20070731McKenzie direct.pdf

David J. Meyer
Vice President and Chief Counsel of
Regulatory and Governmental Affairs
Avista Corporation
1411 E. Mission Avenue
P. O. Box 3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE POWER COST
ADJUSTMENT (PCA) ANNUAL RATE
ADJUSTMENT FILING OF A VISTA
CORPORATION
CASE NO. A VU-07.qJ
DIRECT TESTIMONY OF
RONALD L. MCKENZIE
FOR A VISTA CORPORATION
Please state your name, the name of your employer and your business address.
My name is Ronald L. McKenzie. I am employed by Avista Corporation at 1411
East Mission Avenue, Spokane, Washington.
In what capacity are you employed?
I am employed by Avista as Manager of Regulatory Accounting in the State and
Federal Regulation Department.
Please state your educational background and professional experience.
I graduated :fi:om Eastern Washington University in 1973 with a Bachelor of Arts
Degree in Business Administration, majoring in Accounting. I joined the Company in September
1974.I obtained a Master of Business Administration Degree :fi:om Eastern Washington
University in 1989. I have attended several utility accounting and ratemaking courses and
workshops. I have held various accounting positions within the Company. I have served in the
State and Federal Regulation Department for the majority of my career with the Company.
What is the scope of your testimony in this proceeding?
My testimony provides a status report of the accounting entries and account
balances related to the Idaho Power Cost Adjustment (PCA) for the twelve months ended June
2007. My testimony also addresses the proposed surcharge to be effective October 1 , 2007
which will replace the existing surcharge that will expire on September 30 2007.
Are you sponsoring an Exhibit?
Yes. I am sponsoring Exhibit No. - (RLM-l), consisting of a sheet showing the
impact of the proposed PCA surcharge by rate schedule, a sheet showing the calculation of the
proposed uniform cents per kilowatt-hour PCA surcharge of 0.267~, and the proposed PCA
tariff, Schedule 66.
McKenzie, Di
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Would you please explain the recent order that was issued regarding the
review of the PCA methodology?
Yes. On June 29 2007 the Commission issued Order No. 30361 in Case No. A VU-
07-01. That case dealt with the review of the PCA methodology and method ofrecovery. The
Commission approved a change in the PCA methodology :fi:om a trigger and cap mechanism to a
single annual PCA rate adjustment filing requirement. The Commission approved the following
procedural schedule for administering the annual PCA filings:
August 1 Company filing for prior July - June deferral period
September 1 Review and comments by Staff and other interested parties
October 1 Commission Order and effective date of PC A rate adjustment
The Commission approved a change in the method of PCA deferral recovery :fi:om a uniform
percentage basis to a uniform cents per kilowatt-hour basis effective with the October 1 , 2007
rate change. And, finally, the Commission approved a continuation of the existing 2.448% PCA
through September 30 2007.
Does the present fIling conform to the requirements of Order No. 30361?
Yes. The proposed PCA rate adjustment is based on the unrecovered deferral
balance at June 30, 2007. Surcharge amortization associated with revenue to be collected from
the remaining term of the existing surcharge is used to reduce the deferral balance that is to be
recovered by the new PCA surcharge rate. The proposed PCA surcharge rate is a uniform cents
per kilowatt-hour rate of 0.267 ~ to be effective October 1 , 2007.
Would you please show the change in the unrecovered deferral balance from
June 30, 2006 to June 30, 2007?
McKenzie, Di
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Yes. The change in the unrecovered deferral balance :fi:om June 30, 2006 to June
, 2007 is shown below:
Unrecovered balance at June 30, 2006
Deferrals (July 2006 - June 2007)
Centralia gain over-refund transferred to PCA deferral
Amortizations related to surcharge revenues (July 2006 - June 2007)
Interest
Unrecovered balance at June 30, 2007
$1 ,517 103
239 763
380
691 623
501.895
$10.573518
Would you please explain the components listed above?
Yes. The deferral amount of $13 239 763 represents the Idaho jurisdictional share
of the actual power costs that were greater than authorized costs and deferred under the PCA
mechanism by Avista for the twelve months ended June 30, 2007. Mr. Storro discusses the
components that make up this amount.
