20070808Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER RED FO RD
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:AUGUST 2, 2007
SUBJECT:A VISTA'S ANNUAL POWER COST ADJUSTMENT (PCA)
APPLICATION, 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 A vista 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
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 this PCA Application, A vista calculates that its annual power costs have increased
approximately $4.6 million more than the existing PCA surcharge of about $5.0 million. The
Company estimates that this results in an overall PCA rate increase of 2.22%. Application
Exhibit RLM-1 at page 1. The Company proposes an effective date of October 1 , 2007.
BACKGROUND
A. Recent PCA Changes
In Order No. 30361 issued June 29, 2007, the Commission approved two major
changes to Avista s PCA methodology. First, the Commission changed Avista s PCA from a
trigger and cap" mechanism to a single annual PCA rate adjustment. Order No. 30361 at 6.
Under the trigger-and-cap mechanism, a PCA rate change was not "triggered" until the deferral
exceeded a certain threshold, and the rate change was "capped" at 5%. Order No. 28108 at 1.
Second, the Commission changed the PCA rate from a uniform "percentage" basis to a uniform
cents per kilowatt hour (kWh)" basis. Id. The Commission also authorized continuation of the
DECISION MEMORANDUM
existing 2.448% PCA surcharge until September 30, 2007. The Commission directed that these
changes be implemented in this. docket.
B. The PCA Application
During the PCA year (July 1 , 2006 through June 30, 2007) the Company reports that
its unrecovered deferral balance after the 90/10 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. Storro Direct at 2. Consequently, Avista seeks a PCA surcharge of
267~ 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 ofO.104~ per kWh. If approved
the monthly bill for the average residential customer using 1 000 kWh per month would increase
by $1.04. The average monthly bill for a residential customer using 1 000 kWh would increase
from $69.38 to $70.42, or an increase of approximately 1.5%.
Because the PCA rate is being changed from a percentage basis to a cents-per-
kilowatt 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 PERCENT AGE
(SCHEDULE)CHANGE
Residential (1)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%
McKenzie, Exhibit No. RLM-, Page 1 of3
The Company s Application is supported by the testimony of Richard Storro, the
Director of Power Supply, and Ronald McKenzie, Manager of Regulatory Accounting. The
Company submitted proposed tariff changes to its Schedule 66 (Temporary Power Cost
Adjustment). The Company proposed an effective date of October 1 , 2007 and requests that its
PCA Application be processed under Modified Procedure.
DECISION MEMORANDUM
STAFF ANALYSIS
At this time, Staff believes that the Company s PCA Application is straightforward
and recommends that it be processed under Modified Procedure. Staff suggests that the
Commission use a 28-day comment period so that the new rate may become effective by
October 1 , 2007.
CO MMISSI 0 N D ECISI
Does the Commission find that Avista s PCA Application should be processed under
Modified Procedure with a 28-day comment period?
Don Howell
blslM:A VU-O7-07 dh
DECISION MEMORANDUM