20130911Comments.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERAL
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PO BOX 83720 i , :
BOISE, IDAHO 83720-0074 "i,, ii , .,
[phone]
IDAHO BAR NO. 3366
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 THE APPLICATION )
oF AVTSTA CORPORATTON FOR ) CASE NO. AVU-E-13-04
AUTHORITY TO AMEND ITS ANNUAL )
PowER COST ADJUSTMENT (PCA) ) CSMMENTS oF THERATES. ) covrMrssroN srAFF
)
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of Record,
Donald L. Howell II, Deputy Attorney General, submits the following comments in response to
OrderNo. 32873 issued on August 13,2013.
BACKGROUND
On July 31,2013, Avista Corporation dba Avista Utilities ("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 1,2072 through June 30, 2013. The
Company's Application proposes to increase the customer credit to 0.152f, per kilowatt-hour
effective October l, 2013.
Avista's PCA mechanism is used to track changes in revenues and costs associated with
variations in hydroelectric generation, power market purchases and sales, thermal fuel costs, changes
in power contract revenues and expenses, and other miscellaneous items.
STAFF COMMENTS SEPTEMBER I1 ,2013
Avista lists the reasons for the decrease in power supply expense as:
1) Above normal hydro conditions,
2) Lower natural gas prices,
3) Lower electric market prices,
4) Lower fuel costs at Colstrip, and
5) Lower fuel costs at Kettle Falls.
The Company's Application identifies the power cost deferrals, including interest, for the
July 1,2012 through June 30,2013 deferral period as:
Deferrals (July 2012-June 2013)
Interest
PCA Defenal as of June 30,2013
$(3,875,180)
(22,309)
$(3,897,489)
Avista states that the proposed rebate is designed to pass through the deferral amount for
the period July 1, 2012 through June 30,2013, as well as the unrecovered balance related to the
July 1, 2011 through June 30,2012 deferral period, and estimated interest through September 30,
2014. The proposed 0.152(,kWh PCA credit will replace an existing 0.090dlkwh credit, a credit
increase of 0.062llkWh.
The Company-proposed overall average rate decrease of 0.83% would vary by rate schedule
as shown below.
Customer Group
(Schedule)Percentage Decrease
Residential (Schedule I )-0.74%
General Service (Schedules Il,12)-0.66%
Large General Service (Schedules 21,22)-0.82%
Extra Large General Service (Schedule 25)-1.21%
Clearwater (Schedule 25P)-1.37%
Pumping Service (Schedules 31,32)-0.69%
Street and Area Lights (Schedules 4l-49)-0.25%
Average -0.83%
STAFF COMMENTS SEPTEMBER I I,2OI3
STAFF REVIEW
Audit Results
Staff reviewed and audited the amounts included in the deferral balance in the current filing.
StafPs review covered expenses incurred for the period July 2012 through June 2013. Staff
examined 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 the various power cost transactions appear reasonable at the time they were made.
Staff also reviewed the other PCA calculations and amounts. Staff finds Avista's booked amounts
and other calculations to be correct.
Net Deferral Activity
The net deferral activity represents the Idaho jurisdictional share of the abnormal power costs
and associated revenue adjustments deferred under the PCA mechanism by Avista for the twelve
months ending June 30, 2013. A component of the net deferral is the net change 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, ($3,897,489), consists of the
following items. An explanation of each item is provided below.
l. FERC Account 555 - Purchased Power
2. FERC Account 501 - Thermal Fuel
3. FERC Account 547 - CT Fuel
4. FERC Account 447 - Sales for Resale
5. All Clearwater Revenues and Expenses
6. Resource Optimization - Gain on Natural Gas Resold
7. Idaho Retail Revenue Adjustment
8. Net Transmission Revenue and Expense
9. Interest during deferral period
10. Total
$49,633,797
(1,033,536)
(4,934,966)
(40,058,895)
(5,637,769)
(955,643)
(841,960)
(t46,208)
Q2.309\
63.897,489
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. This
account also includes the expenses related to the Palouse Wind project per Order No. 32371,
STAFF COMMENTS SEPTEMBER I I ,2013
Case No. AVU-E- 1 1-01 . 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.
2. FERC Account 501 - Thermal Fuel. Thermal Fuel, primarily coal, is used to produce
electricity. The amountis90oh 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%o 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 ldaho. 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 - Gain on Natural Gas Resold. Resource Optimization results in a
cost or benefit to customers 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 transactions resulting from optimizing Company resources is included in the PCA. The
gain during the review period, shown as a negative amount, is a benefit to Idaho customers.
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
STAFF COMMENTS SEPTEMBER 11,2013
a benefit to customers, even though this PCA line item amount may be a cost to customers, rather
than a benefit.
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 and Lancaster facilities) was
less expensive than purchasing electricity on the open market to meet its native load. Furtherrnore,
Staff has verified 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.
7. Idaho Retail Revenue Adjustment. The Idaho Retail Revenue Adjustment is a load
change adjustment that removes the average energy-related cost of Production from PCA calculations
when load grows, as it has done in this case. When load declines the adjustment adds back the
average energy-related cost ofproduction at the currently approved rate. The rate changed from
$27.85/lv[Wh to $26.63 on April 1,20131. This rate is reestablished whenever base power supply
costs are reset. The rate is multiplied by the change in load to produce the adjustment, excluding
Clearwater Paper generation.
Ninety percent of the total Idaho Retail Revenue Adjustment is included in the PCA. In the
review period, the Company experienced an increase in load and therefore there is a negative
adjustment. The negative amount represents a benefit 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-09-01. 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
I Case No. AVU-E-I l-01, Order No. 32371 adopted a Stipulation where Attachment B identifies the Idaho Retail
RevenueAdjustmentrateof$27.85. CaseNo.AVU-E-12-08,OrderNo.32T69adoptedanotherStipulationwhere
Attachment B identifies the Idaho Retail Revenue Adjustment rate of $26.63.
