20100727Johnson Direct.pdf

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ZOmJUL 27 AMIO:37
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]
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UTILITiES ,..."' U¡.;
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE POWER COST)
ADJUSTMENT (PCA) ANAL RATE )
ADJUSTMENT FILING OF A VISTA )CORPORATION )
CASE NO. AVU-E-I0-o3
DIRCT TESTIMONY OF
WILIA G. JOHNSON
FOR A VISTA CORPORATION
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 Deparment.
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 ScienceÆconomics. 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 started working for A vista in April 1990 as a Demand Side Resource
14 Analyst. I joined the Energy Resources Department as a Power Contracts Analyst in
15 June 1996. My primary responsibilties involve power contract origination and
16 management 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 during the review period, July 2009 through June 2010. I also describe
20 new long-term contracts the Company entered into durng the deferral period and the
21 supporting documentation that is provided in electronic format.
22
23
Johnson, Di
Avista
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1 II. SUMMAY OF DEFERRS
2 Q.Would you please summarize power supply expenses during the July
3 2009 through June 2010 review period?
4 A.Yes. Durng the review perod, Idaho's share of power supply expenses
5 exceeded the authorized level by $17,815,668. Certain changes in revenues and expenses
6 are tracked at 100% in the PCA, per prior Commission orders, such as the Clearwater
7 Paper power purchase expense, the Clearater Paper retail revenue related to the level of
8 Clearater generation i, and the Lancaster PP A fixed costs2. The $17,815,668 less the
9 Lancaster fixed costs of $5,990,323, results in a balance of $11,825,345, of which the
10 Company absorbs $1,182,535 with the 90%/10% sharng.
11 The $17,815,668 less the $1,182,535 Company share, less the Clearater Paper
12 adjustment of $ 1 9,2293, and less a refud to customers related to the prior sale of the
13 Centralia project of$189,607, results in a net deferral for the period of $16,424,297 in the
14 surcharge direction.
15 Q.What factors contributed to the higher power supply expense during
16 the review period?
17 A.Overall, low hydro generation and expenses related to the Lancaster PP A
18 drove the majority of the deferrals in the review period. Low hydro generation was the
1 The Clearater Paper power purchase and revenue associated with the purchase is tracked at 100% in the
PCA per Idaho Public Utilities Commission Order No. 29418 dated Januar 15,2004.2 Lancaster fixed costs including the power purchase agreement charges, gas transporttion and BP A
transmission charges are recovered at i 00% of the actual expense in the PCA per IPUC Order No. 30856
dated July 17, 2009. Variable fuel and generation values are tracked at the normal 90%/10% PCA sharng.3 The PCA tracks i 00% of the varation in Clearater Paper generation power purchase expense and
Clearater Paper retail revenue related to their generation leveL. Clearwater Paper's generation durg the
review period was less than the authorized level, which results in a PCA deferral in the rebate direction
because the reduction in the power purchase expense exceeded the reduction in the retail revenue related to
the generation leveL.
Johnson, Di
Avista
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1 largest factor, increasing costs by more than $12 milion over the authorized leveL.
2 Lancaster's fixed costs of approximately $6 milion (Idaho allocation) were offset by
3 approximately $ 1.6 milion of operating margin, resulting in a total impact of Lancaster
4 on the PCA of approximately $4.4 milion of increased expense.
5 Offsetting some of the higher expense was higher net operating margins at Coyote
6 Springs 2 and changes in market prices that reduced the net power purchase expense.
7 The table below shows a summary of the major factors driving the deferrals durng the
8 review period.
