20190416Comments.pdf

KARL KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE ELECTRIC LINE
EXTENSION SCHEDULE 5I RATE
ADJUSTMENT FILING OF AVISTA
CORPORATION
CASE NO. AVU-E.19.03
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on Avista
Corporation' s Application.
BACKGROUND
On March 11,2019, Avista Corporation (the "Company") applied to the Commission for
an order allowing it to revise Electric Line Extension Schedule 51. In Order No. 28562, issued
November 27,2000, the Commission directed the Company to update its Schedule 5l charges by
April 1 of each year. The purpose of this filing is to update line extension costs and allowances
that apply to new residential, commercial, and industrial customers. Besides updating its costs
and allowances, the Company proposes five administrative changes to make Schedule 51 easier
for customers to understand. The Company requested an effective date of May 1, 2019.
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ISTAFF COMMENTS APRIL 16,2OI9
i;i lS Fii t2:hJ
STAFF REVIEW
Staff reviewed the Company's application and concludes:
l. The Company's methodology for calculating allowances is appropriate and
recommends approving the proposed allowances.
2. The Company's methodology for calculating average costs is consistent with past
Schedule 5l filings and Staff agrees with the proposed basic costs.
3. The administrative changes the Company is proposing are reasonable and
recommends approval.
Each conclusion will be discussed in more detail in the sections below along with Staff s
recommendations.
Allowances
Staff reviewed the Company's methodology, and agrees with the proposed allowances.
The Company determines allowances using an embedded cost methodology designed to ensure
that the Company's investment in each new customer's distribution and terminal facilities does
not increase rates paid by the general body ofratepayers.
The Company continues to use the same embedded cost methodology it has used in past
filings. The embedded costs are based on the Cost of Service study completed in the last General
Rate Case (AVU-E-17-01), but have been updated to the 2019 base rates approved in that case.
The Company proposes average increases of l.7Yo in the allowances offered to all service
schedules. These increases are consistent with the 2019 increases approved for each service
schedule's embedded cost as part of the last General Rate Case (AVU-E-17-01). The
Company's proposed changes to the allowance amounts by service schedule are shown in
Table 1:
2STAFF COMMENTS APRIL 16,2OI9
Table l: Changes in Allowance by Customer Class
Service Schedule
Current
Allowance
Proposed
Allowance
Percent
Change
Sched. 1 Individual Customer (per unit)$ 1,810 $ 1,840 1.7%
Sched. 1 Duplex (per unit)$ 1,445 $1,470 1.7%
Sched. 1 Multiplex (per unit)$ 1,085 $ 1 ,105 1.8%
Sched. llll2 (per kWh)$0.14788 $0.15022 1.6%
Sched. 21122 (per kWh)$0.1 3603 $0.1 38s3 t.8%
Sched. 31132 (per kWh)$0.24227 $0.246s3 t.8%
Basic Costs
Basic costs have fixed and variable components, with variable components specified on a
cost-per-foot basis. The Company is proposing slight changes in basic costs ranging from a
3 .|Yo or $7 1 decrease for the fixed cost of an overhead transforme r to a 4 .9Yo or $0.49-per foot
increase for the cost ofan underground secondary circuit.
The basic costs are calculated using recent average actual costs for facilities such as
transformers and conduit. The Company has consistently used this methodology to determine
line extension tariffs, including prior versions of Schedule 51.
The Company is proposing to update the primary, secondary, service, and transformer
average costs. Residential developments costs are also updated for the most current Construction
Standards and average 2018 construction costs.
Staff has reviewed the filing, including the workpapers provided with the filing, and
agrees with the changes. Staff notes that the average costs for this year are comparable with last
year's costs. The present and proposed basic costs are shown in Table 2 below:
JSTAFF COMMENTS APRIL 16,2OI9
Table 2: Present and Proposed Cost of Facilities
Basiclosls
Sinele Phase
Overhead Primary Circuit
Fixed Cost
Variable Cost
Underground Primary Circuit
Fixed Cost
Variable Cost
Underground Secondary Circuit
Fixed Cost
Variable Cost
Overhead Secondary Circuit
Fixed Cost
Overhead Service Circuit
Variable Cost Only
Underground Service Circuit
Variable Cost Only
Overhead Transformer
Fixed Cost Only
Padmount Transformer
Fixed Cost Only
Current Proposed Difference
s 4,323
$ 8.43
$ 1,889
s 11.24
$ 430
$ 9.93
$ 4,253
$ 8.38
$ 1,854
$ I 1.23
$ 418
$ 10.42
($7o.oo)
($o.os)
($3s.oo)
($0.01)
($12.00)
$0.49
$ 1,785 $ 1,774 ($l1.00)
$ 3.e8 $ 3.er ($0.07)
$ 9.39 $ 9.41 $0.02
$ 2,381 $ 2,310 ($71.00)
$ 3,516 $ 3,507 ($9.001
Re s identi al D evel opment s
Developers are responsible for the basic cost of a development which can be refunded as
new customers receive service within five years from the date that the extension was completed.
The basic cost represents the cost of a development line extension minus the cost of service line
extensions within the development. It is computed by subtracting the average service cost from
the average total cost per lot. The builder must pay the difference between the average total cost
per lot and the allowance.