STAFF COMMENTS SEPTEMBER 11,2013
Company's interest calculation and found the amounts included in the filing to be correct. The
Company uses the Customer Deposit Rate to calculate interest on current year deferrals and on
carryover balances from one year to the next. The Customer Deposit Rate for 201 1 and for 2012 is
lo%. Interest on the deferral balance accumulates during the deferral period at the customer deposit
rate. In the review period, the interest is a benefit to customers.
Other Booked Amounts
This PCA includes two other booked amounts. An unrecovered deferred State Income Tax
(DSIT) customer refund amount of $484,663 transferred into the PCA per Commission Order No.
32070, Case No. AVU-E-10-01. The second is a customer surcharge amount of $116,773 that is the
under-recovered amount associated with the PCA rate implemented by the Commission in Case
No. AVU-E-11-03 in 2011. This is the true-up from that case. Staff has reviewed these booked
amounts and determined the two booked amounts to be correct.
The PCA Rate
The PCA rate is calculated from three categories of revenue and expense. The first category
is amounts booked through June 30, 2013, the end of the deferral period. The second category
consists of amounts expected to be booked after June 30, 2013 from PCA rates and interest rates
currently in place. The third category is Revenue Conversion amounts. The revenue conversion
factor captures the amount of increased or decreased commission fees and uncollectibles that result
from the collection or refund of the deferral balance as these items fluctuate with revenue.
Booked Amounts
-3,897,489
-484,663
-7,024,834
r16.773
-5,290,213
Expected to be booked Amounts (Trued-Up)
-10,899
765,927
-22.676
732,352
Deferral with Interest
DSIT Transfer of Unrecovered Balance
Unamortized Balance - 20 12 P C A
True-Up Amount - 2011 PCA
Booked Total
Deferral Interest
Amortization including Interest
Interest During Amortization
Expected Total
STAFF COMMENTS SEPTEMBER I I, 2013
Revenue Conversion Amount
-22,959
Total
-4,580,719
Rate Calculation
-4,590,719
3.02t.657
-0.00152
Commission Fees and Uncollectibles
Total for Rate Design
Rate Design Total
Expected Sales (MWh)
PCA Rate ($/kwh)
The Staff has reviewed these amounts and believes that they are reasonable. Estimated
amounts are included in the rate calculation to minimize next year's true-up. The estimated amounts
are trued-up in the next PCA filing.
CUSTOMER RELATIONS
The Company's press release and customer notice included in the Application met the
requirements of IPUC Rules of Procedure I25.04 and 125.05. IDAPA 31.01.01.125. The customer
notice was mailed with cyclical billings beginning August 8, 2013 and ending September 7 , 2013.
Avista filed this annual PCA case on July 31,2013. Its press release and customer notices
covered three separate cases: the PCA (AVU-E-13-04), the PGA for natural gas (AVU-G-13-01), and
the electric Energy Efficiency Tariff Rider Adjustment (AVU-E-13-05). The PCA, as mentioned
earlier in Staff s Comments, results in an average rate decrease of 0.83o/o. Also mentioned in both
the press release and customer notice is that a decrease in the credit Avista receives from the
Bonneville Power Administration's Residential Exchange Program will be lower than the current
level of benefits and as a result will cause a slight increase (less than l%) to customers' bills. In
addition, the l.9oh rate increase approved by the Commission in the last general rate case and
effective October 1,2013 is mentioned. The overall electric increase to residential customer bills, if
all the adjustments are approved, will be 4.2oh.
Customers had until September ll,2013 to file comments. As of September lOth,
2 customers had filed comments, both opposing any increase in rates.
Although the PCA itself results in a rate decrease, the combined impact of all proposed
adjustments,2 if approved, will be a net increase in electric rates. For that reason, Staff encouages
2 The Company proposed to increase the Energy Efficiency Rider (Sch. 91) and explained that the credit from BPA's
Residential Exchange Program was reduced by BPA. This latter adjustment is not subject to the Company's control and
is a flow-thru credit from BPA.
STAFF COMMENTS SEPTEMBER 11, 2OI3
the Commission to remind all customers who are struggling to pay utility bills that there is financial
assistance available to qualified customers as well as the possibility of making payment
arrangements. Information regarding the federally-funded Low Income Energy Assistance Program
(LIHEAP) and local non-profit and other fuelfunds such as Project Share in Avista's northem 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 with interest of
($3,897,489) for the period July 1, 2012 through June 30,2013. The Staff also recommends that the
Commission implement a PCA rate credit of 0.152 l/kwh effective October 1,2013 as proposed by
Avista.
Respectfully submitted this I I ln o^rof Septemb er 2013.
Technical Staff: Kathy Stockton
Keith Hessing
Marilyn Parker
i: umisc:comments/avue l3.4dhkhklsmp.doc
Deputy Afforney General
STAFF COMMENTS SEPTEMBER 11, 2OI3
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS llTH DAY OF SEPTEMBER 2013,
SERVED THE FOREGOING STAFF COMMENTS, IN CASE NO. AVU-E-13-04, By
E-MAILING AND MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
KELLY O NORWOOD
VP STATE & FED REG
AVISTA CORPORATION
PO BOX3727
SPOKANE W A 99220-3727
E-MAIL: [e-mail]
DAVID J MEYER
VP & CHIEF COI.]NSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL: [e-mail]
SECRETARY
CERTIFICATE OF SERVICE