The Centralia gain over-refund relates to the pass-through to customers of the customer
portion of the gain on sale ofthe coal-fired Centralia Power Plant and the related Skookumchuck
hydroelectric generation facility. Commission Order No. 30166 in Case No. A VU-06-
dated October 31 , 2006 approved termination of the rate adjustment credits used to pass-through
the gain and approved Avista s request to transfer any over- or under-refunded balance to the
PCA deferral account. The amount transferred to the PCA deferral account turned out to be an
over-refund of$6 380.
The amount for amortizations related to surcharge revenues of -691 623 represents the
amount of surcharge revenues for the twelve months ended June 30, 2007, net of revenue-related
expenses (commission fees and uncollectibles). The current level of surcharge rates of 2.448%
was made effective April 15, 2005 by Order No. 29752 dated April 12, 2005 in Case No. A VU-
05-1. At that time the surcharge rates were 19wered to offset the increase in base tariff rates to
McKenzie, Di
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recover costs associated with the purchase of the second half of the Coyote Springs 2 generating
plant. The existing surcharge was extended through September 30, 2007 by Order No. 30361
dated June 29, 2007.
The $501 895 interest amount represents interest for the twelve-month period July 1
2006 through June 30, 2007. Interest for the twelve-month period was calculated using the
Customer Deposit Rate (July-December 2006 of 3%, January-June 2007 of 5%) on current year
deferrals and the Customer Deposit Rate plus 2% on carryover balances :fi:om one year to the
next. This interest rate methodology was approved by Order No. 29323 in Case No. A VU-03-
04 dated August 21 2003.
What surcharge rate is the Company proposing to be effective October 1
2007?
The Company is proposing a uniform cents per kilowatt-hour PCA surcharge of
267~ to be effective October 1 , 2007. Page 3 of Exhibit No. - (RLM-l) is a copy of the
proposed tariff, Schedule 66, which contains the proposed PCA surcharge rate. Page 2 of Exhibit
No. - (RLM-l) shows the calculation of the proposed surcharge. The proposed surcharge is
designed to recover the deferral balance at June 30, 2007, less forecasted amortization associated
with the existing surcharge that is effective through September 30, 2007, plus an estimate of
interest during the recovery period. After applying the conversion factor related to commission
fees and uncollectibles, the resulting revenue requirement of approximately $9.6 million is
divided by forecasted kilowatt-hours for the period October 1 2007 through September 30 2008
to derive the proposed surcharge rate of 0.267 ~ per kilowatt-hour.
What is impact of the proposed surcharge by rate schedule?
McKenzie, Di
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Page 1 of Exhibit No. - (RLM-l) shows the impact of the proposed PCA
surcharge by rate schedule. The proposed surcharge is approximately $9.6 million, which is
approximately $4.6 million more than the existing surcharge of approximately $5.0 million.
Column (j) shows the breakdown of the $4.6 million by rate schedule and column (k) shows the
resulting percentage increases by rate schedule.
What will be the impact of the proposed surcharge on an average residential
customer?
Under the Company s proposal, the surcharge rate for residential customers will
increase from 0.163~ per kilowatt-hour to 0.267~ per kilowatt-hour, or an increase ofO.l04~ per
kilowatt-hour. For an average residential customer using 1 000 kilowatt-hours per month, the
monthly increase will be $1.04. Under present rates, a residential bill for 1 000 kilowatt-hours
amounts to $69.38. With the proposed surcharge in place the monthly bill would be $70.42, or
about 1.5% higher than the bill under present rates.
Is the Company continuing with its customer bill paying assistance programs?
Yes. The Company has several programs available to assist customers with paying
their bills. A vista s comfort level billing program offers customers the option of averaging their
bills and paying the same monthly amount all year long in order to smooth out the seasonal highs
and lows.Under the C.A.R.E.S. (Customer Assistance Referral and Evaluation Service)
program, specially trained customer service representatives provide referrals to area agencies and
churches for customers with special needs for help with housing, utilities, medical assistance, etc.
