HomeMy WebLinkAbout20140430final_order_no_33031.pdfOffice of the Secretary
Service Date
April 30,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION’S APPLICATION TO )CASE NO.AVU-E-14-02
UPDATE ELECTRIC LINE EXTENSION )
SCHEDULE 51 AND ALLOWANCES.)ORDER NO.33031
__________________________________________________________________________________
)
On March 14.2014,Avista Corporation filed a tariff advice to revise the Company’s
Electric Line Extension Schedule 51.The Company proposes to update both its line extension
costs and the developer/builder allowances that apply to new residential,commercial,and
industrial customers’services.The proposed changes would take effect on May 1,2014.
Although the Company initially filed a tariff advice,the Company and Commission
Staff later agreed that the tariff advice—that proposes to update electric line extension
allowances that were last set in 2001—should be processed as an application so interested
persons could file comments under the Commission’s Modified Procedure rules.
On April 1,2014,the Commission issued a Notice of Application and Notice of
Modified Procedure setting an April 22,2014 comment deadline.See Order no.33003.Staff
filed the only comments and the Company concurred with them.See Comments of the
Commission Staff;Concurrence in Staffs Comments.
Having reviewed the record,we issue this Order approving an updated Schedule 51
based on new line extension costs and allowances as follows.
THE APPLICATION
With its Application,the Company proposes to revise Schedule 51 by updating the
costs it incurs to extend electric lines to new customers.It also proposes to update its allowance
to developers and builders against those costs.By way of background,the Company annually
updates the cost of line extensions (e.g.,the cost of transformers and lines)to new customers that
are recovered through base rates.Developers and builders who request the line extension must
pay for any costs above the Company’s line extension allowance.But,while the Company has
annually updated its line extension costs,it has not updated the line extension allowance since
2001.The Company now seeks to update both the line extension costs and allowances.The
Company’s proposed updates and how the Company expects them to impact residential
developments are summarized below.
ORDER NO.33031 1
A.Proposed Line Extension Costs
The Company proposes to revise its Schedule 51 line extension costs to reflect its
new Construction &Material Standards and the actual costs for materials and labor used to
extend lines in 2013.The Company updated its Construction &Material Standards to meet
heightened standards contained in the 2012 National Electric Safety Code (NESC).For
example,the 2012 NESC sets higher strength standards for guy-supported wood poles and
requires upgrades to guy wire insulation.The Company’s proposed cost updates also reflect that
transformer costs have significantly increased.See Application at 1-2.
B.Proposed Line Extension Allowances
The Company also proposes to increase the developer/builder allowances that were
last set in 2001.See Order No.28562.The allowances vary by customer class.The
Company’s current and proposed allowances are:
Current Proposed
Service Schedule Allowance Allowance
Schedule 1 Individual Customer (per unit)$1,000 $1,600
Schedule 1 Duplex (per unit)$800 $1,275
Schedule 1 Multiplex (per unit)$600 $975
Schedule 11/12 (per kWh)$0.10703 $0.13766
Schedule 21/11 (per kWh)$0.06000 $0.1 1657
Schedule 3 1/32 (per kWh)$0.6000 $0.19689
The Company explains that it calculated the proposed allowances using an embedded-cost
methodology.The Company believes this methodology ensures that the Company’s investment
in distribution/terminal facilities for each new customer will equal the embedded costs of the
same facilities that were used to calculate base rates.Any costs exceeding the allowance will
be paid by the developer/builder as a contribution in aid of construction (CIAC).The Company
says that it calculated embedded costs based on the cost-of-service study from its last general
rate case (AVU-E-1 2-0 1)as updated to account for the settlement agreement in that case.Id.at
2.
C.Impact to Residential Developments
The Company claims its proposed changes would lower developer/builder payments
for line extensions in residential developments as follows:
ORDERNO.33031
Residential Developments
Filing —Development Summary 2013 2014
Total Cost per Lot $1,716 $1,598
Less:Service Cost $469 $485
Developer Responsibility $1,247 $1,113
Developer Non-refundable Payment $247 -
Developer Refundable Payment $1,000 $1,113
Builder Payment $469 $0
Id.at 3.
STAFF COMMENTS
Commission Staff reviewed the Company’s Application and recommended some
adjustments to the Company’s proposed costs and allowances.The Company concurs with
Staff’s recommendations.The recommendations are summarized below.
