate
remains in place, the larger the over-refunded balance becomes. When the existing rate credit
was established, it was projected that the balancing account would reach zero at the end
October 2007. The Company stated that because the Schedule 59 rate credit is a uniform cents
ORDER NO. 30327
per kilowatt-hour rate, and because the REP benefit payments from BP A are lower in the winter
and higher in the summer, the result is the current over-refunded balance.
The Company proposed an effective date of June 22, 2007, to accomplish a 30-day
notice. However, the Company also notes that the delay in the effective date will increase the
credit deferral balance subject to later recovery and therefore requests approval of the tariff
change as soon as possible. In support of its filing the Company submitted the affidavit of David
J. Meyer regarding the emergency situation and need for the filing, a copy of the letter from BP
regarding the elimination of REP payments, and a press release, as well as the revised Tariff
Sheet 59 and the associated workpapers.
STAFF RECOMMENDATION
Staff reviewed the Company s filing and supports emergency revision of the
Residential and Small Farm Energy Rate Adjustment Credit. Failure to take immediate action
will result in significant overpayment of credits to Avista s customers with rapid growth in the
credit deferral balance subject to later recovery through customer surcharge. Staff further
recommended that the proposed surcharge rate of 0.144 cents per kilowatt-hour be implemented
with an effective date of June 1 , 2007. Staff supported both eliminating the existing credit and
imposing the requested surcharge to collect the over-refunded balance as requested by the
Company. Staff stated that its support of the surcharge is on an interim basis in an effort to
impose a single change in the rate credit. Staff further recommended Modified Procedure with a
30-day comment/investigation period to conduct additional audit of the deferral balance amount
and to determine if the surcharge is properly allocated and appropriate for the full period as
proposed by A vista.
DISCUSSIONIFINDINGS
We find that good cause exists to issue this Order on an expedited basis, based upon
the suspension of the REP payment/credits by BP A to A vista that are passed directly through
customers. Continuation of the credit after the suspension of payments by BP A would result in a
rapid accumulation of a negative balance. Failure to take immediate action will result in
significant overpayment of credits to customers with rapid growth in the credit deferral balance
subject to later recovery through customer surcharge. We recognize that this suspension of the
REP benefits to customers will result in an immediate and substantial increase in residential and
small farm/irrigation customers' electric bills. However , we also acknowledge that this credit is
ORDER NO. 30327
a direct pass-through by the utilities of a federal benefit, and the actions of the federal court and
federal agency with authority over such benefits are what require our actions in eliminating the
billing credit.
We find the immediate elimination of the existing credit to be just, reasonable, and
necessary to stop the accumulation of the over-refunded balance to customers. We further find
that the surcharge rate of 0.144 cents per kilowatt-hour should be implemented on an interim
basis to bring the over-refunded balance back to zero. The surcharge amount will be subject to
refund. We find that Modified Procedure with a 30-day comment period is reasonable and
warranted with regard to the amount of the surcharge needed to collect the over-refunded
balance. We direct Staff to audit the deferral balance amount, to review the assumptions and
calculations leading to the surcharge rate, and advise the Commission as to whether it is properly
allocated, whether it is in the proper amount, and whether the recovery period is appropriate.
The proposed revisions to the Company s Schedule 59 are approved.
ORDER
IT IS HEREBY ORDERED that the filing of Avista Corporation to revise the
Residential and Small Farm Rate Adjustment Credit, Schedule 59, is approved. The rate credit is
eliminated and a surcharge rate of 0.144 cents per kilowatt-hour is hereby implemented. The
proposed revisions to Schedule 34 are approved as filed, with an effective date of June 1 2007.
IT IS FURTHER ORDERED that the surcharge rate of 0.144 cents per kilowatt-hour
be implemented on an interim basis in order to bring the over-refunded balance back to zero.
This amount will be subject to refund based on Staff s audit and investigation and subsequent
Commission Order. Staff is directed to audit the deferral balance amount, to review the
assumptions and calculations leading to the surcharge rate, and to advise us as to whether it is
properly allocated, whether it is in the proper amount, and whether the recovery period is
appropriate. A separate Notice of Modified Procedure will be issued setting forth a 30-day
comment period for the purposes stated above and for public comment.
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 with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code 9 61-
626.
ORDER NO. 30327
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this :)/ sf
day of May 2007.
JM~
MARSHA H. SMITH, COMMISSIONER
ATTEST:
/L.",,-L\ i
! D. Jewell
).bmission Secretary
O:A VU-07-03 dw
ORDER NO. 30327