20130731Direct William Johnson.pdf

DAVID J. MEYER
vICE pRESIDENT AND CHIEF CoUNSEL FoR ?tlt Jr.!i- 3 I Pil 12: l6
REGULATORY AND GOVERNMENTAL AFFAIRS : ., : .
AVISTA CORPORATION . ,.,-,,,, 'I, -
I4IIE.MISSIoNAVENUE ril-ir 1r' "
P.O.BOX3727
SPOKANE, WASHINGTON 99220
PHONE: [phone], FAX: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMIVISSION
rN THE MATTER OF THE POWER COST ) CASE NO. AyU-E-B-o+
ADJUSTMENT (PCA) ANNUAL RATE )
ADJUSTMENT FILTNG OF AVISTA ) DIRECT TESTIMONY OFCORPoRATTON ) WILLTAM G. JOHNSON
FOR AVISTA CORPORATION
I I. INTRODUCTION
2 Q. Please state your name, business address, and present position with Avista
3 Corporation.
4 A. My name is William G. Johnson. My business address is l41l East Mission
5 Avenue, Spokane, Washington, and I am employed by Avista Utilities ("Avista" or "Company")
6 as a Wholesale Marketing Manager in the Energy Resources Department.
7 Q. What is your educational background?
8 A. I graduated from the University of Montana in l98l with a Bachelor of Arts
9 Degree in Political Science/Economics. I obtained a Master of Arts Degree in Economics from
10 the University of Montana in 1985.
I I a. How long have you been employed by the Company and what are your duties
12 as a Wholesale Marketing Manager?
13 A. I started working for Avista in April 1990 as a Demand Side Resource Analyst. I
14 joined the Energy Resources Department as a Power Contracts Analyst in June 1996. My
15 primary responsibilities involve power contract origination and management and power supply
16 regulatory issues.
17 a. What is the scope of your testimony in this proceeding?
18 A. My testimony will provide a brief summary of the factors driving power supply
19 expenses during the review period July 2012 through June 2013. I also describe new long-term
20 contracts the Company entered into during the deferral period and the supporting documentation
2l that is provided in electronic format.
Johnson, Di
Avista
Page I
I II. SUMMARY OF DEFERRALS
2 Q. Would you please summarize power supply expenses during the July 2012
3 through June 2013 review period?
4 A. Yes. During the review period, Idaho's share of power supply expenses were
5 lower than the authorized level by $6,805,121, excluding the Clearwater Paper and Palouse Wind
6 related differences. Certain changes in revenues and expenses are hacked at l00yo in the PCA,
7 per prior Commission orders, such as the Clearwater Paper power purchase expense, and the
8 Clearwater Paper retail revenue related to the level of Clearwater generationl. The power
9 purchase expense for Palouse Wind was also tracked at 100%o through March 20132. The
l0 Company absorbs $680,512 with the 90o/oll0o/o sharing, leaving a balance of $6,124,608 in the
ll rebate direction. The $6,124,608 rebate plus the Clearwater Paper differences of $56,003 in the
12 surcharge direction and the Palouse Wind power purchase expense of $2,193,425 in the
l3 surcharge direction results in a net deferral for the period of $3,875,180 in the rebate direction.
14 a. What factors contributed to the lower power supply expense during the
l5 review period?
16 A. Overall, lower power costs were due primarily to above normal hydro generation,
17 lower natural gas and power prices, and lower costs for Colstrip and Kettle Falls generation.
l8 Lower natural gas prices reduced the cost to generate with natural gas-fired resources. The
19 average market power price during the review period was $25.89/l\4Wh compared to an
t The Clearwater Paper power purchase and revenue associated with the purchase is tracked at l00o/o in the PCA per
Idaho Public Utilities Commission Order No. 29418 dated January 15,2004.
' The Palouse Wind power purchase expense was tracked at l00Yo through March 2013 per Idaho Public Utilities
Commission Order No. 32371 dated September 30, 2011. Effective April l, 2013, the Palouse Wind power
purchase expense is included in the PCA subject to the normal 90yoll0% sharing until it is included in base rates as
a part of the implementation of new rates from the Company's next general rate case anticipated in 2015, per Order
327 69 dated March 27, 20 I 3 (Case AVU-E-12-08).
Johnson, Di
Avista
Page2
I authorized average price of $35.62lIvIWh. The average natural gas price during the review
2 period was $3.47ldth compared to an authorized average price of $4.34ldth.
3 Partially offsetting the lower spot market natural gas and power prices was the cost of
4 prior fixed-priced purchases of natural gas and power through the Company's hedging program.
