20110728Johnson Di.pdf

~
RECEI l"
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, VV ashi~on 99220
Phone: [phone], Fax: [phone]
., ri r r 'f'" l" (lL.Ull '-d'L ¿o 10: 30
BEFORE THE IDAHO PUBLIC UTILITIES COMMSSION
IN THE MATTR OF TH POVVR COST)
ADmSTMNT (PCA) ANAL RATE )
ADmSTMNT FILING OF AVISTA )CORPORATION )
CASE NO. A VU-E-11-0 "3
DIRCT TESTIMONY OF
WILIA G. JOHNSON
FOR AVISTA 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 VViliam G. Johnson. My business address is 1411 East
5 Mission Avenue, Spokane, VV ashin~on, and I am employed by the Company as a
6 VVolesale Marketing Manager in the Energy Resources Deparent.
7 Q.What is your educational background?
8 A.I graduated from the Univerity of Montana in 1981 with a Bachelor of
9 Ars Degree in Political Science/EconomIcs. I obtaied 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 staed working for A vista in April 1990 as a Demand Side Resource
14 Analyst. I joined the Energy Resources Departent as a Power Contracts Analyst in
15 June 1996. My priar 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 will provide a brief sumar of the factors driving power
19 supply expenses during the review perod, July 2010 though June 2011. I also describe
20 new long-term contracts the Company entered into durng the deferral perod and the
21 supporting documentation that is provided in electronic format.
22
23
Johnson, Di
Avista
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1 II. SUMY OF DEFERRS
2 Q.Would you please summarize power supply expenses during the July
3 2010 through June 2011 review period?
4 A.Yes. Durg the review period, Idaho's share of power supply expenses
5 were lower than the authorized level by $1,262,205. Cerain changes in revenues and
6 expenses are tracked at i 00% in the PCA, per prior Commssion orders, such as the
7 Clearater Paper power purchase expense, the Clearater Paper retail revenue related to
8 the level of Clearater generation i, and the Lancaster PP A fixed costs2. The Company
9 absorbs $126,222 with the 90%/10% sharng, leaving a balance of $1,135,983 in the
10 rebate direction.
11 The $1,135,983 rebate Company share, plus the Clearater Paper adjustment of
12 $47,881, plus the Lancaster fixed costs of $3,152,470 results in a net deferal for the
13 perod of $2,064,368 in the surcharge direction. The Lancaster fixed costs were deferred
14 for the thee-month period of July, August, and September of 2010, as descrbed in
15 footnote 2, until the costs were included in base rates effective October 1, 2010, per
16 Order No. 32070 dated September 21,2010.
17 Q.What factors contributed to the higher power supply expense durig
18 the review period?
19 A.Overall, reduce expense due to higher hydro generation was offset by
20 the Lancaster fixed cost, thermal fuel costs at Colstrp and Kettle Falls and the effect of
i 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 100% of the actual expense in the PCA per IPUC Order No. 30856
dated July 17,2009. Varable fuel and generation values are tracked at the normal 90%/10% PCA sharng.
Johnson, Di
Avista
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1 declining power prices, which drove the expense related to the Gas-Fired Generation and
2 Fuel Expense3 cost category. High hydro generation was the largest factor, decreasing
3 costs by more than $5 milion below the authorized level and was the primar factor in
4 the rebate direction. Lancaster's fixed costs of approximately $3.1 milion, theral cost
5 increase of approximately $1.3, and the Gas-Fired Generation and Fuel Expense of
6 approximately $1.8 milion were the primar factors in the surcharge direction.
7 The table below shows a sumar of the major factors drving the deferals
8 during the review period.
