20091007final_order_no_30919.pdf

Office of the Secretary
Service Date
October 7 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION DBAAVISTA
UTILITIES FOR COMMISSION APPROVAL TO
RECOVER DEFERRED POWER COSTS FOR
THE PERIOD OF JULY 1 , 2008 THROUGH JUNE
30, 2009
CASE NO. A VU-09-
ORDER NO. 30919
On July 30, 2009 , Avista Corporation ("Avista" or "Company ) dba Avista Utilities
filed its annual Power Cost Adjustment ("PCA") and requested a Commission Order approving
the recovery of power costs deferred for the period of July 1 , 2008 through June 30, 2009.
Avista also requested that the current PCA rate, established by the Commission in Case No.
A VU-09-01 (Order No. 30856) and effective August 1, 2009 , remain in effect until the
Company s next annual PCA filing due on October 1 , 2010.
THE FILING
As mentioned above, A vista is requesting a Commission Order approving the
recovery of power costs deferred for the period of July 1 , 2008 through June 30, 2009.
Application at 1. A vista is not seeking an adjustment to the PCA surcharge rate in this filing. Id.
Avista s PCA is used to track changes in revenues and costs associated with
variations in hydroelectric generation, secondary prices, thermal fuel costs, and changes in power
contract revenues and expenses.Id. at 2. The current Avista PCA mechanism (single annual
rate adjustment filing) was approved by the Commission on June 29 2007 (AVU-07-01). Id.;
See Order No. 30361. PCA deferral recovery is permitted on a "uniform cents per kilowatt-hour
basis. . . .Id. In its Order, the Commission approved a change in the PCA methodology from a
trigger and cap mechanism to a single annual PCA filing requirement. The Commission also
approved a chang~ in the method of PCA deferral recovery moving from a uniform percentage
increase in rates to uniform cents per kWh rate.
Avista claims $10 761 381 in deferral costs for the above-referenced deferral period.
Id. at 3. Avista Power Contracts Analyst William G. Johnson filed companion testimony
summarizing the "factors driving the power supply expenses during the review period, July 2008
through June 2009. . ." and describing "new long term contracts the Company entered into during
the deferral period. . .William G. Johnson Direct at 1. Avista Regulatory Accounting
ORDER NO. 30919
Manager Ronald L. McKenzie filed companion testimony supporting the "accounting entries and
account balances related to the Idaho Power Cost Adjustment (PCA) for the twelve months
ended June 2009 . . ." and explaining "why no change in the surcharge rate is being proposed.
Ronald L. McKenzie Direct at I.
In its filing, A vista included copies of monthly reports (July 2008 through June 2009)
documenting their "actual PCA deferral entries to date.Id. Pursuant to the Stipulation and
Settlement Agreement reached in Avista s recently completed general rate case (A VU-09-
and A VU-09-01), Avista is not requesting a PCA rate adjustment. See Order No. 30856. In
the Settlement Agreement, parties agreed to reduce the PCA surcharge rate from 0.610~ per
kilowatt-hour to 0.344~ per kilowatt-hour effective August I , 2009. Id. A vista expects that this
PCA rate will remain in effect until October I , 20 10, when the Company files its next annual
PCA report. Id.
A vista requests that the Commission issue an Order approVIng the recovery of
deferral costs from July I , 2008 through June 30, 2009, and that the Commission process the
Company s Application through Modified Procedure. Id. at 4.
STAFF REVIEW
Staff examined a representative cross-section of Avista s expenses comprising the
deferral balance for the period between July 2008 and June 2009 - including transactions
pertaining to the Purchased Power account (FERC 555), Thermal Fuel account (FERC 50l),
Combustion Turbine Fuel account (FERC 547), Resource Optimization (557), and Power Sales
account (FERC 447). After conducting the audit, Staff concluded that the amounts entered in
these accounts by A vista were reasonable and should be included in the deferral balance as of
June 30, 2009.
In addition, Staff examined the amount owed to Avista by Lehman Brothers
Commodity Services, Inc. (LBCS) for power delivered to LBCS during August and September
2008. LBCS subsequently declared for Chapter II bankruptcy and Avista was compelled to
write-off' a portion of the amount owed to A vista. The Company later sold its bankruptcy
claim against LBCS to a third party. Staff explained that the proceeds from the sale would be
used to offset the expense of the write-off. Staff noted that the net amount of the write-off
accounted for only a small fraction, approximately 1.02% of the total Sales for Resale, of the
ORDER NO. 30919
overall power supply costs during the deferral period.Further, Idaho customers' share
approximately $814 231 , as part of the PCA calculation is considerably less than that.
Staff recited the amount requested by A vista for deferral recovery, $10 761 381 , and
noted that the Company had previously been granted Commission approval to recover interest on
that amount and true-up amounts that have been over- or under-recovered. Staff then added the
interest on the deferral activity balance ($77 175) and true-up ($383 225) for a total unrecovered
balance of$11 221 781 as of June 30, 2009.
Finally, Staff calculated that the current PCA rate approved in Order No. 30856
effective August 2009 will ultimately generate approximately $14 million dollars during the
14-month period ending October 1 , 2010. The resulting $2.8 million difference between the
revenue generated by the current rate and the deferral balance could then be used to offset the
amortization shortfall that will occur in August and September 2009 due to the early decrease in
the PCA rate. The resulting under-recovery is estimated to be approximately $2.6 million. If the
aforementioned estimates are accurate, then A vista will have over-recovered by approximately
$0.2 million. This amount would be returned to Idaho customers in a future rate proceeding.
Thus, Staff believes that the current PCA rate is reasonable and appropriate and supports its
continuation along with the recovery of the requested $10 761 381 deferral balance.
PUBLIC COMMENTS
On August 28 2009, the Commission received handwritten comments from a Boise
Idaho resident objecting to Avista s Application on the grounds that it would lead to a "rate
raise. "
COMMISSION FINDINGS
The Commission has reviewed the filings of record, including Avista s Application
written testimony, Staffs review and public comments, in Case No. A VU-09-07. We find that
the Company s request to recover power costs deferred for the period of July 2008 through
June 30, 2009, and maintain the decrease in the Company s annual PCA rate, previously
approved in Commission Order No. 30856, to be reasonable. The Commission accepts the
$10 761 381 deferral balance, audited by Commission Staff, and presented in the Company
filing.
The Commission recognizes the concerns expressed in the public comments filed in
this case and reiterates Avista s and Staffs assertion that this filing will not result in an increase
ORDER NO. 30919
to customer rates. Furthermore, the Commission is satisfied that A vista has acted appropriately
in its efforts to mitigate the potential effect of power supply costs on its customers.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over A vista Corporation dba
Avista Utilities, an electric utility, pursuant to Title 61 of the Idaho Code and the Commission
Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
IT IS HEREBY ORDERED that Avista Corporation dba Avista Utilities' Application
requesting Commission approval to recover $10 761 381 for power costs deferred by the
Company for the period of July I , 2008 through June 30, 2009 is approved. The Company is
directed to file conforming tariffs.
IT IS FURTHER ORDERED that the PCA rate of 0.344~ per kilowatt-hour
previously approved in Commission Order No. 30856 and effective August 2009, shall
continue until Avista s next annual PCA filing due on October 1 2010.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
ORDER NO. 30919
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this -"to
day of October 2009.
~u. L.
MPT , P SIDENT
tl~-lL
ARSHA H. SMITH, COMMISSIONER
MACK A. REDFO
ATTEST:
tJeje . Jewell
Co mission Secretary
O:A VU-09-07 _
ORDER NO. 30919