20070731Storro direct.pdf

, ,
\ 0
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL OF
. .
REGULA TORY AND GOVERNMENT AL AFF AIRS
A VISTA CORPORATION
1411 E. MISSION AVENUE
O. BOX 3727
SPOKANE, WASHINGTON 99220
TELEPHONE: [phone]
FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TIER OF THE POWER COST
ADmSTMENT (PCA) ANNUAL RATE
ADmSTMENT FILING OF A VISTA
CORPORATION
CASE NO. A VU-07-
DIRECT TESTIMONY OF
RICHARD L. STORRO
FOR A VISTA CORPORATION
I. INTRODUCTION
Please state your name, employer and business address.
My name is Richard L. Storro. My business address is 1411 East Mission
Avenue, Spokane, Washington, and I am employed by the Company as the Director of
Power Supply.
What is your educational background?
I participated in a program with the College of Idaho and the University of
Idaho, where upon completion I received a Bachelor of Science degree in physics from
the College of Idaho and a Bachelor of Science degree in electrical engineering from the
University of Idaho, both in 1973.
How long have you been employed by the Company?
I started working for A vista in 1973 as a distribution engineer. I have
worked in various engineering positions, and have held management positions in line and
gas operations, system operations, hydro production and construction, and transmission. I
joined the Energy Resources Department as a Power Marketer in 1997 and became
Director of Power Supply in 2001. My primary responsibilities involve the oversight of
both the short-term and long-term planning and acquisition of power supply resources for
the Company.
What is the scope of your testimony in this proceeding?
My testimony will provide a brief summary of the factors driving power
supply expenses during the review period, July 2006 through June 2007. I also describe
the supporting documentation that is provided in electronic format.
Storro, Di
Avista
Page 1
II. SUMMARY OF DEFERRALS
Would you please summarize power supply expenses during the July
2006 through June 2007 review period?
Yes. During the review period, Idaho s share of power supply expenses
exceeded the authorized level by $14 971 034 (not including Potlatch generation and
revenue variance of $234 169 in the rebate direction).Of that total, the Company
absorbed $1 497 103 or 10 percent of the additional power costs subject to the 90%/10%
S anng.This resulted in a net deferral of $13 473 932 in the surcharge direction.
Adding the Potlatch related deferral of $234 169 in the rebate direction results in a net
deferral for the period of $13 239 763 in the surcharge direction.
What factors contributed to the higher power supply expense during
the July 2006 through June 2007 review period?
Overall, slightly reduced hydro generation and high natural gas fuel costs
drove the majority of the deferrals in the review period. Also, as has been the pattern in
recent years, the second half of the calendar year, July 2006 through December 2006
(first half of the deferral year) experienced higher expenses relative to the authorized
level than the January 2007 through June 2007 period.
Deferrals during the third quarter of 2006 (July 2006 through September 2006)
alone totaled $7 100 927, or more than half of the total review period deferrals. This was
largely caused by low hydro generation coupled with high power replacement costs.
1 The Potlatch power purchase and revenue associated with the purchase is tracked at 100% in the PCA per
Idaho Public Utilities Commission Order No. 29418 dated January 15 , 2004. The 10% portion absorbed by
Avista is based on the portion of the PCA deferrals that are shared 90%/10% which was $1 497 103 during
the review period.
Storro, Di
A vista
Page 2
Hydro generation was 117 aMW below the authorized level during the third quarter of
2006.The average weighted price to replace that lost hydro generation was
$59.72/MWh.
Hydro generation during the last nine months of the review period (October 2006
through June 2007) was 28 aMW above the authorized level. Over the entire July 2006
through June 2007 review period hydro generation was 8 aMW below the authorized
level.This amount of reduced hydro generation caused approximately $2.2 million of
the deferrals during the review period.
Natural gas fuel costs were significantly higher than the authorized level and were
responsible for a large share of the power cost deferrals during the review period. Natural
gas fuel expense for C,?yote Springs 2 was approximately $27 million more on a system
basis ($9.3 million Idaho allocation) than the authorized level. This increased expense
occurred even though Coyote Springs 2 generated 37 aMW less than the generation in
authorized base expense. The average cost of gas for Coyote Springs 2 was $8.10/dth
during the review period compared to a cost of $4.81/dth included in authorized power
supply expense.
The average market power purchase pnce during the reVIew period was
$55.05/MWh. This compares to an average market purchase price of $46.17/MWh
included in authorized power supply expense.
Overall, high natural gas fuel prices and slightly below normal hydro generation
were responsible for the bulk of the deferrals during the review period.
Storro , Di
A vista
Page 3
What new long-term contracts did the Company enter into during the
July 2006 through June 2007 review period?
The Company entered into four new long-term contracts during the review
period.In August 2006, the Company entered into a one-year capacity exchange
agreement that allows the Company to receive power during on-peak hours and return
power during off-peak hours. In September 2006 the Company entered into an agreement
to purchase power for ten years ITom a small power qualifying facility. In November
2006, the Company renewed an exchange capacity agreement for 2007. Finally, in
December 2006 the Company entered into an eight-year agreement to sell energy and
associated renewable energy credits to a California utility. Copies of these contracts are
being provided with this filing.
IV. SUPPORTING DOCUMENT A TION
Please provide a brief overview of the documentation provided by the
Company in this flling.
The Company maintains a number of documents that record relevant
factors considered at the time of a transaction.The following is a list of current
documents that are maintained. Unless noted, these documents have been provided on a
compact disk as part of this filing. Other documents will be provided on request:
GaslElectric Transaction Record:These documents record the key details of the
price, term, and conditions of a transaction and include a discussion of market
conditions at the time of the transaction, the reason for the transaction, and
pertinent transmission or other delivery issues.The Company has provided
Storro, Di
A vista
Page 4
worksheets showing the details of each electric and natural gas term transaction
during the review period. Additional documentation will be provided on request.
Position Reports:These daily reports show the daily and term purchases each
business day and provide a summary of market power and natural gas prices over
an 18-month forward period.
Long-Term Physical Electric Load & Resource Tabulation:For transactions with
deliveries extending greater than the 18-month period covered by the Position
Report, the Company includes this document to show the net system position
during the extended period. This document also shows variability associated with
an 80% confidence interval around the combined variability of hydroelectric
generation and variability of load.
Forward Market Electric and Natural Gas Price Curves:This daily data shows
forward market prices for electricity and natural gas and is maintained in Nucleus
the Company s electronic energy transaction database record system.
Price Quote Worksheet:Provides a record of the natural gas purchase or sales
prices available from several parties in the market at the time of a particular gas
transaction. This record includes price information at specific points of delivery
(part of Gas/Electric Transaction Records that will be provided on request for
specific transactions).
Storro, Di
Avista
Page 5
Credit Report:Lists those counterparties with which the Company is allowed to
enter into either purchase or sales transactions as determined by credit criteria set
by the Company. This report may also provide information on other parties
credit limits placed upon their own transactions with the Company (not provided
but available on request).
Does that conclude your direct pre-fIled testimony?
Yes.
Storro, Di
A vista
Page 6