20150731Johnson Direct.pdf

DAV]D .J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL EOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AV]STA CORPORATION
1411 E. MISSION AVENUE
P.O. BOX 3727
SPoKANE, WASHTNGTON 99220
PHONE: [phone], FAX: [phone]
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BEFORE trHE IDAIIO PT'BI.IC U':TILIIIIES CO'DTISSION
rN THE MATTER OF THE POWER COST ) CASE NO. AVU-E-L5-fiI
ADJUSTMENT (PCA) ANNUAL RATE )
ADJUSTMENT FTL]NG OF AVISTA ) DIRECT TESTIMONY OF
CORPORATION ) WILLIAM G. JOHNSON
FOR AVISTA CORPORATION
3 present position with Avista Corporation.
A. My name is V{illiam G. Johnson. My business
5 address is L47L East Mission Avenue, Spokane, Washington,
6 and I am employed by Avista Utilities ("Avista" or
7 "Company" ) as a V{hol-esale Marketing Manager in the Energy
8 Resources Department.
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I. INTRODUCEION
a. Please state your nane, business ad&ess, and
A. What is your educational background?
A. I graduated from the University of Montana in 1981
Bachefor of Arts Degree in Political
12 Science/Economics. I obtained a Master of Arts Degree in
13 Economics from the University of Montana in 1985.
14 A. How long have you been eqrloyed by the Company and
15 what are your duties as a lfltrolesale Marketing Manager?
16 A. I started working for Avista in April 1990 as a
17 Demand Side Resource Analyst. I joined the Energy Resources
l8 Department as a Power Contracts Analyst in June 1996. My
19 primary responsibilities involve power contract origination
20 and management and power supply regulatory issues.
2l A. Iftrat is ttre scope of your testimony in ttris
22 proceeding?
23 A. My testimony will provj-de a brief summary of the
24 factors driving power supply expenses during the review
Johnson, Di
Avista P. 1
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period July 201,4 through June 201,5. I also describe new
long-term contracts the Company entered into during the
deferral perlod and the supporting documentation that is
provj-ded in electronic format.
II. ST'}!!NRY OF DEFERRAI,S
A. Would you pJ.ease sumarize power supply e:.trenses
7 during the JuIy 20L4 through June 2OLS review period?
A. Yes During the review period, Idaho's share of
9 power supply expenses was lower than the authorized level by
l0 $3,62'7 ,213, not including the net changes in costs
ll associated with the Clearwater Paper electric service
12 agreement. Of the $3,627,213 in decreased power supply
13 expenses, the Company retained $362,121,, leaving a balance
14 of $3,264,492 in the customer-rebate direction.
l5 Certain changes 1n revenues and expenses are tracked at
16 1003 in the PCA, per prior Commission orders. The Clearwater
17 Paper power purchase expense and the Clearwater Paper retail
18 revenue related to the level- of Cl-earwater generationl is
19 one such item. The difference between actual- costs/revenues
20 and authorized costs/revenues related to Clearwater Paper
2l power purchase expense and retail revenue was $2,442,91,3 in
22 the surcharge direction
1 The Cfearwater Paper power purchase and revenue associated with thepurchase i-s tracked at 100% 1n the PCA per Idaho Public Utllities
Commlssion Order No. 3284L dated ,June 28, 2073.
Johnson, Di
Avista P. 2
I The net impact of these two items is a net deferral for
2 the July 201,4 through June 2015 time period of $821,579 in
3 the rebate direction. Interest and the transfer of funds
4 rel-ated to a BPA Settlementr ds described by Company witness
5 ur. Ehrbar, brings the total deferral balance to $1,202,604.
6 A. Wtrat factors contributed to ttre J.orea porer supply
7 e:<pense during ttre revier period?
8 A. Overa11, lower power supply costs were due
9 primarily to higher hydro generation, favorable natural gas
10 and wholesale power prices, and lower net expense for
11 Colstrip and Kettle Fal1s generation. Offsetting a portion
12 of the lower net expense was Palouse Wind and Clearwater
l3 Paper. Palouse lriind is currently not included in the
14 authorized level of power supply expense (i.e., is not
15 included in base rates). The actual Pal-ouse Wind expense is
16 included in the computation of the PCA deferral, therefore,
17 90 percent of the net expense of Palouse Wind (actual
18 Palouse lrlind expense less the value of the power generated)
19 flows through the PCA as a surcharge deferral.