Change in Hydro Generation
Change in Gas-Fired 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 Other Mics. Factors
Total Expenses Above (Below) the Authorized Level
10% Absorbed by the Company
Clearwater Paper Generation and Revenue Variance
Lancaster Fixed Costs
Total Power Cost Deferrls
-$5,260,629
$1,758,425
$503,270
$795,274
$743,322
$198,135
-$1,262,203
$126,220
$47,881
$3,152,470
$2,064,3689
10 Over the review period hydro generation was 63.9 aM above the authorized
11 leveL. Close to normal hydro generation durng the second half of 2010 was followed by
12 ver high hydro generation durng the first half of 2011.
3 Gas-Fired Generation and Fuel Expense includes the fuel cost and generation value of natu gas-fied
resources and also the PCA line item labeled Resource Optimiation which includes the expense and
revenues related to the purchase and sale of natual gas that was bought for generation but later sold due to
the changing economics of gas-fired generation.
Johnon, Di
Avista
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1 Colstrp generation was 21.3 aM below the authorized level due primarly to
2 reduced generation in the second quarer of 2011 due to a planed maintenance outage of
3 Unit 3 and reduced generation due to lower market power prices. Gas-fired generation
4 was 32 aM below the authorized level due to economics resulting from low power
5 prices. Kettle Falls generation was 0.7 aM below the authorized leveL. Retail loads
6 were 12.1 aM below the authorized leveL. The table below shows the change in
7 generation and retail loads from the authorized levels.
Change
aMW %
Change in Hydro Generation 63.9 12.2%
Change in Gas-Fired Generation -32.0 -12.8%
Change in Colstrip Generation -21.3 -11.3%
Change in Kettle Falls Generation -0.7 -2.1%
Change in Idaho Retail Load -12.1 -3.4%8
9 III. NEW LONG-TERM CONTRACTS ENTERED INTO DURG DEFERR10 PERIOD
11 Q.Please provide a brief description of new long-term contracts that the
12 Company entered into during the review period.
13 A.On September 23, 2010 Avista entered into an agreement with Chelan
14 County PUD to purchase a 4.5% slice of the Rocky Reach hydro development for a
15 perod of July 2011 through June 2012, and a 3.0% slice of the Rocky Reach and Rock
16 Island hydro developments for a period of July 2012 though December 2014. This
17 purchase was made though a competitive auction. The purchase was made to maintain
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Avista
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1 an adequate level of Mid-Columbia generation to provide load regulation and ramping
2 capabilties at the Mid-Columbia, which allows the company to operate its own hydro
3 facilities in a more effcient maner. Avista's long-term purchase of 2.9% of the Rocky
4 Reach hydro development expires October 31, 2011. This purchase did not affect the
5 power supply expense durng the July 2010 though June 2011 PCA review perod since
6 the contract begins July 1, 2011.
7 IV. SUPPORTING DOCUMNTATION
8 Q.Please provide a brief overvew of the documentation provided by the
9 Company in this filg.
10 A.The Company maintans a number of documents that record relevant
11 factors considered at the time of a transaction. The following is a list of curent
12 documents that are maintaned. Unless noted, these documents have been provided on a
13 compact disk as par of this filing. Other documents wil be provided on request:
14 Electrc/Gas Transaction Record: These documents record the key details of the
15 price, ter and conditions of a transaction and include a discussion of market
16 conditions at the time of the transaction, the reason for the transaction, and
17 pertinent transmission or other delivery issues. The Company has provided
18 worksheets showing the important details of each electrc and natual gas ter
19 transaction durng the review perod. Additional documentation wil be provided
20 on request.
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Avista
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1 Position Reports: These daily reports show the daily and ter purchases each
2 business day and provide a sumar of market power and natual gas prices over
3 a 36-month forward period.
4 Forward Market Electrc and Natual Gas Price Cures: Ths daily data shows
5 forward market prices for electrcity and natual gas and is maintaied in Nucleus,
6 the Company's electronic energy transaction database record system. Forward
7 market prices are included in the daily Position Reports.
8 Q.Does that conclude your direct pre-fied testimony?
9 A.Yes.
Johnson, Di
Avista
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