20080716Comments.pdf

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WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03 1 8
IDAHO BAR NO. 3283
l 8
Street Address for Express Mail:
472 WWASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION DBA AVISTA )
UTILITIES FOR AN ORDER AUTHORIZING )
DEFERRL OF NET REVENUES FROM SALES )
OF CARBON FINANCIAL INSTRUMENTS. )
)
)
CASE NO. A VU-E-08-2
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through
its Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 30580 on
June 25, 2008, submits the following comments.
BACKGROUND
On May 22, 2008, A vista Corporation filed an Application requesting an Order from the
Commission authorizing the Company to defer net revenues from the sale of carbon financial
instruents (CFIs). The revenues result from the sale of credits relating to the reduction in
greenhouse gas emissions through a pilot program offered through the Chicago Climate
Exchange. Paricipants in the Exchange are required to reduce greenhouse gas emissions during
two phases. The Exchange allows members to sell greenhouse gas credits based on greenhouse
STAFF COMMENTS 1 mLY 16,2008
gas reductions compared to a baseline. A vista banked credits for 2003 through 2006, and was
able to sell surlus Phase 1 CFIs for $2,557,065, net of the Exchange commissions.
In this fiing, the Company is requesting an Order allowing for the deferral of the net
revenue (revenues from sales of CFIs, less cost, including membership fees paid to the
Exchange). The net revenues will be allocated to the Company's Washington and Idaho
jursdictions based on the curent production/transmission allocation of 64.59% to Washington
and 35.41 % to Idaho. The Company requests authority to defer the CFI revenues in Account 254
- Other Regulatory Liabilities. The Company proposes to accrue interest on the Idaho share of
the deferrals at the customer deposit rate. The Company wil propose ratemaking treatment of
the net revenues and accrued interest in its next general rate case filing or some other proceeding.
STAFF REVIEW
The Chicago Climate Exchange (CCX) is an emission registry, reduction and trading
system for greenhouse gases. Membership in CCX is voluntar for Phase I and Phase II,
although the emission reduction pledges are legally binding under the CCX Accord. Currently
members represent various industries with emission sources and offset projects worldwide. In
the Electric Power Generation industry there are 17 members. A vista became a member in
November 2007.
The Carbon Financial Instruent (CFI) is the traded commodity. Each CFI contract
represents 100 metric tons of C02 equivalents (C02e). Emissions from six greenhouse gases
(GHGs) are converted to metric tons C02e using the one-hundred-year Global Waring
Potential values established by the Intergovernental Panel on Climate Change. The six GHGs
include carbon dioxide (C02), methane (CH4), nitrous oxide (N20), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs) and sulfu hexafluoride (SFs).
Members paricipating in Phase I and Phase II commit to meet emission reduction tagets
for Phase I of 1 % per year for 2003 - 2006 and Phase II of 0.5% per year for 2007 - 2010 or a 6%
reduction. Members joining during Phase II commit to a 6% reduction by 2010. Exhibit A to
the Application shows Avista's qualifying reductions for Phase I, 2003 - 2006. CCX has built-in
provisions to protect members from extreme penalties or gains. Members are not required to
purchase more than 3% of its baseline to cover missed reduction targets if its operation grew
rapidly. A cap on sales of 3% is established to prevent gaming or unfair capitalization of the
market. These caps increase to 9% by 2010. Reductions that exceed the sales cap in Phase I are
STAFF COMMENTS 2 mLY 16,2008
reclassified to Super Reductions that may be baned to offset a portion of Phase II reductions or
may be sold outside of the normal CCX trading system to the general public. A vista qualified
for 6906 CFI Super Reduction credits leaving 4007 CFI baned credits in Phase I as shown on
Exhibit A. These Phase I baned credits are the 4007 surlus CFIs sold by A vista for
$2,557,065, net ofCCX commissions.
A vista requests authority for deferred accounting in Account 254 - Other Regulatory
Liability. The deferred accounting treatment covers booking of the net revenues, revenues from
the sale of CFIs less costs including commissions and fees during both Phase I and Phase II of
the CCX. The total CCX fees paid in 2007 or to be paid in 2008 - 2010 amounts to $305,000 as
shown òn Exhibit B to the Application. A vista proposes to address the ultimate ratemaking
treatment in its next general rate case fiing or other proceeding, as appropriate. Staff intends to
address the ratemaking treatment in the current rate case AVU-E-08-1 when it verifies the
expenses are not included in the base year.
Deferred accounting is appropriate to provide customers benefits from the sale of CFIs.
Deferred accounting is consistent with the authority granted by this Commission for sulfu
dioxide (S02) credits. The revenues are derived from utilty property and should be allocated to
customers paying for that property.
Avista proposes to establish separate Washington and Idaho accounts using the curent
Production/Transmission allocator of 64.59% to Washington and 35.4 1 % to Idaho. Staff
believes this allocation factor is appropriate. For futue Phase II activity the percentage
allocation wil change reflecting the then curent Production/Transmission allocator.
STAFF RECOMMENDATIONS
Staff recommends the Commission grant Avista's request for deferred accounting
treatment authority utilizing the following components:
The revenues should be deferred in Account 254 - Other Regulatory Liabilty
with an offset shown for associated CCX commissions and fees.
Separate regulatory sub account wil be established for Washington and Idaho
based on the Production/Transmission allocator.
Ratemaking treatment will be established in a separate case. Staff intends to
make its recommendation in the curent rate case, Case No. AVU-E-08-L.
STAFF COMMENTS 3 mLY 16,2008
Respectfully submitted this ,~ V- day of July 2008.
LC~~
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Terri Carlock
i:umisc:commentsavue08.2wstc
STAFF COMMENTS 4 mLY 16,2008
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 16TH DAY OF mLY 2008, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-E-08-02, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL
AVISTA CORPORATION
PO BOX 3727
SPOKANE WA 99220
E-MAIL: david.meyer(favistacorp.com
KELLY NORWOOD
VICE PRESIDENT - STATE & FED. REG.
A VISTA UTILITIES
PO BOX 3727
SPOKANE WA99220
E-MAIL: kelly.norwood(favistacorp.com
CERTIFICATE OF SERVICE