A.Recommended Line Extension Costs
Staff recommended some adjustments to the Company’s proposed line extension
costs.As an initial matter,Staff notes that the Company changed how it calculates construction
costs and cost reduction credits after 2013.For example,in 2013 the Company included
trenching costs in the Company’s construction costs and cost reduction credits.But the
Company’s proposed costs and credits omit these costs because developers have always provided
their own In addition,the Company’s proposed tariff accounts for the costs of
complying with the updated 2012 NESC standards.Furthermore,the Company moved some
cost components from 2013 categories to new cost categories.For example,while 2013
transformer cost category includes only transformer equipment costs,the Company’s proposed
transformer cost category also includes transformer installation costs.Although these above
changes made it difficult for Staff to compare the Company’s existing and proposed construction
costs and credits,Staff believes the changes were reasonable.
Because the Company changed how it calculates construction costs and cost
reduction credits after 2013,Staff compared the Company’s proposed,individual construction
cost components to similar cost components from the prior year.Staff reports that the
As the cost reduction credits for developer-provided trenching are not needed,Staff removed $546 in trenching
credits from the Company’s average underground primary and secondary distribution costs (although the cost to
inspect the trench remains).Staff’s adjustment reduces the total weighted average cost while increasing the
underground primary and secondary credits by $0.13 and $0.21 per lot.
ORDERNO.33031 3
Company’s average transformer installation cost per lot changed the most and increased by 51%
because:(1)each transformer’s cost increased;(2)the Company moved fixed costs from primary
distribution costs to transformer costs;and (3)the Company incurred greater costs to satisfy the
more rigorous NESC standards.Staff opines that these changes and increases are reasonable.
Staff also reports that the Company’s distribution and service costs per lot increased or decreased
with the average length of an installation.For example,the cost to install underground primary
distribution facilities decreased because the average installation length decreased.On the other
hand,the cost to install underground secondary distribution and service lines increased because
the average installation length grew.
Based on its analysis,Staff recommended some adjustments to the Company’s
proposed line extension costs.Staff’s recommended adjustments combine with the Company’s
proposal to decrease total line extension costs by 7%,from $1,716 per lot to $1,596 per lot.This
decrease mainly occurs because primary distribution costs are 73%less than they were in 2013
(although the costs of secondary distribution,transformers,and service drops have increased).
The table below summarizes the Company’s approved costs,the Company’s proposed costs,and
Staffs recommended adjustments:
Change in Developer and Builder Cost
2013 to 2014 Revised
2014 2014
Per Lot Cost(S)2013 Company Filing Revised (No Trenching)$Difference %Difference
Primary Distribution Cost 1227 511 333 (894)-73%
Secondary Distribution Cost 255 424 308 53 21%
Transformer 311 470 470 159 51%
Total Weighted Ag Cost (Trenching by Developer)1793 1405 1111 (682)-38%
Trenching Credit (546)(292)0 546 -100%
Total Deeloper Cost 1247 1113 1111 (136)-11%
Ser’ce Drop Cost 469 485 485 16 3%
Total Builder/De’eloper Cost 1716 1,598 1,596 (120)-7%
Staffs adjustments to the Company’s proposed construction costs and cost reduction credits are
further detailed in Attachment A to this Order.Staff opines that the adjusted costs and credits
are reasonable and should be approved by the Commission.
B.Recommended Line Extension Allowances
Staff also analyzed the Company’s proposed line extension allowance.Staff explains
that the Company uses the allowance to credit developers and builders for the upfront
distribution and terminal facility line extension costs that the Company recovers through base
ORDERNO.33031 4
rates.The Commission set the current allowance in 2001.See Case No,AVU-E-00-0l.Staff
notes that in the present case,the Company updates its allowances using the same method that
Staff used to calculate the allowances in Case No.AVU-E-00-01.Applying this calculation
method here,the Company proposes increasing all allowances—except Schedule 31/32—from
29%(Schedule 11/12)to 94%(Schedule 2 1/22)above 2001 levels.Staff finds the updated
allowances to be about equal to the fully embedded cost of the same facilities used to calculate
base rates for each customer class.Because of this,and because 12 years of growth and inflation
have affected the total embedded cost,Staff believes the Company’s proposed increases are
reasonable.
However,while Staff agrees with the Company’s calculation method,Staff believes
the Company incorrectly applied that method in one respect.Specifically,Staff says the
Company’s proposed allowance includes certain service meter costs even though Schedule 51
excludes all meter costs.Staff thus recommended removing all meter costs from the proposed
line extension allowance to ensure the allowance is consistent with Schedule 51.The currently
approved allowance,Company’s proposed allowance,and Staffs proposed adjusted allowance
are shown below:
Company’s Company’s Staff’s
Service Schedule Current Proposed Proposed
Allowance Allowance Allowance
Schedule 1 Individual Customer (per unit)$1,000 $1,600 $1,550
Schedule 1 Duplex (per unit)$800 $1,275 $1,240
Schedule 1 Multiplex (per unit)$600 $975 $930
Schedule 11/12 (per kWh)$0.10703 $013766 $012868
Schedule 21/22 (per kWh)$0.06000 $0.1 1657 $0.1 1874
Schedule 3 1/32 (perkWh)$0.6000 $0.19689 $0.l9279
Staffs proposed,adjusted line extension allowances are further described in Attachments B
through E to this Order.
