20120928final_order_no_32654.pdf

Office of the Secretary
Service Date
September 28, 2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION'S ANNUAL POWER COST ) CASE NO. AVU-E-12-06
ADJUSTMENT (PCA) )
ORDER NO. 32654
On July 31, 2012, Avista Corporation ("Avista" or "Company") 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, 2011 through June 30, 2012 and a rebate of 0.0900
per kilowatt-hour to be effective October 1, 2012. Application at 1. The Company estimates an
overall decrease of 2.17%. Id. at 4.
On August 21, 2012, the Commission issued Notices of Application, Modified
Procedure and Intervention Deadline. See Order No. 32622. Thereafter, Idaho Forest Group
LLC ("IFG") petitioned for and was granted intervention in this case. Staff, IFG and two
individual customers filed written comments regarding Avista's Application.
AVISTA'S PCA FILING
Avista's Application states that its "existing PCA methodology and method of
recovery were approved in Case No. AVU-E-07-01 by Order No. 30361 dated June 29, 2007."
Id. at 2. In that case, the Commission "approved a change in the method of PCA deferral
recovery from a uniform percentage basis to a uniform cents per kilowatt-hour basis effective
with the October 1, 2007 PCA rate change." Id.
The Company's Application outlines the power cost deferrals, including interest, for
the July 1, 2011 through June 30, 2012 deferral period:
Deferrals (July 2011 - June 2012) $(3,170,099)
Interest (21,812)
PCA deferral balance as of June 30, 2012 $(3,191,911)
Id at 3. In its filing, Avista included copies of its monthly PCA deferral reports for the months of
July 2011 through June 2012. Id.
Attached as Exhibit A to Avista's filing is a copy of the Company's proposed tariff
"proposing a uniform cents per kilowatt-hour PCA rebate of 0.0900 to be effective October 1,
2012." Id. Avista states that the "proposed rebate is designed to pass through the deferrals for
ORDER NO. 32654 1
the period July 1, 2011 through June 30, 2012, as well as the unrecovered balance related to the
July 1, 2010 through June 30, 2011 deferral period, and interest during the recovery period of
October 1, 2012 through September 30, 2013." Id.
Avista's Application also includes the direct testimony of Ronald L. McKenzie,
Regulatory Account Manager, and William G. Johnson, Power Contracts Analyst. Mr.
McKenzie' s direct testimony "shows the effect of the proposed PCA rebate by rate schedule."
Id. "The proposed rebate of 0.0900 per kilowatt-hour. . . is 0.1620 per kilowatt-hour less than
the existing surcharge of 0.0720 per kilowatt-hour." Id. at 3-4. Specifically, Avista claims that
"residential customers using an average of 939 kilowatt-hours per month would see their
monthly bills decrease from $80.56 to $79.04, a decrease of $1.52 per month, or 1.89%." Id. at
4.
Below is a table demonstrating the Company's proposed average decrease for each
customer class:
Customer Group
(Schedule)
Percentage Decrease
Residential (Schedule 1) -1.86%
General Service (Schedules 11, 12) -1.62%
Large General Service (Schedules 21, 22) -2.09%
Extra Large General Service (Schedule 25) -3.02%
Clearwater (Schedule 25P) -3.25%
Pumping Service (Schedules 31, 32) -1.85%
Street and Area Lights (Schedules 4 1-49) -0.73%
Average -2.17%
STAFF COMMENTS
Staff reviewed Avista's Application, including the Thermal Fuel account (FERC
501), Combustion Turbine Fuel account (FERC 547) and the Power Sales Revenue account
(FERC 447), and concluded "that the various power cost transactions appear reasonable at the
time they were made." Staff Comments at 3. Staff confirmed that the amounts in the deferral
balance in the Company's Application as of June 30, 2012 are true and correct. Id.
Staff audited the Company's proposed PCA deferral amount and itemized the total
deferral amount, ($3,191,911), in the following manner:
1.FERC Account 555- Purchased Power $40,772,828
2.FERC Account 501- Thermal Fuel (1,594,239)
3.FERC Account 547- (11,679,124)
ORDER NO. 32654 2
4. FERC Account 447- Sales for Resale (28,339,101)
5. All Clearwater Revenues and Expenses (6,087,025)
6. Resource Optimization- Loss on Natural Gas Resold 3,346,283
7. Idaho Retail Revenue Adjustment 1,281,440
8. Net Transmission Revenue and Expense (871,161)
9. Interest during deferral period (21.812)
10.Total ($3,191,911)
Id. at 3-5.
In addition to the deferral amount, Staff noted that the Company included $93,372 for
recovery in rates. Id. at 6. This amount is equal to the unrecovered balance of the Company's
prior year PCA filing, $108,635, minus interest, ($3,786), and a revenue conversion amount,
($11,477). Id. Staff believes that these amounts are reasonable and remarked that they are
typically "trued-up in the following year's PCA." Id. The foregoing deferral balance results in a
PCA rate of 0.090 0/kWh [total deferral amount/forecasted retail sales for the time period that
the rate will be in effect]. Id.
Staff noted that on August 10, 2012, Avista filed a Notice of Intent to file a general
rate case. Id. Accordingly, Staff recommended the Commission allow the current PCA
surcharge rate of 0.0720/kWh to expire on September 30, 2012, and defer implementing the
proposed PCA rebate of $3,098,539 ($3,191,911 -$93,372) until a later date. Id. Staff believes
that this approach will increase rate stability. Id.
In accordance with Commission Rules of Procedure, the Company apprised
customers of its PCA proposal in a formal Customer Notice and Press Release. Id. at 7. The
notice advised customers that the proposed PCA rebate would be offset by the expiration of
existing rebates and surcharges, including the expiration of the Idaho State tax deferral on
income taxes on October 1, 2012. Id.
