20080728Johnson Direct.pdf

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David J. Meyer
Vice President and Chief Counsel of
Regulatory and Governental Affairs
A vista Corporation
1411 E. Mission Avenue
P.O. Box 3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
i ,',J
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
.IN TH MATTER OF THE POWER COST)
ADJUSTMENT (PCA) ANAL RATE )
ADJUSTMENT FILING OF AVISTA )CORPORATION )
CASE NO. A VU-E-08-0S-
DIRCT TESTIMONY OF
WILIA G. JOHNSON
FOR A VISTA CORPORATION
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.1 I. INTRODUCTION
2 Q.Please state your name, business address, and present position with
3 A vista Corporation.
4 A.My name is Wiliam G. Johnson. My business address is 1411 East
5 Mission Avenue, Spokane, Washington, and I am employed by the Company as a
6 Wholesale Marketing Manager in the Energy Resources Deparent.
7 Q.What is your educational background?
8 A.I graduated from the University of Montana in 1981 with a Bachelor of
9 Ars Degree in Political Science!Economics. I obtained a Master of Ars Degree in
10 Economics from the University of Montana in 1985.
11 Q.How long have you been employed by the Company and what are.12 your duties as a Wholesale Marketing Manager?
13 A.I stared working for A vista in April 1990 as a Demand Side Resource
14 Analyst. I joined the Energy Resources Deparent as a Power Contracts Analyst in June
15 1996. My primar responsibiliies involve power contract origination and management
16 and power supply regulatory issues.
17 Q. What is the scope of your testimony in this proceeding?
18 A. My testimony wil provide a brief summar of the factors driving power
19 supply expenses durng the review period, July 2007 through June 2008. I also describe
20 the supporting documentation that is provided in electronic format.
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22.Johnson, Di
Avista
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1 II. SUMMARY OF DEFERRS
2 Would you please summarize power supply expenses during the JulyQ.
3 2007 through June 2008 review period?
4 Yes. During the review period, Idaho's share of power supply expensesA.
5 exceeded the authorized level by $23,010,582 (not including Potlatch generation and
6 revenue varance of $361,151 in the rebate direction). Of that total, the Company
7 absorbed $2,301,058 or 10 percent of the additional power costs subject to the 90%/10%
8 sharng. i This resulted in a net deferral of $20,709,525 in the surcharge direction.
Adding the Potlatch related deferral of $361,151 in the rebate direction results in a net
deferral for the period of $20,348,374 in the surcharge direction.
Q. What factors contributed to the higher power supply expense during
the July 2007 through June 2008 review period?
A. Overall, reduced hydro generation and high natual gas fuel costs drove the
majority of the deferrals in the review period. Also, as has been the patter in recent
years, the second half of the calendar year, July 2007 though December 2007, (first half
of the deferral year) experenced higher expenses relative to the authorized level than the
Januar 2008 though June 2008 period. Deferrals during the third and four quarers of
2007 (July 2007 through December 2007) alone totaled $13,494,045, or approximately
two-thirds of the total deferrals during the review period.
i The Potlatch power purchase and revenue associated with the purchase is tracked at 100% in the PCA per
Idaho Public Utilities Commssion Order No. 29418 dated Janua 15, 2004. The 10% porton absorbed by
Avista is based on the porton of the PCA deferrals that are shared 90%/10% which was $2,301,058 durg
the review period.
Johnson, Di
Avista
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.1 Over the entire July 2007 through June 2008 review period hydro generation was
2 81 aM below the authorized leveL. Hydro generation was very low durng the third
3 quarer of 2007 at 143 aMW below the authorized leveL. Hydro generation improved
4 during the last nine months of the deferral period (October 2007 through June 2008), but
5 was stil 60 aM below the authorized level durng that period. Only during May and
6 June of 2008 was hydro generation above the authorized leveL. Overall, lower hydro
7 generation caused approximately $14.3 milion of the deferals durng the review perod.
8 Natual gas fuel costs were significantly higher than the authorized level and were
9 responsible for the next largest share of the power cost deferrals after lower hydro
10 generation. Natual gas fuel expense for Coyote Springs 2 was approximately $37.5
11 milion more on a system basis than the authorized leveL. Ths increased expense.12 occured even though Coyote Springs 2 generated 15 aM less than the generation in
13 authorized base expense. The average cost of gas for Coyote Springs 2 was $7.64/dth
14 durng the review period compared to a cost of $4.81/dth included in authorized power
15 supply expense. Increased natual gas fuel expense and the cost of replacing lower
16 generation at Coyote Springs 2 caused approximately $12.4 milion of the deferrals
17 durng the review period.
18 One favorable factor reducing deferrals was the margin from a long-term sale of
19 energy and renewable energy attrbutes (California certifiable renewable energy) to a
20 California utility. Over the review period, the margin from this sale totaled
21 approximately $9.3 millon on a system basis, which reduced the deferrals by
22 approximately $2.9 milion ($9.3 x 34.41 % Idaho allocation x 90% customer share)..Johnson, Di
Avista
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1 Q.What new long-term contracts did the Company enter into during the
2 July 2007 through June 2008 review period?
3 A. The Company entered into two new long-term contracts during the review
4 period. In August 2007, the Company entered into a one-year capacity exchange
5 agreement that allows the Company to receive power durng on-peak hours and retu
6 power during off-peak hours (exchange capacity agreement). In November 2007, the
7 Company renewed an exchange capacity agreement for 2008. Copies of these contracts
8 are being provided with this filing.
9 III. SUPPORTING DOCUMENTATION
10 Q.Please provide a brief overview of the documentation provided by the
11 Company in this rIlg.
12 A.The Company maintains a number of documents that record relevant
13 factors considered at the time of a transaction. The following is a list of curent
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:
Electrc/Gas 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
perinent transmission or other delivery issues. The Company has provided
worksheets showing the important details of each electric and natual gas term
transaction durng the review period. Additional documentation wil be provided
on request.
Johnson, Di
Avista
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.1 Position Reports: These daily reports show the daily and term purchases each
2 business day and provide a summar of market power and natual gas prices over
3 an 18-month forward perod.
4 Long-Term Physical Electric Load & Resource Tab:ulation: For transactions with
5 deliveres extending greater than the 18-month period covered by the Position
6 Report, the Company includes this document to show the net system position
7 during the extended period. This document also shows varability associated with
8 an 80% confidence interval around the combined varability of hydroelectrc
9 generation and varability of load.
10 Forward Market Electric and Natual Gas Price Curves: This daily data shows.11 forward market prices for electrcity and natural gas and is maintained in Nucleus,
12 the Company's electronic energy transaction database record system. Forward
13 market prices are included in the daily Position Reports.
14 New Long-Term Contracts: Electronic copies of the long-term contracts entered
15 into during the review period are provided.
16 Q.Does that conclude your direct pre-ried testimony?
17 A.Yes.
.Johnson, Di
Avista
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SUPPORTING DOCUMENTS
FOR THE DIRECT
TESTIMONY OF WILLIAM
G. JOHNSON WERE
VOLUMINOUS AND
CONFIDENTIAL, AND
WERE FILED ON A CD
SEPARATELY