20120921Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 6864
20I2SEP21 AM 9:59
DAh) )BLC rs -r U uL! t 1 k-
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION'S ANNUAL POWER )
COST ADJUSTMENT (PCA). )
)
)
)
CASE NO. AVU-E-12-06
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of Record,
Neil Price, Deputy Attorney General, in response to the Notice of Application, Notice of Modified
Procedure, and Notice of Intervention Deadline issued on August 21, 2012, Order No. 32622,
submits the following comments.
BACKGROUND
On July 31, 2012, Avista Corporation ("Avista" or "Company") filed its annual Power Cost
Adjustment ("PCA") requesting a Commission Order approving the rebate of below normal power
costs deferred for the period of July 1, 2011 through June 30, 2012. The Company's Application
proposes a customer credit of 0.0900 per kilowatt-hour effective October 1, 2012.
Avista's PCA mechanism is used to track changes in revenues and costs associated with
variations in hydroelectric generation, secondary market prices, thermal fuel costs, changes in power
contract revenues and expenses, and other miscellaneous items.
STAFF COMMENTS 1 SEPTEMBER 21, 2012
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)
Avista states that the proposed rebate is designed to pass through the deferrals for 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 estimated interest during the recovery period of October
1, 2012 through September 30, 2013. The proposed 0.0900/kWh PCA credit will replace an existing
0.0720/kWh surcharge, a decrease of 0.162 0/kVvh.
The Company proposed average decrease of 2.17% would vary by rate schedule as shown
below.
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 41-49) -0.73%
Average -2.17%
STAFF REVIEW
Audit Results
Staff reviewed and audited the amounts included in the deferral balance in the current filing.
Staff's review covered expenses incurred for the period July 2011 through June 2012. Staff looked at
a representative cross section of transactions included in the Purchased Power account (FERC 555),
Thermal Fuel account (FERC 501), Combustion Turbine Fuel account (FERC 547) and the Power
Sales Revenue account (FERC 447). Based on its review of these transactions, Staff concludes that
STAFF COMMENTS 2 SEPTEMBER 21, 2012
the various power cost transactions appear reasonable at the time they were made. Staff also
reviewed the other PCA calculations and amounts. Staff finds the amounts recorded to be correct
and recommends that they be included in the deferral balance as of June 30, 2012.
Net Deferral Activity
The net deferral activity represents the Idaho jurisdictional share of the excess power costs
and associated revenue adjustments deferred under the PCA mechanism by Avista for the twelve
months ending June 30, 2012. A component of the net deferral is the Net Decrease in Power Supply
Costs, FERC Accounts 555, 501, 547, and 447. Along with the costs of serving load using
Company-owned resources, these PCA accounts also include additional power purchase costs when
market prices are lower than generation costs. Generation costs associated with off-system sales are
offset by the revenue from those sales. The proposed deferral amount, ($3,191,911), consists of the
following nine items (an explanation of each item also follows):
1. FERC Account 555 - Purchased Power $40,772,828
2.FERC Account 501 - Thermal Fuel (1,594,239)
3.FERC Account 547 - CT Fuel (11,679,124)
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)
1. FERC Account 555 - Purchased Power. Purchased Power costs reflect 90% of the Idaho
jurisdictional share of the difference in costs the Company incurred for power purchases in the
review period compared to normalized purchased power costs included in base rates. In the review
period, the Company incurred more purchased power costs than are included in base rates. The
positive amount represents a cost to customers.
STAFF COMMENTS 3 SEPTEMBER 21, 2012
2.FERC Account 501 - Thermal Fuel. Thermal Fuel, primarily coal, is used to produce
electricity. The amount is 90% of the Idaho jurisdictional share of the difference in costs the
Company incurred for thermal fuel compared to the normalized amount included in base rates.
During the review period the Company incurred lower coal costs than are currently included in base
rates. The negative amount represents a benefit to customers.
3.FERC Account 547 - CT Fuel. Combustion Turbine (or CT) Fuel is natural gas burned in
the Company's gas fired generators. This amount represents 90% of the Idaho jurisdictional share of
the difference in costs the Company incurred for gas generator fuel compared to the amount included
in normalized base rates. In the review period, the Company incurred less natural gas cost than is
currently included in base rates. The negative amount represents a benefit to customers.
4.FERC Account 447 - Sales for Resale. Sales for Resale are long-term and short-term off-
system sales. The negative amount represents 90% of the Idaho jurisdictional share of the increase in
off-system sales revenues above the amounts included in base rates. This negative amount represents
an increase in sales for resale revenues, a decrease in costs during the review period, and is a benefit
to customers.