Acknowledging the expiration of existing surcharges, below is a table depicting the
results, by customer class, of Staff's PCA review:
ORDER NO. 32654 3
Customer Group
(Schedule) Percentage Decrease
Residential (Schedule 1) -0.83%
General Service (Schedules 11, 12) -0.72%
Large General Service (Schedules 21, 22) -0.93%
Extra Large General Service (Schedule 25) -1.34%
Clearwater (Schedule 25P) -1.44%
Pumping Service (Schedules 31, 32) -0.82%
Street and Area Lights (Schedules 41-49) -0.32%
Average -0.97%
Id
Staff recommended Commission approval of the audited deferral balance of
($3,191,911) for the time period of July 1, 2011 through June 30, 2012. Id. at 8. Staff
recommended the Commission hold back this amount for future credit to customers. Id Staff
recommended the Commission allow the existing PCA surcharge rate of 0.0720/kWh to expire
on September 30, 2012. Id. "The Staff proposes a PCA rate of 0.0000/kWh for the period
October 1, 2012 through September 30, 2013." Id
IDAHO FOREST GROUP LLC COMMENTS
IFG states that it operates two lumber mills in Grangeville and Lewiston, Idaho taking
service from Avista under Schedule 25, Large General Service. IFG Comments at 1. IFG
estimates that its combined annual expense for electric service is approximately $3,000,000. Id.
at 2. IFG states that if Avista's proposed PCA rebate of 0.0900/kWh were approved by the
Commission its businesses would realize a reduction of approximately $7,000 per month. Id
IFG objects to Staff's proposal to hold back the PCA rebate proposed by the
Company. Id. at 2-3. IFG believes that an immediate PCA rebate is more efficient and notes
that any offset of the anticipated rate increase resulting from Avista' s impending general rate
case would not be realized until approximately May 2013. Id. at 3. IFG argues that any offset
"to camouflage the magnitude of a future rate increase is not an appropriate application of the
rate stability goal." Id at 4. IFG concludes that deferring the application of a PCA recovery or
rebate in this case would be an unprecedented decision by the Commission. Id
PUBLIC COMMENTS
The Commission received two public comments. One commenter erroneously
believed that the Company was seeking to institute a rate increase; and the other commenter
ORDER NO. 32654 4
applauded Avista's Application during this time of "economic personal hardship." Staff
contacted the customer who believed that Avista was seeking an increase and advised the
customer that the Company's Application was seeking an average 2% decrease.
COMMISSION FINDINGS AND DECISION
The Commission has reviewed Avista's Application and the written comments filed
by Staff, IFG and the customers. Based upon our review, we note that the Company's
Application is reasonable and adheres to our prior Orders approving the methodology to be
utilized for the recovery or reimbursement of deferred net power costs incurred by the Company.
See Order No. 30361.
Avista's existing PCA methodology and method of recovery were approved in 2007
in Case No. AVU-E-07-01 (Order No. 30361). In that case, the Commission approved a change
in the PCA methodology from a trigger and cap mechanism to a single annual PCA rate
adjustment filing requirement. The Commission also approved a change in the method of PCA
deferral recovery from a uniform percentage basis to a uniform cents per kWh basis.
We recognize Staff's efforts and proposal to promote rate stability. Staff's approach
seeks to defer the recovery of the Company's proposed reduction in order to offset anticipated
base rate increases in the near term. While that is a worthy goal, rate instability, upward or
downward, is an inherent attribute of the annual PCA mechanism. The year-to-year fluctuation
of net power costs is the norm rather than the exception.
We also acknowledge IFG's concerns regarding the real value of an immediate
reduction in rates in order to ameliorate current operating costs. The Commission is mindful that
the same rationale applies equally to other customer groups who may be struggling to pay bills in
the midst of a sluggish economy. Moreover, the Commission finds that the PCA contains an
implicit compact between the Company and its customers to pass through the amount of excess
power costs accrued during the deferral period. Based upon this record, we find no compelling
reason to deviate from this arrangement. Therefore, the Commission finds that it is fair, just and
reasonable to approve the Company's PCA Application, as filed and audited by Staff.
Thus, after reviewing the PCA Application and the comments filed in this case, the
Commission accepts the audited deferral balance of ($3,191,911) and finds it fair, just and
reasonable to approve a PCA rebate of 0.0900 per kilowatt-hour to be effective October 1, 2012.
ORDER NO. 32654 5
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Avista Corporation, an
electric utility, and the issues presented in Case No. AVU-E-12-06 pursuant to Idaho Code, Title
61, and the Commission's Rules of Procedure, IDAPA 31.01.01.000 et seq.
We find that the current PCA rate is no longer reasonable and order that the rate be
reduced as set out in the Company's Application effective October 1, 2012.
ORDER
IT IS HEREBY ORDERED that Avista Corporation's Application for authority to
implement a PCA rebate of 0.0900 per kilowatt-hour to customers, based upon net power costs
totaling ($3,191,911) and deferred for the period of July 1, 2011 through June 30, 2012, is
approved. The tariff sheets filed with the Company's initial Application are hereby approved, to
be effective October 1, 2012.
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 § 61-626.
ORDER NO. 32654 6
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this M
day of September 2012.
PRESIDENTWORE g O-C(,
MACK A. REDFOREPtO MISSIONER
MARSHA H. SMITH, COMMISSIONER
ATTEST:
.1S ion D. Jewell 0 Commission Secretary
O:AVU-E-I 2-06_np2
ORDER NO. 32654