20 The higher expense related to Clearwater Paper is a
2l result of the change j-n the contract between Avista and
22 Clearwater Paper, whereby Clearwater now generates into its
23 own load as opposed to selling their fu1l generation output
24 to Avista, and receiving retail service from Avista for
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Avista P. 3
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their fulI load. The PCA authorized base incl-udes a purchase
by Avista of Clearwater generation and Clearwater purchasing
an equivalent amount of power at retail rates. Given that
the power purchase rate was lower than retail rates, when
the Clearwater purchase contract ended on June 30, 20L3
Clearwater chose to use its generation to reduce purchases
from Avista. The result was a net increase in PCA surcharge
deferrafs.
The table below shows a summary of the ma;or factors
driving the deferrals during the review period.
1) lncludes the change in hydro generation plus changes in Mid Columbia contract expenses.
2) lncludes the efiect of gas-fired turbine optimization, power and gas price changes and other
contract expense and rercnue changes, including renewable energy credit sales.
3) This is the Palouse power purchase net expense considering the short-term wlue of the power
generated, which is less than the gross expense.
4) lncludes the expense of serving higher loads less the Load Growth Adjustment Rate credit.
5) This is a result of Ar,ista's purchase of Cleanrvater generation ending June 30, 20'13 and
Clearwater paper using its generation to reduce power purchases from Arista.
Johnson, Di
Avista P. 4
Factorc Contributing to lncreascd (D,ecreased) Power Supply Erpense
July 2014 - June 2015 - ldaho Allocation
Change due to Hydro Generation (1)
Change due to Power and Natural Gas Prices and Contract Changes, (2)
Change due to Colstrip Generation and Fuel Expense
Change due to Kettle Falls Generation and Fuel Expense
Change in Net Transmission Expense (Expense - Rewnue)
Palouse Wind Purchase (3)
-$1,991,77
$2,468,14',1
otal Expenses Abow (Below) the Authorized Lewl
10% Retained by the Company
Clearwater Paper Generation and Rer,enue Variance (100% ldaho Allocation) (5)
Total Power Cost Defenals,
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Over the review period, hydro generation was 46 aMil0
above the authorized level. Gas-fired generation was 5 aMW
l-ower the authorized level. Colstrip generation was Ll aMW
above the authorized level and Kettle FaIIs generation was 5
aMW below the authori-zed fevels. Idaho retail- sales were L2
aMW above the authorized level.
The tabl-e below shows the change in generation and
retail Ioads from the authorized levels.
III. NEW LONG.EERM CO}{ITRACTS ENTERED IIIIO DURING THE
RIVIET{ PERIOD
A. PJ.ease provide a brief description of new long-
ter:m power contracts that the Corpany entered into during
ttre review period.
A. The Company entered into three new J-ong-term power
purchase contracts duri-ng the review period. In November,
2014, the Company entered j-nto a new/renewed 3B month
Johnson, Di
Avista P. 5
July 14 - June 15 Generation and Load Differences from the AuthorLed Level
in F{ydro Generation
in Gas-Fired Generation
in Colstrip Generation
in Kettle Falls Generation
in ldaho RetailSales
45.6
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17.2
-4.5
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8.7Yo
-1.4o/o
9.9%
-11.8o/o
3.5o/o
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11 documentation provided by the Coryany in ttris fiJ.ing.
12 A. The Company maintains a number of documents that
13 record relevant factors considered at the time of a
14 transaction. The following is a list of documents that are
15 maintained. Unless noted, these documents have been
16 provided on a compact disc as part of this filing. Other
17 documents will be provided on request:
contract with the City of Spokane's Waste-to-Energy p1ant.
In October 201"4 the Company entered into a one-year (2015)
power purchase agreement with Chelan PUD for a slice of the
Rocky Reach and Rock Island dams. In March 20L5 the Company
entered into a new/renewed five-year (201,6-2020) power
purchase agreement with Chelan PUD for a slice of the Rocky
Reach and Rock Island dams. Copies of these contracts are
included with supporting documentation.
IV. SUPPOREING DOCI'MENEATTON
A. P1ease provide a brief overview of the
Electric/Gas Transaction Record: These documents
record the key details of the price, terms and
conditions of a transaction, the reason for the
transaction, and pertinent transmj-ssion or other
delivery issues. The Company has provided worksheets
showing the important details of each electric and
.Iohnson, DiAvista P. 6
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natural gas term transaction during the review period.
Additional documentation will be provided on request.
Position Reports: These daily reports show the
Company's forward Ioad/resource position, daily and
term purchases each business day and forward market
power and natural gas prices.
Forward Market Electric and Natural Gas Price Curves:
This daily data shows forward market prices for
electricity and natural- gas and is maintained in
NucIeus, the Company's electronic energy transaction
database record system. Forward market prices are
included in the daily Position Reports.
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A. Does
testimony?
A. Yes.
ttrat conc].ude rri rect pre-filed
.Tohnson, DiAvista P. 7