9
10
Change in Hydro Generation
Change in CS2 Generation and Fuel Expense
Change in Colstrip Generation and Fuel Expense
Change in Kette Falls Generation and Fuel Expense
Change in Retail Loads
Change in Market Prices on Net Power Purchase Expense
Change in Contract Costs and Other Mics. Factors
Total Expenses Abo\e the Authorized Le\el
10% Absorbed by the Company
Clearwater Paper Generation and Re\enue Variance
Lancaster Fixed Costs
Centralia Refund Adjustment
Total Power Cost Deferrals
$12,098,228
-$1,657,526
$982,630
$188,186
$2,910,762
-$1,795,124
-$901,811
$11,825,345
-$1,182,535
-$19,229
$5,990,323
-$189.607
$16,424,297
Over the review period hydro generation was 106 aM below the authorized
11 leveL. The lack of hydro generation was paricularly acute during the December 2009
12 through May 2010 period due to lack of normal winter precipitation. Heavy rains in May
13 and June led to slightly above normal hydro generation in June.
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Avista
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1 Coyote Springs 2 generated 44.5 aMW above the authorized level due to
2 economics. The average fuel expense at Coyote Springs 2 was below the authorized
3 leveL. The actual gas cost during the review period was $4.56/dth versus an authorized
4 fuel expense of$4.66/dth.
5 Colstrp generation was 20.8 aM below the authorized level due primarily to
6 reduced generation in the third quarer of 2009 due to an extended outage of Unit 3.
7 Kettle Falls generation was 6.5 aM below the authorized level due to a combination of
8 economics (relatively higher wood fuel costs compared to market electrcity prices) and a
9 lack of fuel supply. The Kettle Falls fuel supply is being affected by the reduced
10 constrction activity, which has lowered the output at sawmils that produce the majority
11 of the hog fuel supply for Kettle Falls. Retail loads were 66.4 aMW below the
12 authorized level due primarly to winter temperatures that were significantly warer than
13 normaL. The table below shows the change in generation and retail loads from the
14 authorized levels.
aMW
Change in Hydro Generation -106.4 -19.2%
Change in CS2 Generation 44.5 26.1%
Change in Colstrip Generation -20.8 -11.0%
Change in Kette Falls Generation -6.5 -18.9%
15 Change in Retail Loads - System -66.4 -6.1%
16
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Avista
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1 III. NEW LONG- TERM CONTRACTS ENTERED INTO DURING DEFERR2 PERIOD
3 Q.Please provide a brief description of new long-term contracts that the
4 Company entered into in review period.
5 A.The Company entered into two long-term contracts during the review
6 period. Both contracts were updates to existing contracts. In September 2009, the
7 Company renewed a load following sale for a five year period, October 2009 through
8 September 2014. In Januar 2010, the Company renewed another load following sale for
9 a five year period, Februar 2010 through Januar 2015. Copies of these contracts have
10 been provided electronically with this filing.
11 IV. SUPPORTING DOCUMENTATION
12 Q.Please provide a brief overvew of the documentation provided by the
13 Company in this filig.
14 A.The Company maintains a number of documents that record relevant
15 factors considered at the time of a transaction. The following is a list of curent
16 documents that are maintained. Unless noted, these documents have been provided on. a
17 compact disk as par of this filing. Other documents wil be provided on request:
18 ElectriclGas Transaction Record: These documents record the key details of the
19 price, term and conditions of a transaction and include a discussion of market
20 conditions at the time of the transaction, the reason for the transaction, and
21 pertinent transmission or other delivery issues. The Company has provided
22 worksheets showing the important details of each electrc and natual gas ter
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Avista
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1 transaction during the review perod. Additional documentation wil be provided
2 on request.
3 Position Reports: These daily reports show the daily and ter purchases each
4 business day and provide a sumary of market power and natural gas prices over
5 an 18-month forward period.
6 Forward Market Electric and Natural Gas Price Curves: This daily data shows
7 forward market prices for electrcity and natural gas and is maintained in Nucleus,
8 the Company's electronic energy transaction database record system. Forward
9 market prices are included in the daily Position Reports.
10 Q.Does that conclude your direct pre-fied testimony?
11 A.Yes.
Johnson, Di
Avista
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