5.All Clearwater Revenues and Expenses. The Clearwater revenue and expense
components are a direct assignment to Idaho. They are based on the difference in Clearwater costs
and revenues (for its Lewiston facility) relative to the normalized Clearwater costs and revenues
established in the Company's last general rate case. The negative net amount indicates that, during
the review period, the cost of serving Clearwater was less than the amount included in base rates.
This negative amount is a benefit to Idaho customers.
6.Resource Optimization - Loss on Natural Gas Resold. Resource Optimization amounts
result when natural gas purchased in advance for use in generating plants is later sold because it is
more cost effective to sell the gas and purchase electricity than it is to generate electricity with the
gas. Ninety percent of the Idaho jurisdictional share of the gain or loss on the sale of the gas is
included in the PCA. Staff notes that this line item only shows one side of the transaction when the
Company utilizes its power plants for economic dispatch, and should not be looked at independently
from the entire optimization of Company resources. When looked at in its entirety, Resource
Optimization is a benefit to customers.
Staff has verified that when the Company initially purchased the gas, the cost of producing
electricity at Avista's natural gas plants, primarily the Coyote Springs facility,, was less expensive
than purchasing electricity on the open market to meet native load. Furthermore, Staff has verified
STAFF COMMENTS 4 SEPTEMBER 21, 2012
that when the Company resold the gas and purchased electricity to meet native load, the resale of the
gas and corresponding electricity purchased was the least expensive and most cost-effective
alternative. The loss during the review period, shown as a positive amount, is a cost to Idaho
customers.
7.Idaho Retail Revenue Adjustment. The Idaho Retail Revenue Adjustment has two
components. First, the load change adjustment removes the average energy-related cost of
Production from PCA calculations when load grows. When load declines, as it has in this case, the
adjustment adds back the average energy-related cost of Production at the currently approved rate.
The rate changed from $30.16/MWh to $27.85/MWh on October 1, 20111. This rate is reestablished
whenever base power supply costs are reset. The rate is multiplied by the change in load to produce
the adjustment.
The other retail revenue component is a customer credit associated with the purchase of
Clearwater generation. Ninety percent of the total Idaho Retail Revenue Adjustment is included in
the PCA. The amount is $1,281,440. The positive amount represents a cost to customers.
8.Net Transmission Revenue and Expense. The Company proposed, and the Commission
Staff agreed, to include transmission revenues and expenses in the PCA in the 2009 general rate case,
AVU-E-09-0 1. Avista incurs third party transmission costs when it purchases power and has it
wheeled or delivered to its service area by a third party. Avista also incurs third party transmission
costs when it sells power and pays a third party to deliver it. Third party transmission revenues occur
when Avista is the third party and is delivering power for others. Including transmission revenues
and expenses in the PCA tracks the variability of these items. In the review period, the difference in
transmission expenses was less than the difference in transmission revenue, and the net of the
transmission revenue and expense differences is a benefit to customers.
9.Interest During Deferral Period. The Company calculates interest on the deferral balance
using the methodology stated in Order No. 29323, Case No. AVU-E-03-04. Staff reviewed the
Company's interest calculation and found the amounts included in the filing to be correct. The
Company uses the Customer Deposit Rate on current year deferrals and on carryover balances from
one year to the next. The Customer Deposit Rate for 2011 and for 2012 is 1%. Interest on the
deferral balance accumulates during the deferral period at the customer deposit rate and is a benefit to
customers.
'Case No. AVU-E-I 1-01/AVU-G-1 1-01 established the Idaho Retail Revenue Adjustment rate of $27.85.
STAFF COMMENTS 5 SEPTEMBER 21, 2012
Additional Amounts
The proposed surcharge is designed to recover the net deferral and corresponding accrued
interest for the period July 1, 2011 through June 30, 2012 of($3,191,91 1) plus 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, as well as an amount based on the
revenue conversion factor. The revenue conversion factor captures the amount of increased or
decreased commission fees and uncollectibles that result from the collection or refund of the deferral
balance as these items fluctuate with revenue. Therefore, in addition to the net deferral balance, the
Company has included the following amounts in its rate calculation:
Expected unrecovered 2010 —2011 deferral $108,635
Various Expected Interest Amounts (3,786)
Revenue Conversion Amount (11,477)
Total $93,372
The Staff has reviewed these additional estimated amounts, which are included only in the
rate calculation to minimize next year's true-up. The Staff believes that they are reasonable. The
amounts are trued-up in the following year's PCA.
The PCA Rate
The PCA credit rate is calculated by dividing the sum of the deferred amount and the
additional estimated amounts by the amount of forecasted retail sales for the period that the rate will
be in effect. (-$3,191,911+$93,372)/3,441,832,000 kWh = $0.00090/kWh = 0.090 0/kWh.
