20070914final_order_no_30429.pdf

Office of the Secretary
Service Date
September 14 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A VISTA
CORPORATION'S ANNUAL POWER COST
ADJUSTMENT (PCA) FOR THE PERIOD
JULY 1,2007 TO JUNE 30, 2008 ORDER NO. 30429
CASE NO. A VU-07-
On July 31 , 2007, A vista Corporation dba A vista Utilities filed its annual Power Cost
Adjustment (PCA) Application. Since 1989 the PCA mechanism has permitted Avista to adjust
its PCA rates upward or downward to reflect the Company s annual "power supply costs.
Because of its reliance on hydroelectric and natural gas-fired generation, Avista s actual cost of
providing electricity (its power supply costs) varies from year to year depending on changes in
streamflows, natural gas prices, and the market price of power. The annual PCA surcharge or
credit is combined with the Company s "base" rates to produce a customer s overall energy rate.
In its Application, A vista calculated that its annual power cost adjustment should be
approximately $4.6 million more than the existing PCA surcharge of about $5.0 million. The
Company estimated that this results in an overall PCA rate increase of 2.22%.
On August 10, 2007, the Commission issued a Notice of Application and Notice of
Modified Procedure. Order No. 30402. The Commission requested that interested persons
submit written comments no later than September 7, 2007. Comments were filed by seven
members of the public and Commission Staff. After reviewing the Application and comments
we approve the PCA Application and authorize new rates to be effective on October 1 , 2007.
THE PCA MECHANISM
A vista s PCA mechanism captures the difference between "normalized" power costs
and actual power costs. The PCA rate is designed to move upward or downward based upon
available streamflows and fuel prices. Ninety percent of the difference between normalized costs
and actual costs are charged or credited to customers. The remaining ten percent of the cost
difference is attributed to or absorbed by the Company.This 90/10 sharing mechanism
moderates the PCA increase in years (such as the current year) when actual power costs exceed
normalized power costs. The PCA mechanism stabilizes Company earnings and does not affect
the Company s overall earnings or authorized rate of return.
ORDER NO. 30429
During the recently completed PCA year (July 1 , 2006 through June 30, 2007),
Avista reported that its unrecovered deferral balance after the 90110 split is $10 573 518.
Application at 3. The Company attributed the higher power supply costs to higher natural gas
fuel costs and slightly reduced hydro generation. Further adjustments reduce the PCA balance to
approximately $9.6 million. Id. at 4.
Consistent with the Commission s prior Order No. 28108, Avista proposes to recover
the PCA surcharge on a uniform cents-per-kilowatt-hour (kWh) basis. As portrayed in the
Company s PCA tariff (Schedule 66), Avista seeks a uniform surcharge of 0.267~ per kWh.
Under the Company s proposal, the PCA surcharge rate for residential customers will increase
from 0.163~ per kWh to 0.267~ per kWh, an increase of 0.104~ per kWh. Avista estimates that
the monthly bill for the average residential customer using 1 000 kWh per month would increase
by $1.04. Application at 4. Because the PCA rate is being changed from a percentage basis to a
uniform cents-per-kilowatt-hour basis, the percentage increase will vary by customer class. The
table below shows the proposed increase in the PCA rates for the major customer classes:
CUSTOMER GROUP PERCENTAGE
(SCHEDULE)CHANGE
Residential (1)53%
General Services (11 & 12)98%
Large General Services (21 & 22)04%
Extra Large General Services (25)86%
Pumping ServIces (31 & 32)1.83%
Street and Area Lights (41-49)89%
Source: McKenzie, Exh. RLM-, Page
The Company proposes that the PCA rate change included in Schedule 66 become effective on
October 1 , 2007.
COMMENTS
A. Public Comments
The Commission received seven comments from customers or interested persons.
All the public commenters opposed the PCA rate increase. Three commenters were on fixed
ORDER NO. 30429
incomes or retired. Several customers suggested that the Company absorb the PCA rate increase
by reducing officer salaries or tightening "their belts like everyone else.