The largest increase for residential developments is the Developer Non-Refundable
Payment. This increases $ I 0, or 17 .5Yo; however, the overall allowance increases $30 or I .7%.
4STAFF COMMENTS APRIL 16,2OI9
In last year's filing (TA-18-04), the builder's payment was $57. This year, the Company is
proposing a $67 builder's payment. Staff analyzed the Company's methodology, and determined
that it is consistent with the methodology prescribed by Commission Order No. 28562.
Table 3: Present and Proposed Non-Refundable Payment
Residential Developments Current
Average Total Cost per Lot $1,867
Less: Average Service Cost S 471
Developer Responsibility (basic cost) $1,396
Developer Refundable Payment $1,396 $1,436 $40.00
$1,867
$ 1 .810
$s7
Proposed
$1,907
$ 471
$ 1,436
$ 1,907
$ 1.840
$67
Difference
$40.00
$0
$40.00
$40.00
$30.00
$10.00
Average Total Cost per Lot
Less: Allowance
Builder Non-Refundable Payment
Administrative Chanqes
The Company proposes five administrative changes to Schedule 5l to add operational
flexibility, better align tariff language to operation practices, and make the language easier to
understand and apply. Staff reviewed the proposed changes and believes they clarify the current
tariff. Where the tariff revision would change a procedure or outcome, those changes are
reasonable and would more equitably assign costs to customers. Staff thus recommends the
Commission approve the Company's proposed administrative changes.
The Company currently assesses developers and customers line extension costs that may
be partially or wholly offset by an allowance. The Company calculates the line extension cost as
follows:
5STAFF COMMENTS APRIL 16,2019
Table 4: Calculation of Extension Cost
Basic Cost
Plus Exceptional Costs
Minus Allowance
Plus Customer-Requested Costs
Minus Cost Reductions
Minus (one) Design Fee of $150 (if paid)
Plus Share of Previous Extension
EQUALS Extension Cost
The first proposed administrative change involves the Design Fee. The tariff currently
says a Design Fee "is required." The Company proposes to change the tariff to say a Design Fee
"may be required." The Company believes, and Staff agrees, that the Design Fee should only be
charged when necessary. The Company also proposes removing a reference to the Design Fee
being credited against the cost of construction. Additionally, the revised tariff would clarify the
Design Fee is non-refundable. This change would promote the proper assignment of cost to the
party that caused the cost to be incurred.
The second proposed administrative change involves broadening the definition of "Basic"
cost to include what is now considered an "Exceptional" cost. The calculation of "Extension
Cost" involves adding both Basic and Exceptional Costs. The calculated Extension Cost will be
unaffected by the proposed revision. Staff supports this simplification.
The third proposed administrative change involves two changes to the definition of
Customer-Requested costs. Customer-Requested costs are the costs of unusual labor or materials
requested by the customer that are unnecessary to construct an extension. The Company's first
proposed change eliminates "minimum design" as a basis for necessary costs, and instead
references costs based on "the Company's construction design standards and operating
practices." The second proposed change eliminates the reference to "underground facilities in
overhead areas" as an example of Customer-Requested cost. These proposed changes provide an
opportunity for customers to apply a larger portion of their line extension allowance toward the
extension cost. Assuming that the customer's usage will meet threshold levels, the line extension
allowance is cost-justified because expected revenue paid by the new customer through future
6STAFF COMMENTS APRIL 16,2OI9
energy purchases will, on average, cover the remaining Extension Cost not covered by
Contributions in Aid of Construction paid upfront by the customer. Although these changes
could shift a little cost to existing customers, Staff believes this small cost shift is equitable
because the allowance has an upper limit and would enable new customers to recoup benefits for
which they will pay through base rates. Staff believes that the proposed change offers needed
flexibility and recommends its approval.
The fourth proposed administrative change clarifies when customers will receive a refund
of their allowance if the allowance is not provided immediately to commercial and industrial
customers. This change does not affect current operating practices and Staff recommends
approval.
The fifth proposed administrative change applies to the definition of Salvage Value
(Sheet 51L). The Company proposes clarifying that not all materials removed have salvage
value, and that the Company will determine salvage value in its sole discretion. Staff
recommends approval of this proposed change.
STAFF RECOMMENDATION
Staff believes the Company's proposals are reasonable and conform to
Commission Order No. 28562. Staff recommends the Company's proposed costs,
allowances, and administrative changes be approved.
Respectfully submitted this l- L day of Apr tl20lg
Ul'-
Karl Klein
Deputy Attorney General
Technical Staff: Michael Eldred
Bentley Erdwurm
Kathy Stockton
i : umisc/comments/avue I 9.3kkklsbeme comments
lSTAFF COMMENTS APRIL 76,2019
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I6TH DAY OF APRIL 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-E-I9-03, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
PATRICK EHRBAR
DIR OF REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL:
avistadockets/, 0avistacor?. corn
DAVID J MEYER
VP & CHIEF COI.INSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL: david.me)'er(iliivistacorp.comon'l
rl ,
*a*rry
CERTIFICATE OF SERVICE