5 Avista's hedging program layers in energy purchases (both power and natural gas) to serve load
6 in future periods. Energy purchases are made up to three years prior to delivery period under the
7 hedging program. Because spot market energy prices have been declining over the past several
8 years, these prior purchases were made at prices higher than the spot market natural gas and
9 power prices during the review period. Avista did not include these known actual purchases in
l0 the power supply expense included in base rates, which lowered the authorized level of expense
I I in the PCA. The higher expense of these prior purchases is flowed through the PCA and in this
12 instance, reduced the PCA rebate.
13 The Palouse Wind power purchase also added to the expense during the period. The
14 actual purchase expense for the July 2012 through June 2013 was approximately $3.5 million.3
15 However, when the purchase expense is netted against the market value of the power for the
16 same July 2012 through June 2013 period, the expense increase due to Palouse Wind was
17 approximately $1.5 million. The Company also sold the Renewable Energy Credits from Palouse
l8 Wind for $554,769 through April20l3, of which Idaho's share was approximately $193,000.
19 The table below shows a summary of the major factors driving the deferrals during the
20 review period.
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3 Of the approximate $3.5 million Palouse Wind power purchase expense (Idaho's share), approximately $2.2
million was deferred at l00o/o for the July 2012 through March 2013 time period, and $1.3 million was deferred for
April 2013 through June 2013 (90% share).
Johnson, Di
Avista
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'l) lncludes the aftct of fixed-price power and natural gas purchases through the
Company's hedging progmm.
2) Ihis is the Palouse po\rver purchase expense only and not the net expense considering
the ralue of the pouer genenated, wtrich is less than the gross expense.
Over the review period, hydro generation was 47 aMW above the authorized level. Gas-
fired generationwas 15 aMW above the authorized level dueto the economics of an increased
spark spread. Colstrip and Kettle Falls generation was 7 aMW above and l0 aMW below the
authorized levels, respectively. Retail loads were 4 aMW above the authorized level.
The table below shows the change in generation and retail loads from the authorized
levels.
Johnson, Di
Avista
Page 4
due to Hydro Generation
due to Gas-Fired Generation, Fuel and Power Expense (1)
due to Colstrip & Kettle Falls Generation and Fuel Expense
in Net Transmission Expense (Expense - Rercnue)
due to Retail Loads
-$1,5(N,
-v,327,
-$1,309,
$590,
Expenses Abow (Below) the Authorized Lerel
107o Absorbed by the Company
Paper Genenation and Rerenue Variance
Wind Recoved at 100% Through March 2013 (2)
Change in Hydrc Generation
Change in Gas-Fired Generation
Change in Colstrip Generation
Change in Kettle Falls Generation
Change
aMW
47.3
15.0
7.1
-9.8
4.0
Change
o/o
9.0o/o
5.iYo
3.9o/o
-26.2%
1.2o/o7
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III. NEW LONG.TERM CONTRACTS ENTERED INTO
DURING THE REVIEW PERIOD
a. Please provide a brief description of n€w long-term contracts that the
Company entered into during the review period.
A. The Company entered into three new long-term contracts during the review
period. The Company entered into two contracts with Douglas PUD in December 2012. One
contract was for the purchase of exchange capacity for the period January 2013 through
15 December 2013. The other contract was for purchase of the Colville Indian Tribe's share of the
16 Wells hydroelectric project for the period January 2013 through September 2014. The Company
17 had similar contracts in place during 2012. ln April 2013 the Company entered into a three-year
18 and nine-month PURPA contract with a 411 kW hydroelectric generator. This facility had
19 previously provided power to Avista, but had been mothballed for l0 years. Electronic copies
20 of these contracts have been provided with this filing.
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Johnson, Di
Avista
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I IV. SUPPORTING DOCUMENTATION
2 Q. Please provide a brief overryiew of the documentation provided by the
3 Company in this filing.
4 A. The Company maintains a number of documents that record relevant factors
5 considered at the time of a transaction. The following is a list of documents that are maintained.
6 Unless noted, these documents have been provided on a compact disk as part of this filing.
7 Other documents will be provided on request:
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Electric/Gas Transaction Record: These documents record the key details of the price,
terms and conditions of a transaction and include a discussion of market conditions at the
time of the transaction, the reason for the transaction, and pertinent transmission or other
delivery issues. The Company has provided worksheets showing the important details of
each electric and natural gas term transaction during the review period. Additional
documentation will be provided on request.
Position Reports: These daily reports show the daily and term purchases each business
day and provide a summary of market power and natural gas prices over a 36-month
forward period.
Forward Market Electric and Natural Gas Price Curves: This daily data shows forward
market prices for electricity and natural gas and is maintained in Nucleus, the Company's
electronic energy transaction database record system. Forward market prices are
included in the daily Position Reports.
Does that conclude your direct pre-filed testimony?
Yes.
Johnson, Di
Avista
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