A commenter from Boise asserted that the PCA mechanism is biased in favor of
known energy resources instead of intermittent resources such as wind. He suggested that
ratepayers should not be responsible for the volatility of power costs "when they have no say in
ways to limit or reduce" the risk of the volatility.
B. Staff Comments
The Staff performed an audit of the PCA accounts and concluded that the amounts
recorded are correct. The Staff agreed with the Company that the unrecovered deferral balance
in this year s PCA account is $10 573 518 as of June 30, 2007. Staff Comments at 3-
Staff also reviewed the calculation of the interest and found the amounts included in
the Company s Application to be correct. The Company uses the customer deposit rate on
current year deferrals plus two percent on carry-over balances from one year to the next.
Consistent with the Commission s Order No. 30361 , the Staff recommended that the additional
two percent interest be eliminated effective October I , 2007. Subsequent PCA calculations
should not contain the additional two percent in interest. The Company concurs that this change
should become effective October 1 2007. Id. at 8.
The table below shows the individual PCA components and the calculation of the
unrecovered deferral balance.
Unrecovered Balance at June 30, 2006
Net Deferral Activity (July 2006-June 2007)
Amortizations Related to Surcharge Revenues (July 2006-June 2007)
Interest
Centralia gain over-refund (recorded in November 2006)
Unrecovered Balance at June 30, 2007
$ 1 517 103
239 763
691 623
501 895
6.3 80
$10 573 518
The deferral of $10.57 million is then adjusted to reflect: (1) expected surcharge revenues for
July, August and September; (2) expected interest; and (3) other adjustments. These three
offsetting adjustments result in a PCA recovery balance of $9 609 989. Id. at 2.
In conclusion, the Staff recommended that the Commission accept the audited
deferral balances presented in the Company s filing and approve the proposed PCA rate
surcharge of 0.267~/kWh effective October I , 2007. Staff further recommends that the
ORDER NO. 30429
Company discontinue the additional 2% interest calculation for carry-over balances effective
October 2007.
DISCUSSION
After reviewing the PCA Application and the comments filed in this case, we find it
reasonable to grant Avista s Application to increase its PCA rate. We note that no commenter
objected to the PCA calculations and the rate such calculations produce. We find the PCA rate
of 0.267~ per kWh is fair, just and reasonable. Although we approve the PCA rate increase, we
are sympathetic to those public comments that suggest the Company forego rate increases.
However, we recognize that the 90/10 sharing mechanism does assign at least ten percent of the
PCA power costs to the Company. The PCA methodology is designed so customers will pay no
more or no less than 90% of actual variance in power supply costs over the base. It does not
increase the company s overall earnings. We urge those customers who are eligible for energy
assistance under the Low Income Home Energy Assistance Program (LIHEAP) and other
assistance programs to apply to those programs. Information about the assistance programs may
be obtained from A vista, local community action agencies, our Consumer Assistance staff, or by
calling the "211" Idaho Care Line.
ORDER
IT IS HEREBY ORDERED that Avista Utilities' PCA Application is approved.
IT IS FURTHER ORDERED that from October 2007 through September 30
2008, the PCA rate shall be 0.267~ per kWh for all customer classes.
IT IS FURTHER ORDERED that the PCA rate contained in this Order shall be
effective for service on October 1 , 2007. The Company s proposed PCA tariff Schedule 66
included in its Application is approved.
IT IS FURTHER ORDERED that subsequent PCA calculations discontinue adding
two percent interest on the unrecovered carry-over balance from prior years.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. A VU-07-
07 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 or in interlocutory Orders previously issued in
this case. 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. 30429
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this L/
day of September 2007.
MARSHA H. SMITH, COMMISSIONER
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MACK REDEJ6RD, c(0MMISSIONER
ATTEST:
Je D. JewellCo ission Secretary
bls/O:A VU-O7-07 dh2
ORDER NO. 30429