LIHEAP (Low Income Heating Energy Assistance Program) is a Federal program aimed to help
low income customers pay their electric and gas bills. These funds are distributed through local
agencies. Project Share a voluntary contribution option allowing customers to contribute
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donations that are distributed through local community action agencies to customers in need.
Idaho customers who have children, elderly or infirm persons in the household may qualify for
the winter moratorium plan. From December 1 through February 28, customers are not required
to pay their bills in full and can defer payment or make partial payments. In addition, the Winter
Payment Plan provides for lower winter bill payments by allowing customers to make monthly
payments equal to one-half of the levelized bill amounts, with balance in full or a new payment
arrangement due by April 1st The Company also works out payment arrangements with
customers having difficulty paying their bills.
In addition, the Company has convenience options that help those who need flexibility,
but are generally able to pay. APS, or automatic payment service (money is deducted :fi:om
checking account automatically each month), is one example. Other popular services include
debit and credit card service, check-by-phone or over the web, preferred due date (the customer
picks a more convenient date to pay than the one the Company states on the bill), and e-billing.
Does that conclude your prefIled direct testimony?
Yes it does.
McKenzie, Di
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David J. Meyer
Vice President and Chief Counsel of
Regulatory and Governmental Affairs
A vista Corporation
1411 E. Mission Avenue
P. O. Box 3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
; --. :~;. ,.;. '
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE POWER COST
ADJUSTMENT (PCA) ANNUAL RATE
ADJUSTMENT FILING OF A VISTA
CORPORATION
CASE NO. A VU-07-o'1
EXHIBIT NO. _(RLM-
RONALD L. MCKENZIE
FOR A VISTA CORPORATION
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No,
Avista Corporation
Proposed PCA Surcharge Rate
Effective October 1, 2007
Unrecovered deferral balance at 6/30/07
Forecast of amortization related to existing surcharge to expire 9/30/07
Net unrecovered balance to derive surcharge rate effective 10/1/07
Forecast of interest during recovery period (7% on 1/2 of balance)
Forecasted deferral balance to recover including interest
Conversion factor
Revenue requirement
Forecast kWhs
Proposed Surcharge Rate
$10,573 518
341 810
231,708
323 110
554 818
994259
609 989
594 894,412
$0,00267
Exhibit No, - (RLM-
Case No, A VU-O7-
Avista
Page 2 aD
I.P.C, No.28
Ninth Revision Sheet 66
Canceling
Eighth Revision Sheet 66
A VISTA CORPORATION
d/b/a Avista Utilities
SCHEDULE 66
TEMPORARY POWER COST ADJUSTMENT - IDAHO
APPLICABLE:
To Customers in the State of Idaho where the Company has electric service
available. This Power Cost Adjustment shall be applicable to all retail customers for
charges for electric energy sold and to the flat rate charges for Company-owned or
Customer-owned Street Lighting and Area Lighting Service, This Rate Adjustment is
designed to recover or rebate a portion of the difference between actual and allowed
net power supply costs,
MONTHLY RATE:
The energy charges of electric Schedules 1, 11 , 12 , 21 , 22 , 25, 25P, 31 , and 32
are to be increased by 267if, per kilowatt-hour in all blocks of these rate schedules.
Flat rate charges for Company-owned or Customer-owned Street Lighting and
Area Lighting Service, Schedules 41-, are to be increased by 267if, per kilowatt-
hour times the monthly usages of the various light sizes and types on these schedules.
SPECIAL TERMS AND CONDITIONS:
The rates set forth under this Schedule are subject to periodic review and
adjustment by the IPUC based on the actual balance of deferred power costs,
Service under this schedule is subject to the Rules and Regulations contained
in this tariff.
The above Rate is subject to increases as set forth in Tax Adjustment
Schedule 58.
Issued July 30, 2007 Exhibit No, - (RLM-
Case No, A VU-O7-
Avista
Page 3 of 3
Kelly 0, Norwood - Vice President, State & Federal Regulation
Effective October 1 2007
Issued by Avista Utilities