Staff says the adjusted $1,550 per lot allowance would apply to residential
developments as follows.The first $1,111 of the allowance would eliminate the total developer
cost and reduce current rates by that amount.The remaining $439 of the allowance would be
credited to builders against the $485 cost of a service drop for each lot,which decreases the
ORDER NO.33031 5
builder’s remaining cost to $46 per lot for a 90%decrease from current rates.The following
table summarizes these impacts:
Developer and Builder Cost Impact
2013 to 2014 Revised
2014 2014
Per Lot Cost(S)2013 Company Filing Revised (No Trenching)$Difference %Difference
Total Developer Cost 1247 1 113 1 111 (136)-11%
Allowance (not to exceed cost)1,000 1,113 1,111 111 11%
Remaining Deeloper Cost 247 0 0 (247)-100%
Total Builder Cost 469 485 485 16 3%
Lefi-oer allowance 0 485 439 439 n/a
Remaining Builder Cost 469 0 46 (423)-90%
Total Allowance 1,000 1,600 1,550 550 55%
Total Allowance Used 1,000 1,598 1,550 550 55%
Unused Allowance 0 2 0 0 n/a
Besides adjusting the proposed allowance in this case,Staff also recommended the
Company regularly seek to update those allowances to ensure any changes are gradual and better
represent the costs embedded in base rates.Because the Company would calculate the allowance
based on input from the Company’s last general rate case,Staff recommended that the Company
seek to update the allowances whenever a new general rate case concludes.The Company could
apply to update the allowances when it files its annual Schedule 51 Line Extension Cost updates.
C.Summary of StaffRecommendations
In summary,Staff recommended the Commission approve the revised 2014 Schedule
51 Tariff Construction Costs and Cost Reduction Credits contained in the Attachment to this
Order,and the following allowances,effective May 1,2014:
Service Schedule
Schedule 1 Individual Customer (per unit)
Schedule 1 Duplex (per unit)
Schedule 1 Multiplex (per unit)
Schedule 11/12 (per kWh)
Schedule 2 1/22 (per kWh)
Schedule 31/32 (per kWh)
Allowance
$1,550
$1,240
$930
$0.12868
$0.11874
$0.19279
Staff also recommended the Commission direct the Company to seek allowance updates (using
the method applied in this case)when the Company files its annual update of Schedule 51 line
extension costs after each general rate case.
ORDERNO.33031 6
COMMISSION FINDINGS
We have reviewed the record,including the Application,Staff’s comments,and
Avista’s concurrence in Staff’s comments.We find that Avista is an electrical and gas
corporation,and that we have jurisdiction and authority over Avista and the issues in this case
under Title 61 of the Idaho Code and the Commission’s Rules of Procedure,IDAPA
31.01.01.000,ci seq.
We also find the Company’s proposed changes to Schedule 51,as adjusted by Staff,
are fair,just,and reasonable and we approve those changes with a May 1,2014 effective date.In
making this finding,we specifically approve of the method that the parties used to calculate the
updated allowances in this case.That method ensures the allowances will roughly equal the fully
embedded facilities cost used to calculate base rates for each customer class.This,in turn,
ensures that new customer-related distribution costs will not drive revenue requirement and base
rate increases,and that new customers will pay the cost of new distribution facilities that benefit
them.We further find that removing service meter costs from the Company’s proposed line
extension allowances is reasonable and consistent with Schedule 51’s exclusion of meter costs.
Lastly,we find it is reasonable,and we direct the Company,to seek allowance
updates (using the methodology used for this case)with the annual update of Schedule 51 line
extension costs after each general rate case.Updating the line extension allowances in this
manner will ensure that any changes are gradual and are informed by input obtained during the
general rate case.
ORDER
IT IS HEREBY ORDERED that the Company shall update Schedule 51 to reflect
updated line extension costs and allowances as described in this Order.These changes and the
new Schedule 51 shall take effect May 1,2014.The Company shall promptly file conforming
tariffs,and shall take such other action as directed above.
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.
ORDERNO.33031 7
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of April 2014.
ATTEST:
MACK A.REDF ,COM SIONER
‘L6 vi&J
MARSHA H.SMITH,COMMISSIONER
Jjin D.Jewe4J
Commission Secretary
O:AVU-E-I 4O2kk2
ORDERNO.33031 8
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Ca
l
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4
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Ca
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1
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on
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m
m
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t
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4
C
2
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4
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2
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