20180928final_order_no_34158.pdf

Office of the Secretary
Service Date
September 28,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )CASE NO.AVU-E-18-06
CORPORATION'S APPLICATION TO )
IMPLEMENT FIXED COST ADJUSTMENT )
RATES FOR ELECTRIC SERVICE FROM )ORDER NO.34158
OCTOBER 1,2018 THROUGH )
SEPTEMBER 30,2019 )
On July 2,2018,Avista Corporation ("Company")applied to the Commission for
authority to implement Fixed Cost Adjustment ("FCA")rates for electric service from October 1,
2018,through September 30,2019,and to approve its corresponding modifications to Schedule
75,"Fixed Cost Adjustment Mechanism -Electric."Along with this request,the Company sought
approval of its FCA deferrals from January 1,2017,through December 31,2017.The Company
also requested an FCA rebate rate of0.176 cents per kilowatt-hour (kWh)for its Residential Group
and an FCA surcharge rate of 0.056 cents per kWh for its Non-Residential Group from October 1,
2018,through September 30,2019.The Company requested an effective date of October 1,2018.
The Commission subsequently issued a Notice of Application and Notice of Modified
Procedure setting deadlines for interested persons to submit comments in the case.Order No.
34112.Staff filed the only comments,and recommended the Commission approve the
Application.The Company did not reply.
Having reviewed the record,the Commission enters this Order approving the
Company's Application as set forth below.
BACKGROUND
The FCA rate adjustment mechanism breaks the link between the energy a utility sells
and the revenue it collects to recover its fixed costs'to serve customers,thus decoupling the
utility's revenues from its customers'energy usage.Order No.33437 at 3.This decoupling
encourages energy conservation by removing a utility's incentive to sell more energy to increase
revenue and profits.Id.at 3-4;Application at 4.
I "Fixed costs"are a utility's costs to provideservice that do not vary with energy use,output,or production,and
remain relativelystable between rate cases -for example,infrastructure and customer service.
ORDER NO.34158 1
The Commission approved the Company's FCA as a three-year pilotprogram as part
of the approved settlement of the Company's 2015 rate case.See Case Nos.AVU-E-15-05 and
AVU-G-15-01;Application at 3;and Order No.33437 at 10.In Order No.33437,the Commission
ordered analysis of the program's effectiveness at the end of its second full year,to ensure it is
functioningas intended.Application at 3-4.The Order also set forth how the FCA mechanism
works,including treatment of existing versus new customers,quarterly reporting,annual filings,
interest,accounting,and 3%rate increase cap.Id.at 4-6.
On June 15,2018,the Commission approvedan addendum to the settlement stipulation
approved in AVU-G-15-01 and AVU-E-15-05,which extended the term of the Company's FCA
pilot and,therefore,the effectiveness review,for another year.See Order No.34085.
APPLICATION
The Company proposed to decrease rates for its electric Residential Group and increase
rates for its Non-Residential Group based on the deferred revenue recorded for January through
December 2017.Application at 1.The Company attributed the proposed changes to drivers such
as abnormally cold weather in January and February 2017,and hot weather during the summer of
2017,as well as savings from energy efficiencyprograms in 2017.Id.at 7-8.The Company stated
that other drivers are not easily quantifiable but include,among others,the effects of non-
programmatic energy efficiencyand changes in business cycles.Id.at 8.
The Company recorded $2,816,256 in the rebate direction in deferred revenue for its
electric residential customer group in 2017,which includes the actual 2016 Carry Over Balance of
$788,461.Id.at 9.The Company's proposed rate of -0.176 cents per kWh would rebate
$2,071,515 to the Company's residential electric customers on rate Schedule 1.Id.at 9;Exhibit
B.For its Non-Residential Group,the Company recorded $610,929 in surcharge deferred revenue
in 2017.Id.at 10-11.The Company proposed to increase non-residential rates by 0.056 cents per
kWh,to recover $603,669 from commercial and industrial customers.Id.at 10-11;Exhibit B.
Because the Commission approvedthe extended FCA pilotperiod,the Company also
proposed changes to its Tariff Sheet 75 to reflect,among other changes:(1)an FCA mechanism
term of four years;and (2)that interested parties will conduct an effectiveness review at the end
of the third year.Id.at 4.
ORDER NO.34158 2
STAFF COMMENTS
Staff believes the Company calculated its proposed FCA deferral balances and rates
using the methodology authorized in Order No.33437.Thus,Staff recommended the Commission
allow the Company to rebate $2,071,515 to the Residential Group with a rate of -0.176 cents per
kWh and recover $603,669 for the Non-Residential Group in the 2018 FCA year with a surcharge
rate of 0.056 cents per kWh.Staff Comments at 3.Staff also supported the updates the Company
requested to its Tariff Sheet 75.Id.
While Staff could not reconcile the Company's demand-side management savings
estimates identified as a driver of reduced energy consumption,Staff's recommendation did not
change.Instead,Staff suggested the Company,Staff and interested stakeholders assess the balance
of risk between the Company and its customers when the FCA is reviewed after the third year.Id.
Staff noted that the Company included notices with customer bills between July 12,
2018,and August 10,2018.Staff thus believed customers were sufficiently notified of their
opportunity to comment.Id.at 6.
DISCUSSIONAND FINDINGS
The Commission has jurisdiction over the Company and this matter under Title 61 of
the Idaho Code,and specifically Idaho Code §§61-336,-502,and -622.The Commission has
reviewed the record and finds the Company's requested FCA residential rate of -0.176 cents per
kWh,and FCA non-residential rate of 0.056 cents per kWh to be fair,just,and reasonable.The
Commission finds that the Company correctly calculated its deferral balances.The 3%annual rate
adjustment cap is not operative because there is no proposed carry-over for either class.The
Commission thus approves the Company's Application and proposed Tariff Sheet 75,as filed,
effective October 1,2018.
We encourage interested persons and parties to examine issues related to the
effectiveness of the FCA during the end of third-year programmatic review in 2019,including,
among other issues,how the FCA effects customer and Company risk and the benefits accruing
therefrom.See Order Nos.33437 and 34085.
ORDER
IT IS HEREBY ORDERED that the Company's Application is approved.The
Company's FCA Filing for Electric Service from October 1,2018 through September 30,2019 is
tw i 1 34158 3
granted as requested,effective October 1,2018.The (ommission approves the Company's Tariff
Sheet 75 as filed.
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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of September 2018.
PAUL KJELLANDER,PRESIDENT
KR INE RAPER,C6MMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\AVU-E-18-06\Orders\AVUE1806final sc.doex
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