Other Considerations
On August 10, 2012 Avista filed a Notice of Intent to file a general rate case. Under the
Commission's Rules this rate case could be filed as soon as October 10, 2012. In anticipation of a
rate increase that may result from a general rate case, the Staff proposes to hold back a portion of the
decrease proposed by Avista in this case. The Staff proposes to allow the current surcharge of 0.072
0/kWh to expire and to not pass through any of the proposed rebate of $3,098,539. The PCA rate
associated with this proposal that would be effective October 1, 2012 is 0.000 0/kWh. Staff believes
that holding back the credit balance will improve rate stability in the long-run. The Staff proposes
that the unrefunded credit balance remain in the PCA deferral balance and accumulate interest until it
is removed or rebated to customers in a future PCA.
STAFF COMMENTS 6 SEPTEMBER 21, 2012
On October 1, 2012 the Staff proposal results in the following average decreases due to the
expiration of the current surcharge:
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%
CUSTOMER RELATIONS
Customer Notice and Press Release
The Press Release and Customer Notice included in Avista's Application meet the
requirements of IPUC Rules of Procedure 125.04 and 125.05. IDAPA 31.01.01.125. The Customer
Notice was mailed with cyclical billings beginning August 2, 2012 and ending August 31, 2012.
Avista filed its annual PCA (Case No. AVU-E-12-06) for electric recovery on July 31, 2012.
Its Press Release covered four separate cases: the PCA (AVU-E-12-06), the PGA (AVU-G-12-05),
the natural gas Energy Efficiency Tariff Rider Adjustment (AVU-G-12-06), and the Electric Energy
Efficiency Tariff Rider Adjustment (AVU-E- 12-07).
Also mentioned in the Press Release was that an Idaho State Tax deferral on income taxes
that had been reducing rates for the past year as a result of the last rate case will expire on
October 1, 2012 causing a slight increase in rates of 1.5%. However, even with that increase, if the
Company's Application is approved, there would still be a slight decrease in electric rates.
Customer Comments
Customers were given until September 21, 2012 to file comments. As of September 13, 2012
two customers had commented. One customer mistakenly believed that Avista had requested an
increase to its rates. The customer was notified by Commission Staff that the request in this electric
PCA filing was for a 2% decrease. The other commenter applauded Avista for reducing rates during
a time of economic hardship.
STAFF COMMENTS 7 SEPTEMBER 21, 2012
Financial Assistance for Paying Heating Bills
If approved, residential customers will see a small decrease in their electric rates. Staff
reminds all customers who are struggling to pay utility bills that there is financial assistance available
to qualified customers. Information regarding the federally-funded Low-Income Energy Assistance
Program (LIHEAP) and local non-profit and other fuel funds such as Project Share in Avista's
northern Idaho service territory can be obtained by calling the nearest Community Action Agency,
Avista Utilities, the Idaho Public Utilities Commission, or the 2-1-1 Idaho Care Line.
STAFF RECOMMENDATION
Staff recommends that the Commission accept the audited deferral balance of ($3,191,911)
for the period July 1, 2011 through June 30, 2012 and defer this amount for future customer credit.
Staff also recommends that the existing PCA surcharge rate of 0.072 0/kWh expire September 30,
2012 and that no other amount be set for recovery/rebate at that time. The Staff proposes a PCA rate
of 0.000 0/kWh for the period October 1, 2012 through September 30, 2013.
Respectfully submitted this day of September 2012.
L__ - -) a~ ~.
Neil Price
Deputy Attorney General
Technical Staff: Keith Hessing
Kathy Stockton
Marilyn Parker
I :umisc:comments/avue I 2.6npkhk1smp.doc
STAFF COMMENTS 8 SEPTEMBER 21, 2012
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 21ST DAY OF SEPTEMBER 2012,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-E-12-06, BY E-MAILING AND MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
P0 BOX 3727
SPOKANE WA 99220-3727
E-MAIL: [e-mail]
DEAN J MILLER
McDEVITT & MILLER LLP
P0 BOX 2564
BOISE ID 83701
E-MAIL: joemcdevitt-mi11er.com
KELLY 0. NOR WOOD
VP - STATE & FEDERAL REGULATION
AVISTA CORPORATION
P0 BOX 3727
SPOKANE WA 99220-3726
E-MAIL: [e-mail]
LARRY A CR0 WLEY
THE ENERGY STRATEGIES
INSTITUTE INC
5549 S CLIFFSEDGE AVE
BOISE ID 83716
E-MAIL: [e-mail]
SECRETARY
CERTIFICATE OF SERVICE